Tales of the Sausage Factory: It Depends What Your Definition of “Any” Is

Fans of municipal community networks were dealt a blow by a Supreme Court decision last month in Nixon v. Missouri Municipal League. The Supreme Court found that Congress needed to be more explicit in preempting the states when it said “the states shall not prevent any entity from offering telecom services” as part of the 1996 Telecom Act. Odd as it may seem to speakers of the English language, I think the Supremes may have got this one right.

I’m not happy about the result, but it makes a weird sort of legal sense. It also does satisfy one of my basic rules of advocacy: do not count on someone else to save your butt.

Broadband deployment has become the great cliche of telecom policy. According to enthusiasts, deployment of broadband will foster economic growth, bring us together, solve world hunger, and let you dowload all the porn you can whank to in real time. And, as usual, enthusiasts are: (a) utterly convinced the U.S. has fallen way behind everyone else on the planet; (b) convinced SOMETHING must be done, or other nations will eat our technolunch and we will all emigrate to India to find jobs at local Kwick-E-Marts; and (c) have a tremendously brilliant plan for how to accomplish this.

In 1996, Congress passed the Telecom Act of 1996 (catchy). One of the purposes of the Act was to replace the old “natural monopoly” regulation of telecom (where there was one tightly regulated local provider) with competition at all levels. In theory, cable, electric companies, and anyone else who could figure out how could now offer telephony services.

Now Congress was worried that incumbent telcos, with their long hooks into state public utilities commissions and state legislatures, would use their influence at the state level to get laws or regs passed to block competition from emerging. To prevent this, Congress explicitly preempted the states from legislating in this area. Section 253 of the Communications Act (47 USC 253(a)) prevents any state or local statute or regulation from prohibiting or having the effect of prohibiting any entity from providing any telecom service.

This was pretty explicit language. You might think “oh wow. Those incumbent telcos are in trouble now.” But ho ho ho. You underestimate teh ingenuity of incumbent telcos (don’t feel bad, so did most CLECs in the late 1990s).

Almost immediate, hundreds of plucky entrpreneurs rushed to deploy competing telecom services through a new technology called IPO. Sadly, there were still a few bugs in the new technology, and most of these systems never deployed off the NASDAQ.

Many municipalities got tired of waiting because, despite my sarcasm above, it turns out high-speed internet access is importnat for attracting and keeping businesses. Worse, while ILECs and CLECs and cable cos were rushing to deploy in major cities or affluent suburbs, a very large number of rural or midsize markets got left behind as uninteresting or presenting too costly a technical challenge.

(This, btw, is not a new problem in telecom. It’s one of the reasons we used to regulate it as a natural monopoly– to ensure that everyone in the country received service. When AT&T actually stood for American Telephone and Telegraph and was the monopoly provider of all telecom services, your high long distance rates subsidized the cost of connecting rural communities.)

But to get back to our story, lots of local municipalities started to decide that they didn’t want to wait forever to pay for overpriced T1 lines. This wasn’t only an issue of citizens wanting to download music files faster. It has become just about impossible to attract serious business development without a reliable broadband pipe to your community. (Anyone interested in municipal broadband efforts can get more data at muniwirelss.com or by reading this CNET article. )

Rather like the Grinch, ILECs dislike the thought of all those Whos down in Whoville getting broadband — from somebody else at any rate. So the ILECs started going to their captive critters in the state legislatures and expounding how it was _unfair_ for public entities to compete with private companies — even where the private companies were dragging their heels providing this service to the localities.

Not surprisingly, a number of state legislatures swallowed this and passed laws prohibiting municipalities from providing telecom services. The municipalities, reading the statute, complained to the FCC that this violated Section 253(a).

The FCC concluded that municipalities were not actually entities. Huh? Well, while states allow municipalities to separately incorporate as legal entites for contracting purposes, etc. municipalities are considered a part of the state. So, the FCC reasoned, if a state legislature tells another part of a state not to offer telecom, it is not a state preventing an “entity” from doing anythingy; it is the state exercising its authority to set statewide policy through legislation.

Oddly, from a legal perspective, this makes sense. The whole notion that incorporation creates a legal entity is pure legal fiction. Furthermore, we hold municipalities to the same standards as states for things like antidiscrimination, clean water act, etc. municipal oficials are treated teh same way as state officials generally for purposes of detrmining whether something is an “official” act. So, while it may seem whacky in English, it actually makes sense.

Yeah, absolutely true that it is a pure giveaway to

ILECs. But ya know what? Those citizens of the municipalities and of the rest of the state vote for those state legislators. If they don’t like the result, let ’em vote these guys out of office. Let local activists get this stuff on ballot referenda. As in so many cases, the courts will not save you from random acts of Congress or random acts of state legislatures, and there is no substitute for being politically active.

Anyway, various courts have reviewed this FCC determination over the years, and affirmed. Until it reached the 8th Circuit, which has a history of considering itself infinitly smarter than the FCC, and getting reversed in the Supreme Court. This proved no exception.

In Nixon v. Missouri Municipal League, the Supreme Court agreed with the FCC and several other circuit courts and held that “any” did not include municipalities. While the statute demonstrated a specific intent to preempt the states, meeting the first hurdle in the Court’s every increasing love affair with federalism, it did not display a specific intent to interfere with the state’s management of its own sub-units.

While I love municpal broadband as another competitor in a world that desparately needs them, I gotta say I think the Supremes were right on the merits. Congress is just not that eager to come between the states and the entities it regulates as part of itself.

This doesn’t mean the end of municipal broadband. Not by a longshot. But it does mean that any hope that the federal courts will overide the bad acts of state legislators are dead and buried.

Stay tuned . . . .

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6 Comments

  1. MannyJ says:

    Harold — trying to read this, but there’s something wrong w/ the website, there’s a semi-opaque login popup over the first 4 paragraphs. I don’t think the bug is on my end.

  2. John says:

    Apologies about the site display problems. I’m looking into it.

    jrs

  3. Gary says:

    Whoops. Looks like Kuro5hin’s RSS feed died again, which caused the RSS feed plugin to barf. Again.

    I’ve taken the plugin out back and shot it.

  4. cam says:

    Harold wrote;

    >Those citizens of the municipalities and

    >of the rest of the state vote for those

    >state legislators. If they don’t like

    >the result, let ’em vote these guys

    >out of office. Let local activists

    >get this stuff on ballot referenda.

    We have been locally active, having town and county officials over to our house on several occasions, also having the community in our house, organizing a meeting in a local public building as well. Not much became of that issue. The issue was related to “slow-growth”, as Loudoun County is the US’s fastest growing county, this is a definate local issue.

    Now a group got in to the County Assembly, they are Republicans, not that it matters, abuse of power is endemic to politicians. The Republicans neutered the power of the Independant chairman, taking all the chairman’s responsibilities and giving it to the vice-chairman, who is the lead Republican. I fail to see how this can be right.

    Now it turns out, one of the pro-growth folks, is claiming there is bias in the civil service when the civil servants give reports that dont fit what they want to hear. He has threatened to fire them, and has claimed that they were all employed during the “slow-growth” period, and that they all live in western Loudoun. Basically that cabal is politicising the civil service.

    These are the people that supposedly represent me? We were active locally and bugger all happened of it. Now the pigs that are in there will ramrod anything through that fits their tantrum’s for power.

    I am dissillusioned over government, local and federal. The State has been the least intrusive on me of all the tiers of government I have to suffer.

    cam

  5. Harold says:

    As Roy Rogers is supposed to have said: “The problem with democracy is that I get the government the majority deserves.”

    And even if you are active locally, you can and sometimes will still lose. I live in nearby Montgomery County (MD) where we have faced a number of similar issues. I know the fight over slow growth is a complex one, with a lot of money on the development side.

    If you are looking for a fight where the good guys always win, it doesn’t happen outside Hollywood. But if you fail to show up, you will get screwed, period.

    So what do you do when you lose? Sometimes you move on. But if the issue is still important, you look at why the other guys won and what you can do to stop it. And it’s not just “money.” Yes, money helps, big time, but there are ways to fight the influence of money.

    Lets start with the basics: democracy means you have to convice your fellow citizens. Damn hard, to be sure, because that takes a lot of time and work. I have a full time job and a family to raise. How much time do I have to convince citizens about issues close to them?

    so you see how to do it efficiently. Does organizing your neighbors around one issue work? Are there other orgs already mobilizing you can join/support?

    Now consider granulairty. Pick your fights with care. Can you stop a specific project, and thus raise the overall profile of your issue?

    And the press. How do you reach out to them? The developers have all the advantages of course, so you must be smart. Look at who covers this on local news and your local paper. Figure out who the beat reporters are, if any. Try to figure an angle on the story that’s new. Reporters are deluged with people pitching them. How do you handle them?

    Public advocacy is hard work, particularly when you are up against developers with lots of money and for whom this is their life’s blood. The tools on your side are an ability to persuade fellow voters that this is something they should care about and agree with you about.

    Easy? No. But if you don’t show up and play, you will get rolled over like local greenspace.

  6. cam says:

    >Easy? No. But if you don’t show up and

    >play, you will get rolled over like

    >local greenspace.

    I shouldnt have said lost, it is still in stasis really. We did get the road closed that we wanted closed. But not permanently. It currently has temporary “emergency access only” signs on it.

    I was also impressed with how the local representatives, county and town, wanted us to participate. It all started when I got angry, made the effort to give a speech at a town development committee. My accent thickens when I am nervous, and I am sure I did the Kylie Minogue nostular style Australian accent.

    Another funny thing was that American policians and committees have different standards of behaviour. In Australia you are supposed to participate in the meeting continually. In the US there are “standards of decorum” which I was unaware of. After the public comments, the public is supposed to be quiet. This isnt true in Australia. So I spent most of the meeting interrupting them. Cultural difference.

    We did publish letters to the local newspaper, we also did a paper drop in our local community. Email and “face to face” was the most effective though. Once our community realised there was a stake in it, they did join in. When we had a meeting with the local politicians and officials, there was a local town paper reporter there. The local town paper has a high standard of reporting. I read it week to week.

    Part of the reason I am dissillusioned is because the county government has chosen to mimic the federal in their indifference to process. The shutting out of the elected chairman and politicizing the civil service are bad. I have no doubt that the town I am in, which I chose to live on the edge of, will become like Fairfax County, turning into one long and unbroken sprawl to the Blue Ridge Mountains.

    cam

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