Telecommunications companies are suing cities around the nation to stop the construction of publicly owned fiber optic systems to bring high-speed Internet, telephone and cable television to communities far from metropolitan centers.
Attorneys for cities say the telecommunications suits, whether brought under state law, the Federal Telecommunications Act or other laws, are veiled attempts to stop construction of competing public systems providing an essential utility in the digital age.
“It’s a national playbook. The longer they [telecom companies] delay things, the better for them,” said Patrick Ottinger, general counsel for Lafayette, La.
The city’s plans for a $125 million municipal broadband system were delayed by suits brought by BellSouth and Cox Communications Inc. One suit resulted in the city holding a referendum to approve the bond sale. The other was resolved when the city amended the bond ordinance adopted after the referendum to conform with an unfavorable appellate decision. BellSouth Telcoms. Inc. v. City of Lafayette, 919 So. 2d 844 (La. 3d Ct. App.).
Attorneys for telecommunications companies say the litigation is needed because municipalities with the ability to borrow money cheaply — and not hobbled by the need to return a profit — have unfair competitive advantages.
“Our position has never been that it is unlawful for cities to do this, but you can’t use your powers as a city to create an uneven playing field,” said David Goodnight in Stoel Rives’ Seattle office, who has represented Qwest Communications International Inc. against cities in numerous suits since 2000. Two pivotal cases Goodnight won upended the telecommunications ordinances in Berkeley, Calif., and Sante Fe, N.M. Qwest v. City of Berkeley, 433 F.3d 1253 (9th Cir. 2006); Qwest v. City of Santa Fe, 380 F.3d 1258 (10th Cir.).
A FIGHT IN UTAH
Goodnight cited an association of Utah cities formed to promote the construction of a broadband networks in smaller cities and rural areas. “What we found during discovery was that the cities were providing facilities and personnel at no cost, interest-free loans and, in some instances, outright cash infusions,” he said.
Steve Allread, a solo practitioner in Salt Lake City who represents the Utah association, countered that “[I]f the private sector had been more responsive, there would not have been a need for the project. This litigation was an attempt [by Qwest] to recreate the old monopolistic system.” The suit settled in 2006. Qwest Corp v. Utah Telecommunication Open Infrastructure Agency, No. 2:05-cv-00471 PGC (D. Utah.).
Jim Baller of the Baller Herbst Law Group in Washington has participated in many of the suits and is an advocate for policies favoring municipal broadband networks. “It is common for the affected cable company to sue over these initiatives,” Baller said. “This is similar to electrification a century ago when small towns and rural areas were left behind, so they formed their own authorities.”
Many involved in the issue see a typical clash of viewpoints in the litigation embroiling Monticello, Minn., a town near Minneapolis, and TDS Telecom, a subsidiary of Bridgewater Telephone Co.
The city, complaining that neither TDS nor its competitor Charter Communications Inc. would bring fiber cable to every home and business, won a 74 percent majority in a referendum to build a municipal system. TDS sued on the eve of a city council meeting to finalize the plan.
“The municipal system will be in direct competition with private companies,” said David Johnson of Sidley Austin in Chicago, who is representing TDS. “The city is construing public convenience so broadly it would allow the city of Monticello to go into competition with any business in the city if it didn’t like the prices or services, and they could do it with tax-free financing with no need to make a profit.”
John Baker of Greene Espel in Minneapolis, who represents the city, said cities across the state had used the broadly worded state law to sell bonds backed by anticipated revenues to build water parks, ambulance services, ski areas and Internet services.
“TDS is trying to take the open-ended authority of Minnesota municipalities to issue revenue bonds for public convenience and define ‘public convenience’ right out of existence,” Baker said. A motion for dismal is scheduled to be argued on July 18. Bridgewater Telephone Co. v. Monticello, No. 86-CV-08-4555.