Broadband: Virtue Or Vice?

REUTERS/Yuri Gripas

Katie McAuliffe Executive Director, Digital Liberty
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Successful federal agency power grabs are increasingly common.  The Federal Communications Commission’s broadband grab is no exception.

Like kudzu creeping through forests, the FCC’s massive regulatory expansion has horned in on privacy standards and business competition, while bringing new uncertainties with the Open Internet Order.

Under the guise of broadband competition, the FCC actually tried to tell states how to run their finances.  Agencies cannot regulate where Congress did not give them the authority to do so. They knew it was a step too far, but with all of its excesses somehow slipping past the courts, why not go for broke?

But the courts finally nailed the FCC to the wall. The court was so definitive that the FCC isn’t even challenging this one. “A challenge is not a good use of agency resources,”  a spokesperson said.

The Sixth Circuit Court of Appeals ruled that it is against the law for the FCC to overturn state law that governs its municipalities. Municipalities are administrative subdivisions of a state. A local governing body, such as a city council, is a subdivision of the state, which is under the state’s direction.

Advocates on the left would have you believe that the court ruled against broadband expansion and competition.  The question the court answered was not whether or not government run, or municipal broadband is virtue or vice, but who should decide whether it is good policy and/or its parameters.

The answer: The state, not the federal government.

The states have an interest in regulating municipal taxpayer investments.  States are the backstop should a municipality go into debt, and there are more examples of staggering debts burdening communities, than broadband successes.

The state laws of Tennessee and North Carolina do not prohibit municipal broadband, but were put in place to allow citizens to decide whether they wanted their town to take on the risk of running its own networks. The core of the laws say the municipal network has to stay within certain parameters, which protect unsuspecting taxpayers from holding the bag.

In NC the network bars local governments from using tax dollars to cross-subsidize other local accounts and requires a vote by the municipality’s citizens to authorize new debt used to fund the broadband service.  The state has already seen Davidson and Mooresville N.C. put up $92M in bonds, and continue to lose $6.1M on operations since 2009.

With this experience, Sen. Thom Tillis (R-NC) praised the court’s ruling that maintains his state’s jurisdiction and the principle of federalism:  the “ruling affirms the fact that unelected bureaucrats at the FCC completely overstepped their authority by attempting to deny states like North Carolina from setting their own laws to protect hardworking taxpayers and maintain the fairness of the free market.”

In Tennessee, municipal electric systems can provide telecom within a city’s corporate limits and cannot subsidize the network with funds from anything other than communication services.  Congressman Marsha Blackburn (R-Tenn.) said:  “The FCC’s decision to grant the petitions of Chattanooga, Tennessee and Wilson, North Carolina is a troubling power grab.  States are sovereign entities that have Constitutional rights, which should be respected rather than trampled upon.”

She is speaking from state experience as well.  Memphis residents lost $20.5 million when Memphis Networx folded.

It’s easy to be “altruistic” with other people’s money.  In Burlington Vt., a taxpayer supported government run program got sneakily bailed out by a tricky mayor, who later got caught.  Burlington Telecom got sued, and is awaiting sale to a private company.

Government broadband isn’t cheaper.  When anyone says it is, they are leaving out that the community, even those who don’t subscribe to the service, are already paying for it in their taxes.  In Connecticut, the network was sold for $550,000 while sticking residents with a $27 million bill to pay off.  The costs are possibly sneaking into citizens electric bills like in Tacoma, Wash.

A New York Times article used the small town of Pinetops, NC to color a story of FCC altruism and fat cat lobbyists.  There are other options for Pinetops should the town as a whole want to have the Greenlight municipal broadband service, like having a vote or Wilson could even annex the town of Pinetops.

A vote on local expenditures is a good thing.  N.C. it wasn’t just “big” corporations opposed to unrestrained municipal networks.  It was residents who were on the hook for failing systems.

The states should decide whether municipal broadband is a virtue or vice.  Not the federal government.

Katie McAuliffe is Executive Director of Digital Liberty and Federal Affairs Manager at Americans for Tax Reform.