Introduction

Access to high-speed internet service, known as broadband, has become increasingly important— particularly in light of the Coronavirus Disease 2019 (COVID-19) pandemic, as more aspects of daily life have moved online. Broadband has been deployed in the United States since the late 1990s, primarily by private sector telecommunications and internet service providers. While broadband deployment continues to progress, the Federal Communications Commission's (FCC's) Fourteenth Broadband Deployment Report released in January 2021 estimates that 14.5 million Americans lack access to broadband—which the FCC defines as a connection that provides speeds of at least 25/3 megabits per second (Mbps), meaning 25 Mbps for downloading and 3 Mbps for uploading data.¹ On July 15, 2022, as part of the FCC's annual evaluation of the state of broadband across the country, FCC Chairwoman Jessica Rosenworcel proposed increasing the minimum fixed broadband benchmark speed to 100 Mbps/20 Mbps.²

Broadband deployment is not ubiquitous across the United States. The digital divide refers to the gap between those who have access to broadband services and those who do not. Many U.S. residents who do not have access to broadband live in areas that private sector providers may find unattractive to serve, due to factors such as difficult topography or small numbers of potential customers that might result in an expensive deployment and low return on investment.

The primary means the federal government has employed to encourage broadband deployment is to subsidize private sector providers to serve unserved and underserved areas. Even with subsidies, some areas of the United States remain without adequate broadband coverage. As a result, some municipal governments have attempted to become broadband providers. There is debate in Congress and among state and local governments as to whether municipal broadband networks can play a role in closing the digital divide, or whether broadband deployment should be the exclusive domain of the private sector.

This report provides an explanation of broadband service and the digital divide, as well as an overview of municipal broadband networks. It presents selected stakeholder arguments for and against municipal broadband networks and discusses the patchwork of state laws regarding municipal broadband—some states allow it, some states allow it under certain conditions, and other states prohibit it. A section on policy issues for Congress and observations concludes the report.

Broadband Technologies and Minimum Benchmark Speed

Broadband is high-speed internet service that is faster than traditional dial-up and offers an "always on" connection. It can be delivered through various technologies, such as

• digital subscriber line (DSL),
• cable modem,
• fiber optic cable,
• wireless,
• satellite, and
• broadband over power lines (BPL).³

Broadband service gives users the ability to send and receive data at volumes and speeds that support a wide range of applications operating simultaneously, including voice and video communications that can support distance education, telework, telemedicine, ecommerce, and entertainment.

The Broadband Digital Divide

There are parts of the country that lack access to broadband and there are also residents in areas served by broadband who are unable to afford available service. According to researchers at the College for Health, Community, and Policy at the University of Texas at San Antonio, "broadband availability and affordability in areas with high concentrations of poor, minorities, or rural households provides the starkest examples of the digital divide. In many cases, providers will not enter the market in these areas because the prospect for high profit margins is too low to merit entry."⁴

The Digital Divide and Broadband Deployment

Many areas unserved with broadband exhibit one or more characteristics—low population density, remoteness, and difficult geography—that make deployment of broadband expensive and may discourage private sector providers from investing in broadband infrastructure.⁵ Lack of access is particularly pronounced in rural and tribal areas, many of which are remote and sparsely populated relative to more densely populated urban and suburban areas. For example, while the FCC's Fourteenth Broadband Deployment Report said that 98.8% of urban areas in the United States are served with fixed broadband⁶ at speeds of 25/3 Mbps, that figure is lower for rural areas at 82.7% and tribal lands at 79.1%.⁷

The costs associated with deploying broadband over long distances and through difficult terrain to reach a small number of potential users may mean, in some cases, that broadband providers avoid certain areas since they may not be able achieve a return on investment. Deploying broadband requires a global internet network, middle mile, and last mile infrastructure. According to broadband infrastructure provider Quintillion, "the global internet network consists of subsea cables that connect cities, countries, and continents to data centers across the world."⁸

Middle mile infrastructure "is the physical mid-section of the infrastructure required to enable internet connectivity for homes, businesses, and community institutions. The middle mile is made up of high-capacity fiber lines that carry large amounts of data at high speeds over long distances between local networks and global internet networks."⁹ Middle mile infrastructure is often owned by the private sector, but can also be publicly owned.¹⁰ According to a blog post by network provider Zayo, "substantial parts of the country don't have adequate middle mile infrastructure."¹¹ This can be due to various factors. For example, according to broadband service provider Hunter Communications, "most middle mile connections fall along major interstates and highways throughout the United States … [leaving] many rural areas largely undeveloped when it comes to middle mile networks."¹² Additionally, "unique challenges in both weather and terrain can turn middle mile fiber builds into long and expensive projects."¹³ As an example of the potential scope of this issue, an April 22, 2022, press release from the California Department of Technology highlighted a proposed 8,700 miles of new middle-mile network routes in the state to help connect unserved residents in urban, rural, and tribal areas.¹⁴

Last mile infrastructure is the direct, physical connection to the end user (e.g., home, business, school) from the middle mile network. If no middle mile infrastructure exists, last mile providers may choose not to provide service in that community.¹⁵ Without middle mile network routes, local provider costs would increase dramatically as they would have to cover these additional costs to distant middle mile networks or build their own.

Federal and state initiatives may help subsidize the costs of middle mile infrastructure. For example, the Infrastructure Investment and Jobs Act (IIJA, P.L. 117-58) authorized and appropriated $1 billion for a middle mile grant program to be administered by the National Telecommunications and Information Administration (NTIA).¹⁶ In July 2021, California Governor Gavin Newsom signed Senate Bill 156, which provides $3.25 billion to build a middle mile network for the purposes of connecting homes, businesses, and community institutions to the internet.¹⁷

The Digital Divide and Broadband Adoption

User adoption of broadband services is another factor in the digital divide. In some areas broadband service may be provided only by a monopoly service provider who—in the absence of competition—could charge high prices.¹⁸ Absence of competition alone does not automatically lead to high prices; however, a monopoly provider may set a price low enough to attract the number of subscribers needed to turn a profit, but may not necessarily be compelled to set a lower price to attract new customers. Even in areas with multiple broadband providers competing for customers, there may be populations of potential users for which broadband may be unaffordable without subscription and equipment subsidization. The adoption issue is not only limited to rural areas, but affects cities as well—and adoption rates may vary widely even within the same community. For example, according to an article from Brookings, "even though urban cores and mature suburbs in the nation's largest 100 metro areas have the highest median broadband adoption rates, they also experience the widest variation among their residents[;] … some residents live in digital poverty even as their neighbors thrive."¹⁹

Legislation enacted in response to the COVID-19 pandemic included broadband adoption and affordability programs such as the FCC's Emergency Broadband Benefit Program (now the Affordable Connectivity Program), which provides discounts for broadband service and equipment (e.g., laptops, tablets).²⁰

What Is Municipal Broadband?

Municipal broadband is broadband service provided to a community by a local government (municipality). Glasgow, KY, was the first municipality to offer public internet to its residents in the early 1990s.²¹ Since then, some municipalities that may have factors that discourage investment by private sector providers such as low population density, remoteness, and difficult geography have examined deploying municipal networks.²² Deployment of municipal broadband networks in the United States has increased rapidly in recent years. For example, "by 2018 over 100 communities nationwide were offering some form of high-speed internet service[;] … today [March 28, 2022], over 600 communities offer municipal broadband in some capacity, an increase of more than 600 percent since 2018."²³ There are several ways that a local government might provide broadband service to its residents. These may include

municipality owned and managed networks that provide service directly to citizens;

utility networks, generally operated by a municipal electric company, that sell broadband and telecommunications services to their customers;

public-private partnerships, where a municipality contracts with a private company to provide broadband services to its residents using infrastructure provided by the municipality; and

open access (wholesale) networks, where the city provides the infrastructure and offers it to multiple suppliers to provide retail service.²⁴

There may be advantages and disadvantages to any of the approaches listed above. For a municipally owned and managed network as well as open access networks, the municipality owns the infrastructure and can control when and how its residents and businesses are served, as well as maintain control over service performance.²⁵ However, the municipality becomes the network operator, which may be a new service it has no experience providing.²⁶

A potential advantage of a utility playing a role in municipal broadband is that it has an extensive history with building and maintaining massive communications networks and may already have access to rights-of-way.²⁷ Additionally, "utilities have solid customer relationships and trust with communities built over decades of providing electricity under regulatory obligations that ensure equitable service."²⁸ However, utilities that become broadband service providers may have little experience in competitive markets.²⁹

Public-private partnerships may "achieve balanced partnerships between municipalities and private sector investors, where each party focuses on its own area of expertise and shares risks and benefits associated with network deployment."³⁰ However, "those working as part of a public-private partnership effort may be entitled to a prevailing wage³¹ that they may not otherwise have if they were working as part of a strictly private effort, which may increase overhead costs of a project."³²

According to a whitepaper by nonprofit US Ignite and consulting firm Altman Solon, "a vast majority of cities with municipally enabled programs (68%) have chosen to build and operate their networks through a public entity, which is either a public utility or the municipality itself."³³ Each municipality has a unique set of variables that may factor into what type of network model may provide the best possible solution. For example, as stated by the Indio, CA, Director of Community Development on what types of broadband service the city may provide,

We're looking at what is the best service-delivery model…. It could be a public-oriented delivery model, which some cities have done, where they've built up their own broadband infrastructure. It could be a public-private partnership where we partner with one or more private companies to build out that infrastructure, or it could be entirely private, and we would be more on the policy side helping to guide and facilitate that. Part of this master-planning process is to look at what is best for our city, and it's different for every community.³⁴

Costs to deploy a municipal broadband network can vary widely, and costs to build out a network in one city may not be comparable to the costs to build out in another city. Deployment costs may vary due to factors such as the type of model deployed (e.g., public-private partnership, municipally owned and managed), the size of the municipality, population density, or geography. To assist with network buildout costs, some states provide public entities access to state funding. For example, Massachusetts makes state funds available to towns seeking to build municipally owned networks.³⁵ In New York, Governor Kathy Hochul announced a plan in January 2022 to allow municipalities to apply for grants from the state if they plan to build open and accessible broadband infrastructure.³⁶ 

State Regulations on Municipal Broadband

Whether a municipality can deploy a broadband network varies from state to state, forming a patchwork of laws across the United States. (See Appendix B.) The FCC, an independent regulatory agency overseen by Congress, attempted to preempt some state restrictions on municipal broadband in response to a petition filed by municipal providers. The FCC stated its perceived authority to preempt state laws in a March 2015 Memorandum Opinion and Order:

We first examine whether section 706 [of the Telecommunications Act of 1996 (P.L. 104-104)] gives us authority to preempt any state laws that target providers that are political subdivisions of the state. Finding that section 706 gives us authority to preempt certain—though not all—such laws, we examine whether the laws at issue fall within the scope of our authority to preempt. We conclude that they do.³⁷

However, a decision by the Sixth Circuit Court of Appeals held that the FCC could not preempt state regulation of municipal broadband without an express statutory grant of preemption authority from Congress.³⁸ See also "Preempting State Regulations or Implementing a Nationwide Ban on Municipal Broadband."

Will Municipal Broadband Networks Help Close the Digital Divide?

The track record for municipal broadband networks varies from community to community—some operate successfully, while others have failed. As a result, there are arguments for and against municipal broadband; two arguments for municipal broadband networks and two against are presented below. Each community has a number of unique variables that may influence the decision of civic leaders to pursue municipal broadband and the arguments presented below may be applicable in some cases and not others.

Municipal Broadband Networks May Fill Connectivity and Affordability Gaps Left by Private Sector

There are areas private sector providers do not serve with broadband and are unlikely to, leaving gaps across the United States. Private sector providers may not serve these areas due to factors such as geography or low population, where it is expensive to deploy and potential returns on investment may be low.³⁹ To fill these gaps, some municipalities provide broadband service to their residents. According to the National League of Cities, "there are hundreds of already-existing [municipal] networks … striving to address lack of access, poor connectivity, or inequality."⁴⁰ According to a report from the Online Journal of Rural Research and Policy,

Municipal broadband systems, or those owned and operated by a town government rather than a private company or non-government cooperative, have great potential to improve quality of service and social equity for millions of Americans. Such governments can help 'serve … forgotten' groups of users by choosing to 'experiment and pioneer systems that meet local needs.'⁴¹

Municipal broadband networks may offer higher speeds and service plans that are more affordable than what would otherwise be available. A 2018 study by the Berkman Klein Center for Internet and Society at Harvard University found that "most community-owned [fiber-to-the-home] networks charged less and offered prices that were clear and unchanging, whereas private internet service providers typically charged initial low promotional or 'teaser' rates that later sharply rose, usually after 12 months."⁴² The Technology Policy Institute, a think tank, countered this study, arguing, "Observing prices set by local government provides little information because we don't know how prices were set. Prices could be low because the network was built and operated efficiently, which could be evidence in favor of a success story. On the other hand, prices could be low because politicians use public funds to offer low prices."⁴³

According to a study conducted by New America that examined five U.S. cities that have municipal networks, "looking at dollars per Mbps in advertised download speeds, municipal networks bring down the average cost by $0.06 to $0.52 per Mbps."⁴⁴ Additionally, according to the mayor of Jamestown, NY, an April 2022 municipal broadband feasibility study indicated that the average cost of internet in the city for 100 Mbps is $75 to $100 a month [for a private sector provider's network]; with a municipal network, city residents could receive 1 gigabit per second (Gbps) for $30 to $40 a month.⁴⁵ While the feasibility study did not contain preliminary cost information to deploy a municipal broadband network, the city could use funding received under the Coronavirus State and Local Fiscal Recovery Funds within the American Rescue Plan Act (P.L. 117-2).⁴⁶

Municipal Broadband Networks May Provide Potential Economic Benefits

The potential benefits of deploying broadband may extend beyond economic activity conducted online and include job creation,⁴⁷ as well as encouraging existing businesses and current residents to remain in an area, attracting new businesses and residents, and providing connectivity for critical facilities such as hospitals.⁴⁸ For example, the city of Chattanooga's Electric Power Board (EPB)—a publicly owned utility company—"became the first U.S. city to roll out a citywide gigabit network."⁴⁹ According to EPB promotional material, "In 2010, [EPB] began offering every business and home in their service area access to gigabit-speed internet (i.e., 1,000 megabits per second). Chattanooga became known as 'Gig City,' making it an attractive city for technology companies, startups, and entrepreneurs."⁵⁰ In Ammon, ID, a city investment in broadband produced cost-reduction benefits (i.e., reducing annual telecommunication and internet costs for municipal anchor institutions).⁵¹ According to analysis conducted by Strategic Networks Group, "Over 25 years, Ammon's cost-reduction benefits ($43.6 million) outweigh the fiber network investment costs ($8.6 million). The direct economic benefits are projected to be nine-fold greater at $78.2 million."⁵²

Municipal Broadband Networks May Carry Sustainability Risks

There are potential sustainability risks if a local government does not have the financial resources necessary to operate and maintain a broadband network. According to Pomona College Economics professor Kyle Wilson, municipalities are

motivated to act by some combination of profits and consumer welfare, and so that leads to … better speeds, and often lower prices, for consumers. The potential downside, of course, is that doing this is really expensive. The city has to shoulder the burden that would otherwise have been paid for by private firms. In many cases, they're taking on debt in order to do that, with the hope that the revenue brought in through it will pay for that in the long run.⁵³

Lack of sustainability may lead to network privatization. For example, in December 2021, the Braintree Electric Light Department (BELD)—a nonprofit, publicly owned power utility and broadband internet provider in Braintree, MA—announced that it had sold its internet business to Comcast. BELD conducted a study showing it would need to make a major, multimillion-dollar investment in network infrastructure to maintain its existing quality of service. This cost would have required a significant increase in customer rates.⁵⁴ Additionally, when municipal provider Burlington Telecom was struggling in 2009, the then-mayor diverted $16.9 million in taxpayer funds to help keep it afloat.⁵⁵ The Burlington City Council later decided to privatize the network.⁵⁶ Some Burlington residents sued, attempting to halt the sale and asking for taxpayer reimbursement. However, the Vermont Supreme Court concluded "that sale promotes the public good and that the desired outcome [by the Burlington residents] would likely impose additional financial burden on Burlington Telecom customers and City taxpayers."⁵⁷ One potential counterpoint is that a public-private partnership between a municipal provider and private entity may make network deployment and sustainability "more cost-effective by creating a larger market for services as well as a greater pool for sharing resources (staff, equipment, etc.)."⁵⁸

Municipal networks that are not financially sustainable may also lead to shortfalls for other municipal projects. According to a report by the University of Pennsylvania Carey Law School, "municipalities that initiate projects that are unable to cover their costs of debt and operations will have to make up the shortfall from general tax revenues or default on their debt, either of which would inevitably affect the cost of financing all of the city's operations, not just the municipal fiber project."⁵⁹

Municipal Broadband Networks May Compete with Private Sector Providers

Some critics contend that municipal networks may discourage private investment in areas because providers may be "less likely to compete against the governments that also regulate them."⁶⁰ Former FCC Commissioner Michael O'Reilly stated in a dissent to a 2015 FCC Memorandum Opinion and Order, "It is not the government's role to offer services instead of or in competition with private actors."⁶¹ A study conducted by nonprofit American Consumer Institute for Citizen Research argues that "municipal broadband networks crowd out private investment" and "the desire of GONs [government-owned networks] to expand into adjacent markets should give private broadband providers pause about entering these markets. For these reasons, municipal-owned networks are anticompetitive."⁶² Instead, some critics argue, the government should encourage more private investment, "whether by lowering regulatory barriers (e.g., expedite permitting and licensing, assist private providers in obtaining rights-of-way) or by providing carefully targeted government support to private firms."⁶³

A study published in the journal Information Economics and Policy on entry threats from municipal broadband internet and impacts on private provider quality states, "estimates indicate that the presence of a [municipal electric utility (MEU), which reduces barriers to entry for municipal providers] is associated with lower maximum upload and download speeds offered by private cable and DSL providers. In states where municipal entry is made more difficult by regulation, these effects disappear."⁶⁴ Some critics of municipal broadband networks have identified what they perceive to be a potential unfair practice of municipal networks, "the ability to grant themselves rights-of-way or to clear regulatory barriers that might be placed in the way of private providers."⁶⁵

A potential counterpoint is there would not be a need for municipal broadband if the private sector served an unserved area and municipalities "invest[ed] only when the public demands it, to fill gaps left by the private sector, or to provide better service or lower rates than the private sector is willing or able to provide."⁶⁶ As stated by a member of the Grafton County, NH, Broadband Committee, "The whole point … is to facilitate end connections. We're not trying to compete with these guys [private sector broadband providers]. We're trying to drive (broadband) to the towns."⁶⁷

Policy Issues for Congress

The essence of the municipal broadband debate focuses on whether municipal broadband is an effective tool for providing affordable service to unserved areas and closing the digital divide. A piece of this discussion addresses whether municipal broadband is sustainable, and, if so, whether it encroaches on the private sector market.

If Congress determines that municipal broadband networks may play a positive role in closing the digital divide, it may consider how to best facilitate their deployment, affordability, and sustainability and stimulate competition without discouraging private sector broadband deployment. Options may include the following:

• Municipalities could be provided with additional financing assistance, above amounts in the American Rescue Plan Act. Several bills in the 117^th Congress would provide federal funding opportunities for broadband deployment to public entities.
• Prioritization could be given to municipal broadband networks operated by local governments, nonprofits, and cooperatives in current broadband support programs and future broadband funding, as proposed by the Biden Administration's American Jobs Plan.
• Congress could authorize an independent assessment of if and how to target federal support for municipal broadband networks and any potential effects of federal subsidization.
• Congress may also consider whether legislating preemption of state regulations might be necessary to allow municipalities to deploy broadband networks in further closing the digital divide, as proposed by several bills in the 117^th Congress.
• Congress could enact a nationwide ban on municipal broadband, as proposed by the Communities Overregulating Networks Need Competition Today Act (H.R. 1149).
• Congress could choose to leave the decision of whether or not to allow municipal broadband deployment up to individual states.

Providing Federal Assistance for Municipal Broadband

Various federal broadband programs provide funding for broadband deployment and expansion.⁶⁸ Historically, federal funds were awarded solely to the private sector for broadband deployment. The American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) marked a shift in the guidelines for broadband deployment. Under ARPA, the Coronavirus State and Local Fiscal Recovery Funds⁶⁹ are the first to allocate resources to state and local governments that may be used for broadband, among various eligible uses. States are encouraged to allocate these funds to local government, nonprofit, and co-operative broadband service providers.⁷⁰ For example, per county documents, Skagit County (WA) earmarked $1 million of its share of ARPA funds to extend the county's broadband network.⁷¹

In 2021, the Biden Administration proposed prioritizing funding for municipal broadband networks in the American Jobs Plan, which "prioritizes support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to turn profits and with a commitment to serving entire communities."⁷² The municipal broadband provisions in the American Jobs Plan drew opposition from some private sector providers and were ultimately not included in IIJA.⁷³ For example, the Chief Executive Officer of AT&T called the plan to fund municipal broadband networks "misguided" and said the United States should not pay for any broadband deployment in areas that already have networks.⁷⁴

Several bills in the 117^th Congress would provide federal funding opportunities for broadband deployment to public entities. Some would support municipal broadband deployment where there is no service or where it is found to increase competition. Municipal broadband funding bills include

• Connect America Act of 2021 (H.R. 1672)
• Broadband Infrastructure Finance and Innovation Act of 2021 (H.R. 1700/S. 741)
• Leading Infrastructure For Tomorrow's America Act (H.R. 1848)
• Broadband Justice Act of 2021 (H.R. 1904)
• Community Broadband Mapping Act (H.R. 2400)
• Broadband Internet Connections for Rural America Act (H.R. 4374)
• Broadband Incentives for Communities Act (H.R. 5058)

For more on the bills listed above see Appendix A.

One funding option could be the establishment of a federal program which "prioritizes support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives" as proposed in the Biden Administration's American Jobs Plan⁷⁵ or the creation of a federal program solely dedicated to supporting municipal broadband. An example of this at the state level is Massachusetts' Last Mile Infrastructure Grant.⁷⁶ The program directs funding toward towns for the design, engineering, and construction of municipal broadband networks. The program supplements a municipality's financial contribution during planning and deployment—which may reduce the risk to local taxpayers. Other federal options may include

• loan or grant programs with certain conditions (e.g., a public-private partnership with a reputable entity) to avoid underwriting poorly planned or managed networks and reduce sustainability risk or a sunset clause indicating when the duration for support would end.
• a program that subsidizes a municipality's feasibility study in exchange for allowing private sector providers to match the speed and/or price benchmarks from the study and claim any federal subsidy for build out and maintenance.

As billions of federal taxpayer dollars already subsidize private sector networks (e.g., most recently $65 billion in the IIJA), a counterpoint for consideration may be whether federal taxpayer dollars have a role in subsidizing the sustainability of local broadband networks.

Commissioning a Study to Examine What Circumstances Might Warrant Government Subsidization

Municipal broadband networks may be successful in some communities, but may fail in others. Similarly, municipal broadband may address one issue in one community (e.g., availability) and a different issue in another community (e.g., affordability). If, as some critics state, municipal broadband has economic drawbacks, Congress may wish to examine what circumstances might warrant government subsidization, if any. For example, a study could assess whether there are characteristics that might make some municipalities better candidates for municipal broadband deployment than others. However, data may be limited. According to a report from the Online Journal of Rural Research & Policy, "the chief obstacle to gathering data regarding MBN [municipal broadband network] implementation is the sheer lack of existing MBNs. However, as more communities implement such networks, more tacit knowledge will become available."⁷⁷ Congress could consider tasking a federal agency with collecting standardized data from existing municipal broadband networks⁷⁸ to support both federal and independent evaluation. A provision that has similarities to this option has been proposed in the Measuring the Economic Impact of Broadband Act of 2021 (S. 326), which would require the Department of Commerce to conduct a biennial assessment and analysis regarding the contribution of the digital economy to the U.S. economy. The assessment would include consultation with representatives from state, local, and tribal government agencies, as well as representatives from consumer and community organizations, among other entities.

Additionally, studies could assess a range of general factors, such as population, population density, geography, and local median income, as well as unique community characteristics, such as the existence of specific types of businesses, industries, civic and educational institutions, and infrastructure that may influence municipal broadband deployment, the take rate, and sustainability. According to Utah Telecommunication Open Infrastructure Agency (UTOPIA) Fiber Deputy Director Kimberly McKinley, "We hear all the time that municipal broadband is really only successful in smaller cities.… I think that it is huge to say that a city of 141,000 [West Valley City, UT] is not just built out but they have choice of 16 different providers and what that means to the community."⁷⁹

Preempting State Regulations or Implementing a Nationwide Ban on Municipal Broadband

At the time of this report's publication, 22 states have laws that either explicitly ban municipal broadband networks or limit the deployment of these networks in some capacity (see also Appendix B). There have been federal attempts at preempting state restrictions. In February 2015, the FCC voted to preempt laws in North Carolina and Tennessee to prevent municipal broadband providers from expanding outside the boundaries of their municipality. The FCC argued that it could preempt the laws because Congress authorizes it to promote competition by removing barriers to investment. Section 706 of the Telecommunications Act of 1996 (P.L. 104-104) charges the commission with "encourag[ing] the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans" by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.⁸⁰ However, the U.S. Court of Appeals for the Sixth Circuit ruled⁸¹ that the FCC has no specific authority through Section 706 to overturn state law.⁸²

To increase broadband access during the COVID-19 pandemic, two states—Arkansas and Washington—adopted legislation that reduced barriers on municipal broadband networks.⁸³ Additional states may be incentivized to reduce restrictions as—among the provisions in the IIJA—cooperatives, nonprofit organizations, public-private partnerships, private companies, public or private utilities, public utility districts, or local governments are not to be excluded from eligibility for grant funds for the Broadband Equity, Access, and Deployment (BEAD) Program. Several bills in the 117^th Congress would preempt state laws to allow any municipality in the United States to deploy broadband.⁸⁴ Examples of legislation introduced in the 117^th Congress that would address preemption are the Accessible, Affordable, Internet for All Act (S. 745/H.R. 1783) and the Community Broadband Act of 2021 (S. 1460/H.R. 1631). Other options may include amending Section 706 to grant the FCC explicit authority to preempt state laws to remove a potential barrier to municipal broadband investment in unserved areas. A measure related to this option has been proposed in the Broadband Reform and Investment to Drive Growth in the Economy Act of 2021 (S. 2071), which, among other things, would preempt state and local restrictions on municipal broadband. Congress could also leave Section 706 as is, keeping the decision on whether to allow or prohibit municipal broadband in the hands of states.

Alternatively, to avoid competition between the public and private sectors, Congress could consider a nationwide ban on municipal broadband networks. This concept has been introduced in the Communities Overregulating Networks Need Competition Today Act (H.R. 1149), which would prohibit a state or political subdivision from providing or selling broadband service. A nationwide ban could produce a range of outcomes. A ban could encourage private sector investment. A ban could also be viewed as limiting the role of government in services that are typically provided by the private sector. Some areas currently unserved by private service providers could remain unserved unless the private providers are federally subsidized. Some areas that are currently served may allow a local broadband monopoly or duopoly to become entrenched. There also may be an effect on affordability, as an existing local monopoly may not face pressure from a municipal network to lower rates to be competitive. This could lead to continued federal taxpayer subsidization of users through already existing (e.g., the Affordable Connectivity Program) or newly created federal broadband affordability programs.

Concluding Observations

Roughly 14.5 million Americans lack access to fixed broadband at speeds of 25/3 Mbps, according to the FCC's Fourteenth Broadband Deployment Report.⁸⁵ The primary means the United States has for encouraging broadband deployment is subsidizing the private sector to serve unserved and underserved areas. For addressing broadband affordability, the primary means is subsidizing service for low-income users. Even with the new broadband investment in IIJA, the United States still may not achieve universal broadband coverage due to cost, affordability, and regulatory matters. Congress may weigh how municipal broadband providers could help fill these gaps—potentially connecting the unconnected. For example, Congress may wish to consider consumer broadband affordability—a cause of the digital divide—as a factor in supporting municipal networks and whether to target municipal broadband deployment to communities that are already served by private sector providers, but lack affordable broadband service options.

If the 117th Congress chooses to consider the potential role of municipal broadband, it has a variety of potential options to weigh. Examples of bills and proposals currently before Congress include the following:

support for municipal broadband in the form of targeted loans or grants to municipalities that meet certain conditions, for either deployment or sustainability;

examining what circumstances (if any) might warrant government subsidization for municipal broadband networks, perhaps by commissioning a study conducted by an agency or independent body;

granting the FCC explicit authority to preempt state laws to remove a potential barrier to municipal broadband investment in unserved areas; and

enacting a nationwide ban on states or political subdivisions from providing or selling broadband service.

Appendix A. Selected Municipal Broadband Legislation in the 117^th Congress

At the time of publication, 19 bills had been introduced in the 117^th Congress that refer to municipal broadband in some capacity, with 13 originating in the House and six in the Senate.⁸⁶ One bill (P.L. 117-58) has been enacted into law. A description of selected bills and their potential impact on municipal broadband follows.

Enacted into Law

• P.L. 117-58. Introduced on June 4, 2021, enacted as the Infrastructure Investment and Jobs Act. The act provides funding to build and enhance infrastructure across the United States, including broadband infrastructure. Among the provisions, cooperatives, nonprofit organizations, public-private partnerships, private companies, public or private utilities, public utility districts, or local governments are not to be excluded from eligibility for grant funds for the Broadband Equity, Access, and Deployment (BEAD) Program. The act also requires collaboration with local and regional entities for the five-year action plan under the BEAD program. Became P.L. 117-58 on November 15, 2021.

Introduced in the House

• H.R. 1149. Introduced on February 18, 2021, as the Communities Overregulating Networks Need Competition Today Act. The bill would prohibit a state or political subdivision from providing or selling broadband service. Referred to the Committee on Energy and Commerce on February 18, 2021.
• H.R. 1631. Introduced on March 8, 2021, as the Community Broadband Act of 2021. The bill would prohibit states from blocking the provision of broadband by public providers, public-private partnership providers, or cooperatively organized providers. Referred to the Committee on Energy and Commerce on March 8, 2021. A companion bill (S. 1460) was introduced on April 29, 2021.
• H.R. 1672. Introduced on March 9, 2021, as the Connect America Act of 2021. The bill would require the FCC to establish a funding program to expand broadband access for unserved and underserved areas and unserved anchor institutions, such as schools or libraries. A municipal broadband service provider, among other recipients, would be eligible to receive funding under the program. Referred to the Committee on Energy and Commerce on March 9, 2021.
• H.R. 1700. Introduced on March 9, 2021, as the Broadband Infrastructure Finance and Innovation Act of 2021. Among other things, the bill would provide a means for communities and public-private partnerships to apply for low-interest secured loans, lines of credit, or loan guarantees to finance broadband infrastructure investments. Referred to the Committee on Energy and Commerce on March 9, 2021. A companion bill (S. 741) was introduced on March 11, 2021.
• H.R. 1783. Introduced on March 11, 2021, as the Accessible, Affordable, Internet for All Act. Among other things, the bill would include a provision that would prohibit any state laws or procedures that inhibit a municipality from pursuing a public broadband project, public-private project, or cooperative project. Referred to the Committee on Agriculture on April 28, 2021. A companion bill (S. 745) was introduced on March 15, 2021.
• H.R. 1848. Introduced on March 11, 2021, as the Leading Infrastructure For Tomorrow's America Act. Among other things, the bill would establish a funding program to expand broadband access for unserved and underserved areas and unserved anchor institutions, such as schools or libraries. Under the program, a public-private partnership and municipal broadband service provider would be eligible recipients, among others. Referred to the Committee on Natural Resources on January 20, 2022.
• H.R. 1904. Introduced on March 16, 2021, as the Broadband Justice Act of 2021. Among other things, the bill would establish grants and loans for housing providers, public housing agencies, and other public entities to provide access to broadband service to residents of federally assisted housing. Referred to the Committee on Financial Services, and in addition to the Committee on Ways and Means on March 16, 2021.
• H.R. 2400. Introduced on April 8, 2021, as the Community Broadband Mapping Act. The bill would authorize the Department of Agriculture's Rural Utilities Service to award telecommunications grants to local governments, electric and telephone cooperatives, economic development and community groups, and small internet providers for collecting local broadband service information. Referred to the Committee on Agriculture on June 7, 2021.
• H.R. 3435. Introduced on May 20, 2021, as the American Broadband Act. The bill would include a provision that would prohibit a state or political subdivision from providing or selling broadband service. Referred to the Committee on Agriculture on July 7, 2021.
• H.R. 3703. Introduced on June 4, 2021, as the Nationwide Dig Once Act of 2021. Among other things, the bill would require a state department of transportation to review existing state broadband plans, including existing dig once requirements of the state, municipal governments incorporated under state law, and Indian tribes within the state, to determine opportunities to coordinate highway construction projects with planned broadband infrastructure projects. Referred to the Committee on Transportation and Infrastructure on June 7, 2021.
• H.R. 4374. Introduced on July 9, 2021, as the Broadband Internet Connections for Rural America Act. The bill would combine the ReConnect Program and the Rural Broadband Access Program into one program called the ReConnect Rural Broadband Program. The new program would provide grants, loans, loan/grant combinations, and loan guarantees to finance the costs of the construction, improvement, and acquisition of facilities and equipment needed to expand broadband service in rural areas. Among the entities that would be eligible to receive a grant are a unit of local government, and an economic development or other community organization. The Committee on Energy and Commerce granted an extension for further consideration ending no later than September 12, 2022.⁸⁷
• H.R. 5058. Introduced on August 20, 2021, as the Broadband Incentives for Communities Act. The bill would require the NTIA to establish a grant program to assist local governments and Indian tribes with efficient review and approval of zoning or permitting applications that facilitate the deployment of broadband infrastructure. The NTIA would also be required to establish a Local Broadband Advisory Council to develop solutions to challenges faced by local governments, Indian tribes, and infrastructure providers in facilitating wireless and broadband deployment, including in unserved and underserved communities. Referred to the Committee on Energy and Commerce on August 23, 2021.

Introduced in the Senate

• S. 326. Introduced on February 12, 2021, as the Measuring the Economic Impact of Broadband Act of 2021. The bill would require the Department of Commerce to conduct a biennial assessment and analysis regarding the contribution of the digital economy to the U.S. economy. The assessment would include consultation with representatives from state, local, and tribal government agencies, as well as representatives from consumer and community organizations, among other entities. Referred to the Committee on Commerce, Science, and Transportation on February 12, 2021.
• S. 741. Introduced on March 11, 2021, as the Broadband Infrastructure Finance and Innovation Act of 2021. Among other things, the bill would provide a means for communities and public-private partnerships to apply for low-interest secured loans, lines of credit, or loan guarantees to finance broadband infrastructure investments. Referred to the Committee on Commerce, Science, and Transportation on March 11, 2021. A companion bill (H.R. 1700) was introduced on March 9, 2021.
• S. 745. Introduced on March 15, 2021, as the Accessible, Affordable Internet for All Act. Among other things, the bill would include a provision that would prohibit any state laws or procedures that inhibit a municipality from pursuing a public broadband project, public-private project, or cooperative project. Referred to the Committee on Commerce, Science, and Transportation on March 15, 2021. A companion bill (H.R. 1783) was introduced on March 11, 2021.
• S. 1460. Introduced on April 29, 2021, as the Community Broadband Act of 2021. The bill would prohibit states from blocking the provision of broadband by public providers, public-private partnership providers, or cooperatively organized providers. Referred to the Committee on Commerce, Science, and Transportation on April 29, 2021. A companion bill (H.R. 1631) was introduced on March 8, 2021.
• S. 2071. Introduced on June 15, 2021, as the Broadband Reform and Investment to Drive Growth in the Economy Act of 2021. Among other things, the bill would preempt state and local restrictions on municipal broadband. Referred to the Committee on Commerce, Science, and Transportation on June 15, 2021.
• S. 4763. Introduced on August 3, 2022, as the Grants to Rapidly Invest and Deploy Broadband Act of 2022. The bill would support the construction of middle mile infrastructure and enhance the electric grid. Among other things, municipal utilities would be among the eligible entities to receive grants under the "GRID Broadband Facilitation Program." Referred to the Committee on Commerce, Science, and Transportation on August 3, 2022.

Appendix B. Municipal Broadband Policies by State