Federal Court Blocks Bristol, Virginia’s Operation of a Cable Television System

On Thursday December 12, 2002 the U.S. District Court for the Western District of Virginia held that the City of Bristol did not have the authority under Virginia law to operate a cable television system, and permanently enjoined the City from providing cable television service.

The case, Marcus Cable Assocs. d/b/a Charter Communications v. City of Bristol stems from the City of Bristol’s attempt to enter the communications market in Southwestern Virginia using a fiber network constructed in conjunction with its municipal electric system. Last year, the City successfully challenged a state law that barred Virginia cities from offering telecommunications services. City of Bristol v. Earley, 145 F. Supp. 2d 741 (W.D. Va. 2001).

In June of this year the City Council granted its municipal utility board, known as BVUB, a franchise to provide cable television service in competition with the existing franchised cable operator, Charter Communications. In granting the franchise, however, the City Council failed to comply with state laws that required it to provide notice to Charter, to hold a formal hearing, and to consider testimony on the economic impact of the new franchise. In addition, the franchise granted to BVUB was significantly more favorable than the franchise granted to Charter.

When Charter learned of the City’s plans to enter the cable business, it sued the City on three separate grounds. First, Charter argued that the City lacked authority under state law to operate a cable television system. Second, it alleged that the City Council’s failure to provide notice, convene a hearing, or receive testimony constituted a violation of state law. Finally, Charter claimed that the terms of the BVUB franchise were substantially more favorable than Charter’s in violation of Virginia’s “level playing field” law.

The court agreed with Charter’s primary claim, and found that, in Virginia, there is no express or implied authority for a municipality to operate a cable system. The court rejected the City’s contention that a Virginia statute authorizing cities to operate “public utilities” included the operation of a cable system, finding that cable television service is not an essential service.

The court also rejected the City’s argument that a statute granting cities the power to promote the general welfare was intended to allow the City to provide cable service. If the City’s view were correct, the court explained, then cities could legally operate grocery stores, pharmacies, movie theaters and more. Because it found that the City cannot legally operate a cable system, the court determined that it was not necessary to rule on Charter’s other claims.

The decision is available from the court’s web site, http://www.vawd.uscourts.gov/OPINIONS/JONES/1-02CV00197.PDF, or by contacting us. Please let us know if have any questions concerning this decision or any other aspect of cable overbuilds.