States Fight Federal Intrusion in Municipal Broadband Policy

Residents of Chattanooga, Tenn., have access to Internet speeds of one gigabit per second—more than 50 times faster than the rest of the country, leading it to be nicknamed “Gig City.” If Chattanooga were a country, it would be tied for the fastest Internet connection in the world with Hong Kong. The rest of America comes in at 26th, behind Singapore, Romania, Japan and Sweden.

Residents of surrounding areas are envious because the service, which is provided by the city’s public utility company, is prohibited by state law from expanding beyond city lines. Despite the fact that Tennessee state Rep. Kevin Brooks lives just nine miles outside of the city and can “see Gig City from my house,” he is unable to take advantage of the lightning fast speeds.

Chattanooga is one of several cities—including Lafayette, La., and Wilson, N.C.—that has built its own municipal high-speed broadband networks. These cities have been cited as success stories among local governments, taking action to provide faster Internet speeds for residents and to encourage economic development.

Chattanooga started constructing its broadband system in 1996. Three years later, Tennessee lawmakers passed a law prohibiting cities that operate their own Internet networks from providing access outside of the boundaries of their electrical service. In addition, municipalities are prohibited from offering Internet service in any “area where a privately-held cable television operator is providing cable service.”

Eighteen other states have joined Tennessee in restricting the ability of cities to install their own broadband networks. The laws range from an outright ban on municipal broadband, to having a requirement that cities hold a referendum or public hearing before services may begin.

Supporters of these bans argue that municipal governments should not be competing against the private sector, and that if local broadband systems fail, taxpayers would bear the costs.

At a U.S. Senate hearing in June 2014, AT&T President Randall Stephenson testified, “The idea of private capital competing with taxpayer-provided capital just feels inconsistent to us with what a free-market system looks like.”

On Feb. 25, 2015, the same day the Federal Communications Commission ruled on net neutrality, the agency also voted to pre-empt state laws limiting the expansion of municipal broadband projects. Chattanooga and Wilson, N.C., had petitioned the FCC to act on their behalf. The cities now will be permitted to offer services outside of the city limits. While the ruling only affects these two municipalities, it does set a precedent for other cities to file similar petitions.

Almost immediately, critics of the FCC’s decision argued that the commission did not have the authority to pre-empt state laws regarding municipal broadband. 

Tennessee state Rep. Andy Holt believes that a decision to expand broadband should be “on our own terms.” Holt joined two other legislators in writing a letter to the state’s attorney general, urging him to file suit against the FCC. 

“While the public policy merits of such an idea can be debated another day,” the letter states, “the ability of Tennessee to make its own laws is not a concept that can be taken lightly, and we respectfully urge your office to defend our state sovereignty and seek legal relief to the fullest extent necessary.”

Tennessee Attorney General Herbert Slatery agreed and on March 20 filed a federal lawsuit against the FCC, claiming it “has unlawfully inserted itself between the State of Tennessee and the State's own political subdivisions."

In a statement, Slatery described the suit as a “matter involving a claim of federal pre-emption by the FCC and Tennessee’s right to determine the authority and market area of a political subdivision organized under Tennessee law.”

Congress also is taking action. U.S. Sen. Thom Tillis of North Carolina and U.S. Rep. Marsha Blackburn of Tennessee introduced legislation in February stipulating the FCC does not have the authority to prevent states from making laws regarding municipal broadband service.

In August 2014, CSG—along with the National Governors Association and the National Conference of State Legislatures—wrote the FCC expressing opposition to the petitions by Chattanooga and Wilson. The organizations noted that any action by the FCC to modify or pre-empt state laws would be an “unnecessary encroachment of states’ rights by an agency of the federal government in the absence of express statutory authority.”

Back in Tennessee, Brooks and state Sen. Janice Bowling have introduced legislation that would allow each municipality operating an electric plant to provide services outside its electric system service area. Brooks said municipal broadband has offered numerous benefits to his state and the FCC ruling shows that “internet is now viewed as a necessity, not a luxury.”