President's broadband push pits FCC against states

President Obama gave the FCC his blessing this week to use its regulatory authority to pre-empt state laws prohibiting cities and towns from building broadband networks, but the agency will face opposition.

President Barack Obama's desire for more communities to have access to faster broadband networks could throw the Federal Communications Commission, the agency tasked with making that vision a reality, into a nasty legal battle.

President Obama made remarks supporting municipal broadband deployments at Cedar Falls Utilities in Cedar Falls, Iowa, this week.
President Obama made remarks supporting municipal broadband deployments during a speech at Cedar Falls Utilities in Cedar Falls, Iowa, this week. Official White House photo by Pete Souza

The president outlined his plan for making broadband more accessible to Americans, particularly those in rural communities, at an event in Cedar Falls, Iowa, on Wednesday. As part of this new push, he's urging the FCC to strike down state laws so communities have the option to build networks that can deliver Internet speeds of at least 1 gigabit -- or 100 times faster than a conventional connection.

The initiative casts a spotlight on a question the FCC has been skating around for nearly a decade: How much authority does the agency really have to regulate and promote the Internet? On one side, FCC Chairman Tom Wheeler and Democrats including the president believe existing regulations give the agency explicit authority to promote broadband and remove barriers to competition, even if that means stepping on states' rights. On the other side, Republicans, like FCC Commissioner Ajit Pai, say no federal agency can pre-empt state laws.

The FCC is set to take the first steps to overturn state laws at its open meeting February 26, when it votes on petitions filed by Chattanooga's Electric Power Board and the government of Wilson, NC, both of which want to expand existing gigabit broadband networks. The petitions ask the FCC to strike down state laws in Tennessee and North Carolina that limit municipal broadband deployments.

Experts say the legal challenges will start right after the FCC acts on those petitions.

"Count on 20-plus state attorneys general to challenge, constitutionally, the FCC's frontal assault on their core sovereign state functions of determining economic and fiscal policy," Scott Cleland, president of Precursor, a Washington, DC-based consultancy that works with broadband clients, said in a blog. He expects it to be one of the agency's toughest fights.

Nineteen states prohibit local municipalities from building or running their own broadband networks. The president said that needs to change to encourage competition and the rollout of higher-speed networks.

Wheeler has already signaled his support for the petitions. With Obama's endorsement, it's now likely the other two Democrats on the FCC will vote in favor of the requests.

The battle lines

Cedar Falls was a convenient location for the president to make his case. Iowa doesn't have a law restricting municipal broadband and its Republican governor favors building such networks.

The local municipally owned utility built its own fiber network and now offers 1 gigabit-per-second Internet speeds. The president said more communities should have the same ability to build their own high-speed networks. He blamed cable and telecommunications companies, which feared the additional competition from municipalities, for lobbying state governments to prevent more cities from building their own broadband networks.

"In too many places across America, some big companies are doing everything they can to keep out competitors," Obama said this week. "In some states it is virtually impossible to create networks like the one you have in Cedar Falls. Enough is enough; we're going to change that."

The Tennessee and North Carolina petitions before the FCC, filed in July, are just the first. Other communities will have to file their own petitions to strike down their state laws.

Wheeler intends to make it happen. He warned the cable industry at its April 2014 conference that he planned to use the FCC's authority to overturn state laws prohibiting towns and cities from building their own broadband networks. "I believe the FCC has the power -- and I intend to exercise that power -- to pre-empt state laws that ban competition from community broadband," he said during his keynote speech at the Cable Show confab.

The president said Wednesday that he sent a letter to the FCC in support of this effort.

Does the FCC have authority to pre-empt state law?

Wheeler says the FCC gets its authority to pre-empt these state laws through a provision of the 1996 Telecommunications Act, so-called Section 706, which the agency uses as a basis for all of its regulatory authority over the Internet.

In that section, it says the FCC "shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans." It also says the agency should use that authority to "promote competition" in local markets and "remove barriers to infrastructure investment."

The FCC's authority under Section 706 was bolstered last year in a ruling by a federal appeals court, which struck down the FCC's 2010 Open Internet rules but upheld the agency's authority to regulate other aspects of the Internet.

Even Judge Laurence Silberman, who disagreed with the majority in the 2014 case, believed the law gives the FCC authority to regulate other aspects of the Internet, including barriers to deployment. In a footnote in his dissenting opinion, Silberman highlighted municipal broadband projects, noting that state laws that prohibit municipalities from building broadband networks are "a paradigmatic barrier to infrastructure investment" the FCC could remedy given its authority under Section 706.

Though Obama and Wheeler have felt emboldened by that opinion, the broadband industry and Republican commissioners on the FCC disagree with their interpretation. Pai offered a prelude to the legal battle in his statement after Obama's speech.

"As an independent agency, the FCC must make its decisions based on the law, not political convenience," Pai said. "And US Supreme Court precedent makes clear that the commission has no authority to pre-empt state restrictions on municipal broadband projects."

Pai has said the real debate isn't whether states should adopt laws preventing cities and towns from building their own broadband networks. Instead, he said in a speech in August, the real question is whether the FCC has the authority to override state laws. "The debate at the commission is going to be about a relatively narrow but critical question: Does the FCC have the legal authority to pre-empt state laws regulating municipal broadband?" he said. "The answer to that question is a resounding no."

Pai added that the FCC has been down a similar path before, and noted that the courts, including the Supreme Court, rejected the basis of such arguments.

The case for better broadband

Still, both Obama and Wheeler say the need for faster Internet access in more communities -- especially rural parts of the US -- is key. A recent FCC report found that 53 percent of rural Americans have no access to high-speed Internet. The agency also suggested boosting the defined speeds for broadband to 25 megabits per second for downloads, which is the recommended speed for streaming ultrahigh-definition video. The previous standard was only 4Mbps for downloads.

"Right now about 45 million Americans cannot purchase next-generation broadband," Obama said this week. "That next-generation broadband creates connections that are six or seven times faster than today's basic speeds, and only about half of rural Americans can log on at that superfast rate."

Community broadband projects are just one way to promote the build-out of faster networks. Some communities are also partnering with companies to bring high-speed broadband to their cities. Internet search giant Google has received the most attention with its Google Fiber efforts in cities like Kansas City and Austin, Texas. The group Gig.U is working to bring universities, local governments and private industry together to build citywide and regional high-speed broadband networks in, among other places, North Carolina, Connecticut and Maine.

"This is great that the president is recognizing that as a national policy, communities need affordable, fast broadband," said Blair Levin, head of the Gig.U project and author of the FCC's 2010 National Broadband Plan. "Cities are essential players in making this happen."

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