HBA-TYH, JRA, ALS H.B. 1777 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1777 By: Wolens State Affairs 7/26/1999 Enrolled BACKGROUND AND PURPOSE Prior to the 76th Legislature, there was no statutory provision specifying the method and level of compensation that a municipality may collect from a telecommunications provider (provider) for the use of the public rights-of-way and the right to provide services within that municipality. The purpose of this bill was to provide policies and guidelines relating to compensation that a municipality may receive from a provider within the municipality. H.B. 1777 provides for municipalities to be compensated by certificated telecommunications providers through franchise fees. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Public Utility Commission of Texas in SECTION 1 (Sections 283.003 and 283.006, Local Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subtitle A, Title 9, Local Government Code, by adding Chapter 283, as follows: CHAPTER 283. MANAGEMENT OF PUBLIC RIGHT-OF-WAY USED BY TELECOMMUNICATIONS PROVIDER IN MUNICIPALITY SUBCHAPTER A. GENERAL PROVISIONS Sec. 283.001. STATE POLICY; PURPOSE. Sets forth the policy of this state. Sets forth the purpose of this chapter. Sec. 283.002. DEFINITIONS. Defines "access line," "certificated telecommunications provider," "commission," "consumer price index," "local exchange telephone service," and "public right-of-way" in this chapter. Sec. 283.003. COMMISSION REVIEW. (a) Requires the Public Utility Commission of Texas (PUC) to determine by September 1, 2002, whether changes in technology, facilities, or competitive or market conditions justify a modification in PUC-established categories of access lines or, if necessary, the adoption of a definition of "access line" provided by this section. Prohibits the PUC from beginning a review authorized by this section before March 1, 2002. (b) Authorizes PUC, as part of the proceeding and as necessary after that proceeding, by rule, to modify the definition of "access line" and the categories of access lines as necessary to ensure competitive neutrality and nondiscriminatory application and to maintain consistent levels of compensation, as annually increased by growth in access lines and consumer price index, as applicable, to the municipalities. (c) Requires PUC to make the determination at least once every three years after September 1, 2002. Sec. 283.004. APPLICATION. Provides that this chapter applies only to municipal regulations and fees imposed on and collected from certificated telecommunications providers. Sec. 283.005. INFORMATION. Authorizes PUC to collect and compile information from certificated telecommunications providers and municipalities to implement this chapter. Requires PUC to maintain the confidentiality of that information. Requires information provided to municipalities to be governed by confidentiality procedures established by the PUC. Sec. 283.006. FEE REQUIREMENT FOR USE OF RIGHT-OF-WAY. Provides that notwithstanding any other law, a certificated telecommunications provider that does not use a public right-of-way within the municipality is prohibited form being required to pay franchise fees, right-of-way fees or any other fee or other compensation, other than a fee or compensation excluded from the "base amount" under Section 283.053(a), directly to the municipality to provide local exchange telephone service in the municipality. Provides that this section does not affect the number of access lines counted and reported to PUC under Section 283.055. Requires PUC to adopt rules to determine the method of payment and to ensure that access line fees are paid on a competitively neutral and non-discriminatory basis by certificated telecommunications providers that provide more access lines than they purchase from an underlying provider of resold services or unbundled network elements. SUBCHAPTER B. RIGHT-OF-WAY FEES Sec. 283.051. RIGHT-OF-WAY FEE. Requires a certificated telecommunications provider that provides telecommunications services within a municipality to pay only the compensation amount determined by PUC under Section 283.055 to a municipality for use of the public right-of-way in the municipality. Provides that this section does not affect the right of a municipality to initiate legal action against a certificated telecommunications provider that uses a public right-of-way to provide local exchange telephone service within a municipality and has not compensated the municipality in accordance with this chapter. Requires fees imposed under this chapter to constitute " a municipal fee" or "municipal fees" within the meaning of the Utilities Code. Sec. 283.052. EFFECT OF PAYMENT OF RIGHT-OF-WAY FEES TO MUNICIPALITY. (a) Provides that a certificated telecommunications provider that complies with this chapter and PUC orders issued under this chapter, subject to the requirements of Sections 283.056 and 283.057: _is authorized to erect poles or construct conduit, cable, switches, and related appurtenances and facilities and excavate within a public right-of-way to provide telecommunications service; and _is not subject to municipal franchise requirements. (b) Provides that all use of a public right-of-way is nonexclusive and subject to Section 283.056. Sec. 283.053. BASE AMOUNT. (a) Provides that pole rental fees, special assessments, and taxes of any kind are not included as revenue received by a municipality in determining a municipality's "base amount." (b) Sets forth the base amount for a municipality not described by another subsection of this section. (c) Sets forth the base amount for a municipality located in a county with a population of less than 25,000 or a municipality that did not have an effective franchise agreement or ordinance on or in existence on January 12, 1999. (d) Sets for the base amount for a municipality that was involved in litigation relating to franchise fees with one or more certificated telecommunications providers during any part of 1998, not later than December 1, 1999, and that repeals any ordinance subject to dispute in the litigation, voluntarily dismisses with prejudice any claims in the litigation for compensation, and agrees to waive any potential claim for compensation under any franchise agreement or ordinance expired or in existence on September 1, 1999. (e) Provides that a litigating municipality electing to dismiss with prejudice its claims in the litigation and repealing any ordinance subject to dispute in the litigation does not, by making the election, waive any defenses it may have to claims by other parties to the litigation. Requires a municipality in litigation relating to franchise fees with one or more certificated telecommunications providers during any part of 1998 that does not make an effective election under Subsection (d) to be governed by Subsection (b). (f) Provides that for the purpose of determining the base amount, in-kind services or facilities provided to municipalities under existing franchise agreements or ordinances by certificated telecommunications providers is required to be valued at one percent of the total 1998 revenue from franchise, permit, license, and application fees paid to the municipality under all applicable telecommunications franchise agreements or ordinances, unless a municipality can establish before PUC that those services or facilities received by the municipality had a greater value in 1998. Sec. 283.054. EXISTING FRANCHISE AGREEMENTS AND ORDINANCES. (a) Provides that except as otherwise provided by this chapter, this chapter does not affect the validity of a franchise agreement or ordinance with a certificated telecommunications provider executed before January 12, 1999. Authorizes a municipality to continue to enforce a franchise agreement or ordinance and to collect franchise fees and other charges under that franchise agreement or ordinance until the date on which the agreement or ordinance expires by its own terms or is terminated in accordance with the terms of this section. Authorizes a provider to elect to terminate a franchise agreement or obligations under an existing ordinance as of the effective date of the right-of-way fee rates adopted in accordance with PUC's rules adopted under this chapter. Requires a provider terminating a franchise agreement or obligations under an existing ordinance under this section to become governed by this chapter on the date of termination. Provides that a termination under this subsection does not affect the calculation of the municipality's base amount under Section 283.053. Requires a certificated telecommunications provider electing to terminate an existing franchise agreement or obligations under an ordinance under this section to provide notice to PUC and the affected municipality not later than December 1, 1999. (b) Provides that if a franchise agreement or obligations under an ordinance in a municipality expire or are terminated under Subsection (a) before PUC has determined the amounts to be paid to a municipality, the affected certificated telecommunications providers operating in the municipality are required to continue paying at the rates required under the terms of the expired agreement or ordinance until PUC's determination and the certificated telecommunications provider's implementation of appropriate rates under this chapter. (c) Provides that during the period in which a franchise agreement or ordinance described by Subsection (a) is in effect, a certificated telecommunications provider not subject to an existing franchise agreement or ordinance that wants to construct facilities to offer telecommunications services in the municipality is required to pay right-of-way fees that are competitively neutral and non-discriminatory, consistent with the charges of the most recent agreement or ordinance between the municipality and the certificated telecommunications provider serving the largest number of access lines within the municipality. Requires the provider to pay those fees for the duration of that agreement or ordinance or until the right-of-way fees established by commission rule take effect. If the existing franchise agreement or ordinance contains a provision requiring in-kind services or facilities, the certificated telecommunications provider not subject to an existing franchise agreement or ordinance is required to pay an amount equal to an additional one percent of its total fees under the applicable agreement or ordinance in lieu of any in-kind services or facilities, if any, that otherwise are required under the terms of the existing franchise agreement or ordinance. Prohibits the municipality from requiring a certificated telecommunications provider to provide any services or facilities without compensation or at below-market rates for the right to use a public right-of-way or to provide telecommunications services in the municipality. Requires PUC, on request of the certificated telecommunications provider not subject to an existing franchise agreement or ordinance, to convert the compensation under the existing franchise agreement or ordinance to a fee per access line on a competitively neutral and non-discriminatory basis, and the certificated telecommunications provider may elect to pay the municipality on a fee per access line basis rather than the manner of compensation provided under the existing franchise agreement or ordinance. Sec. 283.055. DETERMINATION OF FEES BY COMMISSION. (a) Requires PUC, not later than November 1, 1999, to establish not more than three categories of access lines for statewide use. (b) Requires PUC, not later than March 1, 2000, to establish: _for each municipality, rates per access line by category for the use of the rights-of-way in that municipality; and _the statewide average of those rates per access line by category for each certificated telecommunications provider, if necessary. (c) Requires the rates, when applied to the total number of access lines by category in the municipality, to be equal to the base amount. (d) Provides that not later than December 1, 1999, a municipality that wants to effect an allocation of the base amount over specific access line categories to be assessed rates is required to notify PUC of the desired allocation. Requires PUC to establish an allocation of the base amount over the categories of access lines if a municipality does not file its proposed allocation by December 1, 1999. Authorizes a municipality to request a modification of PUC's allocation not more than once every 24 months by notifying PUC and all affected certificated telecommunications providers in September of that year that the municipality wants to change the allocation for the next calendar year. Requires a municipality's allocation to be implemented unless, on complaint by an affected certificated telecommunications provider, PUC determines that the allocation is not just and reasonable, is not competitively neutral, or is discriminatory. (e) Provides that rates imposed under this section and the allocation among certificated telecommunications providers must be exercised in a competitively neutral manner, is prohibited from unduly impairing competition, must be non-discriminatory, and must comply with state and federal law. Requires PUC to determine the applicable rates for each municipality for each category, taking into account the allocation under Subsection (d) and the type, use, and function of access lines. (f) Requires certificated telecommunications providers to pay to the municipality a quarterly amount calculated monthly based on the access line rates established by PUC and the number of access lines as reflected in the reports filed under Subsection (j). Requires the providers to make the quarterly payment not later than 45 days after the end of the quarter. (g) Requires PUC, beginning 24 months after the date PUC establishes rates per access line, to annually adjust the rates per access line for each municipality by an amount equal to one-half the annual change, if any, in the consumer price index. Requires PUC, at that time, to provide each certificated telecommunications provider and municipality with the adjusted monthly rates for each category of access line. (h) Authorizes an affected municipality, on an annual basis, to provide notice to PUC to decline all or any portion of any increase in the per category access line rates. (i) Prohibits a certificated telecommunications provider from being required to remit a right-of-way fee to a municipality on those access lines that have been resold, leased, or otherwise provided to another certificated telecommunications provider, if the underlying certificated telecommunications provider supplying those services or facilities has been furnished with adequate proof that the provider of services to the end-use customer will directly remit to the municipality a right-of-way fee based on those access lines. (j) Provides that on a quarterly basis, each certificated telecommunications provider is required to file a report with PUC that shows the number of access lines, including access lines by category, that the provider has within each municipality at the end of each month of the quarter. Requires the provider to include with the report a certified statement from an authorized officer or duly authorized representative of the provider stating that the information contained in the report is true and correct to the best of the officer's or representative's knowledge and belief after inquiry. Requires each certificated telecommunications provider, on request and subject to the confidentiality protections of Section 283.005, to provide each affected municipality with a copy of the report required by this subsection. (k) Requires the report, on request of PUC and to the extent available, to specifically identify access lines that are provided by means of resold services or unbundled facilities to another certificated telecommunications provider who is not an end-use customer and the identity of the certificated telecommunications providers obtaining the resold services or unbundled facilities to provide services to end-use customers. Prohibits a provider from including in its monthly count of access lines, and provides that a provider is not required to remit a right-of-way fee to the municipality on access lines that are resold, leased, or otherwise provided to another certificated telecommunications provider if the provider receives adequate proof that the provider leasing or purchasing the access lines will include the access lines in its monthly count and remit payment on those access lines to the municipality. (l) Authorizes PUC to use a report only to verify the number of access lines that serve premises within the municipality. (m) Provides that notwithstanding any other provision of this chapter, payment by a certificated telecommunications provider that complies with the terms of an unexpired franchise agreement or right-of-way ordinance that applies to the provider satisfies the payment attributable to the provider required by this chapter. (n) Prohibits a municipality from demanding or requiring from a certificated telecommunications provider services, facilities, or goods without compensation or at below-market rates. (o) Requires a certificated telecommunications provider, to the extent required, to implement PUC established access line rates not later than the 90th day after the date the PUC establishes the access line rates under this chapter. Sec. 283.056. MUNICIPAL AUTHORIZATIONS; PROHIBITION ON OTHER FEES AND CHARGES. (a) Prohibits a municipality from requiring a certificated telecommunications provider to: _pay any compensation other than the fee authorized by Section 283.055, including an application, permit, excavation, or inspection fee, for the right to use a public right-of-way to provide telecommunications services in the municipality; or _provide any services or facilities for the right to use a public right-of-way or to provide telecommunications services in the municipality. (b) Authorizes a municipality, notwithstanding any other law or any other provision of this chapter, to require the issuance of a construction permit without cost to a certificated telecommunications provider locating facilities in or on public rights-of-way within the municipality. Requires the terms of the permit to be consistent with construction permits issued to other persons excavating in a public right-of-way. (c) Authorizes a municipality to exercise those police power-based regulations in the management of a public right-of-way that apply to all persons within the municipality. Authorizes a municipality to exercise police power-based regulations in the management of the activities of certificated telecommunications providers within a public right-of-way only to the extent that they are reasonably necessary to protect the health, safety, and welfare of the public. Prohibits police power-based regulation of certificated telecommunications providers from including activities that are governed by this chapter or are within the sole business discretion of the certificated telecommunications provider. Provides that any police power-based regulation must be competitively neutral and may not be unreasonable or discriminatory. Prohibits a municipality specifically from imposing regulations on certificated telecommunications providers that are not authorized by this chapter, including the enumerated regulations. (d) Requires a municipality, in the exercise of its lawful regulatory authority, to promptly process each valid and administratively complete application of a certificated telecommunications provider for any permit, license, or consent to excavate, set poles, locate lines, construct facilities, make repairs, affect traffic flow, obtain zoning or subdivision regulation approvals, or for other similar approvals, and to make every reasonable effort to not delay or unduly burden that provider in the timely conduct of its business. (e) Provides that if there is an emergency necessitating response work or repair, a certificated telecommunications provider is authorized to begin that repair or emergency response work or take any action required under the circumstances, provided that the certificated telecommunications provider notifies the affected municipality as promptly as possible after beginning the work and later acquires any approval required by a municipal ordinance applicable to emergency response work. (f) Provides that the compensation paid under this chapter is in lieu of any permit, license, approval, inspection, or other similar fee or charge, including all general business license fees customarily assessed by a municipality for the use of a public right-of-way against persons operating telecommunications-related businesses. Provides that the compensation paid under this chapter constitutes full compensation to a municipality for all of a certificated telecommunications provider's facilities located within a public right-of-way, including interoffice transport and other transmission media that do not terminate at an end-use customer's premises, even though those types of lines are not used in the calculation of the compensation. Prohibits this chapter from being construed to affect the ad valorem taxation of a certificated telecommunications provider's facilities or to permit the ad valorem taxation of a certificated telecommunication provider's occupancy of a public right-of-way. Sec. 283.057. INDEMNITY. (a) Requires a certificated telecommunications provider to indemnify and hold harmless the municipality and its officers and employees harmless against any and all claims, lawsuits, judgments, costs, liens, losses, expenses, fees (including reasonable attorney's fees and costs of defense), proceedings, actions, demands, causes of action, liability, suits of any kind and nature, including personal or bodily injury (including death), property damage, or other harm for which recovery of damages is sought that is found by a court of competent jurisdiction to be caused by the negligent act, error, or omission of the certificated telecommunications provider, any agent, officer, director, representative, employee, affiliate, or subcontractor of the certificated telecommunications provider, or their respective officers, agents, employees, directors, or representatives, while installing, repairing, or maintaining facilities in the public right-of-way. Provides that this indemnity does not apply to liability that results from the negligence of the municipality, its officers, employees, contractors, or subcontractors. Requires liability to be apportioned comparatively if the certificated telecommunications provider and the municipality are found to be jointly liable by a court, without waiving any governmental immunity available to the municipality under state law and without waiving any defenses of the parties under state law. (b) Requires the certificated telecommunications provider or municipality to promptly advise the other in writing of any known claim or demand against the certificated telecommunications provider or municipality related to or arising out of the certificated telecommunications provider's activities in a public right-of-way. (c) Authorizes municipalities with franchise agreements or ordinances applicable to certificated telecommunications providers in effect under a general-use ordinance adopted before January 12, 1999, and after July 1, 1998, and having 1.3 million access lines or more within the municipality on September 1, 1999, to continue to enforce the indemnity provision contained in those franchise agreements or ordinances until the earlier of the date the franchise agreements or ordinances expire or December 31, 2003. Provides that a certificated telecommunications provider providing access lines in a municipality described by this subsection is also subject to the indemnity provided by this section. Sec. 283.058. ADDITIONAL COMMISSION JURISDICTION. Requires PUC to have the jurisdiction over municipalities and certificated telecommunications providers necessary to enforce this chapter and to ensure that all other legal requirements are enforced in a competitively neutral, non-discriminatory, and reasonable manner. SECTION 2. Requires PUC to determine the access line rates by category for a municipality described by Section 283.055, Local Government Code, as added by this Act, as soon as possible after the effective date of this Act but not later than 180 days after that date. SECTION 3. (a) Provides that notwithstanding any provision of Chapter 283, Local Government Code, as added by this Act, to the extent a municipal regulation, ordinance, resolution, or charter provision is applicable to certificated telecommunications providers, the municipal regulation, ordinance, resolution, or charter provision is preempted to the extent it: _conflicts with Chapter 283, Local Government Code, as added by this Act; or _is not specifically authorized by Section 283.056, Local Government Code, as added by this Act. (b) Authorizes a city charter provision in effect on January 12, 1999, that does not conflict with Chapter 283, Local Government Code, as added by this Act, to be specifically re-adopted in accordance with Chapter 9 (Home-Rule Municipality), Local Government Code. SECTION 4. Effective date: September 1, 1999. SECTION 5. Emergency clause.