Tennessee has continued its fight against a city that wants to expand municipal broadband service, arguing in a legal brief that the Federal Communications Commission can't preempt state laws that limit the rights of cities and towns to offer Internet access.

In a brief filed Friday in a federal appeals court, Tennessee argued that states have an "inviolable right to self-governance," which means that a state may delegate powers to its political subdivisions—i.e. cities and towns—as it sees fit. The brief was in support of the lawsuit Tennessee filed against the FCC in March, shortly after the commission voted to preempt the broadband-limiting state law.

"Far from being a simple matter of preemption, as the FCC claims, this intervention between the State and its subordinate entities is a manifest infringement on State sovereignty," Tennessee's lawyers wrote Friday.

In Tennessee, the Electric Power Board (EPB) of Chattanooga offers Internet and video service to residents, but state law prevented it from expanding outside its electric service area to adjacent towns that have poor Internet service. Tennessee is one of about twenty states that impose some type of restriction on municipal broadband networks, which protects private Internet service providers from competition.

Chattanooga petitioned the FCC to preempt that state law, and the commission did so, citing its authority to encourage broadband deployment by "remov[ing] barriers to infrastructure investment." On the same day, the FCC preempted a similar state law in North Carolina. North Carolina also sued the FCC to restore its broadband restrictions, but that petition was consolidated into the Tennessee case, which was filed first.

The case could have far-reaching impacts. The FCC is testing the limits of its powers from Section 706 of the Telecommunications Act of 1996, which requires the FCC to encourage deployment of broadband to all Americans by using "measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment."

If courts uphold the FCC's argument that it can use this authority to preempt state restrictions on municipal broadband, cities and towns in many more states could petition the FCC to remove state laws. Expansion of municipal broadband networks would in turn create more competition in markets dominated by private cable companies and telcos, potentially boosting speeds and lowering prices.

No “plain statement” of authority

Tennessee attacked the FCC's legal reasoning on multiple fronts, including arguing that the FCC is claiming more authority than it actually has. Section 706 doesn't specifically grant the FCC authority to preempt state laws, Tennessee pointed out.

"The FCC can point to nothing in the statute’s language that meets the Supreme Court’s 'plain statement' requirement for allowable intrusions into areas of state sovereignty," Tennessee wrote.

Tennessee also criticized the FCC's attempt to reconcile its decision in North Carolina and Tennessee with the results of Nixon v. Missouri Municipal League, a case from 2004 in which both the FCC and Supreme Court upheld a state ban on broadband.

The FCC argued that Nixon wasn't relevant to the North Carolina and Tennessee cases because Missouri issued a total ban on municipal broadband instead of a limited grant of authority. The FCC reasoned that a state may outlaw municipal broadband altogether, but it can't allow cities and towns to create their own broadband services and then prevent them from expanding to other cities and towns.

"This attempt to distinguish Nixon fails," Tennessee wrote in its brief Friday. [T]he fact that Nixon addressed a flat ban was not critical; Nixon focused on the lack of clear statement authorizing the FCC to override State sovereignty."

When private broadband companies see demand in nearby areas, they can expand their territory to serve more customers. But municipal providers in North Carolina and Tennessee weren't able to expand even when adjacent cities and towns requested service.

"Tennessee grants municipal power boards authority to offer broadband service within their service areas," Tennessee wrote. "By preempting the geographical limitation, the FCC puts States on notice that once they authorize municipal broadband service of any kind, they may not revoke or limit that authority."

This violates the Supreme Court's ruling in Nixon, Tennessee argued. In that case, the Supreme Court "expressed concern with 'federal creation of a one-way ratchet' whereby a State 'could give the power, but... could not take it away later,'" Tennessee wrote. "This troubled the Court because it 'would mean that a State that once chose to provide broad municipal authority could not reverse course.'"

The FCC is scheduled to file its response to Tennessee by November 5.