Phoenix Center chief economist George Ford has taken issue with a story in The Tennessean newspaper in which Chattanooga, Tenn., Mayor Andy Berke touted the economic benefits of its municipal fiber network.

A federal appeals court recently rejected the FCC's preemption of a Tennessee state law limiting the expansion of that city network, but the story preceded that decision and made no mention of it.

Related: FCC Releases Muni Pre-emption Order

The story noted that, over the past three years, "the city’s unemployment rate has dropped to 4.1% from 7.8%, and the wage rate has also been climbing," citing a speech by Berke to the Fiber to the Home Council Americas conference in June.

Berke is quoted in the story as saying the wage rate in Chattanooga is definitely linked to Internet-related jobs and the tech sector.

“Our fiber goes to each and every home,” the story quoted Berke as saying. “We can’t have digital gated communities. If we do that, and only allow fiber to go to some parts of the city, some parts of the state, we will see technology widen the gulf between people as opposed to bridging it."

But Ford, responding to the story via an op ed in The Tennessean, took issue with what he said was Berke's lead claim that "the city’s unemployment rate has dropped to 4.1% from 7.8%."

Ford pointed out that over the same period the nationwide unemployment rate had fallen from 7.5% to 4.7%, saying, "In terms of unemployment, Chattanooga isn’t much different than the nation as a whole.

"Unless the Chattanooga system is having nationwide economic impacts, it’s pretty clear that attributing the unemployment decline to a city broadband network is bogus," Ford said.

He said that looking at statewide unemployment rates, tying the rate drop to the muni broadband net is even more problematic.

"For those cities operating broadband networks, unemployment has fallen by an average of 4.0 points," he said, while "in cities without municipal systems, unemployment has fallen by 4.7 points."

Rep. Marsha Blackburn (R-Tenn.) says that she does not take issue with the fact that the FCC has chosen to tackle some tough issues--those include privacy, and broadband regulation, and set-tops--but that it has "embraced controversial solutions" seemingly at every turn, including potentially allowing theft by third-party navigation device and radical federal overreach via municipal broadband state law preemption.

Blackburn raised those issues at an FCC oversight hearing Tuesday (March 22), then drilled down on them in a keynote speech at a Free State Foundation policy conference in Washington Wednesday (March 23).

Blackburn is no fan of FCC Chairman Tom Wheelers proposed new framework for regulating broadband customer privacy, authority the FCC gave itself when it reclassified ISPs as Title II telecom services, a move Blackburn also did not like.

The Federal Trade Commission had historically overseen broadband privacy, but only through its ability to pursue companies for violating their own stated policies or otherwise deceptive or unfair conduct. The FCC has more muscular rulemaking authority, and Wheeler sees a need to use it. Among other things, he has proposed requiring broadband customers to opt in to third party marketing uses for their data unless it is being used to market IPS or affiliate services, say seeking to add voice to a video customers' service.

Blackburn points out that the regime only applies to ISPs, calling that one-sided and focusing on the "one part of the Internet ecosystem that doesn't have broad visibility into consumers' online information."

Wheeler has made it clear that the new rules would not apply to edge providers like Web sites and search engines, saying they remain covered by the FTC.

Blackburn referenced a study by Peter Swire, a former Clinton Administration official, that "clearly showed that ISPs – the target of Chairman Wheeler’s new privacy rules – do not have the level of visibility into consumers’ online activities that most edge providers have," a point Swire outlined to Multichannel News/B&C earlier this month.

Blackburn is also no fan of the FCC's preemption of Tennessee state laws limiting municipal broadband buildouts.

She says the logic behind the FCC's preemption is "fundamentally flawed."

"Private companies can’t be expected to compete with taxpayer backed entities," she says. Cable operators who have pushed back on those municipal buildouts agree, arguing that they can be a way to cross-subsidize overbuilds, sometimes with taxpayers left holding the bag for efforts that don't pan out.

Blackburn says that Wheeler's decision to preempt laws in her state and North Carolina "is so radical, so overreaching – that even the Department of Justice could not file a brief in support of the FCC’s position – an almost unprecedented move." She made the same point in her opening statement at the oversight hearing.

Blackburn is also concerned about the FCC's proposal to open up MVPD programming data to third parties, which she branded "AllVid" at the hearing, a reference to the 2010 universal set-top proposal that Wheeler says is not analogous to his current effort. 

"I'm concerned by ideas being pushed by some that would let third parties use content for their own services in ways that violate the licensing terms and without consent of the content creator," she told the Free State audience. "In a TV marketplace that is producing more video content that ever before, why would the government support that kind of intervention and theft?"

Wheeler has said before, and did so again at the hearing this week, that copyrights will be protected, that if they are not MVPDs will have the option of not giving those third parties access to their programming data, and that his proposal was meant to generate this kind of feedback, which the commission will take into account before voting on a final order.

Wheeler has also made the point that competitive navigation devices already in the market have not resulted in copyright violations or license term violations.

Federal Communications Commission chairman Tom Wheeler will circulate an item to the other commissioners this week proposing granting the request by two cities that the FCC preempt state laws limiting their broadband buildouts, an FCC official familiar with the item confirmed on background.

The FCC decision only applies to the two cities, but a senior FCC official said that it provides precedent for how the FCC will view similar petitions.

The official said that the majority of municipal broadband networks have not failed or needed bailouts or created unfair competition to private buildouts, all arguments ISPs and state legislators have made.  The FCC is asserting its broad Sec. 706 authority to preempt, saying that preemption falls under the mandate to regulate to extend broadband.

It is the first time the FCC has considered preempting municipal broadband, though it has preempted local authority, for example in the 2004 Vonage order where the FCC decided that state tarriffs could not be applied to VoIP.

The three Democrats are expected to vote to approve, while the Republicans will almost certainly dissent.

Back in July, the FCC received requests from Chattanooga and Wilson, N.C., to preempt state laws they say unreasonably restrict their ability to provide broadband service. Wilson and Chattanooga complained that state laws were preventing expansion of their exisiting municipal broadband networks via numerous restrictions. In the case of Wilson including requiring public referenda on a buildout, barring discounts, requiring it to impute artificial costs, and barring overbuilds of commercial systems providing 768 kbps downstream.

The chairman had signaled a vote on the items on the Feb. 26 meeting and he has made no secret that he thinks the commission has the power to preempt and the responsibility to do so if it feels those state laws are impeding price and service competition for broadband.

“Communities across the nation know that access to robust broadband is key to their economic future – and the future of their citizens. Many communities have found that existing private-sector broadband deployment or investment fails to meet their needs," wheeler said Monday after the item's circulation had been reported. "They should be able to make their own decisions about building the networks they need to thrive. After looking carefully at petitions by two community broadband providers asking the FCC to pre-empt provisions of state laws preventing expansion of their very successful networks, I recommend approval by the Commission so that these two forward-thinking cities can serve the many citizens clamoring for a better broadband future.”

President Obama has Wheeler's back on pre-emption, saying before the state of the union that the FCC should step in in the 19 states with such laws. Both have branded those laws as efforts by incumbent ISP's to block competitors.

State officials have countered that they are simply doing their fiduciary responsibility to their citizens by protecting them from failed buildouts, including by passing laws that prevent overbuilding. They have threatened to sue if the FCC approves the petitions.

The Coalition for Local Internet Choice, which has been pushing for FCC preemption of state laws limiting municipal broadband, was pleased. "This is a big step forward and just the beginning -- we look forward to working with the Chairman, the rest of the Commission and other stakeholders to remove barriers to better broadband around the country," CLIC said.

Those legislators and Republican FCC members have argued the FCC will be exceeding its authority.

In a backgrounder supplied to reporters Monday, senior FCC officials exlained the authority the FCC has to preempt the laws.

•    "Section 706 of the Telecommunications Act of 1996 directs the FCC to take action to remove barriers to broadband investment and competition.
•    "A federal agency may preempt state laws that conflict with its regulations or policies so long as it is acting within the scope of its authority.
•    Provisions of the Tennessee and North Carolina law prevent expansion of service into surrounding unserved and underserved areas and constitute barriers to broadband deployment.
•    "While states retain authority to grant or withhold the ability of their cities and towns to enter the broadband market, once states have granted that authority, they may not impose on community providers regulatory burdens that act as barriers to infrastructure investment and competition.
•    "Broadband is an interstate service, and the preempted provisions impose state restrictions, impose economic costs, and delay the deployment of interstate communications."

FCC officials pointed out that the Chattanooga and Wilson cases were not about whether service can be provided, since the cities had state authority, but whether states can dictate the mechanics of that service in a way that appears to protect ISPs and to impede the deployment of broadband that the FCC's Sec. 706 authority mandates that it facilitate.

There are at least three states that have absolute bans on muni broadband--including Comcast home state of Pennsylvania, as well as Nebraska and Montana, where preemption could be problematic, but the officials said there is some disagreement on how absolute those are and the FCC would consider all petitions on a case-by-case basis.

“We welcome reports that Chairman Wheeler is taking the concerns of cities and their leaders seriously when it comes to local choice," said executive director Deb Socia. "We look forward to seeing the details, but any move to expand choices for towns and cities is good for innovation, competition, and for the country.”

Sen. Ed Markey (D-Mass.), who supported preemption, praised the move as a big win for consumers.

"Today’s proposal by the FCC to lift restrictions that are preventing these two communities from expanding their own broadband infrastructure is a major win for local choice and competition. Choice in broadband access is not as broadly available in the United States as it should be, and each local community deserves the opportunity to connect its citizens and businesses with the resources and opportunities that competitive broadband supports.”