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Tech Bankruptcy
April 25, 2007
  Cable TV not a "Utility" for purposes of section 366
I've always wondered whether Internet service could constitute a "utility" for purposes of section 366. If it did, section 366 would protect the debtor with past-due bills from having his or her service cut off.

The Court of Appeals for the Fifth Circuit, in In re Darby, 470 F.3d 573 (5th Cir. 2006), shed a little light on the issue. However, the Darby case dealt with cable TV access, not Internet service. The Court held that cable TV is a convenience, not a necessity, and thus differs from the traditional utilities specifically identified in section 366. Thus, section 366 did not provide the debtor any protection when Time Warner terminated his service.

The decision did provide some guidance. The Court noted that the debtor had options to his cable TV. For example, he could get satellite television. Although Internet service is a necessity (at least in my opinion), one can obtain Internet access through many different providers. In this respect it is more like television than like electric service or telephone service (athough these days anyone with an Internet connection can get phone service without going through the phone company - is phone service no longer a "utility"?)

Is an Internet connection a convenience or a necessity? We still don't know, but at least we know what television is.

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Warren E. Agin is a partner in Swiggart & Agin, LLC, a boutique law firm in Boston, Massachusetts focusing on the needs of technology companies. Mr. Agin heads its bankruptcy department. The author of the book Bankruptcy and Secured Lending in Cyberspace (3rd Ed. West 2005), Mr. Agin also chaired the ABA's E-commerce and Insolvency Subcommittee from 1999 to 2005, co-chaired the Boston Bar Association's Internet and Computer Law Committee (2003-2005), and served on the American Bar Association's Standing Committee on Technology and Information Services (2008-2011). Mr. Agin currently co-chairs the Editorial Board of Business Law Today. A contributing editor to Norton Bankruptcy Law and Practice, 3d, and co-author of its chapter on intellectual property for the past fifteen years, he is author of numerous legal articles and addresses on topics of technology, internet and bankruptcy law.

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