A decision has been made in Monticello! The Court of Appeals ruled 2-1 in favor of Monticello and upheld the district court’s conclusion that the City had authority to issue bonds.

There were two issues at hand, as quoted below from the decision: (updated May 25, 2010: page seems to be gone here’s a new link: http://www.lawlibrary.state.mn.us/archive/ctappub/0906/opa081928-0602.pdf)

First, Bridgewater contends that Monticello did not have the statutory authority to issue the bonds because the Fiber Project is not a ―utility or other public convenience from which a revenue is or may be derived.‖ Minn. Stat. § 475.52, subd. 1. Second, Bridgewater asserts that Monticello intends to improperly apply the bond proceeds to pay current expenses, which is explicitly prohibited by the statute. Interpretation of these statutory provisions is an issue of first impression in Minnesota.

It’s the first issue that I think it most interesting. Again I’ve pulled out the portion of the decision that I think is more interesting to readers – that’s the portion where they discuss broadband as a utility. I think this decision has the potential to have an impact beyond Monticello. Broadband as a Utility is a topic that has come up several times with the Broadband Task Force and is often shelved as a contentious topic.

The legislature has granted municipalities the express authority to own and operate telephone exchanges within their borders, as well as to operate public-cable communications systems. Minn. Stat. §§ 237.19, 238.08, subd. 3 (2008). Municipalities are not granted a similar authorization with regard to Internet service; however, the legislature has stated that it is a goal to ―encourage[e] economically efficient deployment of infrastructure for higher speed telecommunication services and greater capacity for voice, video, and data transmission.‖ Minn. Stat. § 237.011 (2008). Therefore, based on a plain and obvious interpretation of the term ―public convenience‖ and the general intent of the legislature to promote telecommunications, the district court did not err in dismissing the action for failure to state a claim.

Regardless, even if this court were to accept Bridgewater‘s reading of the statute, the Fiber Project arguably qualifies as a utility or utility-like project. A Minnesota statute generally restricting the ability of Minnesota municipalities to issue bonds for projects outside of their jurisdiction provides an exception for bonds issued to finance property for ―municipal public utilities.‖ Minn. Stat. § 471.656 (2008). That same statute defines ―municipal public utilities‖ as ―the provision by a municipality of electricity, natural gas, water, wastewater removal and treatment, telecommunications, district heating, or cable television and related services.

Regardless, even if this court were to accept Bridgewater‘s reading of the statute, the Fiber Project arguably qualifies as a utility or utility-like project. A Minnesota statute generally restricting the ability of Minnesota municipalities to issue bonds for projects outside of their jurisdiction provides an exception for bonds issued to finance property for ―municipal public utilities.‖ Minn. Stat. § 471.656 (2008). That same statute defines ―municipal public utilities‖ as ―the provision by a municipality of electricity, natural gas, water, wastewater removal and treatment, telecommunications, district heating, or cable television and related services.‖ Minn. Stat. § 471.656, subd. 3(c).

Bridgewater concedes that telephone services are utilities and that television services are a gray area, but steadfastly denies that Internet services qualify as a utility. Therefore, according to Bridgewater, the project in its entirety lacks statutory authority to be funded by revenue bonds because Monticello intends to provide Internet service. Based on the aforementioned statute, there appears to be minimal dispute that telephone and cable television are utilities. The crux of the issue is whether broadband Internet service is like a utility.

The definition of municipal public utilities appears broad enough to contemplate Internet service. Internet service could arguably be considered a utility under ―telecommunications‖ or ―related services.‖ Bridgewater argues that ―related services‖ means services related to providing cable television, such as on-demand movies.

However, cable-television companies often provide Internet services. Therefore, on-demand movies, digital video recorders, and Internet service could also be considered ―related services‖ under the statute. Furthermore, Merriam Webster dictionary defines telecommunication as ―communication at a distance (as by telephone).‖ Merriam Webster Dictionary 1207 (10th ed. 2001). Internet service seems to meet this definition. E-mail, instant messaging, and talking via web-cam are all ways to communicate at a distance utilizing Internet service. Based on the foregoing definition, the Fiber Project is arguably a utility.

Bridgewater argues that Internet service cannot be considered a utility because it does not have the ―near universal usage common to a utility.‖ This argument is flawed. As noted by Monticello, ―[i]t would be absurd to conclude that the Minnesota Legislature [would allow revenue bonds] to be used only to fund the creation of systems that provide services that already are in universal or near-universal use.‖ Rather, it seems that the reasoning behind allowing municipalities to issue these bonds is to provide utility-like services to people who otherwise would not be able to enjoy the benefits of the services offered. It is illogical to conclude that something is or is not a utility based on the number of people who have access to it.

Then they go on to discuss the definition of public, which I think is less compelling than the issues above.