Editor’s Note: Colorado successfully removed the requirement for local municipalities to hold a referendum before establishing local broadband service in early May 2023. SB23-183 was signed into law by governor Jared Polis, eliminating the previous restriction that had been in place since 2005.
For decades, municipal broadband operations have been subject to a minefield of restrictions and barriers designed to make the prospect of establishing or maintaining a community broadband network costly, difficult, and unsustainable.
There are currently 16 states in total that have restrictive legislation against municipal broadband networks in the U.S. To explore further, see a directory of all internet providers in the United States or enter a ZIP code to find all internet providers in your area.
Although no states have managed to remove their restrictions in 2022, 2023 could be the year that things begin to change for states that have historically been opposed to allowing for a public option. A key stipulation in the language surrounding the BEAD grants may set up a large-scale, politically motivated battleground.
- 16 states currently have laws in place hindering municipal broadband networks in some form.
- Three additional states (Iowa, Oregon, and Wyoming) have other forms of roadblocks in place that make operating municipal networks more difficult.
- Two states – Maine and New York – successfully passed pro-municipal bills over the past year.
- States with roadblocks are setting up potentially public (and lengthy) legal battles with the U.S. government over BEAD grant funding opportunities.
Nebraska introduced a bill in 2022 that would adopt the Rural Municipal Broadband Access Act. This would’ve paved the way for municipal broadband operations to become viable in the state after years of baring public entities from providing such services. Despite this, the bill was listed as “indefinitely postponed” in April 2022.
Maine successfully signed into law LD 1894 in April 2022, which supports municipal broadband infrastructure through incentives and competition.
The bill essentially creates a grant-matching fund that “must be used to provide grants to municipalities to support public/private partnerships to support a municipal gigabit fiber-optic broadband network in their regions…”
New York successfully passed SB 8008 in an April 2022 session, which authorizes the state to enter into agreements with municipalities to utilize excess broadband capacity and supports the state’s ConnectALL program.
An additional bill has been proposed that would establish a revolving fund specifically for municipal broadband operations, earmarking $250 million dollars. The bill was referred to the Committee for Veterans, Homeland security and Military Affairs in January 2023.
A new bill proposed in 2022 would effectively help to limit municipal providers by prohibiting them from using federal funds to service areas where private providers claim to serve. SB 1074 would see to it that “no federal funds received by the state, political subdivision, city, town, or village shall be expended for the construction of retail broadband internet infrastructure unless the project to be constructed is located in an unserved area or underserved area.”
Prediction: Municipal restrictions will be at the center of the BEAD battle
The BEAD (Broadband Equity, Access and Deployment) grants represent the most ambitious funding initiative ever undertaken by the U.S. government.
The NTIA (National Telecommunications and Information Administration) has laid out their policy around municipal broadband in the following language:
A state must Disclose (1) whether the Eligible Entity (the state) will waive all laws . . . concerning broadband, utility services, or similar subjects, whether they predate or postdate enactment of the Infrastructure Act, that either (a) preclude certain public sector providers from participation in the subgrant competition or (b) impose specific requirements on public sector entities, such as limitations on the sources of financing, the required imputation of costs not actually incurred by the public sector entity, or restrictions on the service a public sector entity can offer; and (2) if it will not waive all such laws for BEAD Program project selection purposes, identify those that it will not waive and describe how they will be applied in connection with the competition for subgrants.
States will likely react to this in various ways when the time comes to submit their broadband plan to the NTIA. It will almost certainly open up a discussion in states where restrictions are in place, as municipal providers in these states will be able to petition the NTIA directly for funding if the state refuses to include them in their plan.
If a state goes down this road, it’s likely to face a new challenge – defending its decision in public, instead of creating laws behind closed doors.
It’s not difficult to see how this could potentially play out in states with heavily entrenched anti-municipal stances. When states begin submitting their plans to the NTIA, those without restrictions could begin receiving funds quickly, while those that want a fight could end up being delayed by months – or even years.
It’s also possible that some states decide to preempt their own municipal roadblocks in the name of getting funding for broadband projects through BEAD. This would, in effect, nullify the laws in the sense that the BEAD program is likely to be the nexus of broadband deployment efforts for years to come.
Regardless of the outcome, there is technically nothing stopping the NTIA from denying state plans if they refuse to allow municipal providers to participate. The timeline for when states will actually be receiving BEAD funds is currently unknown, and this is just one of several reasons why it is next to impossible to predict. It is expected that the NTIA will announce initial funding allocations per state on June 30th.
We’ve tracked municipal broadband in the U.S. for nearly a decade. Click here for last year’s municipal broadband report.
There are a variety of mechanisms and restrictions that state lawmakers use to make municipal broadband projects difficult to initiate, costly to build, and commercially unviable. Common tactics include forcing phantom costs into municipal broadband service rates that make them less competitive; restricting the expansion of public broadband networks that make it virtually impossible to generate enough revenue to keep afloat; limiting public funds for broadband to public-private partnerships; or forcing municipalities to sell broadband under a wholesale-only model.
Regulatory barriers vary from state to state, but tend to take the form of outright bans on the establishment and/or operation of municipal broadband infrastructure, as well as bureaucratic obstacles that make it functionally infeasible to create a citywide network.
Competition, population, referendum and other barriers
There are a variety of ways that state laws seek to limit any possible competition between ISPs and municipal broadband networks. Some bureaucratic barriers we considered include compliance with vague legal requirements, refraining from using specific financing mechanisms and pricing mechanisms, proposal-stage barriers, phantom cost requirements, and additional tax burdens imposed on community-owned broadband networks. These state laws prevent municipalities from offering broadband service to residents if there is one commercial provider already offering service — or willing to begin offering service — in the jurisdiction. These requirements are considered roadblocks to municipal broadband because communities can be considered “served” if any provider is present, regardless of what kind of Internet service is being offered. Rural communities are often left with very expensive fixed wireless or satellite services with low data caps, poor reliability, and slow speeds, and are unable to pursue municipal broadband because the community is considered “served.”
Another common barrier for municipal broadband is pricing. Some state laws mandate that any municipal broadband service must match prices with those of an incumbent ISP, thereby removing the opportunity for the municipal broadband network to introduce more competition into the local market.
Some laws require any municipal broadband system to be self-sustaining, limiting local authority to bundle services like voice and data, which is a common industry practice.
States with explicit roadblocks
The following states have at least one significant roadblock in place preventing municipalities from establishing broadband service to their residents, as defined above.
Alabama state laws allow municipal governments to provide broadband services to residents, but they impose a suite of restrictions and conditions that make it decidedly difficult for municipalities to do so. The statutes require municipal governments to conduct a referendum before providing services to residents.
Municipalities are barred from using local funds or local taxes to cover the initial investments required in building out broadband infrastructure. The laws require any municipal broadband system to be self-sustaining, limiting local authority to bundle services like voice and data, which is a common industry practice; and finally the law bars municipalities from providing broadband services to residents beyond their jurisdiction.
City officials of Opelika, Alabama, have struggled to maintain the city’s municipal broadband network under these conditions. Opelika’s public utility, Opelika Power Services, began building out its municipal broadband network in 2010, despite aggressive campaigns launched by telecom firms against the initiative. The OPS ONE network was completed by 2014, serving residents within the city limits of Opelika.
After three attempts to change the state law to expand the network to nearby Auburn failed, the city announced in 2018 it would sell its municipally-owned OPS ONE broadband network to a Georgia-based telecom company Point Broadband in a $14 million deal. Under the deal, Point Broadband is sharing revenue earned from the network with the city government.
Recognizing the lack of broadband in rural areas, the Alabama legislature has hoped to bring more private ISPs to the state using taxpayer-funded grants administered through the Alabama Department of Economic and Community Affairs (ADECA). In 2019, Gov. Kay Ivey signed SB90, a bipartisan bill that expanded the definition of “minimum service threshold” in the Alabama Broadband Accessibility Act to mean 25 Mbps downstream and 3 Mbps upstream, and tweaked the definition of “unserved” to include areas that lack broadband service at the new minimum service threshold throughout the area.
The bill also increased the taxpayer’s share of the costs of broadband projects through the grant program from 20% to 50%. So far, most of the grant awardees have been smaller local and regional telecom firms and cooperatives. But two major ISPs, Charter Communications and Mediacom, challenged at least 14 of the applications for the 2019 round of funding.
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Florida state laws impose “ad valorem” taxes on municipal broadband networks, but does not impose such taxes on other public utilities or services sold to the public. The state laws generally subject municipalities to restrictions on capital-intensive initiatives that make broadband projects difficult to begin. The statutes require municipalities to hold at least two public hearings, during which local officials must offer a roadmap to profitability within four years — making nearly any citywide municipal broadband proposal unfeasible.
Under these conditions, only two municipalities have successfully deployed broadband services to residents. The city government of Ocala, Florida has been operating a broadband network since the early 2000s; and Bartow, Florida, has owned and operated its own fiber network for years. The city government of Lakeland also has its own fiber network.
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Louisiana state laws require municipalities to hold a referendum before providing broadband services to residents. If the referendum fails to garner enough public support, municipalities may proceed with building out a broadband network, but only if they agree to forgo franchise fees paid by private telecom companies for 10 years. The law also requires municipalities to bake phantom costs into their service rates.
To date, Lafayette is the only city in Louisiana that’s been able to successfully launched a FTTH broadband network. The network, which offers triple-play services, has been generating profit since 2012, and begun expanding beyond the city limits in 2015.
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Minnesota state laws require municipal governments proposing to offer telecommunications exchange to obtain a referendum “supermajority” of 65% of voters to proceed. Municipal governments are able to construct, extend, improve and maintain facilities for Internet access only if the city council finds that the proposed broadband network and service will not compete with existing services provided by private telecom companies, or if such services are not and will not be available through private telecom companies in the foreseeable future.
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Missouri state law allows municipalities to offer broadband services to residents, but they cannot offer telephone or TV as well. It also bars municipal governments from leasing broadband infrastructure to other communications providers. Municipalities may offer broadband service for use in internal government services, educational and emergency and healthcare scenarios, but are only able to offer “Internet-type services” to residents. All told, this has historically made the economic prospect of operating a network prohibitively costly in the state.
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Montana state laws only allow municipalities to offer broadband services if there are no other private companies offering broadband within the municipality’s jurisdiction, or if the municipality can offer “advanced services” that are not available from incumbents. For municipalities that are currently offering broadband service, local authorities must alert their subscribers if a private company decides to enter the market. The law also states that the municipality “may choose” to discontinue their own service within 180 days of the arrival of a private company, though it’s unclear whether the municipality must discontinue service.
Montana’s mostly rural landscape and lack of connectivity means that these rules effectively only come into play in urban areas where private telecom companies are operating. And yet, there are no municipal broadband services available in Montana, save for a “community fiber network,” in parts of Bozeman.
In 2021, Rep. Kelly Kortum, D-Bozeman introduced HB 422, which was intended to repeal the above restrictions against cities operating broadband networks. The bill passed two initial readings, but ultimately failed on a third after Republican lawmakers reversed course.
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Michigan state law allows public entities to provide broadband services, but only if the public entity has first sought bids in the form of a request for proposal (RFP) on the project from private companies, and has only received less than three “qualified” bids. The public entity must also adhere to the same terms and conditions that private companies would need to meet as specified in the request for proposals. But doing so effectively eliminates some of the benefits that building a public network can offer residents.
Still, at least two communities are working on creating municipal broadband networks; Traverse City and Farmington Hills. The latter’s City Light and Power board approved last summer financing for the first phase of a municipal fiber buildout. The board approved $3.5 million to serve the community’s first 2,200 customers. The total project is expected to cost $16 million.
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Nebraska state laws bars any public entities from providing retail or wholesale broadband services. Public utilities are barred from offering retail broadband services to residents, but may sell or lease broadband infrastructure on a wholesale basis, and only under very limited conditions. Public utilities are also barred from selling or leasing broadband networks at rates that are lower than current incumbents are charging.
Local governments may be able to work around the wording of the law to help increase access to broadband to residents. In Lincoln, Nebraska, for example, the city was able to build a public conduit for broadband infrastructure that helped to pave the way for private telecom companies to deploy fiber services to residents. In 2017, the city was dubbed a “Smart Gigabit City,” from tech nonprofit U.S. Ignite Inc, thanks in part to its conduit investment.
After previous attempts to pass legislation that would remove Nebraska’s municipal broadband ban, Sen. Lynne Walz (D) introduced new legislation in 2019 that would enable municipal governments to lease dark fiber access to public-private partnerships to increase broadband access throughout the state. The bill has not gained traction in the legislature.
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Nevada state laws prohibit municipalities and counties from providing telecommunications services if the municipality has a population of 25,000 or more; or a county has a population of 50,000 or more. Population caps such as Nevada’s can lead to situations in which portions of urban or suburban areas — often low income — are without adequate service because private telecom companies are unwilling to expand service.
Smaller municipalities and rural co-ops have taken to building out public fiber networks across the state. In 2016, county-owned Churchill County Communications (CC Communications) and the Valley Communications Association of Pahrump (VCA) partnered with tech firm Switch to build out middle mile fiber-optic backbone along U.S. Highway 95.
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North Carolina’s state laws place a number of requisites on municipal broadband initiatives that make it exceedingly difficult for public entities to deploy broadband services to residents. Those requirements include compliance with vague legal requirements and refraining from using specific financing mechanisms and pricing mechanisms. The law also forces public entities to bake so-called “phantom costs” into their rates, and requires public entities to make commercially-sensitive data available to private industry competitors. The state law also prohibits local authorities from offering broadband services beyond their jurisdictions. Some existing publicly-owned broadband networks have been grandfathered in without these requirements. But the laws make it nearly impossible for municipalities to build out new broadband networks to serve residents.
The community of Wilson, North Carolina, has had a public fiber broadband network in place since 2008. The project’s success has spurred neighboring communities such as Pinetops to request Wilson expand its service to their residents.
The issue made North Carolina part of an interesting FCC ruling in 2015. Officials in Wilson decided to challenge some of the state’s rules by appealing to the FCC, along with Chattanooga, Tennessee. In turn, the FCC (under Tom Wheeler) attempted to overrule certain aspects of state laws in North Carolina and Tennessee to make municipal broadband more feasible in those states. However, an appellate court reversal determined that the FCC had no jurisdiction to preempt state law over these types of bureaucratic obstacles to municipal broadband.
Legislators erected further roadblocks to municipal broadband in the state with a piece of legislation that targeted Wilson and its broadband network specifically. Lawmakers successfully amended the state law to include provisions that would allow Wilson to serve residents in nearby Pinetops on a temporary basis, and would require Wilson and other municipalities to shut down their broadband networks if a private company enters the market. Since then, at least one private company — Suddenlink — entered the market, forcing Wilson to shut down its 1 Gbps fiber broadband service to residents in Pinetops.
In 2019, Rep. Josh Dobsons (R) introduced a bill that would allow municipal governments to build their own broadband networks, so long private ISPs could lease the networks to provide service to residents. The bill, which was opposed by nearly all the large telecom firms in the state, ultimately stalled in committee. But Gov. Roy Cooper did sign legislation allowing electric cooperatives to form partnerships with ISPs for deploying broadband in unserved areas.
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Pennsylvania state law prohibits municipalities from providing broadband service to residents for a fee, unless no such services are provided by private telecom companies and no private telecom companies are willing to provide such services within 14 months of being requested to do so. The law further stipulates that data speed should be the only consideration in determining whether private industry is serving residents — excluding crucial aspects of retail broadband service such as pricing, coverage areas, and quality of service.
In 2004, the state public utility statutes were amended to include broadband service regulations.
At the time, Philadelphia became one of the first cities to announce the intent to build and operate a Wi-Fi broadband network and offer broadband service to residents. Under the Wireless Philadelphia initiative, the city released a request for proposals (RFP) for private ISPs to help build out the broadband infrastructure and offer retail services to residents. Telecom providers Verizon and Comcast — neither of which had bid on the project — led a PR campaign against the project, while local politicians sought to cap the city’s involvement in the project. State lawmakers, meanwhile, passed HB 30, a bill that forced municipalities to ask private companies to provide service before building out public broadband networks. Philadelphia partnered with Earthlink to build Wireless Philadelphia, but in 2010, the city bought the assets back, in order to use the broadband network for government work only.
In 2019, the state legislature considered a variety of measures aimed at addressing broadband access gaps in the state, but none made it into law.
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South Carolina’s laws are similar to North Carolina’s on the issue of municipal broadband. The state laws impose restrictions and procedural requirements on municipal broadband projects that are considered unduly burdensome. Those include proposal-stage barriers, phantom cost requirements, and additional tax burdens. The language of the law is so vaguely worded, experts say, that they would open up any such project to a range of disagreements and challenges by incumbent telecom providers.
A canary in the coal mine: In 2010, the Oconee county government received a $9.6 million federal grant, matched by $4.7 million in county funds to build fiber network infrastructure in the northwest corner of the state. County officials had hoped to offer broadband service to residents as a public utility. However, a heavy lobbying push from AT&T resulted in the passage of state bill H3508, which limits local governments’ ability to offer retail broadband services to residents. Instead, public entities may operate broadband networks solely as a wholesale supplier. That means the government can only lease its infrastructure to private companies that can then offer broadband service to residents.
As a result, Oconee County officials were forced to re-think their business model mid-way through its construction. As a wholesale model, the project was unable to generate the needed revenue, and the county entered into a lease-to-own agreement with OneTone to take over the network over a period of 20 years for a paltry $6.3 million. In early 2020, bill H 4993 was introduced and placed into committee before ultimately stalling. It would “authorize and regulate local government-owned broadband internet access service providers”.
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Tennessee state laws allow municipalities to operate their own electric utilities to provide broadband, but limits that service provision to within their electric service areas. Public entities must also comply with a number of requirements around public disclosures, hearings and voting — which no private company would need to comply with to offer service. And municipalities with a broadband network may not expand service beyond city limits. For communities without a public utility, municipalities may only offer broadband service in areas that are deemed “historically underserved,” and only through joint ventures with private companies.
Despite the laws, Chattanooga, Tennessee is home to one of the greatest municipal broadband success stories: city-owned utility Electric Power Board (EPB) built the first fiber network that delivers 1 Gbps to customers in the US. Chattanooga, along with officials from Wilson, North Carolina, challenged the state’s laws before the FCC, which initially ruled in favor of Chattanooga and sought to preempt the state laws in Tennessee preventing EBP from expanding its service to more residents. That ruling was later overturned by an appellate court.
In 2019, the Tennessee General Assembly considered a pair of bills that would allow municipal electric authorities to offer broadband service outside its service area. The bills died in committee.
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Texas state laws bar municipalities from offering specific types of telecommunication services to the public directly or through a private telecom company. The state law does allow some provisions for communities without any private telecom companies presently offering broadband service to residents. Texas municipal broadband is largely regulated by Utilities Code, § 54.201, which was originally enacted in September of 1997.
However, a few cities in the state have been able to get around these rules. Mont Belvieu, for instance, was able to begin building out a fiber network in 2016 to offer broadband services to residents. The local district court decided that the city of Mont Belvieu had the authority to offer Internet service to residents because the Internet does not fall under the state’s definition of a telecommunication service.
In 2019, Gov. Greg Abbott signed into law legislation enabling electric cooperatives to offer broadband services to customers, but the state still actively discourages and bars them from doing so in many circumstances.
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Utah state laws allow municipalities to offer broadband services to residents, but the laws impose many procedural and accounting requirements on local governments that make it exceedingly difficult to deploy a broadband network and offer retail service to residents effectively. Legislation in 2013 added new obstacles to municipal broadband by placing restrictions on the use of municipal bonds to fund broadband projects. Municipalities that are offering wholesale services for publicly-owned broadband infrastructure, however, are exempt from many of these requirements.
Despite restrictions, a group of 11 Utah cities formed UTOPIA Fiber in 2004 in order to deploy and operate fiber to the home services for residents, and continues to expand to several additional cities per year.
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Virginia state laws allow municipalities to build their own broadband networks and offer retail services to residents, but they must meet a bevy of requirements first. Municipalities may not subsidize services nor are they able to charge rates that are lower than incumbents’ rates for similar service. Municipalities must also include phantom costs in their rates, and comply with procedural, financing and reporting requirements that private companies do not face. The law also limits the type of services municipalities can offer. For example, in order to offer a triple-play service of voice, video and data, municipalities must first conduct a feasibility report that indicates the service would be able to generate annual revenues that would exceed the annual costs of the service within the first year of operation. That’s a tall order for any telecom service, public or private.
Some networks are grandfathered past this requirement, as in the city of Bristol, where municipal cable service is available. Other groups, such as the Roanoke Valley Broadband Authority, the city government of Portsmouth, Virginia, the Mecklenburg Electric Cooperative, the Eastern Shore of Virginia Broadband Authority, and the Central Virginia Electric Cooperative are proceeding with public broadband infrastructure projects in spite of the legal hurdles.
In 2019, Gov. Ralph Northam (D) signed into law legislation that enables local governments to contract ISPs to construct broadband networks to help facilitate broadband service reaching the state’s unserved areas. But local governments are only allowed to do so if less than 10% of residents in the area have access to broadband at the time of the project.
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Wisconsin state laws allow municipalities to own and operate broadband networks, but such networks can only be paid for by subscribers of the service, not the general population. Municipalities are required to conduct feasibility studies and hold public hearings prior to offering service, allowing telecom incumbents ample opportunity to stall broadband projects. Public entities must include phantom costs in their rates and are not able to charge rates that are lower than what incumbents charge for the same service. The state laws also prohibit municipalities from subsidizing telecom services.
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States with other barriers to municipal networks
These states have various forms of roadblocks and restrictions in place that make establishing and operating municipal broadband operations prohibitively difficult.
There are no statutes that specifically bar municipalities from offering broadband services to residents, but the state laws do require that all new public utilities must be approved by voter referendum of 51%. If the referendum fails, the municipality cannot hold another referendum vote on the same proposal or a similar proposal for at least four years. If a municipality wishes to use bonds to finance a public broadband network, the measure needs to obtain 60% approval in a referendum. Municipalities are also prevented from using general fund moneys to support a broadband network, and must complete a detailed annual audit, subject to open meeting requirements — meaning that aspects of the audit which might contain commercially sensitive information must be made public.
In 1999, Iowa lawmakers adopted changes to Chapter 63 of the Iowa Acts, enabling municipalities to build and operate public broadband networks to provide service to residents. But telecom lobbying groups pushed through two bills in 2004 that placed new restrictions on municipalities operating broadband networks, including requiring lengthy annual audits, and removing the open meetings exclusion.
In late 2019, the City Council of Waterloo, Iowa, allocated funds to complete a feasibility study on developing a municipal broadband network.
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Oregon state law doesn’t outright prohibit municipal governments from offering broadband services to residents. But Oregon state IT official Alex Petit found himself in the cross hairs of the telecom industry when he and Gov. Kate Brown (D) promoted the idea of government and state’s research universities partnering to purchase 2,300 miles of fiber optic cable, in hopes of building out a fiber network throughout the state. Telecom industry affiliates balked at the idea that rural Oregon was lacking access to high speed Internet and needed government intervention. Ultimately, state lawmakers passed HB 4023 during the 2018 legislative session, which enables the state CIO to provide broadband services to public entities and underserved communities only.
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In 2018, Gov. Matt Mead (R) signed legislation to expand access to broadband for rural residents by establishing funding mechanisms that local governments could use to pay for deploying public broadband infrastructure. The bill created a $10 million fund for building broadband infrastructure under the state’s ENDOW initiative. The original wording of the bill made any city, town or county eligible to receive money from the fund to pay for a broadband network. But after telecom companies weighed in on the bill, a substitute bill was introduced and passed by state lawmakers that made the fund only available to private businesses or public-private partnerships unless no private ISP responds to a request for proposal. The funding is only applicable in areas that are currently unserved by private telecom companies.
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