Two Recently Concluded Legal Battles Over Anticompetitive Occupational Licensing In North Carolina | Eastern North Carolina Now

    Publisher's note: The author of this post is Jon Sanders, who is Director of Regulatory Studies for the John Locke Foundation.

    Last week the Federal Communications Commission moved to set aside North Carolina law in favor of the City of Wilson's Greenlight broadband service. My Spotlight this week explains why this was a bad decision.

    The report, The FCC's Anti-Competitive Greenlight: Commission is wrong to override North Carolina law for municipal broadband, contains the text of my comment to the FCC while it mulled Wilson's petition to override the Level Playing Field Act, which limits municipal broadband systems and aims to support competition in local broadband services. The City of Wilson wanted to expand its broadband service to customers in counties outside of Wilson.

    The Level Playing Field Act did several things:

• required future municipal broadband systems to comply with the same federal, state, and local laws faced by their private competitors
• prevented municipal broadband systems from requiring subscribership from individuals or developments
• limited their sources of revenue to those generated by the service, not from other services' funds (such as electricity)
• forbid them from pricing services below cost
• disallowed municipalities from using non-voter-approved bonds to fund the service
• required payments in lieu of taxes to counties and the state equivalent to what a private company so situated would be required to pay

    Most of the act did not, however, apply to Wilson's Greenlight, except that Greenlight was limited to the borders of the county of Wilson. The City of Wilson alleged, and the FCC agreed, that the Level Playing Field Act of 2011 limited Greenlight's ability to compete.

    As argued in my report, this has the idea of competition entirely backward:


    In reaching its decision, the FCC overlooked several very important details:

1. Under North Carolina's constitution, cities are the creations of the General Assembly (Article VII). The legislature's authority over municipalities is also reinforced over local taxation and debt (Article V). The FCC's decision creates a federal end-run around this authority, which could create fissures in North Carolina government.
2. Wilson and a select few other N.C. municipalities that had set up broadband services did so under a form of debt financing known as Certificates of Participation (COP). Unlike General Obligation bonds, COPs are not subject to a vote of the citizens. Subsequent (and demonstrably predictable) financial struggles by those municipalities' services meant that local taxpayers were on the hook for bailing out a system which they had no say in setting up.
3. Legislators knew of the problems from municipal broadband in Wilson, Salisbury, Morganton, and Mooresville and Davidson — they are what informed the passage of the Level Playing Field Act.

    By the year the Act was passed, 2011, Greenlight's losses were mounting. As John Locke Foundation researchers had warned in 2009, Wilson had begun borrowing from its electric and gas funds — $11 million already — even though Wilson's electricity and gas rates were already higher than others'.

    As stated in the report:


    The FCC's intrusion of its solution into a local political problem is going to encourage even more unfortunate decision-making on local levels in North Carolina. These will further disturb competition, harming service consumers and non-consumers alike through cross-subsidization schemes.

    Such negative outcomes were precisely what the General Assembly, acting in its constitutional oversight role, sought to avoid.