Two Judges Prod FCC, States on Muni Broadband; One Harder on Agency

The argument went well for the states, said TechFreedom President Berin Szoka, a frequent FCC critic, who was one of the few Washington advocates in attendance and spoke to reporters afterward. “The FCC is going to lose,” he said, though he thought it was possible the 6th Circuit could preserve some commission latitude to pre-empt certain types of state municipal broadband regulation. He suggested state pricing regulation might be more about communications policy than restricting municipal service to local boundaries was. The FCC in 2015 pre-empted North Carolina and Tennessee laws that were blocking two municipal broadband efforts from expanding to neighboring localities. The commission said the state restrictions undermined federal communications policy and were the types of barriers to broadband deployment that Congress directed it to remove under Section 706 of the 1996 Telecom Act. Meanwhile, some states including those in the case continue examining municipal broadband laws, some with an eye to limiting the government networks (see 1603170038).

The 6th Circuit case isn't really about telecom policy or municipal broadband, said Tennessee counsel Joshua Turner of Wiley Rein, but about whether the FCC usurped state control of subdivisions. Turner said the FCC (1) violated core state sovereignty, (2) lacked a “plain statement” of congressional intent required under court precedent and (3) lacked direct authority to act under Section 706. He said the FCC's case was so suspect that even the DOJ didn't join its brief.

Rogers asked how the court could know whether the FCC was interfering in state structure versus regulating communications policy. He seemed dubious the states could order local public radio stations to violate FCC broadcast frequency assignments. Turner acknowledged a “limiting principle” and that there are “hard cases,” but said, “This is not a hard case.” He said the Supreme Court's 1991 Gregory ruling required an express congressional mandate for federal intervention into core state governance, which he said was lacking in this case. But White said state prohibition of municipal broadband competition with private entities "starts to look like" regulation of commerce, not of state functions.

The FCC intruded on North Carolina authority over subdivisions that was rooted in its constitution, said state Solicitor General John Maddrey. He said the FCC cited nothing that satisfied the “plain statement” requirement for such an intrusion into state sovereignty. Both Rogers and White questioned Maddrey, but not aggressively.

FCC attorney Matthew Dunne said the case was about competition in interstate commerce. He said Tennessee municipal entities are allowed to provide telephone service outside their localities, but not broadband under the state law. “All it does is regulate broadband competition,” he said.

But Rogers said the FCC seemed to be interfering with state discretion to regulate its units by preventing state limits on municipal broadband expansion. He said the FCC order -- by preempting state restrictions -- gave municipal broadband entities the discretion to enter other jurisdictions, but didn't require them to do so, a point he said Dunne conceded. So federal pre-emption seems just to intrude on state governance of localities, Rogers said. He said he didn't see how the FCC could deprive the state of discretion to tell a city what to do. “Basically, you're making a decision as to who decides,” he said. That “gets at the structure of government.”

White noted the FCC's view that the state laws are a barrier to broadband. But Rogers said the agency is just regulating who gets to decide whether municipal broadband expands to other jurisdictions -- the state or the cities, and the cities get their powers from the state.

White asked where the “plain statement” of congressional intent was for federal intervention. Dunne said the FCC didn't believe that precedent applied because the commission was regulating communications policy, not state powers. White said the FCC can describe its policy however it wants, but if there is a state rule limiting cities to providing service within their geographic boundaries, it seems like a question of how it regulates its subdivisions, not broadband.

But White appeared to tilt the other way later when she said the intent of Section 706 was clear: Congress wanted “everyone” to have broadband, and if the FCC finds barriers, it is to remove them. If people want broadband and a municipal provider is willing to fill a vacuum left by others but is blocked by the states, why is FCC pre-emption about regulating state subdivisions, she asked. Tennessee attorney Turner said there is no clear congressional mandate pursuant to Gregory, and the Supreme Court in a 2004 Nixon v. Missouri Municipal League ruling said that standard even applied under Section 253 of the Communications Act, which expressly gave the FCC some authority to pre-empt state and local regulation.

Turner said Section 706 was a “policy statement” directing the FCC to use other authority that it had to spur broadband. White again said the agency was mandated to remove barriers; Turner said it didn't get unlimited authority. Rogers asked if Turner's view of Section 706 was inconsistent with the rulings of other circuits. Turner acknowledged the D.C. Circuit in a 2014 Verizon ruling upheld FCC Section 706 authority, but only after finding that the agency made a reasonable interpretation of an ambiguous statute. That contradicted the notion Congress had issued a “plain statement” for FCC intervention into state oversight of municipal broadband, he said.

Noting the DOJ absence, Rogers asked if the FCC would need Justice OK to appeal a court reversal to the Supreme Court. Dunne said his understanding was the FCC had occasionally appealed on its own, but the commission had no insight on the DOJ position. Some previously called Justice's absence in the case a bad sign for the FCC (see 1511090056).