Filing a brief last Friday with the Sixth Circuit Court of Appeals, the FCC defended its decision earlier this year to preempt provisions of Tennessee and North Carolina state law that limit the expansion of municipal broadband networks in those states.  The FCC declared that the case at hand “tests whether states can restrict competition and broadband deployment in interstate communications markets . . . by enabling their cities to provide service but then burdening the manner of that provision in order to protect private, incumbent providers.”  

Both states have asked the Sixth Circuit to assess the constitutionality of the FCC order, which was issued last February at the behest of the Electric Power Board of Chattanooga, Tennessee (EPBC) and the City of Wilson, North Carolina.  In addition to operating electric utilities, the EPBC and the City of Wilson both operate gigabit-speed broadband networks that provide data, video and voice services to customers.  Adopted by a 3-2 margin, the FCC order preempted geographic restrictions in Tennessee law that bar the EPBC and other utilities from offering broadband and video services beyond their electric service area boundaries.  With respect to the City of Wilson, the order also preempted “numerous conditions” imposed by North Carolina law that “effectively precluded Wilson from expanding broadband into neighboring counties, even if requested.”  

Although Tennessee advised the court that “any federal interference with a state’s control of its political subdivisions is unconstitutional,” the FCC countered that states could use that logic to “establish municipal broadband providers that were unconstrained by any federal law, including those of general applicability to all private providers such as limitation on a radio licensee’s broadcast frequency and strength, because any federal limit on city providers would intrude on the state’s ‘inviolate’ sovereignty.”  The FCC also maintained that its order drew a line between laws relating to a state’s sovereign control of its subdivisions, and those that enforce a state’s preferences regarding interstate competition.  According to the FCC:  “it is only the latter that the FCC found authority to preempt.”  Disputing provisions of North Carolina law that require imputation of “phantom costs aimed to mirror costs borne by private providers,” the FCC told the court that “this sort of regulation . . . is not a core sovereign function” and that such regulation serves “only to regulate interstate competition [and] deny broadband Internet service to people who want and need it.”