Government-built infrastructure, we’re told, only ends up hampering free market competition.
That’s one of the reasons that opponents of public broadband support state pre-emption laws to restrict cities and towns from building their own fiber networks.
They say things like, “It’s government entry … that brings unfair competition to the market,” and, “Government entry into the broadband market drives out competition and puts taxpayers at financial risk,” and, “The asymmetric subsidized entry of a municipal system is … anticompetitive in nature.”
That’s why the “Private Industry Safeguards Act,” a model policy of the American Legislative Exchange Council, or ALEC, which purports to advance free-market priorities in the statehouses, has been recommended to the organization’s enormous body of state-level lawmakers from across the country since 2002. More than 20 states have prohibitions on municipal broadband on the books.
All this may sound pretty rich at a time when internet providers have effective monopolies in many regions and rates rise faster than download speeds. But to critics, publicly owned broadband could well be the thin end of the socialist wedge.
The Federal Communications Commission disagrees. Last year, in response to a petition from Chattanooga, Tennessee, and Wilson, North Carolina, the FCC decided to pre-empt portions of those states’ laws that restricted the build-out of those cities’ broadband networks. With FCC protection, the cities would have been able to expand their super-fast fiber service into adjoining municipalities and rural areas.
Here’s how the Sixth Circuit Court of Appeals summarized the FCC argument that the rollout of fiber internet by Chattanooga’s Electric Power Board fostered competition: “In response to the EPB’s constructing its fiber network, Comcast stopped raising its rates—which had risen sharply for years—and subsequently reduced them. Both of the private providers in the EPB’s electric service area, Comcast and AT&T, have vastly improved their Internet download speeds since the EPB’s entry. This demonstrates the benefits of increased broadband competition and how a possible expansion for the EPB could promote such competition.” An independent analysis estimated Chattanooga’s network had produced at least 2,800 jobs and $865 million in benefits for the city.
The states sued the FCC, and early last month, they won: The Sixth Circuit Court of Appeals ruled that the FCC had overstepped its bounds. The court found that the Telecommunications Act of 1996 didn’t offer the commission clear authority to pre-empt state law.
It was a legal defeat, but a limited one. While the court ruled against the FCC, it didn’t see any faults with their reason for acting: “We do not question the public benefits that the FCC identifies in permitting municipalities to expand Gigabit Internet coverage,” the decision reads.
It’s another notch for the consensus that municipal broadband introduces competition to an industry too often lacking it. “If the private sector were solving this problem, cities wouldn’t be doing this,” says Deb Socia, the executive chairman of Next Century Cities, a coalition of cities that advocates for municipal broadband as a local option, among other issues.*
Barring an act of Congress to modify FCC powers (don’t hold your breath), the battle returns to the statehouses. But it won’t be as hopeless there as many local control issues are. In most cases, pre-emption disputes pit rural Republican state legislators against progressive urban policies like the minimum wage or a fracking ban. In Tennessee and North Carolina, there’s a twist: Chattanooga and Wilson already have high-speed internet, both public and private. It’s their rural neighbors that suffer from telecom companies’ reluctance to expand good service into low-density areas.
In Tennessee, for example, municipal broadband remains legal—but expanding it beyond the provider’s existing coverage area is not allowed. Chattanoogans are allowed to keep their lightning-fast internet; it’s residents outside the EPB’s coverage area that suffer. “For several years we’ve been fielding requests from neighboring communities who have hardly had access, asking: ‘Would you guys bring services to us?’ ” explains Danna Bailey, vice president of communications at EPB. “And we’ve said: ‘We’d love to, but Tennessee state law prohibits it.’”
That turns the traditional political calculus of state-vs.-city pre-emption bills on its head. In Tennessee, a state law to loosen the regulation of public broadband is being sponsored by a pair of Republicans: Sen. Janice Bowling and Rep. Kevin Brooks. And it was a Republican state senator, Todd Gardenhire of Chattanooga, who said earlier this year, “AT&T is the villain here.”
Proponents of public broadband see a parallel to the rollout of the electrical grid, which ignored rural areas in favor of population clusters where electricity provision was more profitable. “We see broadband in the 21st century as electricity was in the 20th,” said. Bailey. “To participate in this economy you’ve got to have access. Consumers are really starting to demand it, so legislators are hearing from their constituents: ‘I’ve got to have broadband. I have to drag my kid five miles down the street to McDonald’s to do her homework.’ ”
*Correction, September 1, 2016: This post originally implied that Next Century Cities advocates only for municipal broadband capacity; the group works on other issues too.