CONSUMER AND HIGH-TECH GROUPS BACK MUNICIPAL ENTRY INTO TELECOM BUSINESS

The Supreme Court’s intervention is expected to resolve the conflict between decisions of the 8th Circuit and the U.S. Appeals Court, D.C., which ruled in the FCC’s favor in City of Abilene (Tex.) v FCC. In declining to preempt the Mo. statute, the FCC had ruled that the term “any entity” in Sec. 253(a) of the Telecom Act wasn’t intended to include political subdivisions of a state but rather “appeared to prohibit” restrictions on market entry that applied to independent entities. The Commission had held that if municipally owned utilities had sought to provide telecom service as independent corporate entities, it would have reached a different conclusion.

However, the 8th Circuit ruled that there was no doubt that municipalities and municipally owned utilities were entities under the standard definition of the term. Although municipalities in Mo. derive all their powers from the state and although the state can control its subdivisions in an “almost limitless way,” municipalities and its subdivisions have an existence separate from that of the state, the court held in a challenge brought by Mo. municipalities.

The respondent Mo. Municipal League reiterated its argument that the plain meaning of Sec. 253(a) preempted the Mo. statute. Municipalities and municipally owned utilities are unquestionably “entities” in the ordinary meaning of the term, it said. “Any entity” was precisely the phrase that Congress would have chosen if it had been seeking to be as inclusive as possible, it said. Contrary to the petitioners’ contention, such an interpretation of Sec. 253(a) wouldn’t produce “absurd” results such as empowering state officials to provide telecom services over the objection of the legislature, the league said.

In a joint brief in support of the FCC last month, the USTA, Verizon and BellSouth had contended that local govts., unlike other competitors, could take advantage of their “regulator” status “both to advantage themselves and disadvantage competing private providers.” Local govts. control access to rights-of-way (ROWs) and have misused that authority in an attempt to require telephone companies to pay “exorbitant” ROW fees or to install and “donate” facilities for local govts.’ own use, they charged. They also said the telecom industry was a risky, capital-intensive business and local govt. entry into the market “may result in increased tax burdens on businesses and residents of the state, create substantial market uncertainties” and could lead to serious municipal budgetary problems.

Filing as amicus curiae brief in support of municipalities, the Consumer Federation of America (CFA) said consumers shouldn’t be asked to wait for private providers to saturate densely populated and more profitable markets before turning to less profitable areas. Prohibitions against municipal entry protect neither consumers nor taxpayers and inhibit much-needed competition, it argued. In small and rural communities across the country, consumers continue to wait for benefits such competition could bring, the CFA said. Instead of competition, it said, consumers are faced with escalating prices and inadequate service of incumbents. State-imposed bans on municipal entry into telecom services may prevent residents of small and rural communities from having access to advanced communications services, the group said. As for objections raised by incumbent providers, the CFA said the FCC itself had pointed out that there were less restrictive measures than outright prohibition to deal with issues such as taxpayer protection and regulatory bias when a municipality acted as both a regulator and a competitor.

Arguing against state barriers to municipal entry to the telecom market, the High Tech Broadband Coalition and the Fiber-to-the-Home Council said in a joint brief that since 2000, the telecom sector in the U.S. had lost 600,000 jobs and private deployment of next-generation broadband technologies had been insufficient. In contrast, they said, deployment by municipalities and municipally owned utilities had accelerated. Municipal entry into the telecom market has been “enormously valuable” for deployment in areas that aren’t an investment priority for private sector providers, the 2 organizations said. Precluding states from erecting barriers to municipal entry not only is appropriate as a policy, but also, legally, is the right thing to do because it would be consistent with congressional intent, they said.

Educause, which says it represents the information technology interests of more than 1,900 colleges and universities, said such institutions and their surrounding communities, many of which were quite remote, had a vested and mutual interested in the acquisition of high bandwidth network services. Municipal participation in the telecom market holds great potential not only for meeting the needs of the higher education community, but also for speeding the deployment of advanced networking services, it said. Universities and colleges create huge demand for bandwidth but are also looking to cut costs, Educause said, and in some places, “local governments are helping the communities achieve both these goals… while accommodating the financial limitations of public and private colleges and schools.” Municipalities provide services in rural areas, where the private sector is unlikely to provide advanced services in the near future, giving scientific researchers access to advanced network capability, it said.

In seeking Supreme Court review, the FCC said the 8th Circuit’s ruling conflicted with that of the D.C. Circuit, “thus placing the FCC in the position of having to give effect to diametrically opposite court opinions.” The Commission said the questions at issue in the case could be expected to be raised again because several states had statutes similar to that in Mo. and could be subject to attack under Sec. 253(a), and still other states could enact such laws.