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Appeals Court Thwarts FCC Effort to Expand Publicly Owned Broadband

Tom Wheeler FCC
AP Photo/Lauren Victoria Burke

A federal appeals court ruled that the FCC cannot preempt state laws that place restrictions on cities and other public entities from offering broadband service.

A three-judge panel of the Sixth Circuit Court of Appeals ruled that the FCC relied on a statute that lacked a “clear statement” that it had the authority to preempt state laws.

The case involves two public entities that sought to expand their offering of broadband beyond their service area.

Chattanooga, Tenn., had offered high speed broadband Internet service through its electric utility, but was restricted by a state law that prohibited expansion outside its service area. The city of Wilson, N.C. also sought expansion of broadband service beyond its municipal boundaries, but was restricted by a law in that state.

The FCC, however, concluded in 2015 that the state restrictions were preempted by the 1996 Telecommunications Act and its purpose of removing barriers to investment and competition.

FCC chairman Tom Wheeler said that the appellate decision “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.”

He added, “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.”

Major broadband providers opposed the FCC’s efforts, along with the states of Tennessee and North Carolina.

In the opinion, Judge John Rogers wrote that the FCC’s order “essentially serves to reallocate decision-making power between the states and their municipalities.”

Update: Rep. Fred Upton (R-Michigan), chairman of the House Energy and Commerce Committee, and Rep. Greg Walden (R-Ore.), chair of the communications and technology subcommittee, said the court made “the right call.”

“The FCC’s regulatory overreach was not only ill-conceived but illegal, and this direct rebuke should serve as yet another wake up call for the commission to heed the limits of its authority,” they said in a statement. “States have been and will continue to be best suited to determine whether municipalities should build out broadband networks using tax-payers’ dollars.”