BUSY SIGNALS

"Divestiture." Prior to the case of The United States of America v. American Telephone & Telegraph, 552 F.Supp. 131, this word had little or no everyday connotation. However, after the decision of Judge Green in that case, divestiture has become a concept, the effect of which has resulted in various degrees of confusion, difficulty and complication in the operations of America's telephone systems. The decision, rendered in 1984, broke American Telephone and Telegraph Company into "Bell" and the "Baby Bells." As time has passed since the decision, its impact has diminished and the number of newly created complications in telephone service have become fewer. However, a recent decision of the Illinois First District Appellate Court serves as a reminder that the effects of divestiture are not over.

Prior to divestiture, Illinois municipalities entered into franchise agreements with the telephone company which called for payment of franchise fees in exchange for certain accommodations provided by the municipalities. Generally, such franchises provided that the phone company was granted access to public rights-of-way and pole systems owned by the municipality in exchange for free telephone service and relocation. However, divestiture of the local telephone operating companies, like Illinois Bell, from AT&T resulted in a new player, AT&T, entering the municipal franchise market. Divestiture made it necessary for Illinois Bell to renegotiate all of its franchises and left AT&T in a position where it had no franchise rights or obligations in municipalities.

Through a coordinated effort between Illinois municipalities and the Illinois Municipal League, new model franchise provisions were agreed to by Illinois Bell. Under the revised format, Illinois Bell agreed to the payment of "access line" fees in lieu of the free service previously provided. However, the negotiation of franchises with AT&T went unresolved in many, if not most, Illinois municipalities. This lack of resolution led to litigation between five Illinois municipalities and AT&T over the necessity of a franchise arrangement with a municipality.

In February of 1987, the engineering firm of Donahue & Associates, hired by AT&T, sought to obtain permits from the Villages of Arlington Heights, Palatine, Barrington, Lake Barrington and Crystal Lake to permit access to public streets for the installation of approximately 1,200 feet of fiber optic cable as a part of an eighty-five mile system designed by Donahue. The Villages responded by indicating that they would grant permits for such access only after AT&T had entered into franchise arrangements with each of the Villages. After the passage of six months, AT&T had still not been able to secure right-of-way permits from the Villages. Thereafter, AT&T sent a "ten day notice" to the Villages pursuant to the Telegraph and Telephone Act (Ill. Rev. Stat., 1987, Ch. 134, par. 20) (the "Telephone Act"). The statutory notice sent to the Villages indicated that AT&T intended to begin construction of their cable system under the Villages' streets and requested that the Villages "provide time, manner and place specifications within ten days," as required by the Telephone Act. None of the five Villages chose to respond and, upon the expiration of the ten day waiting period, AT&T commenced construction of its lines

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under the Villages' streets. The Villages responded by issuing stop work orders to AT&T. This action, American Telephone and Telegraph Company and AT&T Communications of Illinois, Inc. v. Village of Arlington Heights et al., _ Ill. App. 3d _, _ N.E.2d _, _Ill. Dec. _, was filed in the Circuit Court of Cook County.

The trial court issued a preliminary injunction prohibiting the Villages from interfering with the work and found that the Villages had "exceeded the reasonable scope of their regulatory powers" and ordered arbitration between the parties to determine what "fair compensation" was due to the Villages. [Neither AT&T nor the Villages had sought arbitration from the court.] Additionally, the Circuit Court denied the Villages' request to stay its order pending appeal. Upon the filing of this action in the First District Appellate Court, the Villages sought a stay of the preliminary injunction pending the final outcome of the Villages' appeal. The Appellate Court denied that motion in November of 1987.

In its opinion, the First District Appellate Court overturned the decision of the lower court with respect to the ordering of arbitration of compensation to the Villages but affirmed the injunction granted to AT&T prohibiting interference with the cable installation by the Villages.

The effect of the holdings in this opinion are of substantial importance to the affected Villages. However, the general municipal lessons discussed in the opinion are of application to all municipalities and deserve close attention. The status of public streets, the effect of state regulation on municipal power with respect to utilities and the impact of the Telephone Act are all discussed in the Court's opinion. Each of these issues has an impact on Illinois municipalities that did not originate with this case.

First, the Court discusses the power of a municipality to regulate its public streets. In one paragraph, the Court describes the power over public streets. "Neither the plaintiffs (AT&T) nor defendants (Villages) have an absolute right over the use of the public streets." Quoting Village of Lombard v. Illinois Bell Telephone Company (1950), 405 Ill. 209, 216, reversed on other grounds (1969), 43 Ill. 2d 36, the Court states:

"The public streets are held in trust for the use of the public [Citation.] And while power may be

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granted to the General Assembly to permit the use or the restriction of the use of the streets, such power is to be strictly construed. Numerous powers and rights have been granted to a municipality by the General Assembly over the streets of a city, but they are regulatory in character,..." (Emphasis added.)

As the Court notes, municipalities have broad regulatory powers over the use of the public streets, and the area above and below them. But as regulatory powers, these powers are limited to regulation to insure that the use of the public streets is in a manner consistent with the public good. The power of the municipality does not extend to prohibiting activities unless they are inconsistent with the general purposes for which public right-of-ways are to be used. The installation of utilities and similar activities have been long accepted as a proper use for the public right-of-way. As such, it is not to be prohibited by municipalities but regulated and the utilities are to provide compensation to the municipalities for both damage to the public ways and for their continuing use.

In conjunction with the discussion by the Court of right to use the streets, the subject of regulation by both the state, through the Illinois Commerce Commission (ICC) and municipalities was also discussed. Citing City of Geneseo v. Illinois Northern Utilities Company (1941), 378 Ill. 506, Cert. denied (1942), 316 U.S. 670,86 L.Ed. 1746, 62 S.Ct. 1046. The Appellate Court states, "the (Geneseo) Court acknowledged the well-settled rule that where there is a conflict between a specific grant of power to the ICC which is in opposition to a similar power granted to a city or municipality, the former will prevail." Applying this principle to the case, the fact that the Illinois Commerce Commission had granted a "certificate of convenience and necessity" for the construction of the fiber optic cable was conclusive in preventing the municipality from interfering with the construction of the cable. However, this rule does not mean that the power of the ICC and the municipality are mutually exclusive. It does mean, in those areas where regulation by the ICC conflicts with the municipality, the municipality's power is removed. Therefore, in routine matters relating to franchises in operations within a municipality, the municipality has the power to regulate those activities unless the ICC has superseded municipal power by regulating on identical issues.

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Finally, the impact of the Telephone Act on this decision is one which will be present only in municipal relations with a telephone utility within the scope of the Act. But that impact on the municipality is substantial. Under the Telephone Act, the power of a municipality to control or inhibit the placement of telephone facilities, such as fiber optic cable, is limited. The Act prevents exactly the type of obstruction that was attempted by these municipalities. The Telephone Act grants to telephone and telegraph companies a unique method of condemnation which permits instruction of telephone facilities to proceed even if the effected governmental body has not concurred. Although the paragraph describing this method states that "nothing in this Act shall interfere with the control now vested in cities, incorporated towns and villages in relation to the regulation of the poles, wires, cables and other appliances" of the telephone company, it is apparent from the holding of the Court in this case that those powers are affected. In addition, the same paragraph refers to the "duty" of "highway commissioners" in placement of all telephone facilities in the public right-of-way. Nothing in the paragraph indicates that certain municipal officials are required to similarly cooperate. However, it appears that the Court reads the term "highway commissioners" in a sufficiently broad manner to require similar cooperation from appropriate municipal officials. If those officials do not cooperate with the establishment of specifications for the construction during the period subsequent to the ten day notice, the telephone company has the power to proceed without further authorization of the municipality. If, as in this case, the relationship between the effected municipality and the telephone company is adversarial, the municipality will be forced into providing time, place and manner specifications within a very small window of opportunity between the time of the giving of and the expiration of the ten day notice.

As previously noted, none of these principles are new. Each of them has their origin in previous Illinois court decisions or statutory materials. However, they certainly bear repeating. Their effect on the municipal power to regulate the use of its streets, especially with respect to a telephone company, is not unbridled. As with most other municipal powers, the limits are finite and certain. A lack of understanding of those limits or failure to adhere to those limits can result in a municipality getting a busy signal from the Court. •

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