Federal Court Upholds State Laws To Restrict And Prevent City-Run Broadband Services

Last week, a federal appeals court overturned a Federal Communications Commission (FCC) ruling allowing community (a/k/a "city-run" or municipal) high-speed Internet service providers (ISPs) to expand into areas not served by commercial providers. The court decision immediately affects the expansion plans of community ISPs in Tennessee and North Carolina.

Community high-speed or broadband ISPs typically provide faster speeds (e.g., upload, download) and lower prices compared to commercial ISPs. Both states had passed laws preventing community ISPs from expanding, or making it onerous to expand. he FCC sought to stop such laws to encourage more competition, more choices, and lower prices for consumers.

The initial Reuters news report did not explain the rationale the court used. ABC News reported:

"The appeals court said that the FCC's order pre-empted the state laws and "the allocation of power between a state and its subdivisions." The court said the FCC's action requires a "clear statement" of authority in federal law, but the law does not contain a clear statement authorizing pre-emption of Tennessee's and North Carolina's laws... The appeals court said its ruling was a limited one, and it does not address other issues debated in the case, including whether the FCC has any pre-emptive power at all under the Telecommunications Act of 1996."

Chattanooga, Tennessee advertises itself as "Gig City," and is proud of its fiber broadband network:

"Only in Chattanooga, Tennessee is 1 Gigabit-per-second Internet speed available to every home and business - over 150,000 of them - throughout the entire community. Urban or rural, business or residence, Internet speeds that are unsurpassed in the Western Hemisphere – from 50 Megabits-per-second all the way up to one gigabit-per-second are accessible here. Today... Chattanooga's Fiber Optic network enables upload and download speeds 200 times faster than the current national average, and 10 times faster than the FCC's National Broadband Plan (a decade ahead of schedule)."

How fast is that? You can download a full-length movie in about 2 minutes. Is that faster than the broadband speed you get in your town or city? Probably. Is it cheaper than what you're paying? Probably.

The Attorneys Generals in several states have worked to prevent their residents from forming city-run ISPs. Tennessee Attorney General Herbert H. Slattery III released a statement:

"We are pleased with the 6^th Circuit decision reversing the FCC’s Order. As we have stated from the outset, this case was not about access to broadband. Instead, it was about preventing the federal government from exercising power over the state of Tennessee that it does not have. Current state law allows a municipal Power Board to provide internet service only within its electric service area. Today’s decision preserves Tennessee’s right to determine the authority and market area of a political subdivision organized under Tennessee law."

The trade associations that represents corporate ISPs, US Telecom released a statement:

"Today’s decision is a victory for the rule of law. The FCC’s authority is not unbridled, it is limited to powers specifically delegated by the Congress, and it does not extend to preemption of state legislatures’ exercise of jurisdiction over their own political subdivisions. As an industry that shares the commission’s interest in accelerating broadband deployment, we would suggest that the best way for the FCC to accomplish its goals is to concentrate on eliminating federal regulatory impediments to innovation and investment – where there remains to be much that can and should be done."

Of course, the trade group is happy with the court decision. State laws that restrict or prevent city-run ISPs mean less competition, which makes it easier for corporate ISPs to maintain higher prices and slower speeds (which equals greater profits).

Community ISPs provide benefits for small businesses, and not only consumers. The benefits include more jobs, better services, and the ability of local towns to attract new businesses and start-ups. These benefits apply to rural areas, too; especially rural areas not served by corporate ISPs.

The Community Broadband Networks site described the benefits for small businesses of community broadband in North Carolina:

"... Speed is important, but so is Internet choice, reliable service, and respectful customer service... Before Greenlight began serving Pinetops, the best community members could get was sluggish Centurylink DSL - or Internet access offered over the phone lines... Suzanne Coker Craig, owner of CuriosiTees, described the situation... Her business, a custom screen printing shop, uses an “on-time” inventory system, so speed and reliability is critical for last-minute or late orders... She also subscribes to Greenlight from home and her fiber connection is able to manage data intense uploads required for sending artwork, sales reports, and other large document transfers... Brent Wooten is a sales agent and Manager for Mercer Transportation, a freight management business... moving freight across the country via trucks, requires being on time; he’s an information worker in a knowledge economy... Before Greenlight came to town, Brent’s business paid Centurylink $425 per month for a few phone lines, long distance, an 800 number, and Internet access at 10 Megabits per second (Mbps) download and 1.5 Mbps upload. He was also wasting hours and even days each month trying to get his Internet fixed... When Greenlight came to the community, Centurylink changed their tune. Within hours of his business phone being ported to Greenlight, a Centurylink representative called him. “He offered to cut my current prices in half and double my Internet speed, from 10 to 20 Mbps…My Centurylink 10 Mbps speed never tested at more than 6 Mbps.” Brent chose to keep his Centurylink phone service, but he kept his 25 Mbps symmetrical Greenlight Internet service because upload speed is critical to his business..."

Will these rural consumers and small businesses lose their community broadband services? Given the court decision, that is possible. Will the court decision negatively affect jobs? Probably, since many small businesses depend upon the faster community ISPs. FCC Chairman Wheeler stated:

"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. 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.

In the past 18 months, 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. The FCC’s mandate is to make sure that Americans have access to the best possible broadband. 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. 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...”

In January 2015, several U.S. Senators introduced the Community Broadband Act legislation in to block these restrictive laws in 20 states and to encourage more competition and lower prices for more consumers by allowing residents the right to operate city-run ISPs offering faster speeds and lower prices. Last week, Senator Ron Wyden (Oregon - Democrat) tweeted about the federal court decision:

The legislation has stalled in the Republican-led Congress. Once again, you will hear politicians shout about the importance of defending state's rights against the FCC, while ignoring the rights of rural and small town residents to form community ISPs. Hypocritical politicians do this to protect their corporate ISPs donors from competition, which basically screws over residents by keeping prices high and speeds slow.

Residents in rural areas, small towns, and cities can claim, "we've been mugged" by state' legislatures that enacted laws preventing competition (and lower prices) from community ISPs.

Researchers compared high-speed Internet services worldwide, and found that consumers in the USA pay more and get slower speedsAnd Get Slower Speeds. That's great for corporate ISP profits and bad for consumers. The Community Broadband Act is an attempt to solve this problem.

Read the court decision: State of Tennessee, and the State of North Carolina; versus the U.S. Federal Communications Commission - (Adobe PDF). The FCC is reviewing the court's decision, and has not decided whether to appeal it.

The court decision is definitely pro-state law and anti-consumer. The court decision basically allows states to continue with laws that deny residents in local cities and towns the right to form, operate, and expand their own municipal broadband services to get lower prices and better services. That means less competition and higher prices for consumers living in states with these laws. Consider that when you vote in November.