What Does the FCC Municipal Ruling Really Mean?

Scales-Of-Justice-12987500-300x300On the same day that the FCC passed its new net neutrality rules it also granted the petitions of Chattanooga TN and Wilson NC to allow them to expand their broadband networks. In both of these petitions the municipal network is surrounded by areas with poor or zero broadband, and residents of the area have been asking the two cities to extend their fiber network to serve them. But in both cases there were state laws that restricted the systems from expanding.

On the surface, the FCC ruling is only about these two specific cases, but the FCC has made it clear that they will entertain petitions by other jurisdictions that are being restricted by state laws. FCC Chairman Wheeler said in the ruling that there are several ‘irrefutable truths’ about broadband: “One is, you can’t say that you’re for broadband and then turn around and endorse limits on who can offer it. Another is that 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.”

While this ruling obviously gives great hope to many communities that don’t have broadband, there is still a long way to go until this ruling makes any practical difference in the market. There are already several parties that say they are going to challenge the ruling in court, so this issue will have to slog its way through the legal process before it goes into effect. The primary issue for a challenge is the FCC’s authority to overturn state restrictions on broadband.

The FCC is relying on language passed by Congress as part of the Telecommunications Act of 1996. In that law, section 706 of the Act says the following:

SEC. 706. ADVANCED TELECOMMUNICATIONS INCENTIVES.

(a) IN GENERAL-The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

Further, Section 253 of the Act also included language that that bars states from enacting laws that prohibited ‘any entity’ from providing any interstate or intrastate telecommunications service. I’ve read that language from the Act a number of times and it certainly, on the surface, seems to give the FCC the authority to override the telecom laws in North Carolina and Tennessee that stopped the municipal systems from expanding. I’ve chatted with a few of the legislators over the years that helped to write the Telecom Act and they believed that when they wrote the Act that they were enabling municipal competition.

But as is often the case, a law that Congress passes isn’t fully effective until it’s been tested in court. In this case there have been two prior challenges to the law. A year after the passage of the Act, the City of Abilene challenged the Texas law that was a flat ban on municipal competition in the state, and lost before the FCC and then on appeal to the federal Court of Appeals for the DC Circuit. In 1997, Missouri also banned public entities from providing telecom services. Cities in the state challenged this at the FCC, lost and then appealed to the Eighth Circuit Court of Appeals, which unanimously ruled in cities’ favor. The Supreme Court took the case and let the Missouri law stand.

But the current cases are different than the two prior challenges. Both of those cases challenged an outright ban to competition. But in the new cases, the cities asked to be relieved from specific restrictions that stopped them from expanding their existing service beyond a defined footprint. In Tennessee, the City of Chattanooga is restricted to offering broadband in the same area where they serve electric customers. In Wilson, the City is restricted to the City boundaries. In both cases there are nearby customers just outside of those boundaries that each city wants to serve, and the ruling gives them the right to expand.

So this is going to be up to the courts to decide. Certainly one thing has changed since those two earlier rulings in that the FCC is now in favor of overturning states’ rights. In the earlier cases the FCC ruled against the petitioners, and so the courts started with that refusal in judging the cases. These kinds of cases usually boil down to whether the FCC has the authority to rule, which is not exactly the same thing as ruling about whether the challenger to the law was right or wrong. In the last challenges the courts said that the FCC had the authority to deny the municipal petitions. This time any challenges will begin with an FCC ruling in favor of the cities and we’ll just have to wait and see if that makes any difference in the courts.

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