The FCC: No Friend of Local Government

The Telecommunications Act of 1996 promised a new era of advanced communications services, universally available, at affordable prices — all provided by carriers operating in a competitive environment. Whether or not this Promised Land materializes, local government will bear much of the brunt of the transition from a world of regulated monopolies to one of competing carriers.

Under the act, the Federal Communications Commission must manage the transition from regulation to competition. It has the power to pre-empt state and local rules if it sees them as impeding progress. It is also the FCC's responsibility to ensure universal service for all American communities.

But to date, the FCC appears less than friendly to local interests. Although it has set up a state and local government advisory committee composed of mayors, city councilors and county commissioners to represent local governments in areas such as right-of-way management and taxation, the committee does not appear to carry much weight in policy-setting.

Although the committee's recommendations have received fairly widespread visibility, two recent rulings are more illustrative of the FCC's true direction, particularly cases involving Troy, Mich., and Abilene, Texas.

On Sept. 18 the FCC issued a nondecision in an action by TCI Cablevision of Oakland County against the city of Troy, Mich. In December 1995, Troy enacted an ordinance requiring telecommunications companies to obtain a franchise, paying a one-time franchise adoption fee of $10,000 and an annual fee of 5 percent of gross revenues, or 40 cents per foot of underground lines and 35 cents per foot of overhead lines.

TCI challenged the ordinance in a filing with the FCC, claiming it violated the act, established a barrier to entry and exceeded the city's authority to manage rights-of-way and obtain fair and reasonable compensation. Now, after a long wait, the FCC has arrived at a decision. But unfortunately, it declined to rule on the most important issue — whether Troy's ordinance is a barrier to entry — based on the grounds that the ordinance does not directly affect TCI's operations in the city.

The FCC did, however, include several statements that indicated how it might rule in the future. In particular, it expressed a concern that "Troy and other local governments may be creating an unnecessary 'third tier' of telecommunications regulation that extends far beyond the statutorily protected municipal interests in managing the public rights-of-way and protecting public safety and welfare."

In other words, the FCC signaled that it does not believe local government should play a significant role in directing the development of telecommunications infrastructure.

On Sept. 26 the FCC issued a more troubling decision regarding several challenges to the Texas Public Utility Act of 1995, which prohibits municipalities and municipally owned electric companies from providing telecommunications services.

The city of Abilene filed a petition seeking pre-emption of the act's ban, contending that the ban violated the Telecommunications Act's ban on barriers to entry. In its ruling, the FCC pre-empted several of the act's provisions affecting private telecommunications carriers but left in place the act's prohibition on municipal provision of telecommunications services.

The FCC said, "Texas municipalities are not 'entities' separate and apart from the state of Texas" for the purpose of applying the act. Furthermore, it said that pre-empting the ban "would insert this commission into the relationship between the state of Texas and its political subdivisions in a manner that was not intended by [the act]."

The likely outcome of this ruling is that smaller Texas communities are unlikely to receive upgrades to their telecom services anytime soon. As the Michigan and Texas cases show, you can expect little relief anytime soon from the FCC. Instead, pay close attention to the courts and your state legislature.

Miles Fidelman is president of the nonprofit Center for Civic Networking. He can be reached at mfidelman@civicnet.org or (617) 241-9205.