March 13, 2015 – The FCC has found that it has the authority to remove aspects of Tennessee and North Carolina law that limit local authority to build or expand Internet networks.
While the ruling extends only to communities in Tennessee and North Carolina, it stands to benefit communities all over the nation that want to reap the benefits of high-quality Internet connections at lower costs by overturning laws that create barriers to Internet networks. In fact, the order offers many clues as to how this precedent may impact restrictions in other states.
Summarizing the Decision
In short, states retain the authority to restrict municipalities from offering service at all. However, if states allow local governments to offer services, then the FCC has the power to determine whether any limitations on how they do it are a barrier to the deployment of advanced telecommunications services per its authority in section 706 of the Telecommunications Act.
The FCC has removed a restriction in Tennessee law that prevented municipalities with fiber networks from expanding to serve their neighbors, per a petition from Chattanooga.
In North Carolina, the FCC has removed multiple aspects of a 2011 law, HB 129, that effectively outlawed municipal networks by presenting local governments with a thicket of red tape, including territorial restrictions on existing networks. The city of Wilson had petitioned the FCC for this intervention.
Relevant Links
Read the FCC announcement.
Read the full FCC decision and download the opinion and order.
For more context, read “Key Passages and Arguments” from the decision.
Chris interviewed Jim Baller of Baller, Herbst, Stokes, & Lide for his Community Broadband Bits podcast. Listen to that conversation here.
Excerpts From the Decision
Relevant to Barriers in Other States
16. While the present Memorandum Opinion and Order (Order) only addresses the EPB and Wilson Petitions, the Commission will not hesitate to preempt similar statutory provisions in factual situations where they function as barriers to broadband investment and competition. (p.6)
60. Some commenters argue that municipal entry distorts the marketplace because the municipality functions as both regulator and competitor and could use its authority anti-competitively. This argument fails because these commenters are unable to identify any compelling evidence that this is an actual problem in Tennessee or North Carolina (or elsewhere). (p.31)
Regarding FCC Authority to Preempt State Laws:
146. To put it plainly, section 706 authorizes the Commission to displace state laws that effectuate choices about the substance of communications policy that conflict with federal communications policy designed to ensure “reasonable and timely” deployment of broadband. (p.62)
141. … Before addressing whether section 706 authorizes preemptions of laws regulating municipalities as broadband providers, we first address whether it authorizes preemption under any circumstances; for example, whether it would reach state laws that regulate broadband provision by purely private entities. Take, as an illustration, a hypothetical state law that prohibited cable-based broadband providers from offering broadband capacity greater than that offered by wireless broadband providers. We think that the answer in that instance would be clear. Such a law would prevent cable-based broadband providers from competing based on superior bandwidth, which in turn could cause such providers to conclude that they could not make an economic case for increasing the capacity of their network in certain communities. (p.59)
143. … And section 706(b) uses at least equally urgent language, requiring us to continually reappraise deployment, and mandating that we “shall take immediate action” when necessary by “removing barriers to infrastructure investment and by promoting competition in the telecommunications market. (p.60)
11. We find that section 706 authorizes the Commission to preempt state laws that specifically regulate the provision of broadband by the state’s political subdivision, where those laws stand as barriers to broadband investment and competition. A different question would be presented were we asked to preempt state laws that withhold authority to provide broadband altogether. But where a state has authorized municipalities to provide broadband, and then chooses to impose regulations on that municipal provider in order to effectuate the state’s preferred communications policy objectives, such as the protection of incumbent ISPs, such laws fall within our authority to preempt. (p. 5)
