A decade ago as Internet-based telecommunications grew and began transporting video content, telephone and cable companies feared local governments would using their video franchising authority established in the cable TV era require them to build out their infrastructures to ensure all residents had connections. The pre-Internet cable television franchise had evolved. It was no longer just about entertainment. In the Internet era, it was now the full panoply of advanced telecommunications services: voice and data as well as video. That in turn would stoke demand for better infrastructure that could reliably deliver them.
However, the legacy incumbent telephone and cable companies didn’t want to be forced to upgrade and build out their cable plants to serve all customer premises in order to do business in numerous localities. Their business models are based on serving selected neighborhoods within arbitrary “footprints” of “serviceable” premises and not entire local government jurisdictions.
They initially sought relief in Washington from Congress and the U.S. Federal Communications Commission to preempt state – and by extension local -- video franchise regulation. That would take care of a multiplicity of potentially troublesome local governments imposing universal service conditions under their video franchising authority. But the National Governors Association and the National Conference of State Legislatures pushed back, wanting to keep video franchising within state jurisdiction.
Incumbents were able to easily pivot from that objection to their Plan B to kill local government video franchising authority: lobby state governments to take it over from local governments. That effort was quite successful, with state video franchising laws put on the books in state after state in the mid-2000s. Those laws such as California’s Digital Infrastructure and Video Competition Act of 2006 did not mandate video franchisees provide universal service by some future date in areas where they were awarded state franchises, thus sanctioning neighborhood redlining. Consequently, local governments that often receive complaints from constituents denied landline connections to advanced telecommunications service by the big incumbents are powerless to do anything about it since those connections fall under state video franchising authority. Calling one’s state representative isn’t helpful either since the incumbents have captured legislatures and state telecommunications regulatory agencies by buying political influence with campaign contributions.
The fight over universal service has now shifted from video franchising to a new regulatory front. But this time around, the incumbents ironically want protection from the states. They’re concerned that if the federal government continues avoid enforcement of universal service policy expressed in the Communications Act as amended in 1996 or the FCC’s 2015 Open Internet rulemaking -- or scraps the Open Internet rulemaking altogether -- the states might opt impose their own universal service obligations.
The big legacy incumbents are also worried over the prospect of states regulating service rates as authorized in the federal Open Internet rulemaking. In the two years the Open Internet rulemaking has been the law of the land, the FCC hasn’t enforced that provision either.
Given widespread complaints voiced by state and local elected officials over both spotty access to service due to neighborhood redlining and affordability challenges for low income households, the incumbents have reason for concern. Two of the nation’s largest telephone and cable companies, Verizon and Comcast, respectfully, are urging the FCC to enact a “clear, affirmative” rule preempting states, declaring federal primacy over state regulatory jurisdiction. However, such a rulemaking could fail to hold up in court against a statute enacted by a state legislature given a 2016 decision by the United States Court of Appeal Sixth District in State of Tennessee et al. v FCC & USA finding the FCC could not preempt state law without express federal statutory authority to do so. That could set up a grueling battle in Congress between the big telcos and cablecos and the states over the regulation of advanced telecommunications services.
With the level of dissatisfaction in the states over access and affordability to landline delivered advanced telecommunications services, it’s not a fight the incumbents would automatically win despite the massive lobbying and campaign cash they can bring to bear in Washington. Many if not most candidates for state and local offices have made access to and affordability of advanced telecommunications services a campaign issue, terming it infrastructure vital to commerce, education and telehealth services. In addition, the level of need and public interest is much higher now than it was a decade ago when the incumbents were lobbying state governments to enact statewide video franchise laws.
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