Court Rules FCC Cannot Overrule State Laws Limiting City-Run Broadband

Potential pork projects hardest hit.


Stihl024 / Dreamstime.com

A federal appeals court panel has ruled this week that the Federal Communications Commission (FCC) overstepped its powers by attempting to subvert and overrule state laws that forbid cities from developing and operating their own broadband networks and competing with private providers.

This is a big deal in reining in an FCC that is attempting to intervene more and more in how Americans receive internet access, and it also represents a blow against a potential avenue for porkbarrel federal infrastructure spending in whatever projects the next president hopes to put into place (both Hillary Clinton and Donald Trump have each promised hundreds of billions of dollars in more federal spending in these areas).

The Sixth Circuit Court of Appeals panel ruled unanimously (3-0) that the FCC did not have the authority to bypass state laws that restrict or forbid municipal development and operation of broadband. To be clear, though, this was a very narrow ruling. The court didn't rule that the FCC could never overrule these types of state laws. Rather, the ruling was that there was no federal authorizing legislation that specifically gave the FCC authority to do so. Congress could pass a law that would allow the federal government to preempt the state laws that preempt city involvement in broadband operations. But it hasn't done so, and the FCC's attempts to bend the rules to make it happen anyway were smacked down.

FCC chairman Tom Wheeler complained about the outcome and ignored the legal issues that drove it:

Wheeler criticized the decision that "appears to halt the promise of jobs, investment and opportunity that community broadband has provided in Tennessee and North Carolina."

He said since 2015, "over 50 communities have taken steps to build their own bridges across the digital divide. The efforts of communities wanting better broadband should not be thwarted by the political power of those who, by protecting their monopoly, have failed to deliver acceptable service at an acceptable price."

Anybody who thinks that municipal broadband provides "acceptable service at an acceptable price" should read Kevin Glass' Reason piece from 2015 about what disasters and money pits government-operated broadband programs actually are. Far from competing with monopolies, many of them are proposed as revenue generators at the public's expense.

Chattanooga, Tennessee's broadband program is typically invoked as a success story (one of the lawsuits in this case involved the city trying to expand its program beyond its territorial boundaries, forbidden by state law). But as Glass noted, the reason the city was able to avoid going into debt building their broadband infrastructure was due to a huge infusion of federal stimulus spending:

What goes unmentioned is the cost. Chattanooga didn't build the network cheaply, nor did they even pay for it themselves. No, it took $111 million in federal tax dollars to get the network off the ground. This was doled out to Chattanooga as a part of President Obama's stimulus program. The success that Chattanooga has had in putting federal tax money to work was actually the impetus for the FCC's unilateral, unprecedented overturn of state-level municipal broadband laws; the Chattanooga EPB wants to bring its service beyond the lines of its current authority.

We can see the folly in using Chattanooga as a model for how other municipal broadband projects could work. Not every city can use the federal government to extract money from taxpayers in other cities and states to pay for their government broadband projects. The money has to come from somewhere; the feds can't redistribute hundreds of millions to every city in the country, and the cost for these networks in larger cities would be much, much higher. A proposed network in Seattle, for example, has been projected to cost up to $660 million.

And so we see exactly why the FCC needs to try to bypass or expunge state laws that limit operations. Chattanooga's "success" in building a city-run broadband network came at our expense. It was a federal pork project, and so one of the very obvious goals in this "broadband is a right" push is to federally subsidize other projects. This is not about creating "competition" or fighting monopolies. It's about directing federal money to various connected interest groups, both public and private.

Republican FCC Commissioner Ajit Pai had a better idea. Rather than trying to find new ways to spend federal money and push federal regulations into cities instead back off and make it easier for competition to develop. Whenever a monopoly is found in a public service, the hand of government is almost inevitably involved:

Republican FCC Commissioner Ajit Pai said that "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."

Below, Nick Gillespie and ReasonTV interview Pai about the FCC's meddling in the operations of the internet:

NEXT: Hillary Clinton and Donald Trump Both Want to Restore Detroit's Glory Days with Failed Economic Policies

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  1. Yeah, the only time I can remember that FCC tried to medal in a way that produced a libertarian outcome, but using distinctly non-libertarian methods to do so.

    1. Was it in the 200m Fly? Or Archery?

        1. I live to serve.

          1. Wow, you are Bene Gesserit?!

            1. Nonsense, there are no female libertarians.

  2. Republican FCC Commissioner Ajit Pai said that “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.”

    Sacrilege! Apostasy!

  3. This is my wheelhouse, and I recall several years back arguing with warren about access and how there are TONS of choices…that was like 8 years ago. Now the choices have exploded. Municipal broadband is exactly like watching a snake oil salesman come into town and sell the city council on his con. City Councilors are some of the dumbest lifeforms on the planet.

    1. “Aw, it’s not for you. It’s more a Shelbyville idea…”

      1. Wow, somehow I managed to realize this was a Simpsons quote. What the actual hell.

    2. Where do you live? My options are “State mandated monopoly cable company” or “State mandated monopoly phone company”.

      1. Again, this is the shortsighted view of a simple consumer. I run a business, I needed better SLAs at my home. I have at least 10 providers. YES some are resellers, but “one throat to choke” can be very effective.

        Granted, I do live in Denver, a not insignificant technologically savvy city. But as long as you are not in Paducah you should have at least 6.

        Cable, ILEC (old phone comapany), Satellite (There are two), Wireless (ATT and VZN)…that is 6 that cover MOST of the US.

        1. Not picking on you UCS but I get this a lot and it simply isnt true.

          1. Here’s a philosophical question I’m wondering about sattelite based services. If their orbital hardware has the capability to cover all of North America, but they choose to focus all of their sales and support efforts in the lower 48 between the rockies and the appalachians, are they technically competing further east and west and in canada and mexico?

            I’m not arguing I’m just contemplating.

            1. Iridium uses a constellation that covers the globe of LEOs (latency being an issue of course with GEOs). HughesNet adn Exceed are GEO providers, so no gaming for you. But all in all they will sell on the ground wherever their signal reaches and where the local laws allow. I have not seen too many restriction on sat providers.

              Another option is Wimax and other local microwave providers. You would need either an antenna or connection to a nearby office building with an antenna.

              1. I don’t mean to imply that you can game with Iridium services…or that you would want to pay the 4$ a minute. Just pointing out tech options…if you are in the middle of the ocean Iridium is the way to go…otherwise not so much.

              2. You would need either an antenna or connection to a nearby office building with an antenna.

                I’m the short building in my area, and no microwave antennae nearby that I am aware of.

                “Disqualified due to unacceptable latency” does not mean “Not competing” and is just a metric within the customer’s decision-making process. But yeah, anything high on latency won’t fit my usage pattern.

                Anyway, the hypotheical company above was the result of my realization that “I don’t think I’ve seen a single advert for satellite-based internet services, like, ever. Are they even trying to pick up customers in the area? if so, how?”

        2. Except that the wireless and wired phone company are the same people here (Verizon). AT&T data signal is so bad as to make it non-viable in this area. I don’t know what satellites cover this area, so you could well be right about them being available.

          1. Where are you BTW? There are always two or three regional providers scrambling for customers. Also, if you are serious about serious service a business account would be better…They can sometimes be cheaper too.

              1. Wow, you have a shit ton of options. Even Binghamton.

                My old job was network management for Alabany Rochester Syracuse and Binghamton.

                What is your goal and budget?

                p.s. Why am I not getting kickbacks from these companies?

                1. My goal is A*) Always working [no noticable outages or slowdowns] B) as fast as I can get.

                  My budget is ‘as little as I can get away with’.

                  *the non-negotiable element meaning my trade-offs are between B and the price tag.

                  1. If you aren’t rural Call Level3 (god I hated typing those words). Business class services. 10Mbps full duplex should be about 100-150 a month. SLAs are like 4 hours. TWTC used to have an integrated product using the Integral Access that could provide some possible cheaper alternatives but I am not sure Level 3 still does that. You can also get MORE expensive and blow it out with 100Mbps or 1Gbps.

                    The bummer is you are paying for full dup but only really downloading.

                    1. NOTHING will be as cheap as VZN dsl…just FYI.

        3. My options in Tucson:

          Cable, (municipal monopoly)

          ILEC (old phone company), (doesn’t provide broadband)

          Satellite (There are two), (available, if you don’t mind brutal latency problems)

          Wireless (ATT and VZN) (no broadband coverage where I live. If you you want to run your home network over a cell connection, I guess).

          1. Tuscon has also:
            Bluespan Wireless
            DakotaCom.net (some services are resale others are not)
            Integra (though I don’t see a metro -e option).

            And that is with the smallest of searches. So you have at LEAST 10 options.

            1. Its been a year or so since I looked, but I recall the wireless broadband providers not guaranteeing a decent signal where I live and/or having crap speed (up to 5 MBPs? What is this, 1995?)

              Sure, there are options, like a bicycle is an option to having a car. If you want decent speed and no latency, the list starts getting really short really fast.

              1. No, the list is still long it is just a lot more expensive.

                Go business and they will install fiber into your house…but you gunna pay.

                1. As I recall, and I did my homework at the time but its been a few years, my options were:

                  bicycles (satellite, wireless)

                  a car (cable)

                  my choice of yachts (business)

                  At some point, options stop being substitutable because of price or service. There are still very few substitutable options where I live for reliable, high-speed, residential internet service, is really my only point.

                  1. You have narrowed your criteria down so that you are only including the cable company. Hey, I get it. I do. But you can’t really say you don’t have choices. You have more for internet than you do for power company or president. Also, Yachts are yachts cause they have value. You are NOT getting a yacht for the price of a bicycle when you guy cable or dsl. You may THINK you are but you are not. The Yachts have 2-4 hour SLAs with refunds, guaranteed traffic throughputs, dedicated service teams, and often free support. Your residential does not. Most folks will never notice a drop in service quality because the vat majority of their internet is email and cat videos. You try hosting a service at home thought, without business class SLAs and you will be very sorry.

                    So your defined criteria limit you to one or two of the dozen options. Thats ok, but it doesnt mean there are only two choices.

              2. My point is people say they have two choices…no, they have two government subsidized choices. There are many more. Most do focus on business customers. Nothing has to say you are a business though. If you want high uptime, high throughput, and low cost well welcome to the club. Cause thats what everyone wants. The real myth is that your two local monopolies can provide that. Cause they don’t. There are many choices…just not many that are 24.99 a month. And sometime, look at your SLA for 24.99 a month…not pretty.

          2. And I use a cell as my backup connection for my class 2 datacenter.

            1. When we tried the Verizon cell option a few years ago, it was hideously slow and prone to dropping like a mofo. Maybe its better now.

      2. Having 2-3 choices is not uncommon for much of the country, especially rural areas and smaller cities and towns far away from urban centers, and that’s not really a competition (you probably have satellite Internet available, too, but its service and rates probably aren’t much more attractive). They can offer similar shitty service at similar sky-high rates because, seriously, what are you going to do, complain on Reddit?

        1. Satellite (at least two), Cellular (at least two), ILEC (one), Cable (likely 1). That is six. In almost all or rural America. Satellite has it’s issues as do cellular and terrestrial. But if you live on a farm, WoW gaming ain’t really your focus. If it is more to a city. Beyond that, you can stream cat videos till the actual cows actually come home.

          1. When I lived outside of San Angelo, my options for broadband were (a) satellite and (b) cell. There’s thousands of square miles where that’s basically it, in my experience. Not many people there, of course.

            My folks, who live in the middle of frickin’ nowhere, North Texas, have had fiber optic since forever, since there’s a fiber optic trunk about a mile from their house that they somehow tied into. I suspect, knowing Pater Dean, a combination of bribery and threats.

            1. Tapping a into a span is not easy but any location with a splice point should not be difficult. Of course taking glass off a national route would require some cajoling, scotch, hot tubs, and hookers…at least that what I would charge.

              1. CB, its like you met Pater Dean. You weren’t in North Texas several years ago, were you?

                1. North Texas…lets see, it was either Zayo, Level 3 or Att fiber.

                  1. This Dean sounds like a fine fellow…I like the cut of his jib.

  4. The court didn’t rule that the FCC could never overrule these types of state laws. Rather, the ruling was that there was no federal authorizing legislation that specifically gave the FCC authority to do so. Congress could pass a law that would allow the federal government to preempt the state laws that preempt city involvement in broadband operations. But it hasn’t done so, and the FCC’s attempts to bend the rules to make it happen anyway were smacked down.

    Hey, remember when a major federal program appeared to lack enabling legislation for ambiguous parts of its mandate, so SCOTUS kicked it back to Congress and admonished HHS for overstepping its authority?


  5. It’s Ok.

    The FCC is awesome because now xfinity can’t throttle Netflix.

    All is well.

    1. Please don’t oversimplify a very complex issue…SLD I do not believe the FCC is needed at all in this argument though.

      1. Unfortunately that’s the crux of most people’s interest in net-neut. They can’t even grok the business case for why broadband exists in the first place. And if you start in with Q/COS or how their property rights intersect with content vendors’, they usually just shut down and howl about evil corporations doing corporationey things.

      2. Could you provide a little more insight into what the major arguments are for/against net neutrality? I try to follow it and get lost in some of the jargon, but it is an important issue and I would like to fully comprehend it.

        1. This is tough. And I don’t like the term itself as the issue has little to nothing to do with what the media and politicians are spouting off about.
          But here goes:
          You have three components to how stuff gets to YOUR eyeballs.
          1. Content Creators – Hollywood, TV Producers, Cat videos (youtube), Games (WoW)
          2, CDNs, – Content Aggregators like Akamai and now Level 3
          3. ISPs – The wires/waves that connect to your device (tv, computer, PS4, etc.)

          YOU pay an ISP so that you can “get to the internet”. This model is simple. They put shit in the ground and in offices that is expensive so that your location can connect to everything else. The data goes from your house to a CO/POP/HeadEnd/DataCenter (the terms it burns). There these ISP co-locate with eachother (sometimes neutral locations sometimes not who cares). That way a packet from you, over your Company A isp can get to John who is on Company B isp. This is called peering.

          Now, lets say you want to watch youtube. You aren’t talking to John any more because of his comments on H&R about Trump and you have decided to watch cat videos. Now your packet (which is very little more than “send me cat video number 12734582”) gets sent over to a CDN like Akamai (not in youtubes case but bear with me here). Akamai says “I connect to the You of Tubes”. And then they get the cat video from Youtube and send it back to you. This video is, however, 478,295,642 bazillion peta bytes (its a big HD cat).

          …to be continued

        2. You start to watch it. YOUR isp Company A begins to cry…their network is not capable of handling the throughput to serve such video. So they spend millions upgrading their backbone to be able to deliver the cat video to you. Your bill was not increased, you didn’t even notice a change other than NOW you can watch that video. Who pays for that infrastructure upgrade? Well at this point Company A eats it.

          Company A has agreements with the CDNs. Cause Company A want its customers to be able to see cat videos. But these agreements with the CDNs are/were based on a “bi-directional relationship”. See, before ultra HD big cat videos shit was all “Yo, sup.” “Nuttin, sup wit u.” Which as you can see is tiny payload one way and tiny payload roughly equivalent the other way everybody wins nobody pays. All good. Then comes Netflix in particular. That traffic is one sided. All dumping from Netflix but none (practically speaking) going to it. This is the nature of content consumption.

          NOW, who is paying for Netflix Videos? Well, you are, sort of. You pay 10$ the them. You pay 100$ to Company A isp. Shocker, these do NOT cover the cost of keeping the network in a state that can handle Netflix type traffic. So the Company A start to throttle. You see no change in email, webpages, and the like. But you see your movies and big downloads start to slow/cache more.

          …more to come

        3. Enter the Content Creators. Now you pay HBO, who is not using a CDN, Netflix, who is, and your ISP. But of those three NONE have included in their pricing the ability to upgrade the network to serve all that content.

          This is the essence of the argument. Who owns your eyeballs. Is it the ISP who has the access to your house? Is it the CDN who gives you the internet? Or is it the content creator who made the cat video/next marvel movie.

          These battles are and SHOULD be waged in contract negotiations between those entities. Bringing the government in the mix only fucks shit up. Bandwidth throttling and shaping is one tool the ISPs have, content moratorium is one tool the Content providers have (this is seen in satellite tv all the time…the fucker screwed me out of about 3 Rockies games). And CDNs, which really just aggregate the content, are in the middle…laughing their ass off. The last biggest monkey wrench was by Level3 when they bought Savvis, a CDN. Now you have a CDN and ISP. Comcast is a CDN, ISP, and now Content creator. CenturyLink is just an ISP.

          Imagine, you are CenturyLink, your wireline customers want to watch Viacom content served by Comcast’s CDN. CTL now has to upgrade their network cause their customers want to use it to get to a competitors/content providers content.

          It is a crazy, convoluted, and nuanced problem. It is also solving itself WITHOUT the FCC.

          1. I suppose I should include:
            What the media and pols usually talk about is the tools the ISPs have to defend their networks from an onslaught of one way traffic that no one is paying for. They use protocol base filtering and throttling. This is seen as “unfair”. I have no idea why. If CTL does not want to serve its customers Netflix, it is no different than a taxi driver not wanting to take a fare to Compton. So everyone focuses on “They block traffic that isn’t from their own company/favored provider/etc. And my response is “this is a consumer problem…not a government one.”

            1. But but but but but CB!!!

              I was assured by dozens of people that Net Neutrality would give us broadband internet access so cheap that providers would be paying us for the privilege of accepting their service, downloads at six times the speed of light, and content so amazingly wonderful that we would all be in perpetual orgasm every time we turned on an Internet-connected device! Plus there would be peace in our time and endless manna from heaven!

              You mean that wasn’t true?

              1. It was true…but the ponys and unicorns killed the deal.

                1. DAMN THOSE UNICORNS! Always mucking things up.

  6. Start working at home with Google! It’s by-far the best job I’ve had. Last Wednesday I got a brand new BMW since getting a check for $6474 this – 4 weeks past. I began this 8-months ago and immediately was bringing home at least $77 per hour. I work through this link, go to tech tab for work detail.
    +_+_+_+_+_+_+_+_+ http://www.factoryofincome.com

  7. well with lefties, it’s only the narrative that counts. Cities good private companies bad, ho needs evidence? Like they are ever going to care about and documented proof showing how inefficient cities doing that was, and how much better internet access is than ever before

    1. Cities good private companies bad, ho needs evidence?

      I do love me a good typo, e.

  8. I wish the FCC would ban state and local franchise laws that block competition in most of the country.

    1. So your answer to government abuse on a local level is government abuse by unlected bureaucrats on a federal level?

      He who lives by government dictat dies by government dictat. The power to overrule local laws by regulation is a bigger problem.

      1. Yep. The federal response to a thousand flowers blooming is always going to be indiscriminate application of the weedwhacker.

    2. I believe the FCC can’t actually do that. Those monopolies are baked into the law; you know, to protect the companies’ “investments” in the infrastructure.

    3. Even if they did, it wouldn’t do much. Franchises in NJ are statewide and Verizon is putting fuckall into expanding FIOS. Which really sucks for me: I’m stuck in Cablevision land even though the development down the street is lit and the FIOS CO is less than a mile from my house.

      The business case for expanding broadband really isn’t there. Carriers don’t even bother with excess capacity on the Enterprise side: for the most part it’s if you want fiber then you’re paying to put it in the ground.

  9. Whenever a monopoly is found in a public service, the hand of government is almost inevitably involved[.]

    Now if only this fact could get through progressives’ fucking skulls.

    1. They like monopolies where they are easy to form, like government dominated sectors. They are paranoid about monopolies in freer areas of the economy where they are naturally unstable. They do not really object to monopoly, but they are deeply concerned about who controls, private entities making decisions without government input for a market sector deeply troubled progressives.

  10. So to sum up:

    FCC and crony-capitalist local governments lose

    Pro-private-enterprise state laws win

    Have I got it right?

    1. More:

      FCC and crony-capitalist local governments lose
      Different-crony-capitalist state governments win

      Neither side wants actual free market competition in telecommunications, they just disagree on which set of cronies deserves to benefit from government interference.

      1. True dat.

  11. Look, read this sentence again:

    “A federal appeals court panel has ruled this week that the Federal Communications Commission (FCC) overstepped its powers by attempting to subvert and overrule state laws that forbid cities from developing and operating their own broadband networks and competing with private providers.”

    You have to diagram that sentence to get the meaning.

    Describe the parties, who won and who lost, and then get into details about the issues involved. Easier to follow.

    1. “[so and so] won an important victory in [court] today. The dispute pitted [one side] against [another side]. At issue was [state laws] versus [federal and local laws]. The state laws prevailed.”

      Would that work?

      1. I think you have it wrong, and I’d be surprised if the cities themselves aren’t ultimately responsible for encouraging the FCC (maybe even bringing a suit preceding this challenge?) to help them overturn their own restraints, much like the EPA does with environmental pressure groups. So state laws against city-run broadband remain intact and the wannabe city monopolists and FCC are losers.

        1. OK, I didn’t fill in the Mad Libs this time, I just provided a template with blank spaces.

          1. The [fill in the blank] laws prevailed.”

            1. I see what you’re getting at now. I thought you were critiquing content, not syntax.

              1. I think his complaint was the syntax made it hard to parse the content.

                1. Well, at first I thought I got it, but now I’m not so sure, so, yes, the syntax seems to be a problem.

    2. So, the FCC was blocked from forcing states to allow cities to develop their own services to compete with private business.

      Sounds like a win to me.

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  13. FFS even Europe is moving away from state-controlled monopoly infrastructure and “utilities” – why are Americans even considering this junk?

    1. We lag behind in implementing bad ideas. We fail to implement good ideas.

      1. Does this mean we have to go full-on pre-Thatcher England before we come to our senses again? Fuuuuck.

  14. These are silly state laws. If a municipality is being poorly-served for a service by the market players — which is not unusual for rural areas and smaller cities when it comes to broadband access — and it is willing to manage its own service, it should be allowed to do so. Also, I feel the fact that TN passed this law while leaving public water and electrical utilities unaffected speaks volumes.

    That said, the FCC overstepped its bounds. If a state wants to stupidly overrule local broadband decisions, that is its choice.

    1. If a municipality is being poorly-served for a service by the market players

      That’s a big if. You have to wonder how many cities that are well-served would love to get their own city-owned (and undoubtedly subsidized and protected) company into the action purely for the revenue.

  15. Comcast and Verizon essentially own the U.S. Congress and the companies effectively form a price leader/price follower duopoly in many areas. By the way, the latency issue with satellite providers make it useless for many applications. DSL is painfully slow. If you are lucky enough to pick up a 4g signal, it’s still not real broadband and subject to the same disruptions as all wireless. And the existence of Comcast is an affront to civilization and capitalism.

  16. What do you mean that appointed, unelected officials can’t subvert the rule of law? Next you’ll be telling me the President can only serve two terms and congress is supposed to have the power of the purse! Madness I say!

  17. Good. Municipalities are subdivisions of states and not sovereign entities. They have as little or as much powers as the states choose to delegate. If this had been upheld, the logical future step would be the ATF overturning state level laws prohibiting municipalities from enacting gun control laws stricter than statewide ones.

    Wheeler should be tarred and feathered for the shit he’s been pulling at the FCC for the past several years.

  18. OMG, the Feds aren’t omnipotent – has anyone told Obama?

    1. He ordered the sea levels to recede. I don’t think he’s receptive to the truth.

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