Last week, briefs were filed in the court of appeals by
parties challenging the FCC’s preemption of a Tennessee law imposing
restrictions on a local government’s ownership and operation of a broadband
network. In the same order, the Commission also preempted a similar North
Carolina law. In FCC acronym-land, a government-owned network is commonly
referred to as a GON.
As in … FCC GON wild.
I have never suggested that, as a matter of policy, GONS should
be prohibited in all circumstances at all times. If there are particular areas
that private sector broadband providers simply are not serving, and do not
intend to serve, then a GONS, or some form of public-private partnership, may
be appropriate. But these cases, by far, should be the exception, not the rule.
As my colleague Seth Copper and I explained in a May 2015 article,
FCC Preemption of State Restrictions on
Government-owned Networks: An Affront to Federalism, in the Federalist
Society publication Engage:
A threshold issue is the
problematic nature of government assuming the dual role of both enforcer of public
law and competitor to private sector providers. This duality poses inherent
conflicts-of-interest. For example, local governments may excuse their own networks
from running the bureaucratic permitting and licensing gauntlet through which
private providers must pass. Fear of disfavored treatment deters private market
investment in broadband infrastructure. In addition, questions concerning the
institutional incentives and competency of local governments operating
capital-intensive advanced communications networks in rapidly innovating
markets heighten the concerns of local taxpayers. And speech restrictions that
are common in the terms of services of government-owned networks raise
significant First Amendment issues.
So GONS are problematic from a policy perspective. But I
want to use the occasion of the filing of the initial appellate briefs to
emphasize the highly questionable nature of the FCC’s preemptive action as a
matter of law. The FCC’s action raises rule of law concerns that are at the
heart of our federalist constitutional system.
Our Federalist Society article
focused primarily on theses serious legal issues. To my mind, the FCC’s
preemption order is sufficiently beyond the authority delegated to the agency
by Congress, and beyond the bounds of the Constitution’s federalist structure,
that I suggest this is a case of the FCC GON wild. Below are a few excerpts from
the article that highlight why the Commission’s action is likely to be
overturned in court.
* * *
“The
most obvious difficulty with basing preemptive authority on Section 706 is that
the statute’s language nowhere authorizes it. Section 706(a) provides:
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...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.
Preemption is not
one of the enumerated measures or methods. Inferring preemption from Section
706(a) is also difficult because of its poor fit with the statutory structure.
Section 706(a) recognizes a role both for ‘[t]he Commission and each State
commission with regulatory jurisdiction over telecommunications services.’
Federal preemption of state laws imposing geographic or other forms of
restrictions or safeguards on government ownership of broadband networks
disregards the role of state officials that the statute explicitly
acknowledges.”
* * *
“In a
1997 order, the FCC rejected a petition requesting it to preempt state law
restrictions on municipal telecommunications networks based on Section 253(a)
of the Communications Act. … As the FCC’s 1997 order declared: ‘[S]tates
maintain authority to determine, as an initial matter, whether or to what
extent their political subdivisions may engage in proprietary activities.’ It
also observed that preemption ‘effectively would prevent states from
prohibiting their political subdivisions from providing telecommunications
services, despite the fact that states could limit the authority of their
political subdivisions in all other respects.’
This agency precedent cannot be avoided simply because
Section 706 is now invoked as opposed to Section 253. The states’ authority to
decide ‘whether or to what extent their political subdivisions may engage in
proprietary activities’ is not altered just because a particular FCC majority
wants local governments to offer broadband services. Federalism principles
previously recognized by the FCC, grounded in the Constitution, do not lend themselves
to dismissals based on ‘reasonable explanations’ about current Commission
policy objectives. For that matter, the 1997 Order recommended states consider restrictions
on government-owned networks rather than totals bans. The FCC’s present
about-face regarding such restrictions hardly seems reasonable. Indeed, it
seems arbitrary and capricious.”
* * *
“The clear statement doctrine requires that Congress speak
with unmistakable clarity before federal preemption of ‘a decision of the most
fundamental sort for a sovereign entity’ will be considered. The rule is in ‘acknowledgment
that the States retain substantial sovereign powers under our constitutional
scheme, powers with which Congress does not readily interfere.’ In Gregory v. Ashcroft (1991), the Court
reiterated its longstanding jurisprudential requirement that “[I]f Congress
intends to alter the ‘usual constitutional balance between the States and the
Federal Government,’ it must make its intention to do so ‘unmistakably clear in
the language of the statute,’” and that “Congress should make its intention
‘clear and manifest’ if it intends to pre-empt the historic powers of the
States…. No fair reading of Section 706 can find any clear statement of
congressional intent that the FCC can interpose itself between states and their
political subdivisions. And Section 706 cannot be read to clearly state that
Congress intended to preempt state authority over decisions about whether and
to what extent to allow its political subdivisions to offer proprietary
services.”
* * *
“Finally,
and importantly, the FCC’s preemption of state restrictions on government-owned
broadband networks violates constitutional federalism principles. The Supreme
Court has stressed that: ‘The Framers explicitly chose a Constitution that
confers upon Congress the power to regulate individuals, not States.’ The
Constitution established ‘two orders of government, each with its own direct
relationship, its own privity, its own set of mutual rights and obligations to
the people who sustain it and are governed by it.’ Indeed, ‘[t]he Constitution
thus contemplates that a State’s government will represent and remain
accountable to its own citizens.’
Local governments are created by state constitutions through
state legislation. They are accountable to the citizens of the respective
states in which they exist. Thus, the Supreme Court has long recognized that
“[s]tate political subdivisions are ‘merely ... department[s] of the State, and
the State may withhold, grant, or withdraw powers and privileges as it sees
fit.’” Our constitutional regime does not recognize, as a matter of legal
status, ‘citizens’ of Chattanooga or Wilson. It does recognize citizens of
Tennessee and North Carolina. And the Constitution confers upon these citizens
of states the authority to exert their will through their elected
representatives to adopt laws that restrict municipal activities. In essence,
this is what the Supreme Court reaffirmed in Nixon, declaring that ‘preemption would come only by interposing
federal authority between a State and its municipal subdivisions, which our
precedents teach, are created as convenient agencies for exercising such of the
governmental powers of the State as may be entrusted to them in its absolute
discretion.’”
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