Commissioners, in a 3-2 vote Thursday, moved to preempt laws in North Carolina and Tennessee that limit the expansion of existing municipal broadband networks in the two states.
The FCC order, coming in response to petitions from a city in each state, does not apply to laws that limit municipal broadband networks in about 20 other states. But the vote signals how the agency may act if it gets similar petitions from cities in other states, FCC officials have said.
The FCC action will help bring broadband competition to new areas, FCC Chairman Tom Wheeler said. "You can't say you're for broadband, and then turn around and endorse limits on it," he said. 'You can't say you're for competition, then deny local officials the right to offer competing choices."
Several states have generated "thickets of red tape" limiting city-funded broadband networks from offering service, he said.
The commission's two Republican members criticized the vote, saying unelected members of the FCC are attempting to rewrite legitimate state laws. Lawmakers in several states have said they plan to file a lawsuit to challenge the FCC's authority to preempt state laws.
The U.S. Supreme Court has taken a dim view of federal attempts to preempt state laws, said Republican Commissioner Ajit Pai. The FCC's action is "odd and unlawful," Pai said. "All the lipstick in the world can't disguise this pig."
The FCC, by encouraging municipally funded broadband networks to compete with private carriers, is going to "unprecedented lengths to undermine the free market ... and common sense," added Republican Commissioner Michael O'Rielly.
But the FCC has authority from Congress and the U.S. Constitution to preempt state broadband laws, FCC officials have said. The Constitution gives Congress, and thus the FCC, authority to regulate interstate commerce, and broadband is interstate in nature, FCC officials have argued. In addition, the Telecommunications Act of 1996 gives the FCC authority to take immediate action if broadband deployment lags, officials have said.
Wheeler has talked for months about preempting state laws limiting municipal broadband projects, and in January, President Barack Obama called on the agency to take action against those state laws.
State groups and some congressional Republicans argue that municipal broadband services use taxpayer money to compete with private broadband providers. In a handful of cases, municipal broadband projects have run into financial problems after large initial investments, critics note.
The two petitions to overturn state laws came from Wilson, North Carolina, and Chattanooga, Tennessee. The Tennessee law bars the Electric Power Board of Chattanooga from extending its 1 Gbps service outside the utility's electric service territory.
In North Carolina, the state law requires community broadband services to add additional costs into their budgets, bars them from offering discounts to customers and bars the city service from extending its coverage area.
In some areas just outside the two networks' coverage area, residents have no broadband service available, FCC officials said.
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.