A Forever Fight Against Municipal Competition?

Seattle-SkylineThe appeals of the FCC’s attempt to overturn state laws that preclude municipalities from building broadband networks is working its way through the courts. Both the states of Tennessee and North Carolina have sued the FCC to stop them from overturning existing telecom laws.

It’s hard to say which way the courts will rule on the issue. The states are painting this as a states’ rights issue. In a recent filing in the case, Tennessee said that states have an, “inviolable right to self-governance . . . Far from being a simple matter of preemption, as the FCC claims, this intervention between the State and its subordinate entities is a manifest infringement on State sovereignty,”

Meanwhile, the FCC is following one of the basic responsibilities that it was tasked with by Congress. Section 706 of the Telecommunications Act of 1996 directed the FCC to take actions to remove barriers to broadband investment. I remember when the Act came out that there was a lot of discussion of how this would allow municipalities everywhere into the broadband business. Even then there were numerous barriers to municipalities becoming telephone companies and my peers and I at the time read this language to mean that the FCC would do precisely what they were told to do – which was to remove barriers. It certainly took the FCC a long time to tackle the issue.

Perhaps in the long run it doesn’t really matter what the courts say. In the two cases being appealed, the FCC ruled against specific laws only in North Carolina and Tennessee that prohibited certain actions by municipalities in those states. Even should Chattanooga and Wilson, NC win those cases the victory would apply only to those specific laws in those states.

There would be nothing stopping the legislators in those same states from trying to pass legislation that would put different blocks on municipal competition. Over the years this tactic has been tried as states have tried to overturn federal abortion laws, and more recently in states’ fights against gay marriage. Note that I am not equating the fight for municipal broadband to those hot button topics, but rather pointing out that the same legislative tactics are available to the states that don’t like the FCC ruling. They are free to try to pass different laws to chip away at the FCC until they find something that sticks.

In my mind the FCC ruling might well provide some relief for both Chattanooga and Wilson, but one has to ask if it is going to provide much help to other cities. The cost of fighting these laws has to be steep for those two cities, and one would think that there are not a lot of other cities ready to fight this hard to overturn a broadband prohibition.

I might be wrong about this and there might be dozens of cities lining up awaiting the court decisions in these cases. But realistically, the cost of the expensive court fights needed to challenge existing telecom laws is in itself a big barrier to entry for cities and most of them are probably not willing to tackle the issue.

What is most interesting about this whole fight is that there are not a huge number of cities wanting to become ISPs. I’ve seen dozens of RFPs this year from cities wanting fiber and the majority of those RFPs are seeking a commercial provider to bring broadband to the cities. For the most part cities only end up getting into the broadband business when they don’t see any alternative.

It ought to be clear to all legislators by now that just about every city that doesn’t have a fiber network wants one. Cities without broadband can see themselves slipping against cities who have been lucky enough to get it. Affordable broadband brings a lot of things to cities such as jobs, small business growth, the ability of citizens to telecommute, increased property values, etc.

But the telecom lobby is one of the more powerful lobbies in the country. The large telcos and cable companies contribute to politicians the whole way down to the local government level, and that has paid off for them in many ways. In a lot of states the legislation that is blocking municipal competition was written by the large ISPs like AT&T. And I suspect the large ISPs are willing to keep writing more legislation if that will keep away competition.

2 thoughts on “A Forever Fight Against Municipal Competition?

  1. The news from Colorado: 26 cities and 17 counties have ballot initiatives to over ride the 10 year old law banning municipal broadband. All recent initiatives have passed by wide margins.

  2. No one ever said that Federalism was clean and easy. In fact, it can, at times, be a down-right mess!!
    Where the Federal government seeks to make things neat and concise, along come the states claiming they have no right to do that… We can site mountains of situations made that way by a layer of government with its nose out of joint.
    The Federal Telecom Act of 1996 specifically sought to encourage competition by all means necessary in all the many forums of the Telecommunication industry. One can not understand why a state-level governing body would NOT want to see the many benefits of competition coming to their area — enticing more industry and jobs to enter and start-up in a region… the lowering of prices and vigorous competition that positively benefit a customer base…
    It is almost as though the state-level bureaucrats said, “Forget the facts, we are not considering them — the Earth is FLAT!!”

    As you say, this will be a long-term fight. So long as there is a vested interested in limiting a given competitive marketplace, those that are capable will continue to fight the threat of new entrants.

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