The climate for municipal broadband has worsened significantly since our last report in 2018. There are now 26 states with laws on the books that either roadblock or ban outright municipally-owned broadband networks.
These laws — some of them passed just last year — point to a growing tension between state lawmakers and municipal, county and local governments, whose interests seem often at odds with one another.
The telecom industry’s lobbying efforts have had tangible ramifications on state laws governing municipal broadband. In fact, over $92 million was spent on lobbying in 2018 alone to protect business interests at the national and state level.
Local governments are stepping up to protect their residents’ interests, too. After the FCC repealed Net Neutrality in 2017, municipalities across the country began exploring ways to expand broadband access to residents without relying on private telecom. There are now some 500 communities across the country that are served by some form of municipal broadband network and more than 300 communities are currently served by a cooperative. These numbers grow year after year, even as anti-municipal broadband legislation continues to spread across states.
Congressional politicians are tackling the issue, too. In 2018, nine Democrats backed the Community Broadband Act of 2018, which would have prohibited states from adopting regulations or requirements that prevent municipalities from expanding broadband access to residents by building public broadband infrastructure. The bill, introduced by Maine U.S. Rep. Chellie Pingree (D), was the result of a controversy over a piece of state legislation in Maine which sought to prevent municipal governments from building broadband infrastructure by imposing funding, reporting, and legal restrictions and obligations upon them.
The Maine bill was unanimously opposed by a legislative panel, but Rep. Pingree’s congressional legislation sought to prevent other states from adopting such measures. Rep. Pingree’s bill did not even make it out of committee. In the meantime, the rhetoric around municipal broadband networks is growing more heated and outlandish. In late 2018, Republican FCC commissioner Michael O’Rielly claimed in a speech that municipal broadband networks threaten First Amendment free speech rights. The claim was quickly debunked by telecom analysts, but underscores the increasingly difficult conditions under which municipal governments are navigating public broadband initiatives.
State tactics and overview
State laws use a variety of mechanism and restrictions that 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.
Anti-municipal broadband state laws largely fall into the categories listed below.
Bureaucratic Barriers To Municipal Broadband
Population Caps On Service Areas For Municipal Broadband Networks
Excessive Taxes On Municipal Broadband Services
States with bureaucratic barriers to municipal broadband
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.
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 outside its jurisdiction 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. The top speed Suddenlink was willing to offer in that area? 50 Mbps.
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.
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.
During the 2017 legislative session, a bill considered by state lawmakers would have enabled municipalities to expand broadband infrastructure to residents. Instead, lawmakers passed a bill that offers $45 million in subsidies to private Internet service providers to build the same infrastructure.
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 2017, state delegate Kathy Byron (R) introduced bill HB2108, which limits municipal broadband deployments to very special circumstances and prevents municipalities from launching broadband services if private companies are already present and offering speeds of at least 10 Mbps to 90% of its local customers.
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.
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 same service. The state laws also prohibit municipalities from subsidizing telecom services — a strange restriction as many large incumbent telecom providers in the state already offer subsidized services.
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 chose” 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 Bozeman.
States with direct sale prohibitions on municipal broadband
There is some ambiguity in Arkansas state laws regarding telecommunications services. The state laws allow municipal governments that operate electric utilities to also provide communication services, but the law bars municipalities from providing “local exchange services.” Legislators updated the law in 2011 to allow a municipal governments that own “cable TV” services to also provide broadband to residents. Municipal governments are also prohibited from providing broadband service to residents outside their jurisdiction.
In early 2019, the Arkansas Republican Women’s Legislative Caucus announced a legislative agenda that included repealing the state laws on municipal broadband in order to enable local authorities to partner with private telecom companies in order to deliver broadband services to residents.
Missouri state law outright bars municipalities from selling or leasing broadband services to residents. 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.
In 2017, Republican state senator Ed Emery introduced a telecom-backed bill that would further limit local governments’ ability to provide retail and wholesale broadband networks. The bill ultimately died in committee, but the political climate surrounding municipal broadband hasn’t softened any. In February 2019, Republican state senator Eric Burlison introduced the Stop Socialism Act, which would prevent local and state authorities from competing with private business. If passed, the effects of this bill would certainly further prevent municipalities from launching their own broadband services.
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.
During the 2018 legislative session, state lawmakers considered two bills introduced by Sen. Lynne Walz (D) that would make it easier for municipal governments to establish broadband service for residents. Walz’s first bill, LB 1113 would have eliminated most of the state restrictions on municipal broadband, while LB 1114 would have reinstated requirements for reporting of broadband service access at a more granular level in order to gain a clearer picture of the quality of service being provided to residents across the state by private industry. Both bills died in committee.
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 fiber 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. The city of Philadelphia sold off the Wireless Philadelphia project to Earthlink in 2005, but in 2010, the city bought the assets back, in order to use the broadband network for government work only.
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.
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.
Washington state laws allow some municipalities to offer some communications services to residents, but bars public utilities from providing broadband service directly to customers. Instead, public utilities are allowed to sell or lease broadband infrastructure on a wholesale basis only, but such operations are subject to strict conditions.
In 2018, state lawmakers passed legislation aimed at expanding access to broadband for residents by enabling ports throughout the state to enter into public-private partnerships with private telecom companies to provide broadband to residents. However, amendments to the bill restricted such partnerships to just one telecom provider, thereby ensuring de-facto monopolies for broadband service in some communities.
States with prohibitive referendum requirements on municipal broadband
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.
The success of the project spurred a state senator from neighboring Auburn to propose legislation that would allow the service to expand to Auburn. Three attempts to change the state law to allow OPS ONE to expand to Auburn ultimately failed, and the city was unable to expand its broadband network nor increase its revenue. According to a 2017 audit, OPS ONE was $13.4 million in debt, in part as a result of the legislation.
In 2018, the city announced 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 will share revenue earned from the network with the city government.
Colorado state law allows municipal governments to offer broadband services to residents, but requires the city to hold a referendum before doing so. If there are no private companies offering broadband service, then municipalities may proceed without the referendum. But the law also includes a right of first refusal, which allows any private telecom company to take over any grants held by local co-operatives or public entities for provisioning such services.
In 2017, the right of first refusal played out for a community near Ridgeway, Colorado. The company aimed to provide fiber Internet network infrastructure near Ridgway and won grant money from the state to complete the project. CenturyLink was able to take over the grant using the right of first refusal, and used state money to build out a DSL network instead of the fiber network.
During the 2018 legislative session, bill HB 1099 was introduced to impose conditions on the right of first refusal. The bill was signed into law in April 2018, and under the new rules, an incumbent provider must match the speed and price of the proposed network the new company is offering in order to take over the contract.
To date, 92 municipalities across Colorado have opted out of the state rules established that prevent municipalities to provide Internet to residents. To date, only one city in Colorado — Longmont — has built its own broadband network, but in January 2018, the City Council of Fort Collins, Colorado, approved plans to construct a broadband network.
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.
Minnesota state laws require municipal governments proposing to offer broadband services to residents to obtain a referendum “super-majority” 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 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.
There are no statutes that specifically bar municipalities from offering broadband services to residents, but the state laws do require 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.
Population caps on service areas
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.
Excessive taxes on municipal services
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 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.
States struggling with other tactics used to roadblock municipal broadband
California state laws do not prohibit municipalities from offering broadband service, but up until to 2018 they did prevent “community service districts” (CSDs) from offering broadband unless there was no private company willing to offer service in the area. CSDs are independent local governments formed by residents of rural and unincorporated areas. CSDs were also forced to lease or sell their broadband infrastructure to any private telecom company that enters the market.
In 2018, lawmakers passed legislation that removed state restrictions on limiting publicly-owned broadband networks for CSD residents. The new law enables CSDs to create enhanced infrastructure financing districts (EIFDs), which can be used to pay for public broadband infrastructure. The new law also removed the requirement to determine whether a private company would be willing to offer service, and ensures CSDs do not have to lease or sell public broadband infrastructure to private telecom companies that enter into the market.
Connecticut’s Public Utilities Regulatory Authority (PURA) made a ruling in 2018 barring municipalities from using reserved space on utility poles to build fiber networks for offering broadband to residents. Municipal governments in Connecticut legally have access to reserved space on utility poles, referred to as “municipal gain”, which has been on the law books in Connecticut since 1905. A 2013 amendment further clarified the language of the law, stating that municipal governments can use the utility pole space for “any use.”
Because laying fiber underground is such a costly, time consuming and disruptive process, utility poles are an economically feasible solution for deploying fiber that private companies have been using for years. The PURA ruling makes it that much more difficult for municipalities across the state to build public broadband infrastructure efficiently and effectively.
The decision has thrown a wrench into plans for a $100 million muti-town fiber network in the northwestern part of the state. The Connecticut Office of Consumer Counsel, the Connecticut Conference of Municipalities, and officials from the cities of New Haven, Manchester and West Hartford have joined in filing suit asking a judge to reverse the ruling.
Gov. Charlie Baker’s 2018 economic development bill included a provision for designating funding sources for broadband deployments for the Massachusetts Broadband Institute (MBI) and the Executive Office of Housing and Economic Development, both of which distribute funds to communities for publicly-owned broadband infrastructure. The bill included wording that would enable rural communities in the state to use state funding to serve “edge properties” with municipal broadband service.
After a lobbying push from the telecom organization New England Cable & Telecommunications Association, state senators added “unserved” as a qualifier for the scenarios in which a municipality may offer broadband service to residents living just outside the municipality’s jurisdiction. After some back and forth within the state legislature, the “unserved” wording was ultimately signed into law.
The wording has enabled municipal governments to extend broadband services across jurisdictional boundaries to serve residents in neighboring communities who would otherwise have no access to broadband whatsoever– even if a private broadband provider is offering service to some parts of that community. Thanks in part to the legislation, Massachusetts has awarded $20.2 million in grants to support 20-plus municipally-owned fiber networks since 2016. But the state law still bars municipalities from using state funds to support broadband networks that would compete directly with private industry.
In 2018, state lawmakers in Wyoming considered a bill that sought 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, and that was only applicable in areas that are currently unserved by private telecom companies.
Oregon state IT official 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. That said, it comes with a long list of stipulations, including one that requires the creation of a committee involving a wide variety of individuals, including representatives from an existing broadband provider, the League of Oregon Cities, a public education district, and more.