Network-Owning Cities Cheer Ruling

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An appeals court has ordered the Federal Communications Commission to reconsider its decision to allow Missouri to ban its municipalities from owning telecommunications networks.

In an Aug. 14 decision, the Eighth U.S. Circuit Court of Appeals said that in letting the Missouri ban stand, the FCC employed too narrow a definition of the federal Cable Act. Municipalities in Missouri asked the agency to rule on the ban one year ago.

Attorneys said the decision has national implications. In addition to Missouri and Texas, eight states have rules that either bar municipalities from the telecom business or have stringent financial reporting requirements that officials feel restrict such enterprises.

CLEAR MESSAGE

"I hope the effect of this ruling, assuming it holds up, is to lead to the removal of state barriers and to keep new ones from going up," said Jim Baller, a municipal attorney with the Washington law firm. "I hope the clarity and directness of the decision will send a message."

A year ago — after the Missouri General Assembly passed a law to prevent cities and municipal utilities from obtaining the required certificate of necessity to become a telecom provider — the Municipal League took its case to the FCC. It chose the agency, rather than the courts, because the FCC is charged with defining the Cable Act.

It was joined by the Missouri Association of Municipal Utilities; City Utilities of Springfield; Sikeston, Mo.; Columbia Water & Light; and the American Public Power Association.

Section 253 of the Cable Act forbids regulation that constitutes a barrier to entry to "any entity." The FCC said it disagreed with the state legislature's action, because municipal telecommunications providers "have the potential to become major competitors in the telecommunications industry" and can further the law's goal of fostering competition.

But it ultimately ruled that the phrase "any entity" did not mean cities, so the state's resolution did not violate Section 253.

The FCC was guided in its opinion by a decision from the U.S. Court of Appeals for the District of Columbia in City of Abilene v. FCC.
Abilene, Tex., officials challenged a state law which forbids cities from direct or indirect participation in telecommunications.

That court used a narrow definition of the phrase "any entity," dealing a blow to municipal ownership. No appeal of that decision was made.

But the Eighth Circuit panel disagreed with the D.C. Circuit and the FCC. It said the agency must use the broadest possible definition of the word "any."

The appeals court vacated the FCC order and remanded the dispute for further hearing.

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