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Wheeler to Propose Granting Pre-emption Petitions

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.”