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Tennessee v. FCC: 832 F.3d 597 (8th Cir. 2016).

In Tennessee v. FCC, (1) the Sixth Circuit Court of Appeals invalidated the FCC's 2015 order preempting laws in Tennessee and North Carolina restricting the expansion of municipal broadband. (2) The court found that Section 706 of Telecommunications Act of 1996 fell short of the clear statement that is required to preempt the allocation of power between the states and its subdivisions. (3)

I. BACKGROUND

This case concerns municipal broadband--specifically, whether, contrary to state law, municipalities that provide broadband internet service can expand to cover underserved areas that lie outside of their coverage area. (4) The state legislatures of Tennessee and North Carolina thought statute answered this question when they enacted laws that restricted the expansion of municipal broadband to these underserved areas. (5)

Tennessee enacted a law in 1999 which authorized municipalities operating an electric plant to offer internet services. (6) Sec. 601 of the law limited the area in which municipalities may provide internet services to only "within its service area." (7) This prevented a municipality from offering broadband services to surrounding areas not within its service area. (8) At the time, there was no FCC rule or regulation that required municipalities to offer broadband services outside of its coverage area. (9)

Eventually, developments in technology led to municipalities providing high speed, reliable broadband service. (10) The city of Chattanooga, Tennessee began offering high-speed broadband internet services through its' municipal electric provider. (11) Chattanooga developed a fiber-optic communication infrastructure, and became the first broadband provider in the nation to offer Gigabit services to all of its customers. (12) According to the FCC's findings, Chattanooga's municipal broadband service is a success, providing added revenue to the city, leading to job growth, and lowering rates and increasing services among broadband providers. (13) Despite this, Sec. 601 of Tennessee's municipal broadband law prevented Chattanooga from expanding the service beyond its service area to underserved areas. (14)

North Carolina enacted its own municipal broadband restrictions in 2011, limiting city-owned communications service providers to provide service only within their municipal boundaries. (15) The law also places additional restrictions on municipal broadband providers by forcing them to make payments in lieu of taxes and opening their facilities up to private actors. (16) The law also contained three provisions that exempted municipalities from the restrictions, including "grandfather" exemptions which exempt municipalities "providing communications services as of January 1, 2011" from the restrictions, so long as they abide by limitations. (17) Like the Tennessee law, the North Carolina law did not conflict with any FCC rules or regulations at the time of enactment. (18)

Like Chattanooga, Tennessee, Wilson, North Carolina constructed a highly rated municipal broadband service named "Greenlight". (19) Also like Chattanooga, Wilson faced demand from surrounding communities. (20) However, if Wilson attempted to expand into these surrounding communities, they would no longer be grandfathered from North Carolina's municipal broadband restrictions. (21) As a result, Wilson had been unable to expand beyond its municipal borders. (22)

Chattanooga and Wilson separately petitioned the FCC to preempt the restrictions that prevented them from expanding beyond their borders. (23) The FCC responded by finding that preempting the two laws would increase competition and broadband investment. (24) The FCC found that both the Tennessee and North Carolina laws constituted barriers to broadband investment and competition. (25) The FCC issued an order preempting both statutes. (26)

The FCC found that Congress granted the FCC the authority to pre-empt the laws through Sections 706(a)-(b) of the Telecommunications Act of 1996. (27) The FCC cited the preamble of the law, which stated the express goal of promoting competition in the marketplace, and noted Section 706 is the part of the law that gives the FCC the authorization to achieve this goal. (28) Addressing criticism that focused on the point that only Congress can grant the FCC power to preempt state law through explicit statutory language, the FCC argued the statutory language of Section 706 is not exhaustive and includes "the rule common throughout communications law"--that the FCC may preempt state laws. (29)

The FCC proceeded to preempt several parts of both the Tennessee and North Carolina laws. (30) In his dissent, Commissioner Ajit Pai, citing Nixon v. Missouri Municipal League, argued that the FCC could not preempt the state laws without an express statement from Congress. (31) Indeed, Commissioner Pai argued that Section 706 did not grant FCC any preemptive power at all. (32)

DISCUSSION

The Court began its analysis by noting that in its order the FCC was attempting to insert its authority into matters between a State and its municipal subdivisions. (33) The court also noted that the FCC could not do this absent a clear directive from Congress granting this authority. (34) As stated before, at the time these state laws were enacted no FCC rules or regulations, or directive from Congress, existed preventing states from placing restrictions on municipal broadband providers.

The Sixth Circuit Court rejected the FCC's arguments that Section 706 of the Communications Act gave them the authority to preempt the Tennessee and North Carolina laws. The FCC had attempted to distinguish their pre-emption here from the holding in Nixon, which struck down a Missouri state statute that forbade municipalities from entering the Telecommunications market. (35) The FCC argued that there is a difference between pre-empting a state ban on telecommunications providers and pre-empting state laws regulating an industry that the state has already authorized. (36) The FCC also argued that pre-empting state laws on municipal broadband did not implicate the core state sovereignty that was at stake in Nixon. The Sixth Circuit Court disagreed, noting that the issues invoked in this case are similar to those in Nixon in that they involve state sovereignty and the regulation of interstate communications services. (37)

The Court also further held that Section 706 lacks a clear statement from Congress authorizing the FCC to engage in pre-empting the state laws. (38) The court noted that although Section 706 authorizes the FCC to achieve the goal of promoting competition, it does not authorize it to do so by preempting state law. (39)

The Court declined to address the assertion advanced by Commissioner Pai of whether or not Section 706 provides the FCC preemptive power at all. (40) The court also declined to say whether or not Congress could actually give the FCC the power to preempt as it did here. (41)

Judge Helene N. White wrote concurring in part and dissenting in part. Judge White agreed that the holding in Nixon compelled the reversal of the FCC's order. (42) Judge White, however, articulated a more relaxed view of the Clear Statement rule, stating that it should not require a clear statement whenever the regulation or statute preempted affects local government. (43)

CONCLUSION

The 6th Circuit's decision was a blow to the FCC's efforts to advance its municipal broadband effort. The 6th Circuit handed down a clear message: if the FCC wishes to promote marketplace competition as they see it, they cannot do it by interfering with a state's regulation of municipal affairs absent a clear direction from Congress.

Ryan Farrell (*)

(*) J.D. candidate, The George Washington University, May 2018. Managing Editor, Federal Communications Law Journal, 2017-18.

(1.) Tennessee v. FCC, 832 F.3d 597 (8th Cir. 2016).

(2.) Id. at 614

(3.) Id at 600.

(4.) See Id.

(5.) Id. at 600-01.

(6.) Id. at 600 (citing Tenn. Code Ann. 7-52-601).

(7.) Id.

(8.) See Id.

(9.) See Id.

(10.) Id.

(11.) Id.

(12.) City of Wilson, North Carolina Petition for Preemption of North Carolina eneral Statute Sections 160A-340 Et Seq., Memorandum Opinion and Order, 30 FCC Rcd 2408 (2015) at *10 [hereinafter 2015 Wilson Order].

(13.) Id. at *7-8.

(14.) Id. at *9.

(15.) N.C. Gen. Stat. Ann Sec. 160A-340.1(a)(3).

(16.) Tennessee, 832 F.3d at 601.

(17.) See id. at 601-02.

(18.) Id. at 602.

(19.) 2015 Wilson Order.

(20.) Tennessee, 832 F.3d at 602.

(21.) Id.

(22.) Id.

(23.) Id.

(24.) Id. at 602-03.

(25.) Id. at 603-04.

(26.) Id. at 605.

(27.) Id.

(28.) See Id. at 606.

(29.) Id. at 607.

(30.) Id. at 608.

(31.) Id. at 609 (citing Nixon v. Missouri Municipal League, 541 U.S. 125 (2004)).

(32.) Id.

(33.) Id. at 610.

(34.) See id. (citing Nixon).

(35.) Nixon, 541 U.S. at 129/

(36.) Tennessee, 832 F.3d at 611.

(37.) Id.

(38.) Id. at 613.

(39.) See Id.

(40.) Id.

(41.) Id.

(42.) Id. at 614

(43.) Id. at 615
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Author:Farrell, Ryan
Publication:Federal Communications Law Journal
Date:Jan 1, 2018
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