When the Federal Government Goes Too Far

On February 2, 2015, Federal Communications Commission (FCC) Chairman Tom Wheeler released a statement supporting federal preemption of state laws that restrict municipal broadband networks.  On February 26, 2015, two other FCC commissioners agreed with the Chairman, and voted to overturn laws in North Carolina and Tennessee that restricted local municipalities’ ability to build government owned networks.  Both states filed suit in March 2015 in the U.S. Court of Appeals for the Sixth Circuit to have the FCC’s decision overturned.

Laws similar to those overturned in North Carolina and Tennessee have been enacted in 17 other states.  The restrictions range from requiring that municipal communications services must be both mandated by a referendum and self-sustaining, to complete prohibitions on cities and towns selling telecommunications services if a private sector company already provides such services.  The FCC’s actions have raised constitutional and legal questions that must be addressed.

The Tenth Amendment states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

In The Federalist Papers #45, Madison provided an explanation of the intent for this amendment:  “The powers delegated by the proposed Constitution to the federal government are few and defined.  Those which are to remain in the State governments are numerous and indefinite.  The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected.  The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.”

In an April 10, 2015 review of municipal broadband in Bloomberg BNA, Phoenix Center for Advanced Legal & Economic Public Policy President Lawrence Spiwak noted, “Regardless of what one may think about the merits of municipal broadband, the FCC’s actions have raised a serious issue of Constitutional law: that is, can the federal government dictate to a state how it governs its municipal subdivisions?” 

Spiwak further wrote that the FCC has only narrow preemption authority under Section 253 of the Telecommunications Act of 1996.  In fact, when Section 253 was used to support preemption of municipal broadband restrictions, the Supreme Court held in Nixon v. Missouri Municipal League (541 U.S. 125) that the Act does not permit the FCC to overrule state laws regulating how municipal governments engage in telecommunications services.  The Court wrote that “The class of entities contemplated by §253 does not include the State’s own subdivisions, so as to effect the power of States and localities to restrict their own (or their political inferiors’) delivery of telecommunications services.”

It now appears that the Department of Justice (DOJ) also sees the folly of the FCC’s assertion of jurisdiction over state laws.  While the DOJ usually supports agency decisions, this time it has declined to weigh in on whether the FCC has the authority to overturn a state’s jurisdiction over its own localities.  But, in its own legal brief, the FCC doggedly clings to the notion that Section 706 of the Act grants its such broad authority to regulate that it has unrestricted authority to overturn state laws in order to effect change, with little regard to the state policy-makers who found these laws were necessary to protect the public residing in their communities from potentially poor municipal investments.

As CAGW has often noted, municipal broadband projects have proven time and again to be a waste of taxpayer dollars.  When Wilson, North Carolina and Chattanooga, Tennessee initially filed their petitions to the FCC requesting that their state laws be overturned, CAGW President Tom Schatz weighed in with the agency, noting, “The petitions would require the FCC to effectively overturn state laws and authorize these municipalities to build out broadband networks.  In other words, the federal government would allow them to undertake risky ventures that have proven very costly to taxpayers.” 

Schatz went on to state, “Municipal broadband networks are funded at taxpayer expense and often compete against private sector broadband investments.  The building of municipal broadband in communities across the country is driven by the purported desire to “plug gaps” in broadband access; inject competition into the local and national marketplace; spur local economic development; achieve ubiquitous gigabit connectivity; and provide local self-reliance and self-determination in the broadband space.  However, opening the door to publicly-funded telecommunication services also puts municipalities into competition with existing businesses and places taxpayer dollars at risk.”

Besides being of questionable constitutionality, the FCC’s usurpation of state jurisdiction over their local municipalities creates a dangerous precedent for even greater federal government control of the Internet.  The outcome of the court case could also impact how other federal agencies view the preemption of state laws.