NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION
Request For Comments on )
Deployment of Broadband Networks and )Docket No. 011109273-1273-01
Advanced Telecommunications Services )
COMMENTS OF QWEST COMMUNICATIONS INTERNATIONAL INC.
Lynn R. Charytan
Wilmer, Cutler & Pickering
2445 M St. NW
Washington, DC 20037
Chris J. Melcher
Executive Director, Policy & Law
Qwest Communications International Inc.
1020 19th Street, N.W.
Counsel for Qwest Communications International Inc.
December 19, 2001
Comments of Qwest Communications International Inc.
Qwest Communications International Inc. (“Qwest”) is pleased to file these comments in response to the request for information that NTIA issued in this docket on November 14, 2001 concerning carriers’ experience with access to local rights-of-way and whether, in that regard, there is a need for federal government involvement.
Based on its experience seeking to deploy facilities inside and outside of its 14-state region to provide wireline, wireless, and other services, Qwest believes that one of the most significant deterrents to the deployment of communications infrastructure and the development of facilities-based competition is the increasing tendency of municipalities to attempt to fund their operating budgets on the backs of facilities-based carriers and their customers by adding a third, local tier of regulation to existing state and federal regulation.Perhaps the most pernicious — but certainly not the only — forms of municipal interference with national policy favoring deployment of communications facilities are the attempts to extract exorbitant fees from carriers for the use of public rights-of-way.Attempts to impose these and other unnecessary and improper regulatory burdens as a condition of rights-of-way access significantly delay and multiply the costs of building out this country’s communications infrastructure.
Canada has recognized these problems and has acted to address them.Earlier this year, Canada’s counterpart to the Federal Communications Commission (FCC), the Canadian Radio-television and Telecommunications Commission (CRTC), adopted a decision limiting local government regulation of the public rights-of-way.Although cognizant of the need for municipalities to oversee their physical rights-of-way, the CRTC observed that federal authority over telecommunications overrode municipal control over the rights of way.In particular, the CRTC found that federal telecommunications policies encouraging the development of communications services required limits on excessive municipal regulation of the rights-of-way.Importantly, the CRTC noted that “[t]he benefits of a competitive telecommunications market and greater access to modern, high-speed networks are not enjoyed solely by the shareholders and customers of carriers.The economic base that such facilities support will provide generalized benefits throughout the municipality, attracting industry, creating jobs, increasing tax revenue, etc.”
Accordingly, the CRTC specifically rejected local government efforts to impose charges on carriers that were unrelated to the carriers’ actual use of, or the city’s costs of managing, the public rights-of-way.And the CRTC similarly rejected the requirement that carriers install extra conduit, finding that it would improperly “add another layer of regulation” for communications carriers.
In the United States, existing federal law, embodied in both section 253 and Title I of the Communications Act, likewise provides ample authority for the FCC to step in and limit local government rights-of-way overreaching.However, until now the FCC has been reluctant to become involved and slow to define the limits of proper local regulation.The challenge is to encourage the FCC to act assertively, on the principles that Congress already has enunciated, in order to eliminate the so-called “third-tier” of municipal regulation that currently constrains the communications market.
I.“THIRD TIER” LOCAL GOVERNMENT REGULATION AND ABUSE OF LOCAL RIGHTS-OF-WAY CONTROL
Over the past few years, as the Administration, Congress, and even the FCC have sought to move toward a deregulatory approach for the communications industry, municipal regulation of access to public rights-of-way has become one of the central problems facing all types of facilities-based carriers across the country.The issue is not routine local government oversight of the permitting process, construction scheduling, and the like.To the contrary, municipal authority to regulate such concerns is uncontested.Rather, the issue is that municipalities have converted their control over the rights-of-way into a broad “third tier” of regulation of carriers — one that overlays federal and state regulation and imposes unnecessary and unreasonable costs, burdens, and delays on the deployment of communications facilities.Thus, despite the deregulatory trend on the federal level, noted above, carriers increasingly face a patchwork of inconsistent, burdensome, and inappropriate municipal requirements across the country.
These “third tier” municipal regulations range from the imposition of substantial fees and non-monetary compensation for use of the rights-of-way, to efforts to regulatecarriers’ transfers of control and dictate their provision of facilities to third parties.While municipal governments certainly have a right to be reimbursed for their reasonable costs incurred in managing the rights-of-way, these regulations go substantially farther,imposing fees (and other forms of compensation) that bear little — and usually no — nexus to any burden that carriers’ facilities place on the public rights-of-way.Instead, they are blatant efforts to use the government’s control over rights-of-way access to extort revenues from carriers and their customers.Thus, carriers that may already provide low-cost universal service to local residents, that employ local citizens for the construction involved in infrastructure buildout and to otherwise run the local network, and that pay applicable local taxes, end up nonetheless subsidizing the municipal purse yet again through this hidden rights-of-way subsidy.
Such local rights-of-way access fees and requirements have in many cases significantly increased the cost of providing the facilities needed to roll-out service in a particular area, so much so that in some cases, carriers have been forced to reevaluate or abandon their plans to deploy new facilities or expand existing facilities.In other cases, the result has been extraordinary delay in providing service, as municipalities withhold necessary permits unless and until carriers submit to their terms.
Municipal overreaching with respect to rights-of-way regulation has imposed significant costs on all of Qwest’s operations and has frequently interfered with Qwest’s ability to provide timely service and build facilities.Qwest uses the public rights-of-way for almost all its services.For example, in Portland, Oregon, where Qwest is the incumbent LEC, the local government requires compensation for Qwest’s rights-of-way use that is unrelated in any way to the city’s costs of managing the rights-of-way:Portland demands that Qwest pay a fee of 7% of its gross revenues, as well as a $5,000 application fee.A Sandy, Utah draft ordinance proposes a fee of 6% of gross revenues on top of the $5,000 application fee.In Santa Fe, New Mexico, rather than imposing a percentage of revenues fee, the local government has demanded a “rental” fee equal to the “fair market value” (as determined by a city-approved appraiser, paid for by Qwest) of each and every right-of-way Qwest uses in serving city residents.Given that Qwest is the incumbent and a carrier of last resort and must have facilities in place to serve every citizen of Santa Fe, its rights-of-way use is obviously extensive, and the resulting costs exorbitant.
Santa Fe also has required that Qwest dedicate free facilities to the municipal government in return for rights-of-way use — obligating Qwest to lay twice as much cable as it needs and donate the excess to the city in fee simple.In some other localities, the price for rights-of-way access is that the carrier must provide the local government with free service or facilities and give the city most-favored nations clauses with respect to service.
Outside of Qwest’s region, the situation has been the same:Atlanta, Georgia imposes a fee equal to 3% of gross revenues, in addition to an application fee of $5,000 or $10,000 depending on the type of franchise.Maryland Heights, Missouri and Overland Park, Kansas both impose an annual fee of 5% of gross receipts, as well as a charge per linear foot.Plano, Texas imposes an annual fee of $2.50 per linear foot for any new deployment of facilities, even where such facilities are installed in existing conduit and do not require any new construction or change to the rights-of-way.And Qwest has encountered in-kind compensation demands in cities where it seeks to provide competitive service:for example, Norfolk, Virginia requires carriers installing facilities to provide the city with free use of one duct for municipal wires.
Beyond these specific fees or in-kind compensation obligations, local governments also increase the costs of providing telecommunication services by imposing onerous application requirements for use of the rights-of-way. As a condition for rights-of-way access, many local governments have required Qwest and other carriers to describe their financial, technical, and legal qualifications and describe the services they are providing or will provide — even though the state public utility commission reviews and approves all the same data.These range from the merely bureaucratic to the truly absurd:Laewood, Kansas required Qwest to provide a statement describing its understanding of federal law with respect to rights-of-way regulation before the government would approve access to the rights-of-way.Some local governments have insisted that, in return for rights-of-way access, carriers provide them with copies of all petitions they file at the state public utility commission.And while the costs of complying with such requirements in a single jurisdiction may not be enormous, the cumulative costs of satisfying these obligations in multiple jurisdictions are substantial.
In addition, some local governments have imposed far more costly obligations.For example, in the greater Seattle area, a regional transit authority sought to compel Qwest and other carriers to pay to relocate their facilities to new rights-of-way as a result of a city transitproject that would disrupt the existing facilities, even while city-owned telecommunications providers would have their relocation subsidized by the government.Qwest and other carriers are similarly being asked by other municipalities around the nation to bear relocation costs resulting from construction of proposed transportation projects, though, again, municipally owned utilities are not being asked to pay for relocation.Thus, carriers in some instances must pay three times:to install the facilities in the original right-of-way in the first instance; then for the costs of relocation and new facilities; and then for the privilege of using the new rights-of-way.
The issue is not simply costs.Qwest also has experienced significant delay in providing service and in deploying facilities as a result of these sorts of requirements.In Santa Fe, for example, because Qwest was unwilling to agree to the new and unreasonable requirements imposed by the city, Qwest could not place a new remote terminal in the public right-of-way, and thus could not provide service to many customers; Qwest was not able to install the remote terminal — or provide service — for more than six months, until it brought suit against Santa Fe and was able to negotiate an interim standstill agreement for the pendency of the lawsuit.Out-of-region, Qwest similarly has suffered lengthy delays in deploying facilities, which in some cases have prevented Qwest from serving customers entirely.For example, the City of Berkeley first adopted a moratorium on granting new permits for use of the rights-of-way, then passed a telecommunications ordinance imposing unlawful demands on carriers seeking to use the rights-of-way; as a result, Qwest was delayed more than a year in installing telecommunications facilities that it had agreed to provide under a contract with the Lawrence Berkeley National Laboratory in connection with national scientific research efforts.This dispute was not resolved until Qwest obtained a preliminary injunction in federal court barring Berkeley from enforcing its ordinance.
In addition to delay and cost, municipal over-regulation also leads to uncertainty that makes it difficult if not impossible to plan facilities build-out and commit to provide service on a date certain.Many ordinances give local authorities broad discretion to grant or deny applications to use the rights-of-way, and often the ordinances contain no deadlines for ruling on such applications.Some ordinances even require one or multiple public hearings (sometimes over several months) before ruling on such applications.As a result, a carrier seeking to deploy facilities and provide service in a locality may not know when, or even if, it will be able to obtain approval to use the public rights-of-way.And finally, cities have imposed the ultimate contract of adhesion to ensure their continued right to regulate access to the rights-of-way in this manner:as a condition of rights-of-way access, the local governments have insisted, in several cases, that carriers expressly waive their right to challenge the local rights-of-way ordinances under federal or state law.
II.SECTION 253 OF THE COMMUNICATIONS ACT REQUIRES THE FCC TO LIMIT MUNICPAL RIGHTS-OF-WAY OVERREACHING.
Such municipal overregulation is clearly out of step with the new era of deregulation ushered in by this Administration; these requirements interfere with facilities deployment and artificially inflate costs.FCC Chairman Powell himself recognized that “legal restraints can retard deployment of new services.”In particular, Chairman Powell noted that “regulations that govern rights of way, zoning, and building codes” are among the restrictions that many in the industry point to as “some of the most vexing problems in bringing new services to consumers,” and he observed that “local governments—principally state and local—control the terms and conditions of local upgrades and can be more pro-active in facilitating deployment in their community.”
Although these statements are welcome, merely urging cities to exercise restraint has proven wholly ineffectual.Municipal governments have made quite clear that they see their control over the rights-of-way as a significant cash cow; and they have been resolute in insisting that the federal government should not and may not trim their authority in any manner, asserting that “[a]ny Commission action that intrudes on right-of-way compensation authority will significantly harm state and local government efforts to” manage the rights-of-way.Amazingly, cities now assert that they “are legally and ethically obligated to control and charge for the use of rights-of-way,” insisting that “use of publicly owned rights-of-way is a privilege, not a right,” and that privilege justifies the “levying of rental charges.”Rather than simply urge the cities to come to their senses, then, it is time that the federal government act to ensure that cities wean themselves from heavy handed regulation and enforced subsidies.
And indeed, federal law already provides a potentially powerful mechanism for the FCC to limit excessive municipal rights-of-way regulation.Section 253 of the Communications Act requires the FCC (and the federal courts) to preempt state and local regulations that “prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.”Section 253 is not intended to interfere with — and expressly protects — cities’ genuine right-of-way management and preserves their right to require “fair and reasonable compensation” for use of the public rights-of-way.It is designed, however, to prevent cities from using their rights-of-way authority to impose onerous obligations and extract fees that bear no relationship whatsoever to rights-of-way use, and which do interfere with carriers’ ability to provide services.As one federal district court explained, for example, in considering non-cost-based right-of-way fees under 253(a):
[A]ny franchise fees that local governments impose on telecommunications companies must be directly related to the companies’ use of the local rights-of-way, otherwise the fees constitute an unlawful economic barrier to entry under section 253(a).For the same reason, . . .local governments may not set their franchise fees above a level that is reasonably calculated to compensate them for the costs of administering their franchise programs and of maintaining and improving their public rights-of-way./
Other courts similarly have ruled that section 253 prevents municipal rights-of-way regulations that bear no relationship to actual management of rights-of-way use, but instead seek to procure revenues, or free services, or seek to regulate the providers themselves, or the services they offer.
While, as these precedents suggest, carriers have had some success using section 253 to challenge local regulations in the courts, challenging local regulations one at a time is time-consuming and expensive, and successful challenges often are not sufficient to prevent other local governments from enacting and enforcing similar ordinances.Municipal governments have shown no compunction about enacting ordinances that are substantially equivalent to one that has just been overturned by a federal court in an adjacent district:The Santa Fe rights-of-way ordinance mentioned above and currently the subject of a challenge by Qwest in federal district court, for example, was enacted after the same federal district court overturned a similar ordinance in Grant County, New Mexico for imposing non-cost-based rights- of-way fees.And a campaign of city-by-city challenges is simply too cumbersome; even if carries seek to chip away at municipal regulation in this manner, the process will be endless.In the long run, carriers will be forced to delay or simply abandon deployment of new facilities, to the detriment of consumers and the nation.
In the absence of strong federal policy on this issue, however, carriers have little choice but to fight municipal regulations city by city, filing suits in federal court or bringing individual preemption petitions before the FCC.Yet the FCC has sent confusing signals in the past about its willingness to step up to the plate and exercise its authority under section 253.Over two years ago, the agency initiated a notice of inquiry to explore whether local governments were abusing their rights-of-way authority and interfering with carriers’ provision of service.Many carriers, including Qwest, filed comments and\or have since made ex parte presentations to the FCC regarding these issues, yet there has never been any action from the FCC.Similarly, the FCC recently filed an amicus brief in the Second Circuit in TCG New York, Inc. v. City of White Plains, 125 F. Supp. 2d 81 (S.D.N.Y. 2000), noting that fees for rights-of-way access that are based on a percentage of revenue and are not cost-based are very likely not protected by section 253’s carve out for “reasonable” compensation; this is so, the agency noted, because such fees are not properly related to use of the rights of way and in any eventare likely not to be competitively neutral, as section 253 also requires.But soon after filing the TCG amicus brief, the FCC issued a letter stating that the brief “was not intended to represent a definitive FCC position that Section 253 precludes any compensation above cost recovery.”
What is needed — and what the law clearly permits — is for the FCC to take an aggressive, proactive role in enforcing limits on local government abuse of rights-of-way access.The Administration should encourage the FCC to play a meaningful role in this instance, and not to rely on simply exhorting municipalities to behave well.It is critical for government to recognize that, in this instance, deregulation means the government must play an active role — not in regulating carriers, but in trimming the excesses of municipal regulation.The FCC has full authority under section 253 to act on — and to invite — preemption petitions challenging municipal rights-of-way abuses; indeed, the agency has the authority to act on its own accord, without regard to whether an individual carrier has brought a challenge.
But beyond acting on individual petitions, the FCC can and should issue a clear statement of what types of local regulations it will view as per se violations of section 253.In particular, the government should make clear that rights-of-way fees are not opportunities to raise revenues, but must be designed to recover no more than the costs of maintaining the rights-of-way.If express rules are articulated by the FCC, municipal governments will have clear notice of what types of rights-of-way regulation will and will not be tolerated under section 253 and can design appropriate rights-of-way regulation within that framework.This approach is fully consistent with existing law and is the only means of encouraging deployment of new facilities by incumbents and new carriers of all types, throughout the nation.
III.TITLE I OF THE COMMUNICATIONS ACT PROVIDES ADDITIONAL AUTHORITY FOR THE FCC TO CURB EXCESSIVE LOCAL REGULATION.
Title I of the Act creates the FCC for the express purpose of regulating interstate and foreign commerce in communication by wire and radio to make available rapid and efficient communications service on a nation-wide basis.Title I’s broad grant of authority provides additional jurisdictional support, supplemental to section 253, for an active federal role in eliminating local requirements and policies that impede the orderly deployment of important new facilities and services.The authority granted the FCC under Title I overlaps, and is consistent with, that in section 253 and empowers the agency to preempt local authorities from erecting barriers to the provision of all intrastate and interstate communications services.
The pervasive authority granted in Title I has provided a cornerstone for regulatory approaches facilitating deployment of new, right-of-way dependent services in the past.Nearly 30 years ago, when the nation’s first cable system operators were deploying another new technology, they also confronted the daunting prospect of negotiating a maze of disparate local procedures and requirements to obtain access to critical public rights-of-way in potentially hundreds of individual communities.In this endeavor they encountered a perplexing array of conflicting and often excessive local requirements.
Recognizing its obligation to establish a coherent national policy for the development of this important new medium, the Commission expressed concern over incompatible local requirements and troubling abuses such as extraction of excessive franchise fees “more for revenue-raising than for regulatory purposes.”In the absence of a specific federal statute, the Commission’s response was a regulatory scheme, grounded in Title I, that took a dual jurisdictional approach toward rights-of-way issues. The rules permitted localities to play a key role in management of their public rights-of-way, with certain aspects of local regulation subject to prescribed federal standards.
The examples of local impediments that Qwest has encountered and that are described in Section I above are similar to the impediments faced by pioneering cable system operators thirty years ago and show that access to local rights-of-way poses no less a problem for deployment of advanced networks today than it did in the deployment of cable television systems then.Qwest respectfully submits that NTIA and the FCC have no less of a corresponding obligation to promote a solution for the current generation of rights-of-way issues than the Commission assumed in 1972.And today as yesterday, Title I provides an additional jurisdictional basis theFCC can use to assure the prompt and orderly deployment of advanced networks.The NTIA, as the advocate of the Administration’s telecommunication policy, can and should play an important role by identifying available options and encouraging the Commission to fully utilize them to set standards and guidelines for local rights-of-way management that is compatible with deployment of all types of networks and services.
The Administration should encourage the FCC to use existing federal authority to reign in municipal rights-of-way overreaching, and ensure that local governments join the federal government’s initiative to facilitate, rather than interfere with, the development and deployment of communications infrastructure across the country.A clear and assertive policy is needed, and should be adopted as soon as possible.
Lynn R. Charytan
Wilmer, Cutler & Pickering
2445 M St. NW
Washington, DC 20037
Chris J. Melcher
Executive Director, Policy & Law
Qwest Communications International Inc.
1020 19th Street, N.W.
Counsel for Qwest Communications International Inc.
December 19, 2001