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Focus on Regulation

Sixth Circuit to Hear Oral Argument in Challenge to Municipal Broadband Rules

The Sixth Circuit Court of Appeals has scheduled oral argument for March 17, 2016, in an important case regarding the Federal Communications Commission’s (FCC’s) ability to preempt state laws that place restrictions on local municipalities’ ability to provide their own broadband networks.  Today, 20 states limit the ability of local governmental agencies, such as utilities or branches of city government, to deploy their own broadband networks by, for example, limiting the amount of debt they can incur to build the network.  But the FCC recently stepped in to lift limitations adopted in two states.  Both states have appealed the FCC’s decision, and the Sixth Circuit will soon hear oral arguments in these cases.

Specifically, in February 2015 the FCC voted to preempt (or overrule) laws in Tennessee and North Carolina that curtailed local governmental agencies’ abilities to provide broadband service.  In Tennessee, state law prohibited electric utility companies from providing broadband or video service outside of their electric service territory.  In North Carolina, state regulations prevented municipalities from incurring significant amounts of debt to finance broadband networks.  In an effort to promote greater broadband deployment, the FCC used its authority under federal law to “remove barriers to infrastructure investment” to strike down these limitations.  The FCC struck down these restrictions despite Supreme Court precedent suggesting that preemption of state laws governing the state’s relations with its own subdivisions is more problematic than preemption of state laws governing private conduct.

Disagreeing with the FCC’s decision, the State of Tennessee filed an appeal with the Sixth Circuit Court of Appeals.  North Carolina filed a similar appeal in the Fourth Circuit Court of Appeals, which was then transferred to the Sixth Circuit and consolidated with Tennessee’s appeal.  The Sixth Circuit has now scheduled oral argument in the cases.

The Sixth Circuit’s ruling will have far reaching implications for municipal broadband networks.  If the court upholds the FCC’s decision, other local governments will likely petition the FCC for similar preemptive relief.  Meanwhile, Tennessee and North Carolina are both likely to appeal a decision in the FCC’s favor to the Supreme Court.  Either way, these cases will likely change the regulatory landscape for broadband service in almost half the states in the country.