Cable Tech

Supremes Mull Municipal Broadband

The D.C. Circuit Court’s review of the FCC’s Triennial Review Order isn’t the only important telecom case in the judicial system (see Bells Challenge FCC Ruling). Nixon v. Missouri Municipal League, currently before the Supreme Court, will also play a role in the nation's broadband buildout.

The case centers on whether municipalities or public-owned utilities, such as electric companies, can offer telecom services. Missouri attorney general Jay Nixon is among those arguing that the Telecommunications Act of 1996 doesn’t expressly permit municipal telecom services, while the Missouri Municipal League says it doesn’t prohibit them, either.

Last year, the U.S. Court of Appeals for the Eighth Circuit overturned Missouri’s ban on telecom services. The Supreme Court's decision on the matter is expected this summer and will affect the dozen or so other states that have similar restrictions.

The Supreme Court’s decision will also affect the fiber-to-the-home (FTTH) sector. “In 2003, municipalities and public utility districts (PUDs) made up 32 percent of the FTTH market and have accounted for the single largest builds," according to Render, Vanderslice & Associates.

“In 2002, municipalities and PUDs made up 26 percent of the market. So they are not only the largest market segment, but they are growing robustly, as well,” says Leonard Ray, vice president of the FTTH Council.

The Supremes heard oral arguments in Nixon v. Missouri Municipal League on January 12. “We should see an opinion near the end of the court's term in late June,” says E. Ashton Johnston, a partner at Piper Rudnick. A major part of the case centers on part of the '96 Telecom Act that says that no state, local statute, etc., may "prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.” The court must clarify whether “any entity” includes municipalities and municipal-owned utilities.

Recent decisions suggest that the Supreme Court will rule in favor of municipalities. The debate can be traced back to City of Abilene v. FCC, where the D.C. Circuit Court of Appeals ruled against municipalities. Since then, three other courts have interpreted “any entity” to include municipalities, freeing them to offer telecom services.

As is usually the case in the telecom business, either decision involving potential RBOC competition will line the pockets of lobbyists and lawyers.

If the Supremes strike down the Eighth Circuit’s decision, the incumbent carriers will "lobby hard at the state level to have new anti-municipal laws enacted in states where they currently don't exist,” says Ray.

If the Supremes uphold the Eighth Circuit’s decision, it paves the way for more municipal deployments in Missouri and elsewhere. States with similar restrictions would then take up the matter with the FCC, which would have to determine whether each state is competitively neutral.

But the court has a third option: Defer to the FCC. During oral arguments, one justice mulled that option before it was dismissed. “I don’t see any realistic way that the Supreme Court can send the ‘any entity’ issue to the FCC or defer to the FCC’s interpretation,” says one attorney involved in the case, speaking on the condition of anonymity.

The Supreme's decision in Nixon v. Missouri Municipal League will affect several other states that limit municipal telecom services. According to the FTTH Council:

  • Arkansas prohibits municipal LEC services.
  • Florida levies special taxes on telecom services provided by public entities.
  • Minnesota requires 65 percent of voters to approve a municipal telecom service.
  • Nebraska prohibits government agencies and municipalities from becoming common carriers.
  • Nevada prohibits cities with populations over 25,000 from providing telecom services.
  • South Carolina has significant restrictions on municipal telecom providers.
  • Tennessee and Utah permit some municipal telecom services if they pass a stringent set of anti-competitive guidelines and hearings.
  • Texas prohibits municipalities and city-owned utilities from providing telecom services or facilities.
  • Virginia electric utilities can become LECs as long as they don’t cross-subsidize services and meet guidelines not applied to private carriers.
  • Washington public utilities can provide only wholesale telecom services.
The court’s decision also would indirectly affect CLECs and cable providers. For example, if municipalities get the green light to offer broadband, ILECs might devote more resources to battling municipalities, which already account for a significant chunk of broadband deployments.

— Tim Kridel, Senior Editor, Heavy Reading
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materialgirl 12/5/2012 | 2:27:42 AM
re: Supremes Mull Municipal Broadband The regulatory mess we face in the critical telecom industry is sad. Other countries are moving ahead with critical communications infrastructure, while we just squabble over scraps, wasting money that could go to building our economy. Not being able to communicate effectively will be just one more justification for shipping jobs overseas.

Would it not be nice to see a FCC that stated an actual GOAL, then elaborate on steps to get there. Instead, they say nothing, waste millions of dollars on arguements instead of cap-ex, then behind the scenes push for a dangerous level of concentration in the media.

What is an "entity". Where does this stop? If munis are not "entities", are corporations? What is the "entity" test? What purpose does the deinition serve? As the line beween public and private networks blurr, is the telephone company supposed to put in all of our corporate LAN infrastructure? Will they declare WiFi "illegal" since a private installer is not an "entity"?

If you have no goal, any road will take you there.
coreghost 12/5/2012 | 2:27:41 AM
re: Supremes Mull Municipal Broadband
There are reasons why the FCC acts as it does.

The courts have established a pattern of rulings
that makes it difficult for a regulatory agency
to even function anymore. If the FCC tries
to make a policy and make it stick, its as
likely as not to be struck down by the
federal courts.

The FCC lacks the power to make or enforce
regulations. About all it can do these days
is remove them.

This is part of a broader pattern of subverting
regulatory agencies and then proposing a "reform"
act to fix the problem which consists of weakening
regulation still further.

The reason the FCC doesn't talk about goals
in public is that its goals are not ones that
would be accepted by the voting public.

dirwin40 12/5/2012 | 2:27:40 AM
re: Supremes Mull Municipal Broadband The fact of the matter is that technology and market forces are making regulators irrelevant. Its like "Chinese Baseball." The rules in Chinese Baseball are just like the rules in American Baseball, except you can move the bases while the ball is in the air.

materialgirl 12/5/2012 | 2:27:39 AM
re: Supremes Mull Municipal Broadband All of which begs the question: at what point are market forces counter productive? If the Government just sits back and lets the market rule, do we end up with a useless patchwork of little "toll roads", or a very un-cooperative monopoly?

Can we all agree that the Interstate Highway system was a good idea? Why not a similar netwoark effort? Aren't we smart enough to know the right architecture? Can't we all agree that communications is better for the economy than no communication? Throwing up our hands sounds defeatist.

I am not a closet socialist, but all this squabbling while Rome burns is getting old.
opticalwatcher 12/5/2012 | 2:27:38 AM
re: Supremes Mull Municipal Broadband "The courts have established a pattern of rulings
that makes it difficult for a regulatory agency
to even function anymore. If the FCC tries
to make a policy and make it stick, its as
likely as not to be struck down by the
federal courts. "

You need to study the separation of the branches of governement. FCC cannot make laws, it can only enforce them. Congress makes the laws. The Supreme Court struck down the FCC's attemts to ignore the laws that Congress passed.

If you don't like the laws, complain to your Congressman--don't complain blame it on the Supreme Court.
optoslob 12/5/2012 | 2:27:23 AM
re: Supremes Mull Municipal Broadband Its a sad sad situation and its only getting more and more absurd !!!

Cougarblitz 12/5/2012 | 2:27:12 AM
re: Supremes Mull Municipal Broadband I AGREE WITH YOU MATERIALGIRL 100%

I am not a proponent for the government getting involved, but feel strongly in this case it is appropriate. If we were to rely on the Qwest's and Comcast's of the world to provide a network that is in the best interest of the public it will never happen, their ROI will not allow this type of a capitol investment in a new infrastructure when they have recently spent billions giving their networks a new facelift.

What will we be left with? A copper based infrastructure that is as old as Moses but has a new look? Qwest and Comcast will tell you they are finding different ways to manipulate the existing copper based infrastructure and will be able to deliver broadband to the home.

Qwest and Comcast have re-defined broadband for their own inadequete deficiencies the actual definition is deemed at 54 MB, theirs at the most will be able to deliver 1 MB both ways! I guess what I am saying is Joan Rivers could have 20 facelifts, but inside she's just an old lady wearing a preppy looking mask to cover her true self.

Let's not rely on our current service providers to give us what we need they just won't do it! They have monopolies and high profit margins on an old and deteriorating infrastructure and know that if they were to rebuild the current infrastructure it would mean death...they couldn't afford to do it. So,in the meantime we are stuck with Joan Rivers.

Don't by it for a second
bonnyman 12/5/2012 | 2:21:41 AM
re: Supremes Mull Municipal Broadband Even liberal Democrats have become big believers in free markets in the last decade, which is probably good, since they do work well. It's just that we've forgotten some other things that everybody seemed to understand during most of the 20th century.

The problem is that everybody is forgetting what even conservative Republicans understood several decades ago -- that monopolies and to a lesser extent things like duopolies (2 big players) and oligopolies aren't free markets. Also they aren't very efficient.

So we had anti-trust laws and enforcement actions to keep markets free and to maximize efficiency.

We also understood that there was such a thing as a natural monopoly. It made no sense to have 10 water companies run pipes down your street. But just having one water company provide service could be a license to steal, so the various governments used a different model for these situations instead of the free market -- the regulated utility. One company would get exclusive rights to sell some service in exchange for government oversight and price regulation.

Further complicating things is the lack of engineers at high levels in government. Of the 5 FCC commissioners, only Abernathy, a lawyer, has a bachelor of science undergraduate degree (her web page doesn't give a major). The others have degrees in things like law and political science. I would guess that in Congress, there are probably only a handfull of congressmen with technical degrees.
rjmcmahon 12/5/2012 | 2:21:38 AM
re: Supremes Mull Municipal Broadband bonnyman; Isn't what we are experiencing the failure of a regulated (or deregulated) utility where the people running and regulating the utility have forgotten their mission and have lost their way? That's what it looks like to me.
bonnyman 12/5/2012 | 2:10:18 AM
re: Supremes Mull Municipal Broadband March 24, 2004:

"Voting 8 to 1, the U.S. Supreme Court just issued a ruling upholding Missouri's restrictions on municipal broadband projects."

"Seeking to foster competition, Congress changed the laws governing telecommunications regulation in 1996. One aspect of this act was to ban the states from stopping "any entity" from entering the telecommunications"

"The Court today ruled that Congress lacked the constitutional authority to interfere in the relationship between state and local governments, at least in the way Congress worded this particular statute. (Legally, local governments in the U.S., while often acting autonomously of state government in most matters, are ultimately considered subdivisions of state government)."

"The majority's opinion specifically declined to rule on the merits of municipal telecommunications project, basing its' opinion on its' reading of the statute, the legislative history and its' own assumptions about Congress's intent with respect to municipal entities."

The above is quoted from:

Text of decision:
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