In a significant victory for cities fighting state laws barring municipal efforts to provide low-cost telecommunication and cable services, the U.S. Court of Appeals for the Eighth Circuit (St. Louis) recently overturned a Federal Communications Commission (FCC) decision refusing to preempt a Missouri statute that prevents municipalities and municipally owned utilities from providing telecommunication services or facilities.
According to the municipalities represented by the Missouri Municipal League, the state statute violated section 253 of the federal Telecommunications Act of 1996, which bars states from prohibiting "any entity" from providing interstate or intrastate telecommunications service.
Although municipalities in Missouri (and throughout the country) derive all their powers from the state and although the state can control its subdivisions in "almost limitless ways," said the Eighth Circuit Court, "municipalities and other political subdivisions have existence separate from that of state."
According to the court, the question before it was not the source from which municipalities derived their power, but whether they were included within meaning of "any entity" as used in Telecommunications Act.
In declining to preempt the Missouri statute last year, the FCC ruled that the term "any entity" in Sec. 253(a) of the Telecommunications Act was not intended to include cities but rather "appeared to prohibit" restrictions on market entry that applied to independent entities.
The FCC had determined that if a municipally owned utility sought to provide a telecommunication service or facility as an independent corporate entity that was separate from the state, it would have reached a different conclusion. In particular, the FCC pointed to a decision by the U.S. Court of Appeals in Washington D.C., in City of Abilene v. FCC in which the D.C. Circuit Court reviewed an FCC order that refused to preempt a Texas statute similar to the Missouri statute.
The court found that section 253 didn't contain a plain statement sufficient to preempt state sovereignty.
Chief Judge Roger L. Wollman said that his court didn't find the City of Abilene decision to be "persuasive." He said, "We conclude that because municipalities fall within the ordinary definition of the term `entity,' and because Congress gave that term expansive scope by using the modifier `any,' individual municipalities are encompassed within the term `any entity' as used in section …