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Perspectives from FSF Scholars       

  

Vol. 9, No. 10                    February 26, 2014  
                                
 

FCC Preemption of State Bans on Municipal Broadband Networks Is Most Likely Unlawful

 

by

 

Seth L. Cooper *

 

[Below is the Introduction to this latest FSF Perspectives. A PDF version of the complete Perspectives is here.]

Following its second stinging judicial rebuke in as many attempts to impose Internet regulations, the FCC is now gearing up for a third try. A February 19 statement by FCC Chairman Tom Wheeler outlined a new plan to exert FCC power over broadband Internet services. Not surprisingly, the plan calls for re-thinking the FCC's already overanalyzed legal rationale for imposing network neutrality rules.

 

What might surprise is the plan's call to examine state laws that keep local governments out of the Internet business. It hints at federal preemption of state-level restrictions on municipal broadband projects.

 

But preemption would undermine local government accountability to state governments and to taxpayers. Any FCC attempt to interfere with the relationship between states and their local governments will run up against basic free market and federalism principles.

 

Nearly twenty states restrict local government entry into the business of providing broadband Internet services. Such laws prevent local government conflicts of interest with the private sector marketplace competitors who invest tens of millions of dollars in localities to build out their broadband networks. They also protect local taxpayers from potentially devastating financial losses from poorly-run municipal broadband projects.

 

Federal law contains no clear statement authorizing preemption of state restrictions on their cities and counties going into the telecommunications or broadband Internet business. No matter how broad its regulatory power under Verizon v. FCC - and it is not likely to be as broad as the Commission surmises - the FCC cannot interfere with state control over cities and counties absent a clear statement of intent by Congress.  

 

FCC preemption of state restrictions on government-owned broadband projects would violate constitutional federalism principles. Local governments are creations of the states. It would be constitutionally improper for a federal agency to turn counties or cities into separatist enclaves by granting them powers that their respective states never delegated to them in the first place.

 

The U.S. Supreme Court previously rejected federal law preemption of state prohibitions on telecommunications services. In Nixon v. Missouri Municipal League (2004), the Supreme Court expressly rejected claims that Section 253(a) of the Communications Act preempted a statute prohibiting its cities and counties from offering telecommunications services. The Court based its decision on the "clear statement" rule and constitutional federalism problems posed by preemption of fundamental state sovereign functions.

 

Also, a 1997 order by the FCC rejecting preemption of a Texas restriction on local governments providing telecommunications services is an agency precedent that weighs against preemption. Should the FCC attempt preemption in the future, it would have to offer a reasonable explanation for disregarding the reasoning behind its 1997 order.

 

In short, states that safeguard taxpayers from financially risky government-owned broadband ventures, most of which lose money, are safeguarded by constitutional principles and precedents. Rather than restrict states' ability to ensure the financial soundness of their cities and counties, the FCC should look to promote successful private sector-led investment in faster and better broadband networks. When it comes to local barriers to broadband investment, the FCC should seek ways to end rights-of-way discrimination, streamline tower siting rules, reform franchising processes and fees, and clear away other red tape.

 

* Seth L. Cooper is an Adjunct Senior Fellow of the Free State Foundation, an independent, nonpartisan free market-oriented think tank located in Rockville, Maryland. This Perspectives from FSF Scholars essay is a revised version of a blog post that originally appeared at The American Legislator.

 

A PDF version of the complete Perspectives is here.

   

 

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FSF's newest book, Communications Law and Policy in the Digital Age: The Next Five Years, is chock-full of many good reform-minded ideas for implementing a free market-oriented communications policy suitable for the digital age. There are essays by Christopher Yoo, Jim Speta, Bruce Owen, Michelle Connolly, and other prominent scholars. You may order the book from Carolina Academic Press here, from Amazon here or from Barnes & Noble here.

  

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Don't Miss FSF's Sixth Annual Telecom Policy Conference!
 
   
"A New FCC and a New Communications Act: Aligning Communications Policy with Marketplace Realities"

 

To register, click here.

  

 

Tuesday, March 18, 2014  

8:45 AM - 2:45 PM

 

The National Press Club

Washington, DC

 

Keynote Speakers

  

Opening Keynote Address 

FCC Commissioner  

Mignon Clyburn  

   

Lunch Session "Armchair" Conversation with FSF President Randolph May   

FCC Commissioner  

Michael O'Rielly 

      

Closing Keynote Address 

FTC Commissioner  

Maureen Ohlhausen

 
Other Speakers

 

Rebecca Arbogast

Comcast

 

Shawn Chang

House Commerce Committee 

 

Jim Cicconi

AT&T

  

Gus Hurwitz

University of Nebraska College of Law and FSF 

 

Steve Largent

CTIA   

 

Daniel Lyons 

Boston College Law School

and FSF

 

Michael Powell

NCTA

 

 David Redl

House Commerce Committee

 

Craig Silliman

Verizon 

 

Deborah Taylor Tate

FSF

 

Nicol Turner-Lee

MMTC

 

Philip Verveer

FCC

 

Christopher Yoo

University of Pennsylvania Law School and FSF 

   

Complimentary continental breakfast and lunch are included, but you must register to attend!

 

To register, click here
 

 


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