The FCC’s effort to preempt state laws in North Carolina and Tennessee that restrict municipal broadband network reach took a hit as a Sixth Circuit panel struck down the 2015 order.

In its ruling, the court said that the FCC’s application of Section 706 of the 1996 Telecom Act is not enough to overturn state law, adding that there’s no federal statute or FCC regulation that “requires the municipalities to expand or otherwise to act in contravention of the preempted state statutory provisions."

In February 2015, the FCC voted 3-2 along party lines to preempt elements of state laws in North Carolina and Tennessee that were designed to restrict municipal providers in these communities from providing broadband service outside of their current serving areas.

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In the decision made Tuesday, the court said "This preemption by the FCC of the allocation of power between a state and its subdivisions requires at least a clear statement in the authorizing federal legislation. The FCC relies upon section 706 of the Telecommunications Act of 1996 for the authority to preempt in this case, but that statute falls far short of such a clear statement. The preemption order must accordingly be reversed.”

Municipal broadband providers in Tennessee and North Carolina had to abide by laws that limited the territory where they could build out their networks. For example, a Tennessee law passed in 1999 said any municipal electric provider can offer cable services, video services, and Internet services -- but only “within its service area.”

Tennessee allows municipal electric systems like Chattanooga's EPB to provide telecom services anywhere in the state, but limits provision of internet and cable services to its electrical system footprint.

In 2011, a North Carolina law placed various conditions that prevented the city of Wilson from expanding service, even into areas where the private sector delivers internet service at speeds as slow as 768 kbps.



This decision is clearly a blow to municipal service providers like EPB, one of the first service providers to deliver 1 Gbps FTTH services.

EPB told FierceTelecom in a previous interview that the law prevents them from extending service into a nearby town that is underserved by both the incumbent telco and local cable operators. AT&T’s telephone lines are too far away from the nearest central office (CO), and local MSO Charter Communications refuses to provide broadband service to the town in question -- yet both providers are some of the loudest opponents to municipal broadband.

Likewise, the decision affects the Wilson, North Carolina, which built a fiber network connecting all city-owned facilities in 2005. Due to strong demand from residents, medical facilities, businesses, and educational institutions, the Wilson City Council voted to build a municipal broadband network that would eventually become known as “Greenlight.” In 2013, Wilson rolled out Greenlight to residential customers, offering Gigabit internet service. Although Wilson provides electric service to five neighboring counties, current North Carolina state law prohibits them from expanding service into those areas.



Not surprisingly, the decision drew a mixed reaction from members of the FCC and other industry organizations. FCC chairman Tom Wheeler said in a statement that the court’s decision will be a blow to the state’s broadband competitive landscape in areas where larger players refuse to make investments.

“While we continue to review the decision, it appears to halt the promise of jobs, investment and opportunity that community broadband has provided in Tennessee and North Carolina,” Wheeler said in a statement. “In the end, I believe the Commission’s decision to champion municipal efforts highlighted the benefits of competition and the need of communities to take their broadband futures in their own hands.”

Commissioner Ajit Pai, who was an opponent of the FCC’s order when it went into effect last year, citing state sovereignty rules, applauded the court’s ruling and said that the regulator should focus on ways to encourage carriers like AT&T and Verizon to invest in new broadband infrastructure by lifting restrictive regulations.



“The court’s decision is a big victory for the rule of law and federalism—a constitutional principle that lies at the heart of our system of government,” said Pai. “...Rather than wasting its time on illegal efforts to intrude on the prerogatives of state governments, the FCC should focus on implementing a broadband deployment agenda to eliminate regulatory barriers that discourage those in the private sector from deploying and upgrading next-generation networks.”

However, pro-municipal broadband groups like the Institute for Local Self-Reliance, which filed an amicus brief in support of the FCC's position, said they are "disappointed that the FCC's efforts to ensure local Internet choice have been struck down.”

For more:

- read the court decision (PDF)

Related articles:

FCC ruling overturns state laws preventing municipal broadband expansion

State groups, lawmakers say FCC has no authority to overturn anti-municipal broadband laws