Item C: Telecommunications Tax Fund

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Eugene’s ordinances regulating telecommunications providers. (See detailed discussion in the appendix) Qwest appealed the District Court’s decision. Qwest’s brief was filed with the Ninth Circuit on September 9, 2002. The League of Oregon Cities has posted a copy of this brief on its website in (Adobe Acrobat) format. Verizon, Electric Lightwave, Inc. and the Oregon .pdf Telecommunications Association have filed amicus briefs in support of Qwest. In its October 12 decision, the Ninth Circuit affirmed that cities may continue to receive revenue (in the form of a percentage of a portion of Qwest’s revenue earned in the cities) as compensation for Qwest’s use of the streets. The Court has remanded portions of the decision (the right of way management ordinances) to the Oregon District Court for more detailed findings. There are a number of pending cases in Oregon Federal Court at this time. The outcome may affect the ability of local governments to regulate use of the rights of way. In addition to the remanded case discussed above, there is a separate lawsuit against Portland by Qwest Communications, which is registered as a competitive local exchange carrier (CLEC) in Oregon. That is the case where Qwest-CLEC, Time Warner and XO sued based on in-kind franchise requirements and essentially to stop the City from offering any telecom services. Portland also recently concluded litigation in the case of Portland v ELI, in which the Court upheld franchise fees but determined that in-kind requirements (such as empty conduit and dark fiber as part of a franchise or permit) were unlawful. That case will likely be appealed by both sides. Qwest has also sued Portland in a third case over in-kind requirements in city franchises and the City’s Integrated Regional Network Enterprise (IRNE Network, providing City telecom services). As one Portland representative recently put it, “Our plates are full of Qwest”. In a big win for counties, Lincoln County prevailed in a case challenging its authority to provide telecommunications services outside its geographic boundaries. See GTE Northwest, Inc. v. Oregon PUC, 179 Or App 46, 39 P3d 201(2002). B. Compensation Mechanisms Federal law limits cable franchise fees to five percent (5%) of gross revenue. But gross revenue on which services? Oregon law limits franchise fees for local exchange access to seven percent (7%) of gross revenue earned in the municipality. The privilege tax law, ORS 221.450, sets maximum franchise fees at five percent (5%) of gross revenues earned within the city. How should these provisions interrelate? And what services are regulated? A major point of contention between municipalities and telecommunications providers is the scope of “fair and reasonable compensation” within the meaning of Section 253(c) of the 1996 Act. And the courts have reached inconsistent conclusions. The Dearborn case discussed above contains the Sixth Circuit’s conclusion that Congress did not intend to limit what municipalities charge for compensation for the use of the rights of way to a recovery of actual 15 costs. New York and South Carolina state courts have reached the same conclusion. But 15 Omnipoint Communications, Inc. v. Port Authority, 1999 US Dist LEXIS 10534 (SDNY, 1999); and BellSouth Telecommunications, Inc. v. City of Orangeburg, 522 SE2d 804 (SC 1999). Right of Way Management and Compensation Page 10 of 15 APWA Fall Conference - 2005