Telecommunications Update – Sixth Circuit Court of Appeals Reverses FCC’s Preemptive Action on State Laws in Tennessee and North Carolina
August 16, 2016
Sixth Circuit Court of Appeals Reverses FCC’s Preemptive Action on State Laws in Tennessee and North Carolina
In a move to be watched by many local municipalities, the Sixth Circuit Court of Appeals reversed an order by the Federal Communications Commission (“FCC”) that preempted state restrictions on municipal broadband projects in North Carolina and Tennessee.
This case stemmed out of separate state laws in Tennessee and North Carolina that limited the ability of municipalities in these states to provide broadband services beyond their current territorial boundaries to underserved nearby areas. The FCC, relying on Section 706 of the Telecommunications Act of 1996, stated that it had the statutory authority to remove barriers to broadband services and to increase broadband investment while promoting competition in the telecommunications market. The FCC concluded that based on this mandate, it had the authority to preempt the territorial restrictions in the North Carolina and Tennessee statutes.
In reversing the FCC’s preemptive actions, the Sixth Circuit Court found that the FCC lacked the authority to dictate the state-subdivision relationship and how states regulate their towns. The Court determined that the FCC did not have a “clear statement” granting it authority to override state law, finding that any attempt by the federal government to interpose itself into the state-subdivision relationship must come from a clear directive from Congress. The Court held that Section 706 of the Telecommunications Act does NOT contain a clear statement from Congress authorizing preemption of a state’s statutes governing decision of municipal subdivisions. The Court found that states generally retain the power to make discretionary decisions for its subdivisions, comparing this authority to that of a board of directors’ power to make decisions for a company. As such, they reversed the FCC’s order.