The TVA’s Legal Journey and Lessons for Today 

​

The backlash to, and eventually affirmation of, TVA-driven electrification was based on an evaluation of whether the profits of private utility providers took priority over the larger societal goals of rural electrification. It also illustrates that a similar process—an explicit federal action that serves to reduce the power of private ISPs within state legislatures—is likely a necessary component for achieving universal internet access. 

​

The Tennessee Valley, home to Chattanooga, is not a new site for fundamental challenges to the infrastructure accessibility status quo. The Tennessee Valley Authority (TVA) was created as a New Deal era experiment in federally subsidized electricity generation and distribution, which facilitated the expansion of electricity into rural areas. The goal of New Deal policymakers in creating the TVA was to “diffuse an emerging set of social goods—electricity, consumer appliances, and, they hoped, higher-wage industrial employment—that they believed were rights of modern citizenship.”[19] At the time of the TVA’s creation, in 1933, only 9 percent of the nation’s 6.5 million farms were electrified. Private utilities had quite literally left rural Americans in the dark, mainly because they thought it to be unrealistically expensive to connect them to the grid. The stark divide between urban and rural electrical access is what spurred the government’s involvement in the electric market. Brent Cebul writes, “New Deal officials and private utility officers diagnosed an almost total stalemate in rural markets: energy distribution and electric consumer goods were prohibitively expensive and there seemed little elasticity in the price demand for energy.”[20] This picture of electrification in the 1930s should sound familiar. In fact, it is akin to the “island” of quality, affordable internet access created by Chattanooga, contrasting sharply with the patchwork of connectivity in rural municipalities surrounding the city. 

​

In the 1930s, the TVA faced numerous lawsuits in local courts, with two cases making it to the US Supreme Court. The first Supreme Court case was Ashwander et al. v. Tennessee Valley Authority (TVA), in 1936.[21] The plaintiffs were dissenting stockholders of the Alabama Power Company, which had entered into a contract with the TVA. The contract “expanded power lines from Wilson Dam to seven surrounding counties with a population of 190,000 and ten thousand electrical customers.”[22] A district court ruled in favor of the stockholders, but the Court of Appeals for the Fifth Circuit reversed the decision, setting the stage for a Supreme Court hearing in 1935. While the plaintiff presented a broad argument that the TVA had no legal right to exist, the Supreme Court narrowly ruled on the constitutional authority for construction of the dam and for the sale of the energy generated by the dam. The dam had been constructed in the exercise of the war and commerce powers of Congress. Article IV, Section 3 of the US Constitution granted Congress the authority to dispose of property constitutionally acquired by the US—in this case, the energy from the dam. 

​

The Supreme Court did not affirmatively uphold the legality of the TVA’s presence in the energy market until 1939, in Tennessee Electric Power Company v. TVA.[23] It specifically stated that  “the validity of a statutory grant of power cannot be challenged merely because its exercise results in harmful competition. The damage is “damnum absque injuria,”[24] that is, the TVA caused damage or loss to the plaintiff, but did not injure them by exercising their grant of power to distribute electricity. It should be noted that damage to private profits is not a grievance explicitly employed by ISPs today. Instead, their legal arguments and power derive from state legislation meant to curtail public competition and thus protect profits. This further underscores the necessity of both legislative and judicial action to create federal preemption of local restrictions on municipal broadband. 

​

Public receptiveness to government involvement in the electricity market, even among proponents of free enterprise, may have been the key to the TVA’s legal success. This was caused in part by the dramatic price disparities between public and private electricity costs and by severely restricted service areas that made it difficult to defend the exclusion of the TVA from the market. John H. Fahey, a former president of the US Chamber of Commerce said that “as a businessman I would prefer private ownership, but when the public cannot obtain the best possible service at the lowest possible cost, the advantages of private ownership disappear.”[25] The same could be said about the state of internet service today. 

​

The chief private sector rival of the TVA was Commonwealth and Southern (C&S). C&S was a private utility holding company that led the legal charge against the TVA through their subsidiary companies, which included the Alabama Power Company. When “faced with the TVA’s publicly subsidized prices….C&S began lowering all of its subsidiaries” rates as well. While consumers paid less, the company made up the difference through greater usage, which, in February 1934, was up 15.3 percent over the previous year. It is evident that the expansion of the market benefited the private utility, as well as the newly connected consumers. 

​

Legislative and Judicial Action 

Reflecting on the process of rural electrification in the 1930s and 1940s offers hope that seemingly hegemonic private actors can be counteracted in their efforts to keep publicly subsidized utilities out of the market. It required strong federal legal action—that is, a ruling from the Supreme Court instead of implied preemption by the FCC, TVA, or another federal agency. As with most Supreme Court rulings, the one that opens the door for municipal broadband will likely arrive during a policy window when the country is ready to accept the ruling and the precedent created. 

​

Indeed, this time has arrived. The Chattanooga public internet service nearly eliminated the disparity in internet access by race within the service area, and it ensured that customers’ service was not disrupted by inability to pay due to pandemic-related economic shocks. During the pandemic, the EPB set up over 130 Wi-Fi hotspots and initiated a program to provide internet service at no cost for economically-disadvantaged students. In many instances, the EPB replaced the internet service for families whose Comcast service had been cut off during the pandemic.[26] 

​

The Biden Administration’s American Jobs Plan (AJP) prioritizes “bring[ing] affordable, reliable, high-speed broadband to every American through a historic investment of $100 billion.”[27] This investment will go towards the creation of broadband infrastructure, not to subsidize the inflated cost of private internet service. The AJP specifically discusses removing barriers to municipal providers and requiring clarity on pricing from private and public providers. If this investment is to be effective, the legislation that authorizes it must also create explicit preemption of local barriers to public internet service. The legislation must be subsequently supported by the Supreme Court when it is inevitably challenged. 

​

The judges that comprise today’s Supreme Court might not be amenable to this shift in power from private companies and state legislatures to municipalities. However, the effects of the pandemic, combined with new federal funding opportunities, make this a strategic time to rethink the role of public internet service in the United States. A fundamental shift towards the public provision of internet service will bring the entire country online, just as public power electrified America nearly a century ago. 

​