In Part One of this series, we described factors, benefits and issues that have led to the growing debate over the extent to which a municipality should be able to become an Internet Service Provider (ISP). Wilson, North Carolina, has been a flashpoint in the conflict between municipalities effectively serving the needs of their residents and corporate ISPs serving a broader market. The issue has also created a conflict between state laws and federal initiatives, so the U.S. government has a strong interest in the matter as well. Recent developments keep Wilson on the cutting edge of the dispute over municipal ISPs, and it is worthwhile to have a look at how Wilson got into this position and why it remains a critical case study in determining the future of municipal ISPs.
WILSON’S ROAD TO GREENLIGHT INTERNET SERVICE
Following a major economic downturn midway through the past decade, Wilson sought a way to support existing businesses and attract new ones. The city council determined that a critical factor in creating a favorable business environment was to have the adequate infrastructure for the digital age, namely high speed broadband internet.
Residents and businesses had been unhappy with the insufficient internet service offered commercially. Individual residents and town leaders, at the behest of residents, made inquiries regarding internet service upgrades, but the commercial ISPs showed no interest in making the significant investment to upgrade their services for the small population of 50,000.
This situation created an uncertain business future for Wilson which in turn made for an unstable future as a residential community. Limited internet capability would certainly have been detrimental to its ability to attract new business and could possibly have led to existing businesses leaving as well. The city was clearly in a quandary.
Since Wilson had built a fiber network to link city facilities in 2005, the community members unsatisfied with their internet service options requested access to the city fiber network. The city made inquiries for a private partnership to expand its capabilities but did not receive any interest.
So in 2008, with approval from the state, Wilson moved forward to expand its network to accommodate the community. It created its own fiber optic network, Greenlight, which is now one of the fastest in the nation. (For comparison, it is on par with the highly-touted Google Fiber that will be offered to the Triangle in the very near future.)
Of course this move was very popular with local businesses since they had acquired a new edge over competitors in the digital economy. In response, Time Warner Cable lowered its prices and modestly boosted available Internet speeds, but even so, Greenlight attracted over thirty percent of the local market.
Wilson’s move to become an ISP did result in attracting new businesses, most notably Exodus FX, a movie special effects company that had been formerly based in Hollywood and had worked on Academy Award-winning films Black Swan and The King’s Speech. The company had specifically chosen Wilson for its internet fiber network which would allow it to provide its same previous capabilities to its clients around the world. But just as significantly, the network also provided a noticeably improved standard of digital living which has benefited the community.
In addition to bolstering local business capabilities, Greenlight’s network also provided free wi-fi conveniently available in town, allowing residents to be more mobile with their digital resources. Among other benefits of the network, probably not entirely anticipated, were the enhanced capability of and availability to public library resources and enhanced resources for job seekers.
The capability and success of Greenlight attracted the attention of neighboring residents and communities that took a strong interest in gaining access to the network. Wilson already had been providing electric service to five cities in other counties so it seemed natural to perhaps provide internet service as well.
As Wilson’s opportunities to extend its internet service beyond city limits grew and the actuality of such service became more tangible, the legal issues of jurisdiction and unfair competition came into play. In the rapidly changing landscape of the digital world, private ISPs and municipalities across the country immediately recognized the effect these issues would have nationwide.
Although Wilson had begun its Greenlight service to serve its residents in the absence of other options, it raised red flags for corporate ISPs when it attempted to serve the needs of residents outside of its jurisdiction. The private companies viewed this expansion as a significant change in the marketplace, and saw a threat to their businesses. To protect their interests, the private ISPs lobbied state legislatures to limit, reduce or even prohibit the ability of municipalities to provide internet service, even within the municipality’s own boundaries.
THE LEGAL LANDSCAPE
In the wake of the success of Greenlight and its corresponding large share of the service network market in Wilson, the state of North Carolina in 2011 became, at the urging of the private ISPs, one of about twenty states that enacted regulations greatly inhibiting the ability of municipalities to provide internet service.
Municipal networks were not explicitly banned, but HB 129 made it, among other things, extremely difficult for municipalities to raise the capital necessary to create such networks. Although Wilson was grandfathered in to allow it to continue providing service within its city limits, it was prohibited from extending that service beyond.
The federal government, by way of the Federal Communications Commission (FCC), entered the conflict in the interest of promoting its mandate of making sure that underserved communities and individuals had access to broadband service. As discussed above, those without such service would be at a large business disadvantage, and the likelihood of climbing out of economic difficulties would greatly diminish. The FCC turned its attention to the twenty states that had passed laws limiting broadband expansion and the effect they had on internet access.
In 2014, FCC Chairman Tom Wheeler made statements about the importance of broadband access and the detrimental effect of laws banning municipal networks especially if the citizens of the community supported such ventures. In fact, Chairman Wheeler went so far as to say that municipalities “shouldn’t be stopped by state laws promoted by cable and telephone companies that don’t want that competition.”
The cities of Wilson and Chattanooga, TN, which also has a considerable network, saw that and other statements as support for the operation of their internet services. In 2014, each city filed a petition to have their respective state laws struck down.
In February of 2015, the FCC did strike down those laws citing its efforts to promote broadband investment and remove barriers to advanced telecommunications development. The ruling in part mentioned that the state laws blocking municipal ISPs from providing service outside of their territories were against public policy and conflicted with the FCC mandate to expand broadband access. The FCC claimed jurisdiction over the matter and invalidated the laws.
However, private providers sued to keep the anti-municipal broadband laws in place and both the state of North Carolina and the state of Tennessee appealed the FCC decision in their respective federal jurisdictions. Since the issues in both cases were similar and the state of Tennessee filed first, those appeals were combined and were presented in that state’s jurisdiction, the Sixth Circuit (North Carolina is in the Fourth Circuit. Incidentally, the joining of these two appeals cases is why Wilson and Chattanooga are often mentioned together regarding this issue even though these types of regulations are being contested all over the country.)
In August of 2016, the Sixth Circuit decision ruled in favor of the states and reinstated the law that prevents Wilson from offering internet service to nearby municipalities.
On August 31, 2016, the FCC announced that it would not appeal the decision. In September Wilson also announced that it would not appeal the decision and would terminate its internet service agreement with the nearby town of Pinetops, another underserved community that felt it had been disregarded, and other clients outside its county limits by October 28.
However, in an unexpected development at the end of October, Wilson announced, that Greenlight would continue to provide broadband service free of charge to Pinetops for up to six months, thus circumventing the state regulation. As set forth by the definition of service within the regulation, the law only applies to services provided “for a fee.” Therefore, Greenlight’s free internet access complies with the NC state law.
Wilson Mayor Bruce Rose stated, “While the short-term fix is not perfect, it was the only alternative we had to disconnecting our neighbors. Taking broadband service from the people of Pinetops would have been a terrible blow, especially when they are still recovering from Hurricane Matthew.”
It is notable that Greenlight’s extension of service is also a strategic alternative to appealing the Sixth Circuit Court’s decision. During the stated six-month period, Wilson will lobby the state legislature to change the restrictive state law, and the publicity from continuing service will draw attention to the issue.
The conflict over municipal broadband service appeared to be ending, at least in North Carolina. However, Wilson’s unanticipated strategy has kept the issue in play, and we can expect continued interest and debate in the near future.
So this is how the seemingly obscure struggles of a small town in sparsely populated eastern North Carolina improbably became a widely scrutinized, nation-wide case study on the possible future of municipal broadband service regulations. Although this is an issue in dispute across the country, decisions and results in North Carolina are at the forefront of the conflict and will be highly significant and influential since the outcome will set the precedence in this field. Courts across the country will use this case as a reference and a guide to make their own decisions.
In light of Wilson’s latest move, it is also safe to say that this case will also affect the approaches and strategies of other parties at interest. And should the federal government insert itself in the conflict again, the outcome in North Carolina will become of even greater significance.
The principal author of this post is Friend of the Firm Victor Lee. Please see our disclaimer and let us know if you have questions or comments about this post, or any ideas for future posts on broadband or any other topic.