Time Warner loses constitutional challenge over fiber-optic network

Daily Record and the Kansas City Daily News-Press, Jan 6, 2006 by Emily Umbright

Time Warner cannot pursue its injunction against North Kansas City until the city upgrades its fiber-optic network to provide cable TV services, the 8th U.S. Circuit Court of Appeals said last week.

The communications company claimed the city's plan to construct such a network violated Missouri law requiring voter approval before a municipality owned and/or operated cable television services.

The 8th Circuit affirmed the lower court's dismissal of the dispute, finding the case was not ripe as the city had yet to acquire cable television service capabilities.

Here, no threat of state law violation exists because the antecedent cable-television facility does not exist and its future existence is uncertain, wrote Judge Lavenski Smith for the court.

If the City seeks to upgrade the network without a public vote, Time Warner may again seek a preliminary injunction, he added.

The lawsuit arose shortly following the issuance of a report commissioned by the City Council that entailed construction of a fiber-optic network to provide telephone, Internet and cable television services to the city's residents and businesses.

For the network to be capable of providing cable services, it would have to connect to a head-end facility owned by a private company, like Time Warner, or one the city constructed and owned.

Section 71.970 of the Missouri Revised Statutes requires a public referendum on municipality-owned cable television services but specifically exempts Internet services from such a vote.

North Kansas City maintained in its briefs the fiber-optic network was created only to provide Internet services to its residents and businesses, but, according to the opinion, the report said the network could only be self-supporting if it provided cable television services.

The City Council has never stated that the improvements in the City's telecommunication infrastructure must be, or should be, self- supporting, attorneys James Borthwick and Michael Norton wrote in their brief for North Kansas City.

The City has not yet decided and has never voted on the issue of whether to provide cable television service on the proposed fiber optic network, the attorneys added.

But, drawing on depositions from the chief project engineer and the city's mayor, Time Warner claimed the evidence showed North Kansas City intended to provide cable television services to financially support the network.

In short, if the City does not manage to take cable TV customers from providers like Time Warner, it risks losing money, wrote attorneys Bernard Rhodes and Michael O'Shea for Time Warner, noting in their brief that the report showed the company could lose between 20 percent and 30 percent of its customers if the city provided cable TV services.

The City's own study shows that once the network is constructed, it will lose money unless the cable television services are offered, they continued. Obviously, the voters will have little incentive to reject television services at that point - their money will have already been irretrievably spent.

Hence, the need for a voter referendum was urgent, Time Warner contended, raising claims of constitutional violations of due process, equal protection and free speech, in addition to its statutory violation claim.

Concrete economic and democratic interests of Time Warner Cable and other taxpayers are threatened, the company's attorneys wrote. The Complaint shows that the City is moving forward rapidly with its plan to slide around the requirements of Mo.Rev.Stat. [Section] 71.070. The matter is time-sensitive, requiring judicial action to enjoin the City before it is 'too late.' The constitutional claims are ripe for decision.

The city, however, pointed out Time Warner does not currently provide high-speed Internet services to a bulk of its businesses and seemingly had no interest in providing Internet services to the business community until the City decided to act.

Time Warner's claims concerning intent are conclusions, not fact, Borthwick and Norton wrote. They are suspicions, not reality.

As such, the attorneys concluded, Time Warner's claims are not ripe since the company is not suffering an immediate injury.

The appellate court agreed with North Kansas City's conclusions, finding that without an upgrade to the fiber-optic wires, the city could not provide cable TV services.

[T]here is currently no ripe case or controversy under Missouri law, Smith concluded, declining to address Time Warner's constitutional claims.

Chief Judge James Loken and Judge Kermit Bye concurred.

This article was originally published in The Daily Record, St. Louis, Mo., another Dolan Media publication.