The Federal Communications Commission has lost its bid to overrule laws in North Carolina and Tennessee that prevent municipal broadband providers from expanding outside their territories.
On Feb. 26, 2015, the FCC granted a petition to preempt the laws, calling them "barriers to broadband deployment, investment and competition" and a "conflict with the FCC's mandate to promote these goals."
In a Memorandum Opinion and Order adopted that day, the FCC said it found a "clear conflict" between Section 706 of the Telecommunications Act of 1996, which directs the FCC to remove barriers to broadband investment and competition, and provisions in laws in Tennessee and North Carolina, preventing the expansion of service to the communities surrounding current service areas.
Under Tennessee law, a municipality operating an electric plant can offer cable, video and internet service within the electric plant's service area. Likewise, in North Carolina, municipalities can only offer internet services to those inside their municipal boundaries. It's these limitations that the FCC was working to expand.
In an Aug. 10 ruling, a three-judge panel of the U.S. Court of Appeals for the Sixth Circuit said the FCC was inappropriately trying to shift the decision-making power between states and their municipalities.
The judges' ruling states:
"There are no federal statutes or regulations requiring telecommunications providers to have a set geographic service area. Providers thus have discretion to choose the geographic areas that they serve, whether that means expansion or restriction. Providers likewise have discretion to choose the rates they charge for their services and how long the services-rollout process takes.
"What the FCC seeks to accomplish through preemption is to decide who—the state or its political subdivisions—gets to make these choices. The FCC wants to pick the decision maker for the discretionary issues of expansion, rate setting, and timeliness of rollout of services. It wants to provide the [Electric Power Board of Chattanooga] and the City of Wilson [in North Carolina] with these options notwithstanding Tennessee's and North Carolina's statutes that have already made these choices."
On the FCC site, all five Commission members issued statements.
Chairman Tom Wheeler said that, while he was reviewing the decision, some good may have already come from the fight.
"I believe the Commission's decision to champion municipal efforts highlighted the benefits of competition and the need of communities to take their broadband futures in their own hands," said Wheeler.
"In the past 18 months, over 50 communities have taken steps to build their own bridges across the digital divide," Wheeler added. "The efforts of communities wanting better broadband should not be thwarted by the political power of those who, by protecting their monopoly, have failed to deliver acceptable service at an acceptable price."
Commissioner Jessica Rosenworcel called the Sixth Circuit's decision a "setback."
"It makes it harder for communities struggling when existing providers fail to meet their needs because it makes it more difficult for them to come together and build it themselves," said Rosenworcel. "I fully respect this decision, but regret that it is at odds with our history of self-reliance—and constrains our options for new infrastructure in the future."
Commissioner Mignon Clyburn said she was "extremely disappointed" that the FCC's "long-standing mission" had been "dealt a blow."
"State laws like the ones upheld today are part of the reason why families on one street may have gigabit service, while those on the other have nothing," said Clyburn. "It is sad that those laws will still stand tall and act as a barrier to digital inclusion and universal opportunity for all."
Ajit Pai and Michael O'Rielly, the two Republicans on the Commission, again split with their colleagues, applauding the court ruling.
"I am heartened by Sixth Circuit U.S. Court of Appeals' decision," O'Rielly said in his statement. "The FCC clearly tried to invoke imaginary authority and finally was called out by a court for doing so."
Pai, in essence, announced: I told you so.
"In my statement last year dissenting from the Commission's decision, I warned that the FCC lacked the power to preempt these Tennessee and North Carolina laws and that doing so would usurp fundamental aspects of state sovereignty," he stated. "I am pleased that the Sixth Circuit vindicated these concerns."
Pai added that he hopes the FCC will "turn the page" on the matter.
"Rather than wasting its time on illegal efforts to intrude on the prerogatives of state governments," he stated, "the FCC should focus on implementing a broadband deployment agenda to eliminate regulatory barriers that discourage those in the private sector from deploying and upgrading next-generation networks."