Where there is a high rate of return on investment with old technology without any threat of competition, monopolistic incumbents have little reason to improve their networks and/or product offerings.
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As we noted yesterday, the DC Circuit of Appeals has decided that the FCC does not have authority to implement its Open Internet (network neutrality) rules as proposed several years ago.
But the court nonetheless found that the FCC does have some authority to regulate in the public interest, particularly when it comes to something we have long highlighted: state barriers to community owned networks. For example, see North Carolina and recent efforts in Georgia.
States have been lobbied heavily by powerful cable and telephone companies to create barriers that discourage community owned networks. Nineteen states have such barriers (see our map with the states shown in red), largely because communities have nowhere near the lobbying power of massive cable and telephone companies, not because the arguments against municipal networks are compelling.
For those who remember a certain Supreme Court decision called Nixon v Missouri, the Court has once weighed in the matter of state barriers to community networks. In the '96 Telecom Act, Section 253 declares "No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service."
However, the Supreme Court decided in 2004 that Congress was insufficiently clear in its intent to preempt state authority - that "any" did not mean "any" but rather meant something else. In making this decision, it ignored a legislative history with plenty of evidence (see Trent Lott for instance) that suggested Congress meant "any" to mean "any."
ANYway, we lost that one. States were found to have the right to limit the authority of communities to build their own networks. But we have long felt that a different grant of authority gave the FCC the power to overrule state limits of local authority to build networks, Section 706.
And this is where yesterday's decision comes in. Circuit Judge Silberman concurred in part and dissented in part - but more importantly for us, he explained Section 706. Read along with your own copy from here [pdf].
The statute directs the Commission to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . . by utilizing . . . price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”
As I said, we have long felt the FCC had the power to remove state barriers that limit local authority to build fiber networks under its section 706 authority but we did not know whether the courts would read it in the same way. In describing the difference between its authority to promote competition vs. its power to remove barriers to infrastructure investment, he notes:
An example of a paradigmatic barrier to infrastructure investment would be state laws that prohibit municipalities from creating their own broadband infrastructure to compete against private companies.
The footnotes cites this Wired article for further information. It's "kind of a big deal."
We now have a clear roadmap: Section 706 gives the FCC the authority to remove barriers to infrastructure investment and to promote competition. Restoring local authority to build networks achieves both. The Nixon v. Missouri decision is irrelevant, based on a different section of law. And we have plenty of evidence that when allowed to build their own networks, communities can do a wonderful job... that is what we have been documenting for years.