Groups join Lafayette's fight for fiber-optic plan

LAFAYETTE - Lafayette Utilities System has made another round of arguments trying to persuade the Louisiana Supreme Court to allow it to fund its voter-approved telecommunications business - and state and national organizations have joined the fight.

For more than two years, LUS has worked on a plan to build a state-of-the-art fiber-optic network to each home and business in the city - to provide low-cost phone, cable and high-speed Internet services.

Building such a network would require up to $125 million in bonds, paid for by revenues from the new communications business.

This summer, the 3rd Circuit Court of Appeal ruled that the funding mechanism LUS planned to use - propping up certain early losses by the new business by using market-rate loans from existing utilities sales - was a violation of the so-called Local Government Fair Competition Act.

Lafayette resident Elizabeth Naquin is the plaintiff.

The Fair Competition Act was passed by the Legislature in 2004 at the behest of private communications companies concerned about competition from government.

LUS has appealed that decision to the state Supreme Court - arguments will be heard Nov. 28.

The Louisiana Municipal Association and the national Fiber-to-the-Home Council have filed briefs in support of LUS.

Fiber-to-the-Home is a description of the type of technology being pursued by LUS - which proponents say is needed to provide communications services of the future.

"If not reversed, the Third Circuit's decision will prevent the opportunities and benefits provided by Lafayette's FTTH system and detrimentally impact the United State's global competitive position for FTTH development," the FTTH Council argued.

The case is important to the rest of the United States "not just for Lafayette's own residents, businesses and institutions, but also for the other communities across the nation that are looking to Lafayette as a model of courage and determination to keep Lafayette and America at the forefront of global competitiveness," the FTTH Council argued.

When the Legislature enacted the Fair Competition Act, it declared its intent - to ensure that a competing government doesn't use its power to "discriminate" against a private provider and to conversely ensure that publicly owned systems are allowed to engage in the same business practices used by the private sector.

The Fair Competition Act also sought to prohibit government from "cross-subsidizing" communications business with other government revenue.

That "even playing field" was heavily negotiated in lengthy talks set up by Gov. Kathleen Blanco between private providers and LUS.

But the 3rd Circuit's decision would prohibit LUS from obtaining loans for help in making bond payments - something that's a common practice in the telecommunications industry, the FTTH Council argues.

That is because FTTH systems require a great deal of initial investment in infrastructure - paying millions up front in anticipation of future revenue.

Private companies obtain those "up-front" funds from loans, cash transfers from parent companies, cross-subsidies from sales of other products or sales made in other geographic areas, the FTTH Council argued.

But in LUS' case, the Fair Competition Act only allows loans paid back at market-rate interest.

The Fair Competition Act prohibits governments from cross-subsidizing their communications businesses using "tax dollars, income from other local government or utility services, below-market rate loans from the local government or any other means."

By including the phrase "below-market rate loans," the Legislature recognized the legality of allowing LUS to obtain loans as long as they were under terms available in normal circumstances.

Taking away that ability to obtain loans would "effectively render municipal broadband illusory in Louisiana, contrary to the language and state purposes of the Act to make municipal broadband a meaningful opportunity," the FTTH Council argues.

Naquin's attorneys have until Nov. 21 to file a response with the state Supreme Court. Oral arguments are scheduled for Nov. 28 in New Orleans.

LUS officials have said they hope for a final decision by the end of the year.

During the delay caused by the lawsuit, interest rates have risen, but the cost of the technology has also fallen, giving officials hope that - with a favorable ruling - the communications project will still be financially feasible.