These comments are filed in response to the Commission's request for comments on petitions filed seeking preemption of certain state restrictions on municipal broadband networks. For state policy imperatives such as local taxpayer financial protection and avoidance of conflicts of interest, as well as for serious legal and constitutional reasons, we urge the Commission to reject the Petitioners' requests for federal preemption.
States are entrusted with ensuring that their political subdivisions, which are created by the states, act in a financially responsible manner. To protect local taxpayers, several states have adopted safeguards related to local government financial practices. In many cases, these safeguards prohibit local governments from going into the broadband Internet business or impose safeguards that make it more difficult for the municipalities to do so. And in other cases, local voter approval is required before municipal broadband networks may be established. These state laws protecting local taxpayers from financial fiascoes related to municipal broadband networks are backed by experience. The track record of municipal broadband networks includes a significant number of highly-publicized, debt-ridden failures.
Preemption of these state laws would eliminate important financial safeguards. For those states that prohibit municipal broadband networks, preemption would result in a bizarre grant of power by a federal agency to local governments. And in some states preemption would result in an illiberal scenario whereby a federal bureaucracy eliminates requirements provided under state law for local voting by municipal residents.
States also have legitimate interests in avoiding conflicts of interest posed by local governments going into direct competition with the private sector broadband providers that they regulate. Municipal broadband networks are often subsidized directly by the taxpayers or backed by government bond issues. They are granted special privileges, such as favored rights-of-way treatment. There is also the risk of local governments excusing municipal broadband networks from running the bureaucratic gantlet of permitting and licensing processes through which private providers must pass.
Preemption would remove protections against local government conflicts -of interest and thereby make them more likely. It would undermine the policy choices of many states that prefer to keep the role of government as a neutral enforcer of laws and regulations distinct from the highly problematic role of government as a marketplace competitor.
A plain reading Section 706 of the Communications Act reveals no delegation of preemption power by Congress. It is a statutory provision completely devoid of a clear statement of intent to authorize preemption of such an important and historic state interest. Under the structure of our federalist system, states have authority over the policies of the local governments they create. The Constitution does not recognize county or city sovereignty.
The Commission's precedents recognize the role of states in creating and overseeing their local governments. Those precedents also recognize the limits of the Commission's power to interfere with state-local governing relationships. As the Commission's 1997 Order rejecting preemption of state law restrictions on municipal telecommunications networks said: "[S]tates maintain authority to determine, as an initial matter, whether or to what extent their political subdivisions may engage in proprietary activities."
The U.S. Supreme Court upheld the Commission's own rejection of preemption in 1997. In Nixon v. Missouri Municipal League (2004), the Court found that Section 253 of the Communications Act contains no clear statement of intention to preempt state law restrictions on municipal telecommunications networks. Nixon recognized that state control over their political subdivisions is a matter of traditional state concern requiring a clear statement of Congressional intent to preempt. That recognition applies equally in the case of municipal broadband networks. Preemption of state law restrictions on municipal broadband networks would run afoul of the Court's decision in Nixon.
Further, structural federalism principles contained in the U.S. Constitution prohibit the Commission from preempting states' authority to decide "whether or to what extent their political subdivisions may engage in proprietary activities," such as municipal broadband services. As the Supreme Court stated in Printz v. United States (1997), "[t]he Framers explicitly chose a Constitution that confers upon Congress the power to regulate individuals, not 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 or later chose to withdraw. Likewise, the Court in Nixon recognized that "preemption would come only by interposing federal authority between a State and its municipal subdivisions, which our precedents teach, 'are created as convenient agencies for exercising such of the governmental powers of the State as may be entrusted to them in its absolute discretion.'"
Rather than restrict states' ability to ensure the financial soundness of their local governments, the Commission 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 Commission should seek ways to end rights-of-way discrimination, streamline tower siting rules, reform franchising processes and fees, and clear away other red tape.
