PAK S.B. 1937 75(R) BILL ANALYSIS STATE AFFAIRS S.B. 1937 By: Lucio (Carter) 5-13-97 Committee Report (Unamended) BACKGROUND Currently, municipalities charge franchise fees to any telecommunications company providing telecommunications services in the municipality. In general, the purpose of franchise fees is to charge telecommunications utilities for using public right-of-ways to place land lines, telephone poles, and control boxes. However, there is no consistent pattern or structure to franchise fees between municipalities. Some cities require in-kind services in the form of public access channels of phone lines in addition to or in lieu of monetary payment. Telephone utilities contend that the current system impedes competition among providers since municipalities can charge any franchise fee they choose to new entrants to the market. Telecommunication companies who purchase time or rent facilities from telecommunications utilities at a reduced cost and then resell those services to customers are also unhappy with the current arrangement. These resellers are often forced to pay franchise fees when they are not directly using the municipalities' rights-of-way. Resellers are not able to provide services in cities without paying the franchise fees. Many municipalities use franchise fees as a way of garnering needed funds for municipal development and maintaining rights-of-way. Municipalities also argue that they cannot and should not be expected to "give away" public property to private companies without their paying for the service. PURPOSE As proposed, S.B. 1937 requires a joint interim committee to be appointed to investigate, report and make legislative recommendations regarding the state franchise policy for municipalities with respect to telecommunications services provided wholly within municipalities by telecommunications utilities. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Title IIIF, Article 1446c-0, V.T.C.S. (Public Utility Regulatory Act of 1995), by adding Section 3.270, as follows: Section 3.270(a) Provides that it is the policy of the State of Texas to encourage competition among telecommunication utilities providing telecommunications services wholly within municipalities in a competitively neutral, non-discriminatory manner, to reduce the barriers to entry for such telecommunications utilities by eliminating any conditions which prohibit or have the effect of prohibiting the ability of any telecommunications utility to provide telecommunications services wholly within municipalities, to ensure that any compensation to municipalities for the telecommunications utilities' use of municipal rights-of-way or other public property to provide telecommunications services wholly within municipalities is fair and reasonable to telecommunications utilities and municipal residents who own the public property or right-of-way; and to ensure that consumers benefit from such competition. Section 3.270(b) Requires a joint interim committee to be appointed to investigate, report and make legislative recommendations regarding the state franchise policy for municipalities with respect to telecommunications services provided wholly within municipalities by telecommunications utilities. Section 3.270(c) Sets forth the composition of the committee. Section 3.270(d)(1) Requires the joint committee to investigate: (A) the need for consistency in terms and conditions to be included in municipal franchise agreements across the state; (B) the impact of existing municipal fee agreements, ordinances, charters or other municipal requirements on the provision of competitive telecommunications services wholly within municipalities by telecommunications utilities and the authority of the legislature to establish a basis for and require modification of those agreements, ordinances, charters or other municipal requirements; (C) the type and amount of cost incurred by municipalities by virtue of the use of municipalities' rights of way and public property by telecommunications utilities providing telecommunications services wholly within the municipalities; (D) the type, basis for, and amount of revenue received by municipalities from telecommunications utilities providing telecommunications services wholly within the municipalities; (E) the authority of municipalities to impose conditions on or require compensation from telecommunications utilities providing telecommunications services wholly within the municipalities by resale of telecommunications services or the use of facilities of other telecommunications utilities; (F) such other issues as are necessary to promote the public interest and effectuate the policies in support of competition by telecommunications utilities in the provision of telecommunications services wholly within municipalities as set forth in Subsection (a) above. Section 3.270(d)(2) Adds cable television issues to the discussions of the committee. Section 3.270(e) Requires the joint committee to develop a report that analyzes the state's policies with respect to issues described above and that includes recommended rule or statutory changes to implement the policy options. Authorizes the joint committee to make preliminary reports, but shall make a final report no later than November 1, 1998. Provides that the affected parties are placed on notice that any terms and conditions of municipal fee agreements, ordinances, charters or other municipal requirements, now or hereinafter in existence, may be superseded or subject to amendment, to the extent inconsistent with the terms of legislation hereinafter enacted. Section 3.270(f) Requires the Public Utility Commission of Texas (commission), the Texas Legislative Council, the governor's office, the senate, and the house of representatives, on request of the committee, to provide staff as necessary to carry out the duties of the joint committee. Requires the commission to conduct such investigations and provide such information and reports as are necessary for the committee to make the determinations required by Subsections (d)(3) and (d)(4) above. Requires the commission to provide the information and final reports to the committee no later than June 1, 1998. Section 3.270(g) Provides that the committee is given such authority as is necessary to carry out the duties assigned by this section, and in connection therewith may call and hold hearings and compel the attendance of witnesses and the production of information and documents. Section 3.270(h) Authorizes the committee, if necessary to the discharge of its duties, to request the assistance of additional state agencies, departments, or offices. Requires the agencies, departments, or offices to provide the requested assistance. Section 3.270(i) Provides that the committee is abolished on the date it issues its final report under Subsection (e) of this section. SECTION 2. Effective date: September 1, 1997. SECTION 3. Provides that this Act expires on September 1, 1999. SECTION 4. Emergency clause.