NC Vs FCC

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No. 15-____
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
STATE OF NORTH CAROLINA,
Petitioner,
v.
FEDERAL COMMUNICATIONS
COMMISSION, and
UNITED STATES OF AMERICA,
Respondents.
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PETITION FOR REVIEW
Pursuant to 47 U.S.C. 402(a), 28 U.S.C. 2342(1) and 2344, and Rule

15(a) of the Federal Rules of Appellate Procedure, the State of North Carolina
hereby petitions this Court for review of the final order of the Federal
Communications Commission (FCC or Commission) captioned In the Matter
of City of Wilson, North Carolina Petition for Preemption of North Carolina
General Statute Sections 160A-340 et seq.; The Electric Power Board of
Chattanooga, Tennessee Petition for Preemption of a Portion of Tennessee Code
Annotated Section 7-5260, Memorandum Opinion and Order, FCC 15-25, WC
Docket Nos., 14-115 and 14-116 (Order). The Order was released on March 12,
2015, and stated that it became effective upon release.
(Order, p. 76, 185)
A copy of the full text of the Order is attached as Exhibit A and is available at
https://apps.fcc.gov/edocs_public/index.do?document=332489.
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In the Order, the FCC preempts North Carolinas statutory law (N.C.G.S.
160A-340.1 et seq.) and provisions of Session Law 2011-84 governing municipal
provisioning and operation of broadband communications services.
Despite
recognition that the State of North Carolina creates and retains control over
municipal governments, the FCC unlawfully inserted itself between the State and
the States political subdivisions. North Carolina, as a sovereign State and a party
to the proceeding below, is aggrieved and seeks relief on the grounds that the
Order:
(1) is contrary to the United States Constitution;
(2) is in excess of the Federal Communication Commissions authority;
(3) is arbitrary, capricious, and an abuse of discretion within the meaning of
the Administrative Procedure Act; and
(4) is otherwise contrary to law.
Venue is proper in this Court pursuant to 28 U.S.C. 2343. The State of
North Carolina acknowledges that the State of Tennessee filed its Petition for
Review from the Order in the United States Court of Appeals for the Sixth Circuit
on 20 March 2015. (State of Tennessee v. Federal Communications Commission,
Docket No. 15-3291)
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North Carolina respectfully requests that this Court hold unlawful, vacate,
enjoin, and set aside the Order, and provide such additional relief as may be
appropriate.
Respectfully submitted, this the 11th day of May, 2015.
ROY COOPER
Attorney General
s/ John F. Maddrey
John F. Maddrey
Solicitor General
s/ Robert T. Hargett
Robert T. Hargett
Senior Deputy Attorney General
N.C. Department of Justice
Post Office Box 629
Raleigh, NC 27602
Telephone: (919) 716-6900
Facsimile: (919) 716-6763
E-mail:
[email protected]
[email protected]
Attorneys for Petitioner
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CERTIFICATE OF SERVICE
I, John F. Maddrey, hereby certify that on, May 11, 2015, I filed the
foregoing Petition for Review via the Courts ECF filing system, and caused one
copy of the Petition for Review to be delivered by first class mail and electronic
mail, where specified, to:
Jonathan Sallet
Federal Communications Commission
Office of the General Counsel
Room 8-A741
445 12th Street, S.W.
Washington, DC 20554
[email protected]
Counsel for the Federal
Communications Commission
Loretta E. Lynch
U.S. Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, N.W.
Room 3601
Washington, DC 20530-0001
Catherine G. OSullivan
U.S. Department of Justice
Antitrust Division/Appellate Division
950 Pennsylvania Ave., N.W. Room 3224
[email protected]
Counsel for the United States of America
ROY COOPER
Attorney General
s/ John F. Maddrey
John F. Maddrey
Solicitor General
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CERTIFICATE OF SERVICE
I further certify that on May 11th, 2015, I caused one copy of the Petition
for Review be delivered by first class mail to the parties listed below, who
participated in the FCC proceeding, consistent with Federal Rule of Appellate
Procedure 15(c)(1). The Order is available at:
https://apps.fcc.gov/edocs_public/index.do?document=332489.
ROY COOPER
Attorney General
s/ John F. Maddrey
John F. Maddrey
Solicitor General
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SERVICE LIST
James P. Cauley, III
Gabriel Du Sablon
Cauley Pridgen, P.A.
2500 Nash St. N
Suite C P.O. Drawer 2367
Wilson, NC 27894-2367
Counsel for the City of Wilson
Alton Drew
667 Peeples Street, SW Apt. 4
Atlanta, GA 30310
Jim Baller, Sean Stokes,

Ashely Stelfox
Baller Herbst Stokes & Lide, PC
2014 P Street, N.W. Suite 200
Washington, D.C. 20036
Counsel for the City of Wilson
Steve Pociask
American Consumer Institute
1701 Penn. Ave., NW, Suite 300
American Commitment
1300 Pennsylvania Ave., NW #190-406
American Legislative Exchange Council

2900 Crystal Drive, 6th Floor
Arlington, VA 20222
Christopher M. Heimann
Gary L. Phillips, Lori A. Fink
AT&T, Inc.
1120 20th Street, NW Suite 1000
Counsel for AT&T
Emily Sheketoff
American Library Association
1615 New Hampshire Ave NW
Mac Zimmerman
Director of Policy
Americans for Prosperity
2111 Wilson Blvd Suite 350
Arlington, VA 22201
Aaron Harpole
1314 14th St
Santa Monica, CA 90404
Advanced Comms. Law & Policy
Institute at New York Law School
Charles M Davidson
Michael J Santorelli, Directors
185 West Broadway
New York, NY 10013
Amy Love
2669 NC Highway 194 N
Boone, NC 28607
Andrew Lewis
3302 Glacier Ridge Road
Middleton, WI 53562
Allen Woodruff
7517 Inglewood Road
Burlington, NC 27215
6
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Anthony Stuckey
17510 71st Ct. Apt 2C
Tinley Park, IL 60477
Carlos Ayala
1782 W 35th Street
Los Angeles, CA 90018-3805
Anye Freer
3201 Bridlegate Drive
Arlington, TX 76016
Carlos Rodriguez
1468 Madison Ave. Box 1124
New York, NY 10029
Arun Ghosh
3112 Aralia Ln
San Jose, CA 95135
Carole Monroe
51 Railroad Street
Keene, NH 03431
Benjamin Gurga
1033 16th St S
Arlington, VA 22202
Douglas Dawson
CCG Consulting
1133 Bal Harbor Blvd Ste 1139
PMB 296
Punta Gorda, FL 33950
Benjamin Jacob Downey

2704 B Conifer Drive
Raleigh, NC 27606
Melissa E. Newman
Sr VP Federal Policy and Reg. Affairs
CenturyLink
1099 New York Avenue NW Suite 250
Brandon Wade
1402 Judy Lane
Mansfield, TX 76063
Chris Earles
2148 Stanley Hills Drive
Los Angeles, CA 90046
Broadband Alliance of Mendocino

County /Access Sonoma Broadband
Mike Nicholls, Jim Morehead
PO Box 946
Ukiah, CA 95482
Chris Frisina
9112 Nash Ave
Charlotte, NC 28213
Broadband-Matters
Catharine Rice
424 East Alexandria Avenue
Alexandria, VA 22301
Christopher Jones
2504 Richardson Rd
Apex, NC 27502
Bruce Patterson
2135 S Ammon Road
Ammon, ID 83406
7
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Robert M. Cooper
Boies, Schiller & Flexner, LLP
5301 Wisconsin Ave., NW
Christopher Libertelli
3544 NE 87th St
Seattle, WA 98115
Citizen X
123 ABC Road
Wilson, NC 27893
Ken Fellman
Kissinger & Fellman, P.C.
3773 Cherry Creek N. Drive, Suite 900
Denver, CO 80209
Counsel to the Colorado
Communications and Utility Alliance
City of Carl Junction, MO

303 N Main PO Box 447
Carl Junction, MO 64834-0447
Commissioner Mike O'Rielly

445 12th Street, SW
Paul A. Kronberger, CIO

City of Madison
210 Martin Luther King Jr.
Blvd Room 500
Madison, WI 53703-3346
Christopher Mitchell
Todd O'Boyle, Steven Renderos
Common Cause et al,
1133 19th St NW 6
Washington, DC 2003
Nancy Shepard, Mayor

City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94303
Dale Jobe
2472 Tunnel Hill RD SW
Cleveland, TN 37311-8397
Mary Beth Henry

Manager Office of Community
Technology
City of Portland
111 SW Columbia St, Suite 600
Portland, OR 97201
Daniel F. McComas
P.O. Box 2274
Wilmington, NC 28402
Clinton Collins
120 Crescent Drive
Bristol, VA 24201
David Collado
2246 BIGELOW COMMONS
Enfield, CT 06082
Joanne Hovis
Coalition for Local Internet Choice
10613 Concord St.
Kensington, MD 20895
David Deckert
976 Rose Creek Terrace
Woodstock, GA 30189
8
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David R Brown
5903 Barbados Place Apt 103
Rockville, MD 20852-5416
Donald T. E. Landin
206 S. 6th Street
Fort Pierce, FL 34950
David Shaw and Drew Clark

Kirton McConkie
Thanksgiving Park Four
2600 W. Executive Parkway,
Suite 400
Lehi, UT 84043
Donovan Hester
1636 South Seminole Dr.
East Ridge, TN 37412
E. Stanley Seay
3821 Softwind Ln
Hope Mills, NC 28348-9651
Deb Socia
1200 18th Street NW Suite 700
Earl Comstock
Eckert Seamans Cherin & Mellott
1717 Pennsylvania Ave NW
12th Floor
Desmarie M. Waterhouse
Director of Government Relations
American Public Power Association
2451 Crystal Dr. Ste. 1000
Arlington, VA 22202
Ellen Satterwhite
2001 L Street NW Suite 901
Dewayne Siddon
571 Old Lead Mine Valley RD SW
Cleveland, TN 37311
Emily Sullivan
1008 Watsonia Dr
Zebulon, NC 27594
DG Whitley
6771 Good News Church Road
Stantonsburg, NC 27883-9306
Enrique Armijo
Elon University School of Law
201 N. Greene St.
Greensboro, NC 27401
Diana Carew, Economist

Progressive Policy Institute
1101 14th Street, Suite 1250
Washington DC, DC 20005
Eugene Kim
167 National Drive
Pinehurst, NC 28374
Donald S Fuchs
4609 Wee Burn Trail
Raleigh, NC 27612-6393
9
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Heather Hunt
109 W Carr St
Carrboro, NC 27510
Elaine Davis, Executive VP

Fair Competition Alliance
321 High School Rd NE Ste D-3
PMB #233
Bainbridge Island, WA 98110
Heather N. Cristion Wilson

141 Coffee Bluff Lane
Holly Springs, NC 27540
Felice Piserchia
24 Swannaview Dr
Asheville, NC 28805
Institute for Local Self-Reliance

2720 East 22nd Street
Minneapolis, MN 55406
Heather Burnett Gold, President

Fiber to the Home Council Americas
6841 Elm Street 843
McLean, VA 22101
Institute for Local Self-Reliance and

Rural Broadband Policy Group
Christopher Mitchell
Edyael Casaperalta
2720 East 22nd Street
Minneapolis, MN 55406
Thomas Cohen
Kelley Drye and Warren LLP
3050 K Street NW 400
Tom Giovanetti, President

Institute for Policy Innovation
1660 S. Stemmons Frwy. Suite 245
Lewisville, TX 75067
Fred Goodwin
35 Rogers Wood
San Antonio, TX 78248
Mayor Gary Resnick, Chair

Intergovernmental Advisory Committee
445 12th Street, SW
Gerald Fisher
1491 Greenwood Ave
Palo Alto, CA 94301
Governor Nikki Haley (SC)
1205 Pendleton Street
Columbia, SC 29201
International Center for Law &

Economics and TechFreedom
Geoffrey Manne, Ben Sperry
2325 E. Burnside Street Suite 301
Portland, OR 97214
W. Theodore Pibil, Jr. Director

Harford County, Maryland
45 South Main Street
Bel Air, MD 21014
10
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ITIF
Doug Brake
1101 K St NW, Ste 610
Jon Sanders, Dir. of Regulatory Studies

John Locke Foundation
200 West Morgan Street, Suite 200
Raleigh, NC 27601
Micah M. Caldwell
Genevieve Morelli
ITTA
1101 Vermont Ave., NW Suite 501
John Lukach
17A Manor Parkway
Rochester, NY 14620
Jonathan Levy
445 12th Street, SW
Jamaine Arrington
4929 Bartwood Dr
Raleigh, NC 27613
Joseph Hall
706 Lakewinds Trail
Rougemont, NC 27572
James R. Van Zandt

27 Spencer Dr.
Nashua, NH 03062
Joseph S. Wigington
PO Box 667 441 West Main St
Morristown, TN 37815
Jane Blackstone
PO Box 774408
Steamboat Springs, CO 80477
Joseph Wells
1605 Westbridge Ct
Jason Kirk
1318 Laredo Ave
Chattanooga, TN 37412
Joshua Milewski
205 Riegelsville Rd
Milford, NJ 08848-1887
Jeff Hoel
731 Colorado Avenue
Palo Alto, CA 94303
Joshua Pratt
1112 S. Magnolia Dr. Apt Q4
Tallahassee, FL 32301
John D. Sallenger
5742 Thompson Chapel Church Road
Wilson, NC 27896
Justin Jetton
805 White Meadows Drive 6
Fuquay Varina, NC 2752
John Kuhn
7252 Mariemont Crescent
Cincinnati, OH 45227
Karen M. McDonald, City Attorney

11
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2401 SE Monterey Rd
Stuart, FL 34996
City of Fayetteville
PO Box 1513
Fayetteville, NC 28302
Kyra F. Howell, President

KHE Community Solutions, LLC
P.O. Box 591
Signal Mountain, TN 37377
Karen Nakamura
48 Howard Ave
New Haven, CT 06519-2809
National Telecommunications
& Information Administration
Lawrence E. Strickling
U.S. Department of Commerce
1401 Constitution Avenue, N.W.
Katie McAuliffe, Executive Director

Digital Liberty
722 12th street NW Fourth Floor
Keith Weber
8606 Sparkling Springs Dr
Houston, TX 77095
Leann Old
3990 Kristen St
Spring Hill, TN 37174
Ken Joseph
2964 Belrose Avenue
Pittsburgh, PA 15216
Peter d'Errico
Leverett Municipal Light Plant
9 Montague Road
Leverett, MA 01054
Ken Murray
5415 6th Court S 2
Birmingham, AL 3521
Lewis Miles
P.O. Box 67
Gouldsboro, ME 04607-0067
Tillman Lay
Spiegel & McDiarmid LLP
1875 Eye Street, NW Suite 700
Counsel for Kentucky Municipal
Utilities Association and MuniNet
LR Holmes, Ross Holmes Group

PO Box 30924
Raleigh, NC 27622
Kevin Flanagan
3919 CASHEW DR
Raleigh, NC 27616
Madery Bridge
9201 Warren Parkway Suite 200
Frisco, TX 75035
Kevin Kryzda
Maneesh Pangasa
12
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Mike Wendy
8519 Bound Brook Lane
Alexandria, VA 22309
3562 S 18th Ave

Yuma, AZ 85365-3937
Marian Norton
Hwy 902
Pittsboro, NC 27312
Michael C Nicholls
4300 Cazadero Hwy
Cazadero, CA 95421-9758
Rep. Marilyn W Avila

16 West Jones Street Office 2217
Michael Miller
285 18th Street
Fond du Lac, WI 54935
Mark Johnson
302 Helmsdale Drive
Chapel Hill, NC 27517
Michael Procton
1326 Abbotts Creek Cir.
Kernersville, NC 27284
Mark Turner
1108 Tonsler Dr
Michael R. Long
4201 Black Sycamore Drive
Charlotte, NC 28226
Martijn Kleinendorst
986 Gunter Corner Rd.
Parrottsville, TN 37843
Michael S. Keller
1911 W Easton Pl
Tulsa, OK 74127-6424
Mary Sewell
2904 Legion Ave
Durham, NC 27707
Middle Class Action Fund

Andrew King
536 Pantops Center, #111
Charlottesville, VA 22911
Matthew Friedman
2148 Stanley Hills Drive
Los Angeles, CA 90046
Henry Walker
Bradley Arant Boult Cummings
1600 Division Street Suite 700
Nashville, TN 37203
Counsel for Momentum Telecom, Inc.
Tracey Rosenberg, Executive Dir.

Media Alliance
1904 Franklin Street #818
Oakland, CA 94612
James Bradford Ramsay
MediaFreedom
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New America Foundation - Open

Technology Institute
1899 L Street NW Suite 400
General Counsel
National Association of Regulatory
Utility Commissioners
1101 Vermont Ave. NW Suite 200
NGA, NCSL, CSG

444 N. Capitol Street NW Suite 515
Nathan Borson
PO Box 211 Gustavus
AK 99826-0211
NC Next Generation Network

Elise Kohn
334 Blackwell Street Suite 1100
Durham, NC 27701
William T. Pound
National Conference of State Leg.
444 North Capitol Street NW
Suite 515
Northern Virginia Electric Cooperative

Howard Spinner
10323 Lomond Drive
Manassas, VA 20109
David Parkhurst
National Governors Association
444 N Capitol St NW 1
Washington, DC 2000
NTCA - The Rural Broadband Assoc.

Gregory J. Vogt
101 West Street, Suite 4
Black Mountain, NC 28711
Clarence E. Anthony, Executive Dir.

National League of Cities
1301 Pennsylvania Avenue, NW
Suite 550
Michael Romano, Sr VP, Policy

NTCA-The Rural Broadband Assoc.
4121 Wilson Blvd., Suite 1000
Arlington, VA 22203
Erik Stallman, Steptoe & Johnson LLP

1330 Connecticut Ave NW
Counsel for Netflix, Inc.
OptiFi, Kyle Traxler

Box 501
Fostoria, OH 44830
Sarah Collins/Whitney Christen

N.C. League of Municipalities
215 N. Dawson Street
Raleigh NC 27603
Patrick Seymour
24 Mountain View Circle
Amherst, MA 01002
14
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Robert Wack
93 West Green St.
Westminster, MD 21157
Pennsylvania Public Utility Commn

Commonwealth of Pennsylvania
David E Screven, Asst. Counsel
P.O. BOX 3265
Harrisburg, PA 17105-3265
Sabrina Gosnell
10613 Concord Street
Kensington, MD 20895
Peter Honsinger
16432 Phillips Rd
Holley, NY 14470
Preble Law
3400 NW 3rd Ave #207
Pompano Beach, FL 33064
Alan Wilson, Attorney General

State of South Carolina
Rembert C Dennis Building
P.O. Box 11549
Columbia, SC 29211-1549
Rep. Beverly Earle

514 Legislative Office Building
Scott Cleland
7925 Jones Branch Drive #6200
Mclean, VA 22101
Town of Rockport, Maine

Richard C. Bates, Town Manager
101 Main St., P O Box 10
Rockport, Maine 04856
Catharine Rice, President

SEATOA
P.O. Box 1176
Pineville, NC 28134-1176
Rick Weinberger
63 Elm St Apt 214
Manchester, CT 06040
Senator Paul Farrow

Chair, Sentate Committee on
Government Operations, Public Works
and Communications
PO Box 8952
Madison, WI 53708
Rober Billingsley
4507 Sanders Lane
Catharpin, VA 20143
Seth Strong
704 Calloway Ct
Franklin, TN 37067
Robert Carrick
169 W. Main St.
Dayton, PA 16222
SHLB Coalition
John Windhausen, Jr. Executive Dir.
5185 MacArthur Blvd Suite 560
Robert Knox
374 Main St
Otego, NY 13825
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Senator Thom Tillis

G55 Dirksen Senate Office Building
Terri Buckner
306 Yorktown Drive
Chapel Hill, NC 27516
Susan Bjerke
838 N 85th St
Scottsdale, AZ 85257
Clarence A. West
Texas Cities Coalition
4001 Lob Cove
Austin, TX 78730
Attorney for Texas Cities Coalition
Susan Madrak
4343 E. Thompson St.
Philadelphia, PA 19137
Amina Fazlullah, Director of Policy

The Benton Foundation
1825 K Street NW Suite 400
Timothy A Hinnant, Mayor

Town of Wendell
15 East Fourth Street
Wendell, NC 27591
Randolph J. May, President

The Free State Foundation
P.O. Box 60680
Potomac, MD 20859
TechFreedom
Berin Szoka
110 Maryland Ave NE, Suite 407
Michael Beckerman, President & CEO

The Internet Association
1100 H Street NW
Tamah Hughes
15 East Fourth Street
Wendell, NC 27591
Stephen E. Coran
Lerman Senter PLLC
2000 K Street, NW Suite 600
Counsel for the Wireless Internet
Service Providers Association
TechFreedom and ICLE

Berin Szoka
110 Maryland Ave NE, Suite 407
Telecommunications Industry Assoc.
Mark Uncapher
1320 N Courthouse Rd. #200
Arlington, VA 22201
Theodore Barnes
3278 Meadowbrook Blvd
Cleveland Heights, OH 44118
16
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Miles Atkins, Mayor

Town of Mooresville
413 N. Main Street PO Box 878
Mooresville, NC 28115-0878
Thomas A. Schatz
1301 Pennsyvlania Ave., NW St. 1075
Timothy E. Wirth
3900 Watson Place, N.W.
Building B Apartment 6H
United States Telecom Association

Bennett L. Ross, Wiley Rein LLP
1776 K Street, NW
Todd Patton
4512 Bracada Dr
Durham, NC 27705
Jonathan Banks, Sr VP, Law & Policy

B. Lynn Follansbee
United States Telecom Association
607 14th Street, N.W. Suite 400
Senator Tom Apodaca

16 West Jones Street Room 2010
Raleigh, NC 27601
Brett Kilbourne
VP and Deputy General Counsel
Utilities Telecom Council
1129 20th Street, NW Suite 350
Tom Taydus
1924 Chestnut Street Ext
High Point, NC 27262-4405
Town of Davidson
Leamon Brice Town Manager
216 South Main Street PO Box 579
Davidson, NC 28036
Stephen E. Coran
Lerman Senter PLLC
2000 K Street, NW Suite 600
Town of Highlands
P.O. Box 460
Highlands, NC 28741
Wireline Competition Bureau

445 12th Street SW 4
Washington, DC 2055
Richard G. Sears, Mayor

Town of Holly Springs
PO Box 8
Holly Springs, NC 27540
XMission LC
Pete Ashdown, President
51 E 400 S Ste 200
Salt Lake City, UT 84111
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Zach Rutledge
19852 Pitkin Dr.
Foley, AL 36535-4712
Zackary Bennett
23699 S 209th Ct
Queen Creek, AZ 85142
Zoren Gaspar
215 Marion Avenue
Huron, OH 44839
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EXHIBIT A
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FCC 15-25
Before the
Washington, D.C. 20554
In the Matter of
City of Wilson, North Carolina
Petition for Preemption of North Carolina General
Statute Sections 160A-340 et seq.
The Electric Power Board of
Chattanooga, Tennessee
Petition for Preemption of a Portion of Tennessee
Code Annotated Section 7-52-601
)
)
)
)
)
)
)
)
)
)
WC Docket No. 14-115
WC Docket No. 14-116
MEMORANDUM OPINION AND ORDER

Adopted: February 26, 2015
Released: March 12, 2015
By the Commission: Chairman Wheeler and Commissioners Clyburn and Rosenworcel issuing separate
statements; Commissioners Pai and ORielly dissenting and issuing separate
statements.
TABLE OF CONTENTS
Para.
I.
INTRODUCTION.................................................................................................................................. 1
A. Executive Summary ......................................................................................................................... 1
B. Background.................................................................................................................................... 17
1. The Commissions Mandate Under Section 706 of the Telecommunications Act ................. 18
2. The EPB Petition and Territorial Restriction in Section 601 .................................................. 22
3. The Wilson Petition and H.B.129 ........................................................................................... 33
II. PREEMPTION OF PROHIBITIONS ON MUNICIPAL PROVISION OF BROADBAND
WILL LIKELY LEAD TO INCREASED OVERALL BROADBAND INFRASTRUCTURE
INVESTMENT AND PROMOTE OVERALL BROADBAND COMPETITION IN
TENNESSEE AND NORTH CAROLINA, CONSISTENT WITH SECTION 706 ........................... 42
A. EPB and Wilson Provide Service Because Pre-Existing Service Did Not Meet
Community Needs ......................................................................................................................... 43
B. The Private Sector in Wilson and Chattanooga Improved Services and Reduced Rates or
Halted Rate Increases in Response to Municipal Entry................................................................. 49
C. Objections Raised in the Record Fail to Support a Different Outcome ......................................... 56
1. So-Called Level Playing Field and Crowding Out Arguments Do Not Justify
Denying the Petitions .............................................................................................................. 57
2. Claims That There Is a High Rate of Municipal Broadband Failure Are Misplaced .............. 61
3. Other Objections...................................................................................................................... 71
III. THE TENNESSEE AND NORTH CAROLINA STATUTORY PROVISIONS ARE
BARRIERS TO BROADBAND INVESTMENT AND COMPETITION FOR EPB AND
WILSON .............................................................................................................................................. 75
A. The Tennessee Statutory Provision, Section 7-52-601 .................................................................. 77
1. The Territorial Restriction in Section 601 is a Barrier to Broadband Investment and
Competition............................................................................................................................. 77
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FCC 15-25
2. EPB Would Deploy Additional Facilities and Expand Competitive Entry Absent the
Territorial Restriction in Section 601...................................................................................... 80
B. North Carolina Statutory Provisions.............................................................................................. 81
1. Background ............................................................................................................................. 81
a. Measures to Raise Economic Costs .................................................................................. 82
b. Level Playing Field Obligations.................................................................................... 85
c. Measures to Impose Delay................................................................................................ 88
2. The North Carolina General Statute, H.B. 129, is a Barrier to Broadband Investment
and Competition ...................................................................................................................... 93
a. Measures to Raise Economic Costs .................................................................................. 96
b. Level Playing Field Obligations.................................................................................. 108
c. Measures to Impose Delay.............................................................................................. 114
3. Wilson Would Deploy Additional Facilities and Expand Competitive Entry Absent
H.B.129 ................................................................................................................................. 120
4. Statutory Provisions That Do Not Constitute Barriers .......................................................... 123
IV. COMMISSION AUTHORITY TO PREEMPT THESE LAWS ....................................................... 130
A. The Mandate of Section 706 ........................................................................................................ 131
B. General Authority to Preempt under Section 706........................................................................ 140
C. Authority to Preempt Certain State Regulations of Community Broadband Providers............... 146
D. Counterarguments........................................................................................................................ 151
1. Arguments Based on the Act................................................................................................. 151
2. Gregory v. Ashcroft ............................................................................................................... 154
3. Nixon v. Missouri Municipal League .................................................................................... 159
4. The 10th Amendment ............................................................................................................. 167
E. Application to Tennessees Section 601 ...................................................................................... 168
F. Application to North Carolinas H.B. 129 ................................................................................... 170
1. Level Playing Field Obligations ........................................................................................ 173
2. Measures to Raise Economic Costs....................................................................................... 175
3. Measures to Impose Delay .................................................................................................... 179
4. Not Preempted....................................................................................................................... 182
V. ORDERING CLAUSES..................................................................................................................... 183
ATTACHMENT A: EPB / TENNESSEE MAP
ATTACHMENT B: WILSON / NORTH CAROLINA MAP
ATTACHMENT C: TENNESSEE LAW SUBJECT TO PETITION
ATTACHMENT D: NORTH CAROLINA LAW SUBJECT TO PETITION
I.
INTRODUCTION
A.
Executive Summary
1.
In this proceeding, we grant the petition of the Electric Power Board of Chattanooga,
Tennessee (EPB), and grant to the extent described herein and otherwise deny the petition of the City of
Wilson, North Carolina (Wilson),1 and preempt certain challenged provisions of Tennessee and North
Carolina law restricting municipal provision of broadband service pursuant to section 706 of the
Petition of the Electric Power Board of Chattanooga, Tennessee, Pursuant to Section 706 of the
Telecommunications Act of 1996, for Removal of Barriers to Broadband Investment and Competition, WC Docket
No. 14-116 (filed July 24, 2014) (EPB Petition); Petition of the City of Wilson, North Carolina, Pursuant to Section
706 of the Telecommunications Act of 1996, for Removal of Barriers to Broadband Investment and Competition,
WC Docket No. 14-115 (filed July 24, 2014) (Wilson Petition).
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Telecommunications Act of 19962 because we find that they are barriers to broadband infrastructure
investment and thwart competition.
2.
Americans recognize the critical importance of high quality broadband internet access as
necessary infrastructure in todays world.3 As we recently found in our 2015 Broadband Progress
Report:
Today, Americans turn to broadband Internet access service for every facet of daily life,
from finding a job to finding a doctor, from connecting with family to making new
friends, from becoming educated to being entertained. The availability of sufficient
broadband capability can erase the distance to high-quality health care and education,
bring the world into homes and schools, drive American economic growth, and improve
the nations global competitiveness. New technologies and services such as real-time
distance learning, telemedicine, and higher quality video services are being offered in the
market today and are pushing demand for higher broadband speeds.4
3.
The private sector has invested billions of dollars upgrading their broadband networks
throughout the United States, and current deployment data indicate that 92% of Americans in urban areas,
and 47% in rural areas, have access to fixed broadband with speeds of at least 25/3 Mbps.5 But those
actions, while vital, do not address the needs of all Americans because financial incentives for private
deployment of competitive networks are sometimes insufficient. As recognized by Congress in section
706, the need for broadband is everywhere, even if the business case is not. The actions that communities
are taking to make certain their citizens have access to this infrastructure are varied, ranging from
negotiating with private sector providers to engaging in public-private partnerships, and, in some
instances, building municipal networks. No one solution works for all communities. Both the EPB and
Wilson networks provide 1 Gbps broadband to their communities today and were constructed in
significant part because of the economic, educational, healthcare, public safety and other community
benefits they would bring. These communities are seeing those benefits now, particularly in the form of
greater competition, economic development and increased educational opportunities. EPB and Wilson
filed their preemption requests because communities neighboring their service territories that have limited
or no broadband availability or competition have requested expansion in order to garner the benefits such
state-of-the-art networks can deliver. Both EPB and Wilson want to expand to serve their neighbors but
are precluded by the state laws at issue here.6 In Tennessee, state law imposes a flat limitation on
municipal electric service providers providing broadband and video outside their electric service territory,
despite the fact that they are authorized to provide telecommunications services beyond their territory,
and the services likely would be provided over the same infrastructure. In North Carolina, the restriction
takes the form of a series of costly hoops through which a service provider must jump. Although
characterized as intended to level the playing field with private providers when passed, it is clear that
2
Section 706 of the Telecommunications Act of 1996, Pub. L. No. 104-104, 706, 110 Stat. 56, 153 (1996) (1996
Act), as amended by the Broadband Data Improvement Act, Pub. L. No. 110-385, 122 Stat. 4096 (2008), is now
codified in Title 47, Chapter 12 of the United States Code. See 47 U.S.C. 1302, 1303.
3
See, e.g., Letter from Dana Kirkham, Mayor, Ammon, Idaho, et al., Next Century Cities, to Chairman and
Commissioners, Federal Communications Commission, WC Docket Nos. 14-115 and 14-116, at 1-2 (filed Jan. 29,
2015).
4
Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a

Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the
Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act, GN Docket No. 14-126,
2015 Broadband Progress Report and Notice of Inquiry on Immediate Action to Accelerate Deployment, FCC 1510, para. 2 (rel. Feb. 4, 2015) (2015 Broadband Progress Report).
5
Id. at paras. 15, 79.
EPB Petition at 16; Wilson Petition at 23.
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the combination of requirements effectively raises the cost of market entry so high as to effectively block
entry and protect the private providers that advocated for such legislation from competition.
4.
We conclude, contrary to the thrust of some commenter claims, that preemption will
remove barriers to overall broadband investment and promote overall competition in Tennessee and
North Carolina. Wilson and Chattanooga considered a wide range of options and decided to initiate
municipal broadband deployment when they concluded that doing so would serve important community
goals. For example, Wilson requested improved broadband services from the private sector and was
turned down before starting to examine whether a municipal broadband network was a viable option for
its community. And rather than driving out competitors, Wilson and EPB are delivering the benefits of
competition to citizens, not only through their own product offerings but also as evidenced by the
competitive responses to their services.
5.
Accordingly, we conclude that the Tennessee and North Carolina laws are barriers to
broadband infrastructure investment and that preemption will promote competition in the
telecommunications market by removing statutory barriers to such competition. In other words, we find
that removal of such barriers would likely result in more overall broadband investment and competition.
We next turn to considering our statutory authority to act.
6.
We find that the Commission has authority under section 706 of the Telecommunications
Act of 1996 to preempt the laws at issue in these petitions. Five principles undergird the Commissions
authority.
Article I, section 8 of the Constitution gives Congress the power to regulate interstate
commerce.
Internet access unquestionably involves interstate communications, and thus interstate
commerce. Broadband subscribers pay for the right to go to any lawful destination on the
Internet, wherever located.
Congress has given the Federal Communications Commission the authority to regulate
interstate communications. Indeed, section 1 of the Communications Act of 1934, as
amended (Act), specifically gives the Commission jurisdiction over interstate and
foreign commerce in communication by wire and radio.
The Commission has previously exercised its authority to preempt state laws that conflict
with federal regulation of interstate commerce, for example with respect to state
regulation of VoIP, the deployment of wireless facilities, and its order prohibiting local
franchising authorities from unreasonably refusing to grant competitive cable franchises.
These preemption decisions all further competition.
Finally, section 706 of the 1996 Act directs the Commission to take action to remove
barriers to broadband investment, deployment and competition. There is no question that
provisions of the state laws in question do limit broadband deployment they expressly
prohibit Wilson and Chattanooga from providing broadband services to more people in
more places, even places where there is no broadband currently available.
7.
Granting these petitions as described above would both remove barriers to deployment
and promote competition by bringing additional choices to the marketplace so that consumers are served
with more choices, lower prices, and higher quality.
8.
Against this, it is said that because the petitioners are municipalities, these state laws are
rendered immune from the normal application of federal law. But neither the statute nor the case law
supports that proposition.
9.
Section 706 does not contain an exception for state laws regarding how municipalities
may provide interstate communications. Rather, section 706(a) broadly authorizes the Commission to use
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regulating methods that remove barriers to infrastructure investment,7 of which preemption is

undoubtedly one. Section 706(b) equally plainly directs that, upon a finding that broadband is not being
adequately deployed to all Americans, the Commission shall take immediate action to accelerate
deployment of such capability by removing barriers to infrastructure investment and by promoting
competition in the telecommunications market.8 We have made such a negative finding in the 2015
Broadband Progress Report.9
10.
We therefore read section 706 to permit the Commission to preempt state laws that
primarily serve to regulate competition in the broadband market. We reach this conclusion because we
read Section 706 to authorize the Commission to displace state laws that effectuate choices about the
substance of communications policy that conflict with the federal communications policy of ensuring
reasonable and timely10 deployment of broadband. To be clear, we do not assert that state policy
preferences about the competitive landscape for broadband are inherently illegitimate. We find only that
where, as here, they conflict with the federal policy set out in section 706 they must be preempted.
11.
Moreover, a state law that effectuates a policy preference regarding the provision of
broadband is not shielded from all scrutiny, simply because it is cast in terms that affect only municipal
providers. We find that section 706 authorizes the Commission to preempt state laws that specifically
regulate the provision of broadband by the states political subdivision, where those laws stand as barriers
to broadband investment and competition. A different question would be presented were we asked to
preempt state laws that withhold authority to provide broadband altogether. But where a state has
authorized municipalities to provide broadband, and then chooses to impose regulations on that municipal
provider in order to effectuate the states preferred communications policy objectives, such as the
protection of incumbent ISPs, such laws fall within our authority to preempt.
12.
This reading of section 706 is fully consistent with Supreme Court and Commission
precedent. Unlike Gregory v. Ashcroft,11 the issue before us concerns federal oversight of interstate
commerce an area where there has been a history of significant federal presence12 not the inherent
structure of state government itself. We therefore find that the clear statement rule13 from Gregory does
not apply here. And unlike Nixon v. Missouri Municipal League, the question here is not whether the
municipal systems can provide broadband at all, but rather whether the states may dictate the manner in
which interstate commerce is conducted and the nature of competition that should exist for interstate
communications.14 The Nixon Court was concerned that, if Missouris flat ban on municipal
telecommunications were preempted, the municipality would still be powerless to enter the
telecommunications business in the absence of some further, authorizing legislation.15 However, that
is not a concern for our interpretation of section 706, which would allow preemption only in cases of
underlying authorization.16
47 U.S.C. 1302(a).
47 U.S.C. 1302(b).
2015 Broadband Progress Report at para. 4.
10
47 U.S.C. 1302.
11
Gregory v. Ashcroft, 501 U.S. 452 (1991).
12
United States v. Locke, 529 U.S. 89, 107-08 (2000).
13
Gregory, 501 U.S. at 460.
14
Nixon v. Missouri Mun. League, 541 U.S. 125 (2004).
15
Id. at 135.
16
Our conclusion regarding Nixon would remain the same regardless of whether broadband Internet access service
were classified as an information service or as a telecommunications service. Here, we act under section 706, which
(continued)
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13.
We further find that the laws at issue in these petitions fall within our preemptive
authority because they serve as state-law communications policy regulations, as opposed to a core state
function in controlling political subdivisions. The territorial restriction in Tennessee Code Section 601
serves only to restrict municipal electric providers from providing broadband service on fiber networks
that they are already authorized to build statewide. Such a statutory scheme does not further any core
state function of ordering its political subdivisions, such as limiting the expenditures of a city. It serves
only to effectuate state communications policy preferences by enforcing inefficiency and protecting
incumbents from competition.
14.
We also find that North Carolinas H.B. 129 falls within our authority to preempt under
section 706. H.B. 129 does not prohibit service by municipal entities indeed it explicitly permits
service. Instead, certain provisions of the statute, especially when taken together and viewed in context,
serve to regulate the operation and pricing of municipally-owned broadband providers as a means to
shape the competitive landscape for broadband, again with the effect of protecting incumbent ISPs. The
formal title of the statute An Act to Protect Jobs and Investment by Regulating Local Government
Competition with Private Business underscores this. Any one of the laws provisions, taken
separately, might seem to be cast in terms of state limitations on municipal authority. But viewed as a
whole and in context, each of the statutory provisions are actually sector-specific regulatory limitations
that single out a specific service broadband communications and impose burdens on municipal
providers of such services. The clear effect of H.B. 129 is to protect private competitors from unfair
competition, but the question of whether competition will or will not serve the public interest with respect
to interstate communications is one quintessentially reserved to this Commission.
15.
To put it plainly, the Commission has concluded that preemption of these restrictions will
expand broadband investment and deployment, increase competition, and serve the public interest, as
Section 706 intended.
16.
While the present Memorandum Opinion and Order (Order) only addresses the EPB and
Wilson Petitions, the Commission will not hesitate to preempt similar statutory provisions in factual
situations where they function as barriers to broadband investment and competition.
B.
Background
17.
On July 24, 2014, two municipal broadband providers, EPB and Wilson, filed separate
petitions requesting that the Commission preempt statutory provisions in Tennessee and North Carolina,
respectively, which the petitioners contend constitute barriers to broadband investment and competition.
Both EPB and Wilson currently and for some period of time have operated broadband networks with 1
Gbps offerings, and both provide electric service in addition to broadband. EPB and Wilson each state
that they have received a significant number of requests to expand their current broadband service areas
but are unable to meet this demand because of the state statutory provisions at issue in this proceeding.17
EPB requests that the Commission preempt Tennessee statutory language restricting it to providing
broadband and video service within its [electric] service area.18 Wilson seeks preemption of a bill
enacted in 2011 that imposes geographic restrictions and other limitations on municipal broadband in
(Continued from previous page)

we find is an alternate, often complementary source of authority to section 253, the provision at issue in Nixon.
Because section 706 specifically addresses barriers to advanced telecommunications, which are the services at issue
in these petitions, we conclude that section 706 is available as a source of authority, regardless of whether section
253 would or would not also apply here.
17
EPB Petition at 16; Wilson Petition at 23.
18
EPB Petition at 56.
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North Carolina.19 Wilson asserts that the North Carolina statute, as a whole, is a barrier to broadband
infrastructure investment and competition.20
1.
The Commissions Mandate Under Section 706 of the Telecommunications

Act
18.
Congress recognized the critical importance of broadband deployment to all
Americans21 and specifically required the Commission to encourage broadband infrastructure investment
and promote competition in section 706 and through other provisions of the Act. Pursuant to Congresss
clear direction, the Commission has taken action in numerous proceedings to facilitate broadband
deployment and competition.22
19.
In section 706(a), Congress directed the Commission to encourage the deployment of
advanced telecommunications capabilities on a reasonable and timely basis to all Americans, by
utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation,
regulatory forbearance, measures that promote competition in the local telecommunications market, or
other regulating methods that remove barriers to infrastructure investment.23 Section 706(b) requires
that the Commission take immediate action to accelerate deployment of such capability by removing
barriers to infrastructure investment and by promoting competition in the telecommunications market, if
it finds after inquiry that advanced telecommunications capability is not being deployed to all Americans
in a reasonable and timely fashion.24
20.
As required by section 706(b), the Commission issues Broadband Progress Reports
determining whether advanced telecommunications capability is being deployed to all Americans in a
reasonable and timely fashion.25 To date, each of the Commissions Broadband Progress Reports issued
pursuant to section 706(b) established a speed benchmark encompassing a download speed and an
19
See Wilson Petition at 59. In particular, Wilson seeks preemption of Section 1.(a), Chapter 160A of the North
Carolina General Statutes (including 160A-340 through 160A-340.6), and corresponding amendments contained in
Section 2.(a) and Section 3, Subchapter IV of Chapter 159 of the North Carolina General Statutes.
20
Wilson Petition at 2.
21
47 U.S.C. 1302.
22
See, e.g., Modernizing the E-rate Program for Schools and Libraries, WC Docket No. 13-184, Report and Order
and Further Notice of Proposed Rulemaking, 29 FCC Rcd 8870, 8873, para. 4 (2014) (recognizing the critical role
the E-rate program plays as a crucial part of the Commission's broader mandate to further broadband deployment
and adoption across our nation); Technology Transitions et al., GN Docket No. 13-5 et al., Order, Report and Order
and Further Notice of Proposed Rulemaking, Report and Order, Order and Further Notice of Proposed Rulemaking,
Proposal for Ongoing Data Initiative, 29 FCC Rcd 1433, 1461, para. 78 (2014) (stating that we find that soliciting
the type of experiments described in this Order will accelerate broadband deployment and therefore advances the
goals of section 706); Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order and Further
Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17668, para. 5 (2011) (USF/ICC Transformation Order)
(stating that extending and accelerating fixed and mobile broadband deployment has been one of the Commissions
top priorities over the past few years), affd 753 F.3d 1015 (10th Cir. 2014); see also, e.g., Tom Wheeler, Chairman,
FCC, The Facts and Future of Broadband Competition, at 1 (Sept. 4, 2014),
http://www.fcc.gov/document/chairman-remarks-facts-and-future-broadband-competition (The underpinning of
broadband policy today is that competition is the most effective tool for driving innovation, investment, and
consumer and economic benefits.).
23
47 U.S.C. 1302(a).
24
47 U.S.C. 1302(b).
25
Id. Section 706(b) requires the Commission to annually assess the availability of advanced telecommunications
capability, or broadband, and mandates the Commission to take action if it finds that broadband is not being
deployed to all Americans in a reasonable and timely fashion. Id.; see also 2015 Broadband Progress Report at
paras. 13, 49.
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upload speed to determine whether a service satisfies the statutory definition of advanced
telecommunications capability.26 The Commission recognizes that the speed benchmark should change
over time to reflect evolving conditions and therefore must be periodically reassessed in light of market
offerings and consumer demand,27 and in doing so, the Commission in the recent 2015 Broadband
Progress Report indicated we should examine the [t]rends in deployment and adoption, the speeds that
providers are offering today, and the speeds required to use high-quality video, data, voice, and other
broadband applications.28 Thus, the Commissions Broadband Progress Reports are pertinent to this
proceeding not only as a threshold to action under section 706(b) but as our most thorough and up-to-date
analysis of what constitutes advanced telecommunications capability.29
21.
In our 2015 Broadband Progress Report, adopted on January 29, 2015, we revised the 4
Mbps download/1 Mbps upload speed (4 Mbps/1 Mbps) benchmark established in 2010 and relied on in
the prior three Reports.30 We found that 4 Mbps/1 Mbps no longer supports the advanced functions
Congress identified in section 706(d).31 In updating the speed benchmark, we took into account trends in
the market, factors such as the need for multiple members of a household to use broadband services
simultaneously, and that [v]ideo continues to drive demand for faster broadband.32 Based on these and
other reasons, we found that advanced telecommunications capability requires access to actual
download speeds of at least 25 Mbps and actual upload speeds of at least 3 Mbps (25 Mbps/3 Mbps).33
Our analysis indicated that approximately 55 million Americans (17 percent) live in areas unserved by
fixed 25 Mbps/3 Mbps broadband or higher service, and that gap closed only by three percentage points
in the last year.34 Our analysis also indicated that there is a disparity between urban and rural areas at all
26
See 47 U.S.C. 1302(d)(1), which states that the term advanced telecommunications capability is defined,
without regard to any transmission media or technology, as high-speed, switched, broadband telecommunications
capability that enables users to originate and receive high-quality voice, data, graphics, and video
telecommunications using any technology. Municipal broadband services at issue in this Order fall within the
statutory definition of advanced telecommunications capability, and the record does not contain anything disputing
this fact.
27
28
Id. at para. 3.
29
47 U.S.C. 1302.
30
See 2015 Broadband Progress Report; see also Inquiry Concerning the Deployment of Advanced
Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to
Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the
Broadband Data Improvement Act, GN Docket No. 11-121, Eighth Broadband Progress Report, 27 FCC Rcd 10342,
10347, para. 6 (2012) (Eighth Broadband Progress Report); Inquiry Concerning the Deployment of Advanced
Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to
Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the
Broadband Data Improvement Act, GN Docket No. 10-159, Seventh Broadband Progress Report and Order on
Reconsideration, 26 FCC Rcd 8008, 8019, para. 14 (2011) (Seventh Broadband Progress Report); Inquiry
Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and
Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the
Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act; A National Broadband
Plan for Our Future, GN Docket Nos. 09-137 and 09-51, Sixth Broadband Deployment Report, 25 FCC Rcd 9556,
9563, para. 11 (2010) (Sixth Broadband Progress Report).
31
32
Id. at para. 30.
33
Id. at para. 3.
34
Id. at para. 4. We reported that the existence of unserved areas may be attributable, at least partially, to the
cost of building infrastructure over long distances in areas with low population density. Id. at para. 143.
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speeds, not just at 25 Mbps/3 Mbps.35 For this and other reasons, we concluded that broadband is not
being deployed to all Americans in a reasonable and timely fashion.36 As we discuss further in Section
III, consumers growing broadband needs, as quantified by our 2015 Broadband Progress Report,
demonstrate how the state statutes at issue here are barriers to broadband investment and competition.37
We agree with USTelecom that the Commissions decision to raise the standard for broadband to a
significantly higher speed level underscores the need for increased investment across the industry and
that [i]f that is the goal, the FCC should adopt policies that strongly favor investment in local broadband
networks.38 In Section IV of this Order, we discuss in more detail the mandate of section 706 and the
authority it affords the Commission to preempt the state laws at issue in this proceeding.
2.
The EPB Petition and Territorial Restriction in Section 601
22.
EPB, an independent board of the City of Chattanooga, Tennessee, offers voice, video,
and high speed broadband service with speeds up to 1 Gbps to the 170,000 residential and commercial
customers throughout its 600 square mile service area. Almost two decades ago, EPB recognized the
need to enhance its electric system by the addition of [a] high-capacity, dedicated communications
network.39 In 1996, EPBs Board began developing a high-capacity fiber optic communications system
for EPBs communications infrastructure so that it could meet future EPB electric system needs and offer
additional services to its customers.40 EPB deployed broadband in order to offer additional, faster
broadband services and to take advantage of benefits inherent in deploying broadband in conjunction with
deploying an electric smart grid, including efficiency gains and the ability to share costs and generate
additional revenues.41 In 2009, EPB made fiber-based communications services available to residential
customers and, in 2010, EPB became the first broadband provider in the nation to offer Gigabit services
to all its customers.42 EPB describes several key advantages of this fiber network, including its
symmetrical capacity, its low latency, and its consistent reliability.43 According to EPB, about 63,000 of
its electric service customers subscribe to EPBs fiber services.44 EPBs provision of broadband
appears to provide numerous benefits to Chattanooga and surrounding communities in its existing service
area:
23.
Economic Benefits. EPBs broadband network has had a positive impact on job creation
and retention. As early as 2006, a study demonstrated the benefits of EPBs broadband service to the
35
Id. at paras. 133, 136; see also id. at para. 133 (The overall percentage of Americans without access to 25
Mbps/3 Mbps dropped only three percentage points between 2012 and 2013, and the percentage of Americans in
rural areas without such access dropped by a mere two percentage points over the same span of time.).
36
Id. at paras. 133-40.
37
See infra paras. 75-122; 2015 Broadband Progress Report at paras. 2-3, 6.
38
Kery Murakami, Wheeler Proposes Upping Broadband Speed Standard to 25/3, Communications Daily, Jan. 8,
2015, at 10; see also Letter from Walter B. McCormick, Jr., President and Chief Executive Officer, USTelecom, to
Tom Wheeler, Chairman, FCC, GN Docket No. 14-28, at 2 (filed Oct. 24, 2014) (stating that to accommodate
projected two-and-a-half times growth in Internet traffic over the next five years, wireline investment will be
critical).
39
EPB Petition at 19.
40
See id. at 19-20; see also id., Exh. 3, EPB Board Resolution No. 96-08 (Apr. 29, 1996).
41
See EPB Petition at 19-23, 28.
42
Id. at 20.
43
Id. at 28.
44
Id. at 1 n.2. EPB provides all its residential Internet customers at least 100 Mbps symmetrical service. These
customers may choose to upgrade, for $12.00 extra per month, to 1 Gbps symmetrical service. Id.
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success of core business sectors of Hamilton County, in which Chattanooga is located.45 And that study,
along with two additional studies conducted in 2009 and 2011, show EPBs increasing positive impact on
the local economy, including through job growth; the most recent study shows 3,716 net jobs produced as
of 2011.46 Chattanoogas Chamber of Commerce identified more than 1,000 new jobs created since
2010 that have a direct connection to EPBs Gigabit fiber network and the entrepreneurial culture that has
been catalyzed by the network.47 For instance, commenters state that EPBs all-fiber network has
attracted businesses such as Amazon and Volkswagen to Chattanooga, creating numerous jobs and
increasing capital investment.48 And EPBs positive impact on employment appears likely to continue to
grow: Chattanooga currently has several entrepreneurial initiatives focused on businesses that will use
and benefit from extremely high-speed, low-latency fiber, including a GIGTANK non-profit summer
accelerator program that included eight startup companies last year,49 a new venture capital firm, and
firms that invest in early stage startup companies.50
24.
EPB asserts that residents of Chattanooga and surrounding areas have also enjoyed
significant economic benefits from EPBs broadband service.51 Members of these communities who have
45
See EPB Petition, Exh. 7, Bento J. Lobo et al., The Impact of Broadband in Hamilton County, TN at 12 (2006)
(2006 Hamilton County Study) (noting that these sectors include professional, scientific and technical services;
educational services; health care and social assistance; and other services). EPB began providing business service in
2003. See EPB Petition, Exh. 5, Timeline of EPBs Development and Deployment of Gigabit Fiber Network at 2
(EPB Timeline). It did not, however, provide residential service until 2009. See EPB Petition at 20.
46
EPB Petition at 24 (citing the 2006 Hamilton County Study; EPB Petition, Exh. 8, Bento J. Lobo & Soumen
Ghosh, The Economic Impact of Smart Grid Deployment in Hamilton County, Tennessee (2009); EPB Petition,
Exh. 9, Bento J. Lobo, The Economic and Social Value of EPBs Fiber Optic Infrastructure in Hamilton County
(2011) (2011 Hamilton County Study)). But cf. Advanced Communications Law & Policy Institute at New York
Law School Comments, WC Docket Nos. 14-115 and 14-116 (filed Aug. 29, 2014), Attach., Charles M. Davidson &
Michael J. Santorelli, Understanding the Debate over Government-Owned Broadband Networks: Context, Lessons
Learned, and a Way Forward for Policy Makers, Advanced Communications Law & Policy Institute at New York
Law School, June 2014, at iv, 38-39 (ACLP Report) (stating that the direct economic impact of government-owned
networks, especially in job creation, can be difficult to attribute and that, while substantial empirical evidence
indicates broadband and broadband-enabled services create jobs and spur economic development in the United
States, there is little, if any, direct empirical evidence that government-owned networks specifically have similar
impacts on employment); Taxpayers Protection Alliance Reply, WC Docket No. 14-116, at 2, 7 (filed Sept. 29,
2014) (Taxpayers Protection Alliance Reply) (asserting that [d]espite promises of massive economic development
as a result of Chattanooga government-owned fiber scheme, no new jobs have been created).
47
EPB Petition at 25; see also id., Exh. 6, Standard & Poors Rating Services, Ratings Direct, Summary:
Chattanooga, Tennessee; Retail Electric, at 2 (The [improved] rating on the electric utility incorporates other
factors that we believe will help EPB maintain its strong financial risk profile. These include: The city's role as a
regional economic center for a six-county area in southern Tennessee, as well as a three-county area in northern
Georgia, and Chattanooga's ability to attract new business.) (S&P EPB Report).
48
See, e.g., Fiber To The Home Council (FTTH) Comments, WC Docket Nos. 14-115 and 14-116, at 7 (filed Aug.
29, 2014) (FTTH Comments) (noting that the EPB all-fiber network in Chattanooga has attracted Alstom, Amazon,
and Volkswagen to the city, creating over 7,000 jobs and attracting billions of dollars in capital investment);
Netflix, Inc. Comments, WC Docket Nos. 14-115 and 14-116, at 3-4 (filed Aug. 29, 2014) (Netflix Comments).
49
GIGTANK helps seed-stage startup companies developing ultra high-bandwidth business applications by
connect[ing] high-speed entrepreneurs with the tools, capital, and connections to go to market. GIGTANK, About
GIGTANK, http://www.thegigtank.com/gigtank/ (last visited Jan. 28, 2015). GIGTANK is held annually each
summer and provides a fast-paced, 100-day experience packed with on-the-ground guidance from industry experts,
business mentors, and national thought leaders in broadband and entrepreneurship. Id.
50
EPB Petition at 25-26.
51
See id. at 24-25; see also Tennessee Municipal Electric Power Association Comments, WC Docket Nos. 14-115
and 14-116, at 1 (filed Aug. 29, 2014) (TMEPA Comments) (asserting that Tennessee has been very successful in
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access to EPB service are now able to subscribe to services that were previously not available (including
services with higher speeds), enjoy lower prices, and receive improved service reliability.52 Moreover, in
response to EPBs entry, established providers improved their own services and stabilized rates.53 EPBs
deployment of broadband service has also resulted in significant savings for the municipality and
ultimately taxpayers. EPB specifically deployed broadband in conjunction with its deployment of its
smart grid in order to take advantage of efficiencies from joint use of fiber facilities.54 EPBs efficient
provision of broadband service using fiber deployed for smart grid service has generated substantial
revenue for the city, enabling it to, for example, avoid electric rate increases.55 In 2012, Standard and
Poors upgraded EPBs bond rating to AA+, stating that [t]he higher rating reflects both our assessment
of the utilitys strong credit metrics in fiscal 2012 and our view that the stronger metrics are sustainable,
based on our opinion that managements forecast assumptions are reasonable.56 EPB states that its
upgraded rating further benefits taxpayers by reducing the cost of borrowing.57
25.
Education and Libraries. EPBs municipal broadband services have created new
opportunities for schools and libraries in Chattanooga.58 As of 2012, EPB provided Chattanooga schools
with at least 100 Mbps connections.59 The high-speed service available to schools and libraries served by
EPB enables them to offer innovative services not available in most of the Nation. For instance,
Chattanoogas public libraries have emerged as a center for technology education, experimentation, and
engagement and include a 14,000 square foot maker space with 1 Gbps wireless service that contains
computers, 3-D printers, and workspaces with Gigabit connections.60 Thanks to EPB, cities and libraries
around the country and the world recognize Chattanoogas Public Library as a leader. For instance, the
Mozilla Foundation just awarded the library a grant for creation of an enhanced Gigabit Lab, and the New
York Public Library recently announced that it is looking to Chattanoogas Public Library as a model for
renovation of its library facilities with high-tech, collaborative spaces.61
26.
Other Benefits. EPB also has identified benefits its broadband services have provided in
the areas of healthcare and improved network reliability. In Chattanooga, startup companies worked in
the area of health care during the annual GIGTANK program at CoLab, Chattanoogas non-profit
entrepreneurial accelerator.62 Telehealth businesses can also use EPBs 1 Gbps service to provide cutting

bringing new industrial and commercial businesses to [its] state in large part because of access to municipal
broadband).
52
See EPB Petition at 27-29.
53
See infra Section II.B., paras. 49-55.
54
55
Id. at 22-23.
56
S&P EPB Report at 2, 4.
57
EPB Petition at 23; see also S&P EPB Report at 2.
58
See, e.g., EPB Petition at 26, 43; American Library Association Reply, WC Docket Nos. 14-115 and 14-116, at 12 (filed Sept. 29, 2014) (American Library Association Reply); Netflix Comments at 3-4.
59
See New America Foundation Comments, WC Docket Nos. 14-115 and 14-116, at 10 (filed Aug. 29, 2014) (New
America Foundation Comments).
60
EPB Petition at 26; see also Chattanooga Public Library, Inclusive Gigabit Libraries,
http://chattlibrary.org/content/inclusive-gigabit-libraries (last visited Jan. 30, 2015).
61
EPB Petition at 26.
62
Id. at 25.
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edge services.63 EPB states that municipal investment in broadband has improved the reliability of
communications in its community.64
27.
Tennessee Law. Under current Tennessee law, municipal electric systems, like EPB, are
authorized to provide telecommunications services anywhere in the state,65 and are also authorized to
offer Internet services and cable services (including two-way video transmission and video
programming), but are restricted from offering those services outside their respective electric service
territories. This restriction, from section 601 of the relevant code, reads as follows:
Each municipality operating an electric plant . . . has the power and is authorized within
its service area . . . to acquire, construct, own, improve, operate, lease, maintain, sell,
mortgage, pledge or otherwise dispose of any system, plant, or equipment for the
provision of cable service, two-way video transmission, video programming, Internet
services, or any other like system, plant, or equipment within or without the corporate or
county limits of such municipality, and, with the consent of such other municipality,
within the corporate or county limits of any other municipality.66
28.
Since 1999, several bills have been introduced to modify the territorial limitation but
none has been enacted.67 Although on two occasions the Tennessee General Assembly permitted
municipal electric systems to offer Internet and cable services outside their electric footprint through
pilot projects, these services were not permitted beyond the county in which the municipal electric
system was located.68 Municipalities that do not operate electric utilities can provide services only in
historically unserved areas, and only through joint ventures with the private sector.69
29.
Comparative Data. EPB states that it seeks preemption because it wants to expand the
territory in which it provides broadband and video in response to regular requests for service from
residents of neighboring communities that it cannot fulfill because of section 601s territorial restriction.70
EPB asserts that its electric service area is surrounded by a digital desert in which businesses and
residents are unable to access broadband Internet service or must make do with very limited speeds.71
63
2011 Hamilton County Study at 16.
64
See EPB Petition at 28.
65
The authority for municipal electric systems, like EPB, to own and operate telecommunications systems is
contained in Tenn. Code Ann. 7-52-401 et seq.
66
Tenn. Code Ann. 7-52-601(a).
67
EPB Petition at 34.
68
Id. at 33. The authority for the pilot projects is contained in Tenn. Code Ann. 7-52-60l(e). EPB further
asserts that such pilot projects do not seem to be an effective way to evaluate capital intensive communications
services. Id.
69
See Tenn. Code Ann. 7-59-316.
70
See EPB Petition at 16. EPBs electrical service territory includes three counties in Georgia. Id. We do not
address the question of whether Georgia state law permits EPB to provide broadband and video service in that state
as the issue is not before us in this proceeding.
71
EPB Petition at 1; see also Utilities Telecom Council Reply Comments, WC Docket Nos. 14-115 and 14-116, at 4
(filed Sept. 29, 2014) (stating that there is a gaping digital divide that exists outside the city limits of Chattanooga
compared to the gigabit services that are available within the city limits where the city is permitted to offer service
under the state law); FTTH Comments at 10 (stating that large areas surrounding EPB are in a digital desert)
(quoting EPB Petition at 1); Shelly Bradbury, Digital Divide: Just an Hour from Gig City, Rural Residents Live in
Broadband Desert, Chattanooga Times Free Press, Apr. 20, 2014,
http://www.timesfreepress.com/news/local/story/2014/apr/20/the-digital-dividejust-an-hour-from-gig-city/137793/
(In the shadow of the gig, there are hundreds of people nearly all in rural areas who cant access even basic
broadband Internet.).
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EPB states that businesses, institutions, and residents in large areas neighboring its electric service
territory have requested EPB to provide service in at least some areas that are unserved today, and to
provide robust competition in other areas that are currently underserved.72
30.
National Broadband Map data, commonly called SBI Data,73 show that neighboring
communities to which EPB does not provide broadband service have a significantly more limited range of
advanced telecommunications capability choices than the national average. As noted above, in the 2015
Broadband Progress Report we conclude[d] that broadband is not being deployed to all Americans in a
reasonable and timely fashion based on an evaluation of national-level data.74 Below, we provide charts
created using SBI Data as of December 31, 2013, illustrating the number of providers of residential and/or
business fixed terrestrial advanced communications capability available to (a) the Nation as a whole; and
(b) housing units in Hamilton County (in which Chattanooga is located) and surrounding counties in
Tennessee, but excluding census blocks in which EPB provides broadband service.75 The charts illustrate
this information at both our new standard for advanced telecommunications capability, 25 Mbps / 3
Mbps, and at 3 Mbps / 768 kbps, which the Commission used as a proxy for the previous 4 Mbps / 1
Mbps speed benchmark due to limitations of SBI Data.76 The first chart shows that three times as many
72
EPB Petition at 43. Numerous comments in the record from individual residents in Tennessee state that existing
broadband services are inadequate to meet their needs. See, e.g., Chaz Smith Comments, WC Docket Nos. 14-115
and 14-116, at 1 (filed Aug. 1, 2014) (In my area of TN there are people who are unable to obtain suitable internet
coverage . . . or have no option for coverage at all.); Jason Kirk Comments, WC Docket Nos. 14-115 and 14-116, at
1 (filed Aug. 4, 2014) (EPB has provided what COMCAST wont, EPB has brought broadband to some of the
underserved areas in Hamilton and [s]urrounding areas. Comcast tells people in the same remote areas [as] EPB,
they must pay (Comcast) to install cable routes to the locations to provide High Speed Internet.); Leann Old
Comments, WC Docket Nos. 14-115 and 14-116, at 1 (filed July 30, 2014) (I was disappointed to find out that
Charter is the only game in town for cable, and AT&T offers extremely slow DSL service. . . . How nice it would
be if there were some competition in the area. It would be even more nice if Spring Hill had municipal
broadband.); Letter from Joyce Coltrin, J&J Nursery, to Tom Wheeler, Chairman, FCC, WC Docket No. 14-116, at
1 (filed July 29, 2014) (stating that a small business owner who for a year has been requesting Chattanoogas EPB
to provide me and others service . . . formed a group in our neighborhood of about 200 households seeking EPBs
service); cf. Dewayne Siddon Comments, WC Docket Nos. 14-115 and 14-116, at 1 (filed Aug. 4, 2014) (Since we
cannot get adequate high speed internet VOIP services, we are locked into few choices for telephone service. We
find ourselves limited to expensive wireline telephone services and often poorly performing cellular services at [our]
home in southeast Bradley County [Tennessee].); Josh Rogers Comments, WC Docket Nos. 14-115 and 14-116, at
1 (filed July 31, 2014) (I live in Spring Hill, TN and our internet selection is poor at best. I pay $115 per month for
100Mb down and 10Mb up. I have to pay my bill in full monthly, but I consistently have speeds at half what I am
paying for.).
73
See 2015 Broadband Progress Report at paras. 14, 67-70 (explaining SBI Data and finding that the fixed SBI
Data, although imperfect, are sufficiently reliable to serve as the basis of our finding in the 2015 Broadband
Progress Report that advanced telecommunications capabilities are not being deployed to all Americans in a
reasonable and timely fashion). Consistent with the 2015 Broadband Progress Report, the SBI Data used here
include fixed terrestrial technologies: fiber to the home, digital subscriber line, all other copper based technologies,
cable modem, fixed wireless and electric power line; but do not include satellite or mobile technologies. See id. at
paras. 9-11, 71-76. Accordingly, our discussion in this Order based on the SBI Data reflects information on fixed
terrestrial technologies and does not include satellite or mobile technologies.
74
75
We exclude mobile and satellite data from the charts and maps herein for the same reasons as are articulated in
our recent 2015 Broadband Progress Report. See id. at para. 9. We believe that Hamilton and surrounding counties
in Tennessee are an appropriate geographic scope because EPBs electric service territory encompasses much but
not all of Hamilton County and extends only partially into some immediately neighboring Tennessee counties, so
that any EPB expansion likely would occur within Hamilton and/or into these other surrounding counties in
Tennessee. The specific counties included are Bledsoe, Bradley, Hamilton, Marion, Meigs, Rhea, and Sequatchie
counties.
76
See Eighth Broadband Progress Report, 27 FCC Rcd at 10364, para. 29.
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housing units in the area in question in Tennessee lack access to even one broadband provider at 3 Mbps /
768 kbps compared to the national average. It also shows that almost half of the housing units in the area
in question in Tennessee lack access to two or more providers at 3 Mbps / 768 kbps, compared to a
national average of just 12 percent. The second chart shows that in the area in question in Tennessee 28
percent of housing units lack access to 25 Mbps / 3 Mbps, compared to a national average of 16 percent;
and 95 percent of housing units in the portion of Tennessee in question lack access to two or more 25
Mbps / 3 Mbps broadband providers, compared to a national average of just 61 percent. We also attach a
map created using these same underlying SBI data to illustrate the number of advanced
telecommunications capability options at our present standard of 25 Mbps / 3 Mbps available in Hamilton
and surrounding counties.77 Unlike the charts below, the map includes EPBs service territory and shows
the sharp contrast in access to modern advanced telecommunications capability in areas with and without
EPB service. We note that EPBs 1 Gbps symmetrical service is vastly faster than the speed threshold
illustrated by the map.
31.
These charts and map likely slightly overstate available service for several reasons. First,
the data report whether service is available in a census block and indicate that broadband service is
available if a broadband service provider does, or could, provide broadband service to an end user within
a typical service interval (7 to 10 business days) without an extraordinary commitment of resources.78
Thus, the data will indicate that broadband service is available in a census block even when broadband
may be unavailable at some units within the census block.79 Second, the SBI Data include broadband
deployment estimates to both residential and business locations even though some providers, for some
states, indicate that they provide service only to businesses.80 Finally, these charts reflect data for areas
neighboring EPBs service area, and provide guidance regarding the number of providers outside EPBs
service area.
77
See infra Attach. A (EPB/Tennessee Map). EPB also submitted a map showing that there are a significant number
of areas neighboring its electric service territory in Tennessee that do not have access to advanced
telecommunications capabilities under both our current and our most recent prior benchmarks. See EPB Petition
Exh. 1, Areas Served and Unserved by Broadband: Eastern Tennessee (Apr. 1, 2014).
78
See Seventh Broadband Progress Report, 26 FCC Rcd at 8083, Appx. F (Technical Appendix) at para. 14.
79
See id.
80
See 2015 Broadband Progress Report at paras. 69, 79.
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Chart indicates providers of fixed terrestrial technologies.
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32.
Preemption Request. EPB asks the Commission to find that advanced
telecommunications capabilities are not being deployed on a reasonable and timely basis in communities
near EPBs electric service area because the territorial restriction contained in section 601 is a barrier to
its expansion to serve these areas.81 EPB also asserts that, in order for any relief granted by the
Commission to be meaningful, it must allow EPB to offer triple play service. In the event the
Commission preempts the restriction on Internet services, EPB also requests that we preempt the
restriction on cable service, two-way video transmission, and video programming. 82 Accordingly, EPB
requests that the Commission preempt the phrase within its service area contained in section 601. 83
3.
The Wilson Petition and H.B.129
33.
Wilson provides electric service in six counties in Eastern North Carolina. In one of
these counties, Wilson County, it also deployed its own broadband network providing Gigabit Internet
access and cable services over its fiber-optic communications network under the trade name Greenlight.
Wilson states that it began providing broadband services in response to demand from citizens and
businesses that were dissatisfied with the private sectors broadband offerings. 84 In 1990, Wilsons City
81
See EPB Petition at 3.
82
See id. at 1-4, 33.
83
See id. at 16.
84
See Wilson Petition at 17-18.
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Council began to study the possibility of building a municipally-owned cable system in response to
citizen complaints about the high cost and low quality of available voice and video services.85 At that
time, Wilson reports, the incumbent cable operator Alert Cable Television of Wilson, a division of
Cablevision Industries promised to upgrade its system with fiber optic facilities.86 The provider,
however, failed to follow through on this promise.87 A feasibility study in 2003 concluded that a cityowned fiber optic system was financially viable and that there were high levels of customer
dissatisfaction with the services, pricing, reliability, and technological capabilities available from the
current communications service providers.88 In 2005, Wilson built a fiber optic backbone connecting all
City-owned facilities and numerous [c]ity residents, businesses, schools, colleges, [and] medical
facilities contacted Wilson and requested access to and expansion of the network.89 In 2006, the Wilson
City Council unanimously voted to build a municipal broadband network that would become Greenlight.90
In 2008, the City began signing up customers for broadband services.91 According to Wilson, initial
trials found that 86 percent of customers preferred Greenlight services to those previously available.92
Wilson began providing Gigabit residential Internet service in July 2013.93 Wilsons provision of
broadband appears to provide numerous benefits to the city and surrounding communities within its
broadband service area:
34.
Economic Benefits. Wilsons deployment of a municipal broadband network has led to
significant economic benefits for individuals in its community. Wilson reports that it offers triple play
services at prices lower than its competitors and that it offers Gigabit Internet service all while
maintaining a positive cash flow, thereby benefitting taxpayers.94 As discussed further below, Wilsons
entry has forced the established providers to offer better services and rates to their customers, providing
further economic benefits.95 The fiber network also makes other municipal utilities more effective and
efficient, further benefitting the public.96 Wilson provides free Wi-Fi to its entire downtown area,97
thereby saving money for businesses and residents and encouraging economically beneficial use of its
broadband network. Wilson and commenters assert that Wilsons broadband system has had a positive
impact on jobs.98 Each of the top seven employers in the community utilizes Wilsons fiber network.99
85
See id. at 17.
86
Id.
87
Id.
88
Id.
89
Id. at 18.
90
Id.
91
Id. at 19 (acting under the trade name Greenlight).
92
Id.
93
Id. at 20.
94
Id.
95
Id.; see also infra paras. 49-55.
96
97
Id. at 22.
98
See id. at 21; Institute for Local Self-Reliance and Rural Broadband Policy Group Reply Comments, WC Docket
Nos. 14-115 and 14-116, at 20 (filed Sept. 29, 2014) (Institute for Local Self-Reliance Reply) (If you are the mayor
of Wilson and want to diversity [sic] the local economy with high tech jobs, how can you do that without building a
fiber network? Many of the firms that have moved to Wilson since Greenlight was launched would not have moved
there without the network.); Netflix Comments at 3-4 (The petitions demonstrate the many benefits that accrue to
communities that have access to truly high-speed broadband. Both Wilson and Chattanooga attracted new
businesses after deploying gigabit fiber broadband networks.); New America Foundation Comments at 11
(continued)
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Wilson and others report that new residents and new businesses are moving to Wilson in part to take
advantage of its fiber network.100
35.
Education and Libraries. Wilsons municipal broadband network also provides
substantial benefits to schools and libraries, including access to advanced telecommunications capabilities
at levels they would not otherwise be able to obtain, or perhaps even afford.101 Of note, Wilsons
Greenlight network provides all Wilson County school sites with 1 Gbps symmetrical service.102
Wilsons main public library is also one of the nations limited number of public libraries that has
broadband connection speeds of 100 Mbps or faster.103
36.
Other Benefits. Wilson also has identified benefits its broadband services have provided
in the areas of healthcare, public safety and improved network reliability. Wilson states that, after it built
the fiber optic backbone connecting all city-owned facilities in 2005, medical facilities were among the
entities that contacted the city and requested access to the network because the services being offered by
the current providers were inadequate, overpriced, and lacked satisfactory customer service.104 By
responding to this demand, Wilson now provides those medical facilities with superior, affordable
services.105 Wilsons fiber network also has facilitated the deployment of more than 30 public safety
cameras in the city, and the citys broadband division works in close partnership with its police
department to deploy cameras as needs change.106 Wilson additionally states that municipal investment in
broadband has improved the reliability of communications in its community.107
37.
North Carolina Law. The record suggests that Chapter 160A-340 of the North Carolina
General Statutes (H.B. 129) was largely sponsored and lobbied for by incumbent providers.108 In 2011,
(Wilsons network has been instrumental in attracting new residents and new businesses to the area, which in turn
has spurred additional economic activity in the community.).
99
100
Id. at 21-22 & nn.45-46 (citing Kate Murphy, For the Tech-Savvy With a Need for Speed, a Limited Choice of
Towns with Fiber, N.Y. Times (Apr. 2, 2014), http://www.nytimes.com/2014/04/03/technology/personaltech/forthe-tech-savvy-with-a-need-for-speed-a-limited-choice-of-towns-with-fiber.html; Rochelle Moore, Wilsons
Greenlight Sees National Attention, Wilson Daily Times (Apr. 4, 2014),
http://www.wilsontimes.com/News/Feature/Story/30933094---Wilson-s-Greenlight-attracts-national-attention;
Institute for Local Self-Reliance, Being a Gig City: Its All About the Upload, Community Broadband Networks
Initiative of the Institute for Local Self-Reliance (Mar. 20, 2014), http://www.muninetworks.org/content/being-gigcity-its-all-about-upload).
101
Wilson Petition at 21 & n.43 (The City of Wilson provides free broadband service, at 100 Mbps download/100
Mbps upload, to the library computer center and the Wilson Housing Authority computer labs. The City also won
the competitive bidding process and now provides 1 Gbps symmetrical service to all Wilson County school
facilities.).
102
See New America Foundation Comments at 10.
103
See American Library Association Reply at 2.
104
Wilson Petition at 17-18.
105
See id. at 3, 46.
106
Id. at 21 & n.44 (citing Christopher Mitchell and Todd OBoyle, Carolinas Connected Community: Wilson
Gives Greenlight to Fast Internet at 13-14 (Dec. 2012), http://ilsr.org/wp-content/uploads/2012/12/wilsongreenlight.pdf (Carolinas Connected Community)).
107
108
See, e.g., Town of Mooresville Comments, WC Docket Nos. 14-115 and 14-116, at 1 (filed Aug. 28, 2014)
([H.B. 129] was a bill sponsored by the incumbent providers.); Utilities Telecom Council Comments, WC Docket
Nos. 14-115 and 14-116, at 4 (filed Aug. 29, 2014); CCG Consulting Reply Comments, WC Docket Nos. 14-115
(continued)
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North Carolina joined a number of other states that have adopted laws restricting or banning the ability of
municipalities to build broadband networks.109 H.B. 129 was enacted following several failed efforts
between 2007 and 2010 to pass similar legislation that would have imposed impediments on the ability of
a municipality to provide communications services.110 These legislative efforts were sponsored by
[l]arge cable and telephone corporations led by [Time Warner Cable].111 Among other restrictions, the
predecessor bills would have required municipalities to be profitable within 4 years, would have restricted
financing methods, and required referenda for routine repairs.112 According to one January 2013 report,
many of the states with laws restricting or barring the ability of municipalities to build broadband
networks passed similar laws between 2004 and 2006 under pressure from national cable companies,
telephone companies, and the American Legislative Exchange Council (ALEC).113 According to the
report, ALEC members have included Time Warner Cable, AT&T, corporate executives, and over 2,000
state legislators who sit side-by-side and collaborate to draft model bills.114 With regard to North
Carolina, it is reported that [t]ogether, [Time Warner Cable], CenturyLink, and AT&T spent over $1
million over a period of five years to push through [H.B. 129].115
and 14-116, at 1 (filed Sept. 26, 2014); see also Wilson Petition at 26 n.54 (Throughout the legislative process, the
City of Wilson and its public and private allies had to contend with massive campaigns of misinformation conducted
by the cable and telecommunications companies in support of bills sponsored by legislators who openly admitted
that they were acting at the behest of the cable and telecommunications companies.); Christopher Mitchell and
Todd OBoyle, The Empire Lobbies Back: How National Cable and DSL Companies Banned The Competition in
North Carolina at 14 (Jan. 2013), http://ilsr.org/wp-content/uploads/2013/01/nc-killing-competition.pdf (The Empire
Lobbies Back) (After several unsuccessful attempts, Time Warner Cable, CenturyLink, and AT&T finally
succeeded in their quest to stifle municipal broadband.); Carolinas Connected Community at 16 (The Legislature,
under pressure from Time Warner Cable, CenturyLink, and others, passed a bill to restrict publicly owned
networks.); Christopher Mitchell, Director of the Community Broadband Networks Initiative with the Institute for
Local Self-Reliance, Digging into H129: Another Bill in NC to Limit Local Authority and Broadband Competition,
Community Broadband Networks, Institute for Local Self-Reliance (Feb. 17, 2011),
http://www.muninetworks.org/content/digging-h129-another-bill-nc-limit-local-authority-and-broadbandcompetition (Time Warner Cable is pushing a new bill in North Carolina to limit competition and local authority to
build broadband networks.); Fiona Morgan, Mighty, Mighty Broadband: The Small City of Wilson is Leading the
Way in Providing Faster, Cheaper Internet Service, Indy Week (June 18, 2008),
http://www.indyweek.com/indyweek/mighty-mighty-broadband/Content?oid=1209049 (Mighty, Mighty
Broadband); Allan Holmes, How Big Telecom Smothers City-Run Broadband, AT&T, Comcast, Time Warner Cable
Use Statehouses to Curb Public Internet Service, The Center for Public Integrity (Aug. 28, 2014, updated Jan. 15.
2015, 3:00 PM), http://www.publicintegrity.org/2014/08/26/15404/att-and-charter-battle-tennessee-grandmotherfight-competition-municipal-broadband (For more than a decade, AT&T, Comcast, Time Warner Cable Inc., and
CenturyLink Inc. have spent millions of dollars to lobby state legislatures, influence state elections and buy research
to try to stop the spread of public Internet services that often offer faster speeds at cheaper rates.).
109
See The Empire Lobbies Back at 1. Counts of the number of states with restrictive laws vary based on
characterization of certain laws, but generally include roughly two-fifths of states. See, e.g., Letter from Lisa B.
Nelson et al., CEO, American Legislative Exchange Council, to Tom Wheeler, Chairman, FCC, WC Docket Nos.
14-115 and 14-116, at 1 (filed Aug. 29, 2014) (ALEC Comments); Craig J. Settles, Community Broadband
Snapshot Report: How to Navigate, Mitigate or Eliminate the Impacts of State Restrictions on Public Broadband at
3 (Jan. 2015), http://cjspeaks.com/wp/wp-content/uploads/2015/01/Snapshot-1-15.pdf.
110
See Wilson Petition at 26 & nn.51-54 (citing unsuccessful bills).
111
See The Empire Lobbies Back at 6-8.
112
Wilson Petition at 26 n.54.
113
The Empire Lobbies Back at 1.
114
Id. at 2. AT&T was reported as one of ALECs largest funders in 2010. Id.
115
The Empire Lobbies Back at 1-2; see also id. at 1 (stating that after 2006, Time Warner Cable, CenturyLink, and
AT&T kept the issue alive in North Carolina, lobbying for a bill nearly every year). The SouthEast Association of
(continued)
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38.
Following these lobbying efforts, in 2011 the North Carolina General Assembly enacted
H.B. 129, which places numerous restrictions on municipalities wishing to provide communications
services in the state of North Carolina.116 Wilson County qualifies for a limited grandfathering
exemption under H.B. 129 because its service predates the passage of H.B. 129.117 This exemption allows
Wilson to provide communications services in Wilson County free from many of H.B.129s
restrictions.118 However, the grandfathering exemption does not permit Wilson to provide
communications services in the five other immediately adjacent counties that comprise the remainder of
its electric service territory.119
39.
Comparative Data. As with EPB, SBI Data show that the portions of the counties within
Wilsons electrical service area that do not obtain broadband service from Wilson have a significantly
worse range of advanced telecommunications capability choices than the national average, having few or
no advanced telecommunications capability choices. Below, we provide charts created using SBI Data as
of December 31, 2013, illustrating the number of providers of residential and/or business fixed terrestrial
advanced communications capability available to individuals in the five non-Wilson counties within
Wilsons electrical service area at 25 Mbps/3 Mbps and at 3 Mbps/768 kbps.120 The first chart shows that
30 percent of the housing units in the area in question in North Carolina lack access to two or more
providers at 3 Mbps/768 kbps, compared to a national average of just 12 percent. The second chart shows
that in the area in question in North Carolina, 33 percent of housing units lack access to 25 Mbps/3 Mbps,
compared to a national average of 16 percent; and 97 percent of housing units in the area in question in
North Carolina lack access to two or more 25 Mbps/3 Mbps broadband providers, compared to a national
average of just 61 percent. We also attach a map created using these same underlying SBI Data to
illustrate the number of advanced telecommunications capability options at our present standard of 25

Telecommunications Officers and Advisors (SEATOA) states that proponents of [H.B. 129] included the
companies who would be, and were, competing with [the] City of Wilsons and other municipal fiber networks,
including Time Warner Cable, the North Carolina Cable and Telecommunications Association (NCCTA), and
CenturyLink. SEATOA Comments, WC Docket Nos. 14-115 and 14-116, at 2 & n.3 (filed Aug. 27, 2014)
(SEATOA Comments).
116
Act of May 21, 2011, 2011 N.C. Sess. Laws 84 (N.C. 2011),
http://www.ncga.state.nc.us/Sessions/2011/Bills/House/PDF/H129v7.pdf (H.B. 129). The term [c]ommunications
service is defined in Section 160A-340 as [t]he provision of cable, video programming, telecommunications,
broadband, or high-speed Internet access service to the public, or any sector of the public, for a fee, regardless of the
technology used to deliver the service. N.C. Gen. Stat. 160A-340(3).
117
Although H.B.129 contains two other exemptions, in Sections 160A-340.2(a)-(b), we discuss more fully below
our conclusion that neither of these exemptions provide meaningful relief from the restrictions contained in
H.B.129. See infra paras. 92, 101-105.
118
See N.C. Gen. Stat. 160A-340.2(c)(3)(c).
119
See id. At the time that Wilson financed and constructed its fiber optic broadband network in 2008, it had clear
authority to do so under then-existing North Carolina Law, N.C. Gen. Stat. 160A-311. In 2005, the North
Carolina Court of Appeals and Supreme Court confirmed that the authorization to operate cable television systems
in that statute included the authority to operate a broadband system providing broadband Internet access service,
whether or not the network was also used to provide cable television. See BellSouth Telecomm., Inc. v. City of
Laurinburg, 606 S.E.2d 721, 726-28 (N.C. Ct. App. 2005); see also Wilson Petition at 19. Below, we discuss in
further detail how H.B. 129 is a barrier to broadband investment and competition because it forces inefficiencies
onto Wilson by artificially limiting Wilson from providing communications services in the five immediately
adjacent counties that comprise the remainder of its electric service territory. See infra Section III.B.
120
The specific counties included are Edgecombe, Johnston, Nash, Pitt, Wayne, and Wilson. See Rochelle Moore,
Wilson Deals With 40 Million Gallons of Water, The Wilson Daily Times, N.C., May 1, 2014, at 2 (2014 WLNR
11696871) (identifying counties in Wilsons electric service territory).
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Mbps/3 Mbps available in the six counties in which Wilson provides electrical service. 121 Unlike the
charts below, the map includes Wilsons broadband service and shows the sharp contrast in access to
modern advanced telecommunications capability in areas with and without service from Wilson. Just as
for EPB, Wilsons 1 Gbps symmetrical service is vastly faster than the speed threshold illustrated by the
map.122 We also note that for the same reasons discussed above with respect to EPB, these charts and
map likely slightly overstate available service.123
121
See infra Attach. B (Wilson/North Carolina Map).
122
See id. The Wilson/North Carolina Map in Attachment B shows that Greenlights service territory encompasses
a small portion of Nash County, reflecting Greenlights service to Zackly-Right Farms, a local business that crosses
the Wilson and Nash borders. Wilsons service to this location predates the passage of H.B. 129.
123
See supra para.31.
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40.
Preemption Request. Wilson asserts that it has been unable to expand into these five
adjacent counties since the enactment of H.B.129, despite numerous requests for communications
services from residents and businesses in these counties where Wilson provides electric service, 124 and
124
See Wilson Petition at 2. The record contains many comments filed by individual commenters who are
dissatisfied with existing broadband service in North Carolina. See e.g., Benjamin Jacob Downey Comments, WC
Docket No. 14-115, at 1 (filed Aug. 6, 2014) (Please prempt [sic] North Carolinas [sic] State Law 160A-340. This
law is stifling, especially in rural communities residents ability to advance in education, nurture economic
opportunities, engage in the democratic process, and restricts the diffusion of both new and innovative ideas.);
Kevin Flanagan Comments, WC Docket No. 14-115, at 1 (filed July 30, 2014) (We need more options that provide
greater that [sic] 10MB/Sec access to thet [sic] internet, not fewer.); Marian Norton Comments, WC Docket No.
14-115, at 1 (filed Aug. 1, 2014) (Many rural areas of North Carolina still lack adequate access to the internet.
Wilson NC has demonstrated that they can serve areas with futuristic speeds. Perhaps if this state legislation had not
deterred expansion my home would have broadband by now.); cf. Michael Keller Comments, WC Docket No. 14115, at 1 (filed July 29, 2014) (Municipal broadband will tend to have the effect of forcing other incumbent
providers to compete not only on price, but also on quality of service delivered and on quality of customer
service.); Patrick Seymour Comments, WC Docket No. 14-115, at 1 (filed July 29, 2014) (In particular, I find it
troubling that there exists regulations against the expansion of publicly owned broadband services backed almost
entirely by cable industry companies and lobbyists, and brought into legislative sessions by public officials being
sponsored by the cable industry.).
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that H.B. 129 is therefore an impermissible barrier to broadband infrastructure investment and
competition contrary to section 706.125 According to Wilson, the purpose and effect of H.B.129 is to
require[] the municipality to run a gauntlet of barriers that have no purpose other than to
make it as difficult as possible for the municipality to meet these goals [of providing
advanced telecommunications capabilities]. Should the municipality somehow survive
this regulatory minefield, Section 160A-340 then imposes limitations on its day-to-day
activities that make successful operations all but impossible to achieve.126
41.
Wilson requests that we find that H.B.129 serves to thwart or unreasonably delay
broadband investment and competition contrary to section 706 and preempt H.B.129.127
II.
PREEMPTION OF PROHIBITIONS ON MUNICIPAL PROVISION OF BROADBAND

WILL LIKELY LEAD TO INCREASED OVERALL BROADBAND INFRASTRUCTURE
INVESTMENT AND PROMOTE OVERALL BROADBAND COMPETITION IN
TENNESSEE AND NORTH CAROLINA, CONSISTENT WITH SECTION 706
42.
In this section, we conclude that preemption meets the standard for action under section
706 because it will remove barriers to overall broadband infrastructure investment and promote overall
competition in the telecommunications market in Tennessee and North Carolina.128 The record contains a
number of generalized commenter claims purporting to show shortcomings of municipal broadband.129
Many of these are irrelevant to the inquiry before us today. To the extent these arguments attempt to
show that the laws in question actually protect and promote broadband competition and deployment by
restraining various purportedly harmful effects of municipal broadband, we find the comments
unconvincing and unsupported by the record.
A.
EPB and Wilson Provide Service Because Pre-Existing Service Did Not Meet
Community Needs
43.
Numerous commenters favor preemption because they wish to obtain service from EPB
or Wilson but are unable to do so,130 and the maps and data discussed above illustrate that communities
125
126
Id. at 27.
127
Id. at 2-3; see also Letter from James Baller to Marlene H. Dortch, Secretary, FCC, WC Docket No. 14-115 (filed
Mar. 6, 2015), Attach., Letter from James Baller to Commissioner Michael ORielly, FCC, WC Docket No. 14-115
(Feb. 27, 2015) (The City of Wilson would like to clarify the record on [what the City of Wilson said during a
meeting with Commissioner ORielly]. During our visit with you on January 20, 2015, representatives of the City
did not say that the City could live [with] any of the restrictions in S.L. 2011-84, which the City was challenging in
its entirety. Rather, we stated that removing S.L. 2011-84 would not leave the City free of regulation, as it would
still have to comply with the substantial body of requirements that existed before S.L. 2011-84 was enacted. Those
are the requirements that the City said it could live with, not the barriers imposed by S.L. 2011-84.). But see Letter
from Michael P. ORielly, Commissioner, FCC, to Marlene Dortch, Secretary, FCC, WC Docket No. 14-115 (filed
Mar. 2, 2015) (stating that during his meeting with Wilson Commissioner ORielly noted that many state restrictions
on municipal broadband, such as public hearing and voting requirements, seemed like common sense practices,
and that [d]uring the course of that discussion, the City of Wilson said that they could live with such
requirements); Dissenting Statement of Commissioner Michael ORielly at 125 (stating that the overly broad
extension of this item would overrule certain sound restrictions justified by the use of taxpayer funding, such as
public hearings and voting requirements even though, when I met with the City of Wilson, they said that they could
live with them).
128
Our decision in this Order allows for greater local choice in Tennessee and North Carolina. This Order does not
require any community to deploy anything.
129
See infra Section II.C.
130
See supra paras. 29 & n. 72, 40 & n. 124.
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surrounding EPBs and Wilsons current areas of broadband service have far fewer choices for advanced
telecommunications capability than the national average.131 This suggests that further expansion could
generate improved levels of investment and competition in these locations.
44.
Wilsons existing deployment and the proposed expansion by EPB and Wilson reflect
patterns of deployment in areas where existing private sector service is not meeting policy goals and
community needs:
Wilson: Prior to Wilsons initial construction of fiber between municipal buildings, the
incumbent cable operator, a Cablevision subsidiary, promised to upgrade its system with fiber
optic facilities, but failed to follow through on this promise.132 After Wilson built a fiber
optic network that connected all city-owned facilities in 2005, residents, businesses, and other
organizations expressed significant demand for access to and expansion of that network
because the services being offered by the current providers were inadequate and overpriced,
and customer service was unsatisfactory.133 The incumbent wireline communications
service providers, Time Warner Cable and Embarq, were unwilling to build or partner with
the city in building a fiber to the home network in Wilson.134 Wilson states that it had strong
support from the community and businesses when it constructed its fiber optic broadband
network in 2008 and the community has reacted very favorably.135
EPB/Wilson Expansion: EPB and Wilson assert that they seek preemption because residents
and businesses located outside the areas they are currently permitted to serve are not satisfied
with private sector broadband offerings, where available, and that there are additional
opportunities for EPB and Wilson to provide service at prices and speeds not currently
available.136
45.
EPB, which deployed its existing broadband service in conjunction with the electric
system smart grid, provides a clear example of a municipal utility deploying broadband where the
opportunity to take advantage of synergies with existing municipal services was a significant factor in its
deployment decision.137 Although some commenters argue that Chattanooga was well-served by private
131
See supra paras. 30-31, 39; see also EPB Petition at 1 n.3, 34, Exh. 1 (stating that large areas neighboring its
electric service territory are unserved or underserved by broadband as shown on the Connected Tennessee map in
Exhibit 1); Wilson Petition at 23, Exh. A, 36, 45-46 (noting the demand in both unserved and underserved areas in
which Wilson is already providing electric service but not broadband service).
132
133
Id. at 18.
134
See id. at 18 & n.32; Wilson, North Carolina, Greenlight History,

https://www.wilsonnc.org/living/fiberopticnetwork/greenlighthistory/ (last visited Jan. 29, 2015). According to city
leaders, Time Warner slammed the door in our face, would not talk, period, and laughed in our faces.
Carolinas Connected Community at 6. While negotiations with Embarq were more productive, the parties were
unable to come to a final agreement. See Carolinas Connected Community at 6.
135
Wilson Petition at 19. This is consistent with patterns in other areas. See, e.g., Institute for Local Self-Reliance,
Common Cause, Center for Media Justice, Media Mobilizing Project, National Hispanic Media Coalition, Public
Knowledge, Writers Guild of America West, Benton Foundation, The Utility Reform Network (TURN), Hon.
Tommy Wells, and Hon. David Grosso Comments, WC Docket Nos. 14-115 and 14-116, at 4-6 (filed Aug. 29,
2014) (Common Cause, et al. Comments); National League of Cities, National Association of Counties, U.S.
Conference of Mayors, and National Association of Telecommunications Officers and Advisors Comments, WC
Docket Nos. 14-115 and 14-116, at 4-6 (filed Aug. 28, 2014) (National League of Cities, et al. Comments); City of
Fayetteville Comments, WC Docket Nos. 14-115 and 14-116, at 2 (filed Aug. 29, 2014) (City of Fayetteville
Comments).
136
EPB Petition at 2, 15-16, 35; Wilson Petition at 2, 14, 22-25, 45-46.
137
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sector providers prior to EPBs deployment of broadband services,138 a significant factor in Chattanoogas
decision was likely anticipated cost savings and improved opportunities to serve the public from joint
deployment of broadband with its smart grid. Chattanooga complied with the applicable laws and its
network has been a resounding success, delivering substantial benefits to its community.139 Likewise,
Wilsons initial deployment of fiber between municipal buildings was made in part to save money
through self-provisioning.140
46.
The decisions by EPB and Wilson to invest in broadband were driven by, among many
factors, a desire to improve service beyond levels of investment in the same communities by private
sector entities. The investment and deployment that has already occurred in these areas, combined with
the additional investment and deployment that would occur if not for the state laws at issue, exemplifies
why preemption removes barriers to overall broadband infrastructure investment and promotes overall
broadband competition in Tennessee and North Carolina. While private providers necessarily focus on
the bottom line, municipalities can consider a wide range of community benefits discussed above in
their decision-making process. EPB and Wilson exemplify this pattern, as their petitions make clear that
community benefits were significant considerations in their decisions to deploy initially and in their
current desire to expand their broadband offerings.141 Numerous commenters agree that municipalities
deploy broadband service where private providers find doing so uneconomical precisely because of the
community benefits that broadband provides.142 This suggests that these community benefits that EPB,
Wilson, and other municipal broadband providers in Tennessee and North Carolina unlock may come
from (1) reducing market failure, either due to a lack of competition and/or from capturing positive
externalities of broadband that the market is unable to, and/or (2) achieving community public policy
goals, including promoting broadband deployment and infrastructure investment (goals that Congress has
identified and charged the Commission with implementing).143 The differing characteristics of
municipalities and private entities explain why EPB, Wilson, and other similarly situated broadband
providers in Tennessee and North Carolina can invest in broadband beyond levels of investment in the
same communities by private sector entities.
47.
In markets where there is little to no existing competition, as appears to the be the case in
a number of areas outside of the current service territories of EPB and Wilson, municipally provided
service may correct market failures, thereby ensuring that the municipalitys citizens have better
138
See, e.g., Digital Liberty Comments, WC Docket Nos. 14-115 and 14-116, at 3-4 (filed Aug. 29, 2014) (Digital
Liberty Comments); Taxpayers Protection Alliance Reply at 5. But see Letter from James Baller to Marlene H.
Dortch, Secretary, FCC, WC Docket Nos. 14-115 and 14-116, at 1 (filed Jan. 21, 2015) (Before embarking on
developing [its] own fiber network[], . . . Chattanooga asked [the] incumbent communications service providers to
upgrade their facilities to meet the communitys needs. None of the incumbents was willing to do so.); id. at 1-2
(stating that Chattanooga had widespread, bipartisan local support for developing [its] fiber network[], including
broad support from major businesses).
139
We note that EPB vastly increased the broadband speeds available to those within its service territory while
generating revenue from its broadband service without cross-subsidization from its electrical service, indicating that
there was substantial unmet demand. See infra Section II.B. (discussing the positive competitive response to
municipal broadband in Chattanooga and elsewhere).
140
141
See, e.g., EPB Reply at 5; Wilson Reply at 5.
142
See, e.g., American Public Power Association Comments, WC Docket Nos. 14-115 and 14-116, at 9 (filed Aug.
29, 2014) (APPA Comments); TMEPA Comments at 2; Town of Holly Springs, North Carolina Comments, WC
Docket Nos. 14-115 and 14-116, at 4 (filed Aug. 27, 2014).
143
See 47 U.S.C. 1302.
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broadband choices.144 In other cases, even in the absence of market failure, communities may find that
meeting additional unmet demand for broadband serves important policy priorities. For instance, the
municipal provider may have both the incentive and means to serve those broadband needs that are so
widely dispersed in the community they would not show up on the balance sheet of any private firm.
48.
In sum, community broadband solutions in Tennessee and North Carolina such as EPB
and Wilson have played and will continue to play a critical role by providing service where market
failures are occurring or policy goals related to broadband deployment are not being met and where
private providers may have little incentive to invest. This enhances overall broadband deployment and
competition in Tennessee and North Carolina.
B.
The Private Sector in Wilson and Chattanooga Improved Services and Reduced
Rates or Halted Rate Increases in Response to Municipal Entry
49.
The experience of Wilson and EPB also suggests that the threat of entry or actual entry of
a municipal provider spurs positive responses by the incumbent broadband provider. This virtuous cycle
of competition further demonstrates that preemption in Tennessee and North Carolina serves the goals of
section 706.145
50.
EPB. Comcast stabilized its rates in response to EPBs entry into the market. EPB states
that between 1993 and December 2008, Comcast raised its cable television rates annually, increasing its
cable television rates by about 154 percent over that period.146 In December 2008, as EPB neared
completion of its fiber network, Comcast halted its annual rate increases and subsequently reduced its
rates.147 In addition, in 2013, Comcast restructured its services into two tiers, lowering the price of an
144
Some commenters state that Americans currently have access to broadband Internet via multiple platforms and
devices, including from wireless and satellite providers. See, e.g., Digital Liberty Comments at 2. However, the
extent to which these are viable alternatives for broadband services for consumers is unclear. The Commission has
noted the inadequacies of mobile data and insufficiency of satellite data for analysis of deployment of mobile and
satellite advanced telecommunications services. See 2015 Broadband Progress Report at paras. 9, 74-76.
145
An article by Joseph Fuhr claims that, because almost all municipal providers are losing money, they are
pricing below cost, which results in predatory pricing. Joseph P. Fuhr Jr., Coalition for the New Economy, The
Hidden Problems with Government-Owned Networks, at 4, 6 (2012),
http://www.coalitionfortheneweconomy.org/wp-content/uploads/2012/01/1-6-12-Coalition-for-a-New-EconomyWhite-Paper.pdf (Fuhr Article); see also ITTA Comments, WC Docket Nos. 14-115 and 14-116, at 6 n.20 (filed
Aug. 29, 2014) (citing Fuhr Article); American Consumer Institute Comments, WC Docket Nos. 14-115 and 14116, at 9 n. 16 (filed Aug. 28, 2014) (American Consumer Institute Comments) (same). This argument is not
compelling or relevant. Fuhr fails to establish that almost all municipal providers are losing money, and his claim
that almost all municipal providers use predatory pricing is unsupported.
146
EPB Petition at 27.
147
Id. at 27, Exhs. 5, 11. At least one commenter argues that the reduced cost of broadband service from private
providers in localities that have deployed municipal broadband networks is misleading because the reduced costs do
not reflect the higher costs imposed on consumers outside the service area at issue. See Information Technology and
Innovation Foundation Comments, WC Docket Nos. 14-115 and 14-116, at 6-8 (filed Aug. 29, 2014) (ITIF
Comments); see also ITIF Comments at 8 (By cherry picking, either within their city, or by investing only in the
city itself, municipal broadband providers have an advantage over larger private sector providers of lower costs and
higher revenues. To the extent they take market share away from these providers exurban and rural customers will
face higher costs. This sort of cherry-picking imposes negative externalities and will leave those outside populationdense areas worse off.). The relevance of this argument to our evaluation under section 706 is not clear.
Moreover, EPBs and Wilsons desire to expand outside their borders and willingness to go to the trouble of
petitioning the Commission for the right to do so strongly belie the claim of cherry-picking. Further, ITIF fails to
provide any specific evidence of cherry-picking. Another commenter objects to allowing Wilson to extend
Greenlight service beyond Wilson County until/unless they have serviced all the citizens of Wilson [C]ounty before
doing so. D.G. Whitley Ex Parte Comments, WC Docket No. 14-115, at 1 (filed Jan. 20, 2015). We reject this
argument. It is not necessary under section 706 for us to ensure that providers expand broadband services in a
(continued)
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80-channel tier, while increasing the price of a new, 160-channel tier.148 Comcast recently has offered
low-cost introductory rates and gift cards to consumers in EPBs service territory to attract new
subscribers.149
51.
EPBs entry into the market has also led Comcast to improve its own service. For
example, in 2009, Comcast responded to the threat of EPB by investing $15 million in the area to launch
the Xfinity service.150 Comcast increased its top tier download speed following EPBs initiation of
residential service, from 8 Mbps in 2008 to 105 Mbps in 2013.151 BellSouth has also improved its
available top speed of 6 Mbps download in 2006 compared to todays offering by AT&T (which acquired
BellSouth) with a top speed of 45 Mbps download.152
52.
Wilson. The launch of Wilsons municipal broadband services led incumbent providers
to provide better rates and improve services.153 From 2007 to 2009, Time Warner Cable raised rates for
almost all of its services, but held them steady in Wilson.154 Yet, in 2009, the year following Wilsons
launch of broadband service to the public, Time Warner Cable held rates in Wilson steady even though it
raised rates in areas around Wilson without a comparable competitive offering.155 Time Warner Cables
rates in Wilson thereafter remained nearly flat even as they increased, sometimes significantly, in
surrounding areas and other North Carolina communities.156

certain order; it is enough that the laws are barriers and that removal is reasonably likely to lead to increased
broadband deployment or promote competition. Our decision does not mandate any deployment, nor is such an
issue before us.
148
EPB Petition at 27.
149
Dominic Rushe, Chattanoogas Gig: How One Citys Super-Fast Internet is Driving a Tech Boom, The Guardian
Aug. 30, 2014, http://www.theguardian.com/world/2014/aug/30/chattanooga-gig-high-speed-internet-tech-boom.
150
Benton Foundation Comments, WC Docket Nos. 14-115 and 14-116 (filed Aug. 29, 2014), Attach., Christopher
Mitchell, Institute for Local Self-Reliance & Benton Foundation, Broadband at the Speed of Light: How Three
Communities Built Next-Generation Networks at 37 (Apr. 2012), http://ilsr.org/wp-content/uploads/2012/04/munibb-speed-light.pdf (Benton Foundation Report) (citing Fiber Takes On Cable, Chattanooga Times Free Press, Sept.
16, 2009, http://www.timesfreepress.com/news/2009/sep/16/fiber-takes-cable/. This report states that Comcast
offered the Xfinity service in Chattanooga before it was available in other areas, like Atlanta, GA. Id. at 37.
151
See EPB Petition at 28; Netflix Comments at 6-7.
152
See 2006 Hamilton County Study at 43; AT&T, Chattanooga, Tennessee,

http://www.att.com/local/tennessee/chattanooga/ (last visited Jan. 29, 2015).
153
See Cogent Communications Group, Inc. Reply, WC Docket Nos. 14-115 and 14-116, at 2 (filed Sept. 29, 2014);
Netflix Comments at 6-7; New America Foundation Comments at 3; Wilson Petition at 20.
154
Carolinas Connected Community at 9-11.
155
Id.; see also Catharine Rice, Action Audits, LLC, Presentation to the North Carolina House Select Committee on
High Speed Internet Access in Rural and Urban Areas (Dec. 14, 2009),
http://www.ncleg.net/documentsites/committees/HSCHSIARUA/12-142009/Catherine%20Rice%27s%20presentation.pdf (stating, in a December 2009 presentation for the North Carolina
House Select Committee on High Speed Internet Access in Rural and Urban Areas, that Time Warner Cable
stabilized its rates in Wilsons area while it raised rates in other non-competitive areas away from Wilson).
156
See Stephanie Creech, Greenlight Competition Affects Rates Elsewhere, Wilson Daily Times, Sept. 25, 2010,
http://www.wilsontimes.com/greenlight/Story/Greenlight-competition-affects-rates-elsewhere (reporting that a
consultant found that Time Warner was charging customers outside the city of Wilson up to 40 percent higher rates
and that another source stated that Time Warner customers outside the City of Wilson saw increases in 2010 of
anywhere from 15 to 30 percent depending on what services they receive while there were no such increases in
Wilson). This article does state that Time Warners 2010 rates for basic cable in Wilson, which includes broadcast
(continued)
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53.
According to a consultant, Wilsons Greenlight system saved residents more than one
million dollars each year compared to Time Warner Cable customers in other geographic areas.157 Wilson
also states that its fiber network has attracted multiple Tier 1 service providers, which have now
established a point of presence in Wilson and reduced the cost of bandwidth for both businesses and
residents.158
54.
Increased competition from Wilsons entry into the market also led Time Warner Cable
to improve its top speed. When Wilson entered the market, Time Warner Cable offered residential
service at speeds no higher than 10 Mbps at $57 per month.159 In response to Wilson charging $35 per
month for the same speed of service, Time Warner Cable increased its top-tier speed.160 A spokesperson
specifically identified this change as occurring because of the competitive environment.161
55.
We agree with commenters that [f]irms are far more likely to invest when they fear
competition than when they do not and that EPB and Wilson provide an important source of competitive
pressure on private firms.162 This pattern of positive competitive responses further demonstrates that
preemption will encourage the deployment of advanced telecommunications capability, promote
competition in the local telecommunications market, remove barriers to infrastructure investment, and
serve the public interest.
C.
Objections Raised in the Record Fail to Support a Different Outcome
56.
Notwithstanding the benefits for Tennessee and North Carolina of additional broadband
investment by EPB and Wilson some commenters raise a number of generalized objections to preemption
purporting to show shortcomings of municipal broadband. Many of these arguments are irrelevant to the
cable and cable programming tier, increased $2.10 per month from $49.85 per month to $51.95 but that Time
Warners rates in Wilson are still less than other areas in North Carolina, such as the $59.95 rate in Raleigh. Id.
157
Id. At least one commenter asserts that while consumers in Wilson may enjoy reduced broadband prices, those
cost savings to consumers are at least in part off-set by increased utility prices for other services. See American
Consumer Institute Comments at 11-12 (asserting that when Wilson began losing money on its broadband services,
it began shifting those costs to its electricity customers and that [a]ccording to its financial statements, Wilson has
taken more than $11 million from its electric and gas funds to subsidize its competitive foray into the cable
business so that [n]o wonder Wilsons electric rates are 50 percent higher than that of Progress Energy and its
natural gas rates are 30 percent more than PSNC Energy rates (quoting Ed McMahan, Our Experiment With
Municipal Broadband Has Failed, Carolina Journal, Mar. 24, 2011,
http://www.carolinajournal.com/opinions/display_story.html?id=7562)); see also American Consumer Institute
Comments at 2-3. However, this fails to show that preemption would not serve the goals of section 706 or that
Wilsons system has proven economically harmful for consumers.
158
159
Brandon Hill, Time Warner, AT&T Win Big, N.C. Gov Wont Veto Anti-Municipal Internet Bill, DailyTech, May
22, 2011,
http://www.dailytech.com/Time+Warner+ATT+Win+Big+NC+Gov+Wont+Veto+AntiMunicipal+Internet+Bill/arti
cle21696.htm.
160
Id.; see also Mighty, Mighty Broadband.
161
Mighty, Mighty Broadband.
162
Common Cause, et al. Comments at 4; see also Advisory Recommendation 2014-3 of the Intergovernmental
Advisory Committee, WC Docket Nos. 14-115 and 14-116, at 2 (filed Feb. 2, 2015) (The economy and public
benefit from competitive markets.). In at least one case, in response to a community simply conducting a
feasibility study, the incumbent service provider accelerated improvements budgeted for later years and installed
a significantly enhanced circuit to reach this remote community, enabling broadband speeds of 10 Mbps . . . [and]
also began the expansion of broadband service to parts of the [c]ounty that previously were unserved. Coalition for
Local Internet Choice Comments, WC Docket Nos. 14-115 and 14-116, at 16 (filed Aug. 29, 2014) (Coalition for
Local Internet Choice Comments).
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present inquiry, which concerns two specific petitions and not the general question as to whether
municipal broadband is good policy. Thus, we consider these arguments only insofar as they defend the
state laws at issue here by attempting to show that these laws actually protect and promote broadband
competition and deployment by restraining various purportedly harmful effects of municipal broadband in
these two states. However, we find these assertions unconvincing and unsupported by the record.
1.
So-Called Level Playing Field and Crowding Out Arguments Do Not

Justify Denying the Petitions
57.
Commenters opposing preemption argue that municipal entry into the broadband market
discourages or crowds out private sector investment; which is presented as a criticism in and of itself
and as a source of inefficiency because the public sector has advantages that the private sector does not
have.163 Commenters also argue that competition from municipalities is unfair to private sector rivals,
contending that because the public sector has advantages that the private sector does not, competition is
not on a level playing field.164 Because many of these arguments are not addressed to the standards
established by section 706 or the particular state laws or petitioners at issue, they simply are not relevant
to our analysis. To the extent that these arguments are or can be framed as contentions that preemption
would lead to reduced broadband investment and competition in Tennessee and North Carolina, however,
we do not find these arguments convincing because they show only that municipalities such as
Chattanooga and Wilson are different from private market participants, not that these differences are
problematic. In fact, the very factors that distinguish municipalities such as Chattanooga and Wilson
including focus on policy objectives rather than short-term profitability, access to capital, and in some
163
See, e.g., AT&T Comments, WC Docket Nos. 14-115 and 14-116, at 2 (filed Aug. 29, 2014) (AT&T Comments)
([Government-owned networks] can nonetheless discourage private sector investment because of understandable
concerns by private sector entities of a non-level playing field); American Consumer Institute Comments at 1-4
(arguing that municipal provision of broadband services often leads to barriers to entry which displace and crowd
out private investment, discourages private competition, raises consumer costs, and is not in the public interest);
Americans for Prosperity Comments at 1; CenturyLink Reply, WC Docket Nos. 14-115 and 14-116, at 2-3 (filed
Sept. 29, 2014) (CenturyLink Reply) (asserting that preempting state municipal entry laws will not have a positive
impact on broadband deployment or competition, but instead, would stifle private investment due to preferences and
other benefits municipalities can confer upon themselves which render private investment uneconomic as a result of
a skewed competitive playing field); NetCompetition Comments, WC Docket Nos. 14-115 and 14-116, at 1-2 (filed
Aug. 29, 2014) (NetCompetition Comments); Digital Liberty Comments at 3 (Governments can charge less than
what is necessary to recoup investment, because they can always go back to the taxpayer pot and apply for more
grants.); Letter from Melissa E. Newman, Senior Vice President, Federal Policy and Regulatory Affairs,
CenturyLink, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 14-115 and 14-116, at 1-2 (Feb. 13, 2015);
TechFreedom & International Center for Law and Economics Reply, WC Docket Nos. 14-115 and 14-116, at 9, 13
(filed Sept. 30, 2014) (TechFreedom & ICLE Reply). Some commenters appear to use the term crowding out
without explaining what it means. See, e.g., American Consumer Institute Comments at 1-4; United States Telecom
Association Comments, WC Docket Nos. 14-115 and 14-116, at 8 (filed Aug. 29, 2014) (USTelecom Comments);
American Legislative Exchange Council Reply, WC Docket Nos. 14-115 and 14-116, at 5 (filed Sept. 29, 2014)
(ALEC Reply). Where commenters use crowding out to mean any displacement of private sector investment by
public sector investment, we believe for the reasons discussed infra that the benefits of implementing section 706
goals through the preemption granted in this Order are substantial and outweigh any concerns identified by
commenters that may arise from such crowding out in the circumstances before us.
164
See, e.g., Americans for Prosperity Comments at 1; North Carolina Representative Marilyn Avila Comments,
WC Docket No. 14-115, at 2 (filed Aug. 29, 2014) (N.C. Rep. Marilyn Avila Comments) (With regards to fair
competition, the constraints placed on the cities [by the North Carolina law] were intended to protect against
inappropriate use by the government of its inherent advantages as a governmental body for example, control and
pricing of rights-of-way, exemption from laws and regulations applicable to private industry, and exemption from
the payment of taxes.).
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cases preexisting electrical plant infrastructure are what enable them to invest where private entities
have not, thereby serving Congresss goal of increasing broadband investment and competition.165
58.
For example, the intent of the Tennessee and North Carolina statutes appears to be to
protect private competitors from unfair competition. Indeed, the preamble to the North Carolina statute
makes clear that its purpose is to protect private-sector providers from competition by public-sector
providers. Some commenters cast the arguments above expressly in terms of fairness, suggesting that
municipal competition is unfair to the private sector.166 But as to broadband Internet access an
interstate service within the core of section 706 the Commission has the final say regarding
competition policy based on our statutory mandate, and our mandate under section 706 is to expand
broadband and investment as well as increase competition. As discussed above, the efforts by EPB and
Wilson to deploy broadband networks are consistent with our congressional directive under section 706.
We therefore must take action to enhance this important source of investment and competition in
Tennessee and North Carolina.167 Finally, as an example of how markets remain competitive after
municipal entry, Wilson reports a total market penetration of only 33.7% (and penetration of less than half
in eight new areas within Wilson County into which it expanded in 2013 and 2014), suggesting that it
plays a significant role but that fair opportunity exists for other providers.168
59.
Similarly, some commenters suggest that municipal deployment is economically
inefficient.169 This general argument is outside the scope of our inquiry here. Nonetheless, we are not
persuaded that public provision of broadband services is inefficient in markets such as those at issue in
this proceeding. Indeed, in the cases of EPB and Wilson, municipal entry has compelled incumbents to
respond as one would expect any firm would respond when faced with new competition: by expanding
output and choice, and reducing quality-adjusted prices.170 In general, the assertion is made that, by
165
Some commenters argue that the factors that distinguish governments from private sector entities mean that
governments do not really compete. See, e.g., Digital Liberty Comments at 3; NetCompetition Comments at 1-2.
However, EPB and Wilson compete in the marketplace for broadband customers. Contrary to arguments raised by
some commenters, we read section 706 to encompass competition from both public and private providers. See,
e.g., NetCompetition Comments at 2. Any other reading would have the curious result of forcing us to ignore the
competitive effect of other providers authorized to operate in the market even in states with no restrictions
whatsoever. Further, as discussed below, commenters have been unable to identify any compelling evidence that
municipal broadband providers are using their authority as a regulator anti-competitively. See infra para. 60.
166
See, e.g., Americans for Prosperity Comments at 1 (The [North Carolina] law . . . aims to prevent municipal
broadband networks from having an unfair advantage over private sector providers.). Similarly, USTelecom claims
public entities enjoy access to funding sources unavailable to private firms and cites an article by Kathryn Tongue as
evidence that such funding enables municipalities to unfairly undercut competition from private firms. See
USTelecom Comments at 8-9 n.15. This argument is not relevant to the section 706 standards. Further, Tongue
makes no attempt to show that, in the unserved and underserved markets municipal providers tend to enter, such
entry fails to increase consumer welfare or fails to increase broadband deployment. Instead, Tongue treats fairness
to private providers as an end goal. See Kathryn A. Tongue, Municipal Entry into the Broadband Cable Market:
Recognizing the Inequities Inherent in Allowing Publicly Owned Cable Systems to Compete Directly Against Private
Providers, 95 NW Univ. L.Rev. 1099, 1099-1139 (2001).
167
See infra Section II.C.1.
168
Wilson Petition at 20, 24.
169
See, e.g., ITIF Comments at 5 (stating that restrictive state laws are needed to to prevent inefficient waste of
public resources).
170
Considerable empirical literature on the public provision of water and electric utilities also indicates that public
provision of these utilities can be as efficient as private provision. See, e.g., Thomas Bruggink, Public Versus
Regulated Private Enterprise in the Municipal Water Industry: A Comparison of Operating Costs, Q. Rev. Econ. &
Bus., 1982, at 122; James Foreman-Peck & Michael Waterson, The Comparative Efficiency of Public and Private
Enterprise in Britain: Electricity Generation Between the World Wars, Econ. J., 1985, at 83-95; P. Byrnes et al.,
Efficiency and Ownership: Further Evidence, Rev. Econ. & Stat., 1986, at 337-341; William J. Hausman & John L.
(continued)
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entering into highly competitive markets, municipal broadband providers could crowd out private
investment. There is simply no evidence that this has happened in either Chattanooga or Wilson.171
60.
Some commenters argue that municipal entry distorts the marketplace because the
municipality functions as both regulator and competitor and could use its authority anti-competitively.172
This argument fails because these commenters are unable to identify any compelling evidence that this is
an actual problem in Tennessee or North Carolina (or elsewhere).
2.
Claims That There Is a High Rate of Municipal Broadband Failure Are

Misplaced
61.
A number of commenters contend that municipal broadband systems have a high rate of
failure and that municipalities do not have the expertise or resources necessary to succeed.173 These
commenters assert that the North Carolina and Tennessee statutory provisions and similar laws in other
states protect taxpayers from local governments rash decisions and that states should be free to protect
taxpayers from the adverse consequences of such allegedly troubled projects.174 We find no basis to
believe that either Chattanooga or Wilson would be highly likely to fail in their expansion efforts, given
their substantial track records.
62.
These arguments are misplaced. We do not read section 706 to require us to find that any
particular municipal system is certain to succeed if barriers are removed; only that the law is a barrier and
that removal is reasonably likely to lead to increased broadband deployment or promote competition.
Based on the record before us in this proceeding, we find that both EPB and Wilson are financially sound
and would likely continue investing in and deploying broadband if the artificial barriers erected by these
state laws are removed. However, even if we focus on taxpayer protection, as some request, the evidence
before us suggests that the Tennessee and North Carolina laws before us actually increase the likelihood
of failure because of the barriers that they erect to the successful deployment of broadband infrastructure

Neufeld, Property Rights Versus Public Spirit: Ownership and Efficiency of U.S. Electric Utilities Prior to Rate-ofReturn Regulation, Rev. Econ. & Stat., 1991, at 414-423; Steven Renzetti & Diane Dupont, Ownership and
Performance of Water Utilities, Greener Mgmt. Intl, 2003, at 9-19.
171
See supra Section II.B (discussing the positive competitive response to EPBs and Wilsons entry into the
broadband market); infra Attach. A-B (illustrating the comparatively high amount of competition at 25/3 Mbps
within EPBs and Wilsons service territories versus surrounding territories).
172
See ALEC Reply at 4; NetCompetition Comments at 2.
173
See, e.g., American Consumer Institute Comments at 7 (arguing that the failures of government provision of
broadband services continue to be commonplace); Citizens Against Government Waste Comments at 3 (asserting
that municipal broadband success stories are few and far between); National Conference of State Legislatures
Comments, WC Docket Nos. 14-115 and 14-116, at 5 (NCSL Comments); CenturyLink Reply at 2, 5; Speaker of
the North Carolina House of Representative Thom R. Tillis Comments, WC Docket No. 14-115, at 2 (filed Aug.29,
2014) (N.C. Speaker Thom R. Tillis Comments); Letter from Melissa E. Newman, Senior Vice President, Federal
Policy and Regulatory Affairs, CenturyLink, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 14-115 and
14-116, at 1-2 (Feb. 13, 2015) (stating that the history of municipal overbuilding . . . is mostly about costly
business failures and that [c]onsequently, many of the laws adopted were to protect citizens from projects that
could very likely increase their taxes including [f]or example, the North Carolina statute); see also Digital
Liberty Comments at 2.
174
See, e.g., ALEC Comments at 1-2 (stating that municipalities are not used to regularly upgrading as necessary
and therefore underestimate cost); see also N.C. Speaker Thom R. Tillis Comments at 2.
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by these entities.175 Moreover, even if such arguments were relevant, opponents of preemption have not
demonstrated convincingly a pattern of failure176 in Tennessee or North Carolina:177
63.
EPB. The weight of the evidence indicates that EPBs broadband system is financially
sound,178 despite some commenters arguments to the contrary.179 The record includes no credible
evidence that EPBs system has failed or is likely to fail, and there is no evidence that EPB will fail to pay
off its debt and recover the cost of its investment. Indeed, as mentioned above, in 2012 Standard and
Poors upgraded EPBs bond rating to AA+.180 EPBs communications division had a net income of more
than $8.6 million in fiscal year 2013.181
64.
Contrary to some arguments, the facts that EPB has debt and has used federal grant
money do not by themselves demonstrate failure.182 Standard and Poors AA+ bond rating indicates that
EPBs debt is not a problem that is likely to lead to failure. Although some commenters argue that that
175
See infra Sections III, IV.E, and IV.F.
176
In the context of section 706, failure must be something more than using taxpayer funds: private broadband
providers also use public funds to preserve and advance universal service, and doing so is consistent with
Congresss policy goals. See generally 47 U.S.C. 254. Further, since municipal deployment of broadband where
existing service does not meet community needs serves the goals of section 706, the concept of failure here must
encompass whether a municipal broadband network is meeting the goals of the community and not merely whether
it produces a profit or whether its profitability timeline meets private sector standards for return on investment. To
conclude otherwise would be inconsistent with longstanding efforts to provide explicit governmental support to
ensure universal service in areas where there is no private sector business case.
177
Although we decide only issues concerning the laws of Tennessee and North Carolina, we note that the record
simply does not support the assertion that almost all government-owned networks are losing money and that
virtually all of them have a negative net present value or other similar assertions. ITTA Comments at 6 (citing
Fuhr Article); see also, e.g., CenturyLink Reply at 4 & n.14. Although we do not reach a judgment on municipal
broadband success or failure rates as a whole, at best for opponents of preemption the record is inconclusive.
Preemption opponents do not cite any academic study that comprehensively analyzes all government-owned
broadband networks. Instead, they give isolated examples of failures, many of which appear to be exaggerated. For
example, AT&T cites a report that it claims comprehensively analyzes the ability of municipalities to maintain
broadband networks. AT&T Comments at 2, n.3 (citing ACLP Report at xiii); see also ITIF Comments at 9-10
(stating that the ACLP Report provides an extensive review of government-owned broadband networks). In fact,
the ACLP Report provides detailed case studies for only 10 municipal providers, does not claim that they are all
failures, and fails to offer a rigorous economic analysis of the relative efficiency or sustainability of municipal
providers as a whole. See AT&T Comments at 2 n.3; ACLP Report. In contrast, other commenters cite numerous
examples of systems that they state are successful. See FTTH Comments at 7; EPB Reply at 22 (citing Common
Cause, et al. Comments at 3-6; Coalition for Local Internet Choice Comments at 5-15, 17-18; New America
Foundation Comments at 7-16; BVU Authority Comments, WC Docket Nos. 14-115 and 14-116, at 5-11 (filed Aug.
29, 2014); National League of Cities et al. Comments at 4-6; FTTH Comments at 4-7)); Institute for Local SelfReliance Reply at 8.
178
See EPB Reply at 4, 21-23.
179
See, e.g., American Consumer Institute Comments at 11; Americans for Prosperity Comments at 1-2; Citizens
Against Government Waste Comments at 3; ITTA Comments at 10; Taxpayers Protection Alliance Reply at 1-2, 45.
180
EPB Petition at 23; S&P EPB Report.
181
EPB Petition at 23.
182
Institute for Local Self-Reliance Reply at 15 ([T]he mere presence of debt does not show that Chattanooga's
EPB is a failure.); Benton Foundation Report at 10.
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EPBs electric system customers are paying the price for debt incurred by EPBs broadband system,183 in
fact that is not the case. EPBs broadband operations are not subsidized by its electric operations. EPB
states that it does not, and would not, use revenues from EPBs electric system to subsidize EPBs
communications services.184 EPB operates its communications services through a separate division from
its electric system operations and, consistent with Tennessee law and its wholesale power contract with
the Tennessee Valley Authority, EPB allocates the cost of shared facilities and expenses between its
electric system division and its communications division.185 Therefore, commenter assertions that EPBs
communications operation has paid nothing to build the fiber used by its broadband network are
incorrect.186 EPBs communications operations pay for the use of the fiber network and EPB states that
its electric system customers benefit from tens of millions of dollars in communications services
revenue, payments for use of facilities that would be fully funded by the electric operations in the
absence of EPBs communications operations.187 For instance, in the fiscal year ending June 30, 2013, the
electric system received nearly $20 million in access fees and allocation payments from EPBs
communications operations.188 Finally, EPB asserts that the cost of offering broadband services in areas
outside its electric service territory will be covered by service revenue, contributions in aid of
construction, or other capital or operating support.189
65.
Other Systems in Tennessee. Eight additional municipal broadband systems are operating
in Tennessee.190 The Tennessee Municipal Electric Power Association (TMEPA) states that these eight
municipal broadband systems have been providing broadband services competitively and with great
success for several years, and that other municipalities are considering deploying similar broadband
systems.191 TMEPA further states that six of the eight systems it identifies offer 1 Gbps broadband
connections, and all of the eight systems offer faster broadband speeds and better service than was
available in their communities prior to operation of the municipal broadband systems.192 As in private
industry, not every effort is an unqualified success. The American Consumer Institute cites an article that
concludes that municipal electric utilities in Tennessee have incurred deficits of approximately $176
million for these communications ventures.193 However, mere financial loss and/or existence of debt by
183
See Taxpayers Protection Alliance Reply at 1-5; see also Americans for Prosperity Comments at 2 (stating that,
i[f] EPB is unable to pay off its debt, creditors have the right to collect money via electric pay rates and can also
increase rates on all electric customers throughout the city if necessary).
184
EPB Petition at 2.
185
Id. at 22-23 n.36 (citing Tenn. Code Ann. 7-52-402 (prohibiting electric system subsidies of
telecommunications operations); Tenn. Code Ann. 7-52-603(a)(1)(A) (prohibiting subsidies and requiring creation
of a separate division for operation of Internet and video services)).
186
See Taxpayers Protection Alliance Reply at 1, 5 (stating that EPBs fiber services had to pay nothing to build its
business).
187
EPB Petition at 22.
188
Id. at 22-23.
189
Id. at 2.
190
Id. at 15, n.31; American Consumer Institute Comments at 11.
191
TMEPA Comments at 1-2; see also Letter from Joseph S. Wigington, PE, General Manager/CEO, Morristown
Utility Systems, to Federal Communications Commission, WC Docket Nos. 14-115 and 14-116, at 1 (filed Nov. 12,
2014) (stating that the Morristown, Tennessee municipal fiber to the home broadband network has significantly
improved quality of life and made businesses more efficient and that our community is much better off having
local control of its broadband needs).
192
Id. at 1.
193
American Consumer Institute Comments at 11 n.24 (citing R.J. Rizzuto, Financial Performance of Tennessees
Municipal Cable and Internet Overbuilds (March 21, 2011)).
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itself does not demonstrate that municipal deployment is inconsistent with the goals of section 706.
Another commenter argues that government-owned Memphis Networx failed due to mismanagement and
looseness with taxpayer funds, asserting that it grossly overpaid for overhead and paid exorbitant
salaries.194 The fact that one municipal broadband provider in Tennessee struggled does not demonstrate
that failure is likely, nor does it negate a finding that Tennessee law is a barrier to investment and
competition under section 706.
66.
Wilson. Municipal broadband in Wilson has been a success and the weight of the
evidence indicates that Wilsons municipal broadband system is financially sound. Wilsons credit rating
was upgraded by both Moodys and Standard and Poors in late 2008, shortly after its broadband services
were launched, and Moodys reaffirmed its A1 credit rating for the citys $56.2 million outstanding
Certificates of Participation in 2014, noting in particular the strength of Wilsons Greenlight broadband
service.195 There is no credible evidence that the Wilson municipal broadband system is failing or likely
to fail. Some commenters assert that, to the extent that the City of Wilson cannot recover the cost of its
investment, taxpayers will bear the cost of failure.196 There is no evidence that this has happened or is
going to happen. Wilson financed Greenlight through Certificates of Participation and bank loans.197
Certificates of Participation are financing instruments secured by the project revenues and/or the facilities
purchased with the proceeds of the financing.198 The bank loans were issued pursuant to installment
contracts, were secured solely by the equipment purchased thereby, and the debt from these loans will be
paid in full within a few months.199 Wilson used financing options that did not involve taxpayer
financing and did not put the local or state government at risk in the event of project failure; any risk of
default or other financial risk caused by a failure of the Greenlight network to perform as expected would
fall solely on the investors who purchased the Certificates of Participation and/or the installment debt
issued by Wells Fargo.200 Further, debt alone does not demonstrate failure, particularly when Wilson is
able to pay off that debt.201
67.
Other Systems in North Carolina. Some commenters specifically identify the following
North Carolina systems as unsuccessful: MI-Connection in Mooresville and Davidson, North Carolina;
the CoMPAS system in Morganton, North Carolina; and the Fibrant system in Salisbury, North
Carolina.202 However, we find that their factual claims are not dispositive under section 706 as to whether
laws present barriers. Even if they were, we do not find their arguments persuasive.
194
Digital Liberty Comments at 3 (citing Andy Meek, Memphis Networx: From Smart Money to Risky Business,
Memphis Daily News (Jun. 22, 2007), http://www.memphisdailynews.com/editorial/Article.aspx?id=33060).
195
See Wilson Petition at 19-20; id., Exh. 4, Press Release, City of Wilson, City Keeps Strong Bond Rating, Saves
Money (Jun. 11, 2014) (Wilson Bond Press Release). This press release also notes that Moodys affirmed the Aa2
rating on the City of Wilsons $11.1 million General Obligations bonds which are secured by the citys unlimited ad
valorem tax pledge. Wilson Bond Press Release. As noted in this paragraph, Wilson did not use General
Obligations bonds to finance its municipal broadband system.
196
See, e.g., NCSL Comments at 5.
197
See Letter from James Baller to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 14-115 and 14-116, at 1011 (filed Dec. 15, 2014) (Petitioners Dec. 15, 2014 Ex Parte).
198
Id. at 10.
199
Id. at 11.
200
Id.
201
See, e.g., Institute for Local Self-Reliance Reply at 8-11, 15-16, 31.
202
See, e.g., American Commitment Comments, WC Docket Nos. 14-115 and 14-116, at 3 (filed Aug. 29, 2014)
(American Commitment Comments); American Consumer Institute Comments at 8-11; The Free State Foundation
Comments, WC Docket Nos. 14-115 and 14-116, at 7-8 (filed Aug. 29, 2014) (Free State Comments); ITTA
(continued)
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68.
Mooresville and Davidson, North Carolina. American Commitment claims the
municipal provider in these two cities, MI-Connection, has had a disastrous performance and failed
based on a 2012 public policy report that found that MI-Connection had not made a profit in its first four
years of operation.203 The disastrous performance began in 2002 when Adelphia Communications went
bankrupt after disclosing $2.3 billion in off-balance-sheet debt and misleading investors.204 The
communities of Mooresville and Davidson subsequently decided to acquire the Adelphia assets out of
bankruptcy in their area, operate it as MI-Connection, and upgrade it to provide video on demand and
Internet-based telephone service.205 Although MI-Connection did struggle,206 we note that it takes time
for some companies to become profitable.207 And although MI-Connection is not yet out of the woods,
its status has improved.208 Notably, Googles 2014 Video Quality Report rated MI-Connections Internet
speeds well ahead of those of its competitors because it is the only system able to maintain a consistent
video stream at least 90 percent of the time.209
69.
Morganton and Salisbury, North Carolina. The John Locke Foundation (JLF) describes
the cities of Morganton and Salisbury as examples of municipal broadband that delivers harm, not help,
to the competitive environment in North Carolina.210 With respect to the CoMPAS (City of
Morganton Public Antenna System) system in Morganton, JLF asserts that such harm to the community is
evident in two actions by the city council. The first harmful action, JLF claims, was the councils
decision to allow CoMPAS to borrow funds from two municipal funds.211 The same report on which JLF
relies also states, however, that CoMPAS no longer operates at a loss and its loan repayments to those
Comments at 10 n.36; John Locke Foundation Comments, WC Docket Nos. 14-115 and 14-116, at 3-5 (John Locke
Foundation Comments).
203
American Commitment Comments at 2-3; see also ITTA Comments at 6 n.20 (citing Fuhr Article at 4). ITTA
also claims MI-Connection has failed because the towns of Mooresville and Davidson, NC, on the verge of default
a few years ago, still owe $78 million of the more than $92 million they borrowed to buy and upgrade their jointlyowned municipal broadband network in 2007. See Letter from Micah M. Caldwell, Vice President, Regulatory
Affairs, ITTA, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 14-115, 14-116, at 2 (filed Oct. 6, 2014)
(ITTA Oct. 6 Ex Parte).
204
See Sallie Hofmeister, Adelphia Submits Bankruptcy Filing, Los Angeles Times (Jun. 26, 2002),
http://articles.latimes.com/2002/jun/26/business/fi-adelphia26.
205
American Commitment Comments at 2; John Locke Foundation Comments at 4-5.
206
For example, the ACLP Report states that Davidson had to use city revenue and other funds to support MIConnection, that at one time the subsidy amounted to 20 percent of the Davidson budget, and that Davison had to
cut programs, cut staff, reorganize, and charge residents a solid waste fee that equaled a four cent property tax
increase. See ACLP Report at 151.
207
See, e.g., Drew Hendricks, 5 Companies That Didnt Make a Dollar for 5 Years (Jul. 7, 2014),
http://www.inc.com/drew-hendricks/5-successful-companies-that-didn-8217-t-make-a-dollar-for-5-years.html
(explaining that FedEx, Amazon, Turner Broadcasting System, ESPN, and Tesla Motors took almost five years or
more to turn a profit).
208
ACLP Report at 153. Moreover, in 2013, a Mooresville Commissioner said, [n]o longer is MI-Connection the
political albatross that it has been perceived to be -- but it is gaining acceptance as a local tool for community
engagement. Its projected success was always long term -- just far longer to realizing its true value than originally
projected. Dale Gowing, Herring: MI-Connection No Longer a Political Albatross Here (Nov. 6, 2013),
http://www.mooresvilletribune.com/news/herring-mi-connection-no-longer-a-political-albatrosshere/article_0dad7e28-468c-11e3-9cf1-0019bb30f31a.html.
209
See David Boraks, Google Rates MI-Connection Net Speeds ahead of Competitors, DavidsonNews.net(Jul. 2,
2014), http://davidsonnews.net/blog/2014/07/02/google-rates-mi-connection-net-speeds-ahead-of-competitors/.
210
John Locke Foundation Comments at 2-5.
211
Id. at 5.
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two funds will be complete in fiscal year 2014.212 Based on all the information in the report, there does
not appear to be any evidence of harm to the community from the municipalitys decision to temporarily
borrow money from two of its own reserve funds. JLFs second example of purported harm is the alleged
cross-subsidization of CoMPAS cable rates by increases in taxes and electricity rates.213 Significantly, the
news report cited by JLF does not claim that any cross-subsidization actually occurred. On the contrary,
it reports that Morgantons City Manager (a certified public accountant) said it had not occurred.214
70.
With respect to Salisbury, JLF refers to a 2009 JLF public policy paper making the
unsubstantiated claim that that the Fibrant system would fail, a year and a half before Fibrant started
offering service in November 2010.215 The only other evidence cited by JLF is a July 2014 local news
report stating that Moodys had downgraded Salisburys general obligation bond rating to A3 from Aa2,
and its certificates of participation rating to Baa3 from A1, noting that A rated cities are judged to be
subject to low credit risk, and a Baa rating is judged to be subject to moderate credit risk.216 JLF fails to
explain why ratings of low credit risk, and moderate credit risk indicate failure for a fiber system that
has been operating for only three years. Moreover, that same news report states that the city clerk
identifies that Fibrant is operating profitably for the 2013-14 fiscal year and anticipates doing so for the
2014-15 fiscal year as well.217
212
See id. (citing City of Morganton, Managers 2013-2014 Budget Message,

http://www.ci.morganton.nc.us/index.php/departments/administration/1078-manager-s-2013-2014-budget-message
(Morganton Budget Message), which states that the loan repayments to the Electric Fund ($147,953) and the
General Fund ($35,713) will be complete in fiscal year 2014 and that the final payment of $71,425 to the Capital
Reserve Fund will be made in 2015). Additionally, Wilson submitted information showing that CoMPAS operated
at a net profit during the 2010 fiscal year, Morganton made its final Certificate of Participation payment in
December 2010, and it expected to generate roughly one million dollars of annual net income in future years. See
Letter from James Baller to Marlene H. Dortch, Secretary, FCC, WC Docket No. 14-115 (Feb. 3, 2015) (Feb. 3
Wilson Letter); Feb. 3 Wilson Letter, Attach., General Assembly of North Carolina Session 2011 Legislative Fiscal
Note to House Bill 129 (Fourth Edition), at 4 (Legislative Fiscal Note).
213
John Locke Foundation Comments at 5.
214
See Brian Graves, Morganton Council Hikes Tax Rate over Residents Objections, The News Herald (Morganton,
N.C.) (Jul. 30, 2013), http://www.morganton.com/news/morganton-council-hikes-tax-rate-over-residentsobjections/article_80387513-1cf2-55e2-b7fc-aef40e1fbb2b.html.
215
See Michael Sanera & Katie Bethune, Salisburys Fiber-Optic Cable System: Another Corporate Welfare Project
at 5, John Locke Foundation Regional Brief (May 2009), http://www.johnlocke.org/acrobat/policyReports/rb74salisburycable.pdf.
216
See Barry Smith, Salisbury Sewer Fees Prop Up Broadband at 1, Carolina Journal Online, (Jul. 7, 2014),
http://www.carolinajournal.com/exclusives/display_exclusive.html?id=11193 (Salisbury Article). Likewise,
CenturyLink claims Salisburys investment in Fibrant is precarious because Fitch Ratings downgraded the City
of Salisburys bonds on the water and sewer system . . . due to [its] substantial support of the city-run broadband
enterprise system (Fibrant) from fiscal years 2011 to 2013. See CenturyLink Reply at 5 & n.17 (quoting Fitch
Downgrades Salisbury, NC's Water & Sewer Revs to 'A+'; Outlook Stable, Business Wire (Sept. 19, 2014),
http://www.businesswire.com/news/home/20140919005693/en/Fitch-Downgrades-Salisbury-NCs-Water-SewerRevs#.VMf0bVfzhLo (Fitch Salisbury Article)). Significantly, Business Wire reports that this downgrade was just a
single step, from a Fitch rating of AA- to A+. See Fitch Salisbury Article. Contrary to CenturyLinks claim,
nothing in this rating implies that the investment is precarious in any way.
217
See Salisbury Article. Similarly, ITTA claims Salisburys Fibrant system is a failure because the city of
Salisbury, NC has diverted $7.6 million from its water and sewer fund to subsidize its municipal broadband
network, which has experienced operational and debt payment shortfalls since its inception in 2010. See ITTA Oct.
6 Ex Parte at 2. But it is not clear why a communitys decision to borrow from one of its own reserve funds to serve
community needs during the first three years of operating its own fiber network in an effort to serve community
needs is proof of that networks failure.
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3.
FCC 15-25
Other Objections
71.
Loss to Other Municipal Priorities. Some argue that by increasing the likelihood of
spending on municipal broadband, preemption harms other municipal priorities in Tennessee and North
Carolina.218 However, section 706 directs us specifically to focus on measures to enhance broadband
deployment, and our decision enhances local choice in Tennessee and North Carolina without compelling
any particular choice.
72.
Assertions that Commission Should Address Broadband Deployment Through Other
Means. Arguments that we should address broadband deployment solely through means other than
granting the petitions mistakenly assume that these options are mutually exclusive.219
73.
Claims that the Commission Should Address Local Administrative Obstacles. A number
of parties argue that the Commission should address local government administrative obstacles to
broadband deployment instead of preempting the state laws at issue here.220 Parties that believe that state
and local regulatory requirements are delaying broadband deployment can supplement the record in
relevant proceedings or file a separate request for relief.221
74.
Claims That Municipal Competition Raises Prices Where There Is Diversity In Consumer
Preferences. The Information Technology and Innovation Foundation (ITIF) claims that a municipal
providers overbuilding of private broadband networks imposes higher prices on consumers outside the
municipalitys jurisdiction, thus justifying state restrictions.222 ITIF fails to identify any evidence
supporting this claim and we reject the argument because it fails to demonstrate that preemption would
reduce overall broadband competition and investment in Tennessee or North Carolina.223
218
See, e.g., Institute for Policy Innovation Comments, WC Docket Nos. 14-115 and 14-116 at 2 (filed Aug. 29,
2014) (Institute for Policy Innovation Comments); National Governors Association Comments, WC Docket Nos.
14-115 and 14-116, at 3 (filed Aug. 29, 2014) (National Governors Association Comments).
219
See, e.g., Institute for Policy Innovation Comments at 5 (stating that better options to preemption exist such as
the state, county, town, or even federal government could incentivize the private sector in particular geographic
areas at lower costs and certainly with less exposure to taxpayer liability); ITIF Comments at 10 (stating that while
the Commission should not encourage municipally owned or operated networks, this doesnt mean that there arent
other ways to reduce costs of deploying new networks or upgrading existing infrastructure through city and federal
policy, making it easier for private actors to operate in these high fixed-cost fields).
220
See, e.g., USTelecom Comments at 5-6 (Focusing on the elimination of barriers to the deployment of private
broadband imposed at the local level would be a substantially more productive use of the Commissions time.);
ITIF Comments at 10 (stating the Commission should focus on working with private actors on policies to promote
[a]ccess to city assets such as rights of ways, including pole access and fees, conduit access, and city building
access).
221
The Commission sought comment on potential local, state, and federal government obstacles to broadband
deployment in the 2011 Broadband Acceleration NOI. Accelerating Broadband Deployment: Expanding the Reach
and Reducing the Cost of Broadband Deployment by Improving Policies Regarding Public Rights of Way and
Wireless Facilities Siting, WC Docket No. 11-59, Notice of Inquiry, 26 FCC Rcd 5384 (Apr. 7, 2011) (2011
Broadband Acceleration NOI). The Commission also adopted a Notice of Inquiry in conjunction with the 2015
Broadband Progress Report that seeks comment on possible ways to remove barriers to infrastructure investment
while simultaneously promoting competition. 2015 Broadband Progress Report at paras. 153-163.
222
See ITIF Comments at 6-7.
223
ITIF cites a single study that arrives at a far different conclusion, id. at n.8: [T]he presence of a DSL provider in
competition with a cable modem provider may or may not lower the cable providers price, depending crucially on
consumer preference diversity. Yongmin Chen & Scott Savage, The Effects of Competition on the Price for Cable
Modem Internet Access, 93(1) Rev. Econ. & Stat. 201, 217 (Feb. 2011) (Chen-Savage Study). This modest
conclusion says nothing about the effect of municipal providers on prices charged by private broadband suppliers in
North Carolina and Tennessee.
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III.
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THE TENNESSEE AND NORTH CAROLINA STATUTORY PROVISIONS ARE

BARRIERS TO BROADBAND INVESTMENT AND COMPETITION FOR EPB AND
WILSON
75.
In this section, we address the specific impact of the challenged Tennessee and North
Carolina statutory provisions on the provision of broadband service by EPB and Wilson.224 First, we
determine whether these statutory provisions are barriers to additional broadband investment and
competition for the purposes of section 706. As discussed above, both sections 706(a) and 706(b) direct
the Commission to remove barriers to infrastructure investment.225 Under section 706(b), the
Commission is also required to assess broadband deployment each year and, in the event the Commission
determines that advanced telecommunications capability is not being deployed in a reasonable and
timely fashion, section 706(b) compels the Commission to take immediate action and [remove]
barriers to infrastructure investment and [promote] competition.226 Based on the record in this
proceeding, we conclude that both the territorial restriction in section 601 and H.B.129 are barriers to
broadband infrastructure investment and competition. With regard to Tennessee, we conclude that the
language within its service area contained in section 601 prohibiting a municipal electric system from
expanding beyond its electric service footprint is, on its face, an explicit barrier that runs counter to the
policies established in section 706. With regard to North Carolina, we conclude that the provisions
contained in H.B.129 identified below constitute barriers to broadband infrastructure investment and that
preemption will promote competition in the telecommunications market by removing statutory barriers to
such competition, so that preemption under section 706 is therefore justified.
76.
Second, we consider whether preemption of H.B. 129 and the territorial restriction in
section 601 would likely result in increased infrastructure investment and competition by EPB and
Wilson. Specifically, we consider the demand for EPB and Wilson to expand their networks and analyze
whether, in the absence of the challenged provisions, EPB and Wilson would be likely to expand to serve
neighboring communities. We review both the technical and financial capabilities of EPB and Wilson
and conclude that, but for the challenged statutory provisions, EPB and Wilson would likely expand their
broadband services into neighboring communities and meet existing demand for service in those
communities.
A.
The Tennessee Statutory Provision, Section 7-52-601

1.
The Territorial Restriction in Section 601 is a Barrier to Broadband

Investment and Competition
77.
The Territorial Restriction in Section 601 is an Explicit Prohibition on the Provision of
Advanced Telecommunications Capabilities. We find that the language within its service area
contained in section 601 is an explicit barrier to broadband infrastructure investment and competition
under section 706. The effect of the territorial restriction in section 601 is very clear. The fact that
municipal electric systems in Tennessee can provide service within their service areas does not change
section 601s barrier to municipal electric systems providing advanced telecommunications capabilities
elsewhere. We find further that section 601s provision allowing for the possibility of expansion through
pilot projects does not provide meaningful relief from the territorial restriction in section 601 because the
services offered through these pilot programs are themselves subject to territorial restrictions.227
224
Included as Attachment C is Tenn. Code Ann. 7-52-601. Included as Attachment D is H.B. 129 and other
relevant North Carolina statutory provisions discussed in this Order.
225
47 U.S.C. 1302(a).
226
47 U.S.C. 1302(b).
227
See supra note 68.
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78.
The Territorial Restriction in Section 601 Also Is a Barrier to Broadband Investment and
Competition Because It Prohibits the Provision of Video Service Outside a Municipalitys Electric
Footprint. Consumers increasingly demand triple play services from their communications providers.228
The territorial restriction in section 601 prohibits municipal electric service providers from providing
cable service, two-way video, [and] video programming in addition to Internet services outside their
electric service footprint.229
79.
The Commission has recognized the nexus between providing advanced communications
capability and the importance of providing triple play packages that include other services such as
video programming, acknowledging that a providers ability to offer video service and to deploy
broadband networks are linked intrinsically, and the federal goals of enhanced cable competition and
rapid broadband deployment are interrelated.230 And the Commission has recognized the role that
offering video services can play in recovering deployment costs.231 We recognize that providers may not
always have a business case for building a network unless they can optimize revenue by bundling
multiple services.232 This bundling therefore promotes broadband deployment. Accordingly, we find
persuasive EPBs argument asserting that the inability to offer video services as part of a triple play
package places the economic feasibility of investing in broadband infrastructure at risk and may preclude
municipal electric providers from competing effectively for business from consumers preferring bundled
packages combining broadband, video programming, and telecommunications services.233 We therefore
conclude that an absolute bar on the provision of cable services, two-way video, and video
228
For example SNL Kagan estimates that, at the end of 2013, 43.4 percent of cable subscribers purchased the tripleplay bundle. See SNL Kagan, Cable TV Investor: Deals & Finance, at 8 (Apr. 30, 2014).
229
Tenn. Code Ann. 7-52-601(a).
230
Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended by the Cable
Television Consumer Protection and Competition Act of 1992, MB Docket No. 05-311, Report and Order and
Further Notice of Proposed Rulemaking, 22 FCC Rcd 5101, 5132-33, para. 62 (2006); see also Review of the
Commissions Program Access Rules and Examination of Programming Tying Arrangements, MB Docket No. 07198, First Report and Order, 25 FCC Rcd 746, 772 n. 141 (2010) (Terrestrial Order); Implementation of the Cable
Television Consumer Protection and Competition Act of 1992 et al., MB Docket No. 07-29 et al., Report and Order
and Notice of Proposed Rulemaking, 22 FCC Rcd 17791, 17860-61, para. 116 (2007). The Commission has also
noted the benefit to competition that comes from a direct competitor to an incumbents triple play offerings, stating
that combinations of video, voice, and data services similar to those that incumbent cable operators offer to
customers (the triple play), thus posing a greater competitive threat than [direct broadcast satellite] to cable.
Terrestrial Order, 25 FCC Rcd at 765, para. 29. And the Commission also has noted the importance of offering
triple play services to the business strategies of providers, and it has stated that triple play packages shift the
focus of competition from standalone delivered video services to bundles of video, Internet access, and telephone
services. Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming,
MB Docket No. 12-203, Fifteenth Report, 28 FCC Rcd 10496, 10538, para. 19 (2013). In the video distribution
market, the Commission has stated that Some MVPDs [multichannel video programming distributors] differentiate
their services by highlighting bundles of video, Internet access, and telephone services . . . . The major cable and
telephone MVPDs focus their marketing on bundles. Id. at 10538, para. 93.
231
See Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended by the
Cable Television Consumer Protection and Competition Act of 1992, MB Docket No. 05-311, Notice of Proposed
Rulemaking, 20 FCC Rcd 18581, 18581, para. 1 n.4 (2005) (stating that [t]he construction of modern
telecommunications facilities requires substantial capital investment and [a]s a consequence, the ability to offer
video offers the promise of an additional revenue stream from which deployment costs can be recovered).
232
See supra notes 228, 230, & 231.
233
EPB Petition at 4. We note that EPB has made the investment necessary to provide video services over its fiber
network so it can offer triple play service packages within its existing service area. See supra para.22.
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programming along with Internet services, as a practical matter, is a barrier to providing advanced
telecommunications capability in this case.234
2.
EPB Would Deploy Additional Facilities and Expand Competitive Entry

Absent the Territorial Restriction in Section 601
80.
The record demonstrates that EPB would likely meet the substantial customer demand in
surrounding areas absent Section 601s territorial restriction.235 As the SBI Data-based chart and map
illustrate, numerous communities surrounding EPBs service territory have few or no options for
advanced telecommunications capability and would benefit from EPB expansion.236 EPB states that it
seeks the opportunity to respond to requests for access to provide advanced telecommunication services
that EPB regularly receives from citizens and businesses located outside EPBs electric service
territory.237 EPB also has submitted evidence to demonstrate that it has the financial resources and
technical expertise to serve surrounding areas. For example, as of October 2012, Standard & Poors
Rating Services raised EPBs revenue bond rating from AA to AA+, citing revenue from EPBs fiber
network as one reason for the upgrade.238 In 2012, EPBs communications division also obtained
commercial financing to replace the remaining balance of the interdivision loan provided by the electric
system.239 Significantly, EPB has already proven that, within its footprint, it can successfully deploy and
manage a fiber network offering 1 Gbps service to all customers and is actually serving 63,000
subscribers.240
B.
North Carolina Statutory Provisions

1.
Background
81.
H.B. 129 consists of six principal provisions codified together as Article 16A in Chapter
160A of the North Carolina General Statutes, and four amendments to other provisions of the General
Statutes.241 In this subsection, we describe the substantive provisions of H.B. 129. In subsection (2)
below, we analyze whether they are barriers to broadband deployment and infrastructure investment.
While there are a number of separate provisions, they can generally be grouped into three categories
based on the functions that they serve: measures to raise economic costs, measures apparently aimed to
level the playing field, and measures to impose delay. Some provisions fit comfortably in more than
one category. The categorization is for convenience only, and our analysis does not hinge on into which
group a provision is classified.
a.
Measures to Raise Economic Costs
82.
A number of the provisions of H.B. 129 directly increase either the retail prices a cityowned communications service provider (CSP) may charge, or its costs of providing service. Section
340.1(a)(8) prohibits a city-owned CSP from pricing any communications service below the cost of
234
We note that in order to provide video services, EPB will need to obtain a franchise if it does not already have
one. See Tenn. Code Ann. 7-59-304(a)(1); Tenn. Code Ann. 7-59-102(i).
235
See supra paras. 29-32.
236
See supra paras 30-31; see also infra Attach. A (EPB/Tennessee Map). Further, as noted above, the record
contains many comments filed by individual commenters who are dissatisfied with existing broadband service in
Tennessee. See supra note 72.
237
EPB Petition at 2.
238
EPB Timeline at 5; S&P EPB Report at 2.
239
EPB Timeline at 5.
240
See supra note 44 and accompanying text.
241
H.B. 129, 2011 N.C. Sess. Laws at 84.
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providing the service, including any direct or indirect subsidies received by the city-owned [CSP] and
allocation of costs associated with any shared use of building, equipment, vehicles, and personnel with
other city departments. It further requires a city-owned CSP to impute costs when calculating the cost of
providing service, including the cost of the capital component that is equivalent to the cost of capital
available to private communications service providers in the same locality and an amount equal to all
taxes, including property taxes, licenses, fees, and other assessments that would apply to a private
communications service provider, including federal, State, and local taxes; rights-of-way, franchise,
consent, or administrative fees; and pole attachment fees.242 The combined effect is to raise the retail
price that municipal providers may charge.
83.
Several provisions also require city-owned providers to make payments in lieu of taxes to
state, county, or local governments equivalent to the amounts that private-sector providers might be
required to pay in taxes or fees. Under section 340.1(a)(9), a city with a city-owned CSP must annually
remit to the general fund of the city an amount equivalent to all taxes or fees a private communications
service provider would be required to pay the city or county in which the city is located .. . . This
amount must include any applicable tax refunds the city-owned CSP received because of its government
status, and a sum equal to the amount of property tax that would have been due if the city-owned [CSP]
were a private communications service provider.243 Section 340.5 provides that city-owned CSPs shall
be exempt from property taxes, but then requires them to make payments in lieu of taxes (PILOT) to the
county for property taxes, and to the State for State income, franchise, vehicle, motor fuel, and other
similar taxes.244 The statute also provides that city-owned CSPs will not be eligible for sales or use tax
refunds on purchases of tangible personal property unless a private-sector CSP would be entitled to such a
refund.
84.
Section 340.1(a)(3) limits a city-owned CSP to providing communications service only
within the corporate limits of the city providing the communications service.245 As described below,
this territorial restriction functions to impose additional economic costs on entering or competing in the
market by restricting the number of customers over which fixed costs may be spread.
b.
Level Playing Field Obligations
85.
Section 340.1(a)(1) requires a city-owned provider to comply in its provision of
communications service with all local, State and federal laws, regulations, or other requirements that
would apply to the service if provided by a private sector provider.246 Section 340.1(a)(6) prohibits a cityowned provider from airing advertisements or other promotions for itself on a public, education, or
governmental access (PEG) channel if the city requires another communications service provider to carry
the channel. The city is further prohibited from using city resources that are not allocated for cost
accounting purposes to the city-owned communication service to promote city-owned communications
service in comparison to private services and may not require, directly or indirectly, city employees,
officers, or contractors to purchase city services.247 In turn, section 340.1(a)(7) bars a city-owned CSP
from subsidiz[ing] the provision of communications service with funds from any other noncommunications service, operation, or other revenue source, including any funds or revenue generated
from electric, gas, water, sewer, or garbage services.248
242
N.C. Gen. Stat. Ann. 160A-340.1(a)(8).
243
N.C. Gen. Stat. Ann. 160A-340.1(a)(9).
244
N.C. Gen. Stat. Ann. 160A-340.5(a)-(b).
245
N.C. Gen. Stat. Ann. 160A-340.1(a)(3).
246
N.C. Gen. Stat. Ann. 160A-340.1(a)(1).
247
N.C. Gen. Stat. Ann. 160A-340.1(a)(6).
248
N.C. Gen. Stat. Ann. 160A-340.1(a)(7).
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86.
Section 340.1(a)(5) requires that the city-owned CSP must also provide
nondiscriminatory access to private communications service providers on a first-come, first-served basis
to rights-of-way, poles, or conduits, owned, leased, or operated by the city unless the facilities lack
sufficient access and none can reasonably be added. 249 The statute defines nondiscriminatory access to
mean that, at a minimum, access shall be granted on the same terms and conditions as that given to a
city-owned CSP.250
87.
H.B. 129 also amended the definition of public utility in North Carolina General
Statutes section 62-3 to include a city or joint agency that is [c]onveying or transmitting messages or
communications by telephone or telegraph, or any other means of transmission, where such service is
offered to the public for compensation.251
c.
Measures to Impose Delay
88.
A number of the provisions of H.B. 129 directly or indirectly impose delay on city-owned
CSPs seeking to provide or expand service. Section 340.3 sets forth a series of public notice and hearing
requirements that a city or joint agency that proposes to provide communications service must meet
for the purpose of gathering information and comment.252 The city must make available any feasibility
study, business plan, or public survey conducted or prepared [] in connection with the proposed
communications service project.253 Specifically, a city shall hold not fewer than two public hearings,
not less than 30 days apart.254 Notice shall be published at least once a week for four consecutive
weeks in the predominant newspaper of general circulation in the area in which the city is located. The
city must also provide notice to the North Carolina Utilities Commission. At least 45 days prior to the
hearing subject to the notice, the city must provide written notice by U.S. mail to all companies that have
requested service of such notices from the city clerk. Section 340.3 provides that private communications
service providers may participate fully in the public hearings by presenting testimony and documentation
relevant to their service offerings and the citys plans.255 The statute does not apply to the repair,
rebuilding, replacement, or improvement of an existing communications network, but does not
unambiguously exempt geographic expansions of existing systems.256 The notice and public hearing
obligations apparently apply to all municipal systems, even those that are exempted from other provisions
of the statute.257
89.
Section 340.4, discussed in more detail below, requires a city or joint agency to hold a
special election on the question of whether the city may provide communications service before
incurring debt relating to communications service facilities.258 Under North Carolina law, a special
election must be held at the same time as a regularly scheduled general election, meaning either
249
N.C. Gen. Stat. Ann. 160A-340.1(a)(5).
250
Id.
251
See 2.(a), H.B. 129, 2011 N.C. Sess. Laws at 84, codified at N.C. Gen. Stat. Ann. 62-3(23)(l).
252
N.C. Gen. Stat. Ann. 160A-340.3.
253
Id.
254
Id.
255
Id.
256
Id.
257
See, e.g., N.C. Gen. Stat. Ann. 160A-340.2 (setting out exemptions from certain provisions of H.B. 129, but not
notice and public hearing provisions).
258
N.C. Gen. Stat. Ann. 160A-340.4(a)-(b).
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November or May.259 We note that this could also be considered a level playing field restriction
because opponents of community broadband often discuss a citys ability to issue low-cost debt as an
unfair competitive advantage, and these restrictions serve to constrain a citys ability to obtain capital.
90.
Section 340.6 requires a city to first solicit proposals from private business before it
construct[s] a communications network to provide communications service.260 The subsections of
section 340.6 provide specific requirements regarding how the citys request for proposals should be
structured, the information it must contain and solicit, the methods and timing by which it must provide
notice of its request for proposals. Additionally, section 340.6 imposes specific requirements on how the
city may negotiate with private business that respond to its request for proposal, and the time period it
must allot to attempts to negotiate with respondents. If the city is unable to negotiate a contract with
either the most responsive or second-most responsive respondent within 60 days of the opening of the
proposals, the statute provides that it may proceed to provide communications service.261
91.
Section 3 of H.B. 129 added a new article to North Carolinas Fiscal Control Act. This
new section, titled Borrowing by Cities for Competitive Purposes, imposed additional requirements to
an application for financing by a city or a joint agency . . . for the construction, operation, expansion, or
repair of a communication system.262 This new article requires a city to first complete the notice and
public hearing process in section 340.3,263 and then submit an application for financing to the North
Carolina Utilities Commission.264 Under the new article, the state Commission must accept written and
oral comments from competitive private communications service providers in connection with any
hearing or other review of the application, and must make written findings on the reasonableness of the
city or joint agencys revenue projections in light of the current and projected competitive environment . .
. .265 The city or joint agency bears the burden of persuasion, even with respect to comments from a
private sector provider.266
92.
H.B. 129 also includes limited exemptions for certain services or pre-existing systems.
Section 340.2(a) exempts the purchase, lease, construction, or operation of facilities by a city to provide
communications service within the citys corporate limits for the citys internal governmental purposes
from many of the statutes restrictions.267 Section 340.2(b) exempts the provision of communications
service in an unserved area from those restrictions, subject to a determination from the North Carolina
Utilities Commission that the area is unserved, as described in the statute.268 In section 340.2(c), preexisting systems as of January 1, 2011 are exempted from many of the statutes restrictions, provided they
limit the provision of service to specified customers or geographic areas described in the statute.269 In the
259
N.C. Gen. Stat. Ann. 163-287(a) (The special election may be held only . . . [a]t the same time as any other
State, county general election . . . [or a]t the same time as the primary election in any even-numbered year [or a]t
the same time as any other election requiring all the precincts in the county to be open . . . [or a]t the same time as a
municipal general election, if the special election is within the jurisdiction of the municipality only.); see also N.C.
Gen. Stat. Ann. 163-1(b), (c) (primaries held on the first Monday in May and general elections held in November).
260
N.C. Gen. Stat. Ann. 160A-340.6(a).
261
N.C. Gen. Stat. Ann. 160A-340.6(f).
262
See 3, H.B. 129, 2011 N.C. Sess. Laws at 84, codified at N.C. Gen. Stat. Ann. 159-175.10.
263
N.C. Gen. Stat. Ann. 159-175.10(1).
264
N.C. Gen. Stat. Ann. 175.10(2).
265
N.C. Gen. Stat. Ann. 175.10(3), (4).
266
N.C. Gen. Stat. Ann. 175.10(5).
267
268
N.C. Gen. Stat. Ann. 340.2(b); see also infra paras. 102-104.
269
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event a city covered by subsection (c) provides service to a customer outside the limits set forth in that
subsection, the city will lose the exemption if it does not cease providing service within 30 days of
notice or discovery.270 Section 340.2(d) provides that none of the exemptions serve to exempt a city or
joint agency from laws and rules of general applicability to governmental services . . . .271 None of the
provisions in section 340.2 exempt any service or system from the notice and public hearing requirements
of section 340.3.
2.
The North Carolina General Statute, H.B. 129, is a Barrier to Broadband

Investment and Competition
93.
Because the entirety of H.B. 129, as described by its title, serves the unified purpose of
Regulating Local Government Competition with Private Business, we analyze its operation holistically,
cognizant of the interrelation of its several parts. This is so even though any single regulatory provision
of the statute, if considered independently, might not appear to impose a significant barrier. Such a
myopic focus can be deceptive, however. The cumulative effect of a series of interrelating provisions can
become a barrier. The petition asks us to consider whether the cumulative effect of the provisions in the
North Carolina law does just that. We are not deciding whether a state law imposing a single one or even
a subset of these provisions would be a barrier. Imagine a statute that contained 100 provisions, each
imposing a regulatory requirement on a public-sector broadband provider with a compliance cost of
$1,000. Considered on its own, each provision might seem of minimal concern: although the $1,000 cost
constituted an increased expense, it is unlikely that, standing alone, it would be a barrier to infrastructure
investment. Considered as a whole, however, we see that the effect of the statute is to impose a cost of
$100,000 on one category of competitor only. In other words, a thicket may constitute a barrier.
94.
We conclude that H.B.129 considered holistically is a barrier to broadband infrastructure
investment and competition in North Carolina. The record shows that [n]umerous plans . . . were in the
works to develop and deploy municipal broadband networks in the period prior to the passage of HB.
129, but that all were discontinued because of H.B.129 and that no known community-owned residential
fiber networks [have been] built [in North Carolina] since the passage of H129.272 In 2014, Wilson states
that three North Carolina municipalities considered deploying services to residents outside Wilson
County but decided not to because of H.B.129.273 Wilson states that it has been unable to capitalize on
opportunities to make broadband investments and provide competitive 21st Century broadband Internet
connectivity outside of Wilson County, especially to low-income, rural areas that otherwise will likely
never have access to Gigabit services. 274
95.
To illustrate more specifically how H.B. 129 functions as a barrier to broadband
infrastructure investment and competition, we analyze categories of provisions that constitute barriers to
broadband infrastructure investment and serve as barriers that thwart competition.
270
N.C. Gen. Stat. Ann. 340.2(e).
271
N.C. Gen. Stat. Ann. 340.2(d).
272
SEATOA Comments at 3; see also City of Fayetteville Comments at 2 ([T]he law had the collateral effect of
suppressing the desire of numerous communities to even creatively engage in public-private partnerships for fear of
exposing themselves to a legal challenge by any incumbent hungry to suppress potential local broadband options,
and finding ample provisions under which to do so using the numerous ambiguities in their law.).
273
Wilson Petition at 24. Wilson is permitted to provide service within Wilson County. See N.C. Gen. Stat. Ann.
160A-340.2(c).
274
Wilson Petition at 24; see also North Carolina League of Municipalities Comments, WC Docket Nos. 14-115 and
14-116, at 3-4 (filed Aug. 29, 2014) (North Carolina League of Municipalities Comments); SEATOA Comments at
3 (stating that at least five communities stopped their plans to bring fiber to their local residents and businesses as a
result of H129 and [t]here were five community-owned cable-broadband systems in 2011, and there are the same
number today); Petitioners Dec. 15, 2014 Ex Parte at 2 (In fact, since [H.B.129] became law in 2011, not a single
North Carolina community has been able to enter the field.).
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96.
We begin by examining representative examples of provisions that have the effect of
raising economic costs for municipal providers, through limitations on a providers ability to achieve
efficiencies and economies of scale, cost imputation requirements, or pricing restrictions.
97.
H.B.129s Territorial Restriction Prohibiting Expansion. Subject to three exemptions
discussed below, section 160A-340.l (3) limits municipalities to the the provision[ing] of
communications service within the corporate limits of the city providing the communications service.275
On its face, there is no doubt that the territorial restriction contained in section 160A-340.l(3) is a barrier
to deployment and competition.276
98.
In addition, H.B.129 is a barrier to broadband deployment because Wilson otherwise has
authority to provide communications services within reasonable limitations.277 Specifically, North
Carolina law allows municipalities to own and operate a public enterprise outside its corporate limits,
within reasonable limitations . . . .278 The term public enterprise is defined as including, among other
things, [c]able television systems.279 A North Carolina court has construed cable television system to
include a fiber optic network.280 Thus, in the absence of H.B.129s territorial restriction, Wilson and other
North Carolina municipalities would therefore be able to invest in broadband networks outside a citys
corporate limits within reasonable limitations. The effect of the territorial restriction is to artificially
limit Wilsons and other North Carolina municipalities abilities to achieve the economic efficiencies that
would come with deploying across a broader service territory. Indeed, the North Carolina Department of
State Treasurer Local Government Commission recognized this in the legislative history of H.B. 129
when it noted that the boundaries set forth in the PCS weaken the financial viability of [the Greenlight
and Fibrant] broadband systems.281
99.
H.B.129 provides for three limited exemptions to its territorial restriction the
grandfathering interlocal, and unserved exemptions. As discussed in detail below, we find that
these exemptions do not provide a meaningful way for municipalities to expand broadband deployment
beyond their current geographical reach.
100.
First, we conclude that the grandfathering exemption in section 160A-340.2(c) does not
provide a meaningful way for Wilson to expand its current reach. The grandfathering provision
exempts a qualifying municipality from most of H.B.129s requirements and allows the municipality to
provide service beyond its corporate limits if it has already been providing service as of January 1, 2011,
275
N.C. Gen. Stat. Ann. 160A-340.l (3).
276
We also conclude that municipal broadband increases overall broadband deployment. See supra paras. 42-74. .
277
N.C. Gen. Stat. Ann. 160A-312(a). In the context of municipal electric providers, the North Carolina Supreme
Court has developed a list of factors to consider in determining the reasonableness of a city's proposed extension of
electric service. These factors include: the level of current service in the territory in question, the readiness,
willingness, and ability of each competitor to provide electric service, the location of the territory in relation to the
city limits, and the existence of any annexation plans by the City. Duke Power Co. v. City of High Point, N.C., 317
S.E.2d 701, 707 (N.C. Ct. App. 1984) (citing State ex rel. Utilities Comm. v. Virginia Elec. and Power Co., 311
S.E.2d 586 (N.C. 1984); Lumbee River Electric Corp. v. City of Fayetteville, 309 S.E.2d 209 (N.C. 1983); Electric
Service v. City of Rocky Mount, 203 S.E.2d 838 (N.C. 1974)).
278
N.C. Gen. Stat. Ann. 160A-312(a).
279
N.C. Gen. Stat. Ann. 160A-311(7).
280
City of Laurinburg, 606 S.E.2d at 726-28.
281
Legislative Fiscal Note at 4.
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shortly before H.B.129 became law.282 Wilson was not providing service outside Wilson County as of
January 1, 2011. Wilson, however, is allowed to provide service outside its corporate limits to the
boundary of Wilson County because H.B.129 specifies that the service area is the county limits of
Wilson County, including the incorporated areas within the County.283 Wilson is therefore prohibited
from expanding beyond its current service area, Wilson County, unless it qualifies for another exemption.
101.
Second, we find that the interlocal exemption found in section 160A-340.2(a) does not
provide meaningful relief. This provision allows municipalities to provide service within the corporate
limits of another unit of local government that is a party with the city to an interlocal agreement . . . .284
However, any agreement between the municipalities must be limited to the purpose of providing internal
government services.285 Since this exemption does not allow a municipality to expand broadband
deployment to residences and businesses, it does not provide a meaningful way for municipalities to
expand broadband deployment to the public.
102.
Finally, we conclude that the exemption for unserved areas in section 160A-340.2(b)
does not provide a meaningful way for municipalities to overcome the territorial restriction contained in
H.B.129. This is due to both the inadequacy of the speed thresholds to determine when an area is
unserved under H.B.129, and the real-world effects of the statute on the economic feasibility of
providing service to so-called unserved areas.286 H.B.129 adopts speed thresholds that are much slower
than the benchmarks adopted by the Commission in the 2015 Broadband Progress Report. In particular,
section 160A-340.2(b) provides that a city seeking to provide communications service in an unserved
area shall petition the North Carolina Utilities Commission for a determination that an area is unserved.
That provision defines unserved area as a census block . . . in which at least fifty percent (50%) of
households either have no access to high-speed Internet service or have access to high-speed Internet
service only from a satellite provider.287 High-speed Internet service is defined in Section 160A340(4) as Internet access service with transmission speeds that are equal to or greater than the
requirements for basic broadband tier 1 service as defined by the Federal Communications Commission
for broadband data gathering and reporting.288 This definition incorporates an old 2008 Commission
definition of basic broadband tier 1 service, which the Commission used in a limited context for
reporting purposes to mean services [with speeds] equal to or greater than 768 kbps but less than 1.5
mbps in the faster direction.289
282
N.C. Gen. Stat. Ann. 160A-340.2(c). Municipalities under this exemption are limited to providing
communications service to any one or more of the persons within the corporate limits of the city [as those limits
existed as of April 1, 2011] providing the communications service, and [e]xisting customers of the
communications service as of April 1, 2011. N.C. Gen. Stat. Ann. 160A-340.2(c)(1)-(2).
283
N.C. Gen. Stat. Ann. 160A-340.2(c)(3)(c).
284
285
Id.
286
See, e.g., SEATOA Comments at 3.
287
N.C. Gen. Stat. Ann. 160A-340.2(b).
288
N.C. Gen. Stat. Ann. 160A-340(4).
289
See Development of Nationwide Broadband Data to Evaluate Reasonable and Timely Deployment of Advanced
Services to All Americans, Improvement of Wireless Broadband Subscribership Data, and Development of Data on
Interconnected Voice over Internet Protocol (VoIP) Subscribership, WC Docket No. 07-38, Report and Order and
Further Notice of Proposed Rulemaking, 23 FCC Rcd 9691, 9715, para. 20 n.66 (2008) (2008 Broadband Data
Item). We also noted that [s]ubsequent tiers will be labeled broadband tier 2 through broadband tier 7. These
terms are evolving definitions that could change over time based on advances in technology. Id. At the time, the
Commission collected data about broadband subscriptions using specific speed tiers. The Commission has since
amended its reporting requirements and abandoned the use of speed tiers for collecting subscription data. The
Commission also began collecting deployment data, also not using speed tiers. Modernizing the FCC Form 477
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103.
We therefore find that the exemption for unserved areas contained in 160A-340.2(b), is
not consistent with our analysis of marketplace realitiesboth with respect to when H.B.129 was enacted,
and especially with respect to our recent findings in the 2015 Broadband Progress Report reflecting
evolving technology and consumer expectations.290 Under H.B.129, an area qualifies as unserved if at
least 50 percent of the households do not have access to service at download speeds of at least 768 kbps
while, in sharp contrast, under the Commissions current benchmark companies receiving Connect
America funding for fixed broadband must serve consumers with speeds of at least 10 Mbps for
downloads and 1 Mbps for uploads; 291 and areas are unserved by advanced telecommunications
capability if they do not have access to service with speeds of at least 25 Mbps / 3 Mbps.292 As a result of
the significantly lower speed thresholds adopted in H.B.129 compared to any of the above standards, very
few areas in North Carolina will qualify as unserved despite the fact that many areas do not meet the
standards articulated above.293 Given that Congress has directed us to carefully evaluate broadband
deployment in our role as the regulator of interstate communications by wire, we find that our speed
thresholds are the appropriate metric by which to evaluate whether an area is unserved, not the standard
contained in H.B.129.
104.
Additionally, the real-world application of H.B.129 could make providing service to
unserved areas economically infeasible.294 In order to qualify for the unserved exemption under H.B.
129, a municipality must show, by census block, that the statutory criteria are met. This is an example
of a burden that exceeds the burden on private-sector providers. Based on our evaluation of record
evidence, the granularity and nature of the data required by the statute presents challenges in establishing
an areas eligibility for the exemption. As Wilson states, [accumulating this data] would be a very
difficult burden to meet, if not an impossible one, as the kind of information that Section 160A-340.2(b)
requires is not readily available from any source. Wilson would essentially have to do its own householdby-household polling, which would be prohibitively time-consuming and expensive.295 In addition,
practical implementation problems could arise if the eligible census blocks are not contiguous, or as
Wilson puts it, if there [is] a Swiss cheese pattern of served and underserved areas.296 If unserved
areas are not contiguous, a municipal provider seeking to expand service to additional areas could be
forced to deploy facilities in an inefficient manner raising its costs.297 This requirement could deter
municipalities from seeking to provide communications services in unserved areas.
Data Program, WC Docket No. 11-10, Report and Order, 28 FCC Rcd 9887, 9888, 9897, paras. 2-3, 20 (2013).
Thus, while the Commission has not altered the meaning of the term basic broadband tier 1, the term is no longer
used by the Commission.
290
2015 Broadband Progress Report at paras. 3-6.
291
See Connect America Fund et al., WC Docket No. 10-90 et al., Report and Order, 29 FCC Rcd 15644, 15645-46,
para. 4 (2014).
292
293
See FTTH Comments at 11 (Since the law extends broadly to bar deployment in areas that the Commission
would consider unserved and where advanced telecommunications deployment is unreasonable and untimely, the
law imposes a de facto barrier in violation of Section 706 . . . .).
294
See Wilson Petition at 42. Municipalities are required to obtain permission from the North Carolina Utility
Commission to serve unserved areas under the process set forth in Section 160A-340.2(b).
295
296
Id. at 42.
297
See North Carolina League of Municipalities Comments at 4 (In North Carolina, there are large areas that do not
provide sufficient return on investment necessary to encourage deployment of private broadband infrastructure.
Residents and businesses of those communities need access to internet just the same as the rest of the state's
residents.). In the context of the Connect America Fund, we allowed bidders to combine high-cost and extremely
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105.
As we have shown above, none of the exemptions to the territorial restriction provide a
meaningful way for Wilson to expand broadband deployment to its neighboring communities. As Wilson
puts it, there is no way that Wilson can responsibly invest in broadband infrastructure and provide
competitive service outside Wilson County as long as [H.B.129] remains in effect.298 The territorial
restriction has the effect of raising Wilsons economic costs by preventing it from achieving efficiencies
from deploying over a broader territory while not similarly restricting other types of providers. We
therefore conclude that the territorial restriction contained in H.B.129 is a barrier to municipal broadband
infrastructure investment and competition.
106.
Payments in Lieu of Taxes. Sections 340.1(a)(9) and 340.5 require municipalities to make
payments in lieu of taxes in amounts equivalent to what a private-sector provider would have paid in
taxes and fees.299 On their face these provisions raise the economic costs of service.
107.
Imputation of Costs of Private Communications Providers. Section 160A-340.1(8)
prohibits municipalities from pricing below cost, and that theoretical cost requires the imputation of
phantom private sector costs that the municipal provider does not actually carry. We find that this
provision is a barrier to broadband investment and competition. Specifically, municipalities are required
to impute to the costs of a municipal broadband network:
(i) the cost of the capital component that is equivalent to the cost of capital available to
private communications service providers in the same locality and (ii) an amount equal to
all taxes, including property taxes, licenses, fees, and other assessments that would apply
to a private communications service provider, including federal, State, and local taxes;
rights-of-way, franchise, consent, or administrative fees; and pole attachment fees.300
When determining the cost of its service, a municipality therefore is required to include not only the
actual cost of its own service, but also the cost of an actual or hypothetical private-sector competitors
service. Private sector providers face no such obligation. Because the statute states that municipalities
[s]hall not price any communications service below the cost of providing the service, including this
high-cost areas together because extremely high-cost areas are actually interspersed among high-cost areas. See
Connect America Fund et al., WC Docket No 10-90 et al., Report and Order, Declaratory Ruling, Order,
Memorandum Opinion and Order, Seventh Order on Reconsideration, and Further Notice of Proposed Rulemaking,
29 FCC Rcd 7051, 7060, para. 30 (2014). We held that including both high-cost and extremely high-cost areas in
the competitive bidding process will enable parties to build integrated networks that span both types of areas in
adjacent census blocks as appropriate. [Footnote omitted.] In other words, this approach allows potential providers
to decide how best to upgrade or extend networks to serve these areas rather than having the Commission artificially
pre-determining which areas should be served through one mechanism and which should be served through a
separate mechanism. Id.
298
299
N.C. Gen. Stat. Ann. 160A-340.1(a)(9) (The city shall annually remit to the general fund of the city an amount
equivalent to all taxes or fees a private communications service provider would be required to pay the city or county
in which the city is located, including any applicable tax refunds received by the city-owned communications
service provider because of its government status and a sum equal to the amount of property tax that would have
been due if the city-owned communications service provider were a private communications service provider.);
N.C. Gen. Stat. Ann. 160A-340.5(a) ([E]ach city possessing an ownership share of a communications network
and a joint agency owning a communications network shall, in lieu of property taxes, pay to any county authorized
to levy property taxes the amount which would be assessed as taxes on real and personal property if the
communications network were otherwise subject to valuation and assessment.); N.C. Gen. Stat. Ann. 160A340.5(b) (A city-owned communications service provider shall pay to the State, on an annual basis, an amount in
lieu of taxes that would otherwise be due the State if the communications service was provided by a private
communications service provider, including State income, franchise, vehicle, motor fuel, and other similar taxes.).
300
N.C. Gen. Stat. Ann. 160A-340.1(a)(8).
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imputed cost, 301 this provision hampers a municipalitys ability to compete against its private
counterparts.302 Whereas private sector firms are free to offer introductory or other discounts to compete
for customers, municipal providers cannot do so because of this imputation requirement.303 The bar on
below-cost pricing potentially raises the municipalitys rates, sharply restricts the municipalitys ability
to offer discounts, and limits the competitive pressure on the incumbents to lower their rates.
b.
108.
H.B. 129 also includes multiple provisions apparently aimed to level the playing field
between public-sector and private-sector providers.304 Some of these provisions also raise the providers
economic costs. As described below, the effect of these provisions is to impose an asymmetric burden on
one category of providers but not others.
109.
Municipalities Must Comply with Private Regulations as well as Additional Requirements
that do Not Apply to Private Providers. In practice the provisions of H.B. 129 actually serve to impose an
asymmetrical burden on city providers. H.B. 129 purports to equalize legal treatment of municipal and
private broadband providers. In fact, it puts municipalities in the uniquely challenging position of being
subject simultaneously to all the requirements applicable to private entities for communications services,
but does not impose a corresponding obligation on private sector providers to abide by requirements
applicable to public sector entities. 160A-340.l(a)(l) requires municipalities to comply with all local,
State, and federal laws, regulations, or other requirements that would apply to a private-sector
provider,305 but does not relieve the municipal provider of any requirements that apply to all municipal
operations, such as open records requirements, civil service rules, Buy American provisions, and much
more.306 Section 340.1(a)(1) also fails to identify which among the various types digital services line
provider, cable Internet service provider, wireless Internet service provider of private-sector provider a
city-owned CSP should compare itself to, thereby apparently requiring a city-owned CSP to comply with
the obligations applicable to any private-sector provider. The result is a double burden for municipal
providers.
110.
Likewise, section 340.1(a)(5) regulates access to rights-of-way, poles, and conduits.
Instead of addressing a municipalitys authority to provide service, this provision imposes specific pricing
for infrastructure access, the effects of which fall asymmetrically on city-owned providers.307 This
provision is much broader in scope than section 224 of the Communications Act, which is limited to poles
301
Id.
302
Municipalities in North Carolina generally are permitted to set rates charged by public enterprises. See N.C. Gen.
Stat. Ann. 160A-314; Smith Chapel Baptist Church v. City of Durham, 517 S.E.2d 874, 881 (N.C. 1999) (quoting
Town of Spring Hope v. Bissette, 280 S.E.2d 490, 492 (N.C. Ct. App. 1981) (stating that the grant of authority to set
public enterprise rates under the authorizing statute is broad and unfettered)).
303
This imputation requirement differs from other imputation requirements found in the Communications Act, such
as that in section 272(e)(3), 47 U.S.C. 272(e)(3). Such provisions generally require that a service provider with
substantial market power impute to itself the rate that it charges for a service that it provides to itself and to
competing third parties in order to reduce the potential for a price squeeze. Here, a new market entrant without
market power is being required to impute competitors costs to itself.
304
See, e.g., TechFreedom & ICLE Reply at 8-9; Institute for Policy Innovation Comments at 5-6; N.C. Speaker
Thom Tillis Comments at 14 (referring to H.B. 129 as The Level Playing Field Law); AT&T Comments at 4-5.
305
N.C. Gen. Stat. Ann. 160A-340.1(a)(1).
306
Wilson Petition at 32; see also Wilson Petition, Attach. A, Section-by-Section Analysis of Section 160A-340
(Wilson Section-by-Section Analysis) (stating that there are many areas in which public entities have obligations
that are comparable to those that private entities must meet, so that imposing all private-sector obligations on public
entities would result in double burdens on the public entities).
307
N.C. Gen. Stat. 160A-340.1(a)(5).
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owned or controlled by a utility, and requires that rates be just and reasonable, while allowing for
cost recovery. Indeed, section 340.1(a)(5) appears to mandate that a city-owned CSP make available to
private-sector providers infrastructure or facilities that the city is leasing from a third party; and its
nondiscriminatory access provision would require a city to make available city-owned facilities to
private-sector providers at no charge if the city, which owns the facilities, would not itself pay for using
them.308
111.
Section 2.(a) amends the definition of public utility to include city-owned
communication service providers. Its effect is to place communications services provided by a city or
joint agency under the North Carolina Utilities Commissions (NCUCs) regulation, oversight, and rate
regulation. Read in conjunction with the definitions in section 340, this provision would also encompass
public-private partnerships between a city and a private-sector provider. H.B. 129 provided, however,
that this amendment shall not be construed to change the regulatory nature of or requirements applicable
to any particular service currently regulated by the Commission under applicable law.309 North Carolina
law previously exempted broadband services from NCUC regulation, and private-sector providers
apparently continue to enjoy that exemption under H.B. 129, providing another asymmetry between the
regulatory treatment of public-sector and private-sector providers under the law.
112.
Likewise subsection (a)(7), which purports to prohibit municipalities from subsidiz[ing]
the provision of communications service with funds from any other non-communications service,
operation, or other revenue source, including any funds or revenue generated from electric, gas, water,
sewer, or garbage services, could prevent city-owned CSPs from efficiently sharing costs across a range
of municipal services (for example, the costs of conduit or poles shared between broadband and electricity
provision).310 For example, a pole or conduit used to carry one of an electrical, telephone, broadband, or
cable service can generally also be used to carry any or all of the other four listed services. Thus, all the
services that use the pole would share the underlying cost of the pole. A supplier of multiple services that
share certain costs would have an entry or entries for those shared costs in its accounts, allocating those
costs to certain activities, typically, to (at least some) of the services sharing the costs. Without a formal
definition of what constitutes a subsidy, any allocation could be found to be problematic, that is, could be
found to involve a subsidy. For example, if a pole carried a fiber cable for broadband and an insulated
copper cable for electricity, to avoid a subsidy, should the cost of the pole be split 50:50, or be split
according to the margins earned on each service, or be fully allocated to the first (e.g., electricity) service
to be hung on the pole, perhaps because the pole was built and paid for before the second service (e.g.,
broadband) was ever even thought of, or according to the ratio of the respective weight of the cabling, or
should some other rule be used?311 The statute imposes no parallel limitation on private-sector providers,
308
Even the exemptions from requirements create asymmetrical burdens. For example, under H.B.129, an area
qualifies for the unserved exemption if at least 50 percent of the households do not have access to service at
download speeds of at least 768 kbps. See supra para. 102. The effect of this exemption is to restrict city-owned
providers, but not private-sector providers, from providing service to unserved areas.
309
See 2.(b), H.B. 129, 2011 N.C. Sess. Laws at 84.
310
N.C. Gen. Stat. Ann. 160A-340.1(a)(7).
311
To illustrate with a simple example, consider broadband and electrical cabling that share $100 in certain costs.
Assume the incremental cost of broadband (such as the broadband fiber and equipment) is $10, the incremental cost
of the electric cabling is $30, and the municipality earns in broadband revenues $40, and in electricity revenues
$100. In this example, the municipality earns zero economic profit, and each service makes a contribution toward
shared costs (so in the language of economists neither service cross-subsidizes the other. See, e.g., Gerald R.
Faulhaber, Cross-Subsidization: Pricing in Public Enterprises 65(5) Am. Econ. Rev., 966, 966-977 (1975),
http://www.jstor.org/stable/1806633?seq=1#page_scan_tab_contents; Gerald R. Faulhaber, Cross-Subsidy Analysis
More Than Two Services, 1(3) J. Competition L. & Econ. 441, 441-448 (2005). However, without a definition of
subsidy, arguments could be presented for a cost allocation scheme that would imply electricity was subsidizing
broadband. For example, it could be argued that broadband should contribute 50% of the shared cost and so was
being subsidized by electricity to the tune of $20. Given that there are a very wide number of possible cost
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which often have multiple lines of business. As with other provisions, if anything, the restriction makes
the citys service more risky by limiting the citys ability to compete for customers.
113.
Taken together, these purported level playing field provisions single out
communications services for asymmetric regulatory burdens that function as barriers to and have the
effect of increasing the expense of and causing delay in broadband deployment and infrastructure
investment.
c.
114.
The provisions of H.B. 129 also include measures to impose delay on providers. These
include multiple requirements for a municipality to provide notice and public hearings before it may
begin to build or operate its network.
115.
Many of the numerous delay-creating obligations in H.B. 129 have no private sector
analogue. For example, H.B.129s Notice and Public Hearings provision, contained in Section 160A340.3, requires municipalities to participate in a 75-day public hearing process when proposing to provide
communications services.312 Section 340.3 offers an example of a provision that, were it standing alone,
might not constitute a barrier. However, the interrelationship between it and other provisions of H.B.
129, including the requirements for a special election and prior approval of a municipalitys financing
application, illustrate how a thicket may become a barrier.313 More specifically, this provision requires
municipalities considering providing communications services to hold at least two public hearings and to
disclose in advance [a]ny feasibility study, business plan, or public survey conducted or prepared by the
city in connection with the proposed communications service project.314 Wilson asserts this raises issues
of improper competitive advantage because disclosure of business records allows competitors to target
Wilsons plans. Our rules and decisions recognize that early disclosure of confidential business plans can
cause competitive harm.315 We agree that in this case subjecting municipalities to these requirements may
give private communications providers a competitive advantage such as access to sensitive business
information that could be used to undercut municipal broadband networks.
116.
A municipality intending to finance a communications system must, under section 340.4,
first hold a special election on the question of whether the city may provide communications service.
North Carolina law requires municipalities to apply for approval to the Local Government Committee
when seeking to finance certain activities. Section 3 adds an additional set of requirements for review of
allocation rules, the lack of a clear standard in the statute presents a problem here. See, e.g., Ronald R. Braeutigam,
An Analysis of Fully Distributed Cost Pricing in Regulated Industries, 11(1) Bell J. Econ. 182, 182-196 (1980),
http://www.jstor.org/stable/3003407?seq=1#page_scan_tab_contents.
312
313
Additionally, North Carolina law does not appear to impose such requirements on other municipally provided
services, such as electric or water service, the effect being to single out communications services for particular
regulation. See, e.g., N.C. Gen. Stat. Ann. 160A-311-13 (authorizing municipalities to finance and provide
public enterprises, including electric, water, and wastewater treatment services, without imposing public hearing
requirements).
314
315
See, e.g., 5 U.S.C. 552(b)(4) (exempting from Freedom of Information Act disclosure trade secrets and
commercial or financial information obtained from a person and privileged or confidential); 47 C.F.R.
0.457(d)(2) (stating that if an adequate showing is made, privileged or confidential commercial, financial or
technical data will not be made routinely available for inspection); Policy and Rules Concerning the Interstate,
Interexchange Marketplace, CC Docket No. 96-61, Second Report and Order, 11 FCC Rcd 20730, 20750, para. 37
(1996) (concluding that in the interstate, domestic, interexchange market, requiring nondominant interexchange
carriers to file tariffs . . . may harm consumers by impeding the development of vigorous competition, which could
lead to higher rates and will deter price coordination).
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city applications to finance communications service, including notice, public hearings, and an opportunity
for written and oral comments from competitive private sector communications service providers, but
requires that a municipal applicant first complete the public hearing requirements of section 340.3.
Section 340.6 requires municipalities to solicit proposals from private-sector providers interested in
pursuing a public-private partnership before a municipality may begin constructing a network.316
117.
Supporters of H.B. 129 defend these provisions as a general matter on the ground that
they provide State oversight of city decisions regarding financing for communications services, and
protect taxpayers.317 We find these general statements unpersuasive. In contrast to such assertions,
legislative history indicates that the North Carolina General Assembly intended to require municipal
broadband companies to [e]liminate the practice of using certificates of participation to finance the
construction of a system.318 This has the effect of restricting municipalities financing options, limiting
the ability of municipalities to determine the best risk allocation, and potentially exposing citizens to a
higher level of risk.319 Existing provisions in the North Carolina Fiscal Control Act provided for the
Local Government Commission to review a citys plans to use debt to finance services.320 Under the new
requirements,321 the LGC must receive and evaluate written and oral comments from private-sector
providers and consider and make written findings on the reasonableness of the city or joint agencys
revenue projections in light of the current and projected competitive environment for the services to be
provided, taking into consideration the potential impact of technological innovation and change on the
proposed service offerings and the level of demonstrated community support for the project.322 The
Fiscal Control Act, which otherwise applies to city financing, generally requires the Local Government
Commission to evaluate a citys proposal to issue notes in order to finance its activities, including the
reasonableness of the budget estimates of the taxes or other revenues in anticipation of which the tax or
revenue anticipation notes are to be issued. 323 H.B. 129 imposes requirements in addition to those in the
Fiscal Control Act, requiring the LGC to evaluate the reasonableness of the competitive environment,
potential impact of technological innovation and change on the proposed service offerings or the level
of demonstrated community support for the project. 324 Those requirements apply only to
communications services and only to those provided by a public-sector provider.
316
317
See, e.g., N.C. Sen. Tom Apodaca Comments, WC Docket Nos. 14-115 and 14-116, at 1-2 (filed Aug. 29, 2014)
(Sen. Tom Apodaca Comments); N.C. Rep. Marilyn Avila Comments at 2; CenturyLink Comments, WC Docket
Nos. 14-115 and 14-116, at 9-10 (filed Aug. 29, 2014) (CenturyLink Comments); Free State Foundation Comments
at 5-9; ITTA Comments at 8-9; N.C. Speaker Thom R. Tillis Comments at 2; ALEC Reply at 5; TechFreedom &
ICLE Reply at 17-18. Commenters offer little to no support for specific provisions on H.B. 129, providing broad
policy justifications for the statute as a whole instead.
318
Legislative Fiscal Note at 3.
319
For example, this may drive communities to choose financing through general obligation bonds which could put
taxpayers at risk, as they involve a pledge of the full faith and credit of the municipality. See Feb. 3 Wilson Letter at
1-2 (stating that N.C. Gen. Stat. Ann. 160A-340.4 restricts financing in this way); Petitioners Dec. 15, 2014 Ex
Parte at 9 (same); see also supra note 197 and accompanying text.
320
See N.C. Gen. Stat. Ann. 159-148(a).
321
Wilson expresses concern about additional risks of delay, noting that the LGC is a part-time body composed of
nine members and drawing on the staff of the Department of the State Treasurer. Wilson Section-by-Section
Analysis at 19; see also N.C. Gen. Stat. Ann. 159-3 (establishing the Local Government Commission).
322
N.C. Gen. Stat. Ann. 159-175.10(4).
323
N.C. Gen. Stat. Ann. 159-172(b).
324
N.C. Gen. Stat. Ann. 159-175.10(4).
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118.
In practice, these interrelated provisions lead to significant delay. Wilson calculated that
the time period required by all of these requirements could be approximately 27 months before a
municipality can even launch a municipal broadband project.325 Such a delay adds significantly to the
complexity of business planning as conditions in the financial market and the broadband landscape on
which municipalities base their projections will likely change in the interim period. Further, such delay
harms communities by substantially delaying the availability of additional broadband options. We
therefore find that these provisions constitute a barrier to timely deployment of broadband and
infrastructure investment.
119.
The Restrictions in H.B. 129 Are Also a Barrier to Broadband Investment and
Competition Because They Restrict the Provision of Video and Telecommunications Services. The
restrictions in H.B. 129 apply to communications services, which are defined to include [t]he provision
of cable, video programming, telecommunications, broadband, or high-speed Internet access service to
the public, or any sector of the public . . . .326 Prior to Greenlights launch, an article in Wilson Daily
observed that [t]he only way to pay for a fiber to the premises network for Wilson would be to sell
cable television, Internet and phone services - called the triple play in [fiber to the premises]
communities.327 The provisions in H.B. 129 restrict voice and video services, thereby limiting
competition in the local telecommunications market and harming deployment of advanced
telecommunications capability.328 As discussed above with reference to EPB and Tennessee, the
restrictions on the provision of bundled services undermines a providers ability to provide broadband
successfully due to the strong customer preference for bundled offerings.329 For the same reasons, we find
that application of these restrictions to Wilsons provision of video and telecommunications services such
as voice telephony functions as a barrier to Wilsons provision of broadband service
3.
Wilson Would Deploy Additional Facilities and Expand Competitive Entry

Absent H.B.129
120.
Wilson states that it stands ready, willing and eager to expand the scope of its broadband
capabilities into neighboring communities.330 As the SBI Data-based charts and map illustrate,
numerous communities within the five counties into which Wilson seeks authority to expand have few or
325
Petitioners Dec. 15, 2014 Ex Parte, Exh. A at 14 (Communications Network Project Timetable).
326
N.C. Gen. Stat. Ann. 160A-340(3) (definitions).
327
See Wilson Petition at 109, Exh. 5, Matthew Shaw, At the Speed of Light, Wilson Daily Times, Oct. 6, 2006; see
also Wilson Petition at 17 (stating that Wilson began to study the possibility of building a municipally-owned cable
system in response to citizen complaints about the high cost and low quality of voice and video services).
328
47 U.S.C. 1302.
329
See supra para. 79; see also, e.g., Applications filed by Qwest Communications International Inc. and
CenturyTel, Inc. d/b/a CenturyLink for Consent to Transfer Control, WC Docket No. 10-110, Memorandum
Opinion and Order, 26 FCC Rcd 4194, 4212, paras. 38-39 (2011) (stating that Applicants assert that the transaction
will . . . position post-merger CenturyLink to be a stronger competitor to cable companies for the provision of
multichannel video services and the triple play of voice, video, and Internet services and that we agree that an
increased ability to provide voice, data, and video packages is likely to make the merged company a stronger
company overall); Annual Assessment of the Status of Competition in the Market for the Delivery of Video
Programming, MB Docket No. 06-189, Thirteenth Annual Report, 24 FCC Rcd 542, 578, 661, paras. 70, 252 (2007)
(stating that Cox maintains that bundling multiple services has increased the number of new subscribers and
reduced the loss of existing subscribers and that APPA . . . stat[es] that many of todays new broadband networks
are being constructed based on a triple-play business model, i.e., the sale of voice, video, and data services as a
package).
330
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no options for advanced telecommunications capability and would benefit from expansion.331 In addition,
the record further demonstrates that demand exists for Wilson to provide communications services
outside of Wilson County.332 Wilsons 1 Gbps service has received extensive media attention and, within
its service area, its fiber network has achieved 33.7% total market penetration.333 Wilson has received
numerous requests for these services from residents, government agencies, businesses, and other
organizations in the other five counties where it provides electric service.334 The percentage of new
subscribers in new service areas within Wilson County also demonstrate the attractiveness of Wilsons
broadband service and the demand for it to expand outside of Wilson County.335 For example, Wilson
states it has expanded into eight new areas within Wilson County in 2013 and 2014, achieving an average
market penetration of 49% in these territories.336 The record also demonstrates the demand for Wilsons
services in lower-income or rural areas outside of Wilson County. Figure A, in the Wilson Petition,
shows many areas outside of Wilson County that include numerous census blocks in lower-income, rural
areas that lack advanced communications capabilities.337
121.
As we discussed more fully in Sections I and II, municipally owned broadband networks
can generate numerous community benefits such as economic growth, and improvements in education,
health care, and public safety.338 As one commenter notes, [m]any of the firms that have moved to
Wilson since Greenlight was launched would not have moved there without the network. In short, the
problem is classic chicken and egg; without a supply of broadband, it is hard to create demand.339 In
the absence of H.B.129, we believe areas outside of Wilson County will seek expansion of Wilsons
Greenlight network so that they can obtain the community benefits that high-speed broadband has brought
to Wilson County.
122.
Wilson appears qualified both technologically and financially to provide such service
outside of Wilson County. Wilson is cash-flow positive.340 The Citys credit rating was upgraded by
both Moodys and Standard and Poor's in late 2008, shortly after the Greenlight service launched.
Moodys recently reaffirmed its credit rating for the City of Wilson in 2014, noting in particular the
strength of its Greenlight service.341 Moreover, Wilson has already proven it can successfully deploy
and manage a broadband network providing 1 Gigabit service to its customers, within Wilson County.342
We believe these facts establish that, but for H.B.129, Wilson would deploy communications services
beyond Wilson County.
331
See supra para. 39; infra Attach. B (Wilson/North Carolina Map). Further, as noted above, the record contains
many comments filed by individual commenters who are dissatisfied with existing broadband service in North
Carolina. See supra note 124.
332
While we discuss demand to demonstrate that our preemption will produce practical consumer benefits, we do
not view a showing of demand for these services as necessary to our decision to preempt.
333
See Wilson Petition at 20.
334
Id. at 2; see also id. at 22.
335
Id. at 20-25.
336
See id.
337
See id. at 23, Fig. A; see also paras. 102-104.
338
See supra paras. 23-26, 34-36, and 45-46.
339
Institute for Local Self-Reliance Reply at 20 (reference to footnote omitted)
340
341
Id.
342
See id. at 20.
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Statutory Provisions That Do Not Constitute Barriers
123.
We do not determine that every provision of H.B. 129 represents a barrier to
infrastructure investment or broadband deployment such that we are compelled to preempt it. At the
outset, we identify those provisions that we read as not rising to the level of constituting a barrier to
broadband deployment or infrastructure investment that fall within our jurisdiction over communications
regulation. Specifically, we do not preempt sections 160A-340(1), (2), (3), (4), (5) and (6); 340.1(a)(2)
and (4); 340.1(b), 340.2; and H.B. 129 sections 1.(c), 2.(b), 4, 6, 7, and 8.
124.
Section 340 sets out the definitions applicable in H.B. 129. Sections 340(1), (2), (5), and
(6) define a city-owned communications service provider, communications network, interlocal agreement
between units of local government, and joint agency, respectively. Written broadly, they encompass both
wired and wireless networks and reach directly, indirectly, and jointly owned communications networks.
Section 340(3) defines communications service to encompass cable, video programming,
telecommunications, broadband, or high-speed Internet access service to the public, or any sector of the
public, for a fee, regardless of the technology used to deliver the service.343 Section 340(4) defines
High-speed Internet access service to be Internet access service with transmission speeds that are equal
to or greater than the requirements for basic broadband tier 1 service as defined by the Federal
Communications Commission for broadband data gathering and reporting.344 We note that this
definition is independent of the Commissions standard for broadband in its 2015 Broadband Progress
Report, and was only ever intended for gather[ing] more detailed and therefore useful information about
subscription to broadband services . . . .345 By way of clarification, the Commission defined basic
broadband Tier 1 service as service capable of providing between 768 kbps and 1.5 Mbps speed in at
least one direction, either download or upload.346 At the time North Carolina enacted the law, the
Commission defined advanced telecommunications capability to mean speeds of at least 4 Mbps
download and 1 Mbps upload.347 In January 2015, the Commission revised its benchmark for advanced
telecommunications capability to speeds of at least 25 Mbps download and 3 Mbps upload.348
125.
Section 160A-340.1(a)(2) requires municipalities to establish an enterprise fund to
separately account for revenues, expenses, property, and source of investment dollars associated with the
provision of communications service . . . .349 This provision also requires municipalities to prepare and
publish an independent annual report. We interpret this to be simply an accounting statute and not a
barrier to investment or restriction on competition.
126.
Section 340.1(a)(4) prohibits a city-owned communications service provider from
exercising the powers or authority of a city in any area, either directly or indirectly, to require any person
to use or subscribe to any communications service provided by the city-owned CSP.350
343
N.C. Gen. Stat. Ann. 160A-340(3).
344
N.C. Gen. Stat. Ann. 160A-340(4).
345
2008 Broadband Data Item, 23 FCC Rcd at 9700-01, para. 20.
346
2008 Broadband Data Item, 23 FCC Rcd at 9700-01, para. 20 (We will use the terms first generation data to
refer to those services with information transfer rates greater than 200 kbps but less than 768 kpbs in the faster
direction, and basic broadband tier 1 to refer to services equal to rgreater than 768 kbps but less than 1.5 mbps in
the faster directions.).
347
Sixth Broadband Progress Report, 25 FCC Rcd at 9558, para. 4.
348
349
N.C. Gen. Stat. Ann. 160A-340.1(a)(2).
350
N.C. Gen. Stat. Ann. 160A-340.1(a)(4).
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127.
Section 340.1(b) provides that a city-owned communications service provider may sell or
discontinue the citys communications network without voter approval.351
128.
Section 340.2 sets out exemptions from the substantive restrictions of the statute,
including the limited grandfathering for pre-existing systems, interlocal, and unserved exemptions
described above. It also provides that [t]he exemptions provided in [Section 340] do not exempt a city
or joint agency from laws and rules of general applicability to governmental services, including
nondiscriminatory obligations.352
129.
Section 1.(c) of H.B. 129 sets an effective date for a provision regarding eligibility for
certain tax refunds. Section 2.(b) provides that H.B. 129s amendment of North Carolinas definition of
public utility shall not be construed to change the regulatory nature of or requirements applicable to
any particular service currently regulated by the North Carolina Utilities Commission.353 Section 4 adds
cable television systems to the list of services that a city may finance through revenue bonds, Section 6
says that any city designated as a public utility under Chapter 62 (Public Utilities) of North Carolinas
General Statutes when H.B. 129 took effect is not subject to H.B. 129s provisions for operations
authorized by Chapter 62, and Section 8 provides the effective date for H.B. 129. We do not understand
these provisions to restrict competition or function as barriers to broadband deployment, especially in
light of our determinations with respect to the other provisions of H.B. 129.
IV.
COMMISSION AUTHORITY TO PREEMPT THESE LAWS
130.
In this section we consider whether the Commission has authority to preempt the laws at
issue in these petitions. We first examine whether section 706 gives us authority to preempt any state
laws that target providers that are political subdivisions of the state. Finding that section 706 gives us
authority to preempt certainthough not allsuch laws, we examine whether the laws at issue fall within
the scope of our authority to preempt. We conclude that they do.
A.
The Mandate of Section 706
131.
Encouraging broadband deployment is central to federal communications policy.
Congress, exercising its plenary power over interstate commerce, created the Commission so as to make
available . . . to all the people of the United States . . . a rapid, efficient, Nation-wide, and world-wide
wire and radio communication service with adequate facilities at reasonable charges.354 Section 2 of the
Communications Act grants the Commission jurisdiction over all interstate and foreign communication
by wire or radio,355 and broadband Internet access falls comfortably within the Commissions
jurisdiction under section 2, and has historically been supervised by the Commission.356
351
N.C. Gen. Stat. Ann. 160A-340.1(a). A city-owned communications service provider includes cities
providing communications service through a communications network directly, indirectly, or through an interlocal
agreement or a joint agency. N.C. Gen. Stat. Ann. 160A-340.1(b).
352
N.C. Gen. Stat. Ann. 160A-340.2(d). The exemptions specifically exclude from their scope the section 340.3
requirements for notice and public hearing. Id. 340.2.
353
We note that section 62-3(23)a.6 of the North Carolina General Statutes is construed to cover broadband, N.C.
Gen. Stat. Ann. 62-3(23)a.6, and that 62-2(b1) provides that broadband is sufficiently competitive and shall not
be regulated by the [state] Commission. N.C. Gen. Stat. Ann. 62-2(b1).
354
47 U.S.C. 151.
355
Id. 152(a).
356
Verizon v. FCC, 740 F.3d 623, 629-630 (D.C. Cir. 2014) (discussing the historical progression of our regulation
of Internet access) (citing Amendment of Section 64.702 of the Commissions Rules and Regulations, Docket No.
20828, Final Decision, 77 F.C.C.2d 384, 387, paras. 5-7 (1980) (Computer II)); see also Comcast, 600 F.3d at 64647; and 47 U.S.C. 230(b) (announcing the policy of the United States concerning the Internet, which is to
(continued)
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132.
Within the bounds of these jurisdictional grants, Congress has empowered the
Commission with broad authority to make the major policy decisions and select the mix of regulatory
and deregulatory tools the Commission deems most appropriate in the public interest to facilitate
broadband deployment and competition.357 As the central characteristic of the communications field is
the rapid pace of its unfolding, Congress has granted the Commission sufficiently broad authority to
address new issues that arise with respect to fluid and dynamic communications technologies. 358
133.
The 1996 Act repeatedly emphasizes the importance of robust competition to this aim.
The Acts preamble states that it was designed to promote competition . . . and encourage the rapid
deployment of new telecommunications technologies,359 and the Senate Report emphasized that it aimed
to foster the further development of the Nations telecommunications infrastructure through competition
and deregulation.360
134.
Through section 706 of the Act, Congress specifically mandated that the Commission
promote competition and infrastructure investment in broadband,361 instructing the Commission to
encourage the deployment on a reasonable and timely basis of advanced telecommunications capability
to all Americans.362 To do so, Congress empowered the Commission in section 706(a) to utilize in a
manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory
forbearance, measures that promote competition in the local telecommunications market, or other
regulating methods that remove barriers to infrastructure investment.363 Similarly, section 706(b)
requires that the Commission shall take immediate action to accelerate deployment of such capability by
removing barriers to infrastructure investment and by promoting competition in the telecommunications
market, if it finds after inquiry that advanced telecommunications capability is not being deployed to all
Americans in a reasonable and timely fashion.364
135.
Section 706 shows a unique level of Congressional concern with broadband deployment.
Both sections 706(a) and (b) direct that the Commission shall take action to promote broadband
deployment. Section 706(b), moreover, is unique in requiring the Commission to study broadband
deployment and requiring it to take action if the Commission finds that broadband is not being deployed

promote the continued development of the Internet and to preserve the vibrant and competitive free market that
presently exists for the Internet.).
357
Ad Hoc Telecomm. Users Comm. v. FCC, 572 F.3d 903, 908 (D.C. Cir. 2009).
358
National Broadcasting Co., Inc. v. United States, 319 U.S. 190, 219-220 (1943) (explaining the broad authority
of the Commission in the radio context to respond to changing technology). The Court added that [i]n the context
of the developing problems to which it was directed, the Act gave the Commission . . . expansive powers . . . [and] a
comprehensive mandate. Id.; see also FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 137, 138 (1940) (the
FCCs statutory responsibilities and authority amount to a unified and comprehensive regulatory system for the
communications industry that allows a single agency to maintain, through appropriate administrative control, a grip
on the dynamic aspects of that ever-changing industry).
359
Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56, 56 (Introductory Statement) (1996).
360
S. Rep. No. 104-23, at 1 (1996).
361
47 U.S.C. 1302. The statute defines advanced telecommunications capability as high-speed, switched,
broadband telecommunications capability that enables users to originate and receive high-quality voice, data,
graphics, and video telecommunications using any technology. 47 U.S.C. 1302(d)(1). For the purposes of this
Order, we use advanced telecommunications capability and broadband interchangeably. See also supra para. 21.
362
47 U.S.C. 1302(a).
363
Id.
364
47 U.S.C. 1302(b).
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to all Americans in a reasonable and timely fashion.365 Both sections, in targeting broadband deployment
to all Americans, also reflect Congresss concern with unserved and underserved areas.
136.
We have read section 706 as an affirmative grant of authority, as opposed to a mere
exhortation.366 As the D.C. Circuit has held, section 706 vests the Commission with affirmative
authority to enact measures encouraging the deployment of broadband infrastructure.367 Specifically, the
Verizon court acknowledged that section 706(a) grants the Commission authority to encourage the
deployment of . . . advanced telecommunications capability368 and that section 706(b) empowers the
Commission to take steps to accelerate broadband deployment if and when it determines that such
deployment is not reasonable and timely.369 This affirmation of the Commissions authority under
section 706 builds on previous holdings by the D.C. Circuit that the general and generous phrasing of
706 means that the FCC possesses significant, albeit not unfettered, authority and discretion to settle on
the best regulatory or deregulatory approach to broadband.370 The Tenth Circuit has similarly found that
section 706(b) operate[s] as an independent grant of authority to the Commission to take steps
necessary to fulfill Congresss broadband deployment objectives.371
137.
We have found, as discussed above,372 in our 2015 Broadband Progress Report, adopted
on January 29, 2015, that broadband has not been deployed in a reasonable and timely fashion to all
Americans.373 In light of this negative finding, section 706(b) commands that we take immediate action
to accelerate deployment of such capability by removing barriers to infrastructure investment and by
promoting competition in the telecommunications market.374 Preemption constitutes one such
immediate action available to us under this independent grant of authority to fulfill Congresss
broadband deployment objectives.
365
Id.
366
Preserving the Open Internet, Broadband Industry Practices, GN Docket No. 09-191, WC Docket No. 07-52,
Report and Order, 25 FCC Rcd 17905, 17970, para. 121 (2010) (affd Verizon, 740 F.3d at 637).
367
Verizon, 740 F.3d at 628.
368
Id. at 637.
369
Id. at 641; see also id. at 661, n.5 (Silberman, J., concurring in part) (stating that in directing the Commission to
act in section 706, Congress necessarily invested the Commission with the statutory authority to carry out those
acts).
370
Ad Hoc Telecomm. Users Comm. v. FCC, 572 F.3d 903, 90607 (D.C. Cir. 2009).
371
In re: FCC 11-161, 753 F.3d at 1053 (citing USF/ICC Transformation Order, 26 FCC Rcd at 17689, para. 70).
372
See supra Section I.B.1.
373
374
47 U.S.C. 1302(b). Contrary to a dissenting statement, see Dissenting Statement of Commissioner Ajit Pai at
107, Commission actions adopted pursuant to a negative section 706(b) determination would not simply be swept
away by a future positive section 706(b) finding. The Commission takes such measures precisely to achieve section
706(b)s goal of accelerating deployment. That they may succeed in achieving that goal so as to contribute to a
positive section 706(b) finding does not subsequently render them unnecessary or unauthorized without any further
Commission process. Throwing away such measures because they are working would be like throwing away your
umbrella in a rainstorm because you are not getting wet. Shelby v. Holder, 133 S. Ct. 2612, 2650 (2013)
(Ginsburg, J., dissenting). Even if that were not the case, independent section 706(a) authority would remain. We
mention, however, two legal requirements that appear relevant. First, section 408 of the Act mandates that all
FCC orders (other than orders for the payment of money) shall continue in force for the period of time specified in
the order or until the Commission or a court of competent jurisdiction issues a superseding order. 47 U.S.C. 408.
Second, the Commission has a continuing obligation to practice reasoned decisionmaking that includes revisiting
prior decisions to the extent warranted. Aeronautical Radio v. FCC, 928 F.2d 428, 445 (D.C. Cir. 1991). We are
aware of no reason why these requirements would not apply in this context.
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138.
We recognize that this authority is not unbounded.375 Our authority must be read in
conjunction with other provisions of the Communications Act, including, most importantly, those
limiting376 our subject matter jurisdiction to all interstate and foreign communication by wire or radio
and all interstate and foreign transmission of energy by radio.377 Further, any actions we take under
section 706(a) must also be designed to achieve a particular purpose: to encourage the deployment on a
reasonable and timely basis of advanced telecommunications capability to all Americans.378 Section
706(b) is likewise limited empower[ing the Commission] to take steps to accelerate broadband
deployment if and when it determines that such deployment is not reasonable and timely.379
139.
In sum, Congress has granted us broad jurisdiction over broadband in the United States,
and has specifically mandated that we promote broadband deployment, in section 706. We now turn to
whether section 706 provides authority to preempt state law.
B.
General Authority to Preempt under Section 706
140.
Under established law, a federal agency acting within the scope of its authority may
preempt state law.380 Moreover, Congress need not explicitly delegate to the agency the authority to
preempt. [I]n a situation where state law is claimed to be pre-empted by federal regulation, a narrow
focus on Congress intent to supersede state law [is] misdirected, for [a] pre-emptive regulations force
does not depend on express congressional authorization to displace state law.381 Instead, the question is
whether Congress has delegated the authority to act in a sphere, and whether the agency has exercised that
authority in a manner that preempts state law.382
141.
We find that where broadband has not been deployed in a reasonable and timely
fashion, section 706 authorizes the Commission to preempt state laws that stand as a barrier to
infrastructure investment and broadband deployment, or that inhibit competition in the
telecommunications market.383 Before addressing whether section 706 authorizes preemptions of laws
regulating municipalities as broadband providers, we first address whether it authorizes preemption under
any circumstances; for example, whether it would reach state laws that regulate broadband provision by
purely private entities. Take, as an illustration, a hypothetical state law that prohibited cable-based
375
See, e.g., Verizon, 740 F.3d at 639-40 (stating that the scope of authority granted to the Commission by section
706(a) is not so boundless as to compel the conclusion that Congress could never have intended the provision to set
forth anything other than a general statement of policy and affirming the limiting principles the Commission
identified in the Open Internet Order) (citations omitted).
376
377
47 U.S.C. 152(a); see also 47 U.S.C. 151 (purpose of Communications Act is to regulat[e] interstate and
foreign commerce in communication by wire and radio).
378
379
Id. at 641.
380
Louisiana Pub. Serv. Commn v. FCC, 476 U.S. 355, 369 (1986).
381
City of New York v. FCC, 486 U.S. 57, 64 (1988) (quoting Fidelity Fed. Savings & Loan Assn v De la Cuesta,
458 U.S. 141, 154 (1982)).
382
Id.; see also Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 699700 (1984).
383
Congress amended section 706 of the 1996 Act in 2008 finding that broadband has resulted in enhanced
economic development and public safety for communities across the Nation, improved health care and educational
opportunities, and a better quality of life for all Americans. 47 U.S.C. 1301(1); see also, e.g.,47 U.S.C. 1301(2)
(Continued progress in the deployment and adoption of broadband technology is vital to ensuring that our Nation
remains competitive and continues to create business and job growth.); 47 U.S.C. 1305(k)(2) (directing the
Commission to develop a National Broadband Plan that would seek to ensure that all people of the United States
have access to broadband capability).
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broadband providers from offering broadband capacity greater than that offered by wireless broadband
providers. We think that the answer in that instance would be clear. Such a law would prevent cablebased broadband providers from competing based on superior bandwidth, which in turn could cause such
providers to conclude that they could not make an economic case for increasing the capacity of their
network in certain communities. The law would therefore constitute a barrier to infrastructure investment
because one class of providers would be unable or unwilling to invest in further deployment. It also
would constitute a limit on competition because it would restrict the ability of providers to compete with
each other based on bandwidth. As explained below, we find section 706 allows the Commission to
preempt a state law such as this.
142.
In light of Congresss delegation of authority to the Commission to encourage and
accelerate the deployment of broadband to all Americans, we interpret Sections 706(a) and (b) to give
us authority to preempt state laws that stand as barriers to broadband infrastructure investment or as
barriers to competition.384 Again, under City of New York and Crisp,385 the relevant inquiry when an
agency acts to preempt state law is whether Congress delegated the authority to act in this sphere. In both
of those cases, the Supreme Court found that the Commissions authority over cable video
programming extends to all regulatory actions necessary to ensure the achievement of the Commission's
statutory responsibilities, including the preemption of otherwise valid state laws.386 Indeed in Crisp the
Court reached this conclusion before Congress had specifically authorized the regulation of cable, based
on the agencys general Title I authority over interstate communications by wire and radio.387
143.
In the case of section 706, Congress was far more specific in its mandate to the
Commission and used general and generous phrasing, delegating significant, albeit not unfettered,
authority and discretion to settle on the best regulatory or deregulatory approach to broadband.388 Section
706(a) explicitly mandates that the Commission shall use all available regulatory tools to encourage
the timely deployment of broadband to all Americans389 And section 706(b) uses at least equally urgent
language, requiring us to continually reappraise deployment, and mandating that we shall take
immediate action when necessary by removing barriers to infrastructure investment and by promoting
competition in the telecommunications market.390 Both the Senate Report and the D.C. Circuit have
described section 706 as a necessary fail-safe intended to ensure that one of the primary objectives of
the [Act]to accelerate deployment of advanced telecommunications capabilityis achieved.391 Taken
separately or together, sections 706(a) and (b) show a broad delegation of authority to use all available
regulatory tools to address what Congress recognized would be one of the most critical infrastructure
challenges in the 21st Century.
384
See, e.g., City of New York, 486 U.S. at 69 (preemption of state law regarding the quality of cable television
signals); Crisp, 467 U.S. at 708 (preemption of state advertising law); De La Cuesta, 458 U.S. at 162-63.
(preemption of state banking law).
385
City of New York, 486 U.S. at 64 ([T]he correct focus is on the federal agency that seeks to displace state law
and on the proper bounds of its lawful authority to undertake such action.); Crisp, 467 U.S. at 699-700 (The power
delegated to the FCC plainly comprises authority to regulate the signals carried by cable television stations . . . .
Therefore, if the FCC has resolved to pre-empt an area of cable television regulation and if this determination
represents a reasonable accommodation of conflicting policies that are within the agencys domain, we must
conclude that all conflicting state regulations have been precluded.) (citation omitted).
386
Crisp, 467 U.S. at 700 (quoting FCC v. Midwest Video Corp., 440 U.S. 689, 706 (1979)).
387
Id. (citing 47 U.S.C. 152(a)).
388
Ad Hoc Telecomm. Users Comm. v. FCC, 572 F.3d at 90607.
389
47 U.S.C. 1302(a).
390
47 U.S.C. 1302(b).
391
Verizon, 740 F.3d at 639 (quoting S.Rep. No. 104-23 at 50-51).
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144.
Our preemption authority falls within the measures to promote competition in the local
telecommunications market and other regulating methods of section 706(a) that Congress directed the
Commission to use to remove barriers to infrastructure investment. It likewise falls within the available
action[s] to accelerate deployment we may take in order to remove barriers to infrastructure
investment and to promote competition described in section 706(b). As Congress would have been
aware in passing the 1996 Act, the Commission has in the past used preemption as a regulatory tool
where state regulation conflicts with federal communications policy.392 Given this history against which
Congress legislated, the best reading of section 706 is therefore that Congress understood preemption to
be among the regulatory tools that the Commission might use to act under section 706.
145.
Some commenters have noted that Congress did not include the word preemption in the
language of the statute.393 Some commenters also have argued that because Congress referred to
preemption in previous drafts of the bill only with respect to State commissions, the Commission lacks
preemption authority under section 706.394 We disagree. The law is clear that Congress need not
explicitly delegate the authority to preempt.395 In fact, Congresss decision not to specifically identify
preemption is to be expected where, as here, the Commission had previously preempted state law even
where the relevant statutes contained no express discussion of preemption.396 Consistent with that
practice, Congress drafted section 706 in broad terms, directing the Commission to use measures that
promote competition and to do so in a manner consistent with the public interest, convenience, and
necessity.397 That Congress provided a small number of specific examples in section 706(a), such as
price cap regulation and regulatory forbearance, does not exclude other measures within the
Commissions authority. Indeed, the language of section 706(a) supports this understanding, directing the
Commission and State commissions to use measures that promote competition in the local
telecommunications market or other regulating methods that remove barriers to infrastructure
investment. Such methods would of course include those listed, but would also include additional
methods, including preemption, rulemaking, or other appropriate methods. In sum, we find that section
392
Computer & Commcns Indus. Assn v. FCC, 693 F.2d 198, 214 (D.C. Cir. 1982) (Courts have consistently held
that when state regulation of intrastate equipment or facilities would interfere with achievement of a federal
regulatory goal, the Commissions jurisdiction is paramount and conflicting state regulations must necessarily yield
to the federal regulatory scheme.); see also, e.g., Minnesota Pub. Utilities Commn. v. FCC, 483 F.3d 570, 580 (8th
Cir. 2007) (Competition and deregulation are valid federal interests the FCC may protect through preemption of
state regulation.); Pub. Util. Commn of Texas v. FCC, 886 F.2d 1325, 1334 (D.C. Cir. 1989); Natl Assn of
Regulatory Util. Commrs v. FCC, 737 F.2d 1095, 1114 (D.C. Cir. 1984).
393
See, e.g., Wireless Internet Service Providers Association (WISPA) Comments, WC Docket Nos. 14-115 and 14116, at 6 (filed Aug. 29, 2014) (WISPA Comments) ([W]hile all other aspects of the initial Senate provision were
adopted into the final statutory language of Section 706, the language on preemption was not.); NTCA Comments
at 18 (As the Joint Conference Report notes, Section 706 adopted the Senate bill with a modification. The
modification specifically deleted language that would have authorized the FCC to preempt State commissions.);
Letter from Jonathan Banks, Senior Vice President, USTelecom, and Mike Romano, Senior Vice President, NTCA,
to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 14-115 and 14-116, Attach. at 3 (filed Feb. 5, 2015)
(USTelecom-NTCA Ex Parte Letter) ([N]othing in section 706 expressly permits the FCC to preempt state laws
. . . .).
394
See id.; see also CenturyLink Comments at 16; National Conference of State Legislatures Comments at 23;
National Governors Association Comments at 3; State of North Carolina Comments, WC Docket No. 14-115, at 5
(filed Aug. 29, 2014) (State of North Carolina Comments).
395
Louisiana Pub. Serv. Commn, 476 U.S.at 369.
396
See, e.g., Crisp, 467 U.S.at 699; Natl Assn of Regulatory Util. Commrs v. FCC, 746 F.2d 1492, 1499 (D.C. Cir.
1984).
397
47 U.S.C. 1302(a).
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706 incorporates the rule common throughout communications law: the Commission may preempt state
laws regarding interstate communications where they conflict with federal communications policy.
C.
Authority to Preempt Certain State Regulations of Community Broadband

Providers
146.
Given that we find section 706 provides authority to preempt state law in some cases, we
now address whether it may at least sometimes provide authority to preempt state laws that regulate the
provision of broadband by a states political subdivisions. We find that sections 706(a) and (b) both do
give us that authority in certain circumstances. Two different views support our authority. First, the
Commission has concluded that broadband services are jurisdictionally interstate for regulatory
purposes.398 Congress has delegated authority to the Commission to regulate interstate services.399
Second, even if that were not sufficient, section 706 makes clear that Congress has mandated that the
Commission remove barriers to broadband deployment and infrastructure investment and promote
competition in the local telecommunications market. Whether something constitutes a barrier or
promotes competition is a question of the kind that Congress intended the Commission, as the Nations
expert agency of communications, to answer and to govern. For these reasons, we find that where a state
law regulating the provision of broadband by a political subdivision serves to effectuate communications
policy as opposed to core state control of political subdivisions, and where that law stands as a barrier to
broadband infrastructure investment or an impediment to competition, such laws conflict with our
authority to ensure the deployment of broadband to all Americans on a reasonable and timely basis and so
may be preempted. To put it plainly, section 706 authorizes the Commission to displace state laws that
effectuate choices about the substance of communications policy that conflict with federal
communications policy designed to ensure reasonable and timely deployment of broadband.
147.
It is well established that while states and the federal government share jurisdiction over
the regulation of communications, state laws may be preempted where they conflict with the
Commissions prerogative to regulate interstate communications.400 We do not understand this bedrock
principle to vanish simply because the states communications laws target a provider that is also a
political subdivision of a state. To be sure, as explained below, a different question would be presented if
we were asked to preempt under section 706 a law that goes to a states power to withhold altogether the
authority to provide broadband. But where a state has authorized municipalities to provide broadband,
and then chooses to impose regulations on that municipal provider in order to effectuate the states
398
National Association of Regulatory Utility Commissioners Petition for Clarification or Declaratory Ruling that
No FCC Order or Rule Limits State Authority to Collect Broadband Data, WC Docket No. 09-193, Memorandum
Opinion and Order, 25 FCC Rcd 5051, 5054, para. 8 n.24 (2010) (NARUC Broadband Data Order) (citing GTE
Telephone Operating Cos., GTOC Tariff No. 1, GTOC Transmittal No. 1148, CC Docket No. 98-79, Memorandum
Opinion and Order, 13 FCC Rcd 22466, 22475, para. 16 (1998), recon. denied, 17 FCC Rcd 27409 (1999); Inquiry
Concerning High-Speed Access to the Internet Over Cable and Other Facilities; Internet Over Cable Declaratory
Ruling; Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities, GN Docket
No. 00-185, CS Docket No. 02-52, Declaratory Ruling and Notice of Proposed Rulemaking, 17 FCC Rcd 4798,
4832, para. 59 (2002) (Cable Modem Order and NPRM), affd, NCTA v. Brand X, 545 U.S. 967 (2005); Appropriate
Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, WT Docket No. 07-53,
Declaratory Ruling, 22 FCC Rcd 5901, 5911, para. 28 (2007) (Wireless Broadband Classification Order); United
Power Line Councils Petition for Declaratory Ruling Regarding the Classification of Broadband over Power Line
Internet Access Service as an Information Service, WC Docket No. 06-10, Memorandum Opinion and Order, 21
FCC Rcd 13281, 13288, para. 11 (2006)).
399
47 U.S.C. 152.
400
See, e.g., City of Arlington, Tex. v. FCC, 133 S. Ct. 1863, 1873 (2013); Crisp, 467 U.S. at 699; see also, e.g.,
Natl Assn of Regulatory Util. Commrs v. FCC, 746 F.2d 1492, 1499 (D.C. Cir. 1984) (Congress did not intend to
allow inconsistent state regulations [to] frustrate [its] goal of developing a unified national communications service.
(alterations in original, quotation marks and citations omitted)).
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preferred communications policy objectives, we find that such laws fall within our authority to preempt.
To take an example, where a state allows political subdivisions to provide broadband, but then imposes
regulations to level the playing field by creating obligations apparently intended to mirror those borne
by private providers, it does so in order to further its own policy goals about optimal competitive and
investment conditions in the broadband marketplace. The states here are deciding that incumbent
broadband providers require protection from what they regard as unfair competition and regulating to
restrict that competition. This steps into the federal role in regulating interstate communications. Where
those laws conflict with federal communications policy and regulation, they may be preempted. We thus
interpret sections 706(a) and 706(b) to give us authority to preempt state laws that regulate the provision
of broadband by political subdivisions, provided that the law in question serves to effect communications
policy and would frustrate broadband deployment on a reasonable and timely basis . . . to all
Americans.
148.
We find that section 706 provides the authority to preempt these laws because this is the
area in which federal law preempts state law when there is a conflict. Put differently, as the Verizon court
noted, section 706 is cabined by our subject matter jurisdiction over interstate . . . communication by
wire and radio.401 It is thus only the state restrictions that target this subject matter that fall within our
authority to preempt. For example, a state law that allowed municipalities to provide broadband, but that
prohibited the municipal provider from offering service with a bandwidth higher than any private provider
in the state could fall within our authority under section 706 to preempt, if we determined that it acted as a
barrier to infrastructure investment or competition. Such a law is focused solely on policy preferences,
and not core state control of political subdivisions. In short, a state law that effectuates a policy
preference regarding the provision of broadband is not shielded from all scrutiny simply because it is cast
in terms that affect only municipal providers.
149.
Conversely, we do not read this preemptive authority under section 706 to reach all state
laws that may have an effect, however indirect, on the provision of broadband by municipalities.
Although a law could have an indirect effect of restricting the class of entities that may provide
broadband in the state, it may not rise to the level of a restriction on competition or barrier to broadband
deployment or infrastructure investment within our section 706 authority to preempt.
150.
We have before us specific petitions to preempt specific laws. Below, we address
whether those specific laws fall within our authority to preempt and whether they must be preempted
under section 706. We do not decide here that any other class of laws falls within or without our
authority to preempt. We offer these examples only to help illustrate our reading of section 706 and the
general point that our authority to preempt is limited to laws that serve to effect state policy regarding the
provision of broadband, as opposed to laws that have an indirect effect on the provision of broadband,
such as those that serve the traditional state function of granting or withholding authority to political
subdivisions.
D.
Counterarguments
1.
Arguments Based on the Act
151.
Our conclusion is consistent with the fact that section 706(a) directs both the Commission
and each State commission with regulatory jurisdiction to encourage the deployment of broadband. A
few commenters have argued that because section 706(a) addresses state commissions as well as the
Commission, it cannot be read to grant authority to preempt state laws that restrict municipal broadband,
because Congress should not be read to have granted a State commission the power to preempt state
laws.402 We do not find this argument persuasive. We find it more reasonable to interpret the phrase
401
47 U.S.C. 152(a).
402
See, e.g., State of North Carolina Comments at 5 (It would be illogical to construe Section 706(a) as a grant or
preemptive power when the Congress directed the Commission and the State commission to accomplish
(continued)
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other regulatory methods to apply differently to the Commission and state commissions. Each is likely
to have different regulatory tools, and the statute directs each to use the tools it has available to encourage
the deployment of broadband. In the case of the Commission, the available regulatory tools include
preemption. Moreover, the D.C. Circuit has already rejected a similar line of argument in Verizon.403
Finally, even if section 706(a) were so limited, this would not limit 706(b), which we find also
independently furnishes the authority to preempt certain state restrictions that conflict with federal
broadband policy as barriers to infrastructure investment or that stifle competition in the broadband
market.
152.
Separately, some have argued that the legislative history of section 706 demonstrates that
Congress did not intend to grant authority to preempt state laws that restrict broadband.404 This argument
relies on the fact that the final law did not include a provision from a previous Senate draft of the bill
stating that The Commission may preempt State commissions if they fail to act to ensure reasonable and
timely access.405 Some commenters have argued that this change indicates Congress could not have
intended for the Commission to have the authority to preempt state laws under section 706. We do not
find this argument persuasive. The language that was deleted referred only to preemption of state
commissions that were not fulfilling their mandate under section 706, which is very different from the
preemption at issue here. Moreover, the language of statutes may change for many reasons. It may be
that the drafters of the Senate bill thought it necessary to clarify that federal preemption authority applies
even when Congress grants express authority to State commissions, and that Congress later disagreed that
this was necessary. Whatever the reason, Congress eventually chose to remain silent on the issue.
Especially in light of the history of preemption against which Congress legislated, we do not find this
change to the statute to be persuasive evidence that Congress affirmatively intended to exclude
preemption from the regulatory tools available to the Commission to fulfill its section 706 mandate.
153.
We also reject arguments that section 601(c) of the 1996 Act restricts our authority to
preempt here.406 That section states, NO IMPLIED EFFECTThis Act and the amendments made by
this Act shall not be construed to modify, impair, or supersede Federal, State, or local law unless
expressly so provided in such Act or amendments.407 By its terms, section 601(c) prevents implied
preemption. Thus, it would prevent a reading that section 706, or other section of the 1996 Act, itself
preempts state laws by implication. That is not contrary to our reading of section 706 because we do not
read section 706 to itself preempt state laws. Instead, we read section 706 to give the Commission
authority to take any regulatory action within its general authority to address barriers to infrastructure
investment.408 Where we find that a state communications law is such a barrier, section 706 gives us the
authority to preempt.
Congressional intent); National Conference of State Legislatures Comments at 2; CenturyLink Comments at 16;
Free State Foundation Comments at 12.
403
Verizon v. FCC, 740 F.3d at 638.
404
See, e.g., NTCA Comments at 18 (The modification specifically deleted language that would have authorized
the FCC to preempt State Commissions. From this deletion, one can only logically conclude that Congress intended
that FCC actions pursuant to Section 706 not include state preemption.); NTCA Reply at 7; US Telecom
Comments at 21, n.56; CenturyLink Comments at 17; ITTA Comments at 4.
405
H.R. Rep. No. 104-458, at 210 (1996) (Conf. Rep.).
406
See, e.g., State of North Carolina Comments at 3; CenturyLink Reply at 7.
407
1996 Act 601(c)(1), codified at 47 U.S.C. 152 note.
408
See In re: FCC 11-161, 753 F.3d at 1120 (stating that section 601(c)(1) does not limit Congresss actual
delegation of authority to the FCC); Qwest Corp. v. Minnesota Pub. Utilities Commn, 684 F.3d 721, 730-31 (8th
Cir. 2012). Courts have properly read section 601(c)(1) narrowly, because it is a general rule in preemption
analysis that a savings provision does not bar the ordinary working of conflict preemption principles ... lest [it]
(continued)
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2.
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Gregory v. Ashcroft
154.
Some commenters have argued that section 706 cannot authorize preemption because of
the clear statement rule from Gregory v. Ashcroft.409 We find that Gregorys clear statement rule does
not apply here. Where it applies, the presumption requires that courts start with the assumption that
the historic police powers of the States were not to be superseded by the Federal Act unless that was the
clear and manifest purpose of Congress.410 The rule, even where it applies, does not require express
language in the statute, but only that Congress should make its intention clear and manifest.411 As the
Supreme Courts cases make clear, however, the presumption does not apply to every instance of
preemption. Rather, it applies when a court must decide if a statute should be read to upset the usual
constitutional balance of federal and state powers, such as the purported preemption in Gregory itself of
laws regarding qualifications for a states constitutional officersa provision of state law that goes
beyond an area traditionally regulated by the States to reach a a decision of the most fundamental sort
for a sovereign entity.412 Because interference with a states ability to define its constitutional officers
would upset the usual constitutional balance of federal and state powers, the Gregory Court emphasized
that it was incumbent upon the federal courts to be certain of Congress intent before finding that
federal law overrides this balance.413
155.
However, in areas beyond these historic police powers of the States, the Gregory
presumption against preemption has no place. Specifically, the Supreme Court has explained that an
assumption of nonpre-emption [sic] is not triggered when the State regulates in an area where there has
been a history of significant federal presence.414 Because the intent of Congress is always the touchstone
in preemption analysis, it makes little sense to presume Congress meant to permit conflicting state
regulations in an area of traditional federal regulation.415 In matters of interstate communications policy
in particular, courts have repeatedly found that federal law preempts state communications policy without
permit [a] law to defeat its own objectives, or potentially ... to destroy itself. Farina, v. Nokia Inc., 625 F.3d 97,
131 (3d Cir. 2010) (quoting Geier v. Am. Honda Motor Co., 529 U.S. 861, 869, 872 (2000)); accord Qwest Corp.,
684 F.3d at 731; see also Farina, 625 F.3d at 131 (stating that section 601(c)(1) is not a statement of intent to
permit actual conflicts between state and federal law).
409
501 U.S. 452 (1991); see also, e.g., Letter from Herbert H. Slatery III, Attorney General and Reporter, State of
Tennessee, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 14-116, at 2 (filed Feb. 5, 2015) (TN AG Slatery
Ex Parte Letter); Letter from Alan Wilson, Attorney General, State of South Carolina, to Tom Wheeler, Chairman,
FCC, WC Docket Nos. 14-115 and 14-116, at 2 (filed Feb. 5, 2015); USTelecom-NTCA Ex Parte Letter Attach. at
2.
410
Arizona v. Inter Tribal Council of Arizona, Inc., 133 S. Ct. 2247, 2256 (2013) (quoting Rice v. Santa Fe Elevator
Corp., 331 U.S. 218, 230 (1947)).
411
Gregory, 501 U.S. at 461 (quoting Rice, 331 U.S. at 230).
412
Id. at 460; see also id. at 461 (clear statement required for traditionally sensitive areas (quoting United States v.
Bass, 404 U.S. 336, 349 (1971))). Indeed, the Missouri statute concerning how the states judicial branch would be
composed at issue in Gregory implicated the very essence of state sovereignty and political determination. As a
result, the Gregory plain statement preemption rule is limited to federal laws impacting a states self-identification
as a sovereignty. U.S. v. Lot 5, Fox Grove, Alachua County, Florida, 23 F.3d 359, 362 (11th Cir. 1994) (citing
Reich v. New York, 3 F.3d 581, 58990 (2d Cir. 1993) (refusing to interpret Gregory to resurrect undue deference to
States political decisions); cert. denied, 510 U.S. 1163 (1994); EEOC v. Massachusetts, 987 F.2d 64, 69 (1st Cir.
1993) (stating that Gregory made unequivocally clear . . . the narrowness of its holding)).
413
Gregory, 501 U.S. at 460 (quoting Atascadero State Hospital v. Scanlon, 473 U.S. 234, 243 (1985)).
414
United States v. Locke, 529 U.S. 89, 10708 (2000); see also, e.g., Inter Tribal Council of Arizona, 133 S. Ct. at
2256; Cuomo v. Clearing House Assn, L.L.C., 557 U.S. 519, 534 (2009) (analyzing, in response to dissent, whether
bank regulation was traditional area of state authority).
415
Cf. National Conference of State Legislatures Comments at 2-3.
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reference to the Gregory clear statement rule.416 Because we read section 706 to give preemptive
authority for state laws that target the regulation of broadband once a state has permitted cities to provide
service, as opposed to laws that go to the historic police powers of the States, the Gregory clear
statement rule does not apply in this context.
156.
Nixon v. Missouri Municipal League is not to the contrary.417 Below we explain why that
courts holding construing section 253 of the Act does not predetermine the preemptive scope of section
706 as applied to the petitions before us. Here, we explain why it does not require that we apply the
Gregory clear statement rule. To be sure, Nixon referred to the Gregory clear statement rule in the context
of federal preemption of state bans on municipal communications providers under section 253. However,
that case centered on a states flat ban on political subdivisions entering the market at all. Because in that
case, the state withheld a power altogether, preemption would have interfered with States arrangements
for conducting their own governments which the Court held necessarily implicated Gregory.418 That is
different from a situation in which a state has permitted a political subdivision to enter the market as a
broadband provider, but also seeks to impose regulations on the municipal provider in order to effect
separate communications policy goals. In the latter case, the state has crossed from a decision of the
most fundamental sort for a sovereign entity419 into a matter in which conflicting federal law is presumed
to preempt under the Commerce Clause.
157.
For the same reason, our own previous decisions construing section 253 are not to the
contrary. The Commission has held, and the Supreme Court has affirmed, in preemption cases under
section 253 that state statutes banning municipalities from entering local telecommunications markets
implicate core state sovereignty concerns and are subject to the plain statement rule enunciated in
Gregory.420 In the Texas Preemption Order, for example, we found that Gregory applied to the
fundamental issue of Texass decision that it will not permit its municipalities to compete in the
provision of certain telecommunications services.421 We contrasted this with the question of whether
federal standards may be applied to an arm of a Texas municipality that is engaged in the provision of a
service in competition with private entities,422 where the Gregory presumption is inappropriate. We need
not and do not revisit that holding or perform a Gregory analysis in this proceeding, however, because, as
we have explained, the Tennessee and North Carolina statutes do not implicate core attributes of state
sovereignty but rather regulate interstate communications services that are at the heart of the
Commissions jurisdiction.
416
See, e.g., City of New York, 486 U.S. at 64; Crisp, 467 U.S. at 700.
417
Nixon, 541 U.S. at 125.
418
Id. at 140.
419
Gregory, 501 U.S. at 460.
420
See Public Utility Commission of Texas, The Competition Policy Institute, Intelcom Group (USA), Inc. and ICG
Telecom Group, Inc., AT&T Corp., MCI Telecommunications Corporation, and MFS Communications Company,
Inc., Teleport Communications Group, Inc., and City of Abilene, Texas, Petitions for Declaratory Ruling and/or
Preemption of Certain Provisions of the Texas Public Utility Regulatory Act of 1995, CC Docket Nos. 96-13, 96-14,
96-16, and 96-19, Memorandum Opinion & Order, 13 FCC Rcd 3460 (1997) (Texas Preemption Order), aff'd City
of Abilene v. FCC, 164 F.3d 49, 51-52 (D.C. Cir. 1999); Missouri Municipal League; the Missouri Association of
Municipal Utilities; City Utilities of Springfield; City of Columbia Water & Light; City of Sikeston Board of Utilities
Petition for Preemption of Section 392.410(7) of the Revised Statutes of Missouri, CC Docket No. 98-122,
Memorandum Opinion and Order, 16 FCC Rcd 1157 (2001) (Missouri Municipal League), revd Missouri Mun.
League v. FCC, 299 F.3d 949 (8th Cir. 2002), revd sub nom. Nixon, 541 U.S. 125.
421
Texas Preemption Order, 13 FCC Rcd at 3546, para. 183.
422
Id.; see also Missouri Municipal League, 16 FCC Rcd at 1166, para. 15 (distinguishing between instance where a
municipality lacked legal authority from instance in which a municipality can act and then is presumptively
subject to federal regulations).
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158.
The context in which Congress enacted section 706 also illustrates why Gregory is no
barrier here. Congress was legislating in 1996 against a backdrop in which it understood interstate
communications services to be distinct from intrastate services. Indeed, sections 1 and 2 of the Act are
clear that the Commission, not the states, is intended to have comprehensive, if not exclusive, jurisdiction
over interstate services.423 Moreover, the Commission has held broadband services such as those at issue
here to be interstate.424 That federal jurisdiction over interstate services moreover has been foundand
upheldto include preemption authority.425 In this context, where Congress understood federal authority
to be paramount over interstate services and against the backdrop of the Commission using that authority
to in fact preempt state law, the language of section 706, in conjunction with sections 1 and 2, is more
than clear enough to satisfy the purpose of Gregory. It cannot be the case that Gregory requires pervasive
schemes of federal regulation that have long been understood to include powers of federal preemption to
be reconfigured to exclude that power.
3.
Nixon v. Missouri Municipal League
159.
A number of commenters have argued that the Commission cannot have the power to
preempt state barriers to municipal broadband because of the Supreme Courts decision in Nixon v.
Missouri Municipal League.426 In that case, the Court upheld a Commission ruling that section 253(a) of
the Act did not preempt a state-law flat ban on municipal telecommunications, i.e., phone service.
Section 253(a) declares that no state law may prohibit or have the effect of prohibiting the ability of any
entity to provide any interstate or intrastate telecommunications service.427 Missouri had passed a flat
ban under which no political subdivision of the state could provide telecommunications service.428
Certain Missouri cities, organizations, and city-owned utilities petitioned the Commission to find that the
Missouri ban was preempted under section 253(a). The Commission found that section 253 did not
preempt the Missouri law because section 253 was not sufficiently clear that Congress intended to
preempt the decision of a state to withhold from its political subdivisions the power to provide
telecommunications.429 The Eighth Circuit reversed the agency decision,430 creating a circuit split with the
D.C. Circuit, which had upheld a similar Commission ruling regarding a Texas ban.431 In Nixon, the
Supreme Court then reversed the Eighth Circuit, agreeing that section 253 did not reach a states flat ban
on municipal entry to the telecommunications market.
160.
We find that Nixon does not control here or foreclose the possibility of preemption under
section 706 of laws like those before us in these petitions. First, we note that the posture of the cases, and
423
Section 1 states that the Commission was created [f]or the purpose of regulating interstate and foreign
commerce in communication by wire and radio . . . . 47 U.S.C. 151. Section 2 states that [t]he provisions of
this chapter shall apply to all interstate and foreign communication by wire and radio and all interstate and foreign
transmission of energy by radio. 47 U.S.C. 152.
424
See supra note 398.
425
See, e.g., Locke, 529 U.S. at 107-08; see also, e.g., Inter Tribal Council of Arizona, 133 S. Ct. at 2256; Cuomo,
557 U.S. at 534.
426
See CenturyLink Comments at 16-20, 22-23; ITTA Comments at 4; National Conference of State Legislatures
Comments at 4-5; State of North Carolina Comments at 3; NTCA Comments at 4-6, 13; State of North Carolina
Comments at 3-5; TN AG Slatery Ex Parte Letter at 3; USTelecom Comments at 11-12, 16-17, 19-21; USTelecomNTCA Ex Parte Letter Attach. at 1-3; WISPA Comments at 4-5.
427
47 U.S.C. 253(a).
428
Nixon, 541 U.S. at 129.
429
Missouri Municipal League, 16 FCC Rcd at 1169, para. 19.
430
See Missouri Mun. League, 299 F.3d 949.
431
City of Abilene, Texas v. FCC, 164 F.3d 49, 51-52 (D.C. Cir. 1999).
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therefore the legal inquiry, differs. In Nixon, appellants were required to demonstrate that the language of
section 253 itself showed a clear congressional intention to preempt the state law in question. For
example, when the petitions to preempt the Missouri and Texas laws were originally before us, the
question we decided was whether the laws in question fell within the sphere of section 253(a) itself.432
Here, as we have explained, the correct legal question is not whether section 706 itself preempts the state
laws in question, but rather whether Congress has delegated authority to act in this sphere, and whether
we should exercise that authority to make a particularized decision to preempt.433
161.
More fundamentally, these petitions present a different, narrower question than did
Nixon, as a comparison to the Nixon Courts reasoning makes clear. That Court explained, To get at
Congresss understanding, what is needed is a broader frame of reference, and in this litigation it helps if
we ask how Congress could have envisioned the preemption clause actually working if the Missouri law
were preempted.434 We follow that approach here on a different set of facts with a different set of state
restrictions, and we reach a different result than that in Nixon and our underlying orders. Where the
Nixon Court found that preemption of flat bans on municipal telecommunications would produce strange
and indeterminate results,435 we find that the preemption of state communications regulation on
municipal broadband providerswhere the state has given an underlying authorization436will have the
effect of promoting competition and infrastructure investment and is consistent with the states grant of
authority to municipalities, as we have explained above.437
162.
The primary concern of the Nixon Court was that, if Missouris flat ban on municipal
telecommunications were preempted, [t]he municipality would be free of the statute, but freedom is not
authority, and in the absence of some further, authorizing legislation the municipality would still be
powerless to enter the telecommunications business.438 Moreover, this would produce a national crazy
quilt under which municipalities in some states could provide service because of underlying background
state law, but others could not without further affirmative authorizing legislation. However, neither
concern is at issue here.439 Again, here we contemplate preemption under section 706 where a state has
allowed municipalities to enter the broadband market but has also imposed regulations to affect the states
communications policy preferences. Where we preempt those state regulations that apply to municipal
432
See Missouri Municipal League, 16 FCC Rcd at 1158, para. 1 (stating that petitioners asserted Missouri ban
violate[d] section 253(a) of the Communications Act of 1934); Texas Preemption Order, 13 FCC Rcd at 3544,
para. 179 (holding that cities are not any entity within meaning of Section 253(a)).
433
See supra para. 140.
434
Nixon, 541 U.S. at 133.
435
Id.
436
We find unpersuasive NARUCs argument that the strict rule of construction known as Dillons rule precludes
preemption. Dillons rule generally provides that a municipality has only the authority expressly granted to it by the
state. In contrast, home rule provides that a municipality has authority except where expressly superseded by state
law. In the two states at issue in these petitions, the state has granted authority to the municipal entity, thereby
obviating the issue of Dillons rule or home rule status. See National Association of Regulatory Utility
Commissioners (NARUC) Reply, WC Docket Nos. 14-115 and 14-116, at 2, 7 (filed Sept. 29, 2014); Letter from
James Bradford Ramsey, General Counsel, NARUC, to Marlene H. Dortch, Secretary, FCC, WC Docket Nos. 14115 and 14-116, at 2 (filed Dec. 4, 2014).
437
See supra Section III.
438
Nixon, 541 U.S. at 135.
439
We find unpersuasive commenters assertion that preemption of provisions of the Tennessee and North Carolina
laws would lead to the kind of strange and indeterminate results the Nixon court described for the reasons
described here. See, e.g., CenturyLink Comments at 22-23; USTelecom Comments at 12, 16-17; see also Free State
Foundation Comments at 15-16 (expressing concerns about a one-way ratchet); National Conference of State
Legislatures Comments at 4-5 (expressing concerns about strange and indeterminate results).
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providers, the municipal providers are still authorized under the separate delegation of authority. Unlike
in Nixon, the municipality is not powerless to enter the . . . business.440
163.
In the case of North Carolina, before H.B. 129 was enacted, a municipality already had
the right to provide cable service, which the North Carolina Court of Appeals had interpreted to include
broadband service.441 In passing the bill, the North Carolina legislature reaffirmed existing law, and then
applied a number of additional regulations that applied only to municipal providers. It is therefore our
understanding that if North Carolinas statute is preempted, the existing background law will provide
authority for cities to provide broadband, as well as mechanisms to finance those operations.442 In the
case of Tennessee, the preemption of only the geographic restriction in Tennessees Section 601 would
leave a municipal electric provider with the authority to operate under the rest of that authorizing statute.
In sum, while freedom is not authority,443 in the cases before us, we have reason to believe that
preemption of the type petitioners seek will leave a status quo under which additional municipalities will
be able to provide service.
164.
The Nixon Court also expressed concern that preemption in that case would act as a oneway ratchet under which a state could permit municipalities to enter the market, but then could never
withdraw that authority.444 But that would not follow under our reading of section 706 here. Again,
consistent with our previous holdings, we do not read section 706 to give us the power to preempt state
laws regarding the fundamental question of whether political subdivisions may enter the broadband
market at all. The concern about an anomalous one-way ratchet at issue in Nixon is thus inapplicable
here.445
165.
Our conclusion would remain the same regardless of whether broadband Internet access
service were classified as an information service or as a telecommunications service, which was also the
regulatory classification of service at issue in Nixon. This is so both because we act under a different
statutesection 706 as opposed to section 253and because the class of state law is different from those
at issue in Nixon. Again, these petitions concern state competition regulation as opposed to flat bans on
the exercise of authority. We also note that although section 253 addresses preemption of
telecommunications laws, we are not compelled to act under section 253 or to eschew section 706 in this
instance. We find that section 706 is an alternate, often complementary source of authority. Because
section 706 specifically addresses barriers to advanced telecommunications, which are the services at
issue in these petitions, whereas section 253 addresses state anticompetitive laws regarding all
telecommunications generally, we conclude that section 706 is available as a source of authority,
regardless of whether section 253 would or would not also apply here.446
166.
Finally, we note that in Nixon, the Court was affirming the Commissions view. In this
case, however, the Commission has reached the conclusion that preemption is necessary to achieve the
federal goal of encouraging broadband deployment and infrastructure investment. To the extent that this
440
CenturyLink Comments at 21.
441
BellSouth Telecomm., Inc. v. City of Laurinburg, 606 S.E.2d 721 (N.C. Ct. App. 2005) appeal denied by 615
S.E.2d 660 (N.C. 2005); see supra paras. 37-38.
442
See Wilson Dec. 15 Ex Parte Letter at 7-9; see also Nixon, 541 U.S. at 135.
443
Nixon, 541 U.S. at 135.
444
541 U.S. at 137; see also Free State Foundation Comments at 1416.
445
See, e.g., USTelecom Comments at 17.
446
We do not decide whether section 253 could, consistent with Nixon, be interpreted to preempt state laws that
empower municipalities to provide telecommunicationsadvanced or otherwisebut then place regulatory burdens
on those municipal providers in order to effect the states preferences regarding competition in the
telecommunications marketplace.
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reflects the Commissions expert judgment about the critical importance of broadband deployment and
the Congresss concern about that goal as expressed in section 706, it would merit deference.447
4.
The 10th Amendment
167.
Some commenters have argued that the Commission is prohibited from preempting the
statutes at issue here by the Constitutions 10th Amendment,448 which reserves to the states respectively,
or to the people those powers not delegated to the United States by the Constitution.449 We do not find
this argument persuasive. To be sure, municipal subdivisions are created as convenient agencies for
exercising such of the governmental powers of the State as may be entrusted to them in its absolute
discretion.450 Again, however, we do not understand our power to preempt under section 706 as applied
in this order to include interference with a states prerogative to grant or withhold the government
power[] to offer broadband communications. Once the state has granted that power, however, we do not
believe a state is free to advance its own policy objectives when they run counter to federal policy
regarding interstate communications. Put more generally, a state cannot shelter its policy regulations
from all scrutiny, simply because they regulate only political subdivisions.451 Precedent such as United
States v. Printz,452 cited by commenters,453 is also inapposite. This is not an instance in which the
Federal Government would seek to compel the States to implement, by legislation or executive action,
[a] federal regulatory program.454 Indeed, we would not compel any entity to take any action. Instead,
we seek to remove barriers so that local governments are in a position to either build infrastructure or not,
as they determine best meets the needs of their communities.455
447
See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984).
448
U.S. Const. amend. X.
449
See, e.g., NTCA Comments at 6-7; ALEC Comments at 2-3; Institute for Policy Innovation Comments at 1-3;
NARUC Reply at 2; TN AG Slatery Ex Parte Letter at 2 .
450
City of Columbus v. Ours Garage & Wrecker Service, Inc., 536 U.S. 424, 433 (2002).
451
For example, the Supreme Court held that when a federal statute directed that localities could spend federal
payments in lieu of local property taxes for any local government purpose, a state legislature could not dictate how
those funds would be spent, even though such a power to order local taxing and spending is ordinarily a states
prerogative. Lawrence Cnty. v. Lead-Deadwood Sch. Dist. No. 40-1, 469 U.S. 256, 268 (1985); see also City of
Columbus, 536 U.S. at 448 (Scalia, J., dissenting) ([I]t should not be thought that the States power to control the
relationship between themselves and their political subdivisionstheir traditional prerogative . . . to delegate (or to
refuse to delegate) their authority to their constituent parts . . . -has hitherto been regarded as sacrosanct. To the
contrary. (citation omitted)).
452
521 U.S. 898 (1997).
453
See, e.g., Institute for Policy Innovation Comments at 1; ALEC Comments at 2; NTCA Comments at 7; Free
State Foundation Comments at 4, 16; Madery Bridge Comments, WC Docket No. 14-115, at 2 (filed Aug. 28,
2014); USTelecom-NTCA Ex Parte Letter Attach. at 5.
454
521 U.S. at 925.
455
We also find that the First Amendment does not prohibit us from preempting the laws in question. See Professor
Enrique Armijo, Elon University School of Law, Comments, WC Docket Nos. 14-115 and 14-116 (filed Aug. 29,
2014). Professor Armijo argues that the terms of service of some municipal providers infringe on subscribers
constitutionally protected speech rights. Id. at 1-3. Even if that is soan issue we do not reachwe are not
ratifying such infringement by preempting restrictions on municipal broadband, id. at 4-5, because we take no
position here on the terms of service that municipal provider should or may offer.
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Application to Tennessees Section 601
168.
Above, we found that the territorial restriction in Tennessee Code section 601 is a barrier
to broadband deployment and infrastructure investment and limits competition.456 We also find that it
falls within our power to preempt under section 706 because it serves as a state law communications
policy regulation, as opposed to a core state function in controlling its political subdivisions. We reach
this conclusion for a number of reasons. First, the service territory of a communications provider has
long been considered a core area of communications regulation. Many provisions of the 1996 Act grant
and delimit the authority of communications regulatorsboth state and federalto determine the
territorial extent of communications services. Federal communications policy has historically regulated
critical service inputs that determine the geographical scope of communications servicesincluding
limits on local zoning authorities over wireless tower placement457 and the jurisdiction of local franchising
authorities over access to local rights of way.458 Each of these provisions is central to the determination of
service territories for the communications providers in these respective industries, and together they
illustrate Congresss focus on service territories as a fundamental issue of communications regulation.
169.
Even more importantly, in this specific instance, the territorial restriction serves only to
effectuate state communications policy regarding the competitive landscape for broadbandno
commenter has explained how it might protect the public fisc or serve another purpose. As EPB points
out, under Tennessee law, EPB is actually free under present law to build a statewide fiber network under
its authority as a telecommunications provider it simply cannot use that network to provide broadband
outside its electric service area because of the territorial restriction.459 Section 401 of the Tennessee Code
governs the provision of telecommunications by municipal electrical utilities, while section 601 governs
the provision of broadband and video by the same entities. The language of the provisions is almost
identical, except that section 601 restricts the provision of broadband and video to within [a municipal
electric providers electric] service area.460 The undisputed effect of this difference is that EPB may
build a network throughout the state in order to provide telecommunications service, but may not utilize
that already constructed network to provide broadband.461 Such a statutory scheme does not further any
core state function of ordering its political subdivisions, such as limiting the expenditures of a city, or
preventing one community from building a network in another community. It serves exclusively to
effectuate state communications policy preferencesin this case, presumably the state would prefer that
incumbent broadband providers did not face competition from public providers from neighboring areas.
But we have found that in this instance that policy stands as a barrier to broadband deployment and
infrastructure investment and section 706 therefor commands that we utilize the regulatory tool of
preemption to remove that barrier. To be clear, we do not assert that state policy preferences about the
456
See supra Section III.A. Today, we reclassify broadband Internet access as a telecommunications service
pursuant to our section 706 authority. In both that decision and this, we find that our action removes barriers to
infrastructure investment and promotes competition. It might be argued that because Tennessees section 401
authorizes municipal providers such as EPB to provide telecommunications statewide without a territorial
restriction, our reclassification has essentially brought broadband service within the scope of section 401, thus
freeing entities such as EPB from the territorial restriction in section 601. This seems to depend on the extent to
which Tennessees section 401 incorporates the federal definition of telecommunications. We do not opine on
this issue. If it is later clarified by the state of Tennessee or its courts that section 601 does not still restrict EPB,
then our preemption may become a nullity, and we would expect EPB (or a representative of Tennessee) to bring
this to our attention.
457
47 U.S.C. 332(c)(7)(B).
458
47 U.S.C. 541.
459
EPB Petition at 52-53; see FTTH Comments at 12.
460
Tenn. Code Ann. 7-52-601.
461
EPB Petition at 52-53.
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competitive landscape for broadband are necessarily illegitimate. We find only that where they conflict
with the federal policy set out in section 706 because they act as barriers to broadband infrastructure
investment or thwart competition, they must be preempted. We have made that finding here, and so
preempt the territorial restriction in section 601.
F.
Application to North Carolinas H.B. 129
170.
Above, we found that North Carolinas H.B. 129 functions as a barrier to advanced
telecommunications infrastructure investment and competition. Here we find that this statute falls within
our authority to preempt under section 706 because it functions as regulation of interstate
communications. H.B. 129 does not prohibit service by municipal entitiesindeed, it explicitly
acknowledges that municipalities are authorized to provide communications services.462 Instead, as
explained below, the requirements in the provisions of the statute, especially when taken together and
viewed in context, serve to regulate the operation and competitive offerings of municipally-owned
broadband providers as a means to protect incumbent private-sector ISPs.463 Their effect is to impose
asymmetric burdens on one category of providersmunicipal providersbut not on others, and to place
municipal providers at a competitive disadvantage. The formal title of the statute underscores this. H.B.
129 is titled An Act to Protect Jobs and Investment by Regulating Local Government Competition with
Private Business. The preamble of the statute further elaborates, providing that the statute serves to
protect jobs and promote investment . . . to ensure that the State does not indirectly subsidize competition
with private industry.464
171.
Analysis of the statutory restrictions confirms this focus on regulating competition in the
interstate communications marketplace. Although putatively cast in terms of state limitations on
municipal authority, the restrictions are actually sector-specific regulatory limitations. Each of the
restrictions singles out a specific serviceinterstate communicationsand imposes limitations,
obligations, and requirements on the service and on one category of provider of such services. Unlike the
Missouri statute regarding qualifications for the states constitutional officers at issue in Gregory or the
flat ban on municipal authority in Nixon, the provisions on H.B. 129 regulate not issues of state
sovereignty and political determination, but rather the mechanics of how a city may provide a service it is
authorized to provide. The clear effect of H.B. 129 is to protect private competitors from competition. In
enacting this law, North Carolina seeks to protect incumbent ISPs from what it apparently regards as
unfair competition. But this policy steps precisely into the role reserved to the Commission in
regulating interstate communications. The question of whether competition in broadband Internet
462
As discussed supra in Sections I.B.3 and III.B.1, municipalities in North Carolina had authority to provide
broadband services at the time H.B. 129 was enacted. The preamble to H.B. 129 acknowledges this, stating
[w]hereas, certain cities in the State have chosen to compete with private providers of communications services;
and . . . these cities have been permitted to enter into competition with private providers as a result of a decision of
the North Carolina Court of Appeals [interpreting North Carolina Gen. Stat. 160A-312; 160A-311(7)].
Preamble, 2011 N.C. Sess. Laws at 84; see also N.C. Gen. Stat. Ann. 160A-312, 311(7). The ALEC model
legislation, which H.B. 129 resembles, does not seek to prohibit municipal provision of broadband, but rather to
impose a series of asymmetric regulatory burdens on municipal providers.
463
Throughout the floor debates on H.B. 129, Rep. Marilyn Avila (R-Wake), one of the bills primary sponsors,
reiterated that the bill does not prohibit the provision of broadband service by municipalities, but instead creates
rules that will govern cities who decide to get into competition against private [broadband providers]. Transcript
of Third Reading of H.B. 129 at 20:45, N. C. House of Rep. (Mar. 28, 2011).
464
Preamble, H.B. 129, 2011 N.C. Sess. Laws at 84. While the preamble also states that it is against the public
policy of this State for any unit, department, or agency of the State . . . to engage directly or indirectly in the sale of
goods, ware, or merchandise in competition with citizens of the State, the bill does not actually withhold authority.
Instead, it places numerous restrictions on the operation of public entities in order to effect the states preferences
regarding communications competition.
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accessan interstate communications service within the core of section 706will or will not serve the
public interest is one quintessentially reserved to the Commission.
172.
As detailed above,465 H.B. 129 consists of six principal provisions codified together as
Article 16A in Chapter 160A of the North Carolina General Statutes, and four amendments to other
provisions of the General Statutes.466 Again, while there are a number of separate provisions, they can be
grouped into three categories based on the functions that they serve: level playing field obligations,
measures that raise economic costs, and measures that impose delay. Below, we analyze these groups of
provisions to show how they function as regulation of interstate communications, and thus fall within our
authority under section 706.
1.
173.
Above, we describe the set of statutory provisions that serve to effectuate what supporters
and incumbents call leveling the playing field. As explained, we find that these provisions do not
level the playing field, but instead impose restrictions on one category of providerscity-owned
providersthat are not imposed on other categories of providers. We find that these laws fall within our
authority to preempt because, by their terms, these level playing field requirements serve to regulate
competition between public and private providers. Again, the title of H.B. 129 confirms that the law was
intended to Regulat[e] Local Government Competition with Private Business,467 and commenters in
support of H.B. 129 have repeatedly emphasized the objective of creating a level playing field between
public and private business.468 Because these requirements serve the purpose of regulating competition in
interstate communications, they are subject to preemption under section 706 to the extent they constitute
restrictions on competition in and barriers to broadband deployment and infrastructure investment.
174.
Although characterized under disparate section headings, the restrictions are actually
competition-specific regulatory limitations. Their effect is to constrain a city-owned providers ability to
compete in the broadband market while not similarly constraining any other category of provider.
Although any particular obligation might be permissible, were it adopted in isolation, it is the collective
impact of the obligations that conflicts with federal policy. The result, as Wilson has described,469 has
been to slow or completely prevent additional broadband deployment and infrastructure investment.470 To
be clear, we do not take any position on the general question of whether and on what terms public entities
can and should compete with private enterprise. In this specific context, however, Congress has
mandated that we find and remove barriers to infrastructure investment, and we have found that
restrictions on municipal broadband in H.B. 129 have the net effect of hampering investment in
broadband infrastructure and inhibiting competition. Section 706 therefore requires that we preempt these
laws.
465
See supra para. 81.
466
H.B. 129, 2011 N.C. Sess. Laws at 84.
467
Title, H.B. 129, 2011 N.C. Sess. Laws at 84.
468
See, e.g., TechFreedom & ICLE Reply at 8-9 (The nature of North Carolinas bill ought to be apparent from the
short name of the bill that became the law at issue: Level Playing Field/Local Govt Competition.); Institute for
Policy Innovation Comments at 5-6 (The law does not create an outright ban, which might be preferable, but rather
imposes certain requirements intended to provide a level playing field with any competing private sector participant
. . . .); N.C. Rep. Marilyn Avila Comments, Attach. at 1-2; N.C. Speaker Thom R. Tillis Comments at 14 (referring
to H.B. 129 as The Level playing Field Law); N.C. Sen. Tom Apodaca Comments at 1-2 (same); AT&T
Comments at 45.
469
Wilson Petition at 2025, 3638, 4546.
470
See City of Fayetteville Comments at 2 (passage of H.B. 129 led to end of plans in multiple North Carolina
communities to build fiber networks, including planned public-private partnership in Fayetteville).
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175.
Above, we describe a number of H.B. 129s provisions that serve to directly raise the
economic costs of municipal providers. Through these measures, H.B. 129 has the effect of increasing
both the cost to the city and the price charged to customers for broadband services. For example, section
340.1(a)(8) prevents a public provider from charging below a theoretical cost of service, with phantom
costs imputed to mirror those born by a private provider. We find that this provision, like the others we
have included in this grouping, are designed to, and do, functions as communications regulation by
regulating the prices, terms, and conditions on which these providers may offer service. These provisions
do not restrict the authority to provide service, nor do they protect a citys taxpayersif anything, they
make municipal provision more risky by hampering the public providers ability to compete based on
price. The apparent purpose of H.B. 129, as reflected in its preamble, is to protect private competitors
from competition. As such, it falls within our jurisdiction under section 706 to preempt state laws that
regulate competition in interstate communications.
176.
Similarly, the PILOT provisions require city-owned providers to make payments they
would otherwise not be obligated to make; they indisputably raise the cost of providing broadband
service.471 Supporters of these PILOT provisions concede that they are intended to level the playing
field between public-sector and private-sector communications providers by eliminating the advantage a
city-owned CSP may have from tax exemptionsa goal that is clearly one of regulating interstate
communications competition.472 Without opining on whether a state may decide, as a policy matter, to
alter its framework for taxation of municipalities and services provided by municipalities, the effect of
section 340.5 is to single out communications service among all municipally provided services for
additional regulation. North Carolina law imposes payment in lieu of property tax requirements on joint
agencies that provide electric power, but on no other city-provided service and in lieu of no other type of
tax or fee.473 This is not to say that any form of broadband-sector-specific regulations, including
additional procedural safeguards, would fall within our jurisdiction to preempt under section 706. But in
an absence of any indication of a need to target interstate communications with particular state procedural
safeguards, and in the context of a statute that explicitly seeks to Regulat[e] local Government
Competition with Private Business, we can only conclude that the procedural burdens in H.B. 129
function to do exactly thatregulate the competitive landscape in interstate communications.
177.
Other provisions support this view. Section (a)(3) imposes an explicit geographic
limitation on a city-owned CSPs network and services, serving to artificially limit the market for a
public-sector providers services and restraining its ability to compete. This limitation singles out a
particular servicecommunications servicefor greater restriction than other municipally provided
enterprises, including electric service,474 and does so, as the preamble tells us, for the purpose of
regulating competition in communications services. This restriction hampers a city-owned CSPs ability
to achieve efficiencies in scale or operations, and prevents it, but not a private-sector provider, from
serving more rural areas outside its boundaries, which are often under- or unserved by any provider, even
if it already provides electric service or other service to those areas.
178.
Again, these requirements serve only to effectuate the states protection of private-sector
ISPs. In their effort to do this, they restrict the competitive options and raise the costs of one market
471
See supra para. 83.
472
See, e.g., N.C. Rep. Marilyn Avila Comments at 2.
473
N.C. Gen. Stat. Ann. 159B-27(a) (payment in lieu of property taxes requirement imposed on an jointly owned
projects or projects owned by a joint agency for providing electric power and energy services).
474
Wilson provides electric service in six counties in eastern North Carolina but H.B. 129 limits its ability to provide
broadband service to the City of Wilson and areas immediately adjacent to the City within Wilson County. Wilson
Petition at 22-23.
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participant but not the other. Reading the provisions together, it is apparent that North Carolina has
singled out communications services supplied by municipalities for more restrictive treatment and has
done so specifically in order to promote its preferred competitive arrangement in the interstate
communications market. In doing so, the state has moved beyond granting authority to a political
subdivision to provide or not to provide a particular service, and has entered the realm of regulating
communications services that Congress has directed the Commission to oversee. While reasonable
parties may debate the wisdom of that approach, there can be little doubt it is a matter of communications
policy. We therefore view these restrictions as within our authority to preempt.
3.
179.
There can be little question that the provisions of H.B. 129, considered together, mandate
delaysometimes extensive delay475and additional expense on the part of cities, which in turn
increases the cost to the city of an attempt to begin providing service or to expand an existing service.
The effect of the notice and hearing provisions, along with the RFP process requirement, is to compel
cities to expend resources and time sending notices, holding hearings, preparing an RFP, reviewing any
responses, and negotiating with any respondents. Each of these delays imposes costseconomic and
staffon a city, increasing its cost of entering the market, investing in infrastructure, or deploying
broadband. Although any one of these restrictions, standing alone, could conceivably be characterized as
core state control of the manner of local government, we find that in context and viewed as a whole, the
regulations in fact serve to shape the competitive landscape for interstate communications. Again, we
note that the title and preamble of H.B. 129 refer explicitly to these goals.476 By contrast, nothing in the
title or preamble refers to fiscal responsibility, transparency, or the like. H.B. 129 sets out additional
regulatory burdens that apply only to broadband. Although at least one commenter describes a need to
protect citizens and taxpayers from poor local government financial decision making,477 nowhere in the
record is there any indication that the existing controls were inadequate or that there was any need for
additional procedural safeguards.478 As we have noted, we do not find that any form of broadband-sectorspecific regulations would fall within our jurisdiction to preempt under section 706. But on this record
and in this context, we can therefore only conclude that the procedural burdens in H.B. 129 function to do
exactly what the title of the bill statesregulate the competitive landscape in interstate communications.
180.
The effect these provisions in H.B. 129 is to single out communications services among
all city-provided services for additional regulatory obligations that increase expense, impose delay, and
ultimately raise the cost to the city of providing service. As such, they conflict with Congresss mandate
to encourage the deployment of broadband and infrastructure investment. The Commission must, as
directed by Congress, take action to remove these barriers.
*
181.
As we have discussed above, we preempt sections 340.1(a)(1), (3) and (5)-(9), 340.3,
340.4, 340.5, 340.6, and H.B. 129 sections 1.(a) and (b), 2.(a), 3, and 5. Because the restrictions in H.B.
129 serve as state regulation of competition in the interstate communications market, as opposed to core
government control of political subdivisions, they fall within our subject matter jurisdiction and within
our power to preempt under Section 706. These provisions contravene the mandate of section 706 by
475
Wilson has estimated that the total time required to comply with the provisions of H.B. 129 is over two years.
See Petitioners Dec. 15, 2014 Ex Parte at Exh. A (Communications Network Project Timetable).
476
See supra at note 467 and accompanying text.
477
N.C. Speaker Thom R. Tillis Comments at 2.
478
Indeed, as described above, H.B. 129 appears to have the effect of restricting a municipalitys ability to make
decisions about risk allocation and exposing citizens to a higher degree of risk. See supra Section III.B.2.c.
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erecting barriers to infrastructure investment and hampering competition in the broadband market.479 We
therefore preempt them.
4.
Not Preempted.
182.
As explained above, we do not determine that every provision of H.B. 129 represents a
barrier to infrastructure investment or thwart competition such that we are compelled to preempt it.
Because the following provisions do not rise to the level of a barrier to broadband deployment or
infrastructure investment falling within our jurisdiction over communications regulation, we do not
preempt sections 160A-340(1), (2), (3), (4), (5) and (6), 340.1(a)(2) and (4), 340.1(b), 340.2, and H.B.
129 sections 1.(c), 2.(b); 4, 6, 7 and 8.
V.
ORDERING CLAUSES
183.
Accordingly, IT IS ORDERED that, pursuant to sections 1 and 2 of the Communications
Act of 1934, as amended, and section 706 of the Telecommunications Act of 1996, as amended, 47
U.S.C. 151, 152, and 1302, the EPB Petition IS GRANTED.
184.
IT IS FURTHER ORDERED that, pursuant to sections 1 and 2 of the Communications
Act of 1934, as amended, and section 706 of the Telecommunications Act of 1996, as amended, 47
U.S.C. 151, 152, and 1302, the Wilson Petition IS GRANTED IN PART to the extent discussed
herein, and IS OTHERWISE DENIED.
185.
IT IS FURTHER ORDERED that, pursuant to section 1.103(a) of the Commissions
rules, 47 C.F.R. 1.103(a), this Memorandum Opinion and Order SHALL BECOME EFFECTIVE upon
release.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
479
See supra Section III.
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ATTACHMENT A:
EPB / TENNESSEE MAP
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ATTACHMENT B:
WILSON / NORTH CAROLINA MAP
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ATTACHMENT C:
TENNESSEE LAW SUBJECT TO
PETITION
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Title 7: Consolidated Governments and Local Governmental Functions and Entities

Local Government Functions
Chapter 52: Municipal Electric Plants
Part 6: Cable Television, Internet and Related Services
Tenn. Code Ann. 7-52-601 (2014)
7-52-601. Authority to operate services.
(a) Each municipality operating an electric plant described in 7-52-401 has the power and is authorized
within its service area, under this part and on behalf of its municipality acting through the authorization of
the board or supervisory body having responsibility for the municipal electric plant, sometimes referred to
as governing board in this part, to acquire, construct, own, improve, operate, lease, maintain, sell,
mortgage, pledge or otherwise dispose of any system, plant, or equipment for the provision of cable
service, two-way video transmission, video programming, Internet services, or any other like system,
plant, or equipment within or without the corporate or county limits of such municipality, and, with the
consent of such other municipality, within the corporate or county limits of any other municipality. A
municipality may only provide cable service, two-way video transmission, video programming, Internet
services or other like service through its board or supervisory body having responsibility for the
municipality's electric plant. A municipality providing any of the services authorized by this section may
not dispose of all or substantially all of the system, plant, and equipment used to provide such services,
except upon compliance with the procedures set forth in 7-52-132.
(b) The services permitted by this part do not include telephone, telegraph, and telecommunications
services permitted under part 4 of this chapter.
(c) Notwithstanding subsection (a), a municipality shall not have any power or authority under subsection
(a) in any area where a privately-held cable television operator is providing cable service over a cable
system and in total serves six thousand (6,000) or fewer subscribers over one (1) or more cable systems.
(d) Notwithstanding subsection (a), a municipality shall not have any power or authority under subsection
(a) in any area of any existing telephone cooperative that has been providing cable service for not less
than ten (10) years under the authority of the federal communications commission.
(e) (1) Notwithstanding this section, the comptroller of the treasury shall select, not later than August 1,
2003, a municipal electric system providing services in accordance with this part to provide, as a pilot
project, the services permitted under this section beyond its service area but not beyond the boundaries of
the county in which such municipal electric system is principally located; provided, that:
(A) The municipal electric system receives a resolution from the legislative body of the county
regarding service in unincorporated areas of the county, or any other municipality within such county
regarding service within such municipality, requesting the municipal electric system to provide such
services to its residents; and
(B) The municipal electric system obtains the consent of each electric cooperative or other municipal
electric system in whose territory the municipal electric system will provide such services.
(2) The comptroller shall expand the pilot project established in subdivision (e)(1) to include one (1)
municipal electric system located in the eastern grand division of the state that proposes to provide
services in accordance with this part. Not later than August 1, 2004, the comptroller shall select the
municipal electric system pilot project pursuant to this subdivision (e)(2), subject to the requirements of
subdivisions (e)(1)(A) and (e)(1)(B).
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(3) The comptroller shall report to the general assembly, not later than January 31, 2008, with
recommendations regarding whether the pilot projects permitted by this part should be continued or
expanded to other systems. The comptroller shall evaluate the efficiency and profitability of the pilot
project services of the municipal electric system in making such recommendation; provided, that the
comptroller shall not so evaluate a pilot project system that is not providing service in competition with
another cable service provider.
(4) There shall be no other municipal electric system selected to provide pilot project services until the
comptroller issues the recommendation required by subdivision (e)(3).
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ATTACHMENT D:
NORTH CAROLINA LAW SUBJECT
TO PETITION
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GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2011
SESSION LAW 2011-84
HOUSE BILL 129
BUSINESS AND COMMERCE--RULES AND REGULATIONS--LOCAL GOVERNMENT
AN ACT TO PROTECT JOBS AND INVESTMENT BY REGULATING LOCAL GOVERNMENT
COMPETITION WITH PRIVATE BUSINESS.
Whereas, certain cities in the State have chosen to compete with private providers of
communications services; and
Whereas, these cities have been permitted to enter into competition with private providers as a
result of a decision of the North Carolina Court of Appeals rather than legislation enacted by the General
Assembly; and
Whereas, the communications industry is an industry of economic growth and job creation; and
Whereas, as expressed in G.S. 66-58, known as the Umstead Act, it is against the public policy of
this State for any unit, department, or agency of the State, or any division or subdivision of a unit,
department, or agency of the State, to engage directly or indirectly in the sale of goods, wares, or
merchandise in competition with citizens of the State; and
Whereas, to protect jobs and to promote investment, it is necessary to ensure that the State does
not indirectly subsidize competition with private industry through actions by cities and to ensure that
where there is competition between the private sector and the State, directly or through its subdivisions, it
exists under a framework that does not discourage private investment and job creation; Now, therefore,
The General Assembly of North Carolina enacts:
SECTION 1.(a) Chapter 160A of the General Statutes is amended by adding a new Article to read as
follows:
Article 16A.
Provision of Communications Service by Cities.
160A-340. Definitions.
The following definitions apply in this Article:
(1)
City-owned communications service provider. - A city that provides communications

service using a communications network, whether directly, indirectly, or through an
interlocal agreement or a joint agency.
(2)
Communications network. - A wired or wireless network for the provision of

communications service.
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(3)
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Communications service. - The provision of cable, video programming,

telecommunications, broadband, or high-speed Internet access service to the public, or
any sector of the public, for a fee, regardless of the technology used to deliver the service.
The terms "cable service," "telecommunications service," and "video programming
service" have the same meanings as in G.S. 105-164.3. The following is not considered
the provision of communications service:
a.
The sharing of data or voice between governmental entities for internal

governmental purposes.
b.
The remote reading or polling of data from utility or parking meters, or the
provisioning of energy demand reduction or smart grid services for an electric,
water, or sewer system.
c.
The provision of free services to the public or a subset thereof.
(4)
High-speed Internet access service. - Internet access service with transmission speeds that
are equal to or greater than the requirements for basic broadband tier 1 service as defined
by the Federal Communications Commission for broadband data gathering and reporting.
(5)
Interlocal agreement. - An agreement between units of local government as authorized by

Part 1 of Article 20 of Chapter 160A of the General Statutes.
(6)
Joint agency. - A joint agency created under Part 1 of Article 20 of Chapter 160A of the
General Statutes.
160A-340.1. City-owned communications service provider requirements.

(a)
requirements:
A city-owned communications service provider shall meet all of the following

(1)
Comply in its provision of communications service with all local, State, and
federal laws, regulations, or other requirements applicable to the provision of the
communications service if provided by a private communications service
provider.
(2)
In accordance with the provisions of Chapter 159 of the General Statutes, the
Local Government Finance Act, establish one or more separate enterprise funds
for the provision of communications service, use the enterprise funds to
separately account for revenues, expenses, property, and source of investment
dollars associated with the provision of communications service, and prepare and
publish an independent annual report and audit in accordance with generally
accepted accounting principles that reflect the fully allocated cost of providing
the communications service, including all direct and indirect costs. An annual
independent audit conducted under G.S. 159-34 and submitted to the Local
Government Commission satisfies the audit requirement of this subdivision.
(3)
Limit the provision of communications service to within the corporate limits of

the city providing the communications service.
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(4)
Shall not, directly or indirectly, under the powers of a city, exercise power or
authority in any area, including zoning or land-use regulation, or exercise power
to withhold or delay the provision of monopoly utility service, to require any
person, including residents of a particular development, to use or subscribe to any
communications service provided by the city-owned communications service
provider.
(5)
Shall provide nondiscriminatory access to private communications service

providers on a first-come, first-served basis to rights-of-way, poles, or conduits
owned, leased, or operated by the city unless the facilities have insufficient
capacity for the access and additional capacity cannot reasonably be added to the
facilities. For purposes of this subdivision, the term "nondiscriminatory access"
means that, at a minimum, access shall be granted on the same terms and
conditions as that given to a city-owned communications service provider.
(6)
Shall not air advertisements or other promotions for the city-owned

communications service on a public, educational, or governmental access
channel if the city requires another communications service provider to carry the
channel. The city shall not use city resources that are not allocated for cost
accounting purposes to the city-owned communications service to promote cityowned communications service in comparison to private services or, directly or
indirectly, require city employees, officers, or contractors to purchase city
services.
(7)
Shall not subsidize the provision of communications service with funds from any
other noncommunications service, operation, or other revenue source, including
any funds or revenue generated from electric, gas, water, sewer, or garbage
services.
(8)
Shall not price any communications service below the cost of providing the
service, including any direct or indirect subsidies received by the city-owned
communications service provider and allocation of costs associated with any
shared use of buildings, equipment, vehicles, and personnel with other city
departments. The city shall, in calculating the costs of providing the
communications service, impute (i) the cost of the capital component that is
equivalent to the cost of capital available to private communications service
providers in the same locality and (ii) an amount equal to all taxes, including
property taxes, licenses, fees, and other assessments that would apply to a private
communications service provider, including federal, State, and local taxes; rightsof-way, franchise, consent, or administrative fees; and pole attachment fees. In
calculating the costs of the service the city may amortize the capital assets of the
communications system over the useful life of the assets in accordance with
generally accepted principles of governmental accounting.
(9)
The city shall annually remit to the general fund of the city an amount equivalent
to all taxes or fees a private communications service provider would be required
to pay the city or county in which the city is located, including any applicable tax
refunds received by the city-owned communications service provider because of
its government status and a sum equal to the amount of property tax that would
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have been due if the city-owned communications service provider were a private
communications service provider.
(b)
A city-owned communications service provider shall not be required to obtain voter
approval under G.S. 160A-321 prior to the sale or discontinuance of the city's communications network.
160A-340.2. Exemptions.
(a)
The provisions of G.S. 160A-340.1, 160A-340.4, 160A-340.5, and 160A-340.6 do not
apply to the purchase, lease, construction, or operation of facilities by a city to provide communications
service within the city's corporate limits for the city's internal governmental purposes, including the
sharing of data or voice between governmental entities for internal governmental purposes, or within the
corporate limits of another unit of local government that is a party with the city to an interlocal agreement
under Part 1 of Article 20 of Chapter 160A of the General Statutes for the provision of internal
government services.
(b)
The provisions of G.S. 160A-340.1, 160A-340.4, and 160A-340.5 do not apply to the
provision of communications service in an unserved area. A city seeking to provide communications
service in an unserved area shall petition the North Carolina Utilities Commission for a determination that
an area is unserved. The petition shall identify with specificity the geographic area for which the
designation is sought. Any private communications service provider, or any other interested party, may,
within a time established by order of the Commission, which time shall be no fewer than 30 days, file
with the Commission an objection to the designation on the grounds that one or more areas designated in
the petition is not an unserved area or that the city is not otherwise eligible to provide the service. For
purposes of this subsection, the term "unserved area" means a census block, as designated by the most
recent census of the U.S. Census Bureau, in which at least fifty percent (50%) of households either have
no access to high-speed Internet service or have access to high-speed Internet service only from a satellite
provider. A city may petition the Commission to serve multiple contiguous unserved areas in the same
proceeding.
(c)
The provisions of G.S. 160A-340.1, 160A-340.3, 160A-340.4, 160A-340.5, and 160A340.6 do not apply to a city or joint agency providing communications service as of January 1, 2011,
provided the city or joint agency limits the provision of communications service to any one or more of the
following:
(1)
Persons within the corporate limits of the city providing the communications
service. For the purposes of this subsection, corporate limits shall mean the corporate limits of the
city as of April 1, 2011, or as expanded through annexation.
(2)
Existing customers of the communications service as of April 1, 2011. Service to
a customer outside the service area of the city or joint agency who is also a public entity must
comply with the open bidding procedures of G.S. 143-129.8 upon the expiration or termination of
the existing service contract.
(3)
The following service areas:

a.
For the joint agency operated by the cities of Davidson and Mooresville,
the service area is the combined areas of the city of Cornelius; the town
of Troutman; the town of Huntersville; the unincorporated areas of
Mecklenburg County north of a line beginning at Highway 16 along the
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west boundary of the county, extending eastward along Highway 16,

continuing east along Interstate 485, and continuing eastward to the
eastern boundary of the county along Eastfield Road; and the
unincorporated areas of Iredell County south of Interstate 40, excluding
Statesville and the extraterritorial jurisdiction of Statesville.
b.
For the city of Salisbury, the service area is the municipalities of

Salisbury, Spencer, East Spencer, Granite Quarry, Rockwell, Faith,
Cleveland, China Grove, Landis and the corridors between those cities.
The service area also includes the economic development sites, public
safety facilities, governmental facilities, and educational schools and
colleges located outside the municipalities and the corridors between the
municipalities and these sites, facilities, schools, and colleges. The
corridors between Salisbury and these municipalities and these sites,
facilities, schools, and colleges includes only the area necessary to
provide service to these municipalities and these sites, facilities, schools,
and colleges and shall not be wider than 300 feet. The elected bodies of
Spencer, East Spencer, Granite Quarry, Rockwell, Faith, Cleveland,
China Grove, and Landis shall vote to approve the service extension into
each respective municipality before Salisbury can provide service to that
municipality. The Rowan County Board of County Commissioners shall
vote to approve service extension to any governmental economic
development site, governmental facility, school, or college owned by
Rowan County. The Rowan Salisbury School Board shall also vote to
approve service extension to schools.
c.
For the city of Wilson, the service area is the county limits of Wilson
County, including the incorporated areas within the County.
d.
For all other cities or joint agencies offering communications service,

the service area is the area designated in the map filed as part of the
initial notice of franchise with the Secretary of State as of January 1,
2011.
(d)
The exemptions provided in this section do not exempt a city or joint agency from laws
and rules of general applicability to governmental services, including nondiscriminatory obligations.
(e)
In the event a city subject to the exemption set forth in subsection (c) of this section
provides communications service to a customer outside the limits set forth in that subsection, the city
shall have 30 days from the date of notice or discovery to cease providing service to the customer without
loss of the exemption.
160A-340.3. Notice; public hearing.
A city or joint agency that proposes to provide communications service shall hold not fewer than two
public hearings, which shall be held not less than 30 days apart, for the purpose of gathering information
and comment. Notice of the hearings shall be published at least once a week for four consecutive weeks
in the predominant newspaper of general circulation in the area in which the city is located. The notice
shall also be provided to the North Carolina Utilities Commission, which shall post the notice on its Web
site, and to all companies that have requested service of the notices from the city clerk. The city shall
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deposit the notice in the U.S. mail to companies that have requested notice at least 45 days prior to the
hearing subject to the notice. Private communications service providers shall be permitted to participate
fully in the public hearings by presenting testimony and documentation relevant to their service offerings
and the city's plans. Any feasibility study, business plan, or public survey conducted or prepared by the
city in connection with the proposed communications service project is a public record as defined by
G.S. 132-1 and shall be made available to the public prior to the public hearings required by this section.
This section does not apply to the repair, rebuilding, replacement, or improvement of an existing
communications network, or equipment relating thereto.
160A-340.4. Financing.
(a)
A city or joint agency subject to the provisions of G.S. 160A-340.1 shall not enter into a
contract under G.S. 160A-19 or G.S. 160A-20 to purchase or to finance the purchase of property for use
in a communications network or to finance the construction of fixtures or improvements for use in a
communications network unless it complies with subsection (b) of this section. The provisions of this
section shall not apply to the repair, rebuilding, replacement, or improvement of an existing
communications network, or equipment relating thereto.
(b)
A city shall not incur debt for the purpose of constructing a communications system
without first holding a special election under G.S. 163-287 on the question of whether the city may
provide communications service. If a majority of the votes cast in the special election are for the city
providing communications service, the city may incur the debt for the service. If a majority of the votes
cast in the special election are against the city providing communications service, the city shall not incur
the debt. However, nothing in this section shall prohibit a city from revising its plan to offer
communications service and calling another special election on the question prior to providing or offering
to provide the service. A special election required under Chapter 159 of the General Statutes as a
condition to the issuance of bonds shall satisfy the requirements of this section.
160A-340.5. Taxes; payments in lieu of taxes.
(a)
A communications network owned or operated by a city or joint agency shall be exempt
from property taxes. However, each city possessing an ownership share of a communications network and
a joint agency owning a communications network shall, in lieu of property taxes, pay to any county
authorized to levy property taxes the amount which would be assessed as taxes on real and personal
property if the communications network were otherwise subject to valuation and assessment. Any
payments in lieu of taxes shall be due and shall bear interest, if unpaid, as in the case of taxes on other
property.
(b)
A city-owned communications service provider shall pay to the State, on an annual basis,
an amount in lieu of taxes that would otherwise be due the State if the communications service was
provided by a private communications service provider, including State income, franchise, vehicle, motor
fuel, and other similar taxes. The amount of the payment in lieu of taxes shall be set annually by the
Department of Revenue and shall approximate the taxes that would be due if the communications service
was undertaken by a private communications service provider. A city-owned communications service
provider must provide information requested by the Secretary of Revenue necessary for calculation of the
assessment. The Department must inform each city-owned communications service provider of the
amount of the assessment by January 1 of each year. The assessment is due by March 15 of each year. If
the assessment is unpaid, the State may withhold the amount due, including interest on late payments,
from distributions otherwise due the city under G.S. 105-164.44I.
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(c)
A city-owned communications service provider or a joint agency that provides
communications service shall not be eligible for a refund under G.S. 105-164.14(c) for sales and use taxes
paid on purchases of tangible personal property and services related to the provision of communications
service, except to the extent a private communications service provider would be exempt from taxation.
160A-340.6. Public-private partnerships for communications service.
(a)
Prior to undertaking to construct a communications network for the provision of
communications service, a city shall first solicit proposals from private business in accordance with the
procedures of this section.
(b)
The city shall issue requests for proposals that specify the nature and scope of the
requested communications service, the area in which it is to be provided, any specifications and
performance standards, and information as to the city's proposed participation in providing equipment,
infrastructure, or other aspects of the service. The city may prescribe the form and content of proposals
and may require that proposals contain sufficiently detailed information to allow for an objective
evaluation of proposals using the factors stated in subsection (d) of this section. Each proposal shall at
minimum contain all of the following:
(1)
Information regarding the proposer's experience and qualifications to perform the

requirements of the proposal.
(2)
Information demonstrating the proposer's ability to secure financing needed to

perform the requirements of the proposal.
(3)
Information demonstrating the proposer's ability to provide staffing, implement

work tasks, and carry out all other responsibilities necessary to perform the
requirements of the proposal.
(4)
Information clearly identifying and specifying all elements of cost of the

proposal for the term of the proposed contract, including the cost of the purchase
or lease of equipment and supplies, design, installation, operation, management,
and maintenance of any system, and any proposed services.
(5)
Any other information the city determines has a material bearing on its ability to
evaluate the proposal.
(c)
The city shall provide notice that it is requesting proposals in accordance with this
subsection. The notice shall state the time and place where plans and specifications for the proposed
service may be obtained and the time and place for opening proposals. Any notice given under this
subsection shall reserve to the city the right to reject any or all proposals. Notice of request for proposals
shall be given by all of the following methods:
(1)
By mailing a notice of request for proposals to each firm that has obtained a
license or permit to use the public rights-of-way in the city to provide a
communications service within the city by depositing such notices in the U.S.
mail at least 30 days prior to the date specified for the opening of proposals. In
identifying firms, the city may rely upon lists provided by the Office of the
Secretary of State and the North Carolina Utilities Commission.
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(2)
By posting a notice of request for proposals on the city's Web site at least 30 days
before the time specified for the opening of proposals.
(3)
By publishing a notice of request for proposals in a newspaper of general

circulation in the county in which the city is predominantly located at least 30
days before the time specified for the opening of proposals.
(d)
In evaluating proposals, the city may consider any relevant factors, including system
design, system reliability, operational experience, operational costs, compatibility with existing systems
and equipment, and emerging technology. The city may negotiate aspects of any proposal with any
responsible proposer with regard to these factors to determine which proposal is the most responsive. A
determination of most responsive proposer by the city shall be final.
(e)
The city may negotiate a contract with the most responsive proposer for the performance
of communications service specified in the request for proposals. All contracts entered into pursuant to
this section shall be approved and awarded by the governing body of the city.
(f)
If the city is unable to successfully negotiate the terms of a contract with the most
responsive proposer within 60 days of the opening of the proposals, the city may proceed to negotiate
with the firm determined to be the next most responsive proposer if such a proposer exists. If the city is
unable to successfully negotiate the terms of a contract with the next most responsive proposer within 60
days, it may proceed under this Article to provide communications service.
(g)
All proposals shall be sealed and shall be opened in public. Provided, that trade secrets
shall remain confidential as provided under G.S. 132-1.2."
SECTION 1.(b)
G.S. 105-164.14 is amended by adding a new subsection to read:
(d2)
A city subject to the provisions of G.S. 160A-340.5 is not allowed a refund of sales and
use taxes paid by it under this Article for purchases related to the provision of communications service as
defined in Article 16A of Chapter 160A of the General Statutes.
SECTION 1.(c) Subsection (b) of this section is effective when it becomes law and applies to sales made
on or after that date.
SECTION 2.(a) G.S. 62-3(23) is amended by adding the following new sub-subdivision to read:
l.
The term public utility shall include a city or a joint agency under Part 1 of Article 20 of
Chapter 160A of the General Statutes that provides service as defined in G.S. 62-3(23)a.6. and is subject
to the provisions of G.S. 160A-340.1.
SECTION 2.(b) This section shall not be construed to change the regulatory nature of or requirements
applicable to any particular service currently regulated by the Commission under Chapter 62 of the
General Statutes.
SECTION 3. Subchapter IV of Chapter 159 of the General Statutes is amended by adding a new Article
to read as follows:
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Article 9A.
Borrowing by Cities for Competitive Purposes.
159-175.10. Additional requirements for review of city financing application; communications
service.
The Commission shall apply additional requirements to an application for financing by a city or a
joint agency under Part 1 of Article 20 of Chapter 160A of the General Statutes for the construction,
operation, expansion, or repair of a communications system or other infrastructure for the purpose of
offering communications service, as that term is defined in G.S. 160A-340(2), that is or will be
competitive with communications service offered by a private communications service provider. This
section does not apply to the repair, rebuilding, replacement, or improvement of an existing
communications network, or equipment relating thereto, but does apply to the expansion of such existing
network. The additional requirements are the following:
(1)
Prior to submitting an application to the Commission, a city or joint agency shall comply
with the provisions of G.S. 160A-340.3 requiring at least two public hearings on the
proposed communications service project and notice of the hearings to private
communications service providers who have requested notice.
(2)
At the same time the application is submitted to the Commission, the city or joint agency
shall serve a copy of the application on each person that provides competitive
communications service within the city's jurisdictional boundaries or in areas adjacent to
the city. No hearing on the application shall be heard by the Commission until at least 60
days after the application is submitted to the Commission.
(3)
Upon the request of a communications service provider, the Commission shall accept
written and oral comments from competitive private communications service providers in
connection with any hearing or other review of the application.
(4)
In considering the probable net revenues of the proposed communications service project,
the Commission shall consider and make written findings on the reasonableness of the
city or joint agency's revenue projections in light of the current and projected competitive
environment for the services to be provided, taking into consideration the potential
impact of technological innovation and change on the proposed service offerings and the
level of demonstrated community support for the project.
(5)
The city or joint agency making the application to the Commission shall bear the burden
of persuasion with respect to subdivisions (1) through (4) of this section."
SECTION 4. G.S. 159-81(3) is amended by adding a new sub-subdivision to read:

q.
Cable television systems.
SECTION 5. Sections 2, 3, and 4 of this act do not apply to a city or joint agency providing
communications service as of January 1, 2011, provided the city or joint agency limits the provision of
communications service as provided in G.S. 160A-340.2(c). In the event a city subject to the exemption
set forth in this section provides communications service to a customer outside the limits set forth in
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G.S. 160A-340(c), the city shall have 30 days from the date of notice or discovery to cease providing
service to the customer without loss of the exemption.
SECTION 6. Any city that is designated as a public utility under Chapter 62 of the General Statutes
when this act becomes law shall not be subject to the provisions of this act with respect to any of its
operations that are authorized by that Chapter.
SECTION 7. If any provision of this act or the application thereof to any person or circumstance is held
invalid, the invalidity shall not affect other provisions or applications of this act which can be given effect
without the invalid provision or application, and to that end the provisions of this act are declared to be
severable.
SECTION 8. Except as otherwise provided, this act is effective when it becomes law and applies to the
provision of communications service by a city or joint agency under Part 1 of Article 20 of Chapter 160A
of the General Statutes on and after that date.
In the General Assembly read three times and ratified this the 9th day of May, 2011.
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STATEMENT OF
CHAIRMAN TOM WHEELER
Re:
City of Wilson, North Carolina Petition for Preemption of North Carolina General Statute
Sections 160A-340 et seq., WC Docket No. 14-115, The Electric Power Board of Chattanooga,
Tennessee Petition for Preemption of a Portion of Tennessee Code Annotated Section 7-52-601,
WC Docket No 14-116.
Mayor Gary Fuller of Opelika, Alabama recently authored an op-ed in which he asked a very
simple, but important, question: How does Opelika, a city of fewer than 30,000 people, offer Internet
speeds 100 times faster than the national average? The answer, he concluded, was hard work and the
right for a city to determine its own path. Today, there are simply too many communities across this
nation that cannot determine their own path. There are too many community leaders whose hands are tied
by what Mayor Fuller calls state-level red tape designed to limit competition.
Today, we take an important step to rid these communities of that red tape. Specifically, we act
on petitions filed by the leaders of Chattanooga, Tennessee and Wilson, North Carolina asking the FCC to
preempt laws enacted by state legislatures that prohibit them from expanding their successful communityowned broadband networks. The issue is simple: these communities want to determine their own path.
Their elected local officials want to be able to take action to meet their communities needs for highspeed broadband. But the laws at issue today raise barriers to the deployment of and investment in new
broadband networks and infrastructure. That is why I support granting these petitions.
Communities across the nation, including these two petitioners, understand that access to fast,
fair, and open broadband networks is key to their economic future and the future of their citizens. But as
the Commissions 2015 Broadband Progress Report makes clear, broadband deployment especially in
rural areas is not occurring broadly or quickly enough to meet the increasing bandwidth demands of
consumers.
Accordingly, many communities across the nation are taking action. They have concluded that
existing broadband offerings are not meeting their needs, and the only solution is to become directly
involved in broadband deployment.
Many communities work with existing private sector providers to facilitate improved broadband
service. But when that doesnt work, they seek alternatives, including various forms of public-private
partnerships and, in some cases, deploying broadband networks themselves.
These efforts are reaping dividends, enabling new economic opportunities and improvements in
education, health care, and public safety for the communities that take these steps, a pattern exemplified
by the communities of Chattanooga and Wilson. In Chattanooga, large companies like Amazon and
Volkswagen have invested in new facilities, citing the citys world-leading network as a reason why. And
Chattanooga is emerging as an incubator for tech start-ups. In Wilson, the areas top employers all rely on
the community broadband network, new companies have located in Wilson because of its network, and
residents and businesses in five surrounding counties are all pleading for access to this gigabit-speed
connectivity.
However, as their petitions make clear, the leaders of Chattanooga and Wilson are being
prevented from expanding their broadband networks to surrounding areas and making their own decisions
about their broadband future. In Tennessee and North Carolina, and in 17 other states, community
broadband efforts have been blocked or severely curtailed by restrictive state laws laws often passed
due to heavy lobbying support by incumbent broadband providers.
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When local leaders have their hands tied, local business and residents endure the consequences.
Jeff Wilson from Holly Springs, North Carolina, can tell you about the healthcare technology
company in his city that relocated services to another area because of inadequate access to broadband to
do their business. They were simply unwilling to lose business because they were stuck in a digital slow
lane.
Matt Shuler from Highlands, North Carolina, can tell you about how local leaders saw the
Internet as a way to bring economic opportunity to their isolated town of 1,000 residents. But the red tape
of the state law stopped them from doing so.
Richard Thornton can detail the frustration of living only three-quarters of a mile from
Chattanoogas gigabit network but still being in the Internet Dark Age. He has to pay $316 per month for
a collage of services that include two mobile hot spots (that require careful monitoring for data usage),
satellite TV, and phone service. Yet, less than a mile away gigabit service is available with TV and phone
for only $133. Furthermore, that provider would like to extend its service, but is prohibited from doing so
by Tennessees bureaucratic barriers.
Eva VanHook from Bradley County, Tennessee can explain how she has to drive her son to their
church to watch online materials assigned by his biology teacher because state rules keep her from getting
the faster and cheaper Internet service that Chattanooga EPB wants to deliver to her.
The Commission respects the important role of state governments in our federal system, and we
do not take the step of preempting state laws lightly. But it is a well-established principle that state laws
that directly conflict with federal laws and policy may be subject to preemption in appropriate
circumstances.
Congress instructed the FCC to encourage the expansion of broadband throughout the nation.
Consistent with this statutory mandate, the Commission acts today to preempt two restrictive state laws
hampering investment and deployment of broadband networks in areas where consumers would benefit
from greater levels of broadband service.
This Order reflects our continued commitment to the goals of Section 706 and represents a
significant step forward in giving local communities a full range of options for meeting their broadband
needs. While the direct effect of our decision today is limited to the two states involved, it sends a clear
message: communities should be able to determine their own paths to meet their constituents needs.
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STATEMENT OF
COMMISSIONER MIGNON L. CLYBURN
Re:
WC Docket No. 14-116.
For those in this room and to others live-streaming it may be hard to imagine just how many
people lack the capacity to access the Internet. Millions are trapped in digital darkness, robbed of the
opportunity to telecommute in the wake of this winters weather madness or keep up with classroom
studies due to the ever mounting number of snow days and delayed start times. For scores of Americans
the choice of one, let alone multiple broadband networks, is a dream deferred and the promise of
universal access remains un-kept.
Todays vote seeks to draw a line in the sand once and for all by removing barriers to deployment
and fostering competition consistent with the FCCs core mission and values. What has been regrettably
lost in the thunderous debate over whether constructing municipal broadband networks is a good idea or if
one system or another is considered a success, is the only question that really matters: Are these laws
barriers to broadband infrastructure investment and competition?
The Tennessee and North Carolina petitions present this compound question to the Commission
and today we conclude that the answer is yes.
There are provisions that limit service by municipalities to specific areas but not others even if the
local governmental entity has a pre-existing telecommunications network in that region. And just what
has been the result? Certain communities have the capacity to achieve limitless outcomes, while others a
few yards from town are stuck in a digital desert deprived of the means to close persistent opportunity
gaps.
Duly elected officials armed with the desire to address these concerns should not be denied the
ability to respond to the infrastructure needs of their communities particularly when the private sector has
opted not to do so. When a community is so desperate that it literally begs private companies to come in
and serve, but is turned down in a cavalier and dismissive fashion by enterprises seemingly best suited to
provide broadband to their citizens, then the option for that municipality to act on its own should not be
foreclosed.
Sadly, opportunities are being foreclosed far too often leaving citizens without broadband and
local leaders with few meaningful ways to address their needs.
Fortunately, we are poised to adopt an item that grants relief from barriers erected in the
provisions of the laws of two states and we retain the means to address any concerns that may come
before us on a case-by-case basis.
And we are not alone.
Members of Congress, led by Senator Cory Booker, and co-sponsored by Senators Claire
McCaskill, Ed Markey, Angus King, and Ron Wyden, introduced The Community Broadband Act of
2015, which seeks to remove state barriers for constructing municipal broadband networks.
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It is unfortunate, however, that this issue has become a partisan one as of late because it was not
always that way. Indeed, in 2005, an effort lead by Senators John McCain, Lindsey Graham, Norm
Coleman, John Kerry, Russ Feingold, and the late Frank Lautenberg sought to block states from
restricting local governments ability to provide Internet service through The Community Broadband Act
of 2005. When the bill was reintroduced in 2007, the late Senators Ted Stevens, Olympia Snowe, and
Gordon Smith joined as co-sponsors. And across the hall, a House version of the bill was co-sponsored
by Representatives Fred Upton and Rick Boucher.
What is striking, is that the language in all of these bills is nearly identical. The only thing that
has changed is the lack of bipartisan support.
I am hopeful, however, that in time we will once again unite across party lines to endorse
measures that will break down barriers to infrastructure investment, so that no American, no matter where
they live, no matter their economic status, will be perpetually stuck in digital darkness.
I want to thank the Wireline Competition Bureau for their work on this item, and the Chairman
for his leadership on this issue.
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STATEMENT OF
COMMISSIONER JESSICA ROSENWORCEL
Re:
WC Docket No 14-116.
American enterprise and self-sufficiency are the stuff of legend. But when we really thrive is
when we find common cause and come together to get things done.
For our forebears, this meant everything from holding barn raisings to building bridges to setting
up cooperatives to bring electricity to our nations farms. But infrastructure challenges like these are not
limited to the past. We have communities that face them todaywith broadband.
Broadband, after all, is more than a technologyits a platform for opportunity. In urban areas,
rural areas, and everything in between, high-speed service is now necessary to attract and sustain
businesses, expand civic services, and secure a viable future. Without it, no community has a fair shot in
the digital age.
I learned this first hand last year when I visited Lafayette, Louisiana. Deep in the heart of
Acadiana where Zydeco was born, I got the chance to sit downover some awfully good gumbowith
Lafayette City-Parish President Joey Durel and learn about the struggle to bring high-speed service to his
community. It took time and tenacity; this was not an effort for the faint of heart. But eventually
Lafayette did itand brought lightning-fast broadband service to town through its municipal utility.
The story in Lafayette is similar to the one in Chattanooga, Tennessee and Wilson, North
Carolina. They did something that was fundamentally American. When existing providers failed to meet
their needs, they came together as a community and built it themselves. As a result, the Electric Power
Board of the City of Chattanooga now offers Gigabit service to all of its customers and the residents of
Wilson County have access to a municipal network that also supports Gigabit speed. Now both municipal
providers want to extend their broadband offerings to other consumers nearby, in communities where the
speeds are slower and the competitive choice more limited. So today we tear down barriers that prevent
them from expanding their broadband service and offering more consumers more competitive choice. I
am pleased to offer my support.
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DISSENTING STATEMENT OF
COMMISSIONER AJIT PAI
Re:
In 1999, the State of Tennessee authorized municipal electric systems to provide Internet service
within the boundaries of their service areas.1 The legislation enjoyed widespread support among
Tennessees elected representatives. It passed the Tennessee General Assembly and the Tennessee Senate
unanimously, each of which was under the control of the Democratic Party. The votes were 96-0 and 320, respectively.2 The Republican Governor of Tennessee then signed the bill into law.3
Today, however, three unelected officials in Washington, DC, purport to rewrite Tennessee law
on a party-line vote. Specifically, they attempt to empower Tennessee municipal electric systems to offer
broadband service outside of their service areasauthority which those systems have never possessed.
While they do not contest that Tennessee may prohibit municipal electric systems from offering Internet
service altogether, the Order claims that the Volunteer State may not grant municipalities such authority
on the condition that they only serve customers within their service areas. In other words, once the
peoples elected representatives allow municipalities to offer any Internet service at all, the camels nose
owns the tent.
This decision, along with the decision to preempt a similar North Carolina law,4 does not make
any sense. Even more importantly, it is unlawful. Supreme Court precedent makes evident that the FCC
simply does not have the power to do what it claims to be doing. In taking this step, the FCC usurps
fundamental aspects of state sovereignty. And it disrupts the balance of power between the federal
government and state governments that lies at the core of our constitutional system of government.
Whatever the merits of any particular municipal broadband projectand to be clear, on this question I
take no position, deferring to voters and elected officialsI do not believe this agency has the power to
preempt. I therefore dissent.
I.
Lets begin with the one key point that todays Order does not dispute: The Commission cannot
preempt state laws that flat-out prohibit municipalities from offering broadband service. Why? The
answer begins with Constitutional Law 101.
Our Constitution establishes a system of dual sovereignty between the States and the federal
government, such that sovereignty rests concurrently with both the federal government and the States.5
Specifically, the Tenth Amendment reserves all powers not specifically delegated to the federal
government by the Constitution to the States or to the people.6 Thus, States are not creations of the
1
HB 1032, TENN. GEN. ASSEMBLY, http://go.usa.gov/3cQfH (last visited Feb. 24, 2015).
Id.
N.C. Gen. Stat. 160a-340 through 160a-340.6.
Gregory v. Ashcroft, 501 U.S. 452, 457 (1991) (citing Tafflin v. Levitt, 493 U.S. 455, 458 (1990)).
See U.S. CONST. Amdt. 10.
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central government. They are separate sovereigns. This distribution of sovereignty, otherwise known as
federalism, is the defining feature of the relationship between the federal and state governments.
The relationship between a State and its political subdivisions (counties and cities), however, is
an entirely different animal. Legally speaking, municipalities exist as arms of the State. As the Supreme
Court has explained, municipalities are created as convenient agencies for exercising such of the
governmental powers of the State as may be entrusted to them . . . in [its] absolute discretion.7 Because
a municipality is merely a department of the state, the state may withhold, grant or withdraw powers and
privileges to a municipality as it sees fit. That is to say, cities and counties are not sovereign.8 A
municipality has no privileges or immunities under the federal constitution which it may invoke in
opposition to the will of its creator.9
What does all of this mean for purposes of todays Order? First, as a result of our system of dual
sovereignty, the Supreme Court has advised that any federal legislation threatening to trench on the
States arrangements for conducting their own governments should be treated with great skepticism.10
Specifically, in Gregory v. Ashcroft, the Court held that if Congress wishes to allow the federal
government to preempt the States historic powers, it must make its intent unmistakably clear.11 This
has come to be known as the clear statement rule.
And second, because localities are merely creations of the State, any attempt by the federal
government to interfere with a States governance of its own municipalities necessarily constrains
traditional state authority to order its government.12 Indeed, the D.C. Circuit has held that interfering
with the relationship between a State and its political subdivisions strikes near the heart of State
sovereignty.13
Each of these points applies to this Order. It should come as no surprise that any attempt by the
Commission to preempt a state statute prohibiting municipalities from offering broadband service would
trigger the clear statement rule. The Supreme Court case of Nixon v. Missouri Municipal League is
squarely on point. In that case, the Court confronted the question of whether the FCC could use section
253 of the Communications Act to preempt a Missouri law that prohibited municipalities from providing
telecommunications services. The Court concluded that Missouris ability to determine whether its
municipalities could provide such services was part and parcel of the traditional state authority to order
its government.14 It therefore decided that the clear statement rule from Gregory applied.15
7
Wisconsin Pub. Intervenor v. Mortier, 501 U.S. 597, 607-08 (1991) (alteration in original) (internal quotation
marks and citations omitted) (quoting Sailors v. Board of Ed. of Kent Cty., 387 U.S. 105, 108 (1967)).
8
Reynolds v. Sims, 377 U.S. 533, 575 (1964) (Political subdivisions of Statescounties, cities, or whatever
never were and never have been considered as sovereign entities). Indeed, nothing in the U.S. Constitution
prevents a State from abolishing municipalities altogether.
9
Ysursa v. Pocatello Educ. Assn, 555 U.S. 353, 362 (2009) (citing Williams v. Mayor of Balt., 289 U.S. 36, 40
(1933)).
10
Nixon v. Missouri Mun. League, 541 U.S. 125, 140 (2004).
11
Gregory, 501 U.S. at 460 (quoting Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 242 (1985)).
12
Nixon, 541 U.S. at 130.
13
City of Abilene v. FCC, 164 F.3d 49, 52 (D.C. Cir. 1999).
14
Nixon, 541 U.S. at 130.
15
Id. Of course, the fact that this Order deals with broadband services while Nixon addressed telecommunications
services is of no constitutional moment. The federalism implications are exactly the same. In any event, today the
Commission in another item reclassifies broadband service as a telecommunications service. Protecting and
(continued)
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It is also apparent that any attempt by the Commission to preempt state prohibitions on
municipalities offering broadband service would not satisfy the clear statement rule. The Courts decision
in Nixon is again instructive. There, Missouri municipalities argued that section 253 of the
Communications Act gave the Commission the authority to preempt the Missouri statute at issue.16 Here
is what section 253 had to say in relevant part:
(a) In general
No state or local statute or regulation, or other State or local legal requirement, may
prohibit or have the effect of prohibiting the ability of any entity to provide any interstate
or intrastate telecommunications service.
...
(d) Preemption
If, after notice and an opportunity for public comment, the Commission determines that a
State or local government has permitted or imposed any statute, regulation, or legal
requirement that violates subsection (a) or (b) of this section, the Commission shall
preempt the enforcement of such statute, regulation, or legal requirement to the extent
necessary to correct such violation or inconsistency.17
But despite the fact that section 253(a) specifically contemplates the preemption of state laws and
section 253(d) specifically directs the Commission to preempt state laws that have the effect of
prohibiting the offering of telecommunications services, the Supreme Court still concluded that section
253 did not contain the requisite clear statement necessary for the Commission to preempt. As Justice
Souter explained in his opinion for the Court, it was ambiguous whether Congress intended the phrase
any entity in section 253(a) to include state and municipal entities. The Court thus held that section 253
was insufficiently clear to satisfy Gregorys clear statement rule.18
Here, the Commission relies on section 706 of the Telecommunications Act of 1996, not section
253 of the Communications Act, for its authority to preempt state laws governing municipal broadband.
But if section 253 could not clear the high hurdle presented by Gregory, section 706 falls even further
short of the mark.
For starters, while section 253 at least expressly mentions preemption, the text of section 706
makes no reference to it whatsoever. Section 706(a) urges the Commission to encourage broadband
deployment using an enumerated list of tools that includes price cap regulation, regulatory forbearance,
measures that promote competition in the local telecommunications market, or other regulating methods
that remove barriers to entry.19 Preemption is nowhere discussed. Similarly, section 706(b) tasks the
Commission with evaluating the current state of broadband deployment and, if necessary, tak[ing]
immediate action to accelerate deployment of such capability by removing barriers to infrastructure

Promoting the Open Internet, GN Docket No. 14-28, Report and Order on Remand, Declaratory Ruling, and Order,
FCC 15-XXX (2015) (reclassifying broadband Internet access service as a telecommunications service).
16
Nixon, 541 U.S. at 128.
17
Telecommunications Act of 1996, Pub. L. No. 104-104, 253, 110 Stat. 56 (codified at 47 U.S.C. 253))
(emphasis added).
18
Nixon, 541 U.S. at 14041.
19
Telecommunications Act 706(a) (codified at 47 U.S.C. 1302(a)).
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investment and by promoting competition in the telecommunications market.20 Again, theres no

mention of preemption.21
In short, section 706 does not point unequivocally to a commitment by Congress22 to permit the
FCC to preempt state laws governing their own municipalities. Section 706 therefore does not satisfy the
clear statement rule and does not permit the Commission to preempt state prohibitions on municipal
broadband projects. Indeed, its far from certain that section 706 even gives the Commission the ability
to preempt state laws regulating private actorsbut more on that later.23
II.
Notwithstanding all of this, the Commission nonetheless maintains that it can preempt the
Tennessee and North Carolina laws at issue here. Why? According to the Order, the clear statement rule
does not apply because Tennessee and North Carolina have not prohibited municipalities from offering
broadband service altogether. They have only imposed restrictions on their ability to do so.24
The Order claims that the relevant Tennessee and North Carolina laws do not implicate core
attributes of state sovereignty.25 Instead, it asserts that when States impose restrictions on municipal
broadband less onerous than a flat-out ban, such restrictions are magically transformed into an
effectuation of a states preferred communications policy objectivesand therefore subject to federal
preemption if they conflict with federal policy objectives.26
What difference does any of this make? A state is not stripped of its core sovereign power to
govern its political subdivisions, which are arms of the state, merely because it grants them certain
powers. Rather, [t]he number, nature, and duration of the powers conferred upon [municipal]
corporations and the territory over which they shall be exercised rest[] in the absolute discretion of the
state.27 And a state does not relinquish that absolute discretion simply by affording a municipality
some, rather than plenary, authority to offer broadband service. Unfortunately for the Commission, all
the lipstick in the world cannot disguise this pig.
A.
Take, for example, the geographic restrictions set forth in the Tennessee and North Carolina laws
at issue here. In Tennessee, a municipal electric system is authorized to offer broadband service within its
20
Id. 706(b) (codified at 47 U.S.C. 1302(b)).
21
For purposes of Sections I, II, and III of this statement, I will assume arguendo that section 706 provides the
Commission with some measure of independent authority. However, in Section IV, I will explain why I do not
believe that section 706 delegates to the Commission any additional authority.
22
Nixon, 541 U.S. at 141.
23
See infra Section III.
24
Order at para. 162.
25
Id. at para. 157.
26
Id. at para. 147.
27
Holt Civic Club v. City of Tuscaloosa, 439 U.S. 60, 71 (1978) (emphasis added) (quoting Hunter v. Pittsburgh, 207
U.S. 161, 178 (1907)).
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service area, but not outside of those boundaries.28 In North Carolina, a city may only provide broadband
services within its city limits.29
These geographic restrictions go to the heart of a states traditional [] authority to order its
government.30 Indeed, the Commissions claim to the contrary is absurd. A critical component of a
states ability to order its government is the ability to organize its own municipal subdivisions. And a
critical component of organizing municipalities is the power to define each subdivisions geographic
reach. For inherent in the concept of a subdivision is the idea that a locality will exercise authority over a
limited geographic area within a State. For example, the definition of a city under North Carolina law
is a municipal corporation organized under the laws of this State for the better government of the people
within its jurisdiction.31 Indeed, if a State could not confine a municipalitys activities to a specified
geographic area, then there would be little point in maintaining local governments at all; it would be more
efficient to do everything at the state level.
This is why the U.S. Supreme Court has made clear: [T]he territory over which [a
municipalitys powers] shall be exercised rests in the absolute discretion of the state.32 Thus, when the
Commission tries to preempt provisions of Tennessee and North Carolina law that impose geographic
restrictions on municipalities activities with respect to broadband, it is directly interfering with a core
aspect of state sovereigntynamely the ability of Tennessee and North Carolina to make arrangements
for conducting their own governments33 and to determine the territory over which [their municipalities
powers] shall be exercised.34
The implausibility of the Commissions claim to the contrary is perhaps best illustrated by a
couple of hypotheticals. Suppose, for example, that the federal government attempted to tell Tennessee
that it could not limit the City of Chattanoogas Police Department to enforcing the law in Chattanooga.
Instead, once the State of Tennessee authorized the City of Chattanooga to have a police department, it
was required to let Chattanoogas police officers have free rein to patrol from Memphis to Knoxville.
Would anyone seriously contend that such an edict from the federal government wouldnt interfere with
Tennessees ability to order its political subdivisions? Of course not.
Or suppose that the federal government tried to forbid North Carolina from limiting the City of
Wilsons Parks and Recreation Department to operating parks only within Wilson. Instead, if North
Carolina wanted to allow Wilson to have a Parks and Recreation Department, it would have to permit the
Department to operate parks from Asheville to the Outer Banks. Again, such a mandate from the federal
government would obviously interfere with North Carolinas ability to order its political subdivisions as it
sees fit.
B.
There are other problems with the Commissions contention that it can preempt state restrictions
on municipal broadband projects. To begin with, such a claim leads to an exceptionally strange result.
While a state would be free to ban municipal broadband projects outright, it would be forbidden from
28
29
N.C. Gen. Stat. 160a-340.1(a)(3).
30
Nixon, 541 U.S. at 130.
31
N.C. Gen. Stat. 160A-1(3).
32
Holt Civic Club, 439 U.S. at 71.
33
Nixon, 541 U.S. at 140.
34
Holt Civic Club, 439 U.S. at 71.
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imposing more modest restrictions on such projects. Or, in other words, the most severe state law
restrictions on municipal broadband projects (prohibitions) could not be preempted, whereas less stringent
restrictions (those that purportedly do not amount to prohibitions) could be preempted.
I highly doubt that Congress adopted, much less intended, such a convoluted framework when it
enacted the Telecommunications Act of 1996, in part because this would lead to perverse consequences.
For example, if a state is denied the power to authorize municipalities to offer broadband service with
conditions, it will be less likely to authorize them to do so at all. And if, as the Commission suggests,
municipal broadband projects truly advance section 706s aim of enhancing broadband deployment and
competition, it would seem odd to interpret the statute in a manner that would push states toward
prohibiting municipal broadband projects altogether.35
C.
Moreover, the line the Commission draws between state prohibitions of municipal broadband
projects (which it claims present a different question36) and state restrictions on such projects is
artificial and thus untenable. This is because all conditions on the provision of services are effectively
prohibitions when those specified conditions are not satisfied.
Consider, for example, a state law stating that a municipality may not offer broadband service so
long as at least one private broadband provider is offering service to all residents of that municipality.
The Commission likely would claim that such a law would be a restriction on municipal broadband
projects subject to preemption under section 706 because it does not forbid a municipality from providing
broadband service in all circumstances. But in reality, the state law functions as a prohibition as applied
to any municipality where all residents are being offered broadband service by a private provider.
Or consider a state law providing that municipalities were authorized to operate municipal
broadband projects beginning January 1, 2020. Would that condition as to timing be a restriction that
could be preempted using section 706? Or would it be a prohibition on municipal broadband projects
through the end of 2019 that could not be preempted?
In short, the heart of the Commissions analysis rests not on a principled distinction but
semantics. And no matter what wordplay the Commission employs, it cannot escape one basic fact:
Through preemption, the Commission is attempting to provide municipalities in Tennessee and North
Carolina with authority that their state governments have not given them.
35
Indeed, it is worth nothing that in 1997, the Commission explicitly encouraged states to impose restrictions on
municipal entry into the telecommunications market that would fall short of a total prohibition.
[W]e encourage states to avoid enacting absolute prohibitions on municipal entry into
telecommunications . . . . Municipal entry can bring significant benefits by making additional
facilities available for the provision of competitive services. At the same time, we recognize that
entry by municipalities into telecommunications may raise issues regarding taxpayer protection
from the economic risks of entry, as well as questions concerning possible regulatory bias when
separate arms of a municipality act as both a regulator and a competitor. We believe, however,
that these issues can be dealt with successfully through measures that are much less restrictive
than an outright ban on entry, permitting consumers to reap the benefits of increased competition.
Pub. Util. Commn of Tex. et al., CCB Pols. 96-13, 96-14, 96-16, 96-19, Memorandum Opinion and Order,
13 FCC Rcd 3460, 3549, para. 190 (1997).
36
Order at para. 147.
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Such action would interfere with States arrangements for conducting their own governments 37
because it would be inconsistent with the fundamental principle that a State has absolute discretion to
determine the number, nature, and duration of the powers it wishes to entrust to its municipalities.38 As
a result, there must be a clear statement that Congress intended to give the Commission the authority to
infringe upon the sovereignty of Tennessee and North Carolina in this mannera clear statement that is
nowhere found in section 706.
III.
But it even gets worse for the Commissions position. For not only does section 706 lack any
clear statement necessary to preempt States arrangements for conducting their own governments, I also
very much doubt that it even gives the Commission the authority to preempt any state laws, even those
governing private actors.
For example, section 601(c)(1) of the Telecommunications Act of 1996 states: NO IMPLIED
EFFECT- This Act and the amendments made by this Act shall not be construed to modify, impair, or
supersede Federal, State, or local law unless expressly so provided in such Act or amendments. 39 The
Commission acknowledges that [b]y its terms, section 601(c) prevents implied preemption40 and
nowhere claims that section 706 expressly refers to the preemption or impairment of state law.
Nonetheless, the Commission tries to circumvent this prohibition by claiming that section 601(c)
only prevents the Act itself from being read to preempt state law by implication. Section 601(c),
according to the Commission, does not prevent the Act from being read to implicitly give such
preemptive powers to the Commission.41 Nowhere does the Order contain any explanation for why
Congress would have intended such an odd result. It is difficult to believe that Congress would have been
concerned about implicitly superseding state law in the text of the Act yet would implicitly give the
Commission the authority to do the exact same thing. No, section 601(c) counsel[s] against any broad
construction of the 1996 Act that would create an implicit conflict with state [] law.42 Here, that
principle suggests not reading section 706 of the Telecommunications Act so broadly as to give the
Commission the power to manufacture conflicts with state law. Hence, it counsels against interpreting
section 706 to give the Commission the power to preempt state law.
Theres an additional problem with the Commissions approach: Section 706(a) extends beyond
the FCC. Remember that the text of that subsection gives the FCC and each State commission with
regulatory jurisdiction over telecommunications services the same direction: to encourage the
deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans
(including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner
consistent with the public interest, convenience, and necessity, price cap regulation, regulatory
forbearance, measures that promote competition in the local telecommunications market, or other
regulating methods that remove barriers to infrastructure investment.43
37
Nixon, 541 U.S. at 140.
38
Wisconsin Pub. Intervenor, 501 U.S. at 60708 (citations omitted); Holt Civic Club, 439 U.S. at 71 (quoting
Hunter v. Pittsburgh, 207 U.S. 161, 178 (1907)).
39
Telecommunications Act of 1996, Pub. L. No. 104-104, 601(c), 110 Stat. 56 (codified at 47 U.S.C. 152).
40
Order at para. 153.
41
Id.
42
Pinney v. Nokia, Inc., 402 F.3d 430, 458 (4th Cir. 2005).
43
Telecommunications Act of 1996 706(a) (codified at 47 U.S.C. 1302(a)).
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Therefore, if section 706(a) authorizes the FCC to preempt state law, it would appear to empower
State commissions to do the same. Recognizing the absurdity of this result (and perhaps how problematic
it is from a federalism standpoint), the Order contends that the phrase other regulating methods in
section 706(a) means one thing when applied to the FCC and another when applied to State
commissions.44 But nothing in the text of the statute supports that argument. Only by rewriting section
706(a), rather than interpreting it, can the Commission reach this result.45
As support for its position, the Order looks to the D.C. Circuits decision in Verizon v. FCC.46
But there, the D.C. Circuit simply said that it was not implausible to believe that Congress would have
granted authority to State commissions in section 706(a). The court nowhere stated that a single phrase in
section 706(a)other regulating methodscould mean two different things in the same provision.
Turning to section 706(b), the case for interpreting the statute to permit the Commission to
preempt state law is similarly unavailing. Under the Commissions own interpretation of section 706(b),
the provision only gives the Commission authority when the FCC determines that advanced
telecommunications capability is not being deployed to all Americans in a reasonable and timely fashion.
And the Commission asserts that it currently possesses the power to use section 706(b) to preempt state
laws because it has made such a negative determination.47 But that argument presents a pickle: What
happens if the Commission finds at a later date that broadband is being deployed to all Americans in a
reasonable and timely fashion? Once the Commissions supposed section 706(b) authority evaporates,
would any state laws that were preempted under section 706(b) cease to be preempted? That would seem
to be the case since the Commissions authority to preempt such laws would no longer exist. But this
would be an odd result to say the least (notice the recurring theme here). Indeed, I am unaware of any
similar statutory scheme involving preemption, which again suggests that Congress did not intend to give
the Commission the power to preempt state law under section 706(b).48
Furthermore, the statutory history underlying section 706(b) also points in the same direction.
When the Senate in 1995 passed the bill that became the Telecommunications Act of 1996, that
legislation contained a precursor to section 706(b) that authorized the FCC, if it determined that
broadband was not being deployed in a reasonable and timely fashion, to preempt State commissions
that fail to act to ensure [the] availability [of advanced telecommunications capability to all
Americans].49 But Congress ultimately decided not to grant this preemptory power to the Commission
and eliminated that language from the final version of the bill.
44
Order at para. 151.
45
Cf. Clark v. Martinez, 543 U.S. 371, 378 (2005) (To give these same words a different meaning for each
category would be to invent a statute rather than interpret one.).
46
Id. (citing Verizon v. FCC, 740 F.3d 623, 638 (D.C. Cir. 2014)).
47
Order at para. 137.
48
Relying on a statement contained in a dissenting opinion by a U.S. Supreme Court Justice, the Order speculates
that Commission actions adopted pursuant to a negative section 706(b) determination would not simply be swept
away by a future positive section 706(b) finding. Order at note 374. But what authority would the Commission
have to maintain the preemption of state law under section 706(b) without section 706(b) authority? Indeed, if
Congress gave the Federal Emergency Management Agency (FEMA) authority to preempt state law during a
hurricane, would anyone think that FEMA could continue to preempt that state law once the storm had passed,
sunny skies had returned, and recovery efforts were over? Of course not. So too here. But more to the point, even
asking this question is sure to trap the agency in the labyrinth of section 706(b)s on-off authority; the only way to
escape is not to enter in the first place. Here, that means not interpreting section 706 to provide the Commission
with the authority to preempt state law.
49
See S. 652 304(b) (104th Cong. 1995) (contained in Title IIIAn End to Regulation).
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The fact that Congress expressly contemplated providing the Commission with the power to
preempt in section 706 but removed such language from the legislation strongly counsels against
interpreting the provision to allow the Commission to preempt state law. As the Supreme Court
explained in a similar case involving a Conference Committee removing language from a House bill,
Congresss action strongly militates against a judgment that Congress intended a result that it expressly
declined to enact.50 Accordingly, there can be no doubt that neither the text of the statute nor its
legislative history provides support for the argument that section 706(b) gives the Commission the power
to preempt state law.
One more point regarding the statutory history merits mention. The discussion of preemption in
both the Senates version of the Act only involved Commission authority to preempt State commissions.
This Order, however, involves the preemption of statutes passed by the Tennessee and North Carolina
State legislatures. Although the Order claims that this is helpful to the Commissions case,51 it actually
cuts the other way. For if Congress was unwilling to give the Commission the authority to preempt State
commissions, it strains credulity to believe that it intended to empower the Commission to take the far
more serious step of displacing the will of a States democratically-elected legislators.
Finally, at the very least, section 601(c) and the text and statutory history of section 706 add
substantial weight to the argument that section 706 does not give the Commission the authority to
preempt state restrictions on municipal broadband. That is because they make it even more obvious that
section 706 does not contain the unmistakably clear statement required by Gregory. Any interpretation
that suggests otherwise requires one to grasp at statutory straws.
IV.
There is one last reason why section 706 doesnt give the Commission authority to preempt
Tennessee or North Carolina laws pertaining to municipal broadband projects. Up until this point, I have
accepted for the sake of argument the premise that section 706 gives the FCC some measure of
independent authority. But it doesnt. The text, statutory structure, and its legislative history all make
clear that Congress intended section 706 to be hortatorynot delegatoryin nature.
Although each of its subsections suggests a call to action (shall encourage, shall take
immediate action), neither reads like nor is a delegation of authority. For one, neither subsection
expressly authorizes the FCC to engage in rulemaking. Congress knows how to confer such authority on
the FCC and has done so repeatedly: It has delegated rulemaking authority to the FCC over both specific
provisions of the Communications Act (e.g., [t]he Commission shall prescribe regulations to implement
the requirements of this subsection52 or the Commission shall complete all actions necessary to
establish regulations to implement the requirements of this section53), and it has done so more generally
(e.g., [t]he Commission[] may prescribe such rules and regulations as may be necessary in the public
50
Gulf Oil Corp. v. Copp Paving Co., Inc., 419 U.S. 186, 200 (1974). See INS v. Cardoza-Fonseca, 480 U.S. 421,
442 (1987) (Few principles of statutory construction are more compelling than the proposition that Congress does
not intend sub silentio to enact statutory language that it has earlier discarded in favor of other language.) (quoting
Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 392-93 (1980) (Stewart, J., dissenting));
International Broth. of Elec. Workers v. NLRB, 814 F.2d 697, 711 (D.C. Cir. 1987) (Congress, however, decided
against the modification of section 9 proposed by Senator Taft. This fact alone, we believe, strongly militates
against a judgment that Congress intended a result that it expressly declined to enact.) (quoting Gulf Oil Corp.,
419 U.S. at 200).
51
Order at para. 152.
52
Communications Act of 1934, as amended, 227(b)(2).
53
Communications Act of 1934, as amended, 251(d)(1).
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interest to carry out the provisions of th[e Communications] Act54). Congress did not do either in section
706.
For another, neither subsection expressly authorizes the FCC to prescribe or proscribe the
conduct of any party. Again, Congress knows how to empower the Commission to prescribe conduct
(e.g., the Commission is authorized and empowered to determine and prescribe what will be the just and
reasonable charge55) and to proscribe conduct (e.g., the Commission is authorized and empowered . . .
to make an order that the carrier or carriers shall cease and desist56). And again, Congress has
repeatedly empowered the FCC to direct the conduct of particular parties (e.g., [t]he Commission may at
any time require any such carrier to file with the Commission an inventory of all or of any part of the
property owned or used by said carrier,57 or the Commission shall have the power to require by
subpoena the attendance and testimony of witnesses58). Congress did not do any of this in section 706.
For yet another, neither subsection expressly authorizes the FCC to enforce compliance by
ordering payment for noncompliance. Where Congress has authorized the Commission to impose
liability it has always done so clearly: For forfeitures, the Communications Act directs that [a]ny person
who is determined by the Commission . . . shall be liable to the United States for a forfeiture penalty59
and [t]he amount of such forfeiture penalty shall be assessed by the Commission . . . by written notice.60
And for other liabilities, the Communications Act directs that the Commission shall make an order
directing the carrier to pay to the complainant the sum to which he is entitled.61
The lack of express authority to issue rules, order conduct, or enforce compliance should be
unsurprising, however, since section 706s subsections lay out precisely how Congress expected the FCC
to encourage . . . deployment and take action: Congress expected the FCC to use the authority it had
given the agency elsewhere. The FCC already had the authority to adopt price cap regulation since it
had started converting carriers from rate-of-return regulation to price-cap regulation in the early 1990s.62
The Telecommunications Act established the FCCs regulatory forbearance authority.63 The
Telecommunications Act also authorized the FCC to remove barriers to infrastructure investment,
54
Communications Act of 1934, as amended, 201(b) (The Commissioner [sic] may prescribe such rules and
regulations as may be necessary in the public interest to carry out the provisions of this Act.); see also
Communications Act of 1934, as amended, 303(r) (Except as otherwise provided in this Act, the Commission
from time to time, as public convenience, interest, or necessity requires shall . . . [m]ake such rules and
regulations and prescribe such restrictions, not inconsistent with law, as may be necessary to carry out the provisions
of this Act . . . .).
55
Communications Act of 1934, as amended, 205(a).
56
57
Communications Act of 1934, as amended, 213(b).
58
Communications Act of 1934, as amended, 409(e).
59
Communications Act of 1934, as amended, 503(b)(1).
60
Communications Act of 1934, as amended, 503(b)(2)(E).
61
Communications Act of 1934, as amended, 209.
62
Policy and Rules Concerning Rates for Dominant Carriers, CC Docket No. 87-313, Second Report and Order, 5
FCC Rcd 6786 (1990).
63
Communications Act of 1934, as amended, 10 ([T]he Commission shall forbear from applying any regulation
or any provision of this Act to a telecommunications carrier or telecommunications service, or class of
telecommunications carriers or telecommunications services . . . .).
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specifically barriers to entry created by state or local laws,64 and instructed it to identify and eliminate
market entry barriers.65 And as for promoting competition in the telecommunications market, the
Telecommunications Act added a whole second part to Title II of the Communications Act, titling it
Development of Competitive Markets.66 In other words, Congress did in fact invest[] the Commission
with the statutory authority to carry out those acts described in section 70667it just did so through
provisions other than section 706.
The structure of federal law confirms this reading. Although Congress directed that many
provisions of the Telecommunications Act be inserted into the Communications Act,68 section 706 was
not one of them. Instead, it was left as a freestanding provision of federal law.69 As such, the provisions
of the Communications Act that grant rulemaking authority under this Act (like section 201(b)), that
grant prescription-and-proscription authority [f]or purposes of this Act (like section 409(e)), and that
grant enforcement authority for violations of this Act (like section 503) simply do not apply to section
706 of the Telecommunications Act. Indeed, the so-called subject-matter jurisdiction of the FCC under
section 2 applies, by its own terms, only to provisions of this Act70and so the most important[]
limit the D.C. Circuit in Verizon thought applied to section 706 does not in fact exist.71 In other words,
the statutory superstructure that normally undergirds Commission action just does not exist for section
706 of the Telecommunications Act.
What is more, reading section 706 as a grant of authority outside the bounds of the
Communications Act yields absurd results. As the Commission recognized in the Advanced Services
Order with respect to regulatory forbearance, reading section 706 as an independent grant of
authority . . . would allow us to forbear from applying certain provisions in the Act even when section 10
would not let us do so.72 That same logic applies to every regulating method specified in section 706.
If Congress had intended to grant the FCC almost limitless authority for price cap regulation,
removing barriers, or promoting competition, what was the point of specifying limited authority in
the Telecommunications Acts actual amendments to the Communications Act?73
64
65
66
Communications Act of 1934, as amended, Title II, Part II, 25160.
67
Verizon v. FCC, 740 F.3d 623, 638 (D.C. Cir. 2014) (quoting Open Internet Order, 25 FCC Rcd at 17969 120).
68
Telecommunications Act of 1996, as amended, 1(b) ([W]henever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered
to be made to a section or other provision of the Communications Act of 1934 (47 U.S.C. 151 et seq.).); see also
Telecommunications Act of 1996, as amended, 101 (Establishment of Part II of Title II. (a) Amendment.Title
II is amended by inserting after section 229 (47 U.S.C. 229) the following new part: . . . .). Notably, all of the
provisions at issue in AT&T v. Iowa Utils. Bd. were in fact inserted into the Communications Act, and thus the Court
could plausibly claim that Congress expressly directed that the 1996 Act . . . be inserted into the Communications
Act. 525 U.S. 366, 377 (1999).
69
For other examples, see Telecommunications Act of 1996, as amended, 202(h), 704(c).
70
71
Verizon v. FCC, 740 F.3d 623, 640 (D.C. Cir. 2014).
72
Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Docket No. 98-147,
Memorandum Opinion and Order and Notice of Proposed Rulemaking, 13 FCC Rcd 24012, 24046, para. 73 (1998)
(Advanced Services Order).
73
The Verizon court asked the wrong question when it noted that it might well hesitate to conclude that Congress
intended to grant the Commission substantive authority in section 706(a) if that authority would have no limiting
(continued)
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Lastly, the history of section 706 confirms its hortatory nature. For years after 1998s Advanced
Services Order, the Commission consistently interpreted the section to direct the agency to use, among
other authority, our forbearance authority under section 10(a) to encourage the deployment of advanced
services.74 And so the Commission has consulted section 706 in resolving one forbearance petition75
after another76 after another.77 And the Commission has looked to section 706 when employing its
authorities under the Communications Act to promote local competition78 and to remove barriers to
infrastructure investment (such as the Commissions authority over pole attachments).79 In other words,
our own history shows that we can meet section 706s goals without relying on it as an independent grant
of authority.
And the actual legislative history clinches the point. Recall that the Verizon court looked to the
Senate Reports description of section 706 as a necessary fail-safe to ensure that the bill achieves its
intended infrastructure objective.80 That was a mistake because the provision described in the Senate
Report was not the section 706 that Congress enacted. As reviewed above, when the Senate passed in
1995 the bill that became the Telecommunications Act of 1996, that legislation contained a precursor to
section 706(b) that authorized the FCC to preempt State commissions that fail to act to ensure [the]
availability [of advanced telecommunications capability to all Americans].81 In other words, the Senate
principle. Verizon, 740 F.3d at 639. But the question is not whether section 706 of the Telecommunications Act
contains some intelligible principle and thus does not violate the non-delegation doctrine, see Whitman v.
American Trucking Associations, 531 U.S. 457, 472 (2001). Instead, the question is one of congressional intent:
Did Congress really intend to put specific limits on the Commissions forbearance authority in one place (section 10
of the Communications Act) only to largely eliminate them in another (section 706 of the Telecommunications
Act)? Such an interpretation doesnt make sense.
74
Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Docket No. 98-147,
Memorandum Opinion and Order and Notice of Proposed Rulemaking, 13 FCC Rcd 24012, 24047, para. 77 (1998)
(Advanced Services Order).
75
Petition of Qwest Corporation for Forbearance Pursuant to 47 U.S.C. 160(c) in the Omaha Metropolitan
Statistical Area, WC Docket No. 04-223, Memorandum Opinion and Order, 20 FCC Rcd 19415, 19469, para. 107
(2005), affd by Qwest Corp. v. FCC, 482 F.3d 471 (D.C. Cir. 2007).
76
Petition of ACS of Anchorage, WC Docket No. 06-109, Memorandum Opinion and Order, 22 FCC Rcd 16304,
16356, para. 118 (2007).
77
Petition of the Embarq Local Operating Companies For Forbearance et al., WC Docket No. 06-147,
Memorandum Opinion and Order, 22 FCC Rcd 19478, 1950304, para. 46 (2007), affd by Ad Hoc
Telecommunications Users Committee v. FCC, 572 F.3d 903 (D.C. Cir. 2009).
78
Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket No. 9698, Third Report and Order and Fourth Further Notice of Proposed Rulemaking, 15 FCC Rcd 3696, 3840, para. 317
(1999) (Our overriding objective, consistent with the congressional directive in section 706, is to ensure that
advanced services are deployed on a timely basis to all Americans so that consumers across America have the full
benefits of the Information Age.); Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an
Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order, 19
FCC Rcd 22404, 2242627, paras. 3637 (2004).
79
Implementation of Section 224 of the Act; A National Broadband Plan for Our Future, WC Docket No. 07-245,
GN Docket No. 09-51, Report and Order and Order on Reconsideration, 26 FCC Rcd 5240, 5317, 5330, paras. 173,
208 (2011); Implementation of Section 224 of the Act; Amendment of the Commissions Rules and Policies
Governing Pole Attachments, WC Docket No. 07-245, RM-11293, RM-11303, Notice of Proposed Rulemaking, 22
FCC Rcd 20195, 20209, para. 36 (2007).
80
S. Rep. No. 104-23 at 5051 (1995); see Verizon, 740 F.3d at 639.
81
See S. 652 304(b) (104th Cong. 1995) (contained in Title IIIAn End to Regulation).
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version would have let the FCC step into the shoes of the state commissions and exercise their authority
under federal law if they failed to act. Thats a fail-safe. But the enacted version contained, as the
Conference Report dryly put it, a modification to that section: This preemptory language was excised.82
In other words, Congress contemplated giving the FCC fail-safe authority in section 706, but then
expressly decided not to do so.
In short, whether one looks at the statutes text, structure, or history, only one conclusion is
possible: Congress did not delegate substantive authority to the FCC in section 706 of the
Telecommunications Act.
But even if one agrees with the D.C. Circuits Verizon decision to the contrary, the courts
reasoning bolsters the argument that section 706 does not contain the unmistakably clear statement
required by Gregory. Under Chevron, an agencys reasonable interpretation of a statute is entitled to
deference if the statutory language does not reveal the unambiguously expressed intent of Congress.83
In its Verizon brief, the Commission argued that its interpretation of section 706 was entitled to such
deference.84 The court ultimately agreed, concluding that the Commissions asserted authority under
section 706 was a reasonable interpretation of an ambiguous statute.85 The D.C. Circuit contended that
Congress ha[d] not directly spoken to the question of whether section 706(a) is a grant of regulatory
authority at all86much less whether it grants the Commission authority to preempt state laws.
Accepting, for the sake of argument, the Commissions and courts arguments as true, I find it difficult to
see how section 706 could be at the same time both ambiguous as to whether it gives the FCC any
authority at all and unmistakably clear as to Congress intent to allow the FCC to preempt state
restrictions on municipal broadband projects.87
***
The elected representatives of the people of Tennessee and North Carolina have chosen to grant
limited authorizations to municipalities in their respective states to offer broadband services. Most
notably, they have allowed municipalities to provide service only within a specified geographic area.
Reasonable people can disagree about the wisdom of such policies. Some believe that the conditions
imposed by Tennessee and North Carolina are too restrictive. Others believe that municipal governments
shouldnt be in the broadband business at all. As I said earlier, I will leave that debate to others.
What is clear, however, is that the FCC does not have the legal authority to override the decisions
made by Tennessee and North Carolina. Under the law, it is up to the people of those two states and their
elected representativesnot the Commissionto decide whether and to what extent to allow
municipalities to operate broadband projects. Todays Order is therefore unlawful.
During the Clinton Administration, the City of Abilene asked the FCC to preempt a Texas law
prohibiting Abilene and other Texas municipalities from entering the telecommunications business. The
FCC described the citys request as follows: Abilene asked the FCC to take the extraordinary step of
82
S. Rep. No. 104-230 at 210 (1996).
83
Brief for Appellee/Respondents at 23, Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014) (11-1355) (citing Chevron
USA, Inc. v. Natural Resources Defense Council, 467 U.S. 837, 84243 (1984)).
84
Id. at 2530.
85
86
Id. at 638.
87
US Telecom notes that [i]f the underlying grant of authority in Section 706 is ambiguous, the statute by
definition does not contain a plain statement of Congressional intent. Comments of US Telecom at 15, WC
Docket No. 14-115 (filed Aug. 29, 2014).
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preempting a States sovereign power to regulate its own municipalities.88 In 1997, the Commission
stayed within its legal bounds and refused to take that extraordinary step. Unfortunately, the agency
does not exhibit the same restraint today.
This decision violates the constitutional principles that lie at the heart of our system of
government. The FCC is treating Tennessee and North Carolina as mere appendages of the federal
government rather than the separate sovereigns that they are. For all of these reasons, I dissent.
88
Brief for Respondents at 11, City of Abilene v. FCC, 164 F.3d 49 (D.C. Cir. 1999) (97-1633, 97-1634).
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DISSENTING STATEMENT OF
COMMISSIONER MICHAEL ORIELLY
Re:
This order highlights the unprecedented lengths that the Commission is willing to go in
undermining the free market system, the Federal statute, the U.S. Constitution, and common sense in
order to try to dictate when, where, and how broadband is provided in this country. The Commission is
just about to vote to re-write the Communications Act to assume vast new regulatory authority over
broadband providers in the next item, and here the Commission has the arrogance to try to re-write state
laws as well. The order is both legally infirm and bad public policy. I cannot support it.
Let me start by expressing my profound opposition to the offering of broadband or any
communications service by a government entity, in this case a municipality. Some people like to talk
about the principles of network compacts, but this issue goes to the core of more important principles: the
foundations of the U.S. economy and free enterprise. For historians, you will remember how government
involvement was debated and dismissed long ago in many other sectors, such as banking. While other
countries, like Cuba, China, Russia and Venezuela, have effectively nationalized private companies, the
bedrock of American capitalism is private enterprise free from government manipulation as a market
entrant. If there is market need, an individual with a dream and a propensity for risk will enter to provide
service. It is not the governments role to offer services instead of or in competition with private actors.
Separately, I would like to clarify any misperception that I am against preemption as a general
matter. While I support the basic premise of Federalism, I embrace the realities and benefits of a
communications marketplace that does not recognize the political borders of yesterday. For instance, I
have no difficulties preempting state and local restrictions on wireless tower and antenna siting. I have
also worked extensively in my career to preempt state and local burdens on the offering of Internet
applications, such as VoIP. So it shouldnt come to anyones surprise that I firmly believe that Internet
access is an interstate service. But making a finding under section 1 of the Communications Act that a
service is interstate is not sufficient, particularly when preemption would trench on the States
arrangements for conducting their own governments.1 The missing ingredient that is essential to trigger
preemption is clear Congressional direction via the statute. If Congress enacts specific legislation to
preempt state law to further municipal broadband, then I will implement it post-haste.
That key ingredient is not present here. The order relies on an illogical and tortured reading of
section 706 of the Telecommunications Act to assert authority. I have previously expressed my views on
this topic and they havent changed. To reiterate just one portion of my concerns, the FCC claims that its
authority under section 706 is not unbounded because it may act only within the limits of its ever
broadening subject matter jurisdiction and its actions must be designed to achieve a particular purpose:
to encourage the deployment on a reasonable and timely basis of advanced telecommunications capability
to all Americans.2 But as Judge Silberman commented on that very phrase, This is an almost
meaningless limitationany regulation that, in the FCCs judgment might arguably make the Internet
better, could increase demand. I do not see how this limitation prevents [section] 706 from being carte
1
Nixon v. Missouri Municipal League, 541 U.S. 125, 140 (2004).
Supra para. 138.
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blanche to issue any regulation that the Commission might believe to be in the public interest.3 In this
item, we see that prediction come true. Indeed, anything that may incent the use of the Internet is
apparently now fair game for FCC regulation.
Yet even if I believed that section 706 provided some general authority, which I do not and nor
does section 1 of the Communications Act, it certainly does not contain the clear statement that the
Supreme Court has said is a prerequisite for preempting a states control of its municipalities.4 On the
contrary, section 706 expressly contemplates a joint federal-state role in broadband deployment.5
We are told, however, that the Supreme Court decisions dont apply here for two reasons: (1) this
is an area where there has been a history of significant federal presence; and (2) the laws at issue here do
not constitute flat bans on the provision of municipal broadband. Both arguments are unavailing and,
therefore, the presumption against preemption must apply here.
First, the order broadly defines the area of significant federal presence as interstate
communications policy. However, the petitions are primarily focused on the narrower question of where
service may be provided, and that is a core function of the states. As the State of Tennessee noted,
While the Commission may regulate the provision of a telecommunication service that a local
governmental unit is authorized by state law to provide, the Commission cannot expand the territorial
jurisdiction of a local governmental unit since any such action would exceed the powers of a federal
agency and manifestly infringe on the sovereignty of a state.6 In other words, the Commission cannot
mandate that a state authorize a municipality to offer broadband. Its just that simple.
Furthermore, the types of restrictions under scrutiny are not necessarily specific to
communications policy. For example, states may require referenda on a variety of spending or other
matters. The fact that a state may require one for municipal broadband does not necessarily mean that it
is being imposed to affect the states communications policy preferences. Indeed, public hearings and
referenda have a long and well-regarded history in the American political tradition.
Moreover, even restrictions that seem specific to communications policy do not necessarily
conflict with the Commissions role in regulating interstate communications. For example, restrictions
truly designed to prevent cross-subsidization can be consistent with existing communications policy. And
requirements for business planning and feasibility studies are similar to FCC rules that ensure that its own
funding recipients are technically and financially qualified. Are we really striking down a requirement
that a municipality have a cogent business plan?
Second, the order turns precedent on its head to conclude that the Commission has the authority
to preempt any restriction that falls short of an outright ban. Finding that the state provisions at issue here
are not flat bans, the order tosses the relevant Tennessee provision and proceeds line by line through the
3
Verizon v. FCC, 740 F.3d 623, 662 (D.C. Cir. 2014) (Silberman, J., concurring in part and dissenting in part).
See Nixon, 541 U.S. at 140, 141 ((interposing federal authority between a State and its municipal subdivisions
cannot be done without an unmistakably clear statement to that effect) (quoting Gregory v Ashcroft, 501 U.S.
452, 460 (1991)).
5
47 U.S.C 1302(a)(directing the Commission and each State Commission with jurisdiction to encourage the
deployment of advanced telecommunications capability).
6
Letter from Herbert H. Slattery III, Attorney General, State of Tennessee to Marlene H. Dortch, Secretary, FCC,
WC Docket No. 14-116 (filed Feb. 5, 2015), http://apps.fcc.gov/ecfs/document/view?id=60001027109.
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North Carolina statute to eliminate what it sees fit. In doing so, the order ignores how both the City of
Wilson and the State of North Carolina interpret their own statute and the relief petitioners actually
sought. In essence, the overly broad extension of this item would overrule certain sound restrictions
justified by the use of taxpayer funding, such as public hearings and voting requirements even though,
when I met with the City of Wilson, they said that they could live with them.
Moreover, the order is downright hostile to the states, accusing them of passing laws that
allegedly but do not actually protect taxpayers from risk. It seems that no protection enacted by a state,
no matter how beneficial to taxpayers, could survive the FCCs unvarnished skepticism. In fact, the only
restriction that may survive under the Commissions reading of section 706 is a state law imposing a flat
ban, which seems short-sighted and counterproductive. That is, the order may encourage states that are
concerned about the risks of municipal broadband to prohibit it altogether rather than permit it under
carefully tailored conditions that ensure such projects will be successful and not burden taxpayers.
I am also deeply troubled by the policy implications of this order. Municipal broadband networks
have a history of overpromising and under-delivering, leaving taxpayers at risk. Weve seen examples
where municipal broadband projects that failed did so due to competition, poor planning, or unethical
practices. Thats the very scenario and conduct that states are trying to remedy by requiring a right of
first refusal to private sector broadband providers, business plans, feasibility studies, public hearings, and
referenda.
Finally, I have to wonder if all of this is for naught. Municipal broadband providers, like all other
ISPs, will now be subject to Title II regulations. Notably, dozens of these providers opposed
reclassification because, in their own words, it will undermine the business model that supports our
network, raises our costs and hinders our ability to further deploy broadband.7 It is an odd result indeed
to preempt a number of state rules in the name of removing barriers to broadband deployment only to
impose extensive new barriers in their place.
In sum, I find it appalling that we would override democratically-enacted, common-sense
protections for consumers, especially in the absence of clear direction from Congress. I must dissent.
Letter from 43 Municipal Broadband Providers to Tom Wheeler, Chairman, FCC, GN Docket Nos. 14-28 & 10127 (filed Feb. 10, 2015), http://apps.fcc.gov/ecfs/document/view?id=60001028442.
116

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Appeal: 15-1506

PETITION FOR REVIEW

Pursuant to 47 U.S.C. 402(a), 28 U.S.C. 2342(1) and 2344, and Rule

(Order, p. 76, 185)

Jim Baller, Sean Stokes,

American Legislative Exchange Council

Benjamin Jacob Downey

Broadband Alliance of Mendocino

City of Carl Junction, MO

Commissioner Mike O'Rielly

Paul A. Kronberger, CIO

Nancy Shepard, Mayor

Mary Beth Henry

David Shaw and Drew Clark

Diana Carew, Economist

Elaine Davis, Executive VP

Heather N. Cristion Wilson

Institute for Local Self-Reliance

Heather Burnett Gold, President

Institute for Local Self-Reliance and

Tom Giovanetti, President

Mayor Gary Resnick, Chair

International Center for Law &

W. Theodore Pibil, Jr. Director

Jon Sanders, Dir. of Regulatory Studies

James R. Van Zandt

Karen M. McDonald, City Attorney

Kyra F. Howell, President

Katie McAuliffe, Executive Director

LR Holmes, Ross Holmes Group

3562 S 18th Ave

Rep. Marilyn W Avila

Middle Class Action Fund

Tracey Rosenberg, Executive Dir.

James Bradford Ramsay

New America Foundation - Open

NGA, NCSL, CSG

NC Next Generation Network

Northern Virginia Electric Cooperative

NTCA - The Rural Broadband Assoc.

Clarence E. Anthony, Executive Dir.

Michael Romano, Sr VP, Policy

Erik Stallman, Steptoe & Johnson LLP

OptiFi, Kyle Traxler

Sarah Collins/Whitney Christen

Pennsylvania Public Utility Commn

Alan Wilson, Attorney General

Rep. Beverly Earle

Town of Rockport, Maine

Catharine Rice, President

Senator Paul Farrow

Senator Thom Tillis

Amina Fazlullah, Director of Policy

Timothy A Hinnant, Mayor

Randolph J. May, President

Michael Beckerman, President & CEO

TechFreedom and ICLE

Miles Atkins, Mayor