FCC ruling overturns state laws preventing municipal broadband expansion

The FCC moved to preempt elements of state laws in North Carolina and Tennessee that were designed to restrict municipal providers in these communities from providing broadband service outside of their current serving areas. This move could drive other states to act and could result in potential court challenges.

The FCC's order was voted 3-2 on party lines, with Commission Chairman Tom Wheeler joined by fellow Democrats Mignon Clyburn and Jessica Rosenworcel. The order will let communities choose whether or not to build their own networks based on their own missions and the ability to expand services to nearby communities.

Municipal broadband has been one of Wheeler's key focus areas. In May, Wheeler made a call to explore the idea of preempting more than 19 state laws that prevent or discourage municipalities from building their own broadband networks.

Among the cities that are looking for relief from state laws on municipal broadband are Chattanooga, Tenn., and Wilson, N.C., two cities that had also asked the FCC to overturn the anti-municipal broadband laws they have on the books.

Closing broadband deserts
Chattanooga-based municipal utility EPB Fiber has gained notoriety in recent years by delivering 1 Gbps services over its fiber-to-the-home (FTTH) network, but state laws ban it from extending services into new areas--even those that have no Internet access. Likewise, in Wilson, which also acts as an electric utility, the city provides 1 Gbps (FTTP) services to local residents and businesses.  

However, both Chattanooga and Wilson have had to abide by state laws that restrict them from expanding broadband service into nearby communities even if those communities request it.

Tennessee law allows municipal electric systems like EPB to provide telecommunications services anywhere in the state, but limits provision of Internet and cable services to the electrical system footprint. In 2011, a North Carolina law placed various conditions that prevented Wilson from expanding service even into areas where the private sector delivers service at speeds as slow as 768 kbps.

FCC wireline competition official Gregory Kwan told commissioners that one of the common themes of both EPB and Wilson is they both have advanced networks but are surrounded by communities that lack broadband, or any Internet service.

"You can't say you're for broadband and then turn around and endorse limits on who can offer it," Wheeler said. "You can't say, 'I want to follow the explicit instructions of Congress to remove barriers to infrastructure investment,' but endorse barriers on infrastructure investment. You can't say you're for competition, but deny local elected officials the right to offer competitive choices."

Wheeler cited how one person in Tennessee pays $316 a month "for a collage of services that includes two mobile hotspots," although he lives less than a mile from an operator that provides 1 Gbps services.

Harold DePriest, president of EPB, told FierceTelecom that while it can't extend service to nearby counties that today have little if any Internet access yet, he is seeing continual demand from neighboring towns and cities.

"You can go one-tenth of a mile away from our systems [and] there's homes in a desert that literally don't have anything for Internet--that just seems crazy," DePriest said. "What we're interested in is having the ability to help our neighbors have better service and we think we can do that and pay for the systems we installed."

So what about the incumbent players like AT&T (NYSE: T) and Charter Communications (NASDAQ: CHTR) in the Chattanooga area with broadband in the nearby towns EPB wants to serve? According to DePriest, the telephone lines that reach these communities are too far away from the nearest central office (CO) and local cable provider Charter is refusing to serve those areas.

"They have telephone lines that are too far away for DSL and the cable company, which in this case is Charter serving the surrounding county, has refused to go in and serve those areas," DePriest said. "Some people I have talked to are paying up to $300 a month for some kind of wireless service, but I am also hearing it's not a very good service."

Besides the FCC, the municipal broadband issue has also attracted the attention of President Barack Obama, who visited Cedar Falls, Iowa, a town that operates a municipal broadband network, in January. At that time, Obama also sent a letter to the FCC to repeal the 19 state laws on the books that either outright ban building broadband networks or limit a community's move to build its own alternative network.

Complementing the FCC's efforts are a group of Democratic senators in January who developed a new bill called the Community Broadband Act that is designed to overturn existing state laws that ban or restrict cities and towns from building their own broadband networks.

Opposition remains strong
Opposition to the municipal broadband movement continues to be strong. Critics of the municipal broadband movement cite the failures of other cities like Provo, Utah, which ultimately sold fiber network to Google Fiber in 2013.

Within the FCC, Republican commissioners Ajit Pai and Michael O'Reilly argued that the FCC and the president are overstepping their boundaries.

Pai said that the FCC does not have authority to overturn existing state laws and that Section 706 does not include specific language on preempting state laws.

"This yields an exceptionally strange result," Pai said. "While a state would be free to ban municipal broadband projects outright, it would be forbidden from imposing more modest restrictions on such projects. In other words, the most severe state law restrictions on municipal broadband projects, prohibitions, could not be preempted, but less stringent restrictions could be preempted." This could lead states to impose complete bans rather than limited restrictions, he said.

Under Section 706 of the Telecommunications Act of 1996, the FCC is required to encourage the deployment of broadband to all Americans by using "measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment." 

Joining Pai was Republican Commissioner O'Rielly, who called the FCC's order "arrogance" to rewrite state laws.

"It is not the government's role to offer services instead of or in competition with private actors," O'Rielly said. Today's order relies on an "illogical and tortured" reading of Section 706, he said.

For more:
- see the FCC release

Related articles:
State groups, lawmakers say FCC has no authority to overturn anti-municipal broadband laws
FCC commissioners remain divided on municipal broadband issue
FCC says proposed net neutrality rules will withstand legal challenges from AT&T, Verizon

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