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Besides vehicular and pedestrian traffic, municipal rights-of-way (ROW) are also used by telecommunications service providers to install facilities related to broadband and wireless services. Technology deployment has led to increased ROW access.
Municipal management of ROWs results in costs to municipalities, which are typically charged back to the service provider. These include direct costs (such as permitting, utility coordination, and inspections); indirect costs (such as central support functions and other “overhead costs”); and street degradation costs.
What happens when the service provider encounters an excessive management fee? Qwest Corporation v. City of Des Moines, Iowa, No. 17-1257 (8th Cir. July 17, 2018) offers some valuable insight. In Qwest the Court reviewed a decision from the district court granting judgment for the City and against several carriers who claimed the City’s fee ordinance was preempted by federal law and exceeded its authority under Iowa law. The Court affirmed the judgment on preemption, but vacated the judgment on the state claim.
Rejecting the district court’s finding that the fee ordinance “reflect[ed] proportionately the costs incurred by the City”, the Court looked to the plain language of the statute authorizing the fees and held that, on remand, the City could only assess fees for costs that “(1) the City has actually incurred in managing rights-of-way, (2) are reasonable, and (3) are caused by the public utility’s activity in the rights-of-way.” Charging fees based on “future costs” was improper as the costs had not been “actually incurred.”
Qwest articulates a framework to consider whether a management fee is appropriate. Management fees must be authorized by statute and set forth by ordinance.
These guidelines assist in assessing management fees:
- A management fee must: (1) be actually incurred in conducting, carrying on, supervising or controlling the ROW; (2) be reasonable; and (3) be caused by the service provider’s activities in the ROW.
- Certain hypothetical or projected costs are not management fees.
- Increased municipal costs to engineer and construct around equipment in the ROW are not necessarily management fees.
- Management fees must be uniformly applied without discrimination.
- Many state laws provide a mechanism for resolving fee disputes, such as mediation and/or arbitration.
Whether management fees are appropriate is a factually-intensive and jurisdiction-specific question. Municipalities should be prepared to document cost assessments. Service providers should be diligent in monitoring assessments and utilizing appropriate legal protections to prevent the imposition of excessive management fees.
Rodney Carter is a partner at Husch Blackwell and leads its Telecommunications practice group. Jake Remington is an associate at Husch Blackwell and represents telecommunications companies in a variety of matters related to facilities construction, siting, and leasing.
By Rodney Carter and Jake Remington, Husch Blackwell LLP
August 13, 2018