Title: State v. Biddeford Internet Corp.

State: maine

Issuer: Maine Supreme Court

Document:

MAINE SUPREME JUDICIAL COURT 
Reporter of Decisions 
Decision: 
2017 ME 204 
Docket: 
BCD-17-15 
Argued: 
September 12, 2017 
 
 
 
 
 
Decided: 
October 10, 2017 
 
Panel: 
SAUFLEY C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ. 
 
 
STATE OF MAINE et al. 
 
v. 
 
BIDDEFORD INTERNET CORPORATION 
 
 
ALEXANDER, J. 
[¶1]  Biddeford Internet Corporation, doing business as Great Works 
Internet (GWI), appeals, and the State of Maine and the ConnectME Authority 
cross-appeal, from an amended judgment entered in the Business and 
Consumer Docket (Horton, J.) awarding the State and the Authority $406,852 
in unpaid fees pursuant to 35-A M.R.S. § 9216 (2014).1  On appeal, all parties 
argue that the court erred by concluding that the section 9216 assessment 
was a valid business excise tax.  GWI contends that the assessment constitutes 
either an invalid business excise tax or an unconstitutional property tax.  The 
                                         
1  Title 35-A M.R.S. § 9216 was enacted by P.L. 2009, ch. 612, § 10 (emergency, effective 
Apr. 6, 2010) (codified at 35-A M.R.S. § 9216 (2014)), and has since been amended by P.L. 2015, 
ch. 151, §§ 1-2, and ch. 284, § 10 (effective Oct. 15, 2015) (codified at 35-A M.R.S. § 9216 (2016)).  
Unless otherwise noted, references to section 9216 in this opinion are to the statute as originally 
enacted and in effect from April 6, 2010, to October 14, 2015. 
 
2 
State and the Authority contend that the assessment is not a tax but rather a 
fee.2  We agree with the State and the Authority that the Legislature properly 
characterized this assessment as a fee, and, with that clarification, we affirm 
the judgment. 
I.  CASE HISTORY 
[¶2]  After a non-jury trial, the court made the following findings, which 
are supported by competent evidence in the record. 
[¶3]  The Legislature established the Authority “to stimulate investment 
in advanced communications technology infrastructure” and to expand the 
availability of broadband service in unserved or underserved areas in Maine.  
P.L. 2005, ch. 665, § 3 (effective Aug. 23, 2006) (codified at 35-A M.R.S. § 9203 
(2014)); see also 35-A M.R.S. §§ 9202, 9202-A, 9204 (2014).3 
[¶4]  In 2009, private telecommunications service providers began 
meeting with representatives of the State, including the Authority, to address 
the lack of broadband capacity in Maine.  Broadband involves the 
                                         
2  The parties make additional arguments in their appeals.  GWI challenges the court’s 
determination that the State and the Authority had standing to bring an action to collect the unpaid 
fees and argues that section 9216 violates its rights to due process and equal protection.  The State 
contends that GWI lacks standing to assert its equal protection claim.  We are not persuaded by 
these arguments and do not address them further. 
3  These statutes have since been amended, or repealed and replaced, by P.L. 2015, ch. 284, 
§§ 2-7 (effective Oct. 15, 2015) (codified at 35-A M.R.S. § 9202 to 9204-A (2016)). 
 
3 
transmission of data—generally associated with the internet—through both 
fiber optic and digital subscriber line (DSL) technology, among other means.  
Fiber optic transmission is currently the fastest means of data transmission 
and is accomplished via optical fiber cable, which is essentially a group of 
plastic or glass strands that can carry light pulses to transmit data.  The term 
“dark fiber” applies to the unlit fiber optic strands within a cable.  Dark fiber 
providers lease or sell strands of dark fiber to telecommunications service 
providers who then use, “light,” the strands to transmit data for their 
customers. 
[¶5]  During the meetings involving the State, the Authority, and private 
telecommunications service providers, an initiative, called the “Three Ring 
Binder,” was developed to serve as a new route for fiber optic cable in 
unserved and underserved areas.  The purpose of the project was to put dark 
fiber in areas where there was no dark fiber at all. 
[¶6]  GWI, one of the telecommunications service providers that 
participated in the meetings, applied for a federal grant to subsidize 
construction of the Three Ring Binder.  The application required GWI to assign 
the project to a new entity, Maine Fiber Company, Inc., that would own the 
Three Ring Binder and be responsible for its construction.  Maine Fiber would 
 
4 
make the Three Ring Binder available on an “open access” basis so that any 
telecommunications service provider could purchase or lease dark fiber to 
extend service to its residential or business customers. 
[¶7]  The grant was approved in December 2009 in the amount of 
$25,402,904.4  The grant required GWI to transfer the right to receive the 
funds to Maine Fiber and required Maine Fiber to complete construction of 
the Three Ring Binder within three years.  Maine Fiber now holds title to the 
Three Ring Binder, which was completed in 2012, and is a “dark fiber 
provider” within the meaning of 35-A M.R.S. § 102(4-A) (2014) and section 
9216. 
[¶8]  When Maine Fiber was created, it lacked legal authority to attach 
dark fiber and equipment to utility poles that were owned by other entities 
and to construct the Three Ring Binder within public rights of way.  Because 
of the narrow timeline for completion of the project, emergency legislation 
was introduced to provide Maine Fiber the necessary authority to build the 
Three Ring Binder.  See L.D. 1778 (124th Legis. 2009). 
 
[¶9]  In February 2010, the Legislature held a public hearing at which 
GWI, Maine Fiber, and the Authority testified in favor of L.D. 1778.  FairPoint 
                                         
4  The grant provided eighty percent of the cost for construction but required a twenty percent 
match from private individuals or entities. 
 
5 
Communications, the largest provider of dark fiber and telephone service in 
Maine, opposed the legislation, asserting that the Three Ring Binder would 
overbuild the existing network.  A working group was formed to reach a 
compromise that would be agreeable to both sides. 
 
[¶10]  The resulting compromise granted pole attachment rights and 
the right to construct within the public rights of way to Maine Fiber and 
authorized a dedicated broadband sustainability fund, supported by a 
broadband sustainability fee (BSF) to be collected from users of the Three 
Ring Binder.  The purpose of the BSF was two-fold: to support improvements 
to expand broadband access, and to reduce the competitive advantage to 
those utilizing federally supported dark fiber over those who had expanded 
broadband and dark fiber access using private resources.  Although GWI was 
not part of the working group, it did not oppose the agreement reached. 
[¶11]  The Legislature amended L.D. 1778, which was later codified at 
35-A M.R.S. § 9216.  See House Amend. B to Comm. Amend. A to L.D. 1778, 
No. H-807 (124th Legis. 2009). 
[¶12]  Section 9216(2) imposed the BSF on any entity that leased, 
purchased, or otherwise obtained federally supported dark fiber from Maine 
Fiber.  See 35-A M.R.S. § 102(4-B) (2014).  Maine Fiber was required to collect 
 
6 
the BSF from those entities and to remit the collected amounts to the 
Authority.  Id. § 9216(3).  The Authority was required to deposit five percent 
of the funds received into the ConnectME Fund, which was used to support its 
activities pursuant to sections 9204 and 9216.  Id. § 9216(4)(A).  The 
remaining 
ninety-five 
percent 
was 
deposited 
into 
the 
broadband 
sustainability fund.  Id. § 9216(4)(B).  Pursuant to the statute, certain carriers, 
including FairPoint, received a right of first refusal to use the broadband 
sustainability fund to finance the deployment of broadband infrastructure in 
unserved or underserved areas within the carrier’s service territory.  Id. 
§ 9216(6).  Any remaining money in the broadband sustainability fund was 
then transferred to the ConnectME Fund.  Id. 
[¶13]  In 2015, the Legislature repealed the statute creating the BSF, 
which otherwise would have expired on December 31, 2017.  See P.L. 2015, 
ch. 151, §§ 1-2 (effective Oct. 15, 2015) (codified at 35-A M.R.S. § 9216 
(2016)). 
[¶14]  Since 2010, GWI has accessed and utilized dark fiber in the Three 
Ring Binder.  The terms under which Maine Fiber granted GWI access to the 
Three Ring Binder were stated in a series of Dark Fiber Use Agreements 
(DFUAs).  In the parties’ original DFUA, GWI expressly agreed that it “shall be 
 
7 
responsible for any taxes or fees . . . including . . . the ‘broadband sustainability 
fee.’”  Although GWI and Maine Fiber amended the DFUA several times and 
later entered into a Dark Fiber Use and Settlement Agreement, the provision 
regarding GWI’s responsibility for paying any taxes or fees, including the BSF, 
remained intact. 
[¶15]  From approximately May 2010 until May 2012, while the Three 
Ring Binder was being constructed, GWI paid approximately $15,000 of the 
BSF to Maine Fiber.  GWI then stopped paying the BSF but did not reduce the 
fees charged to its customers to reflect the amount it saved by the 
nonpayment of the BSF.  Calculated from when GWI stopped paying the BSF in 
June 2012 until the statute’s repeal in October 2015, the total amount of fees 
collected but not paid by GWI was $406,852.5 
[¶16]  On September 9, 2014, the State and the Authority filed a 
complaint against GWI in the Superior Court (Kennebec County) to collect the 
unpaid fees.  The case was subsequently transferred to the Business and 
Consumer Docket.  The court held a non-jury trial on April 27-28, 2016. 
[¶17]  By a judgment entered on October 5, 2016, the court awarded the 
State and the Authority $406,852 in unpaid fees, concluding that the State and 
                                         
5  Maine Fiber billed the BSF to every entity—approximately two dozen broadband service 
providers—that purchased, leased, or licensed dark fiber from Maine Fiber as required by the 
statute, but GWI was the only entity that did not pay the BSF as required. 
 
8 
the Authority had standing to sue GWI directly, that section 9216 did not 
violate GWI’s constitutional rights to due process and equal protection, and 
that the BSF was a valid business excise tax rather than a fee. 
[¶18]  GWI timely filed motions for additional findings of fact and to 
alter or amend the judgment.  See M.R. Civ. P. 52(b), 59(e).  After a hearing, the 
court issued an amended decision and judgment, but otherwise denied GWI’s 
motions.  GWI appealed, and the State and the Authority cross-appealed. 
[¶19]  GWI argues that, while the court correctly determined that the 
BSF is a tax rather than a fee, the court erred in concluding that the BSF is a 
valid business excise tax rather than a property tax that violates Me. Const. art 
IX, § 8.  The State and the Authority agree with the court’s award, but argue 
that the court erred in concluding that the BSF is a tax rather than a fee. 
II.  LEGAL ANALYSIS 
 
[¶20]  We review questions of law de novo.  Blue Yonder, LLC v. 
State Tax Assessor, 2011 ME 49, ¶ 7, 17 A.3d 667.  “Because both a fee and a 
tax raise monies for governmental use, the distinction between the two is one 
of purpose and of degree of particularity.”  Butler v. Supreme Judicial Court, 
611 A.2d 987, 990 (Me. 1992).  When determining whether an assessment is a 
fee or a tax, we consider four factors: (1) whether the primary purpose is to 
 
9 
raise revenue or to further regulatory goals, (2) whether the assessment is 
paid in exchange for benefits not received by the general public, (3) whether 
the assessment is voluntary, and (4) whether the assessment is a fair 
approximation of the cost to the government and of the benefit to the party.  
See id.; City of Lewiston v. Gladu, 2012 ME 42, ¶¶ 12-26, 40 A.3d 964.  In 
reviewing an assessment, we will respect the Legislature’s characterization of 
an assessment, unless that characterization is inconsistent with the law. 
 
[¶21]  Regarding the first factor, we have recognized that fees can be 
used to fund the construction of capital improvements and infrastructure 
when that construction supports recognized regulatory goals.  See Gladu, 
2012 ME 42, ¶¶ 15-16, 40 A.3d 964.  Here, section 9216 required that 
ninety-five percent of the BSFs remitted to the Authority be deposited into the 
broadband sustainability fund to support the regulatory goal of expansion of 
broadband infrastructure into unserved and underserved areas.  Thus, nearly 
all of the collected fees were used to further the specific regulatory goals 
defined in section 9202-A and to carry out the Authority’s regulatory duties as 
defined in section 9204(2). 
[¶22]  As to the second factor, the BSF provided both direct and indirect 
benefits to GWI as a user of the Three Ring Binder.  The expansion of 
 
10 
broadband infrastructure funded by the BSF benefitted GWI by providing 
access to more potential customers of its services.  See Gladu, 2012 ME 42, 
¶ 12, 40 A.3d 964 (“[A]lthough some jurisdictions have held that benefits 
must be direct and exclusive[,] the trend seems to be in favor of upholding 
fees that confer intangible benefits on both those who are assessed and those 
who are not.” (alteration omitted)).  Furthermore, GWI requested and Maine 
Fiber agreed to build the initial segments of the Three Ring Binder in locations 
that would benefit GWI’s important commercial customers—a request that 
uniquely benefited GWI. 
[¶23]  Turning to the third factor, we observed in Butler that fees are 
voluntary “in the sense that an individual may avoid the charge by choosing 
not to utilize the service.”  611 A.2d at 990.  In Gladu, we also stated that “[t]he 
fact that the costs of avoiding [an] assessment are quite high does not make 
the assessment involuntary.”  2012 ME 42, ¶ 23, 40 A.3d 964.  Here, the Three 
Ring Binder was available on an open access basis, and GWI’s decision to use 
it was voluntary. 
 
[¶24]  Finally, an assessment need be only a “fair approximation” of the 
respective cost to the government or the benefit to the party to be considered 
a fee.  Id. ¶ 24.  Here, only five percent of the collected fees were used to 
 
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defray the costs incurred by the Authority in implementing section 9216, but 
in return GWI and its customers received significant tangible and intangible 
benefits from the BSF. 
[¶25]  After evaluating all four factors, we conclude that the Legislature 
properly characterized the BSF as a fee and not a tax.  Accordingly, the 
arguments advanced by GWI asserting that the BSF is a tax fail, as do GWI’s 
arguments that there is some inequity in utilizing the BSF to support further 
broadband expansion and to level the playing field with providers that have 
supported broadband expansion with their own and their customers’ 
resources rather than relying on the federal subsidy.  Although the trial court 
erred in concluding that the assessment was a tax, the error is harmless 
because, whatever the assessment may be called, GWI is required to pay it.  
Therefore, after recognizing that the assessment is a fee, we affirm the 
decision of the Superior Court awarding the State and the Authority $406,852 
in unpaid fees, plus interest and costs. 
The entry is: 
Judgment affirmed. 
 
 
 
 
 
 
 
 
 
 
 
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David P. Silk, Esq., Benjamin M. Leoni, Esq. (orally), and Rebecca Gray Klotzle, 
Esq., Curtis Thaxter LLC, Portland, for appellant Biddeford Internet 
Corporation 
 
Janet T. Mills, Attorney General, and Thomas A. Knowlton, Asst. Atty. Gen. 
(orally), Office of the Attorney General, Augusta, for cross-appellants State of 
Maine and ConnectME Authority 
 
 
Business and Consumer Docket docket number CV-2014-56 
FOR CLERK REFERENCE ONLY