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North Carolina sues FCC over municipal broadband 

The lawsuit—technically, a "petition for review"—the state of North Carolina filed in federal court last week is, for a case rooted in weighty constitutional matters, fairly short, just two-and-a-half pages.

The argument is straightforward enough: The Federal Communications Commission overstepped its constitutional bounds earlier this year when it preempted a state law that prevented municipalities from establishing their own broadband networks.

At issue in this lawsuit, however, isn't whether these and other restrictions are bad policy. Instead, this case will revolve around the question of whether the FCC had the right to impose its will in the first place. This is, in the legal world, uncharted waters. There's little case law that would indicate how the appellate courts, and maybe the Supreme Court, will rule.

"That's what we're waiting to find out in the appeal," says Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance. "We don't know how the court is interpreting the limits."

North Carolina's law was a reaction to the city of Wilson, a former tobacco town an hour's drive east of Raleigh that in 2008 decided to spend $35 million to create its own fiber Internet service, called Greenlight, which launched in 2009. At its top tier, Greenlight produces speeds that rival Google Fiber—20 times faster than Time-Warner's best offering.

Six years on, Greenlight has been a remarkable success. It's now profitable and providing service to more than 7,000 customers. The city wants to expand the service further into Wilson County.

The big telecoms didn't want the competition. In 2011, they lobbied the receptive, newly Republican Legislature, which produced the Level Playing Field Act, a law designed to scare off other municipalities from following Wilson's example. Cities can't expand communications services beyond their corporate limits. Municipal telecoms have to pay the same fee that the government charges private telecoms. Most important, cities can't subsidize the service with other revenue sources, which makes it more or less impossible to get one up and running.

Last year, Wilson and a public utility in Chattanooga, Tennessee, asked the FCC to overrule their states' respective restrictions on municipal telecoms, arguing that they protect the interests of companies like Time Warner at the public's expense. President Obama, too, urged the FCC to override these restrictions in the 19 states, including North Carolina, that have them.

The FCC agreed. "The need for broadband is everywhere, even if the business case is not," the majority wrote in their March ruling, noting that in rural areas nationwide less than half the population has access to high-speed Internet. "... It is clear that the combination of requirements effectively raises the cost of market entry so high as to effectively block entry and protect the private providers that advocated for such legislation from competition."

In its petition, the state appears to be echoing dissenting FCC commissioner Ajit Pai, an Obama appointee who's voiced skepticism about issues such as net neutrality.

"In taking this step," Pai wrote, "the FCC ... disrupts the balance of power between the federal government and state governments that lies at the core of our constitutional system of government."

Whether the state law is a good idea or not is, in Pai's view, irrelevant.

If his position prevails, Mitchell points out, it will effectively put residents of North Carolina's smaller cities and rural towns at the mercy of the big telecoms' business interests, even as the Triangle positions itself as a high-tech hub.

"That's stunning," Mitchell says.

Time Warner declined to comment. The N.C. Cable Telecommunications Association, which lobbied for the 2011 state law, could not be reached.

Jeffrey C. Billman is the INDY's Raleigh news editor. Reach him at jbillman@indyweek.com.

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