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The Municipal Wire

In Issue 2 (Spring/Summer 2001):

• RCN and AT&T Slow Down
• Municipal Officials Tackle Street Permits
• Local Officials Oppose Internet Tax Ban
• City Successfully Denies Franchise Renewal 
• News Briefs


RCN and AT&T Slow Down

After building 14 cable television systems in New England in three years and emerging as the region’s major cable competitor, RCN has withdrawn license applications and cancelled negotiations in several franchise areas.  In a number of communities where RCN already executed provisional licenses, RCN has requested extensions of construction deadlines.  Municipal officials that have not already commenced the RCN licensing process are being turned away by the telecommunications company, leaving a majority of communities with no immediate prospects for cable competition. (See The Municipal Wire, Vol. 1, Issue 1.)

RCN’s plight appears to mirror broader industry and economic trends.  AT&T, the largest cable operator in New England, has also cut back on some of its capital projects. In a number of communities, AT&T has reportedly informed municipal officials that it would not be adding new services, such as high-speed Internet service, on the timetable discussed during last year’s license transfer hearings. In at least one community, AT&T has requested an extension of a contractually required upgrade completion date. In Rhode Island, the state’s Division of Public Utilities and Carriers (DPUC) terminated pending franchise applications of American Broadband, Inc. (ABI).  ABI, a provider of competitive cable services, reported that it "had fallen victim to the economic downturn in the telecommunications industry," and that it would "not be able to meet the conditions necessary to obtain construction certificates."

RCN’s slowdown has been attributed to multiple factors, including alleged utility company pole attachment delays; trying to build too much, too fast; and recent capital market doldrums. RCN states that in several communities it has sought construction extensions to deal with dilatory pole attachment procedures.  Municipal and state officials are concerned by the possible loss of cable competition, and are considering regulatory responses.  Municipal officials find themselves in a dilemma: choosing between granting RCN a construction extension or risking an attempt by RCN to surrender its license altogether.  Based on RCN allegations of pole attachment delays, the Town of Saugus and the City of Quincy (among others) have contacted utility companies to try to accelerate the RCN pole attachment process.  Utility companies defend their practices, citing electrical safety code issues allegedly not resolved by RCN.  RCN has reportedly entered into a proposed trial with Mass Electric in order to examine disputed pole attachment techniques.

RCN still provides head-to-head competition in numerous operating systems and stands as a potentially significant source of meaningful competition.  However, municipal officials are still concerned about the extent of competition in the cable industry.

Municipalities Tackle New Right-of-Way Requests

Despite the recent slowdown in the telecommunications sector, municipalities continue to face a significant number of companies requesting permits to excavate and wire local streets. Companies such as Adelphia Business Solutions, Metromedia Fiber Systems and XO Communications have pending or recently completed street permitting or ‘grant of location’ proceedings before New England cities and towns, leaving municipal officials increasingly involved with complex street management issues.

To obtain permission to wire the public ways for telecommunications purposes, fiber companies are petitioning municipal officials for both underground and aerial street locations.  Millions of dollars are at stake for municipal officials, as the longevity of costly street surfaces can be reduced from improper street excavation and restoration practices. 

Municipal officials are grappling with important right-of-way management issues such as performance bonds, insurance, dedication of conduit for municipal and future use, possible compensation for use of the rights-of-way, minimizing damage to the streets, street and sidewalk restoration and maintenance and numerous other specialized right-of-way issues.  An important issue municipalities are addressing is whether to adopt a comprehensive right-of-way management policy, ordinance or by-law.  Communities have addressed right-of-way issues in a variety of ways.  The City of Boston has a Policy Statement on use of municipal ways that requires telecommunications companies to notify each other when they are excavating streets so that multiple users can share a common trench and thereby minimize disruption of the streets.   Boston also requires companies to set aside surplus capacity for municipal and third party future use to further reduce the need for future digging of streets.  The City of Cambridge Siting Policy Statement also requires joint trenching notification procedures, surplus capacity for future use and requires consultation with the City to mitigate and reimburse certain administrative and related costs.

The Towns of Easton, Foxborough, and Sharon have adopted by-laws that not only set forth terms for access to public rights-of-way, but also set up a formula for determining how the Town will be compensated.  The by-laws, which were reviewed and approved by the Attorney General's Office, essentially seek a form of user fees/rent based on a calculation of the total space occupied by the carrier's facilities.  While the Massachusetts Department of Telecommunications and Energy has acknowledged that municipal application processing costs are reimbursable, user fees can be imposed only to the extent consistent with state law.

Local officials oppose Internet tax ban

The National Governor’s Association and municipal groups are opposing legislation initially sponsored by Sen. John McCain (R-AZ), chair of the Senate Commerce Committee, that would extend the ban on Internet-specific taxes.  Local officials are concerned that the Internet tax ban results in billions of dollars of lost state and local revenues and inequitably shifts the tax burden to non-Internet stores.  With the Internet tax ban expiring this October, the proposed extension of the ban has become a major state and municipal finance issue. 
In an effort to get the bill reported out of committee, supporters of the bill crafted a compromise that would authorize states to levy sales taxes on out-of state companies if the states adopt tax provisions set forth in the amendment. 

City successfully denies franchise renewal

The Northern District Court of Ohio recently upheld the City of Brunswick, Ohio's denial of a cable franchise renewal to Cablevision based on the operator’s failure to provide twenty hours per week of local origination programming, as required by the franchise.  The court found that non-compliance with a local production obligation was a material breach of the franchise agreement. Municipal lawyers are pleased that the court used a standard of review that affords considerable weight to municipal fact finding in the franchise renewal process.

News Briefs

High Speed Internet deregulation pondered by House subcommittee
The House Telecommunications and Internet Subcommittee approved HR 1542, a bill to allow the Bell Operating Companies to offer high-speed Internet services outside of their local service areas without having to share their networks with competitors as required by the Telecommunications Act.  Consumer groups and Internet Service Providers oppose the proposal fearing that the relaxation of the Act’s requirements would stifle competition.  The bill has yet to be passed by the House Energy and Commerce Committee.

MMA endorses telecommunications bills
The Massachusetts Municipal Association has endorsed two bills dealing with the regulation of telecommunication providers.  The first, Senate Bill 1014, seeks to eliminate the authority of the Department of Telecommunications and Energy to overrule local zoning decisions on the siting of wireless communications towers.  The second, House Bill 2103, clarifies the ability of cities and towns to “collect payment of fees” from utility and telecommunications companies for the processing of street excavation permits.

Comcast offers to buy AT&T Broadband
On July 8, 2001, the third largest cable operator in the US, Comcast Corp., disclosed a $58 billion takeover bid of AT&T Broadband.  The deal, if consummated, would make Comcast the largest provider of cable services in the country.

Metricom files for restructuring
Wireless Internet provider, Metricom Inc., recently filed for reorganization under Chapter 11 of the US Bankruptcy Code.  Metricom, which has actively pursued access to municipal rights-of way in Massachusetts, cited its difficulty in raising capital as the basis for its decision to restructure.

US Court of Appeals Upholds Tower Siting Denial
In Southwestern Bell Mobile Systems, Inc. v. Todd, et al., the First Circuit Court of Appeals upheld the Town of Leicester’s denial of a special permit for the construction of a 150 ft. wireless communications tower.  The Leicester Zoning Board had rejected the wireless company’s application, ruling that it did not meet the “minimal visual impact” criteria in Leicester’s zoning by-law.  Leicester’s by-law assigned wireless towers to locations that “minimized the adverse impacts of these facilities on the adjacent historic and residential areas.”  The by-law also sought to “minimize the overall number and height” of towers to what was “essential” and encourage co-location of these facilities on a single structure.
Upon review of the Leicester record, the Court found that the evidence supported the Town’s conclusion that the proposed tower was of a “different magnitude than anything else in the area."  Specifically, the Court noted that the proximity of the proposed tower to two schools, as well as the height difference between it and the next highest adjacent structure (a water tower), further supported the Town’s conclusion that the communications tower would violate its minimal visual impact standard.

The "Municipal Wire" is a newsletter produced by Epstein & August, LLP. The Municipal Wire focuses on developments in cable television regulation and related municipal technology issues. Readers are advised that the newsletter is for general information purposes and should not be applied to individual situations without inquiry or legal counsel as needed.

Editor's Note: The Municipal Wire is published by Epstein & August, LLP, a partnership of attorneys Bill August and Peter Epstein. We look forward to sharing information on local, state and federal cable television, telecommunications and public right-of-way issues. We extend special thanks to Marc Lucas for his editorial assistance. Copyright Epstein& August, LLP.

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