MediaFreedom Urges FCC to Reject Muni-Broadband Preemption Petitions

by Mike Wendy on August 30, 2014

In late July, Chattanooga broadband provider, EPB, and the City of Wilson, North Carolina, asked the FCC to preempt their state laws, which limit where they can serve customers. This matter was put up for public comment by the FCC, and MediaFreedom filed the attached comments with the agency on Friday.

In this filing, we urge the FCC to reject the request of EPB and the City of Wilson because:

  • The FCC lacks the authority to preempt such state laws;
  • The states have a constitutional right to protect taxpayers by limiting muni-provided broadband;
  • Muni-provided broadband runs contrary to the pro-competition goals of the Communications Act;
  • The FCC can effectuate the rollout of broadband in a less constitutionally offensive manner, with present authority and regulatory reforms; and
  • Government’s spotty IT track record urges caution for the FCC in promoting government-provided broadband.

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COMMENTS OF MEDIAFREEDOM

On July 24, 2014, the Electric Power Board of Chattanooga, Tennessee, and the City of Wilson, North Carolina (herein Petitioners) filed petitions asking that the Federal Communications Commission preempt pursuant to Section 706 of the Telecommunications Act of 1996 (‘96 Act) portions of Tennessee and North Carolina state statutes, which limit their ability to provide broadband services. On July 28, 2014, the FCC established a pleading cycle for these proceedings, putting the matter out for public comment. MediaFreedom[1] believes the FCC lacks the proper authority to preempt state law as urged, and thus respectfully asks that the Commission reject the Petitioners’ request.

MediaFreedom would like to briefly outline its core concerns on the present proceeding:

1. Although Congress has provided clear preemption language elsewhere in the ‘96 Act,[2] no such preemption language exists for Section 706. One must presume that Congress did this intentionally and unambiguously, with an aim toward limiting what the FCC could direct a state to do. Supreme Court precedent supports this idea, having previously rejected federal preemption of a Missouri state statute, which prohibited its cities and counties from offering telecommunications services.[3] The holding in that case recognizes that preemption of state control over its political subdivisions requires a clear statement of congressional intent. To this end, a plain reading of the ’96 Act reveals that Section 706 lacks that clear statement, thus neutering Section 706 as a tool for preemption. Absent this authority, the FCC cannot lawfully grant the Petitioners’ request. Further, non-binding dicta provided in the DC Circuit’s Verizon v. FCC concurring opinion provides no surer footing for the Petitioners and Commission to use Section 706 to preempt state law either.[4] Congress must give that preemption authority, and plainly it has not.

2. Prohibiting municipal provision of broadband is a sovereign act by a state designed to protect taxpayers from waste and abuse. Preempting such a fundamental state function not only violates core precepts of federalism, it puts local taxpayers in harm’s way. Importantly, the Petitioners are not just asking the FCC to preempt a handful of technical regulations to promote infrastructure investment. Rather, they are asking the Commission to impose a whole new taxing and regulatory regime on the states and their residents. Liberated from state control, municipalities will be free to impose tax and other burdens on state coffers in order to manage their risky broadband networks that all state residents – not just those receiving the new services – will have to bear. Whatever Section 706 might be, Congress certainly did not confer upon a majority of unelected FCC Commissioners the power to tax state residents, or to dip into state treasuries to subsidize FCC policy goals.

3. Section 706’s plain language – which seeks to “promote competition in the local telecommunications marketplace” – remains wholly at odds with the request by Petitioners. Quite simply, municipally-provided “competition” is a misnomer. It is a predatory practice shielded by direct and indirect taxpayer subsidies, monopoly control over essential government facilities, and opaque government processes that conflict directly and significantly with the private provision of communications networks. The practical effect of these programs is not to engender local competition but rather to destroy it.[5] Big-footing competition – as the Petitioners essentially seek – will not result in more infrastructure deployment. Instead, it will bring about less investment, especially from private providers because such programs greatly distort market dynamics by tamping down the appetite of private risk takers to supply the market with infrastructure and services.  Stated differently, if the Commission pursues this policy it will be one of de-competition, clearly contrary to the statutory language and policy goals of Section 706.

4. The FCC could achieve a lion’s share of its Section 706 goals by focusing on the majority of states that do not have laws which limit municipal provision of broadband, and join with all marketplace stakeholders to develop programs that boost the rollout of advanced telecommunications where truly needed. These “laboratories” could then be “competed” – through principles of federalism – against those states that have voted to limit such ventures.   Such a path respects the will of voters, and avoids the punch-in-the-face politics presented by the issue of preemption. Additionally, the FCC could reform, streamline or eliminate many of its own policies and regulations, which frustrate the broad private rollout of broadband infrastructure to Americans. The point is – there are many less offensive ways to boost broadband penetration that should be tried first before attempting the “nuclear option” of preemption via murky Section 706.

5. Finally, government has a spotty track record when it comes to providing IT for taxpayers. Just look at the recent Affordable Care Act website rollout. Or, NTIA’s BTOP broadband stimulus program. Or, the IRS e-mail fiasco. Or, the FCC’s website crash while taking Net Neutrality comments from Americans. This is not to mention the multiple failures of municipally-provided communications providers themselves.[6] It’s hard enough for private companies to judge what the marketplace needs and can support; government officials can’t be expected to fare any better. This should hasten caution by the FCC as it seeks to promote government-provided broadband via Section 706 or other aspects of the law. The private economy has done a tremendous job wiring America with broadband.   That growth continues. Government-provided broadband should occur only in exceptional circumstances, where the market is truly “broken.”

Conclusion

The FCC should reject the Petitioners’ request because Section 706 does not provide the authority needed for the Commission to accomplish what the Petitioners are asking. No doubt, boosting broadband deployment is an important goal for all Americans. To this end, the FCC would be better served if it avoided the unnecessary constitutional conflict urged by Petitioners, and sought instead to find ways to effectuate Section 706 in a manner that works with, not against, marketplace dynamics.

Respectfully submitted,

Mike Wendy – MediaFreedom

[1] MediaFreedom.org is a free market-oriented 501(c)(3) nonprofit, which works to minimize the Federal Communications Commission’s regulatory imprint on U.S. communications policy. MediaFreedom urges policymakers to more confidently rely on today’s technological evolution, industry best practices and peer group policing, consumer education and transparency tools, marketplace competition, and presently available enforcement laws to protect consumers from actual, not conjectured, harm. We believe that this approach better serves the marketplace than do new laws or regulations when addressing most marketplace issues that arise.

[2] See 47 U.S.C Section 253(d) PREEMPTION, noting “…the Commission shall preempt the enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or inconsistency” (emphasis added).

[3] See Nixon v. Missouri Municipal League, 541 U.S. 125 (2004).

[4] See Verizon Corp. v. Federal Communications Commission, 740 F.3d 623, at 661 n.2 (D.C. Cir. 2014), wherein Judge Laurence Silberman writes: “An example of a paradigmatic barrier to infrastructure investment would be state laws that prohibit municipalities from creating their own broadband infrastructure to compete against private companies. See Klint Finley, Why Your City Should Compete With Google’s Super-Speed Internet, WIRED, May 28, 2013, http://www.wired.com/wiredenterprise/2013/05/com munity-fiber/.”

[5] See by Tom Giovanetti, Muni Broadband Isn’t About the Unserved, IPI Roundtable (August 28, 2014), accessed at http://www.ipi.org/policy_blog/detail/muni-broadband-isnt-about-the-unserved

[6] See Zack Christenson, The Costly Truth About Municipal Broadband Networks, The American Consumer Institute Center for Citizen Research (April 19, 2012), accessed at http://www.theamericanconsumer.org/2012/04/the-costly-truth-of-municipal-broadband-networks/; see also Tom Schatz and Royce Van Tassell, Municipal Broadband Is No Utopia, Wall Street Journal (June 19, 2014), accessed at http://online.wsj.com/articles/municipal-broadband-is-no-utopia-1403220660.

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