On August 10, 2016, the U.S. Court of Appeals for the Sixth Circuit reversed the Federal Communications Commission's (FCC) 2015 Municipal Broadband Preemption Order, which attempted to override state laws in North Carolina and Tennessee that restricted the use of municipal broadband. FSF scholars have declared that the FCC’s order was one of the most far-reaching and far-fetched attempted power grabs in the agency’s history. FSF scholars also have stated that the language of Section 706 of the Communications Act to remove barriers to infrastructure investment and to "promote competition in the telecommunications market" provides no clear statement of intent to authorize preemption of state laws concerning broadband networks owned by municipalities.
In an August 12 blog in The Federalist Society entitled “Sixth Circuit Ruling Stops FCC’s Unlawful Municipal Broadband Preemption,” FSF President Randolph May and Senior Fellow Seth Cooper recapped the Sixth Circuit’s decision to use the Supreme Court’s precedent in Nixon v. Missouri Municipal League (2004). The legal reasoning behind the decision in Tennessee v. FCC (2016) is simple and obvious: “The force of the clear statement rule… makes the intent of Congress clear in this case: § 706 does not authorize the preemption attempted by the FCC.” Of course, FSF scholars warned the FCC of its misguided and fictional legal authority in their August 2014 comments.
On August 17, 2016, Seth Cooper published an article in The Washington Times entitled “Rescuing Broadband from Government Interference.” From a legal perspective, Mr. Cooper says that even students in Constitutional Law 101 understand that local governments are political subdivisions of their states, and therefore they would recognize that the FCC has no authority to preempt state laws. And from an economic perspective, Mr. Cooper explains why municipal broadband harms consumers and taxpayers. He says that government should not compete against the market providers they regulate, because the dual role of competitor and regulator creates favoritism over private providers in granting permits and licenses. Such favoritism causes uncertainty among market providers and likely stifles private investment, leading to fewer consumer benefits than what would occur in the market absent a municipal broadband provider. Mr. Cooper also states that municipal broadband projects often fail and local taxpayers end up covering the multimillion-dollar bailouts, constraining the amount of money the local government could spend on more valuable programs.
Whether from a legal or economic perspective, the Sixth Circuit’s decision to reverse the FCC’s order creates a framework for efficient policy. At the Free State Foundation’s March 2016 Telecom Policy Conference entitled “The FCC and the Rule of Law,” Daniel Lyons, a member of FSF’s Board of Academic Advisors, said that if the FCC had a better understanding of the rule of law, the Municipal Broadband Preemption Order and the subsequent Tennessee v. FCC court case could have been avoided:
One thing I found interesting, relating back to the earlier conversation, is the way rule of law issues are playing out in the municipal broadband proceeding. One of the things that's long given me comfort is the fact that the Chairman is in the good hands of Ambassador Verveer. I always get a little bit nervous when nonlawyers -- and I say this as a lawyer, right? -- are in the chairman roles because I'm much more concerned that the agency gets driven by questions about policy than about questions about rule of law. And they will say, "Well, the courts take care of the rule of law issue." I think the muni broadband example is a good one. I think the Chairman has a pretty good idea of where the law ought to go in this area. Unfortunately, the path that he's taken is pretty clearly foreclosed by the Nixon vs. Missouri Municipal League precedent. And it becomes very difficult to drive the agency in that direction and force the legal side of the house to engage in the types of really legal gymnastics that they had to engage in before the Sixth Circuit last week in order to try to defend that position. Ultimately, the Sixth Circuit is almost certainly going to strike that down. The question it raises from a rule of law perspective is whether that should've happened in-house long before. I mean with all due respect.
Daniel Lyons is not the only expert who predicted the Sixth Circuit’s reversal of the FCC’s order. At the same conference in a separate panel called “Perspectives on Hot-Topic Communications Issues,” Brad Ramsay, General Counsel/Director of the Policy Department at the National Association of Regulatory Utility Commissioners (NARUC), issued his opinion regarding the action the Court might take:
I still would be very surprised if any three judges or any circuit would want to uphold the FCC in these circumstances given the precedent from the Supreme Court in Nixon. I looked at this case. This is basically the FCC telling the state whether or not it's going to get into the broadband business and where. The problem with the FCC's analysis is that it treats the state and the state organs as two separate entities. Basically it says, "State, this subdivision of the state is not really part of you, it's an independent entity and you can't tell it what to do." It's completely flawed analysis… So I'll be very surprised if this gets upheld at the Sixth Circuit. And if it does, I predict, with as much confidence as I have in the federal judiciary, which, granted, is not a lot, it'll go to the Supreme Court and get reversed if they do.FSF scholars and prominent experts in this field frequently articulated why the FCC’s Municipal Broadband Preemption Order was unlawful and should have been avoided. It is unfortunate that valuable resources (time and taxpayer money) were wasted during the FCC’s proceeding and the subsequent court case. On the hand, hopefully the Sixth Circuit’s decision has halted the FCC’s attempts to preempt state laws.