6th Circuit Rules FCC Can't Lift State Bans on Muni Broadband Expansion

The order "essentially serves to re-allocate decision-making power between the states and their municipalities," said the opinion by Judge John Rogers, who was joined by Judge Joseph Hood, with Judge Helene White concurring in part and dissenting in part but mainly supporting the majority ruling. "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 § 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.”

Wheeler blasted the ruling. “It appears to halt the promise of jobs, investment and opportunity that community broadband has provided in Tennessee and North Carolina. 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. … 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," he said. "We will consider all our legal and policy options to remove barriers to broadband deployment wherever they exist so that all Americans can have access to 21st Century communications,” Wheeler continued. “Should states seek to repeal their anti-competitive broadband statutes, I will be happy to testify on behalf of better broadband and consumer choice. Should states seek to limit the right of people to act for better broadband, I will be happy to testify on behalf of consumer choice.”

Pai said he "warned that the FCC lacked the power to preempt these Tennessee and North Carolina laws and that doing so would usurp fundamental aspects of state sovereignty. 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.” Fellow Republican Commissioner Michael O’Rielly said he was “heartened” by the ruling. “The FCC clearly tried to invoke imaginary authority and finally was called out by a court for doing so,” he said. “Unless Congress specifically authorizes FCC intervention, States rightly can limit government-operated broadband networks in order to protect their citizens’ pocketbooks and good senses. Contrary to some beliefs, municipal networks are not panaceas to solving any lack of ubiquitous broadband, but instead unfairly distort the marketplace.”

Commissioner Mignon Clyburn said: “Local governments that want to bring connectivity to their communities, particularly when the private sector has failed to do so, should be able to ensure that their citizens have access to the enabling opportunities broadband brings. State laws like the ones upheld today are part of the reason why families on one street may have gigabit service, while those on the other have nothing. It is sad that those laws will still stand tall and act as a barrier to digital inclusion and universal opportunity for all.”

The decision won’t stop the wave of muni broadband deployments, said Sen. Ed Markey, D-Mass. "While I am disappointed with the court's ruling, the movement in communities to move forward with building municipal broadband networks is only growing. Congress intended to provide the FCC the tools needed to encourage deployment of advanced telecommunications networks, and when states impose barriers to that very deployment, the FCC should act.”

The fight isn’t over for EPB, the municipality-owned power and fiber company that operates the Chattanooga broadband service at issue in one state lawsuit, EPB President David Wade said in an emailed statement. “We will continue to work with the growing number of state legislators and grassroots citizens interested in removing the barriers that prevent EPB and other municipal providers from serving our neighbors in surrounding areas who have little or no access to broadband.”

Before the ruling, a Tennessee state report supported removing muni broadband restrictions​. The report, released last month by the Tennessee Department of Economic and Community Development (DECD), suggested the state create an open regulatory environment to reach the 13 percent of the state that lacks high-speed broadband. The department afterward distanced itself from the findings, saying the report reflected views of the authoring consultants (see 1607200066). Wade said he's “encouraged by [DECD] Commissioner Randy Boyd’s interest in addressing the lack of broadband in rural areas. As the head of the [Department], he is especially well positioned to join with state lawmakers in addressing this challenge on behalf of Tennesseans.”

Tennessee Gov. Bill Haslam (R) "is committed to developing potential solutions to close the gap on broadband access" there, said a spokeswoman. "He firmly believes that these types of decisions are best made at the state level and that states have a strong interest in overseeing the process for approval and deployment.”

Section 706

The court relied on the Supreme Court’s 2004 decision in Nixon v. Missouri Municipal League, which said federal pre-emption of states is allowed only when there's a clear statement in the authorizing statute.

“Precedent makes clear … that if Congress has the power to allocate state decision making, it must be very clear that it is doing so,” Rogers wrote. “Section 706 does not contain a clear statement authorizing preemption of Tennessee’s and North Carolina’s statutes that govern the decisions of their municipal subdivisions. … Because § 706 cannot be read to limit a state’s ability to trump a municipality’s exercise of discretion otherwise permitted by FCC regulations, § 706 cannot be read to authorize such preemption." Neither state law required municipalities “to violate any FCC rule or regulation,” Rogers said. "There are no FCC rules or regulations requiring municipalities to expand their service offerings beyond their territorial boundaries.”

White agreed in a separate opinion that Nixon compelled the court to reverse pre-emption. "Because these provisions address the States’ historic authority to govern through its subdivisions, a clear statement of Congressional intent to preempt that authority is necessary," she wrote. "I do not, however, understand the clear-statement cases to require a clear statement whenever the state statute or regulation sought to be preempted affects local government in any fashion.” She said the FCC "correctly finds” in Section 706 “a Congressional grant of authority to preempt the enforcement of state laws that directly conflict with Congress’ intent as expressed in the Telecommunications Act. … If a state statute is a barrier to infrastructure investment and competition, § 706 authorizes the FCC to remove it by preempting its enforcement.”

Rogers offered a caveat reining in possible repercussions. “Our holding today is a limited one. We do not question the public benefits that the FCC identifies in permitting municipalities to expand Gigabit Internet coverage. Furthermore, we need not, and do not, address a number of legal issues debated by the parties, including (1) whether § 706 provides the FCC any preemptive power at all, (2) whether Congress, if it is clear enough, could give the FCC the power to preempt as it did in this case, (3) whether, if the FCC had such power, its exercise of it was arbitrary or capricious in this case, and (4) whether and to what extent the clear statement rule would apply to FCC preemption if a State required its municipality to act contrary to otherwise valid FCC regulations.”

The 6th Circuit didn’t resolve whether the FCC has broadband authority under Section 706, TechFreedom President Berin Szoka said in an emailed statement. “Unfortunately, the court did not need to reach the $966 billion question: Is Section 706 really a grant of authority?” said Szoka, who opposed the FCC net neutrality order. “It could be years before the courts finally address this question, so Congress must act to rein in the agency.”

States Laud, Munis Lament

The decision pleased NARUC, which backed the states in the case. “Municipal governments are creations of state law, and their powers exist only because a state has given them a right to exercise them,” NARUC President Travis Kavulla said in an emailed statement. “For the FCC to attempt to remove the restrictions states have imposed on the operation of city governments was an offense to the Constitution, and I am delighted that the Court reversed the decision.” NARUC Telecom Committee Chairman Chris Nelson said he doubted the Supreme Court would agree to hear the case should it be appealed by the FCC. “The law is clear,” he said. “The Court recognized the simple fact that nothing in the Telecommunications Act provides the FCC with the power to give authority to a State entity that is not granted by that State’s constitution or legislature.”

Municipalities represented by NATOA disagreed with state bans. “When private industry fails to step up to the plate and provide Internet services that will enable our communities to thrive in today's fast paced and worldwide economy, local governments should have every option available to right this wrong,” NATOA said in an emailed statement. Community broadband advocates also protested. "We're disappointed that the FCC's efforts to ensure local Internet choice have been struck down," said Community Broadband Networks Director Christopher Mitchell of the Institute for Local Self-Reliance. "Communities desperately need these connections and must be able to decide for themselves how to ensure residents and businesses have high quality Internet access.”

The FCC had faced tough questioning from Rogers at March oral argument (see 1603170031). “It took enormous chutzpah for the FCC to try to preempt state broadband laws, so this is a well-deserved rebuke for an agency run amok,” said Szoka, who had predicted FCC defeat. Free State Foundation President Randolph May said he wasn’t surprised that the court relied on Nixon: “However great Chairman Wheeler may imagine the FCC's authority, or wish it to be, the appeals court has made clear that such authority does not extend to altering the federalist structure of our Constitution.”

Ex-FCC Commissioner Michael Copps stabbed a finger at private lobbying of state legislatures. “Let’s be clear: industry-backed state laws to block municipal broadband only exist because pliant legislators are listening to their Big Cable and Big Telecom paymasters,” said Copps, special adviser to Common Cause. “These corporate providers invest in campaign contributions rather than in deploying high-quality broadband.” He pledged to “redouble our state-by-state efforts to repeal these odious policies.”

“This case was never about the best way to get broadband into rural communities,” countered AT&T Senior Executive Vice President-External and Legislative Affairs Jim Cicconi, who's retiring (see 1608100041). “It was about whether the FCC had legal authority to preempt state law. Despite clear Supreme Court precedent, and without explicit preemption authority in the statute -- which the Supreme Court has said is necessary -- the FCC nonetheless went forward.”