Nixon v. Missouri Municipal League

Can states bar municipalities from providing telecom services?

In Nixon v. Missouri Municipal League, decided on March 24, the Supreme Court considered the relative merits of federalism and free markets. The victory went to federalism. The federal Telecommunications Act of 1996 does not preempt state laws designed to crush local telecom competition.

The Telecom Act promotes market entry. Under its provisions, "no 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." Municipals argue that they are "entities," and thus protected by federal law. 

The Supreme Court, in a decision by Justice Souter, disagreed. Preemption to promote private activity is not the same as preemption that promotes government-sponsored activity; Congress had no intention to set off on the latter "uncertain adventure" that would create a "crazy quilt" of interstate regulations. Municipalities' "generous conception" of preemption must fall because its not convincing on public policy grounds (government providers both help--and hinder--competition) and is not mandated by the Act's language ("entities" is hardly a clear statement).

Good news for states--and the telecom industry, which isn't particularly fond of local government competition. Bad news for cities who have made themselves more attractive through telecom initiatives

link to case here

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