CenturyLink Warns FCC Democrats of Municipal Broadband ‘Failures'

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By Lydia Beyoud

Feb. 17 — Telecommunications provider CenturyLink Inc. highlighted what it termed the “costly business failures” of municipal broadband “overbuilding” in meetings with senior staffers in the Federal Communications Commission's two Democratic commissioners' offices.

CenturyLink, one of the nation's largest wireline broadband companies, sought to make the case that the FCC's likely vote on Feb. 26 to approve preemption of laws in two states that prohibit expansion of locally run Internet services wouldn't stand up in court, according to an ex parte filing posted Feb. 13.

“No part of the federal government, including Congress, has the power to require states to create a municipality in the first place, much less permit such a subdivision of the state to take on obligations binding the people of the state against the will of the majority in the state,” CenturyLink said.

Many of the laws currently in place are intended to “protect citizens from projects that could very likely increase their taxes” and “ensure a level playing field for private investment,” it said.

The company used the examples of Google Inc.'s purchase of a $39 million Provo, Utah-run fiber network for $1, and Wilson, N.C.'s Greenlight broadband service as examples of locally run broadband utilities that “have saddled citizens with substantial financial burdens.”

Wilson as well as Chattanooga, Tenn. have petitioned the FCC to preempt their respective state laws preventing the cities from expanding their existing “muni broadband” networks. Utilities in both cities provide broadband services to their jurisdictions but are prohibited from expanding beyond their designated areas, although they report consumers in immediately surrounding municipalities are demanding access to their services.

FCC officials indicated Feb. 2. that they believe the agency has ample authority to preempt state laws by citing its mandate to promote the deployment of broadband services under Section 706 of the Telecommunications Act, but a number of telecom companies, trade associations and state regulators have pushed back against the FCC's proposal.

Municipal broadband supporters have said incumbent providers don't need protection from laws seeking to ensure level playing fields, because they have the ability but have chosen not to build networks in what are frequently high-cost, rural areas of the country.

Congressional Mandates

Tennessee's attorney general told the FCC a decision to grant the Chattanooga petition would require further legislative authorization for the broadband utility provider to extend beyond its existing service area, according to a FCC filing posted Feb. 9

“Section 706 is not an ‘unmistakably clear' mandate” by Congress to preempt state law, Tennessee Attorney General Herbert H. Slatery III said. “Congress' intent to preempt ‘a power traditionally exercised by a state or local government' must be ‘unmistakably clear in the language of the statute,” Slatery said.

Municipal Successes

“There's been no demonstration that it doesn't work in a lot of areas,” Christopher Mitchell, director of the community broadband networks initiative with the Institute for Local Self-Reliance, told Bloomberg BNA.

“Public ownership is faced with the same challenges private ownership is faced with,” Nicholas P. Miller, a partner at Best Best & Krieger LLP told Bloomberg BNA. “You can't expect a 100 percent success rate,” Miller said of CenturyLink's filing. The better question, he said, was whether the large number of municipal broadband providers learn from the mistakes of the projects that do fail.

Every project should be evaluated on its own economic and community merits, said Miller, who represents local governments on telecom issues.

“At the same time, preemption is a touchy issue,” he said. A law suit to vacate the commission's likely decision to preempt Tennessee and North Carolina state laws would be a case of first impression, he said. “The courts have not yet had a case looking at the balance between the 706 priority and a state law mandate,” said Miller.

Pennsylvania Correcting the Record

The Pennsylvania Public Utility Commission asked the FCC to clarify that it was not among the states commission officials referred to Feb. 2 as having outright bans on any sort of municipal broadband facilities.

FCC officials said Pennsylvania, as well as Montana and Nebraska, prohibited muni broadband, while 21 states have some form of anti-municipal broadband laws on the books. Other sources have put that number at 19.

Section 3014(h)(2) of Chapter 30 of Pennsylvania's Public Utility Code (66 Pa. C.S. Section 3011) “contains no provision that ‘completely bans' municipal broadband networks,” the PPUC said in a FCC filing posted Feb. 13.

Instead, Chapter 30 allows incumbent local exchange carriers (ILECs) in Pennsylvania a two-month right of first refusal after a political subdivision requests to provide broadband services, the filing said.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

Text of CenturyLink's filing is at http://apps.fcc.gov/ecfs/document/view?id=60001029343.

Text of the Tennessee AG's filing is at http://apps.fcc.gov/ecfs/document/view?id=60001028947.

Text of the PPUC's filing is at http://apps.fcc.gov/ecfs/document/view?id=60001029100.