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Turf Tussles

Three states take steps to curb localities' charges for laying broadband lines beneath city streets.

What is a right of way worth? Municipalities have brawled with telecommunications companies over this question for years. As the telecoms tunneled fiber-optic lines beneath streets, some cities charged exorbitantly for the privilege. Others charged next to nothing. In addition, some localities delayed the issuance of permits beyond the normal timeframe.

Now several states are stepping in and taking over. Michigan, Kansas and Missouri have passed laws limiting what localities can charge for rights of way. In addition, the association of state utilities commissioners is set to recommend more state actions in July, while federal regulators are exploring whether there's a federal role here.

The situation has gotten increasingly contentious, with cities and telecom companies duking it out in court. Under federal law and the laws of more than a dozen states, cities and counties are allowed to charge "reasonable" rates for use of rights of way. The problem is defining what is reasonable. The industry thinks that charges should be based strictly on the localities' costs. What the localities have found, however, is that telecoms will sometimes pay much more, especially when they are desperate to get into a market.

Under Michigan's law, passed in March, localities can no longer levy a fee for use of a right of way. Instead, the state will charge companies a set rate and pass most of the revenue through to local governments. In addition, localities must issue right-of-way permits within 45 days. "We had an unlevel playing field before," says Robert Nelson, a Michigan public utility commissioner. "There will no longer be a hodgepodge of different fees for different parts of the state and for different providers."

Under the new formula, the state will charge a flat rate of 5 cents per foot of right of way. Most cities will bring in more revenue than they did before, but some cities see the new state law as a bum deal. "We're not getting anywhere near what it costs to maintain these rights of way," says John Tanner, an attorney for Dearborn, which has been sued three times by telecom companies charging the city with delaying permits and overcharging for the right to tunnel under the right of way.

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