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FCC Moves to Lift State Limits on Government-Owned Broadband Service

The FCC unveiled a proposal to lift state laws that restrict the expansion of broadband service offered by municipal governments in Chattanooga, Tenn., and Wilson, N.C., a move that could lead to other local governments offering their own Internet service in competition with major cable and telco firms.

FCC chairman Tom Wheeler, above, has set a vote for Feb. 26 on his proposal to preempt state laws in Tennessee and North Carolina that prevent the Electric Power Board of Chattanooga and the city of Wilson from expanding their services to neighboring areas. Although the move would apply only to the specific cases, FCC officials believe the pending action could set a precedent for action on laws in other states.

Wheeler has long suggested that a way to boost competition in the broadband market would be to use the FCC’s authority to preempt such state regulations, laws that were in some cases put in place after aggressive lobbying by cable and telco firms.

President Obama last month announced his support for overturning state laws, characterizing them as a means by which special interests can limit competition. Some 19 state laws restrict local governments from offering their own service, according to Broadband Now.

“Many communities have found that existing private-sector broadband deployment or investment fails to meet their needs,” Wheeler said in a statement. “They should be able to make their own decisions about building the networks they need to thrive.”

Last month, Michael Powell, president and CEO of the National Cable & Telecommunications Assn., disagreed, saying that “while government run networks may be appropriate in rare cases, many such enterprises have ended up in failure, saddling taxpayers with significant long-term financial liabilities and diverting scarce resources from other pressing local needs.”

But FCC officials say that the vast majority of government-owned Internet service providers do not end in failure and, in some cases, have led to private providers decreasing prices and improving service.

Some lawsuits are expected if the FCC votes to circumvent state laws, and House and Senate Republicans have proposed net neutrality legislation that includes provisions preventing the agency from taking such an action.

Wheeler’s staff believes that it is on solid legal footing in preempting state laws, citing the federal government’s authority to regulate interstate commerce, as well as Section 706 of the Telecommunications Act of 1996. The latter directed the FCC to take action to remove barriers to broadband investment and competition.

“Provisions of the Tennessee and North Carolina law prevent expansion of service into surrounding unserved and underserved areas and constitute barriers to broadband deployment,” the FCC said.

An FCC official noted that the commission’s proposal applies to a situation in which municipalities already offered service yet were prevented from expanding into other communities. That is different from the FCC moving to circumvent laws in states that ban cities and towns from offering broadband service altogether. FCC officials believe that while states retain their authority to prevent cities from entering the broadband marketplace, they may not impose “regulatory burdens that are barriers to infrastructure investment and competition.”

The FCC also is expected to vote later this month on new net neutrality rules, with Wheeler planning to circulate his proposal to other commissioners later this week.

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