I just filed the following comments in WCB Docket Numbers 14-115 and 14-116.
The Electric Power Board of Chattanooga, Tennessee and the City of Wilson, North Carolina have asked the Federal Communications Commission to pre-empt statutes that ban or restrict the provision of broadband services by municipalities to the public. The parties seek pre-emption pursuant to section 1302 of the Communications Act of 1934 as amended by the Telecommunications Act of 1996. Pursuant to the reasons I lay out below, I ask the Commission to deny their petitions.
The Supremacy Clause of the United States Constitution gives Congress the authority to pre-empt state laws that conflict with the exercise of federal power [Schwartz 2010]. Congress may express its intent to preempt conflicting state law by saying so in the text of a statute or imply the intent to pre-empt state law based on the structure or purpose of the federal law. In addition, where Congress intended to occupy an entire regulatory field or there is a conflict between federal and state law, the federal law would trump state law. The courts may provide federal agencies considerable deference where the federal agency finds that state law conflicts with the federal law an agency is authorized to administer. [Schwartz, 2010]
Although the Commission is an independent agency, it should be able to find guidance on preemption from a May 2009 memorandum issued by President Obama on the issue of preemption. Here is an excerpt from that memorandum:
“An understanding of the important role of State governments in our Federal system is reflected in longstanding practices by executive departments and agencies, which have shown respect for the traditional prerogatives of the States. In recent years, however, notwithstanding Executive Order 13132 of August 4, 1999 (Federalism), executive departments and agencies have sometimes announced that their regulations preempt State law, including State common law, without explicit preemption by the Congress or an otherwise sufficient basis under applicable legal principles.
The purpose of this memorandum is to state the general policy of my Administration that preemption of State law by executive departments and agencies should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption. Executive departments and agencies should be mindful that in our Federal system, the citizens of the several States have distinctive circumstances and values, and that in many instances it is appropriate for them to apply to themselves rules and principles that reflect these circumstances and values. As Justice Brandeis explained more than 70 years ago, ‘[i]t is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.’”
It appears that the President wants the federal government to recognize that federal and state governments are not only partners in serving the public interest, but that the specific circumstances of each state should be taking into account before the federal government risks exercising unnecessary overreach. Using section 1302 as basis for preempting state law would constitute such overreach. Section 1302 (b) reads as follows:
“The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”
The Petitioners argue that state legislation banning or restricting municipal broadband somehow lessens competition or works against deploying broadband and by preempting state legislation the Commission would in essence put in place a policy that encourages the deploying high-speed broadband. I argue that it was never the intent of the Telecommunications Act of 1996 to see municipalities deploy broadband or telecommunications. The Telecommunications Act of 1996 was primarily designed to open the telecommunications markets to more competition between private sector players. Section 1302 was an attempt to recognize the importance of this thing called the Internet and allow the commercialized Internet to grow and flourish with private sector players deploying broadband in a least restrictive regulatory setting.
Ironically over that 18 year period we have gone from the thing called the Internet to an Internet of Things. This is a testament to how a private sector subject to light touch regulation has been able to innovate both broadband and edge services for the benefit of consumers.
Going back to the legislation, there is no language in section 1302 that expressly preempts the states from implementing legislation that bans municipal deployment of broadband. Also, there is nothing in the structure or intent of the Telecommunications Act that implies preemption.
States have been encouraging private sector innovation through deregulation. In Florida where I served on the Florida Public Service Commission’s staff, I witnessed Florida’s attempts in 1994 and 1995 to deregulate Florida’s communications market. We were not encouraging cities and towns to provide Internet access or local phone services. We recognized that the emerging technology at the time allowed for cable companies and resellers to enter the market and sell local and long distance services. The Telecommunications Act continued and built on what the states were doing to encourage competition via a light touch regime, a regime that the Petitioners want to attack by encouraging preemption.
In sum, the structure of federal communications law does not imply preemption but cooperation with and deference to the states and recognizes that the private sector, given its scale and access to capital was best suited to build a nationwide broadband network. The states that ban or restrict municipal broadband deployment also recognize that capital will turn away from a market where a “competitor” is heavily subsidized with free money from tax payers. The private sector, even at today’s low rates of interest, cannot compete with free money or a competitor who may not be subject to the same, onerous net neutrality principles or other rules that a private sector provider has to or may have to abide by.
For the reasons I shared above, the Federal Communications Commission should deny the Electric Board of Chattanooga and the City of Wilson’s petition.