Introduction Edit

In the late 1990s, hundreds of municipalities throughout the country considered whether they should provide broadband Internet access to their residents, and if so, how.[1] During this time, some municipalities installed costly fiber optic or cable wiring. More recently, with the development of less-costly wireless Internet technology, municipalities also have explored and, in some cases played a role in the deployment of, municipal wireless broadband Internet networks (“wireless broadband” or “wireless Internet”). These municipalities have done so either in conjunction with an outside entity, such as a private Internet service provider (“ISP”), or in their own capacity as a municipal provider of wireless Internet service (“municipal wireless Internet” or “municipal wireless”).

Municipalities’ increasing interest and involvement in the development and management of wireless Internet networks appear to have spurred both state and federal legislators to introduce legislation that would define the extent to which municipalities may provide such services. At least nineteen states have some kind of legislation that defines the extent to which municipalities may provide Internet service.[2] At least eight of those nineteen states passed such legislation in the 2004-2006 period; similar bills were introduced in at least nine other states during that time.[3] Some of these state bills have proposed to define, restrict, or eliminate municipalities’ ability to provide wireless Internet service. Many of these recent bills require municipalities to undertake feasibility studies, long-term cost-benefit analyses, public hearings, or referendums. Critics of such legislation, however, believe these requirements slow local implementation.[4]

Federal bills would, variously, preempt state laws prohibiting municipal wireless Internet provision;[5] define how municipalities may go about implementing wireless Internet networks;[6] or prohibit municipal wireless Internet provision altogether.[7]

Arguments by proponents Edit

Proponents of municipal wireless Internet provision have offered various reasons in favor of such service. Some of the proponents’ arguments are: (1) incumbent telecommunications providers have been slow to offer broadband Internet services in certain areas and municipal provision could increase competition; (2) municipalities may be able to use such networks to improve the efficiency of traditional municipal services; (3) municipal provision may be more cost-effective than traditional wireline technologies or private provision; (4) wireless Internet service may produce certain positive externalities, such as attracting or retaining businesses or accelerating the use of new and beneficial technologies in a community; and (5) political accountability and competition with other municipalities minimizes the risk of inefficient provision.

Arguments by opponents Edit

Opponents of municipal wireless Internet provision have presented various arguments why municipalities should not be in the business of competing with the private sector. These arguments include: (1) a government-run enterprise may not perform as well as a private enterprise; (2) a government enterprise may have incentives to engage in anticompetitive conduct against private competitors, distorting the marketplace; (3) the traditional justifications for government intervention in the marketplace do not support municipal provision of wireless Internet service; and (4) a municipality may become “locked-in” to an inefficient operating standard if the chosen technology becomes quickly outdated. Thus, opponents generally suggest first looking to non-government solutions, such as contracting out to a private third-party or a public-private partnership.

Legal issues Edit

The U.S. Supreme Court has recognized that, in some cases, it may be a “respectable position” to argue “that fencing governmental entities out of the telecommunications business flouts the public interest.”[8] The Court also has recognized, however, that “there are . . . arguments on the other side, against government participation. . . .”[9] In particular, the Court noted that “(if things turn out bad) government utilities that fail leave the taxpayers with the bills,” and that “in a business substantially regulated at the state level, regulation can turn into a public provider’s weapon against private competitors. . . .”[10]

The Federal Trade Commission and its staff have previously engaged in advocacy related to competition in the cable industry and the allocation of radio bandwidth spectrum before state and federal entities.[11] In addition, the FTC has reviewed numerous cable industry mergers, as well as mergers involving providers of Internet technology and content.[12] The arguments for and against municipalities providing wireless Internet service for their communities raise important competition issues.

References Edit

  1. See generally Harold Feld et al., Connecting the Public: The Truth About Municipal Broadband 4.[1]
  2. See generally Michael J. Balhoff & Robert C. Rowe, Municipal Broadband: Digging Beneath the Surface 104-07 (2005)[2]; Intel, Digital Community Best Practices 10 (2005).[3]
  3. See generally Balhoff & Rowe, at 104-08; The Baller Herbst Law Group, Proposed State Barriers to Public Entry (as of June 8, 2006) (2006).[4]
  4. See generally Intel, at 10.
  5. S. Res. 1294, 109th Cong., 1st Sess. (2005)[5] (McCain-Lautenberg “Community Broadband Act of 2005"); S. Res. 2686, 109th Cong., 2nd Sess. § 502 (2006)[6] (Stevens “Communications, Consumer’s Choice, and Broadband Deployment Act of 2006"); H.R. 5252, 109th Cong., 2nd Sess. § 401 (2006)[7] (Barton “Communications Opportunity, Promotion, and Enhancement Act of 2006,” as passed out of the House of Representatives and referred to the Senate).
  6. S. Res. 1504, 109 Cong., 1 Sess. § 15 (2005)[8] (Ensign “Broadband Investment and Consumer Choice Act of 2005”); S. Res. 2686, supra.
  7. H.R. Res. 2726, 109th Cong., 1st Sess. (2005)[9] (Sessions “Preserving Innovation in Telecom Act of 2005”).
  8. Nixon v. Missouri Municipal League, 541 U.S. 125, 131 (2004)(full-text). There, the Court held that a provision of the 1996 amendment to the Communications Act (47 U.S.C. §253) authorizing the preemption of state and local laws prohibiting “any entity” from providing a statutorily-defined “telecommunications service” did not preempt state statutes that bar political subdivisions from doing so. The Court noted, however, that “in any event the issue here does not turn on the merits of municipal telecommunications services.” Id. at 132.
  9. Id. at 131.
  10. Id.
  11. E.g., FTC Staff Comment Before the Federal Communications Commission In the Matter of Auction of Advanced Wireless Services Licenses Scheduled for June 29, 2006 (Feb. 28, 2006) (full-text); FTC Staff Comment to the Hon. Frank Sawyer Concerning Ohio H.B. 622 to Define Conditions Under Which Municipalities May Grant Additional Cable Franchises in Areas Having an Existing Cable System (July 5, 1990); FTC Staff Comment Before the FCC In the Matter of Competition, Rate Deregulation and the Commission’s Policies Relating the Provision of Cable Television Service (Apr. 1990); FTC Staff Comment Before the FCC In the Matter of Evaluation of the Syndication and Financial Interest Rules (Sept. 5, 1990); FTC Staff Comment Before the Federal Communications Commission Concerning the Auction of Certain Unassigned Frequencies in the Radio Spectrum (Oct. 29, 1986).
  12. E.g., In the Matter of Time Warner, Inc., et al., 123 FTC 171 (1997) (consent order imposing certain conditions on Time Warner proposal to acquire Turner Broadcasting and create the world’s largest media company, including several leading cable networks); In the Matter of AOL, Inc. and Time Warner, Inc., FTC Dkt. No. C-3989 (2001) (consent order imposing certain conditions on merging parties, including that they allow competing Internet Service Providers to access Time Warner’s broadband cable Internet systems, and to allow content providers competing with Time Warner to have access to AOL’s Internet Service Provider);[10] In the Matter of Cablevision Systems Corp., Dkt. No. C-3804 (1998) (consent order requiring Cablevision to divest certain assets of Tele-Communications, Inc. (TCI), in geographic areas where Cablevision and TCI competed as a condition for allowing the two companies to merge);In the Matter of Tele-Communications, Inc., Dkt. No. C-3575 (1995) (consent order requiring TCI to divest either its cable television system or that of TeleCable Corp. in Columbus, Georgia, as a condition for allowing the two cable companies to merge).

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