The North Carolina city of Wilson is joining with Chattanooga, Tenn., in an effort to void state laws that place restrictions on municipal broadband. Wilson has filed a petition with the Federal Communications Commission to pre-empt the state’s three-year-old law requiring cities and towns seeking to start or expand cable TV and broadband services to get a vote of the people before borrowing money for those operations.
The law prohibits cities from using revenues from noncommunications sources to pay broadband service expenses and bans them from charging customers rates that are lower than the actual cost of providing the service.
It also requires municipalities to pay counties the equivalent of what they would have to pay in property taxes if the broadband service were operated by a private utility, and pay the state the amount a utility would pay in income, franchise, vehicle, motor fuel, or other similar taxes.
The 2011 law exempts municipal broadband businesses already operating from most of the new restrictions. However, it maintains a provision prohibiting municipalities from offering service outside their boundaries.
FCC Chairman Tom Wheeler has threatened to issue rules overruling state laws — like North Carolina’s — limiting the authority of cities with their own telecom services, citing a public interest in “promoting competition.” But a Washington, D.C.-based legal expert questions whether the FCC has the authority to pre-empt state law.
“There has to be a really clear delegation of authority from Congress to say, OK, you can pre-empt a state law,” said Lawrence Spiwak, president of the Phoenix Center for Advanced Legal and Economic Public Policy Studies in Washington. “The FCC only has one statute that allows it to exercise any pre-emption authority.”
When previous cases were taken to the U.S. Supreme Court, the court said that without “a clear statement from the Congress, we can’t imagine that the Congress wanted to go so far as to give the FCC the authority to pre-empt state laws dealing with their own political subdivisions,” such as counties or cities.
Will Aycock, operations manager for Wilson’s Greenlight broadband system, did not respond to a request for an interview for this story.
In a press release posted on the city’s Web page, Aycock said, “Wilson’s fiber system provides many benefits to the community — including enhanced economic development and competitiveness, educational opportunity, public safety, homeland security, energy efficiency, environmental protection and sustainability, affordable modern health care, quality government services, and the many other advantages that contribute to a high quality of life. The public demand for these services is there, and the system has shown steady growth since its inception. In fact, Greenlight was recently cited by federal analysts as a positive factor in Wilson’s credit ratings.”
Wilson Mayor Bruce Rose also used the news release to comment on the effort.
“I have seen Wilson evolve from ‘the World’s Greatest Tobacco Market’ to ‘N.C.’s First Gigabit city,’” Rose said. “We have continuously invested and re-invested in public facilities. Years ago, our city council saw fiber optics as the pubic infrastructure of the future and absolutely essential to improve the economy, provide jobs, and improve our quality of life. … The city’s petition seeks to remove the significant operational barriers imposed by the state law so that Greenlight can continue to thrive and serve our community.”
Spiwak said the issue at hand is not whether municipal broadband is good or bad. It’s whether the FCC has the authority to pre-empt state law that regulates municipalities, which are creations of the state.
“The issue is not the question of the merits of municipal broadband,” Spiwak said, which he argues is an issue that should be decided by state legislatures. “North Carolina passed [its] law; Tennessee passed [its] law,” Spiwak said, noting there are grandfather provisions covering municipalities that already had broadband service.
“Now you’ve got a state law that says these are the parameters,” Spiwak said. “Having failed in the statehouse to win the debate, they’re trying to look for other ways to get around it.”
Rep. Marilyn Avila, R-Wake, who sponsored the 2011 bill, said that it doesn’t ban cities from providing broadband service. It merely places some restrictions binding them.
“My first foray into it was the free enterprise end of it,” Avila said, noting that North Carolina has the Umstead Act, which prohibits many state entities from selling goods and services in competition with private enterprise.
By the time she introduced the 2011 bill, Avila said she had done further research and learned that municipalities were issuing debt for broadband and bypassing voters. They did this by issuing Certificates of Participation, a method governments use to borrow money without having to get voter approval.
“Wilson wants to move out into the six counties where they have electric service,” Avila said. “If they borrow the money to go out in those six counties, the only people that are responsible for paying it are the citizens of the town of Wilson,” Avila said.
The FCC was accepting public comments on the proposal until Aug. 29. Reply comments will be accepted until Sept. 29.