On February 26, 2015, the Federal Communications Commission voted to preempt state laws that restrict a municipality’s ability to expand outside its territory.

This started when the City of Wilson, North Carolina and Chattanooga, Tennessee wanted to provide broadband service to residents of neighboring towns. They complained to the FCC that because of their state laws, providing this service was impossible.

The FCC agreed that these state laws, which exist in one form or another in 19 other states, conflict with the Federal Telecommunications Act of 1996. Specifically, Section 706 of the Telecommunications Act directs the FCC to take action to remove barriers to broadband investment and competition. As a result, state laws that act as barriers to expansion are preempted and unenforceable.

What Does the Federal Preemption of State Laws Restricting Broadband Mean for Michigan?

In 2005, Michigan passed a law that placed restrictions on a municipality’s ability to provide telecommunication services. Specifically, MCL 484.2252 permits a municipality to provide telecommunications services within its boundaries, provided it has issued a request for competitive bids and has received less than 3 qualified bids within 60 days.

Because of the FCC ruling, it is clear that MCL 484.2252’s limitation on providing telecommunication services within a municipality’s boundary is suspect at best. Equally at risk are the provisions requiring a bid process before a municipality can move forward with its own investment.

Municipalities considering the option of investing in telecommunication services, including providing broadband, should see the FCC’s ruling as a win. For more information on municipal broadband issues, please contact us today.

The FCC’s Section 706 Authority and the Sixth Circuit Reversal

The FCC’s 2015 preemption order rested on its claimed authority under Section 706 of the Telecommunications Act of 1996, 47 U.S.C. § 1302. That provision directs the FCC to encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans and authorizes the Commission to take immediate action to remove barriers to broadband infrastructure investment and competition.

The states of Tennessee and North Carolina challenged the FCC’s preemption orders in federal court. In 2016, the Sixth Circuit Court of Appeals vacated the FCC’s orders in Tennessee v. FCC, 832 F.3d 597 (6th Cir. 2016). The court held that Section 706 did not authorize the FCC to preempt state laws limiting municipal authority, because states cannot be required by a federal agency to delegate to municipalities authority that states have the sovereign power to withhold. The Sixth Circuit reasoned that the FCC’s preemption was an intrusion on the state-local relationship that federal telecommunications law did not authorize. The ruling effectively reinstated the state-law restrictions for states within the Sixth Circuit, which includes Michigan, leaving the broader federal preemption question unresolved in other circuits.

The practical consequence for Michigan is direct. Because the Sixth Circuit’s ruling covers Michigan, MCL 484.2252’s competitive bidding requirement and geographic limitation remain on the books and are currently enforceable. Municipalities in Michigan cannot rely on the FCC’s 2015 order as a basis for ignoring the state statute. Any municipality in Michigan that wants to expand broadband service beyond its borders—or that wants to proceed to build without going through the competitive bidding process—faces the risk that incumbent ISPs will seek to block such action under the statute and current state law.

How Michigan’s MCL 484.2252 Operates in Practice

MCL 484.2252 creates a two-step process before a Michigan municipality can invest in telecommunications infrastructure. First, the municipality must issue a request for competitive bids. Second, the municipality must receive fewer than three qualified bids within 60 days. Only if the private market fails to respond with sufficient competitive interest can the municipality proceed with its own investment.

This structure gives incumbent Internet service providers a significant strategic tool. A single incumbent can file a bid—even if the bid is not commercially realistic—to prevent the municipality from proceeding. Critics of MCL 484.2252 argue that the competitive bidding requirement was designed to protect incumbent ISP market share rather than to promote genuine broadband competition. Supporters argue that the requirement ensures public resources are not used to displace private investment that would otherwise occur.

In practice, the statute creates meaningful friction for municipalities trying to address gaps in broadband access in rural areas or in low-income communities where private providers have historically declined to invest. The geographic limitation—prohibiting service outside the municipality’s boundaries—further constrains regional collaboration that could make broadband deployment economically viable.

Federal Infrastructure Funding: BEAD and Broadband Investment

The Infrastructure Investment and Jobs Act of 2021 allocated $65 billion for broadband expansion, including $42.45 billion for the BEAD program administered by the National Telecommunications and Information Administration. This represents the largest single federal broadband investment in U.S. history and has created new pressure to deploy broadband in unserved and underserved communities across the country, including in Michigan.

Critically, the IIJA does not preempt state laws limiting municipal broadband authority. Michigan municipalities seeking BEAD funding must still comply with MCL 484.2252 and other applicable state law. However, the availability of substantial federal grant funding has created political momentum in some states to reform restrictive broadband statutes. Michigan’s legislature faces ongoing pressure from municipalities and advocacy groups to revisit MCL 484.2252 in light of federal broadband investment priorities and persistent connectivity gaps in rural Michigan communities.

What Michigan Municipalities and Businesses Should Do Now

For Michigan municipalities exploring broadband investment, the legal path requires careful navigation of both MCL 484.2252 and the state’s broadband funding structure through the Michigan High-Speed Internet office. Municipalities that believe incumbent ISPs are using the competitive bidding requirement strategically—filing token bids to foreclose municipal investment without genuinely intending to provide service—should document that conduct and consult with legal counsel about available responses, including whether the incumbent’s bid satisfies the statutory definition of a qualified bid.

For businesses and residents in underserved Michigan communities, robust broadband infrastructure is essential for economic development, remote work, telehealth, and educational access. Understanding the legal constraints on municipal broadband—and the advocacy channels available to challenge or reform those constraints—is an important step in achieving the connectivity that communities need.

Revision Legal advises businesses, municipalities, and technology companies on telecommunications law, broadband regulatory compliance, and internet law. Contact us through the forms on this page or call 855-473-8474.

Preemption Doctrine: When Federal Law Overrides State Broadband Restrictions

The FCC’s 2015 order and the Sixth Circuit’s reversal illustrate the limits of federal agency preemption when Congress has not clearly authorized an agency to override state sovereignty over municipal structures. The Supremacy Clause of the U.S. Constitution establishes that federal law is the supreme law of the land, but preemption requires that Congress—not merely a federal agency—has expressed a clear intent to displace state law. An agency cannot expand its own preemptive authority beyond what Congress granted in the enabling statute.

For municipalities and businesses navigating the intersection of federal broadband policy and state telecommunications restrictions, this means that federal initiatives—whether FCC orders, NTIA grant conditions, or other regulatory actions—will not automatically override state laws like MCL 484.2252 unless Congress has clearly authorized preemption. Legislative reform at the state level remains the more reliable path to eliminating restrictive municipal broadband laws. In the absence of state legislative reform, municipalities and their legal counsel must work carefully within the existing statutory framework to maximize broadband investment while minimizing litigation exposure. For questions about telecommunications regulatory compliance or municipal broadband legal strategy, contact Revision Legal at 855-473-8474.