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

Potential pork projects hardest hit.


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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: