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.