Almost lost in the Federal Communication Commission's announcement that it plans to put tighter, Title II utility-style regulation onto broadband carriers is a second notice that the commission wants to override state laws preventing cities from offering high-speed Internet services to their residents.  The story of municipal broadband represents the true state of affairs between service providers and customers, and why so many people spoke out for tighter regulation on dominant telecommunications providers.

In roughly 20 states, municipalities are forbidden by state law to setup government-run Internet services.  In a 3-2 vote on February 26, the FCC voted to overturn state laws preventing the cities of Chattanooga, Tennessee and Wilson, North Caroline from expanding Internet services already offered to some residents.

“The bottom line of these matters is that some states have created thickets of red tape designed to limit competition,” said FCC Chairman Tom Wheeler.  “When local leaders have their hands tied by bureaucratic state red tape, local businesses and residents are the ones who suffer the consequences."

Underserved broadband areas have languished for years.   The traditional telecommunications industry has tried to have it both ways – not investing in infrastructure to deliver broadband services to the widest possible number of people while lobbying for protectionist measures to keep local governments out of the broadband business.

Advocates for muni-broadband say a government run service would be faster and cheaper than private alternatives, delivering better access to more people rather than the typical "cherry picking" that goes on in broadband builds.  More than half of U.S. homes have only one choice for an Internet provider at speeds of 25 Mbps or faster, the new FCC baseline for high-speed broadband.

Telecommunication providers are going to take the muni-broadband access ruling to court, making the usual arguments that the FCC has no right to stick its nose into local government and that the private sector should not have to compete with the government.   But when the smoke clears, if there's only one broadband service provider and that "utility" isn't providing service, who else other than local government should step into the gap?

Service providers are more than happy to fill in the gap, so long as they are paid by municipalities to fill the gap – which is where the whole argument about "we don't need regulation" starts to break down in earnest.   Either the service provider chooses to provide high speed Internet or it doesn't. If it doesn't, it should have no problem if the government steps in to fill the gap, especially when it is in a monopolistic position – the only guy in town – in the market.

What Verizon, Comcast, and their peers don't seem to get is that consumers are fed up with the "We want to have it both ways" attitude.   When Net Neutrality became a hot button issue, over four million people filed comments with the FCC. The vast majority of them supported tighter regulation on companies.

Incidents such as AT&T blocking FaceTime and Verizon putting in "super cookies" into Web pages by default without offering any opt out mechanism haven't helped the perception that larger phone companies are fundamentally tone-deaf to their customers.   Both companies backtracked after public outcry, but the underlying "We'll do whatever we want" attitude is the underlying reason why so many people wrote to the FCC in support of stronger regulation on broadband.