Updated, 8:00 p.m.
A senior congressional Republican this week introduced legislation that would bar the federal government from using its powers to help community-owned Internet service providers compete with private telecommunications companies. The House approved the proposal Wednesday afternoon, 223-200.
The move comes just as a Chattanooga-based, community-owned Internet provider that delivers some of the fastest connections in the nation, EPB, is girding for an expansion plan that would take on major telecommunications firms far beyond its home region.
In many states, major providers of high-speed Internet connections have successfully lobbied state lawmakers to deliver legislation that bars community-owned ISPs from expanding beyond their home territories. The Federal Communications Commission has the authority to intervene and preempt such state laws to enable smaller Internet providers to compete with larger national firms.
The legislation, introduced by Rep. Marsha Blackburn of Tennessee as an amendment to an annual spending bill, would strip the FCC of this power. "Inserting the FCC into our states' economic and fiscal affairs sets a dangerous precedent and violates state sovereignty in a manner that warrants deeper examination," she said.
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The Wednesday vote broke largely along party lines: 221 Republicans voted in favor of the proposal, along with two Democrats; 196 Democrats and four Republicans opposed it. New York Rep. Jose Serrano, the top Democrat on the House Appropriations Financial Services subcommittee, rejected Blackburn's argument. "This amendment means the federal government will tell every local citizen, mayor, and county council member that they may not act in their own best interests," Serrano said. "Any such amendment is an attack on the rights of individual citizens speaking through their local leaders to determine if their broadband needs are being met."
Blackburn’s top campaign donors include private telecommunications firms that do not want to have to compete with publicly owned ISPs. Her state is home to EPB, a taxpayer-owned power company in Chattanooga that also provides local residents some of the fastest Internet speeds in the world at market-competitive rates. EPB is now aiming to expand its services beyond Chattanooga.
However, to go forward with its expansion plan, EPB needs the FCC to enter the fray, applying its authority to preempt a Tennessee law backed by the private telecom industry that restricts the utility’s ability to move into new regions. According to data from the Center for Public Integrity, Tennessee is one of 20 states with such laws on its books.
The chairman of the FCC, Tom Wheeler, has recently voiced support for using his agency’s preemption authority to override state laws preventing community-owned ISPs from competing with private telecoms. That stance represents a break from his past: Wheeler previously worked as a lobbyist representing the cable industry, the principal channel for broadband Internet service.
Last month, Wheeler met with Chattanooga Mayor Andy Berke and a day later published a statement on the FCC’s website declaring “that it is in the best interests of consumers and competition that the FCC exercises its power to preempt state laws that ban or restrict competition from community broadband.”
Blackburn’s amendment could effectively strip the FCC of its preemption power, at least for the year that the underlying annual appropriations measure is in force. That would halt EPB’s expansion proposal, and send a larger message to other community-owned utilities that they may not get federal relief from state statutes.
Such an outcome would be a big win for the private telecom industry, which might explain Blackburn’s central role in the fight. According to campaign finance data compiled by the Center for Responsive Politics, two of Blackburn’s largest career donors are employees and PACs affiliated with AT&T (NYSE:T) ($66,750) and Comcast (NASDAQ:CMCSA) ($36,600). Those are two of EPB’s private-sector competitors in Chattanooga. Blackburn has also taken $56,000 from the National Cable & Telecommunications Association, the lobby for the big telecoms.
Comcast has described community-owned Internet service providers as a waste of taxpayer money while seeking to limit their expansion. A spokesperson told International Business Times, “Comcast operates in 39 states and has 130,000 employees across the country. It is important for our customers, our employees and our shareholders that we participate in the political process. The majority of our PAC contributions are to the senators and members who represent our employees and customers.”
AT&T did not respond to a request for comment by press time.
As the Chattanooga Times Free Press noted a few years back, “EPB offers faster Internet speeds for the money, and shows equal pep in both uploading and downloading content, with Comcast and AT&T trailing on quickness.” The New York Times notes that “for less than $70 a month, consumers enjoy an ultra-high-speed fiber-optic connection that transfers data at one gigabit per second” -- a rate “that is 50 times the average speed for homes in the rest of the country.”
That success has been so rapid that the private telecom industry has abandoned the business lobby’s traditional arguments. Whereas corporations typically argue that the private sector has inherent and obvious advantages over the public sector, the Chattanooga Times Free Press reports that telecom firms have gone to court insisting “that EPB, as a public entity, would have an edge when competing against private companies, which would be at a disadvantage when facing an entity owned by taxpayers.” Similarly, whereas corporations typically push for government to stay out of the marketplace, private telecom firms have pushed for state legislatures to use government power to intervene in the marketplace by prohibiting community-owned utilities from competing for Internet customers.
Blackburn defended her bill to preserve those state laws by presenting it as a measure to protect local sovereignty.
“We don’t need unelected federal agency bureaucrats in Washington telling our states what they can and can’t do with respect to protecting their limited taxpayer dollars in private enterprises,” Blackburn said Tuesday during a congressional debate about her amendment. “We should be careful and deliberate in how we allow public entry into our vibrant communications marketplace. ... This is an issue that should be left to our states.”
The consumer watchdog group Free Press has made the opposite argument. Citing data from the public-private partnership Connected Tennessee, the organization reports that “constituents back in Hickman County in the center of Blackburn’s Tennessee district struggle to get fast and affordable Internet services (as) only 38 percent of Hickman residents have access to broadband services, far below the Tennessee statewide average of 58 percent.” The group argues that if the FCC preempts the 20 state laws limiting municipal broadband, it would help address some of those access shortfalls through entities like EPB.
EPB’s much-vaunted move into Internet services began in 2008 after utility officials realized cost-saving smart-grid infrastructure for energy transmission could also serve as a conduit for super-fast broadband speeds. Like corporations, the utility issued bonds to raise resources to invest in building out its broadband capacity. Similarly, just as many private corporations ended up receiving federal stimulus dollars, so too did EPB, which put those monies into the broadband network.
Earlier this year, EPB executives told the Washington Post that their telecom services have become “a great profit center” -- an assertion that appears to be confirmed by a 2012 Standard & Poor's credit upgrade notice pointing out that the utility "is now covering all costs from telephone, video and Internet revenue, as well as providing significant financial benefit to the electric system."
For Blackburn's proposal to become law, the House and Senate would have to pass final versions of the bills, and President Obama would have to sign it.