Thanks to Jeff Hoel for providing the transcript for the episode 57 of the Community Broadband Bits podcast with Jim Baller on the history of municipal broadband. Listen to this episode here.
Lisa Gonzalez: Hi, and welcome again to the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance. I'm Lisa Gonzalez.
This week, we bring you our first podcast on the history of the modern community broadband movement. We talk to Jim Baller, President and Senior Principal of the Baller Herbst Law Group, the preeminent organization for communications law and policy. Jim has been working with communities for decades, and walks us through some of the pivotal moments in telecom law. Here are Chris and Jim, taking us back.
Chris Mitchell: Welcome to another edition of the Community Broadband Bits Podcast. Today, we have a real treat! We have Jim Baller, the President and Senior Principal of the Baller Herbst Law Group. Welcome to the show.
Jim Baller: Thanks, Chris. Glad to be here.
Chris: Jim, I'm really excited to have you on the show. We've waited a while. I'm not going to say that I was intimidated by your vast knowledge of municipalities, on a show in which I try to show off. But that may have been a part of it.
Jim: Well, Chris, your arrival on the scene a few years ago has been so important, and I think there's now no one who knows as much about the community broadband world, in the detail that you do, anywhere in the country.
Chris: Well, that's very kind. I appreciate that. Today, we're going to be talking about the many years before I was involved. And so, perhaps you can start, for the three people in our audience who aren't aware of your work, by describing how you're involved with community-owned networks.
Jim: Well, our firm has been involved in this area for many years. And perhaps later, we'll get into how that came about. But currently, we represent communities, public power utilities, private entities on projects across the country that have the common feature of attempting to get as much capacity to as many members of the community as possible. We've been involved in more than fifty fiber projects, including most of the leading ones. We've also been involved in the battles across the country, and before the federal government, and in the courts, on the right of communities to make their own choices about their broadband futures and economic development and educational opportunity. And doing that sort of thing on a day-by-day basis makes me feel like the most fortunate attorney in the country.
Chris: I think we should also note the excellent work of Casey Lide, Sean Stokes. And sort of the mystery man -- I know he's up here in the Minneapolis -- Twin Cities area -- but your partner, Adrian.
Jim: Yes. I think we've got a marvelous team. Casey and Sean work with me -- and on projects of their own -- in the entrepreneurial side of local government, and projects of this kind. And Adrian's background primarily is in the regulatory side of local government. He was one the pioneers of cable franchising, and still does lots of work in that area, and in right-of-way management, tower siting, and that sort of thing.
Chris: Great. So, let's jump back and talk about how you first started working with community-owned networks. What was the first city?
Jim: Well, it wasn't a city that started this off. Back in 1992, after the enactment of the cable amendments that year, these amendments were intended to encourage competition in the cable industry. I was, at the time, an energy attorney. And I had a bit of a lull in my business. And I attended a conference with one of my partners. This conference was given by the American Public Power Association. And the purpose of the conference was to acquaint its members with the new communications provisions that had just been enacted. At the time, I had no idea why a utility would be interested in cable television service, but I soon learned at this conference that many municipal utilities and other public power utilities were going to upgrade their infrastructure to fiber and other advanced communications technologies. And with that technology, they could support the provision of cable service, phone service, many other kinds of communications services. And so, there was a great deal of interest in how they could do that, and what the laws meant, and so on and so forth. Toward the end of that conference, the Director of Public Communications circulated a sign-up sheet for members of the audience to help pitch in and hire Washington counsel to work on the wave of rulemakings that the FCC was going to issue to implement the Act. And my partner and I volunteered to do this on a pro-bono basis, as a form of on-the-job training got me. And during that following year, I worked shoulder to shoulder with Billy Ray and some of the other pioneers and visionaries in the municipal area on these rulemakings. And they turned out to be very favorable to municipal utilities.
Chris: And Billy Ray was one of our guests a number of months ago. We're going to come back and hear more from him in a future episode.
Jim: That's great. 'Cause Billy was thinking about things that have taken the rest of the universe a quarter of a century to arrive at. He's one of the very great visionaries in the field. And it was a marvelous experience learning at his side during that period of time.
Chris: I can only imagine. I have gone back and read some of his early writings. And it's -- you almost wonder if someone lied and he had some sort of a time machine or something, because he certainly saw things a lot earlier that are now quite obvious when it comes to marrying information technology and the electrical grid.
Jim: Well, Billy was calling that stuff "infotricity" ...
Jim: ... back in the early- to mid-nineties.
Chris: I think maybe we should actually start -- because both you and I, perhaps, take it for granted, because we're both very much interested in the history of electrification. But I wonder if in two minutes we could go over the rise of the municipal electric utility and sort of the evolution over the years -- just very quickly.
Jim: Well, I'd be glad to do that. And, in fact, one of my first assignments with APPA was to write a history that compared this period in telecommunications with the comparable period in the electric industry. And that was done in 1994. And it's up on our website, and available.
Chris: And that's baller.com .
Jim: baller.com .
Chris: b-a-l-l-e-r dot com. Linked in the notes.
Jim: A century ago, beginning in the 1880s -- I guess that's more than a century ago -- when the country was electrifying, the private sector -- as the private telecommunications sector -- focused first on its most lucrative markets. And at that time, that was primarily cities and the very wealthy. And left most of the country literally in the dark. Because the first use of electricity on a large scale was in lighting. And so, at the time, perceiving that electricity was going to contribute to economic development and educational opportunity and lots of other benefits, something like 3,000 communities ultimately stepped forward and developed electric utilities of their own. And if you go back to that period, you can find opposition mounted by the power companies that are virtually identical to the objections that the communications incumbents often raise in this field of communications today. In fact, sometimes, in my presentations, I quote from chapters of a two-volume symposium that Moody's Magazine published, talking about the advantages that [private] ownership supposedly provides, how municipal networks always fail, and so on and so forth. And this was all done in 1906. And the topic that they were talking about was electricity. But the arguments were identical to the arguments that we see today. And then, over the years, after the peak of the number of systems that were operated by local governments, the technologies changed, new investments were required, operations went on a regional scale, as opposed to a local scale. And about 1,000 municipalities decided that they had achieved their mission of not being left behind in obtaining the benefits of their own electric networks, and got out of the business -- sold their networks to private entities, for the most part. And the numbers stabilized at around 2,000. And we still have about 2,000 public power utilities today, providing service that is largely superior and at significantly lower cost than private entities. And if we can look back to this period in communications at the turn of the next century and see that our public communications providers made as much of a contribution to the well-being of the country as the municipal electrics did in their time -- and today still -- we'd have a lot to be proud of.
Chris: I'm reminded of something Harold DePriest and I talked about -- he's the CEO of the -- Chattanooga's Electric Power Board -- where he would say that, you know, when some look back on electrification and the municipalities, they thought of it very narrowly, in terms of cities that were just investing in electricity, because it was so important. And he said he takes a broader view, which is to say, the utilities formed to help the cities ensure that they had the advantages of the new technology of the day. And when he thinks about investing in the fiber optic networks, it's along those lines. These aren't so much electric power utilities as they are public utilities that are doing what they need to do to make sure that the community can attract jobs and have a high quality of life. And so, when you look back, it's kind of fascinating. 'Cause like in Lafayette, when they voted to form their electric utility -- and water utility -- in Louisiana, it was the vote of the propertied men. You know. And so it was a very different time. But in other ways, it's a very similar time. 'Cause some themes just come back, time and time again.
Jim: You mentioned Lafayette. Let me just say that the history is a good example. Lafayette had a unanimous vote of the individuals who were the important decision-makers back in the 1890s. They were challenged. They went to the Louisiana Supreme Court, won a unanimous decision that they could go forward, developed their electric network, and were very successful as a community -- among other things, attracting a branch of the University of Louisiana to Lafayette. That history repeated itself in this decade. And again we had a referendum. This time, the public participated widely. They won a landslide victory. They were challenged three or four times, and ended up getting a unanimous decision by the Louisiana Supreme Court, again supporting the city's right to move forward with its project. And what you said earlier about Harold certainly is shared by the leadership of Lafayette -- and most other communities that have taken the step of forming their own electric utilities -- or other utilities and communications. And that's because they ARE the community. They're owned by the community. The individuals who work there don't view what they're doing as simply providing a commercial service, but providing something that is important for them and their neighbors.
In Lafayette, for example, during that referendum, my wife, who's very politically active in the DC area, came down for the referendum with me. And she was just astounded to be sitting at the campaign headquarters where we had the leadership of both the Republican and the Democratic parties working shoulder to shoulder, in a way that they NEVER did on other occasions. And that's because everyone there, in that room, among the leadership, viewed the project as primarily a project to promote educational opportunity, economic development, access to affordable healthcare, and so on and so forth -- all values that are shared by members of a community, regardless of what your political or religious or other preferences might be. And it was, in that environment, a question of the right framing of what the project was. It wasn't viewed as a tool to simply compete with the private sector, but something that the community needed in order to be a leader among communities around the world. And they were bound and determined to get it done.
Chris: Before I interrupted you, you were talking about how you had met Billy Ray, of Glasgow, Kentucky, and I'm curious how -- what happened next in your traveling along the path of these municipal networks.
Jim: Well, let's go back to what happened in that year that we worked together, because that, I believe, was an important foundational piece to what happened since then. The FCC issued several rulemakings to look at a variety of challenges that a new entrant into the cable industry -- and it was only cable at the time that we were focusing on -- would have to meet in order to be able to compete successfully. And Billy was especially of interest to the FCC, because he had run into virtually every kind of problem that anyone could have conceived of from the local cable company, [Tele]scripts, running its trucks and salespeople a block ahead of Billy, offering vast discounts to potential customers, to denying access to programming, to blocking them from accessing multiple dwelling units, and on and on and on. And we would go to the FCC and have sessions with their task forces, and explain how all this worked, and what it would take for the rules to prevent these practices. And in the end, the rules were written very much in favor of not just public entrants but entrants of all kinds. They included such things as required access to programming, uniform pricing within a particular franchise area, a ban on unfair trade practices.
Chris: When you say "uniform pricing," that means that you can't just make a discount for like one block, and then charge a different block a different amount of money. Is that right?
Jim: Correct. In 1992, a rule was adopted requiring uniform pricing within a franchise area. And so, with those rules in place, we saw a wave of entrants that lasted several years -- I don't know exactly how many, but there must have been at least 75-100 communities that formed their own cable systems around the country. And I had the good fortune of being able to work with many of them.
And so that took us to about the mid-nineties, when, in 1995, the state of Texas adopted a barrier to municipal entry. Not to put a fine point on it, they just said that municipal -- municipalities and municipal electric utilities can't provide telecommunications services, directly or indirectly. And that's what the law said. We responded to that by working with Congress, which was working on what became the Telecom Act of 1996.
Chris: That took many years to write. I mean, there were some that were hoping that it would have passed in '94, I think, ...
Chris: ... and so, it was passed in '96, but it was something that -- there was hearings on for many years, and discussions about.
Jim: Right. That's correct. And, by the way, the paper that I mentioned before, comparing these periods, was written as a leave-behind by APPA and others, as we spoke to Congress during that period of time. And one of the things that we got from Congress was a provision that said that no state or local government will pass any law or regulation that may prohibit or have the effect of prohibiting the ability of any entity to provide any telecommunication- -- any interstate or intrastate telecommunications service. That was clearly intended to have the effect of getting at laws like the Texas law, that I mentioned. And we were very pleased when that became a part of the Telecom Act as enacted.
Unfortunately, in a case that followed shortly afterwards, when the Texas law was brought before the FCC, under a petition for preemption brought by a private-sector provider that wanted to lease dark fiber from the City of San Antonio to compete with Southwestern Bell. And the FCC decided that the term "any entity" wasn't clear enough -- that it COULD mean any private entity, and they ruled against a preemption. That decision went to the DC Circuit, in a case called City of Abilene v. the FCC. I was the lead counsel on that. And we lost. At the time, the ruling said this involves a city that doesn't operate an electric utility. And there's a lot of legislative history on electric utilities but not on cities. And therefore our ruling applies only to cities.
We then went back to the FCC with another petition for preemption, this time involving municipal utilities in Missouri. We lost again, before the FCC, but then WON a court victory on behalf of the City of Bristol, Virginia. The rationale there rejected the FCC's interpretation. It was the foundation for a ruling by the Eighth Circuit, upholding the challenge to the FCC's rules. We ultimately went to the Supreme Court and lost there as well.
So, what was, in our view, intended to be a clear indication by Congress that state barriers were not appropriate turned out to be a loss at the Supreme Court.
Chris: You know, the interesting thing from my point of view is -- the important role of the FCC here. And so, I think you simplified it a little bit. But if I can -- you can tell me I'm wrong, but, the way I see it, when the FCC decided, in Abilene, it changed a lot of things. In that the Court -- when you challenged the FCC's decision, the Court basically -- the DC Circuit Court -- is evaluating not just what the correct law reading is but also it's deferring to the administrative expertise of the FCC. And so, you know, courts have this obligation to defer to expert agencies, except for when the expert agencies are outside the realm of where they're supposed to be. And so, you know, as soon as the FCC said no -- that the '96 Act was not clear -- then it wasn't just a matter of you demonstrating that it was clear. It was also -- you had the uphill battle of fighting against the inertia of a poor decision from the Federal Communications Commission. And it seems like that set the whole tenor. Because then when you had an independent court -- this district judge in Virginia, who could sit back and evaluate it, without taking into consideration, really, the FCC's initial, erroneous decision, then he came to a different conclusion, which was that it was obvious that -- you know, with Trent Lott and so many other people, the things that they said when they were passing the '96 Act -- it was VERY clear than "any entity" meant to encourage all kinds of competition.
Jim: Well, you're ordinarily correct -- and you're correct in how the district court in the Bristol case read the language. He rejected the FCC's interpretation, because -- you're quite correct -- he said it was clear and unambiguous from the text itself that the term "any entity" was -- should be read broadly to cover anything. We, in fact, cited 60 years of Supreme Court precedent, stating that if you have the modifier "any," in an unrestricted and broad form, in a statute, you should assume that Congress knew what it was doing in using that term. And that unless you find something else in the statute, or in the regulatory history -- or the statutory history -- legislative history -- that requires a different conclusion, you should give Congress the benefit of the doubt. And then use whatever word "any" modifies in its broadest sense. That's what we argued. That's what Judge Jones in Bristol agreed with. And that's what the very conservative Eighth Circuit unanimously agreed with. Unfortunately, by the time this went to the Supreme Court, the Supreme Court had become a -- very strict in its interpretation of what it saw as a battle between a state seeking to enforce traditional state power, namely, telling its political subdivisions what they can and can't do, and local governments; and the federal government preempting a state effort to enforce a traditional state power. And the Supreme Court applied a heightened standard in our case, and said that we need an EXPLICIT statement in the statute, on the face of the statute -- we can't even refer to legislative history -- that says we intend preemption of this particular traditional state power. And finding that "any entity" MIGHT mean any public as well as any private entity. The fact that the statute in question did not say EXPLICITLY that Congress intended to preempt state barriers to public telecommunications services -- that was enough for the Supreme Court to rule against us.
Chris: That's certainly the disappointing decision that has led to 19 states having barriers to community-owned networks. I think when we come back to continue the history in our next show, we will pick up with a more exciting pace, and focus on all the terrific things that local governments have done, rather than the depressing things that some of the -- we've had at the federal level.
Jim: As Shakespeare says, "Sweet are the uses of adversity." And in 2004, we had two pieces of adversity. One was the Supreme Court decision in the municipal -- the Missouri Municipal League case. The second was the enactment of a truly ugly barrier to entry in Pennsylvania at the end of the year. But those two pieces of adversity together enabled us to piece together a broad coalition of high-tech companies and national associations, and public interest groups, and many other kinds of organizations and entities and individuals that set off a wave of success for municipalities that lasted for the next five years. And I hope that will stimulate interest in the next program.
Chris: Excellent! I know I'll be looking forward to it. Thank you so much for joining us, and we look forward to continuing the conversation.
Jim: Thanks, Chris. I enjoyed it.
Lisa: Visit the Baller website at baller.com , where you'll find more information on the firm, their current and past projects, and an extensive list of resources. We will be visiting with Jim again soon, so he and Chris can discuss in detail some of the communities that have turned to the Baller Herbst firm. Thanks again for listening to the Broadband Bits Podcast. If there are issues related to telecommunications that pique your interest, we welcome your suggestions for future shows. E-mail us at firstname.lastname@example.org . You can follow us on Twitter, where our handle is @communitynets . This show was released on July 30th, 2013. We want to thank the group Break the Bans for their song, "Escape," licensed using Creative Commons. And thank you also for tuning in.