The vote could embolden other cities that feel they have been underserved by traditional Internet providers, potentially undermining years of lobbying by the telecommunications industry.
“It's good to see the FCC standing up to phone and cable company efforts to legislate away competition and choice,” Free Press, a consumer advocacy group. “By targeting these protectionist state laws, the FCC is siding with dozens of communities seeking to provide essential broadband services where people have few to no other options.
Last year, Chattanooga and Wilson asked the FCC to intervene on their behalf, citing numerous state restrictions on the expansion of broadband service.
Chattanooga, for example, cannot build its broadband networks anywhere it does not already provide electricity. "What we're looking at here in Tennessee are people who are literally a tenth of a mile off of our system who have no Internet access," said Harold DePriest, the chief executive of Chattanooga's city-owned power utility, EPB.
The FCC's intervention in Wilson, N.C. is even more dramatic, overturning a range of state laws that the city says artificially limits competition.
One provision in North Carolina law bars cities from charging prices that are lower than the private incumbents'. Another requires municipalities to gain public support for a city-run service through a special referendum before borrowing money to fund such efforts. A third effectively prohibits cities from building in "unserved areas," according to Wilson's petition.
Taken together, these restrictions make it difficult for new providers to compete with established Internet providers, FCC officials have said.
“The bottom line of these matters is that some states have created thickets of red tape designed to limit competition,” said FCC Chairman Tom Wheeler. “When local leaders have their hands tied by bureaucratic state red tape, local businesses and residents are the ones who suffer the consequences."
Cities advocating for more leeway to offer Internet service say they are trying to address a lingering problem: Consumers don't have enough choices.
More than half of Americans have only one choice of Internet provider at speeds of 25 megabits per second — the basic threshold for high-speed Internet under a new definition approved by the FCC last month.
Internet providers are expected to challenge the FCC's ruling in court, arguing that the agency lacks the authority to come between a state and the cities under its jurisdiction. Republican lawmakers have warned that FCC intervention on municipal broadband would be an example of government overreach. And other critics argue that the private sector, not taxpayers, should be leading the way in promoting greater Internet access.
“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,” Republican FCC Commissioner Ajit Pai said.