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Municipal Broadband:
Background and Policy Debate
Lennard G. Kruger
Specialist in Science and Technology Policy
Angele A. Gilroy
Specialist in Telecommunications Policy
June 18, 2015
Congressional Research Service
7-5700
www.crs.gov
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Municipal Broadband: Background and Policy Debate
Summary
Since the late 1990s, broadband Internet service has been deployed in the United States, primarily
by private sector providers. While broadband deployment has been rapid and robust overall, there
remain communities that are dissatisfied with their broadband service. Some of these
communities have turned to public entities as possible broadband providers, with the expectation
that municipal broadband networks (also referred to as “community broadband”) can deliver
superior levels of speed, performance, and/or affordability than what is currently offered by
private providers. Public entities that provide broadband service can be local governments or
public utilities, for example, and may construct and manage broadband networks either solely or
in partnership with private companies. There are a number of municipal broadband models that
have been implemented across the nation. Since each community is different and each faces
unique challenges, there is no one size that fits all.
Municipal broadband is controversial, because it involves governmental entities entering a
commercial telecommunications marketplace that had previously been the exclusive domain of
private sector providers. Supporters of municipal broadband argue that in view of substandard
broadband service, communities and local governments should be able to provide this service to
meet their citizens’ needs and to support the community’s economic development. Municipal
broadband opponents argue that public entities are ill-equipped to efficiently develop, operate,
and maintain commercial broadband networks, and that municipally owned and supported
broadband networks constitute unfair competition to private sector providers, which may
ultimately impede private investment in broadband infrastructure.
With under 500 municipalities across the nation embarking on some form of municipal
broadband, 20 states have passed laws placing restrictions (or in some cases, bans) on local
broadband networks. The issue for Congress is whether municipal broadband should be promoted
or discouraged, and more specifically, whether those state restrictions on municipal broadband
should be overridden or affirmed.
On March 12, 2015, the Federal Communications Commission (FCC) released a Memorandum
Opinion and Order granting the petitions filed by two municipal broadband providers in Wilson,
NC, and Chattanooga, TN, to preempt state laws in their respective states that restricted the
expansion of community broadband services. The Order and the decision by the FCC to rely on
Section 706 of the 1996 Telecommunications Act for its authority remain controversial. Both
states have filed petitions for review in the U.S. Court of Appeals, challenging the FCC’s
authority to preempt these restrictions.
Three bills (S. 240, S. 597, and H.R. 1106) have been introduced and one draft measure has been
released in the 114th Congress addressing the municipal broadband debate. The role of municipal
broadband and the appropriate role of the states and the FCC to address the relationship between
the public and private sector is just one facet in the overall debate regarding broadband
deployment. Whether municipal broadband should be encouraged or restricted is one of the many
policies that Congress continues to consider.
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Contents
Background ...................................................................................................................................... 1
Municipal Broadband Networks in the United States ...................................................................... 2
Policy Debate: Pros and Cons .......................................................................................................... 3
Arguments in Favor of Municipal Broadband ........................................................................... 3
Arguments Opposed to Municipal Broadband .......................................................................... 4
Case Studies—Successes or Failures? ....................................................................................... 5
The Role of the Federal Communications Commission .................................................................. 6
The City of Wilson and the Power Board of Chattanooga Petitions ......................................... 7
The FCC Memorandum Opinion and Order .............................................................................. 8
Administration and FCC Initiatives ............................................................................................... 10
Congressional Activity—114th Congress ....................................................................................... 12
Policy Issues .................................................................................................................................. 13
Contacts
Author Contact Information........................................................................................................... 14
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Background
Broadband—also referred to as high-speed Internet service—has been deployed in the United
States since the late 1990s, primarily by private sector providers. These providers include
telephone companies, cable companies, wireless providers, and other entities that provide
commercial telecommunications services to residential, business, and institutional customers.
While broadband deployment has been rapid and robust overall, there are parts of the nation
where broadband is less deployed (primarily rural areas) and there remain regions and
communities that are dissatisfied with the level of broadband service currently offered by private
sector providers. These communities point to problems ranging from low download and upload
speeds, obsolete technology, poor reliability, high prices, and/or a lack of choice in providers.
With the Federal Communications Commission (FCC) moving to define the minimum speed of
broadband at 25 Mbps,1 more communities may perceive a lack of adequate broadband service,
especially those communities in rural areas.
As a solution, some communities have turned to public entities as possible broadband providers.
These communities anticipate that public entities may be able to provide municipal broadband at
superior levels of speed, performance, and affordability than what is currently offered by private
providers. Public entities that provide broadband service can be local governments or public
utilities, for example, and may construct and manage broadband networks either solely or in
partnership with private companies. There are a number of municipal broadband models that have
been implemented across the nation. Since each community is different and each faces unique
challenges, there is no one size that fits all.
Municipal broadband (also sometimes referred to as “community broadband”) is a somewhat
amorphous term that can signify many different ways that a local government might participate–
either directly or indirectly—in the provision of broadband service to the local community.
Municipal broadband models can include public ownership, public-private partnership, and a
cooperative model.
With public ownership, the local government is the principal entity building, financing, and
operating the broadband network. The network can be run by the local municipal electric utility
(Chattanooga, TN, and Lafayette, LA, are examples), or it can be run by a city department such as
the information technology (IT) department (as in Santa Monica, CA). There are also instances
where a publicly owned and built network might be opened to private providers to provide retail
Internet access or other services to the public.2
Public-private partnerships can come in many different forms, from public and private sector
entities sharing capital and operations costs, to governments providing access to public rights-of-
way or other city infrastructure (e.g., conduits, pole attachments) for privately funded and
operated networks, to government funded projects contracting with private providers to build,
1 See Federal Communications Commission, 2015 Broadband Progress Report, available at https://www.fcc.gov/
reports/2015-broadband-progress-report.
2 New America Foundation, The Art of the Possible: An Overview of Public Broadband Options, May 6, 2014, p.8,
available at https://static.newamerica.org/attachments/197-the-art-of-the-possible-an-overview-of-public-broadband-
options/TheArtofthePossible-OverviewofPublicBroadbandOptions_NAFOTI-CTC.pdf.
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operate, and/or maintain the network. Partners can include private for-profit companies, local
non-profits, and even local residents.3
Finally, there is a cooperative model, which refers to electric and telephone cooperatives, many of
which were originally created during rural electrification in the 1930s. These cooperatives, in
rural areas, have begun in some instances to provide broadband service. Many of the cooperatives
providing broadband service have received or are eligible for federal loan and grant support from
the Rural Utilities Service (RUS) of the U.S. Department of Agriculture (USDA). There are also a
few cooperatives that have been recently formed specifically for providing broadband service.
These typically rely on support from local governments and include the East Central Vermont
Community Fiber Network (ECFiber) and the WiredWest project in western Massachusetts.4
Aside from the models of how municipal broadband networks are governed, the nature of
broadband service offered by municipal broadband networks can vary. Municipal networks
• may provide wholesale service (“middle-mile” infrastructure, where retail
providers connect into the municipal network), “last mile” retail service directly
to customers, or both;
• may provide service solely to anchor institutions or also include businesses and
residences;
• may serve solely within municipal boundaries or may be extended to surrounding
municipalities and counties;
• may provide data or data bundled with video and/or voice, or may include smart
grid capacity; and
• while most recent and proposed municipal broadband projects utilize fiber
infrastructure, other broadband technologies such as wireless or cable have also
been deployed.
Municipal Broadband Networks in the
United States
Municipal broadband networks tend to be established in small and mid-sized communities, often
located in rural areas. With some exceptions, municipal broadband networks are typically not
located in major metropolitan areas, where many private providers already offer broadband
service.
The Institute for Local Self-Reliance (ILSR) lists 492 U.S. municipalities with broadband
networks. The complete list is included in the appendix of the January 2015 White House report
Community-Based Broadband Solutions: The Benefits of Competition and Choice for Community
Development and Highspeed Internet Access.5 This includes 89 communities with a publicly
3 Ibid., p. 10.
4 Ibid., pp. 12-13.
5 Executive Office of the President, Community-Based Broadband Solutions: The Benefits of Competition and Choice
for Community Development and Highspeed Internet Access, January 2015, pp. 20-33, available at
http://www.whitehouse.gov/sites/default/files/docs/community-
(continued...)
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owned fiber to the home (FTTH) network reaching most or all of the community, 76 communities
with a publicly owned cable network reaching most or all of the community, over 180
communities with some publicly owned fiber service available to parts of the community, over
110 communities with publicly owned dark fiber available, and over 40 communities in 13 states
with a publicly owned network offering at least 1 gigabit services.6
The magazine Broadband Communities lists 143 public and public-private fiber to the premises
(FTTP) network projects.7 This list identifies community fiber systems in 37 states and in
American Samoa. The largest number of deployments is in Washington (13), Kentucky (11),
Minnesota (10), Tennessee (8), Iowa (8), Illinois (7), and Florida (7).8
Policy Debate: Pros and Cons
The virtues and drawbacks of municipal broadband have been vigorously debated by
policymakers and other stakeholders.9 Advocates for municipal broadband include groups aligned
with local communities, while opponents include private sector incumbent broadband providers
and state governmental entities.
Arguments in Favor of Municipal Broadband
The primary argument in favor of municipal broadband is rooted in the dissatisfaction of some
communities with existing broadband service that is offered by private providers. Many local
communities cite low speeds, high prices, a lack of competition, or even an absence of any
broadband service in particularly sparsely populated areas, and argue that they should be able to
provide this service to meet their citizens’ needs and to support the community’s economic
development. Pro-municipal broadband arguments include
• Municipal broadband can enable small and mid-sized municipalities, often in
rural areas, to offer higher download and upload speeds. This is especially
important given that the FCC continues to identify a persistent “digital divide”
between rural areas (where 53% of Americans do not have broadband speeds of
at least 25 Mbps download/3 Mbps upload10) and urban areas (where only 8% do
(...continued)
based_broadband_report_by_executive_office_of_the_president.pdf.
6 Institute for Local Self-Reliance, “Community Network Map,” updated January 2015, available at
http://www.muninetworks.org/communitymap.
7 Zager, Masha, “Number of Community FTTP Networks Reaches 143,” Broadband Communities, August/September
2014, pp. 10-22, available at http://www.bbpmag.com/.http://www.bbpmag.com/2014mags/Aug_Sep/
BBC_Aug14_CommunityNetworks.pdf.
8 Ibid., p. 14.
9 Reports supporting municipal broadband include Executive Office of the President, Community-Based Broadband
Solutions: The Benefits of Competition and Choice for Community Development and Highspeed Internet Access,
January 2015; and New America Foundation, The Art of the Possible: An Overview of Public Broadband Options, May
6, 2014. Reports opposing municipal broadband include Advanced Communications Law & Policy Institute, New York
Law School, Understanding the Debate over Government-Owned Networks, June 2014; and Coalition for the New
Economy, The Hidden Problems with Government-Owned Networks, January 6, 2012.
10 In its 2015 Broadband Progress Report, the FCC raised its broadband speed benchmark from 4 Mbps (download)/1
Mbps (upload) to 25 Mbps/3 Mbps. This benchmark speed upgrade is controversial. The FCC argues that 25 Mbps/3
(continued...)
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not have access to those speeds).11 Overall, 16% of American households are in
areas without a single provider of 25 Mbps/3 Mbps fixed services.12
• Municipal networks can inject competition in markets where there may be a
limited number of providers. According to the FCC, 45% of households have
only a single provider of broadband offering 25 Mbps/3 Mbps. A lack of
competition can lead to high prices, poor customer service, limited and restrictive
service packages, and delayed or no investment in advanced technologies such as
ultra-fast gigabit networks. A municipal broadband network, in some cases, can
induce private providers to lower prices and increase speeds in order to compete.
• Municipal broadband can address unmet public interest needs. Private providers
tend to favor middle- to upper-income households which will generate adequate
revenue. Municipal broadband entities that are publicly owned may be more
likely to offer broadband to low-income households at affordable prices.
• Municipal broadband follows the tradition of municipal utilities, which have
been providing basic utilities such as water, natural gas, and electricity for many
years.
Arguments Opposed to Municipal Broadband
The main argument against municipal broadband (typically referred to by some opponents as
“government-owned broadband”) is that it is inappropriate for government-sponsored, -owned, or
-supported networks to compete with private providers. Municipal networks have unfair inherent
advantages over existing private networks, including preferential treatment with respect to rights
of way and other local regulatory barriers, and financing by direct taxpayer subsidies or
government bonds with below-market interest rates. This advantage can result in market-
distorting effects that can unfairly skew the competitive playing field between private and public
providers. Anti-municipal broadband arguments include
• Deploying broadband systems are inherently high-risk, because unlike basic
utilities like water or electricity, there are typically competing providers and not
all customers will necessarily sign up for service. Governments can be ill-
equipped to plan, operate, and maintain efficient commercial broadband systems,
and if they fail, the taxpayers will be liable for the cost of that failure.
• Taxpayer money should more appropriately be directed towards basic
infrastructure needs—such as roads, bridges, and water systems—that are
traditionally under the purview of government. In the United States, broadband is
primarily provided by the private sector. Public money that is directed towards
municipal broadband is money that is taken away from other, more critical
infrastructure needs.
(...continued)
Mbps is reflective of advanced telecommunications capability, while many providers assert that the new benchmark is
too high, excessive, or aspirational. See Federal Communications Commission, 2015 Broadband Progress Report, FCC
15-10, February 4, 2015, pp. 29-34.
11 Federal Communications Commission, 2015 Broadband Progress Report, FCC 15-10, February 4, 2015, p. 4,
available at https://www.fcc.gov/reports/2015-broadband-progress-report.
12 Ibid., p. 47.
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• According to the FCC, “private industry continues to invest billions of dollars to
expand America’s broadband networks.”13 Because of the market-distorting
effects of municipal broadband, continued private sector investment in broadband
networks might be discouraged in some cases.
• The broadband market is subject to rapid technological change and intense
competition. The bureaucracy of government is not well suited to making policy
decisions in a dynamic and rapidly changing environment. This poses the risk of
municipal broadband networks being reliant on soon-to-be obsolete technologies.
Case Studies—Successes or Failures?
While all agree that there is risk in municipal broadband, supporters and opponents argue over the
significance of “successes” and “failures” among existing municipal broadband projects. With
hundreds of municipal broadband projects to choose from, there will always be examples to fit
whichever definition of “success” or “failure” that observers choose to apply. In general,
municipal broadband supporters point to projects that have provided improved services, lower
prices, increased competition, and an improved climate for private-sector investment in the local
economy.14 Municipal broadband opponents cite examples where government-owned networks
have not been profitable, have discouraged private competition, and have been subject to
managerial inefficiency or technological obsolescence.15
In some cases, both proponents and opponents of municipal broadband have cited the same
municipal broadband project to bolster their arguments. For example, in 2005, the community of
Lafayette, LA, voted to build a municipal fiber network called LUS Fiber. LUS Fiber, financed by
bond revenues, was built in 2008 and connected to its first customers in 2009.
According to the White House report Community-Based Broadband Solutions: The Benefits of
Competition and Choice for Community Development and Highspeed Internet Access, LUS
Fiber’s network has increased customer savings and strengthened local anchor institutions:
As competing firms adjusted their plans to account for LUS Fiber’s market entry, residents
who weren’t customers of the network started to see lower prices. Cox Communications, a
major regional provider which had raised rates six times in four years, kept its rates stable
from 2004 to 2007 to account for LUS’s possible market entry. Still, LUS’s prices have been
consistently lower than those offered by Cox. Terry Huval, the director of LUS, estimates
that the community saved $4 million from these deferred rate increases. Using estimates of
13 Ibid., p. 9.
14 See for example: Executive Office of the President, Community-Based Broadband Solutions: The Benefits of
Competition and Choice for Community Development and Highspeed Internet Access, January 2015, pp. 13-18;
Institute for Local Self-Reliance, Community Broadband Networks, “Successes and Failures,” available at
http://www.muninetworks.org/content/successes-and-failures; and Edward Wyatt, “Fast Internet is Chattanooga’s New
Locomotive,” New York Times, February 3, 2014.
15 See for example: Thomas A. Schatz and Royce Van Tassell, “Municipal Broadband Is No Utopia,” Wall Street
Journal, June 19, 2014; Free State Foundation, “Another One Bites the Dust: Burlington Telecom’s Failure Shows,
Again, That Government-Operated Broadband Networks Are Not The Solution,” March 3, 2014, available at
http://freestatefoundation.blogspot.com/2014/03/another-one-bites-dust-burlington.html; and George S. Ford, Phoenix
Center for Advanced Legal & Economic Public Policy Studies, “Why Chattanooga Is Not the ‘Poster Child’ for
Municipal Broadband,” January 20, 2015, available at http://www.phoenix-center.org/perspectives/Perspective15-
01Final.pdf.
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Cox’s average competing discounts and LUS Fiber’s lower rates, LUS projects the fiber
system will create total savings of between $90 and $100 million over its first 10 years.
The fiber network has brought in companies eager to obtain fast service at lower prices. Pixel
Magic brought 100 to 200 jobs when it built an office in Lafayette to accomplish work on the
movie “Secretariat.” The high speed capability of the broadband network was a big factor in
their eventual decision to maintain their office in Louisiana permanently. The tech startup
firm Skyscraper Holding moved from Los Angeles to Lafayette to obtain 100 Mb/s speeds at
a fraction of the cost the company was charged on the west coast.16
Municipal broadband opponents have a different take on LUS Fiber, stating the network is 30%
short of its revenue projection as set out in its business plan, more than $160 million in debt, and
struggling to compete with cable, telephone, wireless, and satellite service providers in terms of
price, performance, and service options.17 The think tank R Street noted that LUS Fiber received a
warning from city auditors about low revenues and stated:
Lafayette’s auditors voiced similar concerns in their reports the last two years. In 2012, they
punctuated it with a calculation that the $140-million system was costing the city $45,000 a
day.
Now, after six years of operation, prospects aren’t much better. The city’s financial reports,
provided by a source in Lafayette, show that for the fiscal year ended Oct. 31, 2013, LUS
Fiber reported $23 million in operating revenues, compared to $36.7 million that was
forecast in its feasibility study. The system incurred a $2.5 million operating loss for the
year. According to the original plan, this was to be the point where the operation swung to a
profit of $902,000. The most staggering number, however, is LUS Fiber’s deficit, which
stood at $47 million at the end of October, up from $37.1 million the year before.18
The Role of the Federal Communications
Commission
The FCC, an independent federal agency charged with regulating interstate and international
communications, has taken an active role in promoting the deployment of broadband services and
broadband infrastructure.19 The FCC has adopted numerous proceedings to facilitate access to and
the adoption of advanced services including the following:
16 Community-Based Broadband Solutions: The Benefits of Competition and Choice for Community Development and
Highspeed Internet Access, p. 16.
17 Steven Titch, Reason Foundation, Lessons in Municipal Broadband from Lafayette, Louisiana, November 2013, pp.
i-ii, available at http://reason.org/files/municipal_broadband_lafayette.pdf. A rebuttal was published by Christopher
Mitchell, MuniNetworks.org, and Institute for Local Self-Reliance, Correcting Community Fiber Fallacies: The Reality
of Lafayette’s Gigabit Network, September 2014, available at http://ilsr.org/wp-content/uploads/downloads/2014/10/
fiberfallacieslusfiber.pdf.
18 Titch, Steven, R Street, Muni broadband: The Gift That Keeps on Taking, May 30, 2014, available at
http://www.rstreet.org/2014/05/30/muni-broadband-the-gift-that-keeps-on-taking/.
19 For a further discussion of the structure and role of the FCC see CRS Report RL32589, The Federal Communications
Commission: Current Structure and Its Role in the Changing Telecommunications Landscape, by Patricia Moloney
Figliola.
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• the transition of the Universal Service Fund from a mechanism that supports
voice service to one that supports the deployment and adoption of both fixed and
mobile broadband;
• the modernization of the Schools and Libraries Program to incorporate high
speed broadband and Wi-Fi connections; and
• the proposed expansion of the Low Income Program to provide support for
broadband as well as voice services, to name a few.
FCC Chairman Wheeler has also stated on numerous occasions his support for the development
of community-based broadband service options and has expressed his opinion that the FCC has
the authority to preempt state laws that ban competition from community broadband.20
The City of Wilson and the Power Board of Chattanooga Petitions
On July 24, 2014, two local municipally owned broadband providers, the City of Wilson
(Wilson), an NC municipal corporation, and the Electric Power Board of Chattanooga (EPB), an
independent board of the City of Chattanooga, TN, separately petitioned the FCC to preempt
certain provisions of their respective states’ laws which they claimed restricted the further
deployment of their networks.21
Both Wilson and EPB operate electric utilities that also offer gigabit speed broadband networks
that provide data, video, and voice services. Wilson provides electric service in six counties in
eastern North Carolina and broadband service solely in Wilson County.22 Wilson claims that
despite “... numerous requests for these services ... in the other five counties.... ” and a willingness
to expand broadband services to these counties, it cannot, due to what it stated are overly
burdensome provisions in state law that in effect have “... the purpose and effect of prohibiting it
from doing so.”23 As in the case of Wilson, EPB states that it regularly receives requests from
citizens and businesses, located outside of EPB’s electric service territory, to provide advanced
telecommunications services (e.g., broadband Internet access and services). EPB states that it is
willing to provide these services and expand its service footprint, but is restricted by Tennessee
state law that permits authorized municipal electric systems to provide Internet service (as well as
cable service and video), but only within the boundaries of their (electric) service areas.24 Both
petitioners allege that existing provisions in their respective states’ laws restricted their ability to
20 For example, see the statement of FCC Chairman Wheeler before the House Subcommittee on Communications and
Technology, May 20, 2014, hearing on “Oversight of the Federal Communications Commission,” available at
https://apps.fcc.gov/edocs_public/attachmatch/DOC-327165A1.pdf. However, it should be noted that this opinion is
not universally held by all of the FCC Commission members.
21 Petition of the City of Wilson, North Carolina, Pursuant to Section 706 of the Telecommunications Act of 1996, for
Removal of Barriers to Broadband Investment and Competition, filed July 24, 2014, available at
apps.fcc.gov/ecfs/document/view?id=7521737310.
Petition of the Electric Power Board of Chattanooga, Tennessee, Pursuant to Section 706 of the Telecommunications
Act of 1996, for Removal of Barriers to Broadband Investment and Competition, filed July 24, 2014, available at
https://www.epb.net/downloads/legal/EPB-FCC petition.pdf.
22 Wilson County qualified for a grandfathering exemption since it provided these services in that county prior to the
law’s passage, but is not permitted to provide these services in the five other counties in which it provides electric
service.
23 Wilson petition, p. 2. (N.C. Gen. Stat. sec. 160a-340 through 160a-340.6).
24 EPB petition, p. 16. (Tenn. Code Ann. sec. 7-52-601).
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expand their broadband services to surrounding areas where customers have expressed interest in
these services and both request that the FCC use its authority pursuant to Section 706 of the
Telecommunications Act of 1996 to preempt these laws.25
The FCC Memorandum Opinion and Order
The FCC’s Wireline Competition Bureau released a public notice on July 28, 2014, establishing a
pleading cycle for the petitions setting comment and reply dates of August 29, 2014, and
September 29, 2014, respectively.26 After consideration of record the FCC, in a February 26,
2015, action, granted the petitions to preempt state laws in North Carolina and Tennessee that
restricted the expansion of community broadband services.27 In a Memorandum Opinion and
Order (Order), which became effective upon its release on March 12, 2015, the FCC stated that
selected provisions of the laws in North Carolina and Tennessee are barriers to broadband
deployment, investment, and competition, and conflict with the FCC’s mandate to promote these
goals.28
The FCC relied upon its authority under Section 706 of the 1996 Telecommunications Act
(Section 706), which directs the FCC to “... encourage the deployment on a reasonable and timely
basis of advanced telecommunications capability to all Americans ... by utilizing ... measures that
promote competition in the local telecommunications market, or other regulating methods that
remove barriers to infrastructure investment.”29 According to the Order the FCC concludes that
“... preemption meets the standard for action under Section 706 because it will remove barriers to
overall broadband infrastructure investment and promote overall competition in the
telecommunications market in Tennessee and North Carolina.”30 Furthermore, the Order stated
that “... preemption of these restrictions will expand broadband investment and deployment,
increase competition, and serve the public interest, as Section 706 intended.”31
The FCC preempted the geographic restrictions of both the Tennessee and North Carolina laws
stating that they are barriers to broadband infrastructure investment and competition and
preempted additional provisions of the North Carolina law containing other limitations, stating
that the cumulative effect of those provisions collectively amount to a barrier to broadband
25 Section 706 of the Telecommunications Act of 1996, P.L. 104-104, sec. 706, 110 Stat. 56, 153 (1996), as amended
by the Broadband Data Improvement Act, P.L. 110-385, 122 Stat. 4096 (2008), is now codified in Title 47, Chapter 12
of the United States Code, at 47 U.S.C. Sec. 1302.
26 Pleading Cycle Established for Comments on Electric Power Board and City of Wilson Petitions, Pursuant to Section
706 of the Telecommunications Act of 1996, Seeking Preemption of State Laws Restricting the Deployment of Certain
Broadband Networks, WC Docket Nos. 14-115 and 14-116, Public Notice, DA 14-1072 (Wireline Comp. Bur. rel. July
28, 2014). Available at http://apps.fcc.gov/eefs/document/view?id=7521737783.
27 The 3-2 vote fell along party lines with Chairman Wheeler and Commissioners Clyburn and Rosenworcel approving
and Commissioners Pai and O’Rielly dissenting. Statements of the Chairman and the commissioners available at
https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-25A1.pdf.
28 In the Matter of City of Wilson, North Carolina, Petition for Preemption of North Carolina General Statute Sections
160A-340 et seq., and the Electric Power Board of Chattanooga, Tennessee, Petition for Preemption of a Portion of
Tennessee Code Annotated Section 7-52-601, WC Docket No. 14-115 and WC Docket No. 14-116. Released March
12, 2015. Available at https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-25A1.pdf.
29 The Telecommunications Act of 1996, P.L. 104-104, Sec. 706.
30 Order, at para. 42.
31 Order, at para. 15.
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investment and competition.32 These barriers are in clear conflict, the Order states, with Section
706, which directs the FCC to take action to remove such barriers. More specifically the Order
concludes that in the case of the EPB petition “the territorial restriction in Tennessee Code
Section 601 is a barrier to broadband deployment and infrastructure investment and limits
competition.”33 With regard to the Wilson petition, the Order concludes that the geographic
restrictions34 and other, but not all of the remaining provisions of North Carolina law cited in the
petition, when considered holistically, represent a barrier to broadband infrastructure investment
or thwart competition.35 Therefore the Wilson petition is granted in part to the extent discussed in
the Order and otherwise denied.36
The FCC stated that while it believes it cannot preempt state laws that outright ban municipal
broadband networks, it can intervene (under the authority contained in Section 706) if a state
allows municipal broadband networks, but imposes restrictions that create barriers to a timely and
reasonable deployment of advanced telecommunications services to all Americans. That is, the
FCC cannot require a state to allow municipal broadband networks, but it can preempt laws that
impose restrictions on an existing network if they are creating barriers to deployment of such
networks.37 While the Order states that this ruling only applies to provisions of the laws of the
two states (North Carolina and Tennessee) of the two petitioners, the FCC noted that “... the
Commission [FCC] will not hesitate to preempt similar statutory provisions in factual situations
where they function as barriers to broadband investment and competition.”38
Whether the FCC does, or does not, have the legal authority under Section 706 to preempt state
laws that restrict municipal broadband deployment remains controversial.39 While the majority of
the FCC commissioners (Chairman Wheeler and Commissioners Clyburn and Rosenworcel)
voted in favor of this decision, it was not unanimous. Both Commissioner Pai and Commissioner
O’Rielly dissented, stating that the FCC lacked the authority to grant the petitions.40
Both the state of Tennessee and the state of North Carolina have filed lawsuits (petitions for
review) challenging the FCC’s authority to preempt these restrictions. The state of Tennessee filed
its petition on March 20, 2015, with the U.S. Court of Appeals 6th Circuit, Cincinnati.41 The state
32 The EPB petition is granted and the Wilson petition is granted in part, Order, paras 183 and 184. The FCC
determined that not every provision of the North Carolina law represents a barrier to infrastructure investment or
thwarts competition such that they felt compelled to preempt it, para. 182.
33 Order at para. 168 and paras. 77-79.
34 As stated in the Order “... restrictions on the provision of bundled services undermines a provider’s ability to provide
broadband successfully due to a strong customer preference for bundled offerings.” Order, para. 119.
35 Order, at paras.94 and 182.
36 See Order, paras. 123-129 for the justification for not preempting selected provisions and paras. 123 and 182 for a
list of the provisions of North Carolina law not preempted.
37 Order, at paras. 11, 162-167.
38 Order, at para. 16.
39 The legality of this action goes beyond the scope of this report. For a discussion of the legal issues regarding
municipal broadband and federal preemption see CRS Legal Sidebar, Municipal Broadband and Federal Preemption,
by Kathleen Ann Ruane.
40 Dissenting Statement of Commissioner Ajit Pai and Dissenting Statement of Commissioner Michael O’Rielly.
Available at https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-25A1.pdf.
41 Tennessee v. FCC, Case No. 15-3291 (6th Cir.) petition for review filed March 20, 2015.
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of North Carolina filed its petition on May 11, 2015, with the U.S. Court of Appeals 4th Circuit,
Richmond.42
Administration and FCC Initiatives
In January 2015, President Obama announced steps “to help more Americans, in more
communities around the country, get access to fast and affordable broadband.”43 In addition to
supporting the FCC Order (discussed above), the Administration plan contained several initiatives
directly relevant to municipal broadband, including the following.
• Establishment of the Broadband Opportunity Council. On March 23, 2015, the
President signed a Presidential Memorandum, “Expanding Broadband
Deployment and Adoption by Addressing Regulatory Barriers and Encouraging
Investment and Training.”44 The memorandum established an interagency
Broadband Opportunity Council which will be chaired by the Department of
Commerce (DOC) and the USDA, and consist of 25 other member agencies. The
Council’s objectives are to engage with industry and other stakeholders to
understand ways the government can better support the needs of communities
seeking to expand broadband access and adoption; identify regulatory barriers
unduly impeding broadband deployment, adoption, or competition; survey and
report back on existing programs that currently support or could be modified to
support broadband competition, deployment, or adoption; and take all necessary
actions to remove these barriers and realign existing programs to increase
broadband competition, deployment, and adoption. On April 29, 2015, DOC and
USDA put out a notice and request for public comment in the Federal Register.45
The Council is supposed to submit a final report to the President in August
2015.46
• BroadbandUSA. Based on the expertise acquired from administering the
American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5)
broadband stimulus program (specifically the Broadband Technology
Opportunities Program), the National Telecommunications and Information
Administration (NTIA) has established an information and best-practices
resource available to communities seeking to develop broadband public-private
partnerships.47 BroadbandUSA48 will offer online and in-person technical
42 North Carolina v. FCC, Case No. 15-1506 (4th Cir.) petition for review filed May 11, 2015.
43 The White House, Fact Sheet, “Broadband That Works: Promoting Competition & Local Choice in Next-Generation
Connectivity,” January 13, 2015, available at https://www.whitehouse.gov/the-press-office/2015/01/13/fact-sheet-
broadband-works-promoting-competition-local-choice-next-gener.
44 Available at https://www.whitehouse.gov/the-press-office/2015/03/23/presidential-memorandum-expanding-
broadband-deployment-and-adoption-addr.
45 Department of Commerce and Department of Agriculture, “Broadband Opportunity Council Notice and Request for
Comment,” Federal Register, Vol. 80, No. 82, April 29, 2015, pp. 23785-23787, available at http://www.ntia.doc.gov/
files/ntia/publications/fr_boc_notice_and_rfc_4-29-15.pdf.
46 Department of Commerce and Department of Agriculture, “Broadband Opportunity Council (BOC) Request for
Comments,” Webinar, May 20, 2015, p. 5, available at http://www.ntia.doc.gov/files/ntia/publications/
boc_rfc_slides_2015_05_20_final.pdf.
47 Lawrence E. Strickling, Administrator, National Telecommunications and Information Administration, “NTIA
Announced BroadbandUSA Effort to Assist Communities with Broadband Plans,” January 14, 2015, available at
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assistance to communities; host a series of regional workshops around the
country; and publish guides and tools49 intended to help communities address
problems in broadband infrastructure planning, financing, construction, and
operations across many types of business models.
• Community Broadband Summit. The White House announced that it will convene
a Community Broadband Summit where city and county officials will share
information and experiences in deploying broadband for their communities. On
March 23, 2015, the White House announced it will host the Community
Broadband Summit in June 2015.50 To date, the scheduling of the Community
Broadband Summit has not been announced.
The federal government has also affected municipal broadband through broadband funding
programs. While municipal broadband projects are locally directed and funded, the federal
government has supported these efforts by helping to finance some of the middle-mile fiber
networks that municipal networks can interconnect with. A major funding vehicle for middle-mile
fiber networks was the $7 billion broadband stimulus program established by the ARRA.51 ARRA
Awards were made in FY2009 and FY2010, and projects are completed or in the final stages of
completion.52 Going forward, the ARRA broadband programs have concluded and no more
funding will be awarded.
Currently, there are three ongoing programs at the RUS that provide funding for broadband
infrastructure (although at funding levels significantly less than what was provided in the ARRA
broadband programs). These are: Farm Bill Broadband Loans and Loan Guarantees53 ($24 million
loan level in FY2015), Telecommunications Infrastructure Loans and Loan Guarantees54 ($690
million loan level yearly), and Community Connect Grants55 ($10 million in FY2015). While
local governmental entities are eligible to apply for these programs, funding has tended to go to
private providers.
The other major existing federal vehicle for funding broadband infrastructure is the Connect
America Fund (CAF). While RUS grants and loans are used as up-front capital to invest in
broadband infrastructure, the CAF provides ongoing subsidies to keep the operation of broadband
networks in high-cost areas economically viable for providers.
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http://www2.ntia.doc.gov/ntia_announces_broadbandusa_effort.
48 Available at http://www2.ntia.doc.gov/.
49 See for example, NTIA, BroadbandUSA: An Introduction to Effective Public-Private Partnerships for Broadband
Investments, January 2015, 16 p., available at http://www2.ntia.doc.gov/files/ntia_ppp_010515.pdf.
50 The White House, Fact Sheet, “Next Steps in Delivering Fast, Affordable Broadband,” March 23, 2015, available at
https://www.whitehouse.gov/the-press-office/2015/03/23/fact-sheet-next-steps-delivering-fast-affordable-broadband.
51 See CRS Report R41775, Background and Issues for Congressional Oversight of ARRA Broadband Awards, by
Lennard G. Kruger.
52 A listing of Broadband Technology Opportunity Program (BTOP) infrastructure awards made by the National
Telecommunications and Information Administration (NTIA) is available at http://www2.ntia.doc.gov/infrastructure.
Broadband Initiative Program (BIP) awards made by the Rural Utilities Service (RUS) are available at
http://www.rd.usda.gov/files/reports/RBBreportV5ForWeb.pdf.
53 See http://www.rd.usda.gov/programs-services/farm-bill-broadband-loans-loan-guarantees.
54 See http://www.rd.usda.gov/programs-services/telecommunications-infrastructure-loans-loan-guarantees.
55 See http://www.rd.usda.gov/programs-services/community-connect-grants.
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Congressional Activity—114th Congress
Three bills (S. 240, S. 597, and H.R. 1106) have been introduced, and one draft measure (H.R.__)
released, in the 114th Congress that address the municipal broadband debate. Provisions in these
measures range from those that restrict states and localities from enacting laws that prohibit
public (municipal) broadband (S. 240) to those that prevent the FCC from preempting current or
future state and local laws that prohibit municipal broadband (S. 597 and H.R. 1106), and in the
case of the discussion draft (H.R. __), preempt the FCC and/or any state regulatory authority from
using Section 706 as a source of authority to preempt state laws (e.g., those that prohibit
municipally owned broadband networks).
The Community Broadband Act of 2015 (S. 240), introduced by Senator Booker on January 22,
2015, seeks to remove state barriers for constructing municipal broadband networks and
encourages public-private partnerships. S. 240 provides that no state or local statute may prohibit,
or have the effect of prohibiting or substantially prohibiting, any public entities from providing
either telecommunications services (e.g., telephone services) or advanced telecommunications
capability or services (e.g., broadband Internet access services). With respect to the private
provider that a municipality regulates, S. 240 requires a public provider not to discriminate in
favor of its own public network with respect to how it applies municipal ordinances, rules,
policies, and fees related to requirements such as rights of way and permitting. S. 240 encourages
public-private partnerships and requires extensive public notice of proposed municipal broadband
projects, including an opportunity for private providers to bid on that proposed project. The anti-
discrimination and public notice requirements in the bill would not apply where a public provider
does not provide telecommunications or broadband services to the public “or to such classes of
users as to make the capability or services effectively available to the public,” or during an
emergency. S. 240 prohibits the use of federal funds to assist a public provider in reviving or
renewing a project that has failed due to bankruptcy or termination. The bill was referred to the
Senate Committee on Commerce, Science, and Transportation.
The State’s Rights Municipal Broadband Act of 2015 (S. 597 and H.R. 1106), introduced on
February 26, 2015, by Senator Tillis and Representative Blackburn, respectively, states that the
FCC cannot preempt states with municipal broadband laws already in place, or any other states
that subsequently adopt such municipal broadband laws. The bill also includes a Sense of
Congress stating that the FCC does not have the legal authority under Section 706 to prohibit
states from implementing any law of such state with respect to the provision of broadband
Internet access service (e.g., municipal broadband restrictions). The bills were referred to the
House Committee on Commerce, Science, and Transportation and the House Subcommittee on
Communications and Technology, respectively.
Draft legislation56 released on January 16, 2015, by Republican leaders of the House Energy and
Commerce Committee and the Senate Committee on Commerce, Science, and Transportation
includes a provision that prohibits the FCC, or any state commission with regulatory authority
over telecommunications services, from relying on Section 706 as a grant of authority. If enacted
this would be in direct conflict with the FCC’s final Order which rests on its Section 706
56 Available at http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/114/BILLS-114hr-
PIH-OpenInternet.pdf.
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authority to preempt selected provisions of North Carolina and Tennessee law that restrict
municipal broadband deployment.
Policy Issues
Since the private sector began deploying broadband infrastructure in the late 1990s, Congress and
the FCC have sought to enact policies and programs that address the directive of Section 706 to
“encourage the deployment on a reasonable and timely basis of advanced telecommunications
capability to all Americans.”
With respect to municipal broadband, the issue for Congress is whether locally owned and/or
supported networks should be encouraged or restricted. The debate is complicated by the
diversity of municipal broadband projects. Each community and project is unique and subject to
different factors that can lead to its ultimate success or failure. Abundant examples of successes
and failures are available to support arguments made by both supporters and opponents alike.
In addressing municipal broadband, Congress and the FCC have sought to balance two competing
public policy interests. On the one hand, with hundreds of municipal broadband projects
underway in communities across the country, with other communities exploring various kinds of
municipal networks that might offer higher speeds at affordable prices, and with 20 state laws that
ban or restrict municipal broadband projects, many have argued that state restrictions be
overridden either by congressional legislation or by FCC rule. Ultimately, as discussed above, on
March 12, 2015, the FCC released an order lifting restrictions on municipal broadband networks
in Wilson, NC, and Chattanooga, TN.
On the other hand, counterbalancing arguments point to the primacy of private sector providers in
deploying the nation’s broadband. Municipal broadband opponents argue that public entities are
ill-equipped to efficiently develop, operate, and maintain commercial broadband networks, and
that municipally owned and supported broadband networks constitute unfair competition to
private sector providers, and may ultimately impede private investment in broadband
infrastructure.
One way that Congress has addressed the debate is through its oversight and authorization of the
FCC. Committees with jurisdiction over telecommunications policy—such as the House Energy
and Commerce Committee and the Senate Commerce, Science and Transportation Committee—
are considering measures reflecting both sides of the issue: from preventing the FCC from
overruling state municipal broadband restrictions on the one hand, to overriding those state
imposed restrictions on the other.
Congress can also have an impact through the appropriations process. For example, in the 113th
Congress, H.R. 5016 (Financial Services and General Government Appropriations Act, 2015), as
passed by the House on July 16, 2014, would have provided that none of the funds made
available in the FY2015 FCC appropriation could be used to prevent 20 states from implementing
their own laws with respect to the provision of broadband by the state or a municipality or other
political subdivision of the state.57
57 Amendment offered by Representative Blackburn on House floor, July 15, 2014. The House adopted the amendment
by a vote of 223-200 on July 16, 2014. This language was not enacted in the final version of the legislation, P.L. 113-
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Another way Congress could support municipal broadband is through funding broadband
infrastructure, although funding initiatives are often balanced against fiscal considerations and
against concerns over whether federally funded networks unfairly compete against private sector
broadband deployment.
Ultimately, whether municipal broadband should be encouraged or restricted is one of many
policies that Congress continues to consider for promoting broadband deployment. These include
loans and grants for broadband infrastructure deployment; universal service reform; tax
incentives to encourage private sector deployment; regulatory and deregulatory measures; and
spectrum policy to spur roll-out of wireless broadband services. Some of these policies may be
considered in the context of efforts to rewrite the Communications Act of 1934. To the extent that
Congress may consider the various options for promoting broadband, a central issue is how to
strike a balance between providing government support for broadband in areas where the private
sector may not be providing acceptable levels of broadband service, while at the same time
minimizing any deleterious effects that government intervention in the marketplace may have on
competition and private sector investment.
Author Contact Information
Lennard G. Kruger
Angele A. Gilroy
Specialist in Science and Technology Policy
Specialist in Telecommunications Policy
lkruger@crs.loc.gov, 7-7070
agilroy@crs.loc.gov, 7-7778
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