76R12867 CBH-F By Wolens, Carter H.B. No. 1777 Substitute the following for H.B. No. 1777: By Wolens C.S.H.B. No. 1777 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the provision of local exchange telephone service in a 1-3 municipality and the management by the municipality of public 1-4 rights-of-way used by providers of that service. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. Subtitle A, Title 9, Local Government Code, is 1-7 amended by adding Chapter 283 to read as follows: 1-8 CHAPTER 283. SUPERVISION OF PUBLIC RIGHT-OF-WAY USED BY 1-9 TELECOMMUNICATIONS PROVIDER IN MUNICIPALITY 1-10 SUBCHAPTER A. GENERAL PROVISIONS 1-11 Sec. 283.001. STATE POLICY; PURPOSE. (a) It is the policy 1-12 of this state to: 1-13 (1) encourage competition in the provision of 1-14 telecommunications services; 1-15 (2) reduce the barriers to entry for providers of 1-16 services so that the number and types of services offered by 1-17 providers continue to increase through competition; 1-18 (3) ensure that providers of telecommunications 1-19 services do not obtain a competitive advantage or disadvantage in 1-20 their ability to obtain a franchise for use of a public 1-21 right-of-way from a municipality; and 1-22 (4) fairly end the uncertainty and litigation 1-23 concerning franchise fees. 1-24 (b) It is also the policy of this state that municipalities: 2-1 (1) retain the authority to manage the public 2-2 right-of-way of the municipality and to ensure the health, safety, 2-3 and welfare of the public; and 2-4 (2) receive from certificated telecommunications 2-5 providers reasonable and stable revenue for the private use of the 2-6 public right-of-way within the municipality. 2-7 (c) The purpose of this chapter is to establish a uniform 2-8 method for compensating municipalities for the use of their public 2-9 right-of-way by certificated telecommunications providers that: 2-10 (1) is administratively simple for municipalities and 2-11 telecommunications providers; 2-12 (2) benefits consumers by keeping the cost of services 2-13 low; 2-14 (3) is consistent with state and federal law; 2-15 (4) is competitively neutral; 2-16 (5) is nondiscriminatory; 2-17 (6) is consistent with the burdens on municipalities 2-18 created by the incursion of certificated telecommunications 2-19 providers into the public right-of-way; and 2-20 (7) provides fair and reasonable compensation to 2-21 municipalities for the use of the public right-of-way. 2-22 Sec. 283.002. DEFINITIONS. In this chapter: 2-23 (1) "Access line" means, unless the commission adopts 2-24 a definition under Section 283.003, a unit of measurement 2-25 representing: 2-26 (A) each switched transmission path of the 2-27 transmission media within the public right-of-way extended to the 3-1 customer's network interface device within the municipality that 3-2 allows the delivery within the municipality of local exchange 3-3 services that is provided by a person leasing, reselling, or owning 3-4 facilities; 3-5 (B) each termination point or points of a 3-6 nonswitched telephone or other circuit consisting of transmission 3-7 media connecting specific locations identified by, and provided to, 3-8 a customer for delivery of nonswitched services within the 3-9 municipality; or 3-10 (C) each loop provided to any person used for 3-11 the provision of telecommunications transmission services. 3-12 (2) "Certificated telecommunications provider" means a 3-13 person who has been issued a certificate of convenience and 3-14 necessity, certificate of operating authority, or service provider 3-15 certificate of operating authority by the commission to offer local 3-16 exchange service and who is providing local exchange services to 3-17 customers within the municipality. 3-18 (3) "Commission" means the Public Utility Commission 3-19 of Texas. 3-20 (4) "Consumer price index" means the annual revised 3-21 consumer price index for all urban consumers for Texas, as 3-22 published by the federal Bureau of Labor Statistics. 3-23 (5) "Public right-of-way" means the area on, below, or 3-24 above a public roadway, highway, street, public sidewalk, or 3-25 utility easement in which the municipality has an interest. The 3-26 term does not include the airwaves above a right-of-way with regard 3-27 to nonwire telecommunications. 4-1 Sec. 283.003. COMMISSION REVIEW OF DEFINITION OF "ACCESS 4-2 LINE." (a) Not later than September 1, 2003, the commission, on 4-3 its own motion, shall determine whether changes in technology or 4-4 facilities justify adoption of a definition of "access line" 4-5 provided by this section. 4-6 (b) The commission by rule may define "access line" in the 4-7 manner necessary to maintain consistent levels of revenues, as 4-8 annually increased, to the municipalities to ensure that the 4-9 municipalities are not affected by changes in technology or 4-10 facilities. 4-11 (c) After September 1, 2003, the commission, on its own 4-12 motion, shall make the determination required by this section at 4-13 least once every three years. 4-14 Sec. 283.004. APPLICATION. This chapter applies only to 4-15 municipal regulations and fees imposed on and collected from 4-16 certificated telecommunications providers. 4-17 Sec. 283.005. INFORMATION. The commission may collect and 4-18 compile information from certificated telecommunications providers 4-19 and municipalities to implement this chapter. The commission shall 4-20 maintain the confidentiality of that information in accordance with 4-21 Section 52.207, Utilities Code. 4-22 (Sections 283.006-283.050 reserved for expansion 4-23 SUBCHAPTER B. FRANCHISE FEES 4-24 Sec. 283.051. FRANCHISE REQUIREMENT. Notwithstanding any 4-25 other law, a person may not operate in a municipality without a 4-26 franchise if the provider is: 4-27 (1) a certificated telecommunications provider who 5-1 uses a public right-of-way in the municipality and fails to pay 5-2 franchise fees in accordance with this chapter; or 5-3 (2) a noncertificated telecommunications provider who 5-4 locates facilities in a public right-of-way in the municipality. 5-5 Sec. 283.052. FRANCHISE FEE. (a) Notwithstanding any other 5-6 law, a certificated telecommunications provider is required to pay 5-7 as franchise fees to a municipality for use of the public 5-8 right-of-way in the municipality only the compensation amount 5-9 determined by the commission under Section 283.056. 5-10 (b) This section does not affect the right of a municipality 5-11 to initiate legal action against a certificated telecommunications 5-12 provider that has not compensated the municipality in accordance 5-13 with this chapter. 5-14 Sec. 283.053. EFFECT OF PAYMENT OF FRANCHISE FEES TO 5-15 MUNICIPALITY. (a) Subject to the requirements of Sections 283.058 5-16 and 283.059, a certificated telecommunications provider may erect 5-17 poles or construct conduit, cable, switches, and related 5-18 appurtenances and facilities and excavate within a public 5-19 right-of-way to provide telecommunications service if the 5-20 certificated telecommunications provider makes timely payments of 5-21 the franchise fee amount determined by the commission under Section 5-22 283.056 for the use of the public right-of-way. 5-23 (b) All use of a public right-of-way is nonexclusive and 5-24 subject to the rights of the municipality. 5-25 Sec. 283.054. BASE AMOUNT. (a) In determining a 5-26 municipality's "base amount" under this section, pole rental fees, 5-27 special assessments, and taxes of any kind, including ad valorem or 6-1 sales and use taxes, may not be included as revenue received by the 6-2 municipality. 6-3 (b) For purposes of determining the amount of a 6-4 municipality's franchise fee under Section 283.056, the "base 6-5 amount" for a municipality not described by another provision of 6-6 this section or Section 283.055 is the total amount of revenue 6-7 received by the municipality in franchise, license, permit, and 6-8 application fees from certificated telecommunications providers in 6-9 1998 within the boundaries of the municipality, including all newly 6-10 annexed areas. 6-11 (c) A municipality located in a county with a population of 6-12 less than 75,000 may negotiate a base amount that exceeds the 6-13 amount provided by this section if the resulting amount does not 6-14 result in an access line fee that exceeds the statewide average fee 6-15 per line. 6-16 (d) The base amount for a municipality that does not have an 6-17 effective franchise agreement on September 1, 1999, but that had a 6-18 franchise agreement during 1997 or 1998, is the total amount of 6-19 revenue received by the municipality during the 12 months 6-20 immediately preceding the date the agreement expired in franchise, 6-21 license, permit, and application fees from certificated 6-22 telecommunications providers within the boundaries of the 6-23 municipality, including all newly annexed areas, adjusted by the 6-24 consumer price index for the period from the date of the expiration 6-25 to September 1, 1999. 6-26 (e) The base amount for a municipality that has a population 6-27 of less than 15,000 or that has not had an effective franchise 7-1 agreement since January 1, 1997, is an amount equal to the state 7-2 average access line rate or the highest total amount of revenue 7-3 received by a similarly sized municipality within the same or an 7-4 adjacent county. The municipality may choose which amount the 7-5 commission must use. 7-6 (f) The base amount for a newly incorporated municipality 7-7 that did not have a franchise agreement in 1998 or for a 7-8 municipality that did not have a franchise agreement during 1997 or 7-9 1998 is an amount equal to the highest total amount of revenue 7-10 received by a similarly sized municipality within the same or an 7-11 adjacent county. 7-12 (g) The base amount for a municipality that was involved in 7-13 litigation relating to franchise fees during any part of 1998 and 7-14 that elects or agrees to withdraw from or otherwise voluntarily 7-15 terminate that litigation is equal to the greater of: 7-16 (1) the amount of revenue the municipality received in 7-17 franchise, license, permit, and application fees during any single 7-18 calendar year beginning in 1990 and ending in 1999, including the 7-19 amount the municipality is adjudged to have been entitled to 7-20 receive through final judgment or settlement of litigation relating 7-21 to the franchise fees during any part of 1998; 7-22 (2) an amount equal to the state average access line 7-23 rate multiplied by the total number of access lines located within 7-24 the boundaries of the municipality in 1999, including any newly 7-25 annexed areas; or 7-26 (3) an amount equal to 22 percent of the total sales 7-27 and use tax revenue received by the municipality in 1998. 8-1 Sec. 283.055. TREATMENT OF NEW ENTRANT OR PROVIDER SEEKING 8-2 RENEWAL. (a) If a municipality has entered into one or more 8-3 franchise agreements or has adopted a right-of-way ordinance before 8-4 January 12, 1999, the base amount for the municipality on 8-5 expiration of each agreement or ordinance, unless renewed as 8-6 provided by Subsection (c), and until all agreements and ordinances 8-7 expire, is an amount equal to the total amount of franchise, 8-8 license, permit, and application fees the municipality received in 8-9 the 12 months immediately preceding the date of the most recent 8-10 expiration of a franchise agreement or right-of-way ordinance 8-11 executed before January 12, 1999. 8-12 (b) If a franchise agreement expires before the commission 8-13 has determined the amounts to be paid to the municipality under 8-14 Section 283.056, the provider subject to that agreement shall 8-15 continue paying at the same rate until the commission determines 8-16 the appropriate rate. If the commission determines that the 8-17 provider would have paid more money during that period if the 8-18 commission had determined the rate on the expiration date, the 8-19 provider shall pay that amount not later than the 30th day after 8-20 the date the commission makes that determination. 8-21 (c) During the period in which a franchise agreement or 8-22 right-of-way ordinance entered into before January 12, 1999, is in 8-23 effect in a municipality, the municipality may require a new 8-24 entrant as a condition of beginning construction of facilities, or 8-25 an existing provider that wants to renew an agreement or ordinance, 8-26 to comply with any applicable terms of the most recent agreement or 8-27 ordinance entered into between the municipality and a certificated 9-1 telecommunications provider for the duration of that agreement or 9-2 ordinance. A new entrant may elect to pay an additional one 9-3 percent instead of providing any in-kind services and facilities 9-4 that would otherwise be required. 9-5 Sec. 283.056. DETERMINATION OF FRANCHISE FEE. (a) The 9-6 commission by rule shall prescribe categories of various access 9-7 lines considering the type, use, and function of the lines. At a 9-8 minimum, the commission shall prescribe categories that subdivide 9-9 residential, business, and point-to-point services. 9-10 (b) The commission shall establish for each municipality 9-11 monthly rates for each category of access lines so that the sum of 9-12 the rates for each category of access lines multiplied by the total 9-13 number of access lines in a municipality for the first month, 9-14 multiplied by 12, approximately equals the municipality's base 9-15 amount, as determined under Section 283.054, plus the value of 9-16 in-kind services and facilities. In determining the value of 9-17 in-kind services and facilities, the commission shall assume that 9-18 the value is equal to one percent of the base amount unless the 9-19 municipality can establish that it received a greater amount during 9-20 1998. 9-21 (c) The commission shall ensure that rates imposed under 9-22 this section and the allocation among telecommunications providers 9-23 are competitively neutral, do not unduly impair competition, are 9-24 nondiscriminatory, and comply with state and federal law. 9-25 (d) A municipality may annually establish the relationship 9-26 between fees on access line categories. 9-27 (e) The commission shall adjust access line rates on an 10-1 annual basis to reflect the percentage increase in the consumer 10-2 price index. At that time, the commission shall provide each 10-3 municipality with the adjusted monthly rates for each category of 10-4 access line. 10-5 Sec. 283.057. PAYMENT OF FRANCHISE FEE. (a) Each 10-6 certificated telecommunications provider within a municipality 10-7 shall pay the municipality according to the actual number of access 10-8 lines by access line category as of the last day of the preceding 10-9 calendar month. Each monthly payment must reflect any change in 10-10 the number of access lines. Every 13th month, the provider shall 10-11 reduce the payment due that month by an amount equal to the 10-12 statewide average annual percentage of local service revenues that 10-13 are not paid by consumers, as determined by the commission, 10-14 multiplied by the sum of the payments for the previous 12 months. 10-15 (b) The certificated telecommunications provider shall make 10-16 the payment for the preceding calendar month not later than noon on 10-17 the 15th day of each month. If the 15th day of the month is on a 10-18 weekend or holiday, the payment is due on the business day that 10-19 immediately precedes the 15th day of the month. The provider shall 10-20 make the payment by electronic funds transfer or by another method 10-21 that provides availability of the funds on the day the payment is 10-22 due. 10-23 (c) The certificated telecommunications provider shall file 10-24 a report with each payment that shows the number of access lines, 10-25 including access lines by category, that the provider has within 10-26 the municipality at the end of the month. The provider shall 10-27 include with the report a certified statement from an authorized 11-1 officer or duly authorized representative of the provider stating 11-2 that the information contained in the report is true and correct to 11-3 the best of the officer's or representative's knowledge and belief 11-4 after inquiry. 11-5 (d) The report required under Subsection (c) must 11-6 specifically identify access lines owned, operated, or maintained 11-7 by the provider that are leased or used by a person who is not an 11-8 end-use customer. A provider may not include in its monthly count 11-9 of access lines and is not required to remit a franchise fee to the 11-10 municipality on access lines that are resold, leased, or otherwise 11-11 provided to another certificated telecommunications provider if the 11-12 provider receives adequate proof that the provider leasing or 11-13 purchasing the access lines will include the access lines in its 11-14 monthly count and remit payment on those access lines to the 11-15 municipality. 11-16 (e) A municipality may use a report required under 11-17 Subsection (c) only to verify the number of access lines that serve 11-18 premises within the municipality. 11-19 (f) Notwithstanding any other provision of this chapter, a 11-20 payment by a certificated telecommunications provider that complies 11-21 with the terms of an unexpired franchise agreement or right-of-way 11-22 ordinance that applies to the provider satisfies the payment 11-23 attributable to the provider required by this chapter. 11-24 Sec. 283.058. MUNICIPAL AUTHORIZATIONS. Notwithstanding any 11-25 other law or any other provision of this chapter, a municipality, 11-26 for use of the public right-of-way, may: 11-27 (1) require a certificated telecommunications provider 12-1 locating facilities in or on a public right-of-way within the 12-2 municipality to obtain a permit without cost; 12-3 (2) exercise any police power-based regulations that 12-4 are not specifically precluded by this chapter and that are not 12-5 inconsistent with state or federal law; and 12-6 (3) determine and order, at the telecommunications 12-7 provider's expense, relocation, removal, colocation, maintenance, 12-8 or placement of the provider's facilities. 12-9 Sec. 283.059. INDEMNIFICATION. (a) A certificated 12-10 telecommunications provider shall indemnify and hold harmless the 12-11 municipality and its officers and employees for or against any 12-12 claim, lawsuit, judgment, cost, lien, loss, expense, fee, including 12-13 reasonable attorney's fees and costs of defense, proceeding, 12-14 action, demand, cause of action, liability, suit of any kind and 12-15 nature, including personal or bodily injury or death, property 12-16 damage, or other harm for which recovery of damages is sought that 12-17 may arise out of or be occasioned or caused by the negligent act, 12-18 error, or omission of the provider or of the provider's officer, 12-19 agent, director, representative, employee, affiliate, or 12-20 subcontractor or by their respective officers, agents, employees, 12-21 directors, or representative, while installing, repairing, or 12-22 maintaining facilities in the public right-of-way within the 12-23 municipality. 12-24 (b) The indemnity provided by this section does not apply to 12-25 liability that results from the negligence of the municipality or 12-26 of a municipal officer or employee that causes personal or bodily 12-27 injury, death, or property damage. 13-1 (c) If the certificated telecommunications provider and the 13-2 municipality are found to be jointly liable by a court, liability 13-3 shall be apportioned comparatively in accordance with the law of 13-4 this state without, however, waiving any governmental immunity 13-5 available to the municipality under state law and without waiving 13-6 any defenses of the parties under state law. 13-7 (d) This section is solely for the benefit of the 13-8 certificated telecommunications provider and the municipality and 13-9 is not intended to create or grant any rights, contractual or 13-10 otherwise, to any other person. 13-11 (e) The certificated telecommunications provider shall 13-12 promptly advise the municipality in writing of any claim or demand 13-13 against the municipality or the provider that the provider knows is 13-14 related to or arises out of the provider's activities in the public 13-15 right-of-way within the municipality. 13-16 SECTION 2. (a) This Act does not affect the validity of a 13-17 franchise agreement or right-of-way ordinance with a certificated 13-18 telecommunications provider executed before January 12, 1999. A 13-19 municipality may continue to enforce that agreement or ordinance 13-20 and to collect franchise fees and other charges under that 13-21 agreement or ordinance until the date on which the agreement or 13-22 ordinance expires on its own terms. 13-23 (b) In a municipality described by Section 283.054(g), Local 13-24 Government Code, as added by this Act, each certificated 13-25 telecommunications provider that does not have a franchise 13-26 agreement with the municipality shall begin paying franchise fees 13-27 to the municipality in accordance with Chapter 283, Local 14-1 Government Code, as added by this Act, at the time the Public 14-2 Utility Commission of Texas determines the amount the municipality 14-3 is entitled to receive under Section 283.056, Local Government 14-4 Code. A certificated telecommunications provider whose franchise 14-5 agreement expires after the commission makes that determination 14-6 shall begin paying franchise fees in accordance with Chapter 283 on 14-7 the earlier of the date the agreement expires on its own terms or 14-8 the date the agreement expires on mutual agreement of the parties. 14-9 SECTION 3. (a) The Public Utility Commission of Texas shall 14-10 determine the monthly rates for a municipality described by Section 14-11 283.056, Local Government Code, as added by this Act, as soon as 14-12 possible after the effective date of Chapter 283, Local Government 14-13 Code, but not later than 180 days after that date. 14-14 (b) The Public Utility Commission of Texas shall determine 14-15 the monthly rates for a municipality described by Section 14-16 283.055(a), Local Government Code, as added by this Act, not later 14-17 than the 60th day after the date the last franchise agreement or 14-18 right-of-way ordinance executed by the municipality under Section 14-19 283.055(c) expires. 14-20 SECTION 4. Section 1 of this Act takes effect September 1, 14-21 1999. The other sections of this Act take effect on the first date 14-22 on which they may take effect under Section 39, Article III, Texas 14-23 Constitution. 14-24 SECTION 5. The importance of this legislation and the 14-25 crowded condition of the calendars in both houses create an 14-26 emergency and an imperative public necessity that the 14-27 constitutional rule requiring bills to be read on three several 15-1 days in each house be suspended, and this rule is hereby suspended, 15-2 and that this Act take effect and be in force according to its 15-3 terms, and it is so enacted.