Court Opinion

ID: 4023141
Source: CourtListenerOpinion
Date Created: 2016-08-10 17:01:03.861046+00
Date Added: 2024-06-11T12:50:08.016566
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                                   Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                            File Name: 16a0189p.06

                       UNITED STATES COURT OF APPEALS
                                        FOR THE SIXTH CIRCUIT
                                          _________________

 STATE OF TENNESSEE (15-3291); STATE OF NORTH                    ┐
 CAROLINA (15-3555),                                             │
                                    Petitioners,                 │
                                                                 │
 NATIONAL ASSOCIATION OF REGULATORY UTILITY                      │
 COMMISSIONERS,                                                   >        Nos. 15-3291/3555
                                                                 │
                                    Intervenor,
                                                                 │
                                                                 │
            v.                                                   │
                                                                 │
                                                                 │
 FEDERAL COMMUNICATIONS COMMISSION; UNITED
                                                                 │
 STATES OF AMERICA,
                                                                 │
                               Respondents,                      │
 ELECTRIC POWER BOARD OF CHATTANOOGA; CITY                       │
 OF WILSON, N.C.,                                                │
                                Intervenors.                     │
                                                                 ┘

                                 On Petitions for Review of an Order of
                               the Federal Communications Commission.
                                               No. 15-25.

                                         Argued: March 17, 2016

                                   Decided and Filed: August 10, 2016

                 Before: ROGERS and WHITE, Circuit Judges; HOOD, District Judge.*

                                            _________________

                                                 COUNSEL

ARGUED: Joshua S. Turner, WILEY REIN LLP, Washington, D.C., for Petitioner in 15-3291.
John F. Maddrey, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North
Carolina, for Petitioner in 15-3555. Matthew J. Dunne, FEDERAL COMMUNICATIONS

        *
         The Honorable Joseph M. Hood, United States District Judge for the Eastern District of Kentucky, sitting
by designation.

                                                       1
Nos. 15-3291/3555            State of Tenn., et al. v. FCC, et al.                   Page 2

COMMISSION, Washington, D.C., for Respondents. ON BRIEF: Joshua S. Turner, Megan L.
Brown, WILEY REIN LLP, Washington, D.C., for Petitioner in 15-3291. John F. Maddrey,
NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for Petitioner in
15-3555.    Matthew J. Dunne, Richard K. Welch, FEDERAL COMMUNICATIONS
COMMISSION, Washington, D.C., for Respondents. James Bradford Ramsay, NATIONAL
ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, Washington, D.C., for
Intervenor National Association of Regulatory Utility Commissioners. James Baller, Sean A.
Stokes, Ashley Stelfox, BALLER HERBST STOKES & LIDE, PC, Washington, D.C., James P.
Cauley III, Gabriel Du Sablon, CAULEY PRIDGEN, P.A., Wilson, North Carolina, for
Intervenor City of Wilson. Frederick L. Hitchcock, Willa B. Kalaidjian, CHAMBLISS,
BAHNER & STOPHEL, P.C., Chattanooga, Tennessee, for Intervenor Electric Power Board of
Chattanooga. William J. Kirsch, Arlington, Virginia, Andrew L. Brasher, OFFICE OF THE
ALABAMA ATTORNEY GENERAL, Montgomery, Alabama, Conor B. Dugan, WARNER
NORCROSS & JUDD LLP, Grand Rapids, Michigan, Richard A. Samp, WASHINGTON
LEGAL FOUNDATION, Washington, D.C., David Parkhurst, NATIONAL GOVERNORS
ASSOCIATION, Washington, D.C., Bartlett Cleland, Jonathan Hauenschild, AMERICAN
LEGISLATIVE EXCHANGE COUNCIL, Arlington, Virginia, Ashley Stelfox, BALLER
HERBST STOKES & LIDE, PC, Washington, D.C., Mark C. Del Bianco, LAW OFFICE OF
MARK C. DEL BIANCO, Kensington, Maryland, Andrew Jay Schwartzman, Eric G. Null,
INSTITUTE FOR PUBLIC REPRESENTATION, Washington, D.C., Lani L. Williams, LOCAL
GOVERNMENT LAWYER’S ROUNDTABLE, INC., Oconomowoc, Wisconsin, Kimberly
Hibbard, NORTH CAROLINA LEAGUE OF MUNICIPALITIES, Raleigh, North Carolina,
Markham C. Erickson, STEPTOE & JOHNSON LLP, Washington, D.C., for Amici Curiae.

        ROGERS, J., delivered the opinion of the court in which HOOD, D.J., joined, and
WHITE, J., joined in part. WHITE, J. (pp. 23–25), delivered a separate opinion concurring in
part and dissenting in part.
                                      _________________

                                            OPINION
                                      _________________

       ROGERS, Circuit Judge. Municipalities in Tennessee and North Carolina providing
broadband service would like to expand their networks beyond their current territorial boundaries
to underserved nearby areas. The legislatures of Tennessee and North Carolina have passed laws
either forbidding or putting onerous restrictions on such expansion by municipal
telecommunications providers. The Federal Communications Commission (FCC), citing its
statutory mandates to remove barriers to broadband service and to promote competition in the
telecommunications market, has issued an order purporting to preempt these state statutory
provisions. Tennessee and North Carolina now seek review of the FCC’s order.
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                      Page 3

       The FCC order essentially serves to re-allocate decision-making power between the states
and their municipalities. This is shown by the fact that no federal statute or FCC regulation
requires the municipalities to expand or otherwise to act in contravention of the preempted state
statutory provisions. This preemption by the FCC of the allocation of power between a state and
its subdivisions requires at least a clear statement in the authorizing federal legislation. The FCC
relies upon § 706 of the Telecommunications Act of 1996 for the authority to preempt in this
case, but that statute falls far short of such a clear statement. The preemption order must
accordingly be reversed.

                                          Tennessee Law

       Under a Tennessee law enacted in 1999, any municipality operating an electric plant is
authorized to offer cable services, video services, and Internet services. Tenn. Code Ann. § 7-
52-601. However, this authority is limited—the statute grants a municipality this authority only
“within its service area.” Id. This geographic limitation forbids a municipality from offering
Internet services to surrounding areas that are not served by that municipality’s electric plant.

       The territorial restriction in § 601 does not require municipalities to violate any FCC
requirement. There are no FCC rules or regulations requiring municipalities to expand their
service offerings beyond their territorial boundaries. Tennessee, in enacting § 601, has simply
made the choice for its municipalities on the issue of expansion, which is a discretionary decision
under the current FCC regulatory scheme.

       Chattanooga, Tennessee operates an electric provider known as the Electric Power Board
(EPB). In re City of Wilson, North Carolina, 30 FCC Rcd. 2408, 2015 WL 1120113, at *7
(2015). The EPB offers high-speed broadband Internet service with speeds up to one Gigabit per
second (Gbps).     Id.   The EPB offers this service to 170,000 residential and commercial
customers in its 600-square-mile service area, which includes counties in Tennessee and
Georgia.   Id. at *7, *10.    In 1996, the EPB began developing a high-capacity fiber-optic
communications infrastructure.       Id. at *10.       In 2009, the EPB made its fiber-optic
communications services available to residential customers and, in 2010, became the first
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                      Page 4

broadband provider in the nation to offer Gigabit services to all its customers. Id. About 63,000
of the EPB’s electric service customers subscribe to the fiber services. Id.

       The EPB’s fiber-optic network has received uniform praise. It has led to job growth and
attracted businesses to the area. Id. at *7–8. Its introduction led established Internet providers to
lower rates while increasing the quality of their services. Id. at *7. The fiber network has also
put more money in Chattanooga’s coffers, which contributed to Standard and Poor’s upgrading
of the EPB’s bond rating to AA+ in 2012. Id. at *8.

       Educational institutions within the EPB’s service area have benefitted from the fiber
network. Id. The high-speed network is available to Chattanooga schools and allows the schools
to offer services not available in many parts of the country. Id. Further, Chattanooga’s public
library system—with a 14,000 square foot space dedicated to innovation—is a leading one in the
nation. Id. The New York Public Library has announced that it sees Chattanooga’s library as a
model for its renovations. Id.

       Neighboring communities outside of the EPB’s service area, however, cannot partake in
the EPB’s high-speed Internet service due to the geographic limitation in § 601. Residents from
those communities have repeatedly requested expansions of the EPB’s services to the
surrounding areas. Id. at *9. The EPB’s surrounding communities allegedly constitute a “digital
desert” in which the Internet services are abysmal or nonexistent. Id. These areas are known as
“unserved” and “underserved” areas. Id.

                                       North Carolina Law

       Under a North Carolina law originally enacted in 1971, municipalities were authorized to
provide broadband Internet services.        See N.C. Gen. Stat. Ann. § 160A-311; BellSouth
Telecomm., Inc. v. City of Laurinburg, 606 S.E.2d 721, 726–28 (N.C. Ct. App. 2005). In 2011,
North Carolina’s General Assembly passed Session Law 2011-84, entitled “An Act to Protect
Jobs and Investment by Regulating Local Government Competition with Private Business,”
which among other things imposed requirements on city-owned communications service
providers. See N.C. Gen. Stat. Ann. §§ 160A-340 to -340.6. Under § 160A-340.1(a)(3), city-
owned communications service providers are directed to “[l]imit the provision of
Nos. 15-3291/3555               State of Tenn., et al. v. FCC, et al.                     Page 5

communications service to within the corporate limits of the city providing the communications
service.” Thus, municipalities in North Carolina may not offer Internet services to anyone
beyond their municipal boundaries.

       The Session Law contains additional restrictions that focus on the financial operation of
municipal providers. Sections 160A-340.1(a)(9) and -340.5 of Session Law 2011-84 require
municipalities to make payments in lieu of taxes that would equal the amount a private-sector
provider would have to pay in taxes and fees. Section 340.1(a)(8) requires municipalities to
impute the costs of private providers when pricing the municipal services. Section 340.1(a)(1)
requires municipalities to comply with all of the laws and rules that apply to private providers
(without exempting municipalities from generally applicable municipal regulations). Section
340.1(a)(5) requires municipalities to open their facilities for private providers at no charge if the
municipalities themselves would not have to pay. Section 340.1(a)(7) forbids municipalities
from subsidizing their “communications service with funds from any other non-communications
service.” A separate part of Session Law 2011-84 amended the state’s definition of “public
utility” to include municipal providers of broadband, which exposes them to regulation from the
state’s Utilities Commission.

       The Session Law also contains restrictions on the implementation of municipal services.
Section 340.3 requires a 75-day public hearing process before a municipality can provide
communications services, and § 340.4 requires a special election on the issue of municipal entry
into communications services. Section 3 of Session Law 2011-84 mandates a period for private
providers to comment on municipal entry. Under § 340.6, municipalities must solicit public-
private partnership proposals before a municipality can begin construction on a communications
network.

       The Session Law, in § 340.2, includes three provisions that exempt municipalities from
the restrictions. The first of these provisions, § 340.2(a), exempts city providers from the
Session Law restrictions if the providers use the telecommunications services only for “internal
governmental purposes” or within another city’s corporate limits so long as the other city is a
party to an “interlocal agreement.” Section 340.2(b) exempts municipalities serving “unserved
areas” from the restrictions. An “unserved area” is defined as a “census block . . . in which at
Nos. 15-3291/3555            State of Tenn., et al. v. FCC, et al.                    Page 6

least fifty percent (50%) of households either have no access to high-speed Internet service or
have access to [such] service only from a satellite provider.” Lastly, in § 340.2(c), there is a
series of “grandfather” exemptions, which exempt municipalities “providing communications
service as of January 1, 2011,” from the restrictions so long as those municipalities abide by
certain limitations.

       Like Tennessee’s restriction, the North Carolina provisions do not require municipalities
to violate any FCC rule or regulation. This is clear from the record, and in any event was
conceded by the FCC’s counsel at oral argument. The Session Law is simply an instance of
North Carolina making choices for its municipalities on the issues of expansion and municipal
offering of telecommunications services.

       In 2005, the City of Wilson, North Carolina constructed the backbone of a fiber-optic
network connecting all City-owned facilities. In re City of Wilson, 2015 WL 1120113, at *10.
Many residents, medical facilities, businesses, and educational institutions requested access to
and expansion of the network. Id. at *11. In 2006, the Wilson City Council responded to these
requests by unanimously voting to build a municipal broadband network that would eventually
become known as “Greenlight.” Id. at *10. In 2013, Wilson rolled out Greenlight to residential
customers, offering Gigabit Internet service. Id.

       Greenlight has provided benefits for Wilson.          Wilson states that its “triple play”
services—phone, Internet, and cable—are cheaper than its competitors’ and that it offers its
Gigabit Internet while maintaining a positive cash flow. Id. at *11. Wilson also provides free
Wi-Fi to its entire downtown area, which in turn frees up money that downtown businesses
would normally spend for Internet. Id. Each of the top seven employers in Wilson is a customer
of the fiber network. Id. Local schools benefit from using Greenlight, as does the City’s main
public library. Id.

       Wilson has only deployed Greenlight in one county, Wilson County. Id. at *10. It has
five other counties for which it provides electric service. Id. Individuals in those five counties
have repeatedly requested that Wilson expand its offering of Greenlight. Id. at *13. Wilson is
currently exempt from the restrictions in §§ 160A-340 to -340.6 due to the grandfather
Nos. 15-3291/3555            State of Tenn., et al. v. FCC, et al.                     Page 7

provisions contained in § 340.2. If Wilson attempted to expand its offering beyond its corporate
limits, however, it would no longer fall under the grandfather exemption and would have to
abide by all of the restrictions, which would include the territorial restriction in § 340.1(a)(3).
Therefore, due to the restrictions in §§ 160A-340 to -340.6, Wilson is unable to expand its
offering beyond its municipal limits.

                                        The FCC’s Order

       The EPB and the City of Wilson separately petitioned the FCC to preempt the restrictions
in their respective states’ laws. The EPB asked the FCC to preempt the phrase “within its service
area” and excise those four words from § 7-52-601. In re City of Wilson, 2015 WL 1120113, at
*10. Wilson asked the FCC to preempt the entirety of Session Law 2011-84. Id. at *13.

       The FCC concluded that preemption of most of the Tennessee and North Carolina
statutes at issue would further the purposes of § 706 of the Telecommunications Act of 1996 by
increasing broadband investment. Both Wilson and the EPB sought expansion because the
private cable providers in their areas were unsatisfactory to the local residents and businesses.
Id. at *14. The EPB deployed its Internet services to “take advantages of synergies with existing
municipal services,” such as its smart power grid for its electric service. Id. Wilson likewise
deployed Internet in part to save money. Id. Further, by virtue of their being municipal
providers, the EPB and Wilson are concerned with more than just the “bottom line”—they are
also concerned with benefitting the communities they serve. Id. According to the FCC, these
differing interests support the conclusion that municipal-provider entry into the surrounding
areas would increase investment in broadband Internet.

       The FCC additionally concluded that preemption of the Tennessee restrictions and
allowing the EPB to serve the surrounding areas would promote competition in the broadband
marketplace, which is a goal of § 706. In response to the EPB’s constructing its fiber network,
Comcast stopped raising its rates—which had risen sharply for years—and subsequently reduced
them. Id. at *15. Both of the private providers in the EPB’s electric service area, Comcast and
AT&T, have vastly improved their Internet download speeds since the EPB’s entry. Id. This
Nos. 15-3291/3555            State of Tenn., et al. v. FCC, et al.                    Page 8

demonstrates the benefits of increased broadband competition and how a possible expansion for
the EPB could promote such competition.

       The FCC likewise found that preemption of most of the North Carolina restrictions would
promote and increase competition. In response to Wilson’s entry into the broadband market,
Time Warner held rates steady in Wilson while simultaneously raising rates in places without
such competition. Id. Like the private providers’ responses to the EPB’s entry, Time Warner
improved its top download speeds in response to Wilson’s entry. Id. The FCC concluded that
these reactions from Time Warner show that municipal-provider entry into the broadband market
increases competition.

       Commenters’ objections to preemption failed to persuade the FCC. The arguments that
municipal providers and private providers are not on “a level playing field” were unpersuasive
because, according to the FCC, they show only that municipal providers like the EPB and
Wilson differ from private providers but not that the differences are problematic. Id. at *16.
Some commenters argued that municipal entry would “crowd out” or be unfair to private
providers, but the FCC found that Wilson’s 33.7% market penetration indeed left room for
private providers.   Id. at *17.    The FCC likewise found no evidence to support some
commenters’ claims that municipal-service providers would act anti-competitively or that such
providers would be economically inefficient.        Id.   In response to claims that municipal-
broadband providers fail at a high rate, the FCC stated: “We do not read [§] 706 to require us to
find that any particular municipal system is certain to succeed if barriers are removed; only that
the law is a barrier and that removal is reasonably likely to lead to increased broadband
deployment or promote competition.” Id. at *18. Addressing the substance of the failure claims,
the FCC found them meritless. Id. at *18–21. Finally, the FCC disposed of what it considered to
be weaker objections, finding them unpersuasive or underdeveloped. Id. at *21.

       The FCC also found that the Tennessee statute constitutes a “barrier” to broadband
investment and competition. Tennessee’s territorial restriction in § 601—the language “within
its service area”—is, according to the FCC, “an explicit barrier to broadband infrastructure
investment and competition under [§] 706.” Id. at *22. Furthermore, “[the] EPB would likely
meet the substantial customer demand in surrounding areas absent [§] 601’s territorial
Nos. 15-3291/3555              State of Tenn., et al. v. FCC, et al.                    Page 9

restriction.” Id. at *23. Thus, the FCC stated that Tennessee’s territorial restriction falls under
the FCC’s authorized power to preempt “barriers to infrastructure investment” pursuant to § 706.

        North Carolina’s Session Law 2011-84, however, required a more in-depth analysis. The
law as a general matter was found to constitute a barrier to infrastructure investment and
competition. According to the FCC, “this is so even though any single regulatory provision of
the statute, if considered independently, might not appear to impose a significant burden.” Id. at
*27. The FCC found that the passage of 2011-84 chilled deployment of municipal broadband in
North Carolina. Id.

        The FCC divided the North Carolina provisions into three categories of restrictions:
measures to raise economic costs, obligations that would “level the playing field,” and measures
to impose delay. Id. at *23.

        The FCC first considered multiple measures to raise economic costs in Session law 2011-
84 and deemed them to constitute barriers. The first provision analyzed was the territorial
restriction contained in § 160A-340.1(3), which limits the provision of telecommunication
services to “within the corporate limits” of the municipal provider. Id. at *28. According to the
FCC, there is “no doubt” that the territorial restriction is a “barrier to deployment and
competition.” Id. This is because, absent the restriction, “Wilson and other North Carolina
municipalities would . . . be able to invest in broadband networks outside a city’s corporate limits
‘within reasonable limitations.’” Id. Finally, the three limited exemptions to the territorial
restriction—labeled the “grandfathering,” “interlocal,” and “unserved” exemptions—fail to
provide meaningful opportunities for municipal-provider entry, according to the FCC. Id. The
first two exemptions do not allow for municipalities to serve residents and businesses outside of
their current service areas, and the “unserved” exemption uses improperly low benchmarks for
determining what was an “unserved” location. Id. at *28–29. Further, the real-world application
of the “unserved” exemption would render service to those areas “economically infeasible” due
to the impracticability of obtaining the required information for an area to be labeled “unserved.”
Id. at *30.
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                       Page 10

       The next provisions analyzed were §§ 340.1(a)(9) and 340.5 of Session Law 2011-84,
which are provisions requiring payments in lieu of taxes. Id. According to the FCC, these
provisions, “on their face,” constitute barriers by raising the cost of providing service. Id.

       The third and final “measure to raise economic costs” in the North Carolina law that the
FCC analyzed was § 160A-340.1(a)(8), which requires municipalities to impute the costs of
private providers when pricing the municipal services. The FCC found that this provision
hampers municipalities’ ability to offer introductory or other discounts to compete for customers
and therefore “limits the competitive pressure on the [private providers] to lower their rates.” Id.
at *30–31.

       The FCC next considered North Carolina’s provisions that sought to “level the playing
field” between municipal providers and private providers. The FCC stated that § 340.1(a)(1),
which requires the municipalities to comply with all of the laws and rules that apply to private
providers but does not exempt those municipalities from regulations that apply to general
municipal operations, results in a double burden for municipal providers rather than a level
playing field. Id. at *31. The FCC reached a similar conclusion regarding § 340.1(a)(5), which
requires the municipalities to open their facilities for private providers at no charge if the
municipalities themselves would not have to pay.              Id. at *32.     Private providers of
telecommunications services are also exempt from regulation by the state’s Utilities
Commission, but a separate part of Session Law 2011-84 subjects municipal providers to such
regulation.   Id.   With regard to § 340.1(a)(7), which forbids a municipal provider from
subsidizing its “communications service with funds from any other non-communications
service,” the FCC noted that there is no similar limitation on private providers, who could use
funds from multiple lines of business to subsidize their communications-service offerings. Id.
These provisions, the FCC concluded, do not “level the playing field” but rather “function as
barriers to and have the effect of increasing the expense of and causing delay in broadband
deployment and infrastructure investment.” Id. at *33.

       The final provisions that the FCC analyzed were the “measures to impose delay.” The
FCC found that “these interrelated provisions lead to significant delay” and that “the time period
. . . could be approximately 27 months before a municipality can even launch a municipal
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                   Page 11

broadband project.” Id. at *34. Thus, the FCC concluded that §§ 340.3, 340.4, 340.6, and § 3 of
Session Law 2011-84 are collectively “a barrier to timely deployment of broadband and
infrastructure investment.” Id. The FCC also concluded that the provisions’ application to video
and phone services—which are necessary for a municipality’s offering of “triple play service”—
was a barrier, because municipalities needed to bundle those services with Internet in order to
maintain profitability. Id. at *35.

       The FCC order preempted portions of the Tennessee and North Carolina statutes. The
FCC found that Congress, in enacting § 706(a)–(b) of the Telecommunications Act of 1996,
vested the agency with the authority to preempt the laws. Id. at *37–43. Section 706, entitled
“Advanced Telecommunications Incentives” and codified at 47 U.S.C. § 1302, reads in part:

       (a) In general
       The Commission and each State commission with regulatory jurisdiction over
       telecommunications services shall encourage the deployment on a reasonable and
       timely basis of advanced telecommunications capability to all Americans
       (including, in particular, elementary and secondary schools and classrooms) by
       utilizing, in a manner consistent with the public interest, convenience, and
       necessity, price cap regulation, regulatory forbearance, measures that promote
       competition in the local telecommunications market, or other regulating methods
       that remove barriers to infrastructure investment.
       (b) Inquiry
       The Commission shall, within 30 months after February 8, 1996, and annually
       thereafter, initiate a notice of inquiry concerning the availability of advanced
       telecommunications capability to all Americans (including, in particular,
       elementary and secondary schools and classrooms) and shall complete the inquiry
       within 180 days after its initiation. In the inquiry, the Commission shall
       determine whether advanced telecommunications capability is being deployed to
       all Americans in a reasonable and timely fashion. If the Commission’s
       determination is negative, it shall take immediate action to accelerate deployment
       of such capability by removing barriers to infrastructure investment and by
       promoting competition in the telecommunications market.

The FCC, in its order, seized upon language in both subsections. The FCC stated at the outset
that Congress desired to give the FCC broad authority regarding telecommunications:

             131.    Encouraging broadband deployment is central to federal
       communications policy. . . . Section 2 of the Communications Act grants the
       Commission jurisdiction over “all interstate and foreign communication by wire
       or radio,” and broadband Internet access “falls comfortably within the
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                  Page 12

       Commission’s jurisdiction” under section 2, and has historically been supervised
       by the Commission.
              132. Within the bounds of these jurisdictional grants, Congress has
       empowered the Commission with broad authority to “make the major policy
       decisions and select the mix of regulatory and deregulatory tools the Commission
       deems most appropriate in the public interest to facilitate broadband deployment
       and competition.”

Id. at *38 (footnotes omitted).

       The FCC discussed how the preamble of the Telecommunications Act of 1996 states the
Act’s purposes: the promotion of competition in the telecommunications market and the
encouragement of both infrastructure investment and deployment of technologies.                Id.
Section 706, according to the FCC, is the statute that authorizes the FCC to further these
purposes:

               135. Section 706 shows a unique level of Congressional concern with
       broadband deployment. Both sections 706(a) and (b) direct that the Commission
       “shall” take action to promote broadband deployment. Section 706(b), moreover,
       is unique in requiring the Commission to study broadband deployment and
       requiring it to take action if the Commission finds that broadband is not being
       deployed to all Americans in a reasonable and timely fashion. Both sections, in
       targeting broadband deployment to “all Americans,” also reflect Congress’s
       concern with unserved and underserved areas. . . .
               137. We have found, . . . in our 2015 Broadband Progress Report,
       adopted on January 29, 2015, that broadband has not been deployed in a
       reasonable and timely fashion to all Americans. In light of this negative finding,
       section 706(b) commands that we “take immediate action to accelerate
       deployment of such capability by removing barriers to infrastructure investment
       and by promoting competition in the telecommunications market.” Preemption
       constitutes one such “immediate action” available to us under this independent
       grant of authority to “fulfill Congress’s broadband deployment objectives.” . . .
              139. In sum, Congress has granted us broad jurisdiction over broadband
       in the United States, and has specifically mandated that we promote broadband
       deployment, in section 706.

Id. at *39–40 (footnotes omitted).
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                    Page 13

       After concluding that § 706 gives the FCC some authority, the FCC analyzed whether
that authority includes the ability to preempt state law:

                142. In light of Congress’s delegation of authority to the Commission to
       “encourage” and “accelerate” the deployment of broadband to all Americans, we
       interpret Sections 706(a) and (b) to give us authority to preempt state laws that
       stand as barriers to broadband infrastructure investment or as barriers to
       competition. . . . [U]nder City of New York and Crisp, the relevant inquiry when
       an agency acts to preempt state law is whether Congress delegated the authority to
       act in this sphere. In both of those cases, the Supreme Court found “that the
       Commission’s authority” over cable video programming “extends to all
       regulatory actions ‘necessary to ensure the achievement of the Commission’s
       statutory responsibilities,’” including the preemption of otherwise valid state
       laws. . . .
               144. Our preemption authority falls within the “measures to promote
       competition in the local telecommunications market” and “other regulating
       methods” of section 706(a) that Congress directed the Commission to use to
       remove barriers to infrastructure investment. It likewise falls within the available
       “action[s] to accelerate deployment” we may take in order to “remove barriers to
       infrastructure investment” and to “promote competition” described in section
       706(b). As Congress would have been aware in passing the 1996 Act, the
       Commission has in the past used preemption as a regulatory tool where state
       regulation conflicts with federal communications policy. Given this history
       against which Congress legislated, the best reading of section 706 is therefore that
       Congress understood preemption to be among the regulatory tools that the
       Commission might use to act under section 706.

Id. at *40–41 (footnotes omitted).        The FCC defended this conclusion against various
counterarguments to the effect that Congress may authorize preemption only with explicit
statutory language:

               145. . . . The law is clear that Congress need not “explicitly delegate” the
       authority to preempt. In fact, Congress’s decision not to specifically identify
       preemption is to be expected where, as here, the Commission had previously
       preempted state law even where the relevant statutes contained no express
       discussion of preemption. Consistent with that practice, Congress drafted section
       706 in broad terms, directing the Commission to use “measures that promote
       competition” and to do so in “a manner consistent with the public interest,
       convenience, and necessity.” That Congress provided a small number of specific
       examples in section 706(a), such as price cap regulation and regulatory
       forbearance, does not exclude other measures within the Commission’s authority.
       Indeed, the language of section 706(a) supports this understanding, directing the
       Commission and State commissions to use “measures that promote competition in
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                    Page 14

       the local telecommunications market” or “other regulating methods that remove
       barriers to infrastructure investment.” Such methods would of course include
       those listed, but would also include additional methods, including preemption,
       rulemaking, or other appropriate methods. In sum, we find that section 706
       incorporates the rule common throughout communications law: the Commission
       may preempt state laws regarding interstate communications where they conflict
       with federal communications policy.

Id. at *41 (footnotes omitted).

       After reaching the conclusion that § 706 delegates to the FCC the general authority to
preempt state laws, the FCC then analyzed whether § 706 authorizes preemption in the context of
state laws regulating municipal subdivisions:

                146. . . . [W]e now address whether [§ 706] may at least sometimes
       provide authority to preempt state laws that regulate the provision of broadband
       by a state’s political subdivisions. We find that sections 706(a) and (b) both do
       give us that authority in certain circumstances. Two different views support our
       authority. First, the Commission has concluded that broadband services are
       jurisdictionally interstate for regulatory purposes. Congress has delegated
       authority to the Commission to regulate interstate services. Second, even if that
       were not sufficient, section 706 makes clear that Congress has mandated that the
       Commission remove “barriers” to broadband deployment and infrastructure
       investment and promote competition in the local telecommunications market.
       Whether something constitutes a barrier or promotes competition is a question of
       the kind that Congress intended the Commission, as the Nation’s expert agency of
       communications, to answer and to govern. For these reasons, we find that where
       a state law regulating the provision of broadband by a political subdivision serves
       to effectuate communications policy as opposed to core state control of political
       subdivisions, and where that law stands as a barrier to broadband infrastructure
       investment or an impediment to competition, such laws conflict with our authority
       to ensure the deployment of broadband to all Americans on a reasonable and
       timely basis and so may be preempted. . . .
               147. . . . [W]here a state has authorized municipalities to provide
       broadband, and then chooses to impose regulations on that municipal provider in
       order to effectuate the state’s preferred communications policy objectives, we find
       that such laws fall within our authority to preempt. To take an example, where a
       state allows political subdivisions to provide broadband, but then imposes
       regulations to “level the playing field” by creating obligations apparently intended
       to mirror those borne by private providers, it does so in order to further its own
       policy goals about optimal competitive and investment conditions in the
       broadband marketplace. The states here are deciding that incumbent broadband
       providers require protection from what they regard as unfair competition and
Nos. 15-3291/3555                   State of Tenn., et al. v. FCC, et al.                        Page 15

        regulating to restrict that competition. This steps into the federal role in
        regulating interstate communications. Where those laws conflict with federal
        communications policy and regulation, they may be preempted. We thus interpret
        [sub]sections 706(a) and 706(b) to give us authority to preempt state laws that
        regulate the provision of broadband by political subdivisions, provided that the
        law in question serves to effect communications policy and would frustrate
        broadband deployment “on a reasonable and timely basis . . . to all Americans.”

Id. at *42 (footnotes omitted).

        According        to   the    FCC,     § 706    provides     this    preemption   authority   because
telecommunications is an area in which a federal law preempts a state law when the two laws
conflict.     Further, the FCC reasoned that “a state law that effectuates a policy preference
regarding the provisions of broadband is not shielded from all scrutiny simply because it is cast
in terms that affect only municipal providers.” The FCC, however, noted limitations on its
ability to preempt such state laws:

                149. Conversely, we do not read this preemptive authority under section
        706 to reach all state laws that may have an effect, however indirect, on the
        provision of broadband by municipalities. Although a law could have an indirect
        effect of restricting the class of entities that may provide broadband in the state, it
        may not rise to the level of a restriction on competition or barrier to broadband
        deployment or infrastructure investment within our section 706 authority to
        preempt.
                150. We have before us specific petitions to preempt specific laws. . . .
        [O]ur authority to preempt is limited to laws that serve to effect state policy
        regarding the provision of broadband, as opposed to laws that have an indirect
        effect on the provision of broadband, such as those that serve the traditional state
        function of granting or withholding authority to political subdivisions.

Id. at *43 (footnotes omitted). The FCC thus found that Congress granted it authority to preempt
most of the Tennessee and North Carolina laws.                     It found this authority notwithstanding
commenters’ counterarguments based on the Telecommunications Act as well as Supreme Court
decisions and the Tenth Amendment.1 Id. at *43–44.

        Bringing its analyses together, the FCC preempted the territorial restriction in the
Tennessee statute as well as the provisions in the North Carolina Session Law that it deemed to

        1
            These counterarguments are addressed in depth below.
Nos. 15-3291/3555                  State of Tenn., et al. v. FCC, et al.                                  Page 16

be “barriers.” Because the territorial restriction in Tennessee’s § 601 “serves as a state law
communications policy regulation, as opposed to a core state function in controlling its political
subdivisions,” the FCC found the restriction to fall within its authority to preempt under § 706 of
the Telecommunications Act of 1996. Id. at *49–50. It further reasoned that the “level playing
field” provisions, “measures to raise economic costs,” and “measures to impose delay” of North
Carolina’s Session Law 2011-84 regulated “not issues of state sovereignty and political
determination, but rather the mechanics of how a city may provide a service it is authorized to
provide.”2 Id. at *50–54. The sections of the Session Law that were not deemed to constitute
barriers were left untouched by the FCC’s preemption.3 The FCC therefore granted the EPB’s
petition and granted in part the City of Wilson’s petition.

         The FCC’s grant of these petitions did not result in a requirement for either the EPB or
the City of Wilson to expand their offerings, to charge a certain rate, or to roll out their services
promptly.      Instead, the FCC’s grant required Tennessee and North Carolina to give their
municipalities the choice of whether to undertake these discretionary actions.

         Commissioner Pai, in dissent, contended that Nixon v. Missouri Municipal League,
541 U.S. 125 (2004), interpreting principles underlying the Constitution, compelled the
conclusion that the FCC had no power to preempt the Tennessee and North Carolina laws
without a clear statement from Congress. Id. at *71–76. Commissioner Pai also contended that
§ 706 did not grant the FCC any preemption authority whatsoever. Id. at *78–81.

                                                 Judicial Review

         Tennessee filed a petition for review of the FCC’s order with this court. North Carolina
filed its petition for review with the Fourth Circuit. The Fourth Circuit then transferred the case
to this court, and the cases were consolidated. We granted petitions to intervene brought by the
National Association of Regulatory Utility Commissioners (NARUC), the EPB, and the City of

         2
         The provisions that were preempted: §§ 340.1(a)(1), (3), and (5)–(9); 340.3; 340.4; 340.5; 340.6; and
Session Law 2011-84 §§ 1.(a) and (b); 2.(a); 3; and 5.
         3
           The provisions that did not constitute barriers and were therefore not preempted: §§ 160A-340(1), (2), (3),
(4), (5), and (6); 340.1(a)(2) and (4); 340.1(b), 340.2; and Session Law 2011-84 §§ 1.(c), 2.(b), 4, 6, 7, and 8. Id. at
*55.
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                     Page 17

Wilson. The United States is also a party, but the Department of Justice’s Antitrust Division—
on behalf of the United States—filed a letter stating without elaboration that it “takes no position
in these cases.”

       Tennessee argues that the FCC’s order violates the Constitution by infringing on the
state’s right to determine the boundaries of its political subdivisions. Tennessee, North Carolina,
and NARUC argue that even if Congress has the power to authorize such orders, it has failed to
provide the necessary clear statement as required by Nixon. The latter argument is persuasive, at
least where—as here—the FCC order purports only to restrict the states’ power to make
decisions for municipalities that the FCC does not otherwise forbid.

                               The Clear Statement Rule Applies

       Under federal law, municipal telecommunications providers currently have the option to
expand their geographic service areas or to restrict their service areas to their municipal
boundaries. There are no federal statutes or regulations requiring telecommunications providers
to have a set geographic service area. Providers thus have discretion to choose the geographic
areas that they serve, whether that means expansion or restriction. Providers likewise have
discretion to choose the rates they charge for their services and how long the services-rollout
process takes.

       What the FCC seeks to accomplish through preemption is to decide who—the state or its
political subdivisions—gets to make these choices. The FCC wants to pick the decision maker
for the discretionary issues of expansion, rate setting, and timeliness of rollout of services. It
wants to provide the EPB and the City of Wilson with these options notwithstanding Tennessee’s
and North Carolina’s statutes that have already made these choices.

       Precedent makes clear, however, that if Congress has the power to allocate state decision
making, it must be very clear that it is doing so. As the Supreme Court stated in Nixon, the clear
statement rule applies when federal-government preemption results in “interposing federal
authority between a State and its municipal subdivisions, which our precedents teach, ‘are
created as convenient agencies for exercising such of the governmental powers of the State as
may be entrusted to them in its absolute discretion.’” 541 U.S. 125, 140 (2004) (citing Wis.
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                      Page 18

Public Intervenor v. Mortier, 501 U.S. 597, 607–08 (1991); Columbus v. Ours Garage &
Wrecker Serv., Inc., 536 U.S. 424, 433 (2002)); see also City of Abilene, Tex. v. F.C.C., 164 F.3d
49, 53 (D.C. Cir. 1999). The political subdivisions of a state are nothing more than that state’s
“convenient agencies,” and the state generally retains the power to make discretionary decisions
for its subdivisions, just as a board of directors generally retains the power to make discretionary
decisions for a company. Any attempt by the federal government to interpose itself into this
state–subdivision relationship therefore must come about by a clear directive from Congress, and
the FCC can only pick the decision maker here if there exists a clear statement to do so in § 706.

       Nixon supports the conclusion that the clear statement rule applies here. In Nixon, a
Missouri state statute forbade municipalities from entering the telecommunications market
altogether. 541 U.S. at 129. The FCC, under § 253 of the same Telecommunications Act at
issue in this case, held that there was no clear statement from Congress to preempt the Missouri
law. Id. The Supreme Court agreed with the FCC and held that a clear statement was needed
because federal preemption of Missouri’s law threatened “to trench on the States’ arrangements
for conducting their own governments.” Id. at 140–41. This case similarly involves Tennessee’s
and North Carolina’s arrangements for conducting their own governments: if there is a decision
to make, one way for states to conduct their own governments is to make the decision for their
municipalities. Any attempt by the federal government to reorder the decision-making structure
of a state and its municipalities trenches on the core sovereignty of that state. Nixon involved
Missouri’s making a choice for its municipalities on the issue of whether to provide
telecommunications services at all.      No federal regulation or statute existed that required
municipalities to provide telecommunications; the decision whether to provide services was left
to the discretion of the provider. The present case involves two states that likewise have made
discretionary determinations for their political subdivisions.        Nixon is therefore analogous
regarding the clear statement rule and supports the rule’s applicability in this case.

       The FCC sought to distinguish Nixon on the ground that there is a difference between
preempting a state-law ban on municipal telecommunications providers and preempting state
laws regulating municipal broadband providers for which the state has given an underlying
authorization. In re City of Wilson, 2015 WL 1120113, at *47–48. The distinction, however,
Nos. 15-3291/3555             State of Tenn., et al. v. FCC, et al.                        Page 19

does not hold up. It is true that the Nixon Court, in identifying the “strange and indeterminate
results” that would arise, reasoned that if the FCC preempted the ban on municipal providers,
“[t]he municipality would be free of the statute, but freedom is not authority, and in the absence
of some further, authorizing legislation the municipality would still be powerless to enter the
telecommunications business.” Nixon, 541 U.S. at 135. This would produce a “national crazy
quilt” of municipalities in some states being able to provide services based on state laws
authorizing them to do so while municipalities in other states would still be without any power
due to the absence of an authorizing statute. Id. at 136. It is true that this particular anomaly
does not arise when the FCC’s preemption applies only to municipalities authorized to provide
telecommunications services.      But a related anomaly, and one equally intrusive on state-
municipal relations, is presented. States can flatly prohibit municipalities from engaging in
telecommunications altogether, but they cannot do it in limited steps or with conditions based on
the governmental nature of the municipalities. This state of affairs, in short, would be at least as
anomalous a result.

       In any event, the anomalous result of the preemption was only one of the two bases for
the Court’s decision in Nixon. In the alternative, the Court reasoned, if the preemption in Nixon
“could operate straightforwardly to provide local choice,” then “the liberating preemption would
come only by interposing federal authority between a State and its municipal subdivision,” thus
triggering the clear statement rule. Id. at 140–41. The same is true here.

       The FCC falls short in its attempt to distinguish Nixon on the ground that the state laws
here do not implicate concerns about core state sovereignty like Nixon’s Missouri law. The FCC
stated in its order and argues on appeal that Tennessee’s and North Carolina’s laws “target the
regulation of broadband . . . as opposed to . . . go[ing] to the historic police powers of the states.”
In re City of Wilson, 2015 WL 1120113, at *45. Based on this purported distinction, the FCC
concluded in its order that “the Tennessee and North Carolina statutes do not implicate core
attributes of state sovereignty but rather regulate interstate communications services that are at
the heart of the [FCC]’s jurisdiction.” Id. But the same was true in Nixon, because the Missouri
statute there forbade municipalities from entering the telecommunications market. 541 U.S. at
129.   The statutes at issue here implicate core attributes of state sovereignty and regulate
Nos. 15-3291/3555            State of Tenn., et al. v. FCC, et al.                     Page 20

interstate communications services, just like the statute in Nixon. These effects are not mutually
exclusive.

       Finally, the FCC sought to distinguish Nixon on the ground that the Court was upholding
the agency’s order, rather than reversing it as we do today. In re City of Wilson, 2015 WL
1120113, at *47. The distinction only makes a difference if we are required to apply Chevron
deference to the agency ruling in this case. See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council,
Inc., 467 U.S. 837 (1984). The first step of Chevron, however, requires that, “if the intent of
Congress is clear, that is the end of the matter.” Id. at 842–43. The force of the clear statement
rule, as applied in the next section, makes the intent of Congress clear in this case: § 706 does
not authorize the preemption attempted by the FCC. There is certainly room for the application
of canons of construction to ascertain whether the first step of Chevron has been met. Id. at 843
n.9; Alliance for Cmty. Media v. F.C.C., 529 F.3d 763, 777 (6th Cir. 2008); Gerson v. Comm’r,
507 F.3d 435, 439 (6th Cir. 2007). Perhaps the strongest case for using a canon of construction
at the first step of Chevron is where, as here, the canon is strong enough to act as a clear
statement rule, and where the canon is firmly based not only on what Congress is presumed to
intend, see Nixon, 541 U.S. at 140–41, and on fundamental constitutional policy.

       Chattanooga’s home-rule status likewise does not compel a different conclusion. When a
Tennessee municipality adopts home-rule status, it elects to govern itself, and the state
legislature may only interfere with municipalities via “laws which are general in terms and
effect.” See Tenn. Const. Art. XI, § 9. The EPB argues that because Chattanooga is a home-rule
municipality, the relationship between Tennessee and the EPB is weaker, and the FCC’s
preemption is correct. Chattanooga’s home-rule status is hardly relevant to the issues in this
appeal—the validity of § 7-52-601 under the Tennessee constitution is not contested.

       A different issue would be presented if there were a federal regulation or statute that
removed all discretion from providers, and a state then enacted a law requiring a municipality to
violate the regulation.    For example, assume a federal regulation requiring a class of
telecommunications providers to provide services to areas of at least fifty square miles, and a
state law restricting the geographic area municipal providers could serve to areas of twenty-five
Nos. 15-3291/3555                 State of Tenn., et al. v. FCC, et al.                               Page 21

square miles or less. We need not decide whether the clear statement rule would apply in that
situation. That simply is not the case here.

        Similarly, the examples put forward by the FCC are not analogous to the present case.
The FCC’s examples of federal regulations on radio licensees’ broadcast frequency and strength,
bandwidth size, and other non-communications regulations such as OSHA workplace safety
standards all involve situations in which the federal government has removed discretion from
regulated parties in a particular area.4

                                  Section 706 Lacks a Clear Statement

        Section 706 does not contain a clear statement authorizing preemption of Tennessee’s
and North Carolina’s statutes that govern the decisions of their municipal subdivisions.
Section 706(a) instructs the FCC to utilize “measures that promote competition in the local
telecommunications market, or other regulating methods that remove barriers to infrastructure
investment.” Subsection (b) is a similar but broader instruction—it directs the FCC to “remov[e]
barriers to infrastructure investment and . . . promot[e] competition in the telecommunications
market.” “Remove barriers to infrastructure investment” is unclear regarding whether it applies
to public and private infrastructure investment or only private infrastructure investment.
“Infrastructure,” by itself, is not specific to the public sphere. Furthermore, nowhere in the
general charge to “promote competition in the telecommunications market” is a directive to do so
by preempting a state’s allocation of powers between itself and its subdivisions. Although
preemption authority does not have to be explicit, see Gregory v. Ashcroft, 501 U.S. 453, 467
(1991), the authority to preempt such allocations must be delegated by way of a clear statement.
In applying the clear statement rule, the federal statute “should be treated with great skepticism[]
and read in a way that preserves a State’s chosen disposition of its own power, in the absence of

        4
          The FCC quotes out of context the Supreme Court’s statement that “an ‘assumption’ of non-preemption is
not triggered when the State regulates in an area where there has been a history of significant federal presence.”
United States v. Locke, 529 U.S. 89, 107–08 (2000). The assumption that Locke referred to was the general
assumption “that the historic police powers of the States were not to be superseded by the Federal Act unless that
was the clear and manifest purpose of Congress.” This general presumption, overcome in Locke itself, is not the
same as the clear statement rule at issue in the instant case. Indeed, Locke involved rules regarding the design and
operation of oil tankers without regard to whether the tankers were operated by municipalities. Locke had no hint of
a municipal-powers issue.
Nos. 15-3291/3555            State of Tenn., et al. v. FCC, et al.                      Page 22

the plain statement that Gregory requires.” Nixon, 541 U.S. at 141. Because § 706 cannot be
read to limit a state’s ability to trump a municipality’s exercise of discretion otherwise permitted
by FCC regulations, § 706 cannot be read to authorize such preemption.

       A comparison to the provision at issue in Nixon demonstrates § 706’s lack of a clear
statement. In Nixon, municipalities sought the FCC’s preemption of state laws under 47 U.S.C.
§ 253. Nixon, 541 U.S. at 129. That provision states that “[n]o State or local statute or
regulation . . . may prohibit or have the effect of prohibiting the ability of any entity to provide
any interstate or intrastate telecommunications service.” 47 U.S.C. § 253(a). The Nixon Court
found the language “any entity” to be ambiguous and susceptible to readings that included either
private entities alone or public and private entities. 541 U.S. at 132–33. Thus, following the
clear statement rule, the Court found that the federal statute did not authorize preemption of
Missouri’s regulations of its municipalities. Id. at 140–41. It can hardly be argued that § 706 is
a clearer directive than § 253; the directives in § 706—to remove barriers and to promote
competition—do not make clear whether public entities are included.

       Our holding today is a limited one. We do not question the public benefits that the FCC
identifies in permitting municipalities to expand Gigabit Internet coverage. Furthermore, we
need not, and do not, address a number of legal issues debated by the parties, including
(1) whether § 706 provides the FCC any preemptive power at all, (2) whether Congress, if it is
clear enough, could give the FCC the power to preempt as it did in this case, (3) whether, if the
FCC had such power, its exercise of it was arbitrary or capricious in this case, and (4) whether
and to what extent the clear statement rule would apply to FCC preemption if a State required its
municipality to act contrary to otherwise valid FCC regulations.

       The petitions for review are accordingly granted, and the FCC’s order is reversed.
Nos. 15-3291/3555                  State of Tenn., et al. v. FCC, et al.                Page 23

                    ____________________________________________________

                      CONCURRING IN PART AND DISSENTING IN PART
                    ____________________________________________________

       HELENE N. WHITE, Circuit Judge, concurring in part and dissenting in part. I agree
that Nixon v. Missouri Municipal League, 541 U.S. 125 (2004), compels us to reverse the FCC’s
preemption of the geographical restrictions of both States’ statutes as well as several other
provisions of the North Carolina statute. I write separately to address a few issues left open by
the majority, to explain what I understand to be the scope of the clear-statement rule, and
because I conclude that at least one of the North Carolina provisions was validly judged by the
FCC as pertaining solely to the regulation of broadband, and not the State’s ordering of its
government.

       The FCC correctly finds in § 706 of the Telecommunications Act of 1996, 47 U.S.C.
§ 1302, a Congressional grant of authority to preempt the enforcement of state laws that directly
conflict with Congress’ intent as expressed in the Telecommunications Act. Section 706’s
directive is broad; if the FCC finds that advanced telecommunications capability is not being
deployed to all Americans in a reasonable and timely fashion, “it shall take immediate action to
accelerate deployment of such capability by removing barriers to infrastructure investment and
by promoting competition in the telecommunications market.” 47 U.S.C. 1302(b). Thus, if
telecommunications resources are not being reasonably and timely deployed, the FCC is directed
to remove barriers and promote competition. Id. If a state statute is a barrier to infrastructure
investment and competition, § 706 authorizes the FCC to remove it by preempting its
enforcement. For me, the only question is whether Congress intended to grant the FCC authority
to preempt enforcement of state laws restricting municipal authority.

       As the majority explains, Nixon makes clear that Gregory’s1 clear-statement requirement
applies to the FCC’s powers under the Telecommunications Act to preempt state laws
concerning municipal authority to provide telecommunications services. Maj. Op. at 21-22. The
FCC is no doubt accurate in its characterization of the statutes at issue as legislation intended to

       1
           Gregory v. Ashcroft, 501 U.S. 452 (1991).
Nos. 15-3291/3555            State of Tenn., et al. v. FCC, et al.                   Page 24

further the States’ “own policy goals about optimal competitive and investment conditions in the
broadband marketplace,” and as effectuating a judgment that “incumbent broadband providers
require protection from what they regard as unfair competition.” In re City of Wilson, N.C.
Petition for Preemption of N.C. General Statute Sections 160A-340 et seq., 30 FCC Rcd. 2408
(March 12, 2015).      Nevertheless, as the majority observes, a statute can address both
governmental authority and the effectuation of substantive policy. Maj. Op. at 19-20. The
statutory provisions imposing geographical limitations on the provision of broadband clearly
concern the States’ arrangements for conducting their own governments, including how
municipalities interact with each other. Likewise, the provisions of the North Carolina law that
require notice, comment, a hearing process, and a special election before a municipality can
construct a telecommunications network clearly involve the core of the State’s regulation and
control of the power granted to its municipalities, as does the provision barring a municipality
from subsidizing its communications service with funds from other services. Because these
provisions address the States’ historic authority to govern through its subdivisions, a clear
statement of Congressional intent to preempt that authority is necessary.

       I do not, however, understand the clear-statement cases to require a clear statement
whenever the state statute or regulation sought to be preempted affects local government in any
fashion. The rationale for requiring a clear statement is that certain powers and spheres are
historically so clearly confided to the States that Congress should not be understood to preempt
the States’ authority to act freely in those areas unless its intent is clear. North Carolina’s
requirement that municipalities impute the costs of private providers when pricing municipal
services, including telecommunication services, N.C. Gen. Stat. § 160A-340.1(a)(8), has little to
do with the State’s core sovereign power to order its government. Rather, it is an expression of
its telecommunications policy that private providers must be protected from a municipal
provider’s unfair advantage. While the other provisions discussed above serve dual purposes
that preclude their preemption even if the communications-policy purpose is in reality
paramount, the provision requiring the imputation of costs is exclusively regulatory and
commercial.
Nos. 15-3291/3555            State of Tenn., et al. v. FCC, et al.                    Page 25

       Lastly, I agree that the FCC’s preemption decision is not entitled to Chevron deference.
See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). Chevron applies
only where “Congress has not directly addressed the precise question at issue” and the “statute is
silent or ambiguous with respect to the specific issue” leaving the agency to fill the gap. Id. at
842–43. But that very silence or ambiguity with respect to whether Congress intended to
preempt the states’ regulation of their subdivisions triggers application of the clear statement
rule; thus, application of Chevron deference to the FCC’s determination that it has the authority
to preempt in this situation—as distinguished from the decision whether to exercise the authority
to preempt––would turn the clear statement rule on its head.