City, state and federal governments are fighting over Chattanooga’s effort to bring broadband to rural consumers

August 12, 2014

A quiet battle between telecom giants and a small electric utility over broadband access is blossoming into a national fight over state and municipal rights as rural residents of southeastern Tennessee and northwestern Georgia clamor for some of the fastest Internet speeds in the world.

The fight pits the Electric Power Board of Chattanooga, a public utility that serves about 170,000 residents and businesses, against Internet and cable companies like Comcast and Cox. At the same time, it has created an alliance between the Federal Communications Commission and small municipalities around Chattanooga, who take a different position than most congressional Republicans and the state of Tennessee.

In an effort to reduce power outages, EPB created a fiber optic network that allows more reliable energy delivery. The network also allows EPB to deliver cable, phone and Internet service to residents in its 600-square-mile service area. As a result, residents get some of the fastest Internet service in the country, and the fees they pay help the utility cover infrastructure costs.

Now, other communities around Chattanooga want to tap into EPB’s network. Danna Bailey, a spokeswoman for the utility, said they have fielded “multiple requests” from nearby towns and counties to extend their network.

“We’d like to be able to respond to these folks, and if there’s a community that wants us to come in and bring our services to their citizens, we want to be able to do that,” Bailey said.

But a Tennessee state law passed in 1999 prohibits the utility from offering television and Internet service outside that 600-square-mile service area. So while other communities outside Chattanooga might want to tap into EPB’s network, they aren’t allowed to do so.

The industry has a lot to lose if local governments get into the fiber optic game. Telecommunications companies are some of the biggest players in state governments across the country. AT&T and Comcast have contributed more than $215,000 to state lawmakers in Tennessee this election cycle alone, according to the National Institute on Money in State Politics.

Enter the FCC. In July, Chattanooga and Wilson, N.C., filed petitions asking the commission to preempt state limits on municipal broadband networks. In May, FCC Chairman Tom Wheeler said he thought the commission had the power to do just that.

“I have said before that I believe the FCC has the power — and I intend to exercise that power — to preempt state laws that ban competition from community broadband,” Wheeler told an audience at the National Cable and Telecommunications Association.

The FCC’s involvement angers state legislators, who almost universally loathe federal efforts to preempt state laws. The American Legislative Exchange Council, which counts hundreds of Republican legislators among its members, opposes any federal preemption.

“As a state lawmaker, somebody who works at the state level where we have the accountability, I would prefer the safeguards that we have in place are done by the state and not at the federal level,” said North Dakota State Rep. Blair Thoreson (R), a former telecommunications executive who heads ALEC’s efforts to block federal preemption. “We are closer to the situation at this level as a state institution than the FCC.”

It’s not just Republican groups that oppose the FCC’s move: The National Conference of State Legislatures, a bipartisan organization, wrote to Wheeler expressing their outrage.

Last month, the House of Representatives passed an amendment to an appropriations measure authored by Rep. Marsha Blackburn (R-Tenn.) that would prohibit the FCC from preempting Tennessee state law. The amendment earned support from 221 Republicans and two Democrats; among the four Republicans voting against was Rep. Chuck Fleischmann (R-Tenn.), who represents Chattanooga.

“For me, this is an issue of local versus state” government, Fleischmann said in an interview. “A city or a county might look at the state as being the big government prohibitor in this. I’ve always believed in local government.”

Cities agree with Fleischmann. “The fiber optic network has been a huge plus for the city,” Chattanooga Mayor Andy Berke said in an interview. Berke said the network, which is only five years old, is already directly responsible for adding 1,000 new jobs, and it’s an important part of his pitch when he woos new companies considering headquartering in Chattanooga. “We now see ourselves as a city on the front end of the curve, rather than the rear.”

The National League of Cities will file a letter with the FCC backing the Chattanooga and Wilson petitions. “When you have state preemption, it adds a layer of difficulty,” said Julia Pulidindi, NLC’s broadband expert.

Blackburn’s measure’s fate in the Senate remains unclear, though the Senate has not acted on any appropriations bills this year. Its best chance at passage will be in a likely continuing resolution to fund the government on a temporary basis.

A group of Senate Republicans has written a letter to Wheeler opposing preemption. Notably absent on the letter: Sen. Bob Corker (R-Tenn.), the former mayor of Chattanooga.

Corker has not publicly weighed in on the issue, though he believes it’s best left to the states.

Some opponents of municipal broadband networks are critical of the government’s role in filling what they say should be the private sector’s domain. Others point out that municipal broadband networks have a checkered history. In a June report by the Advanced Communications Law and Policy Institute at New York Law School, directors Charles Davidson and Michael Santorelli write that failed broadband networks can become a fiscal problem for state governments, which must shoulder the costs when cities can’t pay their bills.

“The Great Recession exposed a number of critical weaknesses in local finances that, taken together, create an inhospitable environment for taking on the risks and making the massive new investments associated with redundant long-term construction projects like [government-owned broadband networks],” Davidson and Santorelli wrote.

Nineteen states have laws on the books that place at least some restrictions on municipal broadband networks, according to Davidson and Santorelli’s research. They range from strict prohibitions on any or most municipal broadband service, in Texas and Nevada, to requirements that a municipality hold public hearings or a referendum before offering service, as in Alabama, Colorado, Minnesota and Virginia. Eighty-nine communities around the country have publicly owned fiber optic networks.

Back in Chattanooga and its surrounding environs, EPB’s service may be the only way rural residents can get broadband access: Private sector companies have yet to invest in the expensive infrastructure it takes to serve relatively few customers in rural communities.

“There’s a tremendous amount of rural areas where the constituencies tell me on a regular basis that they are underserved by the availability of broadband,” Fleischmann said. “First and foremost, the duty of a representative is to represent the interests of his constituents.”

“For the city to grow, we want to have regional cooperation. That means when we see an economic development prospect that’s just outside the city, we know that individuals who work there are going to shop in the city, live in the city and expand our base. All that regional cooperation is good for the city,” Chattanooga Mayor Berke said. “I want to see the counties around us develop as well. It’s good for the state.”

Reid Wilson covers national politics and Congress for The Washington Post. He is the author of Read In, The Post’s morning tip sheet on politics.
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