Court Hears Challenge to FCC’s Municipal Broadband Rule

Can the Federal Communications Commission (FCC) interfere with how a state regulates its cities, counties or other municipalities?

This is the question the United States Court of Appeals for the Sixth Circuit entertained today. A three-judge panel heard arguments in the case of the State of Tennessee v. FCC, in which the American Legislative Exchange Council filed an amicus curiae brief.

Consistent with ALEC concerns, Joshua Turner, the attorney for Tennessee clearly stated in his opening remarks to the court:

The case before this court is not about telecommunications policy or the merits of municipal broadband but whether or how the federal government can intercede between a state and its municipal subdivisions.

The case focuses on the FCC’s municipal broadband order, which specifically preempted state laws limiting a municipality’s ability to operate a broadband network. Several municipalities, such as the Electric Power Board of Chattanooga and the City of Wilson, North Carolina, wanted either to expand their broadband networks or create them. In both cases, Tennessee and North Carolina enacted taxpayer protections that municipalities had to meet before moving forward.

Rather than comply with the law to provide citizens a voice and give them transparency into local decisions, both EPB of Chattanooga and the City of Wilson asked the FCC to preempt the restrictions. The FCC complied, and in February of 2015, issued the municipal broadband order.

States have a strong interest both in regulating the municipalities within their borders and in protecting taxpayers from wasteful spending.

Municipalities are created by states, as is the federal government. States give to municipalities of various sizes certain, limited powers. Traditionally, the federal government has decided not to interfere in the relationship between a state and its political subdivisions.

For a federal commission, such as the FCC, to interfere in the relationship between a state and its political subdivisions, Congress must expressly grant the commission such authority. In this case, the FCC is implying its authority from various sections of the Telecommunications Act of 1996. In at least one previous case, the Supreme Court significantly questioned this type of reasoning.

Other municipalities have tried to launch municipally-owned broadband networks and failed miserably. For example, Memphis, Tennessee sold its Networx for a loss of $27 million. The Utah Telecommunication Open Infrastructure Agency (UTOPIA), similarly, has cost taxpayers hundreds of millions of dollars over a nearly decade long existence.

These municipally owned broadband networks compete directly with the private sector that are already in particular markets—most municipal networks are not about expanding broadband access, as most of the municipalities that want or have tried them are cities well-served by existing telecommunications companies. As municipalities control the local permitting process, if municipalities owned broadband networks they could impose costs on the existing companies preventing them from being competitive with the municipality’s network.

States have the right to regulate their political subdivisions. States have an obligation to protect their citizens from wasteful spending. This includes wasteful spending on municipal broadband networks, as municipalities are not the most efficient entity to provide broadband service.

The municipal broadband order usurped authority from state governments without clear congressional authorization. The American Legislative Exchange Council hopes the judges of the Sixth Circuit recognize the Federal Communications Commission’s order for what it is and restore the proper balance between a federal agency, the states and municipalities created by the states.

In Depth: Federalism

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