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Cities see dollar signs in telecoms

Telecom companies are irked by a new idea that they should have to pay extra fees--beyond the typical ones for repairs, permits and security--for using public facilities.

Faced with a budget shortfall, the mayor of Boston recently floated an idea for a new way to raise revenue that he claims could bring in an extra $9 million to the city's coffers: Charge telecom companies to use public assets such as city streets and telephone poles.

The idea is that companies that want to use these "rights of way" should have to pay for the privilege beyond just purchasing permits, making repairs and paying for police officers to guard constructions. Boston Mayor Thomas Menino said he sees right-of-way fees as a potential revenue source, and he isn't alone. However, any new moves by Boston are likely to face a fight from telecom carriers.

In a speech earlier this month, Menino pointed to New York, Austin and Chicago, saying, "Boston provides exemptions that other cities don't. And these exemptions add up."

Menino may have a point. Many municipalities charge fees to access their rights of way. But industry officials say they can't afford the additional fees, especially at a time when even major telecom companies are struggling and smaller competitive local exchange carriers are disappearing entirely.

"In the current environment it could have an impact on investment. The telecom industry for the last year or so has been hit pretty hard, and things like this would not make it any easier to make investment in hardware," said Verizon Communications spokesman Bob Noble. "In general we would be concerned about the affect such fees could have on consumers and on businesses in the area. As is often the case, fees can often be reflected in the price that everybody pays for services."

Municipalities have argued that it's not just about the money. Cities have also used the fees to discourage excessive construction traffic and tie-ups as telecom companies rip through streets to lay in new fiber.

"In Washington, right after the telecom act was passed, all the streets in town were dug up in order to put competitive carriers' lines in the ground. A lot of consumers complained, and as a reaction municipalities said, 'We'll make it difficult and expensive to do that,' in the hopes that it would stop that construction going on," said Philip Malet, a partner in the telecom group at the Washington, D.C., law firm Steptoe & Johnson. "Part of it is revenue enhancement, but part is responding to consumers and commuters who are complaining that the streets were being dug up every two months."

The telecom companies argue that the fees violate the federal Telecom Act of 1996. The act does allow cities to charge companies for access, but requires that the fees be "fair and reasonable," essentially compensating a city for the cost of digging up streets and the like.

"From our understanding it's not supposed to be a source of revenue. Other cities have even gone beyond that and attempted to charge one company and not another, and that is also very troublesome," said Jeff Roberts, a spokesman for AT&T. "In general around the country these situations have caused both companies and the municipalities lots and lots of money in litigation and the outcome is still unclear in most of them."

There have been some legislative moves to rein in municipalities. New York State Assemblyman Joseph Morelle, D-Irondequoit, has proposed a bill that would require municipalities that charge fees or levy taxes to charge the same rate to all companies.

That would help close a loophole in the 1996 law that prohibits cities from charging the old Baby Bells, a representative for the assemblyman said.

As for now, court cases are pending throughout the country. But one problem is that because the matter is largely one of local jurisdiction, what can be charged depends upon where you are.

"The problem with the court is it could be (that) a court in Illinois, says one thing, another (court) says something else in New York, and another one in Massachusetts says another thing. What are you going to do?" said Roger M. Golden, a partner in the Washington, D.C., office of Fenwick & West. "You've got to wait (for the Supreme Court), and don't hold your breath."

And there are some signs that higher governmental powers may get involved.

A recent Federal Communications Commission report pointed to a host of complaints from telecom companies, including requests to waive the right to challenge the legality of a permit's provisions and a request to "'voluntarily' contribute $350,000 to a property's improvement fund in order to obtain a permit."

FCC Chairman Michael Powell expressed the agency's "growing concern about rights of way as a barrier to effective deployment of new services," in a speech earlier this month. He said the FCC might file briefs in some pending cases to advise the respective courts on the issue.

"We've heard these concerns, we share them and are looking for ways to act on them," Powell said.