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Supremes to Weigh in on Munis

6/29/2003 8:00 PM Eastern

The U.S. Supreme Court will determine whether states can prevent municipalities from moving into telecommunications businesses.

Petitioners, including Theodore Olson of the Solicitor General's office at the Department of Justice, representing the Federal Communications Commission, asked the high court to sort out conflicting rulings from the U.S. Courts of Appeal for the Eight Circuit and the District of Columbia Circuit.

Each has taken cases challenging state laws preventing cities from getting into telecommunications businesses.

'Any entity' at issue

At issue is the legal definition of the words "any entity" in the federal Cable Act. Section 253 of the law forbids regulation that constitutes a barrier to entry to "any entity."

In 1999, an interpretation of the act was challenged in City of Abilene v. the Federal Communications Commission.

Ruling on that lawsuit, which contested a statewide curb on municipal telecommunications in Texas, the D.C. Circuit said it is not clear if "any" applies to cities and not just telecommunications companies.

Because of the ambiguity, the court upheld the Texas ban, preventing cities from direct or indirect participation in local broadband projects.

In 2001, the Missouri General Assembly passed a law preventing cities and municipal utilities from obtaining certificates of necessity, required of ventures that wish to become telecommunications providers.

The Missouri Municipal League filed a complaint with the Federal Communications Commission, arguing that legislators have misinterpreted the federal Cable Act.

The FCC said it disagreed with the state legislature's action, because municipal tele-communications pro-viders "have the potential to become major competitors in the telecommunications industry."

Municipal providers can further the Cable Act's goal of fostering competition, the agency added.

Still, the FCC determined the that phrase "any entity" did not mean cities, noting it was guided in that determination by the ruling in the Abilene case.

Municipal proponents then took the argument to the Eight U.S. Circuit Court of Appeals, which reversed the FCC. The federal agency used too narrow a definition of the Cable Act, the court panel said in its ruling last August. The term "any entity" is clear and unambiguous, the ruling said, meaning cities are not barred from telecommunications competition.

The appeals court vacated the FCC's ruling and remanded the dispute for further hearing at a lower court. The FCC, the Missouri attorney general and attorneys for telephone companies filed a writ with the U.S. Supreme Court seeking clarity on the issue.

Last Monday, the nation's top court decided to hear the case this session.

Last word coming?

"The Supreme Court's decision to grant immediate review will expedite a final resolution of this controversy. We believe that we have a strong case, and we look forward to the opportunity to show the Supreme Court that the Eighth Circuit was correct," said Jim Baller of Baller Herbst Law Group, lead counsel for the Missouri Municipal League.

The case will be closely watched across the country. Eight states currently have bans against municipal telecommunications ventures, Baller said, each of which could be affected should the high court determine that municipal curbs are improper.

The Supreme Court proceeding comes at a time of increased interest in telecommunications ventures by cities. Consultants are surfacing every day, urging cities to leverage their investment in utility infrastructure by adding cable or Internet services to the list of municipally provided services. Such ventures will stabilize or lower consumer rates while giving cities a strong tool for economic development, proponents argue.

Some in telecommunications have always argued that cities do not have the same competitive pressures as those of private industry and therefore the competitive playing field is not level.

The level of the public policy debate is rising. A bill in Pennsylvania proposes a ban on most commercial ventures by cities, from telecommunications to golf course management.

 

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