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Public Contract Law Journal

Public Contract Law Journal Vol. 52, No. 1

Improving Broadband in Appalachia: How Municipal Broadband Networks Can Bring High-Speed Internet to Millions

Taylor McDaniels


  • Addresses the digital divide in rural America due to a lack of reliable and affordable broadband, causing disparities in healthcare, education, and economic growth
  • Advocates for state and local governments in Appalachia to utilize public-private partnerships and public-utility-owned networks to address the digital divide
  • Discusses the restrictive state laws that hinder municipal broadband in Appalachia, requiring Congress to amend telecommunications statutes
  • Highlights that municipal broadband networks offer a unique solution, foster competition, and improved service quality and affordability
Improving Broadband in Appalachia: How Municipal Broadband Networks Can Bring High-Speed Internet to Millions
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High-speed broadband infrastructure is essential in today’s technology-driven climate. However, in rural America, millions do not have Internet access at home. The lack of reliable and affordable broadband infrastructure leads to disparities in health care, education, and economic growth.

This Note proposes that state and local governments should utilize different forms of municipal broadband networks to remedy the digital divide in America using Appalachia as a case study. Specifically, public-private partnerships and public-utility-owned networks provide a unique opportunity to implement broadband infrastructure in the rural areas of Appalachia. However, to do so, the Federal Communications Commission (FCC) must be able to preempt overly restrictive state laws that prohibit or obstruct municipality-owned broadband networks. This Note describes the digital divide in Appalachia, how the restrictive state laws are a barrier to broadband infrastructure in rural areas, how Congress should amend the Telecommunications Act of 1996 to give the FCC preemptive power, and how public-private partnerships and public-utility owned networks provide a viable option for state and local governments in Appalachia to bring Internet access to the underserved residents of the region.

I. Introduction

Affordable, high-speed broadband access is essential to an area’s ability to promote economic growth, create new career opportunities, advance education, improve health care, and raise the standard of living. The digital divide in America is growing, and the effects of this divide are especially highlighted in the Appalachian region. Only 78.3% of Appalachian households have a broadband subscription. In more rural areas of Appalachia, this average can be much lower. In eighteen of the region’s counties, less than 60% of households have a broadband subscription. To put this figure into perspective, around 5,654,000 Appalachians do not have access to the internet at home. The increasing use of telework and remote work in the wake of the COVID-19 pandemic highlighted that broadband access is necessary for ordinary citizens, businesses both large and small, and local governments. The increasing importance that Internet access has in society puts Appalachia’s communities at greater risk of becoming “economically crippled.”

There are many reasons for this divide. Studies have shown that lack of available infrastructure, cost, or an absence of perceived need for broadband networks can all lead to disparities in high-speed Internet access. Additionally, in rural communities, it is common for private industry to essentially have a monopoly over broadband. This lack of competition inevitably leads to higher prices and disparities in broadband access for the economically disadvantaged, racial and ethnic minorities, and residents of rural communities.

The disadvantages of having a private-industry monopoly over broadband create an obligation for state and local governments to step in to provide critical broadband infrastructure for their communities. However, many states in Appalachia have explicit restrictions that prohibit the establishment and operation of municipal broadband infrastructure or have systems in place to impede other broadband subsidies.

Chattanooga, Tennessee provides an example of how municipal broadband networks can bring economic success to an area. Chattanooga has realized a return of over $2.69 billion for the local economy. Thus, other parts of Appalachia could reap proportional benefits by using similar strategies to successfully implement and manage broadband infrastructure. Using different forms of municipal broadband networks can bridge the digital divide in Appalachia, but, without preempting or overriding these restrictive laws, state and local governments have few options.

The primary thesis of this Note is that state and local governments should utilize different forms of municipal broadband networks, specifically public-private partnerships, and public utility networks, to remedy the digital divide in Appalachia. Federal, state, and local governments and the American public have a strong interest in reducing or eliminating the digital divide—especially in marginalized areas such as Appalachia. Municipal broadband networks present a unique opportunity to bring broadband to underserved areas within the Appalachian region.

Part I of this Note introduces broadband and gives an overview of the main issue: the lack of high-speed Internet access in Appalachia. Part II examines the restrictive state laws and gives examples of how they prevent states from utilizing municipal network opportunities. These laws have essentially created a natural monopoly, and thus, congressional or federal agency action is necessary to promote municipal participation in broadband infrastructure. Part III briefly discusses the actions the federal government needs to take to preempt these restrictive state laws.

Finally, Part IV identifies and explores two municipal broadband network mechanisms that would provide potential opportunities for state and local governments in Appalachia to increase broadband infrastructure in their communities and any criticisms that have been considered when evaluating municipal broadband networks. Appalachians across the region lack adequate broadband access, and state and local governments should utilize different contracting methods to effectively raise the standard of living in their communities.

II. The Problem: Lack of High-Speed Internet Access in Appalachia

The Appalachian region has historically been a region where many residents live in poverty—and the effects of this marginalization are still evident today. This section describes Appalachia’s struggles, how broadband access is limited in the area, and how the lack of high-speed Internet has led to other disparities in the region.

A. Appalachia—A History of Poverty and Seclusion

Appalachia spans over 204,000 square miles within and around the Appalachian Mountains. It includes portions of twelve states, including all of West Virginia, and it extends from southern New York to northern Mississippi. Historically, the area has struggled to achieve economic growth.

Coal mining in Appalachia began in the mid-1700s to supply residents and local tradesmen. The industry started to expand in the mid-1800s, and Appalachian coal had a substantial impact on the American economy. Coal companies were able to reap the benefits of the booming coal industry until the 1970s when dependence on the electricity market increased. However, once most of the coal companies left and the need for Appalachian coal declined, Appalachia struggled to find an alternative to the economic boon that the mines once provided. This created an area secluded within the Appalachian Mountains with few economic investment opportunities. Since then, the residents of the region have struggled due to the lack of critical infrastructure like roads, schools, and government services.

Out of Appalachia’s 420 counties, 107 are “completely rural,” or counties that are neither part of nor adjacent to a metropolitan area. Comparatively, rural Appalachia struggles behind the rest of the country’s rural population in terms of educational attainment, household income, population growth, and labor force participation. This gap can be attributed to several causes, such as a lack of resources, a tough mountainous topography, and a substantial lack of infrastructure. Today, as the importance of technology rises, another disparity in Appalachian infrastructure has been highlighted—broadband access.

B. Broadband (and the Lack Thereof) in Appalachia

Broadband, or high-speed Internet, “allows users to send and receive data using multiple frequencies, which increases the transmission speed.” Broadband signals can be used in two different ways: (1) fixed, which delivers the signal using a physical transmission path, or (2) mobile, which delivers the signal using a smartphone or similar device. Certain benchmarks have to be met for an Internet service to be officially considered “broadband.” According to the FCC, the speed for “broadband” is twenty-five megabytes per downstream and three megabytes upstream. These are the standards that broadband service has to meet for consumers to be marked “served” under the FCC’s Broadband Progress Report.

While the number of broadband subscriptions in Appalachia has risen during the past few years, the region still has more “unserved” residents as compared to the rest of the country. The Appalachian Regional Commission (ARC) measures Appalachia’s broadband access with three categories: (1) broadband subscriptions, (2) computer access, and (3) smartphone access. According to the ARC, 78.3% of Appalachian households have a broadband subscription, which is below the nation’s average of 83%. Further, in eighteen Appalachian counties, less than 60% of households have broadband. Additionally, in some of the rural communities in Appalachia, more than 20% of residents have no access to a computer or smartphone.

The lack of broadband in Appalachia can be attributed to various causes. First, in 2018, statistics from the Census Bureau found that an area’s rural or urban geography and income levelcan impact residents’ rates of subscription to the Internet. Appalachian poverty rates range from 6.5% to 41.0%. In counties with median incomes of less than $50,000, the average broadband subscription is merely 65%. Additionally, local markets for broadband access tend to be natural monopolies; the fixed costs of developing broadband infrastructure are very high, and these new networks in rural areas would have few subscribers. Many private companies find it hard to rationalize a project with substantial up-front costs with a small chance of being able to break even within a couple of years. Thus, few incentives exist for private Internet service providers (ISPs) to expand their networks, leaving the companies that are there with a monopoly over the area. This lack of competition leads to higher prices, and, as a result, a substantial number of Appalachians cannot afford broadband Internet access.

With private ISPs unwilling to invest in infrastructure, state and local governments have the responsibility to support municipal broadband networks and other methods of government-funded projects to provide adequate Internet service to their citizens. However, the restrictive state laws prohibiting municipal broadband networks are preventing many states in Appalachia from taking action.

These laws are having a detrimental effect on the development of broadband in Appalachia. Before state and local governments can have a role in distributing broadband to their citizens, Congress and the FCC need to act to preempt these laws. Preempting these laws would not only allow for state and local governments to be more involved in the growth of their broadband networks but would promote competition and make broadband more accessible for the Appalachian customer. More competition, especially in rural areas, can result in decreased prices for customers. Hence, when coupled together, rural geography, lower income levels, and restrictive municipal networks have caused the Appalachian region to lack affordable broadband access.

C. Examples: The Impact of the Digital Divide

Undoubtedly, the lack of quality broadband infrastructure can significantly impact disparities in other socioeconomic categories. Specifically, inequalities in education and health care tend to show evidence of a correlation between those disparities and the lack of Internet access. While this Note does not suggest that these statistics are necessarily caused by the absence of Internet service, it does suggest that broadband infrastructure could be part of the solution to addressing healthcare and education inequalities in the region.

First, inadequate Internet access can impair the quality of education in an area. Low rates of Internet subscriptions lead to fewer students completing their homework daily, lower grade point averages, lower SAT and PSAT scores, and a lower probability of students furthering their education after high school. In Appalachia, 24.7% of Appalachian adults aged twenty-five to sixty-four hold a bachelor’s degree. However, this number is lowest in Central Appalachia (which mostly includes Eastern Kentucky), where only 15.2% of the population holds a bachelor’s degree; this figure is 18.3% below the U.S. average.

Next, lack of broadband access can contribute to disparities in health care. With most of Appalachia being rural, communities are most susceptible to having a lack of healthcare providers. Appalachia has a lower ratio of health care professionals (primary care physicians, mental health providers, dentists, etc.) per 100,000 people than the national average. In Central Appalachia, the number per 100,000 people is sixty-five percent lower than the national average. The increasing use of telehealth could help remedy these problems, but the lack of Internet access in parts of the region makes it extremely difficult for telehealth to become a viable option in Appalachia.

III. The Barrier: Restrictive State Laws That Prevent the Use of Municipal Broadband Networks

Today, many states in Appalachia have restrictive state laws that obstruct or expressly prohibit municipality-owned broadband networks. A municipality-owned broadband network is “any high-speed Internet system that is built and operated by a municipality, [or] a consortium of municipalities . . . that is offered on a commercial basis to residents.” In other words, the state or local government constructs, funds, and controls the local Internet network.

Restrictive state laws not only hinder public entities from creating these networks but effectively create a monopoly for private ISPs in the area. This section discusses the lobbying efforts that aim to develop and maintain the restrictive laws, examples of the laws and how they have affected states within Appalachia, and an example of a successful municipal network and how the laws are preventing that network from expanding.

A. The Private Sector’s Effort to Retain Its Autonomy

In the late 1990s, Congress passed the Telecommunications Act of 1996. The goal of the legislation was to encourage all entities involved in the telecommunications industry—including municipalities—to expand within the market to promote competition. The Act dealt with telephone services, cable programming, video services, and the Internet. As a result, many state and local governments took initiative and began creating public networks to provide affordable Internet access for their residents. Almost immediately, private Internet service providers realized municipal networks threatened to erode their autonomy in the industry. Private ISPs began a vast lobbying effort to encourage states to restrict or ban municipal networks. These campaigns successfully convinced many states to protect private ISPs and restrict the usage of municipal broadband networks.

The private communication companies and other lobbyists advocated for the idea that government participation in Internet services was anti-competitive because it prevents private sector companies from entering the market. They argued that because the municipal networks’ main priority is to provide affordable Internet services to residents, the cheaper prices prevented private companies from expanding into rural areas. However, the private companies are unlikely to expand into rural areas, regardless of any municipal network in place because of the high costs associated with network development. Broadband deployment is expensive because, while networks are cheap to operate once built, the up-front costs for construction, capital, and labor are substantial. While these expenditures are offset in urban areas rather quickly, the costs take longer to balance in rural areas. Consequently, many private ISPs do not expand into rural areas, including the secluded regions of Appalachia. However, if they do decide to expand in these areas, they are likely to increase the price to break even at a quicker pace. Virginia ($6.74), North Carolina ($5.87), and Alabama ($5.87) all rank within the top ten of states in terms of price for broadband per megabits per second. Thus, in the areas where municipal broadband is restricted, one of two things is likely occurring: (1) there is essentially a monopoly with only one or a few private ISPs offering limited services charging more than most of the residents can afford, or (2) there are no broadband providers at all.

B. The Art of Eluding Municipal Broadband Infrastructure

The lack of broadband is a stark problem within the Appalachian region. This is not because it is unknown or that there has not been enough attention brought to the issue. In fact, the broadband industry has been the subject of many federal and state political and policy debates over recent years. Restrictive municipal broadband laws are one of the many reasons broadband infrastructure has not expanded into the rural areas of Appalachia.

Out of the thirteen states located in Appalachia, six of them have restrictive municipal broadband laws. Alabama, North Carolina, Pennsylvania, South Carolina, Tennessee, and Virginia all have restrictive laws in place. These laws place “bureaucratic barriers” that prohibit state and local municipalities from constructing and participating in public broadband networks. As a result, many communities are left with an overpriced Internet service that is slow and unreliable.

When enacting these laws, state legislatures have many options in how they deter the use of municipal broadband networks. For example, many states have chosen to enact laws that explicitly prohibit the use of public networks or make it unreasonably difficult for any municipality to succeed in doing so. Examples of these types of barriers include “vague legal requirements, refraining from using specific financing mechanisms and pricing mechanisms, proposal-stage barriers, phantom cost requirements, and additional tax burdens” that would be placed on the municipal networks. Additionally, some states have even passed laws that prevent local governments from offering internet service if a private ISP is already working in the area—thereby maintaining the monopoly the ISP has in the state or area.

In states within Appalachia that are affected by these laws, there have been a variety of ways in which a state tweaked its legislature to make it nearly impossible for any municipality-owned service to succeed. For example, in North Carolina, public entities have multiple “phantom costs” that they must include in their rates. Phantom costs are expenses that are “small enough to not be noticeable on a bank or credit card statement but in total can really add up.” In North Carolina, these fees can include small license or administrative fees. Additionally, in Virginia, municipalities may not subsidize their Internet services or charge rates that are less than the competing private companies in the area. In Alabama, the municipalities are prohibited from using revenue from state or local taxes and money allocated to the state through appropriations to build the infrastructure necessary to provide Internet service to the area’s residents. Finally, in Pennsylvania, a municipality cannot provide Internet access to their residents for a fee unless no private ISPs currently operate in the area and no private ISP would be willing to expand to that area within a fourteen-month period. The statutes listed above are just a few of many that cause the implementation of municipal broadband infrastructure to be nearly impossible. With these types statutes in place, it makes it extremely difficult for state and local governments to use public-private partnerships or public-utility networks to expand Internet access.

C. A Success Story and How Restrictive Laws Are Preventing a Networkfrom Growing

Chattanooga, Tennessee is one of seven large metropolitan areas located in Appalachia. Chattanooga lies at the foot of the Appalachian Mountains and is home to one of the best examples of how a broadband network controlled by a municipality can be successful. Chattanooga’s Electric Power Board (EPB) built one of the first municipal broadband networks in the United States. The network was first initiated in 2010, and Chattanooga was the first municipality to offer downloading speeds of one gigabit per second for an entire city. Since that time, the program has had immense success and has generated $2.69 billion in economic and social benefits.

Bento Lobo, Ph.D., is the head of the Department of Finance and Economics at the Rollins College of Business at the University of Tennessee at Chattanooga. He conducted a study that showed that broadband infrastructure, during its first ten years of usage, improved the digital divide within the city, created numerous jobs, and reduced carbon emissions. The report provides that the value gained has outweighed the costs of creating the network by over $2.2 billion. It is evident that the network has had major success, but private ISPs and lobbyists are still encouraging the state to restrict municipal broadband networks.

When the plan first became public, Comcast and AT&T were the two most prominent ISPs in the area. Both companies tried to persuade Ron Littlefield, Chattanooga’s former mayor, to not go forward with the project. While they were unsuccessful, Comcast and AT&T still have a large say in the state, with both companies being members of the Tennessee Cable Telecommunications Association. In fact, AT&T wielded enormous influence when the Tennessee legislature passed a law that prohibits municipalities from expanding their Internet access from outside their city limits. J anice Bowling, a Tennessee state senator, commented that “AT&T would not allow [broadband legislation] to pass unless there was a restriction that municipalities could only provide it within their electric footprint.” This statement showcases the adamancy that private ISPs and lobbyists have in thwarting the development of state and local broadband networks. The law has become a “major roadblock” in the expansion of the networks of the areas surrounding Chattanooga. Chattanooga’s EPB petitioned the FCC, asking the federal agency to preempt the restrictive law. The FCC ruled in favor of the EPB, but the state of Tennessee sued the FCC in response. Unfortunately, in State of Tennessee v. Federal Communications Commission, the Sixth Circuit ruled in favor of the state and upheld Tennessee’s law that prevented municipal networks from expanding to areas outside of their city limits. This ruling is not only preventing the FCC from preempting any of the state’s restrictive laws but prohibits the city of Chattanooga from expanding its broadband network to more rural areas of Appalachia in eastern Tennessee.

Chattanooga provides a perfect example of how, if done correctly, a state and local government can successfully implement and manage broadband infrastructure. However, as previously stated, in Tennessee, and many other states in the Appalachian region, obstructive laws prevent municipalities, state governments, and federal agencies from utilizing all of their options to increase Internet access in certain areas.

IV. The Required Action: The FCC Must Be Able to Preempt the States’ Restrictive Municipal Broadband Laws

Because it is improbable that states will repeal or revise these statutes, the FCC must be given the authority to preempt the laws. This section explains why, in its current state, it is unlikely that the Telecommunications Act of 1996 provides the FCC with preemptive power and the steps Congress should take to amend the Act.

A. The FCC and the Clear Statement Rule

Within the Telecommunications Act of 1996, in Section 706, Congress instructed the FCC to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans . . . by . . . regulating methods that remove barriers to infrastructure investment.” The FCC’s 2010 Open Internet Order held that “Section 706(a) directs [it] . . . to take actions . . . that encourage the deployment of advanced telecommunications capability by any of the means listed in the provision.” Further, the Open Internet Order elaborated that 706(b) can serve as a grant of authority when the FCC concludes that telecommunications services are not utilized reasonably. The United States Court of Appeals for the D.C. Circuit agreed with these statements in Verizon v. FCC, by confirming the FCC’s interpretation and holding that it was reasonable to interpret Section 706 as providing the FCC a grant of authority to regulate states’ broadband.

Relying on the interpretation from Verizon, the FCC issued preempting orders for restrictive statutes in Tennessee and North Carolina. These orders were issued in response to petitions from Chattanooga, Tennessee (discussed above) and Wilson, North Carolina. In these orders, the FCC provided three reasons why it believed that it had peremptory authority. First, Congress granted this authority in Section 706. Second, because of this authority, the FCC can preempt state laws that “conflict with federal communications policy.” Third, the state laws in North Carolina and Tennessee could be preempted because they met the following criteria: (1) the municipal networks were implemented due to the lack of ISPs in the area; and (2) the implementation of the public networks prompted competition from private ISPs.

However, the Sixth Circuit, in Tennessee v. FCC, overturned this order in 2016. The court found that the central issue of preemptive power by federal agencies concerns an issue of state sovereignty. Thus, to have preemptive authority over a state’s laws, the FCC must have an express, clear statement from Congress that indicates that the intent of Congress to provide the Commission with this power. This is called the “clear statement rule.” The majority, in Tennessee, relied on Supreme Court opinions from Nixon v. Missouri Municipal League and Gregory v. Ashcroft. In Nixon and Gregory, the Supreme Court stated that for an agency to have the power to preempt a state’s laws, there must be a “clear statement” from Congress authorizing it to do so. As the current law stands, the FCC does not have the power to preempt a state’s restrictive municipal broadband laws because the clear statement rule requires that Section 706 “unmistakably state congressional intent to modify the federal-state balance.”

B. Congress Should Provide a Clear Statement That Authorizes the FCCto Preempt Overly Restrictive State Municipal Broadband Laws

If the FCC possesses the authority to preempt these statutes, state legislatures will be forced to revise or repeal the overly restrictive statutes, which would open the door for various government contracting opportunities to bring broadband to rural areas in Appalachia. Commentators have discussed many solutions to how the FCC can overcome the holding in Nixon to give the agency preemptive authority. In Nixon, the majority opinion emphasized the importance of the language that is necessary to overcome state sovereignty. Justice Souter, in his majority opinion, wrote:

Hence the need to invoke our working assumption that federal legislation threatening to trench on the States’ arrangements for conducting their own governments should be treated with great skepticism, and read in a way that preserves a State’s chosen disposition of power, in the absence of the plain statement Gregory requires.

In Gregory, the Supreme Court’s standard for a “plain statement” was that Congress “must make its intention to do so ‘unmistakably clear in the language of the statute.’”

Thus, to protect the sovereignty of the states and the Supreme Court’s decision in Nixon and Gregory, this Note proposes that Congress amend the Telecommunications Act to provide an “unmistakably clear statement” that authorizes the FCC to preempt state laws when the laws are overly restrictive and prevent communities from getting access to sufficient broadband service.

V. Two Methods to Provide Fast and Reliable Internet Access to Appalachian Communities

Once state and local governments are no longer subject to overly restrictive municipal broadband laws, opportunities will expand for states in Appalachia to focus on bringing broadband to the more rural areas of the region. For example, the broadband network previously discussed in Chattanooga, Tennessee will be able to extend into and benefit those residing in the rural areas surrounding the city.

Municipality-owned networks present a unique opportunity for Appalachian communities. Most of the funding for these programs comes in the form of federal grants. With the recent passage of the Infrastructure Investment and Jobs Act, there is a rare opportunity for states and municipalities to get involved in and focus on broadband infrastructure due to the abundance of funding. The Act has promised to deliver sixty-five billion dollars to the states “to help ensure that every American has access to reliable high-speed internet through a historic investment in broadband infrastructure deployment.” States are currently preparing plans and learning where the funding would be the most advantageous to meet local needs. This Note suggests that state and local governments should utilize different forms of municipal broadband networks to remedy the digital divide in Appalachia.

These networks can assist in bringing affordable broadband to the customers of Appalachia because these networks offer meaningful competition to private ISPs, which improves the quality and the price of the service. Two specific types of municipal networks that use a form of government contracting to build broadband infrastructure are (1) public-private partnerships; and (2) public utility networks. The following sections will describe these two methods and discuss concerns for each solution.

A. Public-Private Partnerships

1. Overview of Public-Private Partnerships and Why They Would Help Bring Reliable Internet Access to Appalachia

A public-private partnership is a contractual arrangement between a governmental entity and a private corporation. The private company and governmental entity collaborate in the financing, building, and managing of a project. In the case of municipal broadband, specifically, a state or local government will contract with an ISP to provide Internet services to its residents. This is a general definition. Most states use varying definitions of a “public-private partnership” because the federal government does not provide a consistent definition of the term. In addition to broadband, public-private partnerships are used in multiple types of infrastructure developments—including roads, airports, water systems, and electric power grids.

Moreover, many variations and structures implement broadband infrastructure using public-private partnerships. The focus of this Note is on public-entity-led partnerships. In this form of agreement, the public entity retains a majority of the project’s responsibilities, while leasing infrastructure access to a private partner so it can handle the network’s operations. The government agrees to do most of the heavy lifting by “financing, constructing, and owning the network,” while the private ISP takes on more of the technical duties by providing Internet service to customers.

The goal of a public-private partnership is to create a “happy medium” between using solely municipality-owned networks and complete privatization. This method allows the government to utilize the private sector’s strengths by using its advanced competencies and capital when building broadband infrastructure. In this public entity-led contracting scheme, the government will take on the majority of the responsibilities, such as constructing and owning the network infrastructure, while the private ISP will provide the service itself in return for a percentage of the profit. The model balances positive incentives for both sides by allowing the municipality to control and own the network while giving the private ISP profits in an area it normally would not invest in because of the excessive costs of building broadband infrastructure. One of the biggest barriers that prevents private ISPs from offering services in rural Appalachia is, as discussed above, the large start-up costs associated with broadband deployment. Thus, a public-private partnership takes away that concern and allows private ISPs to make profits in these areas without having to pay for the infrastructure itself.

Additionally, public-private partnerships could help alleviate the apparent monopoly on broadband in Appalachia. When a state or local government uses a public-private partnership, it allows the government to organize the network and determine how it will be managed. The municipality functions as the “owner and operator” of the infrastructure while the contract is being negotiated. To preserve competition, the municipality could (and should) include an “open access” clause in the contract that would allow the municipality to resell access to the network to other providers if it finds it necessary to do so. Additionally, the municipality should incorporate a section that requires the contract to be renegotiated after a specified period. A municipality that includes these clauses into a contract would ensure that the private ISP does not have too much control after the negotiation stage. In other words, these contract requirements would help safeguard against the possibility of a monopoly of Internet services in an area because these provisions would allow the municipality to adapt to rising costs and different conditions or economic needs within the community.

However, including these requirements would likely be challenged by the private ISP, because both entities have different priorities when entering into this partnership. Private entities are more focused on the short-term financial gains, while the municipality will be focused on the long-term stability of its residents’ Internet access. However, with sufficient planning, research, cooperation, and the ability to learn-as-you-go, the municipality can come up with a contract that serves both parties’ interests.

2. Working with the Private Sector

Because this method involves significant cooperation with private sector entities, certain policy issues could inevitably arise: (1) the potential for high costs; (2) the government’s potential loss of control, and (3) failing to find adequate private sector participation.

First, in addition to providing the funding to build the infrastructure, the government is at risk of encountering high transaction costs when negotiating with the ISPs. This risk can be due to the costs of researching and evaluating various candidates and negotiating and drafting various project agreements with the ISPs. Additionally, as with any large-scale project, many unforeseen circumstances may arise and cause the government to incur unexpected costs. For example, if the funding needs to be reallocated, this could create tensions between the private ISP and the government, which could lead to delays and thus additional costs for the municipality. Nevertheless, while high costs are a risk that should be considered, they can be avoided and mitigated. To prevent unnecessary excess costs, the government should ensure sufficient appropriations for the project along with a high probability of being sustained over several years, transparency in the negotiations phase, including a basic process for dispute resolution within the contract, and identification of the risks that could arise.

Next, there is a concern that once the negotiation and construction stages are completed, the government could lose some of its control over the project. For example, without the government being diligent during the negotiation phase, projects could be arranged to have “revenue-sharing agreements” that are not beneficial to the government and leaves the government with few options to transfer revenues or contract with another service provider if need be. However, again, some of these concerns can be partly negotiated away if the government is aware of them and takes them into account when drafting the contract. Additionally, this loss of control is often seen to be counteracted by the fact that the private ISP is responsible for the maintenance and delivery of the project’s service.

Finally, there is the concern that, especially in the rural areas of Appalachia, there will not be enough willing private ISPs to enter into a contract with the municipalities. One of the main reasons for this is that the public and private sectors prioritize certain benefits and risks differently. These differing goals of the municipality and private sector can cause a delay in the project. To combat this possibility, Appalachian states should start using this method in cities with larger populations to gain confidence in their networks and development experience, before moving into rural Appalachia. It is hoped that this plan will encourage private ISPs to participate because they have been able to observe that these broadband infrastructure projects can be successful.

B. Using Public Utility Networks

1. Overview of Municipalities Using Public Utility Networks as a Formof Broadband Infrastructure

Another form of a municipality-owned broadband network that could be implemented is the repurposing of public utility networks that are already in place. These utility networks are “generally operated by the municipal electric company” that sells “broadband and/or telecommunications services to their own customers using the same model as their electric or other utility service.” This method would require the state and local governments to enter into agreements with the public utility companies in the area to develop broadband networks using the infrastructure already in place. Several reasons why using an already-in-place public utility system is an option to bring broadband infrastructure to unserved areas of Appalachia.

First, the municipality already owns and operates the network. This ownership gives the public utility company certain advantages over any private ISP. The utility will already have access to any public rights-of-way, city engineers, billing systems, and a relationship with the people living in the community. These advantages will improve the chances that the network could be sustained for a long period.

Additionally, this approach could be considered more “economical” for the municipality. Adding a broadband network to an already existing fiber network will likely be cheaper than building the core for a brand-new network. It could also bring a plethora of new jobs for the residents of the area. However, it is important to note that while infrastructure will likely be more developed in urban areas of Appalachia, the infrastructure in rural areas may need modernizing to be able to fully take advantage of the possibility of using public-utility networks for broadband deployment.

Further, it is possible that, by having a more localized Internet provider, service would become more reliable. Due to the majority of private ISPs not having offices in rural Appalachia, having one of the public utilities run the broadband network would allow for quicker response times when an issue arises. The most prevalent argument against using public utilities to implement broadband infrastructure is that this method would hurt network competition in communities because of the lower price that the utility would offer. However, to reiterate, these underserved areas of Appalachia are either victims of having no Internet providers available or having to pay higher prices due to only a few private ISPs offering services in these communities. Thus, using public utility networks could potentially be one of the only viable options to bring affordable and reliable Internet access to the rural towns of Appalachia.

2. Modernizing Public Utility Networks: “Smart Grids”

“Smart-grids” are a type of public utility network that allow a municipality “to deliver electricity more reliably and efficiently.” Smart grids provide a unique opportunity for municipalities to bring Internet access to their residents. A smart grid is an electric grid that employs digital technology that provides “two-way communication between the utility and its customers.” Smart grid technologies are more efficient, have a quicker restoration of electricity after power outages, provide enhanced security measures, and have reduced operation and management fees. With the rising consensus that power distribution services need to be upgraded, smart grids can bring outdated utility services to meet the standards of today’s technologies. To implement broadband on the grid, providers can build a fiber network along with the advanced sensors of the grid, bringing Internet access to the customers of the smart grid network.

The U.S. Department of Agriculture’s Rural Utilities Service (RUS) has different programs that provide federal loans and loan guarantees to states and municipalities to “finance the construction of electric distribution, transmission, and generation facilities, including system improvements and replacement required to furnish and improve electric service in rural areas.” Within the RUS, two programs would be involved in coordinating broadband: the Electric Program (EP) and the Telecommunications Program (TP). The EP finances smart grid initiatives in rural areas. The EP can coordinate with the TP to support the development of broadband through the use of the facilities already in place from the smart grid. Because the EP and TP run different initiatives, they receive separate funds, requiring that they each must only use the funds that are allocated directly to them. However, with reasonable care and attention to statutory boundaries, states and municipalities should be able to work with both the EP and TP without fear of using the incorrect funds.

Further, smart grid broadband services facilitate advantages for both the public utility provider and their customers. First, the customers will obtain reliable access to the Internet, and the public utility gains a new source of revenue, thereby making it feasible for a municipality to update its systems more frequently. Additionally, because competition will likely come into an area, the price of Internet access will likely be more affordable for customers. Not only could the residents of Appalachia gain access to the Internet using smart grids, but they also will benefit from the advantages that the grid offers for their other utilities, such as electricity. While smart grids are a relatively recent development, the technology provides a unique opportunity for states and municipalities to bring broadband services to rural Appalachia.

VI. Conclusion

In conclusion, state and local governments should utilize different forms of municipal broadband networks—specifically public-private partnerships and public-utility networks—to remedy the digital divide in Appalachia. About five and a half million Appalachians are without Internet access at home. The COVID-19 pandemic has made it clear that Internet access at home is essential—and Appalachian communities are at risk. That said, municipal-broadband networks present a unique opportunity to bring broadband to underserved areas within the Appalachian region.

However, many states in Appalachia have restrictive state laws that obstruct or expressly prohibit municipality-owned broadband networks. These laws hinder public entities from creating these networks and have essentially created a monopoly for private ISPs in the area. Because of vast lobbying efforts, campaigners have successfully convinced many states to protect private ISPs and pass laws restricting the usage of municipal broadband networks.

Thus, for municipalities to be able to take advantage of public-private partnerships and public utility networks, Congress must first amend the Telecommunications Act to provide a clear statement so the FCC has the authority to preempt overly restrictive state laws. If the FCC exercised this power, states legislatures would be forced to revise or repeal these overly restrictive statutes.

Once state and local governments are no longer subject to overly restrictive municipal-broadband laws, that will provide more opportunities to improve broadband infrastructure in the Appalachian region. Using public-private partnerships and public utility networks would assist in bringing affordable broadband to the customers of Appalachia by not only offering local internet services but also by offering meaningful competition to private ISPs, thereby improving the quality and price of the service. While both of these methods are relatively new, they each employ valuable mechanisms to bring Internet access to underserved residents of the Appalachian region. Appalachian people across the region lack adequate access to broadband infrastructure, and municipal broadband networks have the capabilities to remedy this digital divide.