Taking Back the Streets From State Telecom Pre-emption

The 1996 Telecommunications Act preserved municipal governments' authority over local rights-of-way. But it imposed some constraints as well-notably that local governments treat all telecommunications players in a competitively neutral fashion and erect no barriers to market entry. Not satisfied with this remaining local authority, telecommunications providers have targeted state legislatures for further regulatory relief.

In some cases, providers have had their day. Last year, for example, Colorado enacted Senate Bill 96-10, which strips local governments of the ability to charge carriers any form of rent for the use of public rights-of-way or utility easements. Communities cannot obtain any above-cost compensation-either direct or in-kind-from carriers. With the exception of cable TV operators, still subject to franchising controls, carriers can use public rights-of-way and easements for free.

Colorado communities are left with retaining police authority over their rights-of-way, and they can charge for direct costs of permitting, engineering and direct damage to public property. Less clear is whether they can recover the longer-term costs, such as reduced street life.

Perhaps the most extreme example is the Texas Public Utilities Act of 1995, which states that providers cannot enter the telecom business without a certificate of convenience and then goes on to say that "a municipality may not receive a certificate of convenience under this act." The impact of this law among Texas municipalities has been far-reaching:

In 1994, the city of Austin began seeking a strategic partner to develop an advanced telecommunications network. The city initially wanted an ongoing ownership and decision-making role, and it sought a prominent role for the city's electric utility department in constructing and maintaining the network's physical cable plant. Partially as a result of the Public Utilities Act, the city selected a proposal that limits its role to that of a franchising authority with no direct decision-making or operating role.

San Antonio had negotiated a relationship with ICG Access Services Inc., under which ICG would lease city-owned fiber and use that fiber to provide telecommunications services. But the Texas attorney general has issued an opinion stating that this arrangement is unlawful under the Texas Public Utilities Act.

In Abilene, the mayor's task force on technology established the need for an advanced telecommunications infrastructure to support the city's economic development goals. The task force further determined that Southwestern Bell and other local carriers were unlikely to make significant investment in upgrading their infrastructure in Abilene. The best course for Abilene appears to be either building city-owned infrastructure or some form of public/private partnership-a course that is precluded by the Texas law.Texas and Colorado are not isolated cases. Under intense lobbying from the communications industry, state legislatures have already passed, or are working on, a variety of measures that would hamstring local action on telecommunications issues. These laws include measures that prohibit public entities from competing with private entities, state-level pre-emption of right-of-way provisions and limits on the ability of municipalities to provide telecommunications services.

It's curious that this wave of municipal pre-emption is occurring, given the federal statute's apparent intolerance of such regulations. The Telecommunications Act of 1996 specifically says that "no state or local statute or regulation...may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." Furthermore, the statute requires the Federal Communications Commission to pre-empt any such statutes or regulations.

How are telecommunications carriers and state legislatures getting around that? They have argued that local governments are subdivisions of state governments and are thus subject to any limitations that state legislatures see fit to impose. The issue is a hairsplitter: Is local government an "entity" under the Telecommunications Act? Does "any entity" include local governments? It's a question that is central to several key cases now making their way through the FCC and various courts.

In the meantime, some localities are chipping away at state pre-emption. A case in point is the town of Hawarden, Iowa, which voted to establish a municipal cable system that would also offer Internet access and local telephone service. But when the city filed for a certificate of public convenience, the Iowa Telephone Association (ITA)-representing telephone companies-asked the Iowa District Court for a ruling that Hawarden be prohibited from providing telephone services, based on an Iowa law that prohibits public entities from competing with private entities. In the case, the court held that the 1996 act pre-empts state law and dismissed ITA's motion, which freed Hawarden to proceed.

In Florida, the legislature recently passed a bill requiring any public entity that offers telecommunications services to operate under the same constraints as private carriers by accounting separately for all revenues, expenses, property and investment associated with providing the services. The good news is that the bill explicitly states that municipalities can obtain certifications necessary to provide telecommunications services. Florida is also considering a bill that would replace local franchise fees with a uniform set of state-level fees.

Again in Texas, the city of Abilene and ICG Access Services have filed motions with the FCC asking for pre-emption of the Texas Public Utilities Act. ICG holds that the Texas act is preventing the company from entering the San Antonio market. Abilene's filing directly addresses the question of whether it is an "entity" under the act. The FCC has not yet ruled in either case. Pending a ruling, San Antonio's relationship with ICG is stalled. Abilene, still in a planning phase, can better afford to wait for a decision.

It is unclear whether the FCC will make an overarching ruling or will deal with these issues on a case-by-case basis. But in the absence of a clear precedent, some local governments are acting to protect themselves up front.

Arizona municipalities and major telecommunications providers, for example, are holding discussions aimed at finding a coordinated strategy for managing rights-of-way that would be acceptable to municipalities and industry. The initiative was started by the Maricopa Association of Governments, located in the Phoenix area, and is now under the leadership of the city of Phoenix and the Arizona League of Cities. So far municipal and industry interests have agreed to find cooperative solutions to right-of-way issues and have held off legislative initiatives.

In Michigan, several municipalities have formed Protect Rights of Way From Telecommunications EnCroachments (PROTEC), an effort to develop model franchise ordinances, file comments with the FCC, analyze alternate forms of right-of-way compensation and share legal costs for protecting local interests. (Information about PROTEC can be obtained from the city of Dearborn at 313-943-2282.)

So while the Telecommunications Act and state legislation threaten to further reduce local control over telecommunications infrastructure and rights-of-way, the work of these cities shows that the issue is far from settled. Indeed, the work done so far might help galvanize other city telecom planners into taking back their streets, or at least it might show how to bring the players to the bargaining table.

-- Miles Fidelman is president of the nonprofit Center for Civic Networking and the author of Telecommunications Strategies for Local Government-A Practical Guide. He can be reached via e-mail at mfidelman@civicnet.org or (617) 241-9205. The Center for Civic Networking maintains a Web site covering municipal telecom at www.civic.net/telecom.

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