North Carolina and Tennessee Lose in 6th Circuit - Community Broadband Bits Podcast 217

Christopher Mitchell: I think it moved us forward. It unfortunately has not removed the barriers permanently, but we are in a better place because of it.

Lisa Gonzalez: Welcome to episode 217 of The Community Broadband Bits Podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. On August 10th, the United States Court of Appeals for the Sixth Circuit filed its opinion in the case of the states of Tennessee and North Carolina versus the FCC. As you probably already know, the case was based on a February 2015 ruling in which the FCC preempted state laws that restricted municipal Internet networks. You probably also know that the court found in favor of the states and reversed the FCC's ruling. In this podcast, Chris and I discuss the courts decision and what we think the future holds for communities affected by it. We also discuss next steps and what this ultimately means for the municipal broadband movement and the fight to restore local authority. To read about the decision and the history of the case that was commenced by the cities of Wilson and Chattanooga, check out our stories on MuniNetworks.org. We've collected the opinions, briefs, and a number of stories as the case unfolded. Here we go.

Christopher Mitchell: Hey Lisa. Welcome back to the office.

Lisa Gonzalez: Hey Chris, glad to be back.

Christopher Mitchell: What's more terrifying, working with me on a daily basis or the roller coasters of Cedar Point in Ohio?

Lisa Gonzalez: No comment.

Christopher Mitchell: Well, you came back and we're beyond time where we should talk about the Sixth Circuit decision on the podcast.

Lisa Gonzalez: Yes, it did happen a while ago and we've been licking our wounds.

Christopher Mitchell: I mean, it's disappointing. It's not the end of the world. I think we haven't really lost that much. Really, it's bad for North Carolina and Tennessee. I would argue the impact on the rest of the states, it's marginal. I really don't think it's as big of a deal, and I think the most important thing is that we are better off today than we were 18 months ago when the FCC started this, even though we lost at the appeals level and even though probably no one will be appealing it further. I think the FCC really helped to encourage more investment by going down this road.

Lisa Gonzalez: Right. Something has been defined. There has been some boundaries established, and so now we know that will not work.

Christopher Mitchell: Right. The FCC went through this incredible comment period and I think a number of us were sort of waiting to see from the comments if we were actually going to see substantive good arguments against municipal networks, but we didn't. We basically saw the same 5 to 10 cities being trotted it out where it didn't go very well or where it did go well, frankly, and the industry lies about how it went. We didn't see any really good arguments against it and the FCC made it very clear in their order that these municipal networks have been a positive force and that communities should be able to decide them. Now Lisa, you're the legal beagle, so let's ask you to jump in, and tell us a little bit about the decision. Because I think the most important thing is that the decision really doesn't say anything about municipal networks except to say very clearly that it accepts the FCC's determination that municipal networks are generally a good thing, they're positive. And, if I was to sum it up, you can explain it more in depth, the Sixth Circuit basically said, "Look. States are doing stupid things by banning these municipal networks by creating these barriers." That's what the FCC found, and we found no reason to dispute that, but states have the right to do stupid things.

Lisa Gonzalez: Right. It's not the first time that a decision has come to this. It was basically a question of state's rights versus the federal authority to tell a state what to do.

Christopher Mitchell: Right. Specifically, I think an executive agency, right? No one doubts that if Congress was very clear, Congress could do this or if Congress more clearly gave the power to the FCC, it could then do it.

Lisa Gonzalez: This is this whole concept of having a federal government, but still giving states the ability to run themselves, control themselves. This Gregory precedent says that if the federal government is going to decide to control some part of governing, then they have to be very specific about what it is. There was nothing in statute --

Christopher Mitchell: Not enough.

Lisa Gonzalez: There is nothing that says that the federal government --

Christopher Mitchell: It's not that there's nothing, there's just not enough.

Lisa Gonzalez: Right. That is why the court in this case decided to defer to the state's ability to control this issue.

Christopher Mitchell: Right. It was not clear that the FCC was given the power by Congress to overrule state law.

Lisa Gonzalez: Right, right, right.

Christopher Mitchell: Right. That's one of the principles that we hold pretty dear here at ILSR. The idea of being anti-preemption.

Lisa Gonzalez: Right. It's bittersweet for us.

Christopher Mitchell: Well in this case we supported preemption to get rid of preemption. That was the odd situation in which we want cities to be able to make up their own minds. Frankly I would say, and I was ragging on the states a little bit for making stupid policy. At the Institute for Local Self-Reliance, I think we generally think cities should have more freedom and some cities will do dumb things and that is the price of freedom. I think it's a double-edged sword, and it's disappointing but it's certainly not the end of the world and I think that I should go back. It's been almost a year since I debated on the Federalist Society Podcast. A number of people including, I believe he goes by Randy May, but he's listed as Randolph May and he debated us on the Federalist Society. He basically said the decision was going to come down to this and this is how it would be decided and he was right.

Lisa Gonzalez: Yeah. Snaps to Randy.

Christopher Mitchell: Right. He correctly identified that. Let's talk about where we go from there. The FCC cannot get rid of these laws. North Carolina and Tennessee still have these laws. We're going to talk a little bit about what would have happened, but first of all let's look at North Carolina, right?

Lisa Gonzalez: Okay, right. Yeah. Let's talk about North Carolina. I'm curious about Pinetops and Wilson, but specifically Pinetops. Because this is a community that they expanded to the small community that really sort of started to blossom since they've had accessed to Greenlight.

Christopher Mitchell: Right. Wilson has this municipal network in North Carolina. It's great, but they cannot go outside their county boundaries without incurring all of these terrible restrictions that the state has [no-glossary]passed[/no-glossary], specifically to stop Wilson from going outside of its county, even though it's electric department already serves in 4 other counties, and the FCC really went through this with a fine-tooth comb as to why these really are effectively a barrier to Wilson being able to expand. During that period where the FCC has struck down the North Carolina law, Wilson went outside of its county to bring service to Pinetops, this community of 1700 people, and as we learned today from the New York Times, a manufacturing facility that was built after Wilson brought fiber optics to, it to process potatoes.

Lisa Gonzalez: Right. Now I think that they will allow them to continue to provide that service.

Christopher Mitchell: I think North Carolina would be crazy if they didn't.

Lisa Gonzalez: Yeah because Pinetops can argue, look, we're already dependent on it. By making them stop, they're going to be causing undue harm.

Christopher Mitchell: Right. Not just that but I think even, if you look at Time Warner Cable who basically wrote this bill and rammed it through with the help of ALEC and AT&T and few others, I don't think they would be served by more and more stories talking about how ridiculous it is that Pinetops has to go back to having really crappy CenturyLink service, right? That's the only option. There's not cable in Pinetops. Pinetops is stocked with CenturyLink and, even though in the New York Times piece that CenturyLink claims is doing a good job, I spoke with a resident from Pinetops, he said the best that is advertised is 10 by 1, and they don't even get that. It's slower than that. If I'm working for Time Warner Cable in North Carolina, I'm thinking, "I don't care about Pinetops. I just don't want to see a bunch of stories about how great municipal broadband is in Pinetops and it's being ripped away." Yeah, you just grandfather it in. That would be the rational thing to happen, but the question is, of course, this is an election season. This is, I don't know exactly when this -- I don't know if the law would start being reinforced at the end of the appeal period, which I believe would be 90 days, but that would be before the next session would start so they would have to a special session to grandfather it in. I don't really know what happens here, but I have to think that that is ultimately what happens in the longer term. If it doesn't, then Pinetops becomes a poster child for an invigorated campaign to try and roll back this ridiculous barrier that lessens investment in North Carolina.

Lisa Gonzalez: Right. Then the next question is, it moves everything to state level fights.

Christopher Mitchell: Right. I don't think we're going to see a significant federal angle to trying to restore local choice. We may and certainly Senators Cory Booker and a number of others have signed on to a bill in the Senate, all Democrats. It would be really great to have some Republicans on there but none have been willing to break the party orthodoxy on municipal broadband currently. Even though this is, we talked about this many times, I always like to reiterate it. At the local level, it's not partisan but at the federal level, it suddenly is and you have Republicans that want these bans. They don't trust their own people to make these decisions. I don't see that going through Congress. I certainly think that President Obama would support it. This will be a state level issue. We're going to see this fighting and state by state, which is where we were before, frankly. Let's talk about Tennessee and then we'll talk more about this state by state. Where's Tennessee at?

Lisa Gonzalez: In Tennessee they're not allowed to expand beyond the reach of the utility. There's Bradley County that's nearby.

Christopher Mitchell: Chattanooga.

Lisa Gonzalez: Right. Nearby Chattanooga where EPV, there are people who are right across the street from each other where one person can get EPV fiber optics and the person across the street cannot. Bradley County has been suffering for a long time asking for help.

Christopher Mitchell: With AT&T service. With crap AT&T service, yeah.

Lisa Gonzalez: Right, right. And that's --

Christopher Mitchell: Every year it's gotten closer to seeing this bill pass in Tennessee that's been brought by state Republicans, there where it's less partisan, where you have state Republicans that are fighting hard to remove this barrier, but AT&T and Comcast, they really have a lock on the legislature, and that bill has not been able to get out of committee. I think, in the wake of this decision, we'll see the grassroots movement getting stronger. We're going to see more organization, and I think it's going to be harder for Comcast and AT&T to protect their protectionist legislation, especially when the state just issued this report.

Lisa Gonzalez: Oh, that's right. That's right.

Christopher Mitchell: Commissioner Randy Boyd of economic development.

Lisa Gonzalez: That's right, their own report.

Christopher Mitchell: He commissioned a report and he is someone who had a lot of hesitations about removing barriers to municipal networks and he commissioned a report saying what's the situation of broadband in Tennessee and what can we do to make it better? The report came back and said these barriers are ridiculous. Why would you not let Chattanooga expand? Now that they have that report, I really hope that we can see Governor Haslam and Commissioner Randy Boyd just pushing hard to get that. I don't know enough about the state politics right now to know if Governor Haslam's up for reelection or not.

Lisa Gonzalez: Is Thom Tillis --

Christopher Mitchell: Out of North Carolina.

Lisa Gonzalez: Okay.

Christopher Mitchell: He's a senator from North Carolina. He was the speaker of the house in North Carolina who was owned by Time Warner Cable, pushed that bill through. Yeah, he has nothing to do with Tennessee.

Lisa Gonzalez: Tennessee is Blackburn. She's the one in Tennessee.

Christopher Mitchell: Right. Representative Marsha Blackburn. She gets so much money from the cable and telephone companies, ridiculous amounts of money. Don't even get me started. In Tennessee I think we can expect, and I think I predicted that this year would be the year. I was optimistic, did not happen, but in 2017, we can hope that Tennessee will remove that barrier on its own. Then the municipal networks would be able to expand.

Lisa Gonzalez: Then you see Colorado, there's so much going on.

Christopher Mitchell: Sure. Yeah, I mean, there's the real challenge there, and I think we'll talk about Colorado coming up when we talk about all these referendums that are going to be happening again on election day. We'll come back to that and talk about the challenges of changing that law. One of the things that I really wanted to bring up is that, I think there's this question of what have we lost because we lost that decision? Certainly, the FCC cannot go about removing these state barriers now in that way. If the Sixth Circuit had agreed with the FCC, first of all, we would have to deal with another 12 to 18 months of uncertainty while the cable and telephone companies appealed it to the Supreme Court.

Lisa Gonzalez: They certainly would have. They got the money.

Christopher Mitchell: They would have pushed it through there and then the FCC would not have probably taken action during that period which means that we're basically done with the Wheeler FCC. Chairman Wheeler is going to be replaced at some point by the next president. Right now it seems likely that next president will be Hillary Clinton. Hillary Clinton is supportive of municipal broadband. Probably the next chair hopefully will be. However, it's worth noting that, and I bring this up frequently, the first four years of the Obama administration were quite poor at the FCC, so we can't just assume that the FCC, if it's Hillary, will continue in the same way it's been. Chairman Wheeler has been uniquely supportive of municipal broadband and in many ways of other competitive actions to try and encourage competition. It's not clear that other states would have been able to use this even if North Carolina and Tennessee were. Let's just say in a world in which the FCC certainly has this power under Chairman Wheeler, it's not clear that Colorado or Minnesota or Wisconsin or Texas or Nebraska or any of these other states would be able to then go to the FCC and have the same result because many of their barriers are a little bit different. You have to go through another process at the FCC, get at least 3 votes, and I don't know that we could have counted on that necessarily in a new administration. I don't feel like we've necessarily lost a lot. What we've gained is lot more coverage. There's a lot more press attention about these successes about municipal networks. We have this incredible record that the FCC has put together. This is one of those things where you can really refer to this as rock solid because the FCC took everyone's comment, they sifted through them, and they had to look at the evidence and they concluded that municipal networks are a success in general, that that is a viable strategy for communities to go for. Now they didn’t say that iProvo was a success, right? We've talked about how, in fact, the Utah law actually undermined Provo and led to them using a riskier business model than they otherwise would have. That's one of the things that we argued was that these laws are ridiculous because they're actually increasing the risk of taxpayers in local communities rather than decreasing the risk which is what they claim to be doing. I think the point is that we would not necessarily have been able to use this power in future administrations. I'm not setback. I feel like I'm reinvigorated. I think people are more enthusiastic about changing these barriers at the state level. It's more clear than ever to more people that these barriers are counter-productive.

Lisa Gonzalez: True. It definitely gave us, not just us, but it gave everybody the opportunity to see the data.

Christopher Mitchell: Yes. It's really unfortunate for North Carolina and Tennessee. They're the ones that really suffer the fallout of this Sixth Circuit decision but it's not the end of the world. I think it really helps to highlight what poor policy this would be to restrict local decision-making. Local governments, communities, need to be the ones that decide what are the appropriate strategies for ensuring everyone has high quality Internet access. Nothing's changed because the Sixth Circuit has ruled that in the case of how our federal government interacts with our sovereign states, somewhat sovereign states. I can't avoid the alliteration when I have the opportunity, because of how the federal government operates with our somewhat sovereign states that, in this case, the FCC cannot remove state municipal broadband restrictions no matter how stupid, counter-productive, and clearly protectionist they are.

Lisa Gonzalez: Great, so even though the results was bad, the overall result was a positive outcome.

Christopher Mitchell: Right. There's this idea that somehow Chairman Wheeler has lost prestige or the FCC has lost prestige because they lost this decision. That's just like your opinion, man, to quote Jeff Lebowski. What it comes down to is all about perception. In my perception, the chairman and the Commissioners Clyburn and Rosenworcel were willing to go out on a limb to say we are so supportive of this that we are going to embrace this test case. Let's just plug Harold Feld. Harold Feld has a brilliant post on his --

Lisa Gonzalez: He does. It's a really good post about it.

Christopher Mitchell: If you really want to understand this, if you are at all confused about what we're talking about, highly recommend reading his posts on his Tales From the Sausage Factory blog about this. We are better off. The goal of the FCC is not to win every case. It's not to just take the safest path. It's really to move investment forward and their decision to overrule North Carolina and Tennessee in this position, I think it moved this forward. It unfortunately has not removed the barriers permanently, but we are in a better place because of it, and I think that that's what their job was.

Lisa Gonzalez: Here, here.

Christopher Mitchell: Everyone, I hope that you had a great summer. I'm sure you didn't have as much fun as Lisa just did at Cedar Point.

Lisa Gonzalez: Woohoo!

Christopher Mitchell: This will be our last podcast of the summer, I guess. Coming back, it'll be Labor Day, post-Labor Day. We've got a lot of things lined up I'm very excited about. Hope you enjoyed this and hope I answered your questions. If not, leave us some comments.

Lisa Gonzalez: That was Chris and I talking about the recent opinion from the United States Court of Appeals for the Sixth Circuit. Remember, we have transcripts for this and other Community Broadband Bits Podcasts available at MuniNetworks.org/broadbandbits. Email us at Podcast@MuniNetworks.org with your ideas for the show. Follow Chris on Twitter. His handle is @CommunityNets. Follow MuniNetworks at org stories on Twitter where the handle is @MuniNetworks. Thank you to the group Roller Genoa for their song “Safe and Warm in Hunter's Arms” licensed through Creative Commons and thank you for listening to episode 217 of the Community Broadband Bits Podcast.