Many cities rely on revenue generated by renting municipal rights-of-way to utility providers, and telecommunications companies collect and remit a significant portion of that revenue.

Previous articles in the TML Legislative Update have pointed out that some in state government believe that municipal access line fees (the current method by which telecommunications providers compensate cities for the use of municipal rights-of-way) should be reduced or eliminated.

In December 2009, the Public Utility Commission voted to publish a proposed rule for public comment that would make certain “tweaks” to the access line system. The notice was routine in that it asked for comments on the technical aspects of the proposed rules. However, the addition of an unrelated question was not routine: “The commission invites specific comments on the commission’s jurisdiction to affect the total amount that a municipality collects as access line fees.”

The question was posed pursuant to a commissioner’s statements regarding the fees at a September 24, 2009, meeting. The commissioner discussed her concern with the “outrageous” level of fees and stated her opinion that the fees are a “hidden tax…that is coming through [the commission].” Her comments indicated that she may want to reduce the total amount of revenue to cities from the fees.

The commissioner’s statements, combined with the above question, are cause for concern and raise a much larger issue than the recently proposed rules. Over the years, some have incorrectly argued that the compensation for the use of a city’s rights-of-way is a “tax” on telecommunications providers or consumers. In fact, right-of-way fees are a value-based rental of the use of public property.

At a May 14, 2010, Public Utility Commission meeting, the commissioners took no action on the adoption of the technical aspects of the rulemaking. Rather, one commissioner asked for a one-day workshop among the commissioners and interested parties. That workshop has been scheduled for August 13, 2010. The commissioners’ comments seem to show that they are not concerned with municipal revenue and would be willing to reduce that revenue. Presumably, the point of the workshop is to set the stage for future legislation that would either reduce – or give the commission the authority to reduce – access line fees. To view the commissioner’s comments to this effect, which last about thirteen minutes, please CLICK HERE.

In addition, the commission has asked that the access line compensation issue be added to its biennial “scope of competition report” to the legislature. Municipal compensation has not been a part of that report in the past.

It appears that municipal right-of-way fee compensation will become an important legislative issue next session, perhaps more so than in recent sessions. League staff is working with the Texas Coalition of Cities for Utility Issues, and will monitor and participate as necessary. In fact, a survey regarding each city’s compensation may be coming from the League in the near future.

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