Public RightsofWay: LegalPolicy Issues

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Public Rights-of-Way Legal/Policy Issues
Pennsylvania American Public Works Association
Symposium and Rodeo September 7, 2005 Grantville,
PA
Matthew K. Schettenhelm Miller Van Eaton,
P.L.L.C.
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Myth Buster

• Federal Law does not limit the fee charged a
  telecommunications company for access to public
  rights-of-way to recovery of costs.
• Federal law permits up to a 5 gross revenue fee
  for PROW use by cable.
• CAVEAT Your state may have passed limitations on
  fees and charges that may be assessed a public
  right of way occupant.

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What are Rights-of-Way

• Public rights-of-way (PROW) are real, tangible,
  limited, and valuable real estate.

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Guiding Principle

• Sound economics and political equity require that
  private entities using public property for
  private profit should pay fair and reasonable
  rents. Failure to capture the fair value for the
  use of these assets transfers real estate costs
  from company stockholders to taxpayers.

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What is a Franchise?

• A Grant of a Special Privilege
• A License to Use PROW
• Revocable
• Personal (does not travel with estate)
• Burdens the real estate
• Not a Privilege to Offer a Service
• Broad Confusion Between These Two

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Federal Law -- Yields to State Law

• 5th Amendment US Constitution
• Federal Law May NOT Preempt State Property Law
• Cities have same rights as citizens
• 47 USC Sec. 253(c)
• 47 USC Sec. 332(c)(7)

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Federal Law Reserves for Local Government

• Property Rights
• Right to Charge Rent
• Right to Manage Behavior in ROW
• Right to zone and site antennas and towers

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State Property Law Controls

• Same Principles as other Property Rights
• Must Hold a Right to Burden the Property (Right
  to Use) from the Owner
• Estate in Fee/Lease/Easement/ Franchise/or
  License (Explicit or Implicit) Required

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Fundamental PROW Dispute

• Is franchise a regulatory relationship?
• Is franchise a property interest?

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Leading Cases were Determined by Answer

• Dearborn Cablevision of Boston right to occupy
  PROW is property interest, subject to state
  property law.
• Auburn Prince Georges II Chattanooga PROW
  occupancy is a regulatory interest, subject to
  state and federal regulatory exclusion.
• Coral Springs If govt action prohibits, OK if
  related to property interests

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History

• The Supreme Court, as early as 1893, in City of
  St. Louis v. Western Union Tel., recognized that
  local governments have a property right in
  controlling all elements and benefits of
  rights-of-way property and that the payment of a
  franchise fee is not a tax but a rental fee.
• City of St. Louis v. Western Union Tel., 148 U.S.
  92 (1893), opinion on rehg, 149 U.S. 465 (1893).
  
• City of Dallas v. FCC, 118 F.3d 393, 397 (5th
  Cir. 1997).

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Rights transferred to a PROW franchisee

• ROW franchisees gain 3 types of rights
• option to place facilities in ROW burden of
  potential use
• construction and maintenance rights for
  facilities actually installed actual burden
• Ongoing use or occupation of ROW to do business
• In a free market, property owner has a right to
  charge a fair market price

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Valuing Public Rights-of-Way

• Three kinds of compensation correspond to the
  three valuable rights
• annual option payment possibly fixed sum
• payment for facilities actually installed
  possibly linear or cubic measure
• fair market value for value derived by private
  user from public property possibly measured by
  gross revenue

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Cost vs. Value

• Industry argues that under 47 U.S.C. 253
  compensation is limited to costs
• There is no reference to costs in 253
• The legislative history of 253 refers to gross
  revenues does not imply costs
• Nonetheless, some courts have succumbed to
  industrys access argument, ignoring property
  rights

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Section 253

• (c) STATE AND LOCAL GOVERNMENT AUTHORITY. --
  Nothing in this section affects the authority of
  a State or local government to manage the public
  rights-of-way or to require fair and reasonable
  compensation from telecommunications providers,
  on a competitively neutral and nondiscriminatory
  basis, for use of public rights-of-way on a
  nondiscriminatory basis, if the compensation
  required is publicly disclosed by such
  government.

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Measures of ROW Value

• Where compensation is permitted, different ways
  of determining amount may be used (subject to
  state law)
• Linear foot fee
• Gross revenues-based fee
• Throughput-based fee
• Access line fee
• 253 Are local franchise requirements to provide
  in-kind facilities prohibitions? -- pending,
  but probably OK

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Section 253 in the States

• Legislatures
• 21 States have acted
• 10 permit gross revenue charges
• PUCs
• Challenging local government as 3rd tier of
  regulations.
• eg Minn/Md/Mich/Oreg

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Has Your State Chosen?

• Open question in Pennsylvania.
• Legislature has not clearly limited rights-of-way
  fees to costs.

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Has Your Municipality Chosen?

• General ordinances
• St. Louis linear foot charge starting at 1.50
  in 1991 with inflation adj., now 1.88 (2004-05)
• Little Rock, AR 5 of gross revenues
• Particular agreements
• Los Angeles (through 2002) 5 per linear foot
  of 6 conduit 1.25 per linear foot overhead
• Eugene, OR 4-5 per linear foot, or in kind

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Limited to Costs

• Some state laws limit local governments to cost
  recovery
• Iowa management costs caused by utilitys
  occupation of the ROW
• Missouri limitations established by SB 369
  scope unclear some cities grandfathered
• others e.g., Alaska, Indiana, Minnesota
• But the game is not over

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Identifying Costs

• Not all state laws limit all categories of costs.
• Acquisition fees for obtaining rights-of-way
• Administrative or processing costs
• Inspection costs
• Costs of safety precautions for ROW work
• Costs of locates and conflict resolution
• Cost of repairing maintaining the ROW
• Construction costs for ROW improvements
• Costs to community from delays, etc.

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Classification of Services

• Title 2
• Telecomm
• Fed/State
• Local franchise

• Title 3
• Wireless
• Fed. for service
• State Local for zoning and tax.

• Title 6
• Cable
• Fed/State/ Local reg.
• Local franchise

• Title 1
• Information Services
• Federal

Cable Modem Wireline Broadband VoIP/IP
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Classification of Services
Title 1

• Title 3
• Wireless
• Fed. for service
• State Local for zoning and tax.

• Title 6
• Cable
• Fed/State/ Local reg.
• Local franchise

• Title 2
• Telecomm
• Fed/State
• Local franchise

• Information Services
• Federal

Cable Modem Wireline Broadband VoIP/IP
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Issues at Stake in an IP World

• CALEA
• Universal service
• Back-up power and network redundancy
• E-911
• ADA

• State and local
• Taxation
• Consumer protection
• Access to services
• Compensation for rights of way
• Non-discrimination

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Post Brand X

• Brand X/Portland Issue Is IP platform a telecomm
  service?
• Consequence of Brand X No franchise needed to
  occupy public rights-of-way for provision of
  information services.

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Local Governments IP Interests.

• Local government has five transcendent interests
  in IP deployment
• Capture capabilities as a means to enhance all
  citizens quality of life
• Ensure the public is adequately compensated for
  use of any public resources committed to IP
  endeavors
• Ensure that all consumers, including local
  governments receive fair treatment as a consumer
  of the service
• Seek guarantee that Local Govt may provide
  service and
• Regulator of Last Resort.

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Industrys Primary Interests

• The Industry seeks to maintain its privileges but
  shed its obligations
• 1. Free and unfettered use of public resources
• Escape service (and tax) obligations to all
  segments of community
• Avoid any state or local oversight and
• Ban competition from local governments.

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REGULATORY TRACK OF THE THREAT

• Tax and Fee Freedom
• Cable modem
• Brand X

• Characterization of Services
• CABLE MODEM
• Broadband over Wireline
• Vonage
• IP Enabled Services Docket
• BellSouth Petition

VoIP/IP Social Responsibility freedom
Spectrum Refusal to acknowledge superior claims
of public
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The Domino Effect/Impact of Classification

• Cable Modem
• Wireline Broadband
• VoIP/IP and
• Internet Tax Freedom

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Local Government Wants Consequences of
classification understood (Dominos)

• State and local
• Taxation
• Consumer protection
• Access to services
• Compensation for rights of way
• Rights of Providers

• CALEA
• Universal service
• Back-up power and network redundancy
• E-911
• ADA

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Municipal Wish List for New Act?

• Should Congress amend the Communications Act?
• If so how?
• CAVEAT Recognize we are not the only party that
  gets to make the decision.
• We will likely need to play offense and defense.

• Amend the 96 Act to conform to local government
  policy.
• Clarify just and reasonable does not equal cost
  and local govt is a protected entity.
• Define cable modem as cable.
• Preserve local governments zoning authority.
• Make industry honor promises.

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Questions?

• Matthew K. Schettenhelm
• Miller Van Eaton, P.L.L.C.
• 1155 Connecticut Ave, N.W., Suite 1000
• Washington, D.C. 20036
• www.millervaneaton.com
• [phone]