Is There Cash in Your Conduit?

As telecommunications competition heats up, many communities will be faced with an onslaught of street construction. Unlike the good old days when you only had to deal with a small number of utilities, we are now seeing expanded construction by existing carriers and market entry by new players. For communities, this represents a public nuisance, new costs and increased workloads for public officials.

But the expansion also represents a potential source of new revenue. Consequently, the time is overdue for cities to work out how to manage increased construction in a way that minimizes public inconvenience and staff workload, recovers the full costs of right-of-way management and collects rents from carriers that reflect the real value of the public's rights-of-way.

Ideally, you should have a set of rules that allows you to manage your rights-of-way in a rational manner and to collect appropriate revenues. Unfortunately, this is easier said than done. The Telecommunications Act of 1996 requires that you allow new entrants into your market and rights-of-way and that you provide a level playing field for all carriers.

The problem, of course, is that incumbent carriers often operate under highly preferential rules that are hard to change. In some states, franchises that pre-date statehood provide telephone companies with free access to rights-of-way. Too often these existing preferential rules are being applied to new market entrants. But even in states where the law allows it, many communities are not regulating incumbent telecom carriers or charging them for right-of-way use. If you have the authority, start revising your ordinances and fees now, not after new players enters your market.

The situation may also be different in the case of carriers seeking to cherry-pick or to serve only targeted portions of your market. A number of telecom attorneys suggest that a level playing field requires only that like carriers be treated the same.

While you may have limited franchising or taxing options, you probably retain significant control over construction activities. Consider revising your construction to permit rules to reflect the new multiple-carrier environment. A good place to start is a street-excavation ordinance. A particularly good model was recently enacted in Sacramento, Calif. (available at www.sacto.org/trench_cut.htm). The ordinance provided a well-thought-through approach to managing street cuts and recovering full costs.

A further step might be to invest in community-owned conduit or fiber. If you have a major road-building or water-main project coming up, this might be an excellent time to consider installing conduit, at least in key locations. Such conduit can avoid future excavations. Beyond that, you may find it to be a good revenue source. You may also be able to find a private partner to invest in the project, such as a cable TV or telephone company that is planning a major rebuild or a new carrier that is trying to enter your market.

For some more ideas, take a look at how state highway departments address the issue. While telecom is a new issue for most localities, competing carriers have been running fiber along state rights-of-way for years. Take a look at "Telecommunications Shared Resources: Legal and Institutional Issues," from the U.S. Transportation Department, for an overview of how several states are addressing the issue (www.its.dot.gov/sharedrpt.html).

Also watch the state of Minnesota carefully. Following a competitive bid process, Minnesota has entered into a contract with a private firm that grants exclusive access to certain freeways for the installation of fiber-optic cables. In return, the firm will provide the state with both active and dark fibers, require the vendor to install fiber that is owned by third parties at the same time as their own installation and make the capacity available for lease to all interested telecommunications companies.

But whatever you do or don't do, prepare to be challenged in court by at least one carrier.

Miles Fidelman is president of the Center for Civic Networking, which helps local governments with local information infrastructure. He can be reached at mfidelman@civicnet.org.