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Tennessee v. FCC.


832 F.3d 597 (6th Cir. 2016)

In Tennessee v. FCC, (1) the United States Circuit Court of Appeals for the Sixth Circuit dealt a major setback to the FCC's attempt to preempt state laws that restricted expansion of municipal broadband service networks. The Court reversed the FCC's preemption order, holding that Section 706 of the Telecommunications Act of 1996 ("the Act") did not contain the requisite clear statement of congressional intent to delegate preemption authority to the agency.


Section 706(a) of the Act grants the FCC authority to encourage the deployment of advanced telecommunications capability by removing barriers to infrastructure investment. (2) Section 706(b), similarly directs the Commission to "take immediate action" to accelerate deployment of such capability by removing barriers and promoting competition if the Commission finds that the capability is not being deployed to in a reasonable and timely fashion. (3)

In Tennessee, a Chattanooga-operated municipal broadband provider (the Electric Power Board, or EPB) petitioned the FCC to preempt a state law that barred Chattanooga from offering Internet service to any areas not served by the municipality's electric plant. (4) In North Carolina, the City of Wilson asked the FCC to preempt the entirety of Session Law 2011-84, (5) which contained a number of restrictions on municipal broadband providers. (6) In relevant part, the law (1) confined service offerings to the municipality's corporate limits; (7) (2) required municipalities to impute the costs of private providers when pricing municipal services; (8) and (3) amended the state's definition of "public utility" to include municipal broadband providers, thereby exposing them to additional regulation by the state utilities commission. (9)

The FCC granted both petitions and preempted most of the laws at issue. (10) In the resulting Order, (11) the FCC argued that Sections 706(a) and (b) of the Act granted it implicit authority to preempt state telecommunications laws that conflict with federal communications policy. (12) Further, it concluded that Section 706 also allowed it to preempt "state laws regulating municipal subdivisions" when the laws stand as a barrier to broadband infrastructure investment or an impediment to competition. (13) The FCC, therefore, could preempt Tennessee's territorial restriction by categorizing it as a "state law communications policy regulation, as opposed to a core state function in controlling its political subdivisions . . . ." (14) As to North Carolina's Session Law, the Commission preempted only those sections deemed to constitute such "barriers." (15)

This case dealt with the consolidated petitions for review of the Order by the states of Tennessee and North Carolina. (16) Tennessee argued that the Order unconstitutionally interfered with a state's right to determine the boundaries of its political subdivisions. (17) Tennessee, North Carolina, and the National Association of Regulatory Utility Commissioners (NARUC) argued that even if Congress could pass such a law, Section 706 did not provide the required "clear statement" of legislative intent to delegate preemption authority over state laws regarding municipal subdivisions. (18) Although preemption authority need not be explicit, (19) the authority to preempt a state's allocation of powers between itself and its subdivisions "must be delegated by way of a clear statement." (20)


The Sixth Circuit ruled against the FCC, reversing the preemption order. (21) First, the Court held that the clear statement rule did apply. (22) Finding binding precedent in Nixon v. Missouri Municipal League, the court held that the clear statement rule should apply here, where federal preemption results in "interposing federal authority between a State and its municipal subdivisions . . . ." (23) As in Nixon, where the Supreme Court upheld the FCC's determination that it needed a clear statement to preempt a Missouri state statute barring its municipalities from entering the telecommunications market, here federal preemption threatened "to trench on the States' arrangements for conducting their own governments." (24) Because both Tennessee and North Carolina made "discretionary determinations for their political subdivisions," the Nixon case was therefore analogous, and the clear statement rule applied. (25) Importantly, the Sixth Circuit clarified that the Tennessee and North Carolina statutes at issue in this case implicated both interests in state sovereignty and regulation of interstate communications services. (26) But because Nixon also interpreted a section of the Telecommunications Act that dealt with the same competing interests, (27) the Court essentially implied that state sovereignty interests will trump federal regulatory telecommunications interests (absent explicit statutory directives).

Therefore, Section 706 could only grant the FCC authority to preempt state laws regarding municipal subdivisions if it contained a clear statement of congressional delegation of that power. Because the statutory language was unclear as to whether "remov[ing] barriers to infrastructure investment" encompassed both public and private investment, or only private, and because "promot[ing] competition in the telecommunications market" did not specifically direct the agency to preempt a state's allocation of powers between it and municipalities, the court held that Section 706 could not be read to authorize federal preemption. (28) The Order was reversed. (29)


It is difficult not to sympathize with the FCC here if one believes that the state laws at issue clearly presented "barriers" of some sort to infrastructure and competition. North Carolina's statute is especially illustrative: requiring municipal broadband providers to impute costs of private providers when pricing municipal services, as in Section 340.1(a)(8), does not appear to serve a sovereign state interest. Instead, as the dissent highlights, "it is an expression of [North Carolina's] telecommunications policy that private providers must be protected from a municipal provider's unfair advantage." (30) If the clear statement rule only applies where federal preemption threatens to interfere with a state's authority to govern its subdivisions, perhaps Section 706 arguably implied delegation of preemptory authority should have been enough to save at least one victory for the FCC and consumers in the City of Wilson.

by Laura K. Hamilton (*)

(*) J.D. candidate, The George Washington University Law School, May 2017. Senior Publications Editor, Federal Communications Law Journal, 2016-17.

(1.) Tennessee v. FCC, 832 F.3d 597 (6th Cir. Aug. 10, 2016).

(2.) See id. at 605-06 (citing 47 U.S.C. [section] 1302 (2012)).

(3.) See id.

(4.) See id. at 599-600.

(5.) See id. at 601 (citing N.C. GEN. STAT. [section][section] 160A-340 to -340.6 (2011)).

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

(7.) See id. at 601 (citing to N.C. GEN. STAT. [section] 160A-340.1(a)(3)).

(8.) See id. (citing to N.C. GEN. STAT. [section] 160A-340.1(a)(8)).

(9.) See id.

(10.) See id. at 602-03.

(11.) City of Wilson, N.C. Petition for Preemption of N.C. Gen. Statute Sections 160A-340 et seq., Memorandum Opinion and Order, 30 FCC Rcd 2408 (2015) [hereinafter Preemption Order].

(12.) See Tennessee, 832 F.3d at 606-07 (citing Preemption Order, supra note 11, at paras. 142, 144-45).

(13.) Id. at 607-08 (citing Preemption Order, supra note 11, at paras. 146-47).

(14.) Id. at 609.

(15.) See id.; see also id. at n.2.

(16.) See id. at 609. Also noteworthy is the fact that the court granted motions to intervene by the National Association of Regulatory Utility Commissioners (NARUC), the Electric Power Board (EPB) of Chattanooga, Tennessee, and the City of Wilson, North Carolina. The United States was also a named party, but the Antitrust Division of the Department of Justice filed a letter disclaiming any particular position in either case. See id.

(17.) See id. at 609-10.

(18.) See id. at 610.

(19.) See id. at 613; see also Gregory v. Ashcroft, 501 U.S. 452, 467 (1991).

(20.) See Tennessee, 832 F.3d at 613.

(21.) See id. at 600.

(22.) See id. at 611.

(23.) Id. at 610 (citing Nixon v. Mo. Mun. League, 541 U.S. 125, 140 (2004)).

(24.) Id. (citing Nixon, 541 U.S. at 140-41).

(25.) Id. at 610-11.

(26.) See id. at 612 ("These effects are not mutually exclusive.").

(27.) See id. at 610-11.

(28.) Id. at 613.

(29.) Id. at 614.

(30.) See id. at 615 (White, J., concurring in part and dissenting in part).
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Title Annotation:expansion of municipal broadband service networks
Author:Hamilton, Laura K.
Publication:Federal Communications Law Journal
Date:Nov 1, 2016
Previous Article:U.S. Telecom Association V. FCC.
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