Connecting state and local government leaders

The Next Front In Net Neutrality And Internet Privacy Wars Might Be Your Hometown

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Connecting state and local government leaders

A court decision just strengthened local governments’ leverage over cable companies

On July 12, the Sixth U.S. Circuit Court of Appeals overturned a decade’s worth of Federal Communications Commission orders limiting the role local governments play in regulating the cable industry. The case is a significant win for local authorities, affirming that counties and cities have a wide berth to regulate cable companies operating in their jurisdictions.

The decision not only gives local governments stronger leverage in collecting fees and demanding access for public institutions, but could also make local governments a central front in the ongoing wars over internet privacy rights and net neutrality.

For over a decade, both left and right-leaning commissioners at the FCC sided with cable companies that complained negotiations with local governments were hindering the deployment of cable and high-speed broadband services. Over time, the FCC implemented rules that strengthened the hands of the cable companies in these negotiations. Ajit Pai, who was appointed chairman of the FCC by President Trump in January, is pushing for additional limits on local control. He has publicly stated that the “FCC must aggressively use its statutory authority to ensure that local governments don’t stand in the way of broadband deployment.”

The Sixth Circuit’s decision questions the FCC’s statutory authority, saying the commission had “no valid basis — statutory or otherwise” to bar local governments “from regulating the provision of non-telecommunications services by incumbent cable providers.”

“It returns leverage back to where it was supposed to be,” Gerard Lederer, a partner at Best, Best & Kreiger LLP, which argued the case on behalf of the local governments, told Route Fifty. Lederer explained that, according to the court’s decision, “Congress said [local governments] could regulate the services that were provided over the network so long as they weren’t telecommunications services.”

That last part creates a major quandary for the FCC and Chairman Pai. The commission is currently considering reversing a two-year-old rule that had classified internet service as a telecommunications service under Title II of the Telecommunications Act, creating the legal basis for net neutrality regulations. In eliminating the Title II designation, the FCC would do away with net neutrality rules.

Advocates for net neutrality fear that if the FCC eliminates the Title II designation, internet service providers, known as ISPs, would be able to play favorites on what internet traffic comes into your household—whether it’s slowing down streaming video that competes with their programming or expediting large companies they have a relationship with over small start-ups.

After this court ruling, though, the FCC reversing the Title II designation could hand control of net neutrality and privacy rules for cable companies to local governments. Privacy and net neutrality rules could be decided via thousands of local government agreements with cable companies across the nation.

While eliminating net neutrality is a policy priority for most telecommunications and cable service providers, the specter of thousands of local governments demanding cable broadband providers’ adhere to their own version of net neutrality rules could be a much greater headache for cable companies than the current FCC rules.

Your city or county could potentially demand cable companies treat all traffic similarly. It could also develop privacy protections that regulate how cable companies use consumer information.

With over 59 million cable broadband customers in the United States, and 93 percent of households having access to cable internet services, these local community battles may have a very real impact on what the internet looks like in the years ahead.

The FCC declined to comment on the decision for Route Fifty, or whether it will seek to appeal the ruling.

Immediate Implications

Beyond net neutrality and privacy, the decision is a victory with consequences on a number of other fronts. The court’s decision reaffirmed state and local governments have significant authority to regulate cable companies that want to provide television and internet services in their jurisdiction.

Under the 1992 Cable Act, cable companies are required to negotiate with state and local authorities to be granted a cable “franchise” in their jurisdiction. As part of those negotiations, the city and cable company make decisions on a wide range of issues:  whether cable companies will pay for the right for access to publicly owned rights-of-way or pay a fee for operating locally, for instance. It also allows local governments to enforce customer service requirements, equity in service regardless of income, and other issues. Only after creating a franchise agreement with a local government can cable companies deploy services.

Through its rulemaking authority, the FCC had empowered cable companies to withhold payments to local governments when there were disagreements around the franchise agreements. Localities could only recoup their losses by taking the cable company to court, forcing communities to decide whether it was worth going through costly litigation to collect fees.

Lederer explained that cable companies “could do their own valuation” to figure out how much they want to hold on to.” Meanwhile local governments would have to “pay litigation fees to get back money that was rightfully [theirs].”

It was also becoming less clear what local governments could ask cable companies to provide to the community in return for a franchise agreement. The decision gives cities and counties much more flexibility.

For instance, many local governments had required cable networks link fiber optics to community institutions—known as institutional networks, or I-Nets—providing broadband for public schools, first responders and government buildings.

These fiber rings have become crucial for education and public safety as we move into a data-driven world. Lederer pointed out that in the greater District of Columbia region, I-Nets have benefited first responder communication across the region. “I-Nets in Montgomery County, the District of Columbia, Prince George’s County, Arlington, and Alexandria; you put them all together … that’s served as the public safety backbone of this area.”

Prior to the decision, “there were cable operators that were out there saying you couldn’t have an institutional network,” Lederer said. Both the FCC and court affirmed that local jurisdictions could demand institutional networks of cable companies.

Congress could pass legislation handing power back to the FCC in this matter, taking away the authority that the court just affirmed. In the short term, though, local governments are in a much stronger position to regulate cable services on behalf of its citizens—and the FCC and cable companies has been put in a potentially precarious position when it comes to net neutrality.