On Wednesday, a state district judge ruled that the Lafayette Utilities System (LUS) must follow a different portion of state law to issue $125 million in bonds to pay for its planned fiber-optic telecommunications business. The ruling opens the door for a special election to decide whether the LUS can borrow the money necessary to fund the project.
The utility system, which built a fiber network to service its utilities business, has been offering wholesale bandwidth services to at least 11 Internet service providers, and providing retail broadband services to city agencies, since 2002. Now the LUS wants to expand this network, and provide residents and businesses with cable, phone and high-speed Internet services over fiber connections into homes and businesses.
BellSouth and Cox Communications, the local telephone and cable companies serving Lafayette, have strongly opposed the utility system's plan. Last month, the service providers filed a lawsuit against the LUS, alleging that it was using a portion of state bond law that contained no provision for citizens to call for a public election.
Wednesday's ruling hasn't killed the LUS' plan entirely, but it does mean that the utility system will be forced to go back to the drawing board before it can ask the state's bond commission whether it can borrow money for the project. One of the new procedural requirements is that the LUS will have to have a public hearing where a petition may be presented, which could force the city to hold an election on this issue.
BellSouth applauded the judge's decision.
"As government moves forward to compete with private industry, it is important that voters, as well as taxpayers and investors, have the assurance the right state laws will be followed," John Williams, BellSouth's regional manager, said in a statement.
While city officials say they're confident that the community would support funding the project if the vote were held today, they worry that BellSouth and Cox would outspend them in a long advertising campaign that could sway public opinion.
"It's all part of the same playbook the phone and cable companies have used in other parts of the country," said Terry Huval, the utility system's director. "First, they try to use political connections to influence legislators. And when that doesn't work, they say the people should vote on it, knowing fully well that they can outspend any government agency on advertising. We've already seen them distort the truth on this subject."
Lafayette is just one of many cities trying to build its own broadband network. Proposals have already sprung up all over the country in cities such as; Chaska, Minn.; and Palo Alto, Calif. Larger cities, such as and Los Angeles have also started looking into building their own broadband networks.
These projects have ignited a firestorm of opposition from the Baby Bell phone companies and cable operators, who view the existence of these networks as threats to their businesses. As a result, they have spent millions of dollarsand to make sure that these networks aren't built.
In 2003, a referendum was put before voters in the Illinois cities of Batavia, St. Charles and Geneva. The community known as theplanned to build its own fiber network. When funding for the project came down to a referendum, SBC Communications, the local phone company, and Comcast, the local cable provider, spent millions of dollars to influence voters. In the end, the referendum failed, and the project has been put on hold.
"What happened in the Tri-Cities in 2003 is the biggest example of the phone and cable companies' new tactics for stopping these projects," said, a principal attorney for the Baller Herbst Law Group, which represents many municipalities. "But even if a city is successful in winning the referendum, it's an expensive and time-consuming process."
The Lafayette Utilities System can appeal the court's decision, but Huval said the utility is still weighing its options.