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Court of Appeals Rules that Municipality's Participation in Telecommunications Venture is Permissible


The North Carolina Court of Appeals recently issued an opinion in a case that should be reviewed by any municipality in North Carolina who has, or is considering constructing a fiber optic network or similar infrastructure. It will also be of interest to any municipality considering utilizing the technology of broadband over power lines.

Starting in 1996, the City of Laurinburg constructed and then expanded the bandwidth of a fiber optic network. The City's facilities, Scotland County government buildings and schools, and the local hospital, were all connected to the network. They all used the network for data transmission and internet services, which were provided through a contract Laurinburg entered with School Link, an internet service provider. Laurinburg received certain fees from School Link.

This put Laurinburg into competition with BellSouth. BellSouth sued, claiming Laurinburg did not have the requisite authority to operate a fiber optic network and to enter into the arrangement with School Link. The trial judge granted summary judgment in Laurinburg's favor. In a unanimous decision, the Court of Appeals recently affirmed that ruling of the trial court.

The Court of Appeals opinion is noteworthy for several reasons. One is its discussion about how the courts should generally construe municipal powers granted under Chapter 160A of the General Statutes. The other is whether authority exists under the public enterprise statutes for this venture of Laurinburg's. The Court ruled that Laurinburg had authority to enter this venture because the network constituted a "cable television system" as defined in the public enterprise statutes, which municipalities are authorized to operate.

Since the Court of Appeals decision was unanimous, BellSouth will have to successfully petition the Supreme Court to review the matter. There is also the possibility that this may prompt the telecommunications companies to ask the General Assembly to address the authority of municipalities to be involved in the provision of telecommunications and internet access services. Arguably, our public enterprise statutes need to be updated to account for the new technology Laurinburg is utilizing.

The case is BellSouth Telecommunications v. City of Laurinburg and School Link, COA04-145 (opinion rendered Jan. 18, 2005).

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