The FCC may put a stop to state laws that let big ISPs strangle consumers
Soon after the announcement of the proposed merger between Comcast and Time Warner Cable, a survey conducted by University of Michigan’s Ross School of Business revealed a fairly inconvenient fact: The telecom giants were the two most hated companies in America.
The question is, why? What is it about this pair of Internet service providers (ISPs) that incites more ire than other unpopular industries, like oil producers or the consistently detestable Abercrombie & Fitch?
The reason so many people absolutely hate the companies that pipe fresh, hot Internet into their homes on a daily basis is at least partially because, when those companies offer poor service (or even worse customer service), consumers rarely have the option of decamping to a superior competitor.
A report released last year by the New America Foundation found that only nine percent of Americans have three or more options for high-speed Internet carriers. A large number only have a single option and, for people in a lot of remote and rural areas, they don't have any options at all.
There is something governments around the country can do about this—treating Internet like other essential utilities, such as water or sewage, and create their own municipal broadband networks. In recent years, cities like Lafayette, La., and Ephrata, Wash., have built their own municipal fiber networks; the latter’s infrastructure was even rated as the fastest in the country.
The municipal model has, in many cases, been successful. However, replicating it has often proven impossible—and not just because building a broadband network from scratch is really, really expensive. The legislatures of at least 20 states have passed laws either restricting in scope, or eliminating altogether, the ability of local municipalities to set up their own municipal broadband networks.
Last week, a group of Democratic lawmakers wrote a letter to Federal Communications Commission (FCC) Chairman Tom Wheeler to act unilaterally and overturns these laws, thereby allowing cities and counties in across the U.S. to create new publicly-owned networks or expand the geographic reach of the ones already in place.
"Local communities should have the opportunity to decide for themselves how to invest in their own infrastructure ... even building their own networks," reads the letter, which has a list of authors that reads like a Who's Who of congressional open Internet advocates. "We urge you and your colleagues to utilize the full arsenal of tools Congress has enacted to promote competitive broadband service to ensure America's communities obtain a 21st century infrastructure to succeed in today's fiercely competitive global economy.”
It’s an argument to which Wheeler, who previously helmed the cable industry’s top lobbying group, has actually shown himself to be quite sympathetic.
In a speech before cable industry executives this spring, Wheeler insisted that the FCC has both the power and the inclination to ‟preempt state laws that ban competition from community broadband.”
Wheeler followed that up with a June blog post to the FCC’s website laying out a case for the federal government effectively tossing the state laws in question. Wheeler’s example stemmed from a problem being faced by the municipal broadband provider in Chattanooga, Tenn., often considered the most successful implementation of municipal broadband anywhere in the United States.
Tennessee is one of many states that have placed limits on the deployment of community networks. Tennessee’s law is restricting Chattanooga from expanding its network’s footprint, inhibiting further growth. The mayor told me how adjoining communities have asked to join the network, but cannot also be served by a simple extension of the broadband network because of the state law. In some of these communities, there is no available broadband service whatsoever.
Despite Wheeler’s stated intention to dispense with the roadblocks impeding the development of municipal broadband, the FCC hasn’t yet said precisely how it’s going to skirt these laws. The Democrats’ letter asked the commission to inform them of its plan within the next 30 days.
The FCC did not respond to our request for comment.
For their part, a coalition of conservative legislators drafted its own letter to Wheeler, in the wake of the Chairman’s speech in April, arguing pretty much the exact opposite of what the Democrats advocated.
"The insinuation that the Federal Communications Commission will force taxpayer funded competition against private broadband providers—against the wishes of states—is deeply troubling,” the group charged.
“Inserting the Commission into the states' economic and fiscal affairs in such a cavalier fashion shows a lack of respect for states' rights. The last thing the Commission should do in these trying fiscal times, with so many other important priorities, is usurp state policy with respect to municipal broadband.”
The laws themselves vary from wholesale bans on municipal broadband, like the one in place in Texas, to rules that are slightly more complex. Some, like in Alabama, prohibit municipalities from using taxpayer funds to pay for the expensive startup costs. Others, as in California, allow for public entities to provide broadband, but only in regions of the state where there is no private company willing to provide service.
Many of these bills are based off of legislation drafted by the American Legislative Exchange Council, a conservative group that provides model legislation designed to be introduced in statehouses around the country. The telecom industry is one of the group’s major financial backers.
A provision in the 1996 Telecommunications Act, which was affirmed in a 2004 Supreme Court decision, "allows states to prevent municipalities from providing telecommunications services."
However, Wheeler has stated that he believes Section 706 of that same law gives the FCC the authority to overturn laws that go against its broader mission of expanding broadband access. Specifically, the law gives the FCC ‟regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans ...[and] promote competition in the local telecommunications market ... [as well as] remove barriers to infrastructure investment.”
Municipal broadband networks aren’t always successful. One rolled out in Provo, Utah, suffered from a low subscription rate and was ultimately sold to a private firm.
Still, the increased competition they create almost always spurs private competitors in the area to upgrade their service. An informal survey also found that, by and large, municipal broadband providers were willing to pledge not to charge online content providers for a ‟fast lane” to consumers—a policy recently floated by the FCC that’s drawn a widespread backlash. Large telecoms, on the other hand, wouldn’t come down one one side or another or argued that the end of net neutrality would be a positive for consumers.
‟What the FCC is going to do, I don't know. But if the FCC does anything at all, you can bet it will be appealed by the cable companies who will do anything to prevent competition,” said municipal broadband advocate Christopher Mitchell of the Institute for Local Self-Reliance. ‟There is no action the FCC can take that the cable companies will accept if it results in them facing actual competition for subscribers.”