Before the

UNITED STATES DEPARTMENT OF COMMERCE

National Telecommunications and Information Administration

Washington, D.C. 20230

In the Matter of

Request for Comments on Deployment of

Broadband Networks and Advanced

Telecommunications

)

Docket No. 011109273-1273-01

RIN 0660-XX13

INITIAL COMMENTS OF THE NATIONAL ASSOCIATION OF TELECOMMUNICATIONS OFFICERS AND ADVISORS (“NATOA”) AND THE TEXAS COALITION OF CITIES FOR UTILITY ISSUES (“TCCFUI”)

I. Introduction

The National Association of Telecommunications Officers and Advisors (NATOA) is a national association that represents the telecommunications needs and interests of local governments, and those who advise local governments. The membership is predominately composed of local government agencies, local government staff and public officials, as well as consultants, attorneys, and engineers who consult local governments on their telecommunications needs.[2]

The Texas Coalition of Cities for Utility Issues (“TCCFUI”) is a coalition of more than 110 Texas Cities dedicated to protecting and supporting the interests of the Citizens and Cities of Texas. TCCFUI monitors the activities of the Texas Legislature, Public Utility Commission, Rail Road Commission and the Federal Communications Commission. TCCFUI also provides franchising expertise and model franchise documents to member cities, and ensures that the citizens of Texas continue to enjoy quality utility and cable service.[3]

NATOA and TCCFUI respond to three elements of specific questions posed by NTIA. The following comments address: (a) the appropriate federal-state-local relationship necessary to foster broadband development; (b) the role of public rights-of-way as one of the market characteristics necessary to induce competitors to make facilities-based investments; and (c) the impact of local government right-of-way management regulatory policies on current broadband deployment rates.[4] In particular, NATOA and TCCFUI herein discuss the impact of broadband deployment on: the legal authority and fiduciary duty of state and local governments to recover fair value for private use of publicly-owned property; and present evidence that local franchising and right-of-way compensation authority has not affected broadband deployment rates.

The Communications Act of 1934, as amended by Congress in 1996[5], establishes a system of shared regulatory authority between the states and the federal government. The Federal Communications Commission ("FCC" or “Commission”) regulates “interstate communication by wire and radio,”[6] subject to the acknowledged authority of local and state governments over public rights-of-way. However, the FCC’s jurisdiction over interstate communications itself has limits. For example, the FCC may not broadly preempt federal, state or local health and safety regulations, zoning regulations, and Equal Employment Opportunity requirements. The states (and local governments pursuant to delegated state authority) regulate “intrastate communications by wire and radio.”[7] Local governments and the FCC each have a measure of independent authority, but also share certain regulatory jurisdiction over cable television franchise requirements related to "facilities and equipment,"[8] and cable television consumer protection.[9] For example, the FCC has authority to establish minimum cable television customer service standards, but each state and each locality has the authority to establish more rigorous requirements, and the FCC is not authorized to intrude upon that authority. In sum, where Congress has granted federal agencies regulatory authority, Congress has also reserved discrete authority for state and local governments.

Federal agencies should acknowledge that federal law assigns local governments responsibility for protecting and stewarding their most valuable real estate asset — the public right-of-way. Local authority assures that multiple, conflicting uses of public rights-of-way does not thwart the public purposes to which it is dedicated. In this context, local governments currently manage public rights-of-way to encourage market entry and competition. Local governments are committed to the following regulatory principles:

1. Encourage rapid deployment of advanced networks which enhance the welfare of our citizens and the economic development of our communities;

2. Ensure advanced network providers address local community needs and interests;

3. Protect consumers from unfair and unreasonable business practices;

4. Encourage the development of meaningful telecommunications competition; and

5. Ensure that the private, for-profit use of public property is efficiently and effectively managed, fully compensated, and consistent with the dedication of public rights-of-way to serve the public interest.

NATOA and TCCFUI dispute suggestions by telecommunications companies (made in numerous filings before the FCC) that further preemption or restriction of local government right-of-way authority will speed deployment of advanced services. All available evidence suggests that restricting or preempting local government authority to manage and require compensation for use and occupation of the public rights-of-way does nothing to accelerate the rate of deployment of advanced services. Preempting local authority does, on the other hand, increase costs to all persons dependent on using rights-of-way. When telecommunications providers do not pay their fair share, local governments and their taxpayers must foot the bill.

All available evidence demonstrates that effective right-of-way management and compensation speeds development of overbuild telecommunications facilities. Preemption of this local authority has the opposite effect. Many of the local government restrictions suggested by industry are now imposed on Texas municipalities by Texas HB 1777. These restrictions on local government right-of-way authority have not accelerated deployment of advanced services to Texans. The implementation of HB 1777 has harmed Texas taxpayers and all right-of-way users. HB 1777 proves local government regulation is not the cause of delays in telecommunications network deployment. Advanced services remain unavailable to the majority of Texans – regardless of whether they live in urban areas, affluent suburbs, rural areas, or economically depressed or disadvantaged areas. Advanced services are deployed only to large commercial buildings in Texas that are more profitable to service than residential and small business subscribers. Deployment of advanced services is most influenced by the single factor of capital availability – access to capital and return on investment. When capital was available to the telecommunications markets, deployment rates in Texas and elsewhere increased. When access to capital became limited, deployment stopped. This was not caused by HB 1777’s preemption of local authority. HB 1777 did not improve the deployment rates in Texas, and there is no evidence that such a preemption on a national level would improve deployment rates anywhere in America.

II. THE TELECOMMUNICATIONS ACT OF 1996 PROTECTS LOCAL AUTHORITY TO MANAGE AND REQUIRE COMPENSATION FOR USE OF THE PUBLIC RIGHTS-OF-WAY TO DEPLOY BROADBAND FACILITIES.

The Telecommunications Act of 1996 (“1996 Act”) sought to promote the entry of multiple, competing telecommunications and advanced services providers, without transgressing the rights and responsibilities of state and local governments. Congress explicitly resolved these two goals in the final text of 47 U.S.C. § 253 (Removal of Barriers to Entry). NTIA’s ultimate broadband recommendations will impact the use and occupation of local public rights-of-way to deploy broadband facilities. Therefore, an accurate analysis of § 253 is crucial to any NTIA action on broadband deployment.

47. U.S.C. § 253 states:

(a) IN GENERAL. ‑‑ No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.

(b) STATE REGULATORY AUTHORITY. ‑‑ Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers.

(c) STATE AND LOCAL GOVERNMENT AUTHORITY. ‑‑ Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.

(d) PREEMPTION. ‑‑ If, after notice and an opportunity for public comment, the Commission determines that a State or local government has permitted or imposed any statute, regulation, or legal requirement that violates subsection (a) or (b), the Commission shall preempt the enforcement of such statute, regulation, or legal requirement to the extent necessary to correction such violation or inconsistency. . . .

First, it is useful to briefly summarize the proper interpretation of the various subsections of § 253. Subsection (a) is a general prohibition against state and local regulations that have the effect of prohibiting the provision of telecommunications service. Subsection (b) is a safe harbor that protects traditional state consumer participation regulations, including universal service. Subsection (c) is a safe harbor that protects state and local right-of-way management and compensation authority. Finally, subsection (d) gives the FCC jurisdiction to determine whether state or local regulations violate subsection (a), or fall within the state safe harbor of subsection (b). As discussed below, if the FCC were to determine that a state or local regulation actually had the effect of prohibiting the provision of telecommunications service in violation of subsection (a), it would be for a federal court – not a federal agency – to determine whether such state or local regulation is nonetheless permissible because it falls within the safe harbor of right-of-way management and compensation.

Congress delegated to the courts – and thus took away from federal agencies – the power to interpret what are fair and reasonable right-of-way management and compensation regulations. Section 253 dismisses federal agency jurisdiction to take actions (even to promote competitive networks) that infringe upon local property rights in the public rights-of-way.[10]

A. Preemption of State and Local Regulations Is Not Permissible Unless Such Regulations Have the Effect of Prohibiting the Provision of Telecommunications Service.

As a threshold matter, under § 253(a), state and local right-of-way management regulations may not be preempted by the FCC unless the agency determines that the state and local requirements “prohibit or have the effect of prohibiting the ability of any entity to provide” telecommunications service.

In one of the seminal cases analyzing § 253, the FCC itself recognized that there must be a prohibition before there can be a violation of § 253:

[I]t is up to those seeking preemption to demonstrate to the Commission that the challenged ordinance or legal requirement prohibits or has the effect of prohibiting potential providers' ability to provide an interstate or intrastate telecommunications service under section 253(a). Parties seeking preemption of a local legal requirement . . . must supply us with credible and probative evidence that the challenged requirement falls within the proscription of section 253(a) without meeting the requirements of section 253(b) and/or (c).[11]

Most recently, the Eleventh Circuit interpreted § 253 and applied the same construction:

[I]t is clear that (b) and (c) are exceptions to (a), rather than separate limitations on state and local authority in addition to those in (a). Consistent with this interpretation, if a party seeking preemption fails to make the threshold showing that a state or local statute or ordinance violates (a) because it "may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service," the FCC has found it unnecessary to consider whether the statute or ordinance is "saved" by the exceptions in (b) or (c).[12]

B. Section 253(d) Precludes Federal Agencies From Addressing Issues Regarding Local Right-Of-Way Compensation Or Management.

In the event that credible evidence is presented to demonstrate that a state or local regulation has the effect of prohibiting the provision of telecommunications service, under § 253(d) the FCC lacks authority to consider whether state or local right-of-way compensation or management are nonetheless permissible regulations under the safe harbor of § 253(c). Congress intended these questions to be left to the courts. Subsection (d) gives the Commission authority to resolve only subsection (a) and (b) disputes, and withholds from the Commission authority over subsection (c) disputes. Federal agencies lack authority to determine whether compensation charged by a municipality is "fair and reasonable" or whether right-of-way management or compensation requirements are exercised on a "competitively neutral and nondiscriminatory basis." Such questions are for the courts to resolve. Any NTIA policy regarding broadband deployment must recognize Congress withheld from federal regulations the jurisdiction to intrude on the rights of sovereign state and local governments on matters of rights-of-way management and compensation.

Subsection 253(d), the preemption provision, was added in Conference, based on Section 254 of the Senate Bill.[13] In the Senate, § 254(d), as originally proposed and numbered, contained a sweeping preemption provision that did not exclude subsection (c) from its coverage. After a proposed amendment to remove the preemption provision in subsection (d) entirely, and after substantial debate on the Senate floor, a compromise amendment, offered by Senator Gorton (R‑WA), was adopted to preserve state and local authority over management of and compensation for the public rights-of-way. The Gorton Amendment, adopted by unanimous voice vote, revised subsection (d) to clarify that subsection (c) (rights-of-way management and compensation issues) would not be subject to FCC preemption authority under subsection (d).

Senator Gorton, the author of the successful compromise amendment, stated:

There is no preemption . . . for subsection (c) which is entitled, "Local Government Authority," and which preserves to local governments control over their public right of way. It accepts the proposition from [Senators Feinstein and Kempthorne] that these local powers should be retained locally, that any challenge to them take place in the Federal district court in that locality and that the Federal Communications Commission not be able to preempt such actions.[14]

The intent of Congress to reject any implied FCC preemptive authority over local and state governments is also explicit:

The conference agreement adopts the House provision [under Section 601] stating that the bill does not have any effect on any other Federal, State, or local law unless the bill expressly so provides. This provision prevents affected parties from asserting that the bill impliedly preempts other laws.[15]

Section 601(c)(1) states:

NO IMPLIED EFFECT. –This Act and the amendments made by this Act shall not be construed to modify, impair, or supersede Federal, State, or local law unless expressly so provided in such Act or amendments.[16]

In sum, under the 1996 Act, the federal agency responsible for implementing the Act has no implied authority, its delegated authority is limited, and does not extend to the authority to review state and local government management and compensation decisions affecting public rights-of-way.

C. Congress Preserved Local Authority to Impose Reasonable Compensation and Management Requirements.

Section 253(c) specifically preserves local authority over reasonable right-of-way compensation and management. Both the language of 253(c) and the intent of Congress are explicit and unambiguous. The Senate bill which eventually became the 1996 Act was introduced without any safe harbor for local governments. The Senate Commerce Committee added subsection (c) in much its present form to the Senate bill as originally introduced. The Committee intended to provide a safe harbor for local governments.

The House took similar action to preserve local authority over public rights-of-way. The corresponding bill introduced in the House explicitly preempted local right-of-way compensation. While it included a safe harbor provision for state consumer regulation, analogous to the Senate’s version,[17] it also contained a preemption requiring “parity” of franchise fees and other local charges between incumbent local exchange carriers (ILECs) and competitive local exchange carriers (CLECs). This parity provision was cast in the form of a prohibition (“no local government may impose or collect…"). These two provisions were generally referred to as the “MFS amendment,” because that company had successfully sought inclusion of similar language in H.R. 4103, a predecessor bill in the 103d Congress.

In the House hearings, local government witnesses testified in opposition to the MFS amendment. Negotiations between Representatives favoring the local government position and Representatives favoring the MFS position failed to resolve how the House bill should treat right-of-way issues.[18] The debate then moved to the floor of the House. After debate, the House adopted the Barton-Stupak amendment by the overwhelming vote of 338-86.[19] The Barton-Stupak amendment struck the entire Committee proposal to preempt local governments, including the MFS amendment, and substituted new language essentially the same as that added by the Senate Committee, with three exceptions not directly material here. Speaking in support of the Barton-Stupak amendment, Representative Barton stated:

[The amendment] explicitly guarantees that cities and local governments have the right not only to control access within their city limits, but also to set the compensation level for the use of that right-of- way…. The Chairman’s amendment has tried to address this problem. It goes part of the way, but not the entire way. The Federal Government has absolutely no business telling State and local government how to price access to their right-of-way.[20]

Despite the overwhelming House vote in favor of the Barton-Stupak amendment and rejecting Mr. Schaefer’s position, as well as the unanimous adoption of the Gorton amendment on the Senate floor, the debate over local right-of-way management and compensation language continued into the conference committee. Mr. Schafer was a member of the Conference Committee and attempted once again to revisit preemption of local right-of-way authority. The final conference agreement on the bills as adopted by both houses, however, adopted the Senate language of § 253. The final law thus preserves the safe harbor protecting the authority of local governments over right-of-way management and compensation.

Section 253(c) begins “Nothing in this section affects….” Congress chose this language to mirror Section 2(b) of the 1934 Act, 47 U.S.C. § 153(b) (“Nothing in this act shall … apply …”).[21] Congress was well aware that the Supreme Court had held that language to be an overarching denial of jurisdiction to the Commission in Louisiana PSC v. FCC, 476 U.S. 355, 370, 374 (1986) (the language “fences off” this area from FCC jurisdiction).[22]

D. Under Federal Law, Compensation for Use and Occupation of Public Rights-of-Way Is Not Limited to Cost.

Nothing in Section 253(c) suggests that public compensation for private use of public rights-of-way is limited to cost. Congress spoke of “compensation … for use” rather than reimbursement of costs. The debate on the Barton-Stupak Amendment on the House floor explicitly ratified franchise fees measured by the traditional percentage of gross receipts – analogous to the percentage franchise fee for cable television operators, embodied in Section 622 (Franchise Fees) of the Cable Act of 1984. [23]

If Congress had intended to limit local government to recovery of its costs, it would have used language to that effect rather than using the term “compensation,” which as one federal court recently stated, “has long been understood to allow local governments to charge rental fees for public property appropriated to private commercial uses.”[24] The United States Supreme Court held early on that a franchise fee could properly be based on the value of the franchise and that whether the municipal fee was excessive or not could not be determined from the face of the franchise.[25]

E. Compensation For Use of the Public Rights-of-Way May Be In the Form of Gross Revenues.

A gross revenues fee is a fair and reasonable method of approximating use of public rights-of-way. A percentage of a telecommunications provider’s gross revenues is a measure of use that is roughly proportional to the intensity of the provider’s use of the public rights-of-way. Use is not limited to permanent physical occupancy. Transiting a public right-of-way is a use of that roadway. Consider that the telecommunications provider using facilities in a right-of-way is in the business of transporting bits of information over lines occupying the streets. As a first approximation the provider’s charge to customers is proportional to the amount of information transported, i.e., the number of bits. The amount of the carrier’s transport is reflected in its revenues. Thus, to measure use of the rights-of-way by information transported for which the end-user pays is comfortably within the legislative discretion of local governments.

Furthermore, “calculating the impact or costs of telecommunications providers on the public rights-of-way would not be a simple undertaking.”[26]

(“A number of intangible factors would need to be considered, including the shortened life of pavement, added police costs to deal with traffic disruptions, interference with the City’s other systems, impact on traffic, and offsetting benefits to the City from the availability of multiple telecommunications providers.”)[27]

Given the difficulty of determining the costs to be associated with a particular company’s use of the rights-of-way, a gross revenues fee offers the simplest and fairest way of setting compensation. Several courts have recognized these difficulties, and have upheld gross revenue-based compensation.[28]

III. APPROPRIATE RIGHT-OF-WAY MANAGEMENT IS NOT A BARRIER TO ENTRY.

The various and often competing interests of the rights-of-way users must be coordinated and managed. Telecommunications providers, utilities and the traveling public have conflicting requirements. A right-of-way manager must take control if any of the parties are going to use the local public rights-of-way effectively. For this reason alone it is imperative that an entity coordinate these uses of the local rights-of-way, taking into account the needs of the local community. Local governments are the only practical level of government that balance these interests and preserve the local rights of way for future use.

A. Right-Of-Way Management Is Necessary To Balance the Competing Demands Placed Upon Local Rights-of-Way.

Since the passage of the 1996 Act, the number of companies seeking to offer telecommunications services has exploded. Since 2000, the number of these providers that have postponed or eliminated scheduled broadband facility deployment or gone into bankruptcy has increased exponentially.[29] While not every provider will seek to enter every market at the same time, local communities are increasingly finding themselves faced with a myriad of telecommunications providers seeking access to or abandoning facilities in their public rights-of-way — property often under intensive use by other providers, utilities, and the traveling public. With each new user of the local rights-of-way comes, in addition to increased physical burdens on the local right-of-way, an increase in the possibility that a new user will interfere with and damage existing uses.

Appropriate right-of-way management is not a barrier to entry. Nor is there any substantial evidence in any federal regulatory or court proceeding to the contrary.[30] Local communities have worked with telecommunications providers and other right-of-way users to resolve problems and make right-of-way work more efficient. For example, the permitting process affords a community the opportunity to be aware of the various activities occurring in the public rights-of-way and to spot any potential conflicts.[31] Local governments may also be involved in arranging for common trenching or joint undergrounding of utilities and similar facilities when new developments are built or existing areas rebuilt.[32] Such construction- and restoration-related requirements are characteristic of right-of-way use agreements and telecommunications ordinances.

Reasonable right-of-way management does not prevent competitive entry. Indeed, it is essential to competitive entry, insofar as the local government must make sure that entrants do not interfere with other telecommunications providers or other right-of-way users. If each telecommunications provider were permitted to occupy the public rights-of-way in any manner it saw fit, some users would inevitably interfere with the use of others. The coordinating function of the local government is thus crucial to advancing competitive networks.[33]

B. Right-of-Way Management Is Necessary to protect the Public Health and Safety.

More directly harmful are those cases where failure of telecommunications providers (or other right-of-way users) to abide by sound standards of right-of-way management results in serious damage due to the use of the same physical space by multiple companies.[34] The following list are only one set of examples from the state of Texas:

· A contractor laying fiber optic cable for SWBT dug into a 2-inch diameter gas main in Harris County (outside Houston). The resulting explosion destroyed one home, badly damaged another, and forced evacuation of 25 other homes when gas entered the sewer lines. Multiple fire crews were required. Damage was estimated at $600,000.[35]

· A contractor putting in a fiber-optic duct system drilled into a 33-inch diameter pressurized sewer line. The spill lasted 9 hours, sent 4.3 million gallons of sewage downstream creating the worst environmental spill in Plano (near Dallas) history. Twenty municipal workers worked through the night to repair the damage and sewage pump stations had to be shut down to repair the damage.[36]

· A construction crew installing fiber-optic cable in downtown Dallas hit a 32-inch diameter water main buried 32 feet beneath the street. The force of the water created a 50-foot gash in the sidewalks, and 20 million gallons of water flowed for four hours, flooding the basements of four buildings before the break could be contained. The flooding destroyed electrical boxes, motors that run air conditioning and pump water, elevators, carpeting and 30 to 40 cars. Eight hundred federal employees and residents of a 205-unit apartment building could not return to their offices or homes for several days.[37] If the incident had not occurred on a holiday, workers in basement offices could have been killed.

· A contractor installing underground conduit severed a SWBT telephone line, cutting off telephone service, including emergency 911 service for 3,600 Arlington, Texas (near Dallas) residents.[38] Surrounding merchants could not make credit card sales during the phone outage.[39]

· Over a two-week period, sub-contractors for Touch America cut through two water lines and three gas lines in Flower Mound, Texas. Forty people were evacuated, residents were without water for seven hours, flooding occurred for four hours, and traffic had to be diverted. Municipal utility crews worked through-out the night to repair damage.[40]

· A private contractor doing fiber optic work drilled into a 4-foot diameter water pipe shutting down one of Irving, Texas’s (Dallas suburb) primary water mains.[41]

· Fiber optic installation contractors caused $204,440 worth of damage to Plano, Texas water and sewer facilitates between 1998 and 2001.[42]

· A SWBT contractor bored into an 8-inch diameter water main at Crowley Road and Westwood Drive in the City of Arlington, Texas, causing $41,284 in damages.[43]

· A Level 3 Communications contractor bored under West Street in the vicinity of the Union Pacific Railroad in the City of Arlington, Texas. Immediately after the boring began, West Street began to shift and crack due to the boring operations. The City was required to expend $84,957 to repair the damage to West Street.[44]

The list of Texas incidents is duplicated in every state of the Union. These right-of-way accidents will be reduced only if local governments have adequate regulatory authority to: properly manage the public rights-of-way; to impose construction and control and coordination requirements; to enforce inspections and penalties for safety violations; to evaluate the experience and safety procedures of construction contractor crews on-site; and to impose appropriate bonding, insurance and restoration requirements with incentives for safe performance.

Local government requirements not only prevent accidents, but will save all right-of-way users money. For example, common trenching can save money for all concerned, avoiding cases such as that of Sierra Pacific Power Company in Reno, Nevada, which ended up paying $90,000 in additional costs when it dug up a newly resurfaced street for a new installation.[45] In a similar case, Constitution Avenue N.W. in Washington, D.C., after being resurfaced in 1998, was being reopened by e.spire in early 1999 to install communications lines.[46]

C. Communities Experience Substantial Costs For Right-Of-Way Management.

Public rights-of-way involve substantial costs to communities. The most obvious, and smallest, are the costs of administering use – processing applications, reviewing the qualifications of users (and their subcontractors), overseeing installations, and the like. But in addition, a community incurs the cumulative cost of telecommunications companies' incursions into the public rights-of-way. Numerous studies have documented, for example, how repeated street cuts reduce the useful life of a street, even if the surface is "repaired" by the company making the cut.[47] This cost is massive, and it is increasing. For example, the D.C. government's average of 9,000 street cut applications had swelled to 15,000 by 1998.[48] A news item from San Francisco reported: "In the past three months, three different telecommunications companies have torn up exactly the same strip of road in almost the exact same spot. Three more companies are lined up to do the same."[49]

Further, neither of these categories of costs takes account of the communities' original cost of obtaining the land and constructing and maintaining the physical improvements public rights-of-way require. Full recovery of the asset cost of rights-of-way for communities thus represents substantial amounts in addition to the superficial cost of administration alone.[50]

In effect, failure to recover these costs represents a subsidy to telecommunications companies by the community. Such a subsidy is, of course, something the community may choose to provide, perhaps as a means of stimulating business development. That choice, however, belongs purely to the community, not to to federal agencies not willing to pay the costs themselves.[51]

Finally, September 11th requires local governments across the country to redirect scarce resources to strengthen homeland security and first response capabilities. In a recent letter to the Congress, New Orleans Mayor and U.S. Conference of Mayors President Marc Morial estimated the cost of the new burdens of homeland security on local governments to be at least $1.5 billion for next year alone.[52] Where will this money come from? Unlike the federal government, cities and counties cannot print money, and by law must balance their budgets every year. Fair market value compensation for private use of municipally-maintained public rights-of-way represents sound economical public policy.

IV. REASONABLE RIGHT-OF-WAY COMPENSATION IS NOT A BARRIER TO ENTRY.

A. A Local Government Has A Right To Gain A Fair Price For Its Property.

A local government has a constitutional right to the benefits of property ownership. A private-sector property owner has a right to rent its property for the market value of that property, not merely its costs (much less its administrative costs). So does a local government.

Because local government property interests are constitutionally protected, the courts' analysis of the value involved in the context of unconstitutional taking (further discussed below) is relevant. The Supreme Court has addressed the wide range of property interests that, if seized by federal action, would constitute a taking.[53] The opinion in Lucas v. South Carolina Coastal Council indicates that the "interests" cognizable for 5th Amendment purposes "may lie in how the owner's reasonable expectations have been shaped by the State's law of property -- i.e., whether and to what degree the State's law has accorded legal recognition and protection to the particular interest in land." If the access/use sought by the telecommunications company was cognizable if requested from a private property owner, then it should be comparably valued and enforceable in a public property context. The illusory plausibility of a compensation scheme strictly limited to costs rests on the unstated and erroneous belief that a local government lacks the right to sell or lease its property for its full market value.[54]

For this reason, any analysis that focuses on recovery of costs as the sole purpose of right-of-way compensation is misguided. There is a persistent (but unsound) impression that local government property is not entitled to the same protection as other property. In TCG Detroit v. Dearborn, the federal district court recognized that conveying to a telecommunications provider the valuable right of access and use of the public’s property warrants additional compensation based on the value conveyed.[55]

The federal government’s own spectrum auction policies are directly analogous.[56] In devising a scheme to permit telecommunications providers to use a public resource – the electromagnetic spectrum – the federal government made no pretense of limiting the providers' payments to the government’s costs of acquiring and administering the electrocmagnetic spectrum. Rather, the federal government recognizes that the for-profit user of such a public resource should pay fair market value for that use. The Federal government has designed an entire auction mechanism to establish that value. Indeed, the FCC and Congress has congratulated itself publicly for wise stewardship of the federal government's "property" based on the large sums telecommunications providers were willing to pay for its use:

· “The spectrum auction is a ‘cash cow’. [W]e’re trying to milk it for billions more in auction revenue.” Reed Hundt, Former Chairman of the FCC [57]

· “It would be wrong to allocate these valuable resources for less than their real, free market value.” Sen. John McCain[58]

· “The digital spectrum is beachfront property on the Cybersea.” – Reed Hundt[59]

Economists will agree with the federal government’s reasoning. Spectrum, like right-of-way space, is a scarce resource that is most efficiently allocated through a market price mechanism. It is important to assure this limited resource is made available to its highest and best use. It would be most extraordinarily inconsistent if a federal agency were now to take the position that local government property, unlike federal property, should be given away to telecommunications companies at below market values.[60]

A compensation arrangement based on gross revenues has the advantage of directly reflecting the value of the use.[61] In addition, it automatically self-adjusts to the shifting fortunes of the right-of-way user in the market. As revenues increase, reflecting the increased value the user is deriving from use of the right-of-way, a revenue-based payment increases to match.

B. Prohibiting Local Governments from Collecting Fair Compensation Would Create A Subsidy.

A federal or state law that prevents a community from charging a fair price for its property forcibly transfers funds from the community to the user of the property (the telecommunications provider). This is a forced subsidy of the provider by the community. In the days when a single monopoly telephone provider ‑ the nationwide Bell System ‑ provided universal service, it was plausible to think of this as a harmless subsidy from the community to itself (all citizens own the public rights-of-way, all citizens receive telephone service). But in a competitive market, where the telecommunications provider does not provide universal service and the variety of services offered are largely unconfined by rate regulation, that pre-competition rationale disappears. If all citizens are compelled to contribute their property (local rights-of-way) at below-market prices in order to lower the costs for the favored telecommunications provider and its customers, the citizens are subsidizing the telecommunications provider (and its customers).

Should a local community choose to use its own property to subsidize new entrants, such a policy can be debated and resolved by the affected citizens themselves through normal democratic processes. But the federal government cannot take local property for a forced subsidy. Such a taking without compensation is both unconstitutional and a violation of the Unfunded Mandates Act.[62] The House adopted the Barton-Stupak amendment in the 1996 Act to avoid any suggestion that the 1996 Act might impact localities in a way that conflicted with the Unfunded Mandates Act.[63]

C. Local Communities Seek To Apply Reasonable Right-Of-Way Compensation Requirements Fairly To All Competitors.

The FCC has questioned right-of-way arrangements that "favor incumbent LECs over competing carriers."[64] Local governments share this concern. In every case where a local community addresses telecommunications use of the public rights-of-way, the single most difficult question is how to deal with the incumbent LEC – the proverbial "900-pound gorilla" in the local telecommunications market.

If the federal government wishes to resolve such anomalies, it must reject proposals to ratify and generalize the incumbents' claims to special privileges. State or federal laws or regulations that favor incumbents are historical relics with no place in a modern competitive environment. At best, such rules are based on a century-old notion of a social compact with the Bell System that allowed a monopoly in return for rate regulation and universal service. That compact no longer applies in today's market. Times change, and the incumbents' views of their historic rights must change with them.

V. PREEMPTION OF LOCAL GOVERNMENT RIGHT-OF-WAY FRANCHISE AUTHORITY HAS NOT INCREASED DEPLOYMENT OF ADVANCED SERVICES.

Texas is a paradigm of industry efforts to preempt local government right-of-way franchise authority. Texas is the third most populous state in America and was one of the first states since 1996 to restrict local government right-of-way franchise authority. The Texas experience since passage of HB 1777 objectively describes the consequences of preemption of local government regulatory authority.[65] The Texas experience is proof-positive that preemption of local authority does not result in accelerated deployment of advanced service.

In 2001, two years after passage of HB 1777, the Public Utilities Commission of Texas (“PUCT”) reported that 16.5% of Texas communities have advanced service and 36.1% have high-speed service.[66] However 47.3%, almost half of all Texas communities, do not have either high-speed or advanced services.[67] By contrast, the Commission reported that by December 2001, 75% of all U.S. zip codes had high-speed service.[68]

In Texas, local right-of-way franchise authority has been preempted. In Texas, communities still do not have access to advanced services. Missouri City, Texas, a fast growing community near Houston, Texas, cannot find a telecommunications company willing to provide high-speed or advanced service to the City or its residents.[69] Under HB 1777, Missouri City cannot impose or require many of the right-of-way management requirements that commentors have asked to have preempted. Yet deployment of advanced services still has not reached Missouri City.

A. Preemption of Local Authority Has Not Increased Deployment of Advanced Telecommunications Services to the Majority of Americans, i.e., Residential and Small Business Customers.

Elimination of local franchising requirements may have actually encouraged CLEC “cherry-picking” and discouraged full deployment throughout communities. The vast majority of Texans do not have advanced services. In the experience of TCCFUI members, competitive providers do not attempt to serve entire communities. Rather, competitive providers attempt to serve a same small, lucrative subset of a community – i.e., large office buildings and corporate complexes.

· Attachment G is a map of AT&T Broadband’s proposed cable modem service routes for Plano, Texas. Portions of the map without hatchette marks are sections of Plano in which AT&T does not plan to offer high-speed cable modem service to the entire community. AT&T Broadband is planning to provide high-speed service to the large businesses that lie along the community’s major rights-of-way.[70] But as the map demonstrates, significant numbers of Plano residents will not be able to receive high-speed cable modem service within any reasonable period of time.

· The FCC reports that by zip code, most Plano, Texas residents have a choice of 7 to 10 high-speed service providers.[71] Yet the Plano, Texas Comments reported that almost 40% of Plano residents could not receive high-speed service.[72]

The evidence demonstrates that advanced and high-speed services are still not deployed to all Texans in a reasonable and timely fashion. The elimination of local government right-of-way management authority requirements has not changed this reality. Residential and small business customers are not likely to have access to high-speed or advanced services.

B. Broadband Deployment Is Dependant on Access to Capital Financing, Not the Absence of Local Regulation.

The barrier to entry is not local regulation – it is lack of access to capital financing. As Adelphia Business Solutions (“ABS”) commented to the FCC: “While revenues were limited, and profits non-existent, CLECs were able to continue their forward progress because of the confidence placed in them by the financial markets, and the capital that such investment provider for facilitates construction. Now that bubble has burst.”[73] ABS noted that CLEC capitalization reached its pinnacle in March 2000.[74] The Commission’s most recent high-speed services data supports ABS’ claim. Between December 1999 and December 2000, the number of high-speed service lines grew by 158% and advanced services lines grew by 118%. In the latter half of 2000, between June 2000 and December 2000, rate of deployment slowed. High-speed service lines grew by only 63% and advanced service lines by 51%.[75] The declining deployment rate of advanced services has no correlation with local right-of-way management regulations and further attempts to restrict local right-of-way authority will not reverse the declining deployment rates.

Furthermore, as of June 1, 2001, fifteen CLECs had filed for bankruptcy protection. For local governments, this means that fifteen bankrupt providers now have facilities located in the public rights-of-way, facilities whose location may or may not have been reported to state and local authorities, and facilities whose ownership and control is now uncertain. These bankrupt providers may have customers – which may include government and public schools – who may or may not be receiving service. Further limiting local right-of-way authority will not reverse these bankruptcies and it will not speed broadband deployment.

VI. CONCLUSION

Any policy recommendations issued by NTIA must recognize and comply with the legal authority reserved for state and local governments by Congress in enacting Section 253 of the Telecommunications Act of 1996. State and local governments retain the right to implement and enforce local right-of-way management regulations, and to require fair and reasonable compensation for use and occupation of the public rights-of-way. Broadband deployment is driven by access to capital financing and demographic characteristic. Local regulation is neither a disincentive nor a barrier to broadband deployment, and the preemption of local authority over rights-of-way has hurt, not helped broadband deployment.

Respectfully submitted,

_______________________________________

Nicholas P. Miller

Mitsuko R. Herrera

Holly L. Saurer

MILLER & VAN EATON, p.l.l.c.

Suite 1000

1155 Connecticut Avenue N.W.

Washington DC 20036

(202) 785-0600

Counsel for the National Association of

Telecommunications Officers and Advisors

(“NATOA”) and the Texas Coalition of Cities

for Utility Issues (“TCCFUI”)

9430\14\MRH01572.DOC

[1] NTIA Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications Services, Questions L, G and C.

[2] Government members have responsibilities that range from cable telecommunications administration, franchising, rights-of-way management programming governmental channels on cable television systems, information technologies and E-Government planning and management. There are also members from not-for-profit organizations whose needs and interests are complementary to those of NATOA's government members. Finally NATOA includes in its membership vendors to local governments, including telecommunications providers of all types of services. For more information visit http://www.natoa.org

[3] The members of TCCFUI include the following Texas cities: Abernathy, Addison, Alamo, Allen, Andrews, Arlington, Austin, Balcones Heights, Belton, Big Spring, Bowie, Breckenridge, Brenham, Brookside Village, Brownfield, Brownwood, Buffalo, Burkburnett, Canyon, Carrollton, Cedar Hill, Center, Cisco, City of Ralls, City of Timpson, Clear Lake Shores, Cleburne, College Station, Conroe, Corpus Christi, Cottonwood Shores, Crockett, Dallas, Denison, Denton, Dickinson, El Lago, Electra, Fairview, Flower Mound, Fort Worth, Fredericksburg, Friendswood, Georgetown, Grand Prairie, Grapevine, Greenville, Gregory, Groves, Harlingen, Henrietta, Hewitt, Huntsville, Irving, Jacinto City, Jamaica Beach, Kilgore, La Grange, La Joya, Lampasas, Lancaster, Laredo, League City, Levelland, Lewisville, Longview, Los Fresnos, McAllen, Mexia, Midlothian, Missouri City, Navasota, Nolanville, North Richland Hills, Palacios, Pampa, Paris, Pearsall, Plainview, Plano, Port Neches, Ralls, Refugio, Reno, Richardson, River Oaks, Rosenberg, San Marcos, San Saba, Selma, Seminole, Seymour, Smithville, Snyder, South Padre Island, Spearman, Stephenville, Sugar Land, Sunset Valley, Taylor Lake Village, Terrell, The Colony, Thompsons, Timpson, Town of Westlake, Trophy Club, Tyler, University Park, Victoria, Waxahachie, and Webster.

[4] NTIA Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications Services, Questions L, G and C.

[5] 47 U.S.C. § 151 et seq.

[6] 47 U.S.C. § 151(a).

[7] “. . .(S)ubject to the provisions of section 301 and Title VI of this chapter, nothing in this Act shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier.” . . 47 U.S.C. § 152(b).

[8] 47 U.S.C. § 544(a).

[9] 47 U.S.C. § 552.

[10] Attachment A, see generally, Cablevision of Boston, Inc. v. Public Improvement Comm'n, 184 F.3d 88 (1st Cir. 1999); BellSouth Telecommunications, Inc. v. Town of Palm Beach, 252 F.3d 1169 (11th Cir. 2001).

[11] Attachment B, In the Matter of TCI Cablevision of Oakland County, 12 FCC Rcd. 21,396 at ¶ 101, aff'd FCC Rcd. 16,400 (1998) (emphasis added).

[12] Town of Palm Beach, 252 F.3d at 1188 (emphasis added) citing [Attachment B] In re Missouri Municipal League, 16 FCC Rcd. 1157, 2001 WL 28068 (2001); In re Minnesota, 14 FCC Rcd. 21,697, 21,730 (1999); In re American Communications Servs., Inc., 14 FCC Rcd. 21,579, 21,587-88 (1999); In re Cal. Payphone Ass'n, 12 FCC Rcd. 14,191, 14,203 (1997).

[13] The House provision did not contain any preemption provision at all. H.R. Conf. Rep. No. 458, 104th Cong., 2d Sess. 126-27 (1996). Thus, the history of the provision must be found in the Senate bill, S. 652, rather than in the House.

[14] 141 Cong. Rec. S 8213 (Daily Ed. July 13, 1995) (remarks of Sen. Gorton) (emphasis added).

[15] H.R. Conf. Rep. No. 458, 104th Cong., 2d. Sess., 201 (1996).

[16] Telecommunications Act of 1996, 47 U.S.C. § 601(c)(1).

[17] Id.

[18] Representatives Schaefer (R-Colo.), the leading proponent of the MFS amendment met with Representative Barton (R-Texas), and Representative Stupak (D. Mich). In these negotiations the parties failed to reach agreement on whether to replace bill language that, in the words of the Committee’s Report on H.R. 1555, H. Rpt. 104-204, would prohibit activity that “discriminates among providers of telecommunications services (including the LEC).” Id. at 75.

[19] 141. Cong. Rec. H 8477 (daily ed. Aug.. 4, 1995). The Barton-Stupak amendment was adopted despite Representative Schaefer’s objection that the amendment “is going to allow the local governments to slow down and even derail the movement to level competition.” Id. at H 8460-61. In other words, in enacting the Barton-Stupak amendment, Congress considered specifically whether to allow preemption if local governments were slowing down competition – which they are not – and rejected preemption even in that unlikely case.

[20] Id. at H 8460.

[21] This is the same section 2(b) that the drafters of Section 243(e) of H.R. 1555 (part of the “MFS amendment”) had thought necessary to expressly override in their 1995 attempt to give the Commission jurisdiction over such matters.

[22] Attachment A, see also Iowa Utilities Board v. FCC, 120 F.3d 753, 800 (8th Cir. 1997), cert. granted, 118 S.Ct. 879 (1998) (“a fence that is hog tight, horse high, and bull strong”).

[23] 47 U.S.C. § 542(b). 141 Cong. Rec. H8460-61 (daily ed. Aug. 4, 1995).

[24] Attachment A, TCG v. White Plains, 125 F. Supp. 2d 81, 96 (S.D.N.Y. 2000).

[25] Attachment A, City of St. Louis v. Western Union Tel. Co., 148 U.S. 92, 104-105 (1893).

[26] White Plains, 125 F. Supp. at 96, n. 11.

[27] Id.

[28] Attachment A, TCG Detroit v. City of Dearborn, 206 F.3d 618 (6th Cir. 2000); TCG v. White Plains, 125 F. Supp. 2d 81; Omnipoint Comm’ns, Inc. v. Port Authority of New York and New Jersey, 1999 WL 494120 (S.D.N.Y. 1999); BellSouth Telecommunications v. City of Orangeburg, 522 S.E.2d 804, 808 (S.C. 1999) (finding “franchise fee equal to a percentage of the revenue generated is not inherently unfair or unreasonable…”)

[29] See, e.g., Richard Waters, CLECs Prepare for a Rough Ride in the Financial Markets: Competitive Local Exchange Carriers are Scrambling To Cut Spending as Investors and Lenders Become Skittish, Financial Times (London), at 38 (“Most are now scrambling to cut spending and bring forward the point at which they can report a profit”); Lee Bergquist, New Cable Company Pulling Plug; Digital Access Cites Inability to Raise Capital, Milwaukee Journal Sentinel, Mar. 3, 2001, at 1D (“when financing is drying up for many companies that want to build cable systems in markets where there is existing cable operator.”); Attachment C, Mavis Scanlon, RCN: After the Fall, Cable World, Jan. 1, 2001 (“The pull back in the capital markets ‘definitely’ is going to effect every overbuilder”).

[30] Telecommunications providers have frequently approached the FCC with complaints that local right-of-way management is discouraging deployment. In this attack by anecdote, the industry commonly misstates the facts and never shows actual changes in deployment plans. Moreover, the industry’s complaints are not about prohibitions but about local requirements that increase the cost of particular construction projects. Rights-of-way cannot be managed on a least-cost basis that endanger other users or and abutting landowners. There are hundreds of thousands of right-of-way construction permits granted annually by state and local governments. A problem rate of a tenth of one percent should generate a thousand or more complaints. The industry is unable to find even a hundred that it claims are a problem.

[31] Currently, nineteen states require persons who intend to dig to call a statewide coordination phone number, usually called “Miss Utility,” to prevent accidental cuts of wires and pipelines. See, e.g., Maryland Code Article 78, § 28A(c) (1991 Rep. Vol). Many localities require franchisees to comply with state “Miss Utility” regulations as part of their franchise permitting process. See, e.g., Austin City Code § 18-8-17 (1998); Denver Municipal Code, § 10.5.2 (1999).

[32] Officials “hire consultants to devise plan to coordinate requests from companies that want to string wires or lay underground cables.” Attachment C, Carri Karuhn, Hoffman Drawing the Lines for Future; Town Out to Control Disruption of Cables, Chicago Tribune, Oct. 9, 1997, at News 1. Attachment C, see also Cecilia M. Quick, Mastering Telecommunications: Milpitas [California] Develops A Master Plan, Government Finance Review, Feb. 1997, at 48; James W. Crawley, The Dream is a Wonderland of Information and Entertainment. But for now, San Diego’s Ambitious Rewiring in …IN THE TRENCHES, San Diego Union-Tribune, May 29, 1994, at I-1.

[33] As the Commission has stated, "Management of the rights-of-way is a traditional local government function. Local governments should be able to manage the rights-of-way in their usual fashion." Third Report and Order and Second Order on Reconsideration In the Matter of Open Video Systems, 11 FCC Rcd. 20,227 at ¶ 194, 197.

[34] In some urban areas the degree of crowding already causes significant problems for work in the right-of-way. For example, a sewer repair crew in San Francisco recently reported having to repair a three-by-five sewer pipe from inside the pipe because there was no other room left to work. Attachment C, Joanna Glasner, High Bandwidth Bureaucracy, Wired News, Mar. 25, 1999.

[35] Attachment C, S.K. Bardwell, Gas Explosion Destroys Home, Forces Evacuation, Houston Chronicle, Nov. 3, 2000, at A35.

[36] Attachment C, Wendy Hundley, Plano Creek Cleaned After Sewage Spill, Dallas Morning News, Oct. 14, 2000, at A37.

[37] Attachment C, Ian McCann & Steve Quinn, Water Mains Flood Downtown, Dallas Morning News, Sept. 5, 2000, at A1

[38] Attachment C, Rani Cher Monson & Melissa Borden, 3,600 Lose Emergency Phone Service, Arlington Morning News, July 16, 1999, at A1.

[39] Attachment C, Jeff Prince, Telephone Outage Jangles Commerce, Star-Telegram, July 17, 1999, at A1.

[40] Attachment C, Jason Lamers, Latest Gas Line Break Adds to Woes, Dallas Morning News Insert, Summer, 1999 at A1.

[41] Attachment C, Rachel Horton, City Urges Water Conservation After Water Line Slashed, Irving News, July 11-14, 1999, at A1.

[42] Attachment D, Damages from Contractor Installing Fiber Optic Cable, Plano, Texas, as of June 7, 2001.

[43] September of 1998: Cause No. 96-187697-01, filed in the 96th Texas Judicial District Court on May 21, 2001.

[44] April 11, 2000: Settlement Agreement was authorized by City of Arlington Resolution No. 00‑185.

[45] Attachment C, see Nevada Briefs, Las Vegas Review Journal, Sunday, Aug. 8, 1999, at 4B.

[46] Attachment C, Stephen C. Fehr, Road Kill on the Information Highway, Washington Post, Sunday, Mar. 21, 1999, at A1.

[47] Attachment D, See Raymond L. Sterling, Indirect costs of Utility Placement and Repair Beneath Streets, University of Minnesota, Report No. 94-20, Aug. 1994, p. 28; Ghassan Tarakji, PH.D, P.E., The Effect of Utility Cuts on the Service Life of Pavements in San Francisco, Volume I: Study Procedure and Findings, Final Report, May 1995, p. 19; IMS Infrastructure Management Services, Inc., Estimated Pavement Cut Surcharge Fees For the City of Anaheim, California Arterial Highway and Local Streets, Dec. 9, 1994, p. 2,; City of Phoenix, The Effects of Utility Cut Patching on Pavement Performance in Phoenix, Arizona, Project 499, July 18, 1990, p. 5.; Andrew Bodocsi, Prahlad D. Pant, Ahmet E. Aktan, Rajagopal S. Arudi, Cincinnati Infrastructure Institute, Department of Civil & Environmental Engineering, University of Cincinnati, Impact of Utility Cuts on Performance of Street Pavements, Final Report, 1995, Exec. Summ. at 1.

[48] Fehr, op. cit.

[49] Glasner, High Bandwidth Bureaucracy, Wired News, Mar. 25, 1999. Attachment B, see also Ellen Perlman, Taxing the Craters in the Street, Governing, Feb. 1997.

[50] See Governmental Accounting Standards Board Statement number 34. This recent addition will require local governments to capitalize and depreciate the costs of right-of-way construction.

[51] Federal land-owning agencies are also concerned about the problem of adequate compensation for rights-of-way across federal land. Attachment E, see “Fair Market Value Analysis for Fiber Optic Cable Permit in National Marine Sanctuaries,” a report by the National Ocean’s and Atmospheric Administration (“NOAA”) as noticed for comment in 66 Fed. Reg. 43135 (Aug. 12, 2001), and studies cited therein.

[52] Agreement B, Ed Somers, Mayors Irate As Congress Cuts Local Law Enforcement Block Grant By $122 Million, US Mayor, Nov. 19, 2001, at 4.

[53] Attachment A, Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1016 n.7 (1992).

[54] Implementation of Section 302 of the Telecommunications Act of 1996, CS Docket 96‑46, Comments of National League of Cities, filed Apr. 1, 1996 (National League of Cities OVS Comments); Joint Motion to Dismiss of PROTEC, the Michigan Municipal League, the Michigan Townships Association, the United States Conference of Mayors, the City of Los Angeles, California, and the Michigan Communities, In the Matter of TCI Cablevision Of Oakland County, Inc. Petition for Declaratory Ruling, Preemption and Other Relief Pursuant to 47 U.S.C. §§ 541,544(e) and 253, File No. CSR-4790, filed Sept. 4, 1996.

[55] Attachment A, TCG Detroit v. City of Dearborn, 16 F. Supp. 2d 785, 789 (E.D. Mich. 1998), aff’d 206 F.3d 618 (6th Cir. 2000).

[56] See generally, FCC Report to Congress on Spectrum Auctions (Oct., 1997).

[57] Attachment B, Statement of Commission Chairman Reed Hundt, Christopher Stern, Hundt Calls Budget Slash A “Mistake,” Broadcasting & Cable, Sept. 11, 1995.

[58] Letter from Sen. John McCain to Commission Chairman Reed Hundt (Aug. 8, 1995). Chris McConnell, Senator John McCain to force Federal Communications Commission to auction direct broadcasting satellite frequencies reclaimed from Advanced Communications Corp., Broadcasting & Cable, Sept. 18, 1995, at 7.

[59] Attachment B, Commission Chairman Reed Hundt, quoted by Chris McConnell, Staking Claim to Digital TV, Broadcasting & Cable, Dec. 18, 1995, at 26.

[60] “Classical economic theory holds that subsidies distort the market outcome that would have occurred absent the subsidy, thereby creating inefficiencies in resource allocation which lower global welfare.” Robert H. Lantz , 10 Am. U.J. Int'l L. & Pol'y 993, 1009 (Spring 1995), citing Jeffrey E. Garten, New Challenges in the World Economy: The Antidumping Law and U.S. Trade Policy, Remarks Before the U.S. Chamber of Commerce, Washington, D.C. (Apr. 7, 1994) (quoting Jagdish N. Bhagwati, Protectionism (1988)).

[61] A local government has a right to measure the value of public property based on the gross revenues derived by use of the property. A word should perhaps be added regarding local governments' attempt to develop sound measures of market value for their property. Such a measure is appropriately based on the value derived by the user from its right-of-way use. Revenue-based compensation is one such method (analogous to the franchise fees paid by cable operators, which are based on gross revenues).

And should the telecommunications provider's market fail, the right-of-way payment scales back accordingly. Thus start-up companies with little or no revenues, and long-established telecommunications behemoths, may be charged by the same gross revenue-based standard and yet pay, as a result, dollar amounts that fairly reflect the value each is deriving from the public rights-of-way. A start-up, or a company in trouble, automatically pays a relatively low price, while a successful company pays more – yet a consistent proportion of revenues is paid by each competitor. Thus, such a standard (as distinct from a fixed dollar amount) encourages competitive entry. It is also consistent with revenue-based fees in other industries as diverse as percentage of gross revenues for shopping center space rentals and the 12.5 percent royalty paid to the State of Alaska by crude oil producers for use of the State's property. See Alaska Stat. § 31.13.020 (1999).

[62] Unfunded Mandates Act, 2 U.S.C. § 1501 et seq.

[63] Remarks of Congressman Stupak, 141 Cong. Rec. at H 8460 (daily ed. Aug. 4, 1995,).

[64] Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities, GN Docket No. 00‑185, FCC 00‑355 (rel. Sept. 28, 2000) at ¶ 75.

[65] In 1999, the Texas Legislature enacted House Bill 1777 (“HB 1777”). The primary purpose of HB 1777 was to limit the compensation that Texas local government could charge for use and occupation of the public rights-of-way, but HB 1777 also restricted local government authority in other important ways. HB 1777 made voidable all existing franchise agreements. HB 1777 restricted the power of Texas local governments to require telecommunications providers to: obtain franchise agreements to occupy public rights-of-way; build-out entire communities or otherwise prevent “cherry-picking” by telecommunications providers; build facilities to or provide service to public schools, higher educational facilities, community centers, and government buildings as a condition of using and occupying the public rights-of-way; compensate local governments for the administrative costs of processing right-of-way permits and inspecting facility emplacement and construction within the public rights-of-way; and obtain local approval prior to transferring management and operation of communications facilities located within local rights-of-way. Tex. Local Govt. Code §§ 283.052(a), 283.056(a), 283.056(c), and 283.056(f).

Texas municipalities did retain right-of-way management authority to require: permits; registration of right-of-way occupants; maps of facilities placed in the right-of-way, insurance; performance guarantees; joint trenching; location of other facilities prior to commencing right-of-way construction; limitation hours of construction; compliance with noise abatement, dust and disposal of construction material regulations; management of traffic disruption; construction methods for street cuts and restoration; and standards for restoration of the public rights-of-way. However, municipalities may not recover compensation from providers for the costs of enforcing these protective regulations.

[66] Attachment F, Public Utilities Commission of Texas, Report to the 77th Texas Legislature: Availability of Advances Services in Rural and High Cost Areas (Jan. 2001), available at http://www.puc.state.tx.us/telecomm/reports/index.cfm (“PUCT 2001 Adv. Serv. Rept.).

The FCC defines “advanced services” as high-speed broadband services, i.e., infrastructure capable of delivering 200 kilobits per second (Kbps) in one or both directions. Federal Communications Commission, Deployment of Advanced Services: Second Report and Order, CC Docket No. 98-146, 15 FCC Rcd. 20913 at ¶¶ 10-11 (2000)(“Second Advanced Services Report”). “High-speed” is defined as 200 Kbps in at least one direction; “advanced services infrastructure” is defined as capable of 200 Kbps in both directions. Id.

[67] This information is based on survey responses collected between March and April 2000. 2001 PUCT Adv. Serv. Rept. at Appendix K.

[68] It is difficult to compare the availability of advanced and high-speed service on a national level. The FCC collects data by zip code and does not report what percentage of zip codes or states have advanced service compared to high-speed or slower service. Zip code data collection creates unreliable statistics, since a zip code will be considered to have advanced service if only one business subscriber has a T-1 line, while all surrounding residents in the same zip code have only 28 Kbps dial-up modem service.

[69] See Inquiry Concerning Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerated Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996 (“Section 706 NOI”), Reply Comments of TCCFUI, Attachment A, Declaration of Sandra Stanley.

[70] See also Section 706 NOI Comments of Plano, Texas (“Plano § 706 Comments”) at Exhibit A. One Plano resident stated: “DSL and Cable are NOT available in my area from any vendor!! Cable and DSL are available 2 blocks from my home. I have been trying to get Cable Modem or DSL for over 3 years…..”

[71] Federal Communications Commission, High-Speed Service Providers As of 6/30/01 [Number of High-Speed Service Holding Companies By Zip Code], pp. 368-369 [TX Zip Codes 75023 (9), 75024 (9), 75025(7), 75074 (10), 75075 (10), 75093 (8), 75094 (4)], available at http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/comp.html.

[72] Plano § 706 Comments at 1. Anecdotal evidence supports the same conclusion – residential customers do not have access to high-speed service. Plano, TX Comments at Exhibit B. One Plano resident stated: “My husband and I live in Los Rios Park, an apartment complex on 14th Street. We would very much like to get either DSL or cable modem. I have called Verizon, SWBell, and AT&T and none of these companies can provide high-speed internet service here….”

[73] Section 706 NOI Comments of Adelphia Business Solution (“ABS § 706 Comments”) at 6-7.

[74] ABS § 706 Comments at 1.

[75] Federal Communications Commission, High-Speed Services For Internet Access: Subscribership As of December 31, 2000, Tables 2 & 3 (Aug. 9, 2001) (available at http://www.fcc.gov/ccb/stats).