Cities vs States: A Battle for Broadband

In certain cities across the United States, there is a battle for broadband brewing in the halls of municipal and state legislatures. Currently, 19 states have laws in place that make it difficult for municipal governments to provide broadband service via public power utilities. Cities like Chattanooga, Tennessee and Wilson, North Carolina are petitioning the Federal Communications Commission (FCC) to preempt state laws that restrict the right to offer broadband.

Chattanooga currently provides electric and broadband service to the city’s residents; the City of Wilson provides electric service in six counties in eastern North Carolina and broadband service in Wilson County. Both petitions claim that state statutes prevent them from offering their services to neighboring communities who have requested their services.

More specifically, the petitions ask the FCC to exercise Section 706 of the Telecommunications Act of 1996. This law allows the FCC to remove barriers to infrastructure investment and promote competition in the telecommunications market if the FCC fails to determine that “advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion.” FCC Chairman Tom Wheeler has stated that FCC has the power and intends “to exercise that power – to preempt state laws that ban competition from community broadband.”

“FCC has the power – and I intend to exercise that power –

to preempt state laws that ban competition from community broadband.”

-FCC Chairman Tom Wheeler-

However, opponents claim that this issue lies within state jurisdiction, and federal preemption of state laws in this matter runs counter to U.S. Supreme Court rulings in regards to the relationship between the state and its political subdivisions. According to Mathew Berry, Chief of Staff to FCC Commissioner Ajit Pai, the issue at hand is not whether municipal governments should offer telecommunications services, but whether the FCC has the legal jurisdiction to preempt state laws. Berry believes that “any FCC attempt to preempt such state laws would be unlawful.”

In addition, some opponents claim that the cost of installing fiber-optic networks is expensive, which the taxpayers must eventually pay for. Chattanooga’s broadband network cost $330 million, a third of which came from federal stimulus money. Generally, municipalities pay for these costs using subscription feeds. However, if the project is more expensive than planned or customer demand is shorter than expected, taxpayers may have to cover the shortfall.

In Washington, D.C., Marsha Blackburn (R-TN) added an amendment to H.R. 5016, the Financial Services and General Government Appropriations Act, that would prevent the FCC from preempting state laws regarding municipal broadband networks. The House passed the resolution, largely along party lines, and the bill is now headed to the Senate.

The FCC recently issued a public notice requesting comments on this issue. Interested parties may submit comments electronically or on paper, but all comments must be submitted on or before August 29, 2014.