Cities and Towns_public enterprises_cable television system_fiber optic network_extent of
municipal authority
Summary judgment for defendants was affirmed in an action seeking a permanent
injunction and declaratory judgment against defendants' operation of a fiber optics network,
based on allegations that the network was beyond Laurinburg's statutory authority. North
Carolina cities have the statutory authority to operate certain public enterprises, including cable
television systems, and statutes are to be construed in favor of the municipality when there is an
ambiguity.
Hunton & Williams, L.L.P., by Edward S. Finely and Christopher
J. Ayers, for plaintiff appellant.
Tharrington Smith, L.L.P., by Michael Crowell, for defendant
appellee City of Laurinburg; and Gordon, Horne, Hicks & Floyd,
P.A., by Charles L. Hicks, Jr., for City of Laurinburg
defendant appellee.
Mitchell, Brewer, Richardson, Adams, Burge & Boughman, by
Ronnie M. Mitchell and Coy E. Brewer, for School Link, Inc.,
defendant appellee.
McCULLOUGH, Judge.
Plaintiff appellant, BellSouth Telecommunications, Inc.
(“BellSouth” or “plaintiff”) filed a verified complaint against the
City of Laurinburg (“Laurinburg”) and School Link, Inc. (“School
Link”) (collectively “defendants”) on 25 July 2002. School Link
filed a motion for summary judgment dated 22 May 2003, and
BellSouth and Laurinburg filed separate motions for summaryjudgment dated 23 May 2003. The trial court granted summary
judgment in favor of Laurinburg and School Link on 11 July 2003.
This appeal from the trial court's order arises from the
following facts and circumstances: BellSouth is a Georgia
corporation licensed to do business in North Carolina, and is a
public utility subject to the North Carolina's Utilities Commission
(“Utilities Commission”). Pursuant to Chapter 62 of North
Carolina's General Statutes and its Certificate of Public
Convenience and Necessity issued by the Utilities Commission,
BellSouth is authorized to “convey[] or transmit[] messages or
communications by telephone or telegraph, or any other means of
transmission, where such service is offered to the public for
compensation.” N.C. Gen. Stat. § 62-3(23)(a)(6) (2003). BellSouth
provides Digital Subscriber Line (DSL) high speed Internet service,
and is an Internet Service Provider (ISP) over these lines.
Laurinburg is a city in Scotland County and is a North Carolina
municipal corporation as defined under N.C. Gen. Stat. § 160A, et
seq. (2003). School Link is a North Carolina Corporation which, as
an ISP, provides Internet services in Scotland County.
Sometime in 1996, Laurinburg laid a twelve (12) strand fiber
optic network consisting of multi-mode cable for the purposes of
providing electronic communication services between its city hall
and the Laurinburg public works building (“LPW”). In 1998, the
multi-mode cable was replaced with single-mode fiber optic cable in
what amounted to a nineteen (19) mile loop, with an increase in the
number of fiber optic strands from twelve (12) to thirty-six (36).
Laurinburg believed this would provide sufficient capacity for itsknown present needs as well as future required information capacity
to meet needs not yet foreseeable in light of changing technology.
From approximately 1998 to 2000, the Electronic Community
Resource Center (ECRC), a defense contractor, was connected to the
network between its office in downtown Laurinburg and a training
room leased by it at St. Andrews College (“St. Andrews”). Though
ECRC went out of business in 2000, the fiber used for that
connection was left in place.
In late spring or early summer of 2000, School Link became a
party to the network as its ISP pursuant to a lease with
Laurinburg. Because School Link needed a certain volume of business
to make its link to Laurinburg financially feasible, the lease
discussions included representatives from School Link, Laurinburg,
the Scotland County government, the Scotland County schools, St.
Andrews College, and the Scotland Memorial Hospital (“Scotland
Memorial”). The Laurinburg City Council approved a lease to School
Link following a 21 August 2000 public hearing. School Link was to
provide the network with internet services including Bandwidth,
Mail, Domain Name System (DNS), and web-hosting.
Using the necessary hardware, Laurinburg serviced the rest of
the city government, and additionally the non-city users, to the
network by routing the network traffic onto the users' property by
way of City utility poles. The first non-city users connected were
Scotland County school buildings, two (2) of which were connected
in October 2000, and the remaining seven (7) in March of 2001. In
early to mid-2001, three Scotland County government buildings were
connected. St. Andrews was connected in September of 2001, andScotland Memorial was connected in November or early December of
2001. Each of the users used two (2) strands of the fiber optic
network.
The hardware components for running the network included the
following: The city loop consists of one Cisco 3548 switch, one
Cisco 7200 router, five Cisco 3524's (two used as backup), eight
single-mode fiber converters, and eight two gigabit fiber
connections. The Scotland County government loop consists of six
single-mode fiber converters and one hub, three converters located
in the LPW with a hub, and one fiber converter at the county
administration building, Emergency Medical Services (EMS), and the
county library. The Scotland County school loop consists of 18
single-mode fiber converters and eight hubs located at six schools,
the school administration building, and LPW. Scotland Memorial is
fed by two single mode fiber converters, one at LPW and the other
at the hospital. St. Andrews is fed by two single mode fiber
converters, one at LPW and the other St. Andrews. School Link's
connection is through an interface at LPW with the Laurinburg
network, where School Link leases space on a rack holding their own
router and equipment. This allows School Link to connect its
outside lines to the fiber optic network.
Laurinburg receives $350 per connection per month from each
connected user. Payments from the county schools and library
differ in that these users pay their fees directly to School Link
minus the fees subsidized through E-Rate funding (a federal program
that provides grants to entities in rural areas, which funds the
substantial majority of the connection fees for the library and theschools.) School Link then forwards to the city the total amount
of the connection fees charged by the city for the schools, $2,800,
and the library, $350. School Link pays an additional $2,000 per
month for the space of their router on the rack at LPW.
Currently, Laurinburg's fiber optics network is being used solely
for the purpose of data transmission, and those internet services
provided by School Link. Laurinburg has not yet sought to provide
cable television programming, and despite the current large amount
of excess capacity on the network (approximately 24 strands), it
claims that it would have to purchase additional fiber to do so.
BellSouth owns and operates utility poles throughout
Laurinburg to transmit telephone services. Since the 1930's,
BellSouth has leased from Laurinburg access to its utility poles
for such service. Laurinburg has likewise leased from BellSouth
access to BellSouth's utility poles to transmit data services.
Before the Laurinburg network was in place and providing an
ISP service with School Link, BellSouth provided internet service
to Scotland County schools by running a T-1 line to the schools'
central office which was the hub for the schools. Those schools,
now serviced by Laurinburg and School Link, were at one time
serviced by BellSouth over the Laurinburg network. All of those
schools out of the reach of the Laurinburg network remain on lines
connecting them to the schools' central office, and thus to School
Link, on BellSouth's network. Before St. Andrews was a part of
the Laurinburg network and with School Link as its ISP, BellSouth
provided internet service over a T1 line that connected St. Andrews
to the University of North Carolina at Pembroke. Before ScotlandCounty's three buildings were connected to the Laurinburg network
with School Link as its ISP, Carolina Online was its ISP. With one
exception, all Scotland County users were using a “dial-up”
connection over regular telephone lines owned and maintained by
BellSouth. The Scotland County Department of Social Services was
connected through a T1 line provided by the North Carolina
Cooperative Extension Office. After the county buildings had
connected to the Laurinburg network, the county turned down
BellSouth's offer to provide DSL service.
In their complaint, BellSouth sought a permanent injunction
and declaratory judgment, alleging the following grounds for their
relief: That Laurinburg fiber optics network was being operated as
a “public enterprise” beyond a municipality's authority to do so
under N.C. Gen. Stat. § 160A-311 (2003); and that the contract made
with School Link to service non-city users over the network was
therefore ultra vires. In response to this complaint, and at
differing stages of the litigation, Laurinburg and School Link
offered a host of legal authority permitting the municipality's
operation of their fiber optic network and their agreement with
School Link. See N.C. Gen. Stat. § 160A-272 (2003) (lease of excess
property); N.C. Gen. Stat. §§ 160A-460 through -464 (2003)
(“interlocal” agreements); N.C. Gen. Stat. § 160A-311(7) (acting as
a public enterprise “cable television systems”); and N.C. Gen.
Stat. § 158-7.1 (2003) (allowing for “local development”
appropriations).
In reaching our holding on the merits of the case at bar, our
analysis addresses two significant issues. The first, which affectsthe second, is a question of which tools of legal construction are
to be implemented in our reading of statutes authorizing municipal
powers. And second, when applying the correct tools, do the
actions taken by Laurinburg in establishing their fiber optics
network fall within one of its authorized powers as a municipality.
Based on our analysis set out herein, we affirm the trial court's
grant of summary judgment in favor of Laurinburg and School Link on
the basis that the municipality is operating what is by North
Carolina statutory definition, a “cable television system.” See
N.C. Gen. Stat. § 160A-319(2003). As such, Laurinburg has authority
to engage in this “public enterprise” and contract with School Link
for its ISP services. N.C. Gen. Stat. § 160A-311(7). We do not,
and need not, address those alternative theories offered by
Laurinburg as authority for their fiber optics network.
(5th ed. 1911). The Court in Homebuilders goes out of its way to
distinguish two of its holdings applying Dillon's Rule after the
enactment of N.C. Gen. Stat. § 160A-4. See Builders, Inc. v. City
of Winston-Salem, 302 N.C. 550, 276 S.E.2d 443 (1981); Greene v.
City of Winston-Salem, 287 N.C. 66, 213 S.E.2d 231 (1975). The
Court stated:
In neither case was N.C.G.S. § 160A-4
discussed or cited by the Court and the issue
of the interplay between Dillon's Rule of
construction and N.C.G.S. § 160A-4 was,
therefore, not addressed. Thus, we do not
consider Porsh and Greene as determinative on
the issue squarely presented in the instant
case: the proper rule of construction of
grants of powers to municipalities in light of
N.C.G.S. § 160A-4.
Homebuilders Assn. of Charlotte, 336 N.C. at 45, 442 S.E.2d at 50.
In the same year the opinion in Homebuilders was rendered, the
Supreme Court decided Bowers v. City of High Point, 339 N.C. 413,
451 S.E.2d 284 (1994). In Bowers, the Court allowed the city to
void a contract as being ultra vires, stating that the city was
correct in asserting that it did not have statutory authority to
contract to pay a separation allowance to early-retired police
officers based on anything beyond their “base rate of compensation”
as set out in N.C. Gen. Stat. § 143-166.41(A) (1993). Bowers, 339
N.C. at 420, 451 S.E.2d at 289. The Court concluded the city lacked
statutory power to interpret what the “base rate” included. Id.
While the Court seemed to resuscitate “Dillon's Rule” by restating
it at the beginning of its analysis, the holding of the Court
hinged on the following plain meaning analysis:
Although we are unable to set forth any
rule which easily and conclusively determines
what forms of compensation are to be included
in “base rate of compensation,” we are
satisfied that the plain meaning of “base rate
of compensation” does not include overtime
pay, longevity pay, or pay for unused accrued
vacation. “Base pay” is defined as “wages,
exclusive of overtime, bonuses, etc.”
Id. (quoting Black's Law Dictionary 157 (6th ed. 1990)). Most
recently, without citing either Dillon's Rule, N.C. Gen. Stat. §
160-4, Homebuilders, or Bowers, the Supreme Court utilized the
plain meaning rule again to strike down the City of Durham's Storm
Water Quality Management Program (“SWQMP”) and fees assessed
thereunder. Smith Chapel Baptist Church v. City of Durham, 350
N.C. 805, 517 S.E.2d 874 (1999)(“Smith Chapel”). The Court in Smith
Chapel found that under the plain meaning of N.C. Gen. Stat. §160A-311(10) (1998) (authorizing a municipality to operate as a
public enterprise “stormwater and drainage systems of all types”)
and N.C. Gen. Stat. § 160A-314(a), (a1) (1998), Durham had
authority to run a stormwater management public enterprise for
compensation, but “limited to those systems of physical
infrastructure, structural or natural, for servicing stormwater.”
Smith Chapel Baptist, 350 N.C. at 812, 517 S.E.2d at 879.
Therefore, because much of Durham's SWQMP and related fees were not
related to the physical stormwater system (such as education
programing), the program was found to function as an unauthorized
public enterprise and was struck down. In his dissent writing for
three Justices, Justice Frye applied N.C. Gen. Stat. § 160A-4 and
Homebuilders for the minority opinion's belief that there was some
ambiguity in the language of “'stormwater and drainage system'”
that should have been resolved in favor of enabling Durham to
execute their authorized public enterprise. Id. at 821, 517 S.E.2d
at 884.
Though not without nuances and distinguishing factors, we find
Homebuilders, Bowers, and Smith Chapel to be consistent statements
of the law and in accord with N.C. Gen. Stat. § 160A-4. The narrow
Dillon's Rule of statutory construction used when interpreting
municipal powers has been replaced by N.C. Gen. Stat. § 160A-4's
mandate that the language of Chapter 160A be construed in favor of
extending powers to a municipality where there is an ambiguity in
the authorizing language, or the powers clearly authorized
reasonably necessitate “additional and supplementary powers” “to
carry them into execution and effect[.]” N.C. Gen. Stat. § 160A-4(emphasis added); see Homebuilders Assn. of Charlotte, 336 N.C. at
45, 442 S.E.2d at 50. However, where the plain meaning of the
statute is without ambiguity, it “must be enforced as written.”
Bowers, 339 N.C. at 419-20, 451 S.E.2d at 289; see also, Smith
Chapel Baptist, 350 N.C. at 812, 517 S.E.2d at 879.
any system or facility that, by means of ...
wires or cables alone, receives, amplifies,
modifies, transmits, or distributes any
television, radio, or electronic signal, audio
or video or both, to subscribing members of
the public for compensation.
Id. (emphasis added). The statute in no way limits CTS to a
specified type of wire or cable, such as coaxial cable, copper T1lines, or fiber optic lines. Nor does it limit the transmission or
reception of electronic signals to any specific content. Thus, in
reading this statute, we cannot say that its plain meaning clearly
forecloses the statutory authority of Laurinburg to operate its
fiber optic network. See Bowers, 339 N.C. at 417, 451 S.E.2d at
287; Smith Chapel Baptist, 350 N.C. at 812, 517 S.E.2d at 879.
Stated differently, the language of this statute is ambiguous as to
whether the fiber optic network run by Laurinburg falls within its
contours. Thus, we apply N.C. Gen. Stat. § 160A-4's broad rule of
construction.
Laurinburg's network is run over fiber optic “wires or cable,”
providing a “system” for “transmit[ting]” and “receiv[ing]”
electronic signals capable of being converted to “audio” and/or
“video” streams of information. See N.C. Gen. Stat. § 160A-319(b).
We believe this fits within a broad construction of the definition
of a CTS. Therefore, we hold that Laurinburg is acting within its
municipal authority to run its network, and was not acting ultra
vires in contracting with School Link to provide the network's ISP
service.
(See footnote 2)
We acknowledge that Laurinburg's fiber optics network was most
likely not something the legislature envisioned in 1971 when they
enacted the statute allowing a municipality to operate a CTS as a
public enterprise. However, if Laurinburg were currently offering
the kind of cable programming in place in 1971, and doing so over
their fiber optic network, they clearly would be authorized tooffer the current bundle of network services over these same lines
as “additional and supplementary powers that are reasonably
necessary or expedient.” N.C. Gen. Stat. § 160A-4. Without
authority to offer the bundled CTS services, no municipality could
effectively operate in today's market.
(See footnote 3)
Moreover, just as BellSouth
is able to leverage its telephone infrastructure to provide low
cost DSL broadband services in the market, so too should a
municipality be able to leverage its CTS infrastructure. We believe
it would elevate form over function, against the intent of our
legislature's mandate for broad construction, to first demand 1971-
type cable programming be in place before a 2004 CTS could be
authorized as a public enterprise. Rather, the legislature's intent
in 1971 was to enable the municipality's public enterprise to grow
in reasonable stride with technological advancements, as it is this
advancement which marks the ever-approaching horizon of necessity.
Based upon the record, appendices, exhibits, and briefs, we
uphold the trial court's grant of summary judgment in favor of
Laurinburg and School Link.
Affirmed.
Judges McGEE and ELMORE concur.
*** Converted from WordPerfect ***