HBA-JRA, ALS C.S.H.B. 1777 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1777 By: Wolens State Affairs 5/6/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, there is 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 is to provide policies and guidelines relating to compensation that a municipality may receive from a provider within the municipality. C.S.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 283.056, 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. SUPERVISION 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," and "public right-of-way" in this chapter. Sec. 283.003. COMMISSION REVIEW OF DEFINITION OF "ACCESS LINE." Requires the Public Utility Commission of Texas (PUC) to determine by September 1, 2003, whether changes in technology or facilities justify adoption of a definition of "access line" provided by this section. Authorizes PUC, by rule, to define "access line" in the manner necessary to maintain consistent levels of revenues, as annually increased, to the municipalities to ensure that the municipalities are not affected by changes in technology or facilities. Requires PUC to make the determination at least once every three years after September 1, 2003. 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. SUBCHAPTER B. FRANCHISE FEES Sec. 283.051. FRANCHISE REQUIREMENT. Prohibits a person from operating in a municipality without a franchise if the provider is a certificated telecommunications provider who uses a public right-of-way in the municipality and fails to pay franchise fees in accordance with this chapter or a noncertificated telecommunications provider who locates facilities in a public right-of-way in the municipality. Sec. 283.052. FRANCHISE FEE. Requires a certificated telecommunications provider to pay only the compensation amount determined by PUC under Section 283.056 as franchise fees 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 has not compensated the municipality in accordance with this chapter. Sec. 283.053. EFFECT OF PAYMENT OF FRANCHISE FEES TO MUNICIPALITY. Authorizes a certificated telecommunications provider to erect poles or construct conduit, cable, switches, and related appurtenances and facilities and excavate within a public rightof-way to provide telecommunications service if the certificated telecommunications provider makes timely payments of the franchise fee for the use of the public right-of-way, subject to the requirements of Sections 283.058 and 283.059. Provides that all use of a public right-of-way is nonexclusive and subject to the rights of the municipality. Sec. 283.054. BASE AMOUNT. Prohibits pole rental fees, special assessments, and taxes of any kind from being included as revenue received by a municipality in determining a municipality's "base amount." Sets forth the base amount for a municipality not described by another provision of this section or Section 283.055; a municipality located in a county with a population of less than 75,000; a municipality that does not have an effective franchise agreement on September 1, 1999, but that did during 1997 or 1998; a municipality that has a population of less than 15,000 or that has not had an effective franchise agreement since January 1, 1997; a municipality that did not have a franchise agreement in 1998 or a municipality that did not have a franchise agreement in 1997 or 1998; and a municipality that was involved in litigation relating to franchise fees during any part of 1998 and that elects or agrees to withdraw from or otherwise voluntarily terminate that litigation. Sec. 283.055. TREATMENT OF NEW ENTRANT OR PROVIDER SEEKING RENEWAL. (a) Sets forth the base amount for a municipality that has entered into one or more franchise agreements or has adopted a right-of-way ordinance before January 12, 1999. (b) Requires a provider subject to an agreement that expires before PUC has determined the amounts to be paid to the municipality under Section 283.056 to continue paying at the same rate until PUC determines the appropriate rate. Requires the provider to pay the excess amount within 30 days of PUC's determination if PUC determines that the provider would have paid more money during that period if PUC had determined the rate on the expiration date. (c) Authorizes the municipality, during the period in which a franchise agreement or right-of-way ordinance entered into before January 12, 1999, is in effect, to require a new entrant, as a condition of beginning construction of facilities, or an existing provider that wants to renew an agreement or ordinance, to comply with any applicable terms of the most recent agreement or ordinance entered into between the municipality and a certificated telecommunications provider for the duration of that agreement or ordinance. Sec. 283.056. DETERMINATION OF FRANCHISE FEE. (a) Requires PUC, by rule, to prescribe categories of various access lines considering the type, use, and function of the lines. Requires PUC, at a minimum, to prescribe categories that subdivide residential, business, and point-to-point services. (b) Requires PUC to establish for each municipality monthly rates for each category of access lines so that the sum of the rates for each category of access lines multiplied by the total number of access lines a municipality for the first month, multiplied by 12, approximately equals the municipality's base amount, plus the value of in-kind services and facilities. Requires PUC to assume that the value of in-kind services and facilities is equal to one percent of the base amount unless the municipality can establish that it received a greater amount during 1998. (c) Requires PUC to ensure that rates imposed under this section and the allocation among telecommunications providers are competitively neutral, do not unduly impair competition, are nondiscriminatory, and comply with state and federal law. (d) Authorizes a municipality to annually establish the relationship between fees on access line categories. (e) Requires PUC to adjust access line rates on an annual basis to reflect the percentage increase in the consumer price index. Requires PUC, at that time, to provide each municipality with adjusted monthly rates for each category of access line. Sec. 283.057. PAYMENT OF FRANCHISE FEE. (a) Requires each certificated telecommunications provider within a municipality to pay the municipality according to the actual number of access lines by access line category as of the last day of the preceding calendar month. Provides that each monthly payment must reflect any change in the number of access lines. Requires the provider to reduce the payment due every 13th month by an amount equal to the statewide average annual percentage of local service revenues that are not paid by consumers, as determined by PUC, multiplied b the sum of the payments for the previous 12 months. (b) Sets forth the deadlines by which the certificated telecommunications provider is required to make the payment. Requires the provider to make the payment by electronic funds transfer or by another method that provides availability of the funds on the day the payment is due. (c) Requires the certificated telecommunications provider to file a report with each payment that shows the number of access lines, including access lines by category, that the provider has within the municipality at the end of the month. Requires the provider to include 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. (d) Provides that the report must specifically identify access lines owned, operated, or maintained by the provider that are leased or used by a person who is not an end-use customer. Prohibits a provider from including in its monthly count of access lines a franchise fee 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 and remit payment on those access lines in its monthly count. (e) Authorizes a municipality to use a report only to verify the number of access lines that serve premises within the municipality. (f) Provides that a 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, notwithstanding any other provision of this chapter. Sec. 283.058. MUNICIPAL AUTHORIZATIONS. Authorizes a municipality, for use of the public right-of-way, to require a certificated telecommunications provider locating facilities in or on a public right-of-way within the municipality to obtain a permit without cost; exercise any police power-based regulations that are not specifically precluded by this chapter and that are not inconsistent with state or federal law; and determine and order, at the telecommunication provider's expense, relocation, removal, colocation, maintenance, or placement of the provider's facilities. Sec. 283.059. INDEMNIFICATION. (a) Requires a certificated telecommunications provider to indemnify and hold harmless the municipality and its officers and employees for or against any claim, lawsuit, judgment, cost, lien, loss, expense, fee, including reasonable attorney's fees and costs of defense, proceeding, action, demand, cause of action, liability, suit of any kind and nature, including personal or bodily injury or death, property damage or other harm arising out of a negligent act, error, or omission of the provider incurred while installing, repairing, or maintaining facilities in the public right-of-way within the municipality. (b) Provides that this indemnity does not apply to liability that results from the negligence of the municipality or of a municipal officer or employee that causes personal or bodily injury, death, or property damage. (c) 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. (d) Provides that this section is solely for the benefit of the certificated telecommunications provider and the municipality and is not intended to create or grant any rights, contractual or otherwise, to any other person. (e) Requires the certificated telecommunications provider to promptly advise the municipality in writing of any claim or demand against the municipality or the provider that the provider knows is related to or arises out of the provider's activities in the public right-of-way within the municipality. SECTION 2. (a) Provides that this Act does not affect the validity of a franchise agreement or rightof-way ordinance with a certificated telecommunications provider executed before January 12, 1999. Authorizes a municipality to continue to enforce that agreement or ordinance and to collect franchise fees and other charges under that agreement or ordinance until the date on which the agreement or ordinance expires on its own terms. (b) Requires each certificated telecommunications provider in a municipality that was involved in litigation relating to franchise fees during any part of 1998 and that elects or agrees to withdraw from or otherwise voluntarily terminate that litigation that does not have a franchise agreement with the municipality to begin paying franchise fees to the municipality in accordance with Chapter 283, Local Government Code, as added by this Act, at the time PUC determines the amount the municipality is entitled to receive under Section 283.056, Local Government Code. Requires a certificated telecommunications provider whose franchise agreement expires after PUC makes that determination to begin paying franchise fees in accordance with Chapter 283 on the earlier of the date the agreement expires on its own terms or the date the agreement expires on mutual agreement of the parties. SECTION 3. (a) Requires PUC to determine the monthly rates for a municipality described by Section 283.056, Local Government Code, as added by this Act, as soon as possible after the effective date of Chapter 283, Local Government Code, but not later than 180 days after that date. (b) Requires PUC to determine the monthly rates for a municipality described by Section 283.055(a), Local Government Code, as added by this Act, by the 60th day after the date the last franchise agreement or right-of-way ordinance executed by the municipality under Section 283.055(c) expires. SECTION 4. Provides that SECTION 1 of this Act takes effect September 1, 1999, and that the other SECTIONS take effect 90 days after adjournment. SECTION 5. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in SECTION 1 by amending Subtitle A, Title 9, Local Government Code, by adding Chapter 283 (Supervision of Public Right-of-Way Used by Telecommunications Provider in Municipality), rather than amending Chapter 311, Transportation Code, by adding Subchapter F (Compensation For Right to Provide Telecommunications Services And to Use Public Rights-of-Way). Proposed Chapter 311 would have authorized a municipality, by ordinance, to require communications services providers (providers) who own facilities located within public rights-of-way within the municipality to pay reasonable compensation to use those rights-of way. It would have authorized a municipality, by ordinance, to require all providers who do not use public rights-of-ways within the municipality to pay reasonable compensation for the right to provide services within the municipality and to require providers within the municipality to pay reasonable compensation for the municipality's cost of exercising police power regulation over the providers. It also would have set limits on such compensation and required the municipality to impose the charges in a manner that is competitively neutral and nondiscriminatory. Please see the Section-by-Section Analysis in this document with respect to the new Chapter 283. The substitute modifies the original in SECTION 2 to provide that this Act does not affect the validity of a franchise agreement with a certificated provider that is executed before January 12, 1999, rather than before the effective date of this Act. The substitute also adds Subsection (b) relating to the franchise fees of a municipality that was involved in litigation relating to franchise fees during any part of 1998 and that elects or agrees to withdraw from or otherwise voluntarily terminate that litigation. The substitute adds a new SECTION 3 to require PUC to determine the monthly rates for a municipality described by Section 283.056, Local Government Code, as added by this Act, as soon as possible after the effective date of Chapter 283, Local Government Code, but not later than 180 days after that date and to require PUC to determine the monthly rates for a municipality described by Section 283.055(a), Local Government Code, as added by this Act, by the 60th day after the date the last franchise agreement or right-of-way ordinance executed by the municipality under Section 283.055(c) expires. The substitute redesignates SECTION 3 of the original to SECTION 4 and modifies it to make conforming changes. The substitute redesignates SECTION 4 (emergency clause) of the original to SECTION 5.