A representative of a telecom company told a Senate committee Tuesday that Texas cities should only be allowed to collect franchise, or right-of-way, fees based on the actual costs that cities incur managing the land.   Speaking to the Senate Business and Commerce Committee, which was examining telecom issues pursuant to an interim legislative charge, Kristie Ince of Time Warner Telecom told the committee that city franchise fees are unwieldy and unfairly levied, and that that cities should be required to switch to a cost-based methodology instead of the current-law access line methodology, which contains historical elements of gross revenue methodologies that cities once used before important 1999 legislation was passed.

The attacks on city right-of-way fees are a continuation of a multi-industry assault, many years in duration, on the notion that private companies ought to have to pay for the right to use public lands to make a profit.   Witnesses in recent legislative hearings are arguing that, because these fees get passed on to consumers, it’s really a case of cities charging their own citizens for the use of city land.  This is entirely misleading, of course. 

Many privately-owned utilities (cell phone and satellite T.V. companies, for example) don’t make use of someone else’s land, public or private.  Accordingly, they pass no such costs on to their consumers.  The fact that land line-based companies charge more because they use others’ land to make a profit is a fair business cost to those companies, as that’s simply the business model they have chosen.  The bottom line is this: businesses that need to use the land owned by others to deliver their product ought to pay fair market value for that use.  Any less paid to cities would be a donation of public property for a private use, which would be far more burdensome to the taxpayers as a whole than to the consumers who choose to use those technologies. 

A TML representative at the hearing went on to explain that such donation of city-owned land to a private company would also violate the Texas Constitution, which mandates that city property cannot be donated to a private use.

City officials should prepare for a continued attack on city right-of-way fees during the 2013 legislative session.   The League will vigorously oppose those efforts.

TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.

Back to Legislative Update Index