WSAMA CONFERENCE
Spring, 2003
THE NUTS AND BOLTS OF
TELECOMMUNICATIONS
A REVIEW OF LOCAL GOVERNMENT TELECOMMUNICATIONS REGULATORY AUTHORITY
By Chris Bacha
Assistant City Attorney
City of Tacoma
747 Market Street, Ste. 1120
Tacoma, WA. 98402
(253) 591-5885
cbacha@cityoftacoma.org
TABLE OF CONTENTS
I.
Basic Telecommunication Technology...............................................................1
II.
Divestiture of AT&T. ............................................................................................3
III.
State and Federal Regulation of Telecommunications:
Rights of Way Management. ...............................................................................4
A. Post Roads Act.................................................................................................4
B. State Law Authority to Manage Rights of Way. .......................................9
1. Right of Way Management in General. .................................................9
2. Franchise Fees. ....................................................................................13
3. Chapter 35.99 RCW............................................................................13
IV.
Regulation of Service and Rates........................................................................15
A. The 1934 Communications Act. ..................................................................15
B. The 1996 Telecommunications Act. ............................................................17
C. Washington Utilities and Transportation Commission...........................21
V.
Conclusion. ..........................................................................................................22
ENDNOTES .........................................................................................................24
Telecommunications law and policy is a complex subject matter that has been developing
since the 1840’s when the telegraph first came into use. The purpose of this paper is to
highlight some of the basic elements of wireline telecommunications law and policy and
then focus on the telecommunications regulatory framework. This paper is merely a
starting point for an understanding of this subject matter and, furthermore, because of
space limitations, does not address regulation of wireless communications networks and
devices. For a more thorough review of these subjects, I would suggest looking at the
treatises cited in this paper. One treatise that I have found to be particularly on point and
easy to read was published in 2002 and written by Paul Valle-Riestra, a Senior Assistant
City Attorney for the City of Walnut Creek and is entitled TELECOMMUNICATIONS, THE
GOVERNMENTAL ROLE IN MANAGING THE CONNECTED COMMUNITY (Solano Press).
This introduction to telecommunications regulatory authority begins with an overview of
telecommunications technology so that the reader will have a nuts and bolts understanding
of how telecommunications systems work and are developing. This will be helpful in
understanding the regulatory framework. The paper will then focus upon the breakup of
AT&T and then will move on to right of way management authority and regulation of rates
and services.
I.
Basic Telecommunication Technology.
We learned in elementary school that the telephone was invented by Alexander Graham
Bell in 1876 when he discovered how to encode voice messages so that these messages
could be transmitted by electricity over a copper wire to a receiver that could then decode
the message.
Transmission was in an analog format meaning that signals were transmitted as
electromagnetic waves of different voltages representing varying frequencies. 1 Frequencies
are measured in hertz (Hz); a frequency of one Hz indicates a wave that completes one
cycle per second.2 Thus, the telephone is a device that both encodes and decodes the
electromagnetic waves making up the speaker’s words.3
Telephones were originally connected by a single wire. However, the development of the
switch or switchboard made it possible to have a true telephone network. The switchboard
made it possible for an operator to connect two parties by connecting the caller’s and
recipient’s wires into a single telephone jack. Today, switching is performed by computer
hardware and software that decodes the number signals sent by the caller and directing that
signal to either another telephone in the calling area or to another switch if outside the
calling area and then to the telephone in that calling area.4 Generally, one central switch
commonly services a large geographic area. This switch is known as the “local exchange”
or “local loop.”5 Thus, when a person places a call, the telephone company’s switch
establishes a circuit connecting the person calling to the person being called. This circuit is
the transmission path and it will stay open until one of the parties hangs up.
Historically, the copper wire providing the transmission path was relatively thin because
voice transmission did not require much bandwidth.6 However, with the use of digital
signals and packet-switching, bandwidth has become more important. Bandwidth
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essentially is the capacity of the transmission media such as copper wire or fiber. Analog
bandwidth is measured in hertz and digital bandwidth is measured in bits per second. The
greater the capacity, the greater the data that can be transmitted.
In the early 1960’s, the Bell system began to widely use digital technology to transmit long
distance calls.7 Digital signals consist of a series of binary bits representing either a one or
a zero rather than electromagnetic waves.8 The advantages of the digital signal is that it is
typically faster than analog, has fewer errors, interference can more easily be detected and
filtered out, and it requires less equipment to boost signals. 9
When a digital device connects to an analog device, another device is required to convert
the signals from analog to digital (modulation) or digital to analog (demodulation). This
device is called a modem which is short for modulation-demodulation. The speed of the
modem is measured in kilobits per second which represents the speed at which the modem
can convert analog signals into digital signals and vice versa.10
Twisted pair copper wire has been the traditional and most commonly used transmission
media for telephone services and networking computers.11 However, resistance within
twisted pair copper wire slows down the flow of current and is susceptible to interference
from outside world radio transmission, electronic interference, and other adjacent telephone
lines.12 Fiber optic lines do not have these limitations, have much greater capacity
(bandwidth), and have, therefore, been replacing copper wire in telecommunications
networks.
Fiber optic lines are thin strands of flexible glass the thickness of a hair. Digital signals are
transmitted in the form of light rather than electric transmissions. The fiber optic cable can
be either single-mode fiber or multimode fiber depending upon the use being made.
Multimode fiber is generally easier to splice and used primarily in local area networks. The
disadvantages of fiber are that it has less mechanical flexibility, is more expensive to splice
and repair, the equipment used to terminate each end of the fiber is more expensive, and
most equipment cannot receive the light signal directly, thus, equipment is needed to
convert the light signals transmitted over the fiber to a different format. 13 As a result, most
telecommunications companies do not run fiber all the way to a person’s home and,
instead, use fiber in the network backbone and to connect large commercial customers. 14
Among the technologies currently being used and developed to increase capacity is
packet-switching. Packet-switching is used primarily with transmission of data. The
packet-switch network does not use a dedicated transmission path to send data like a
traditional telephone circuit. The traditional telephone circuit uses one transmission path to
complete the call leaving this path open until one of the parties hangs up. With
packet-switching, the network divides up the transmission into packages of bits, or packets.
These packets will all be sent to the same location but will be sent depending upon the
capacity of available transmission paths. Thus, a single transmission path does not
become dedicated to the transmission allowing better efficiency of use. This is how data is
sent over the Internet.
Packet-switching and other advances in technology such as digital subscriber lines (DSL),
dense wavelength division multiplexing (DWDM), and compression have resulted in what is
referred to as “convergence,” referring to the integration of telecommunications and data
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processing. This convergence has a significant role to play in the regulation of
telecommunications because the regulatory framework has been service based. With the
convergence of services, it has become increasingly difficult to apply current regulations to
today’s telecommunications environment.
II.
Divestiture of AT&T.
The national regulatory policy was based upon the traditional model of local exchange
switches that did not compete with one another, each interconnecting subscribers within
their geographic area and connected by long distance lines.15 At the end of World War II,
AT&T owned and operated about 80 percent of the local exchanges and all of the long
distance lines. In addition, AT&T required customers to rent its equipment from its
subsidiary, Western electric, thus AT&T accounted for at least 80 percent of all customer
premises equipment and supplied its own equipment, as well.16
The AT&T monopoly allowed AT&T to set up a pricing structure with cross-subsidies.
Businesses were charged higher rates than residential customers even though the service
cost the same; rural services, which cost more, were priced the same as urban services;
and long distance service tended to have more costs that could have been applied to local
telephone service.17 These practices came to be referred to as universal service (which
policies were later codified and expanded in the 1996 Telecommunications Act). Universal
service was used to justify the development and maintenance of the Bell regulated
telephone monopoly. The 1934 Communications Act, which created the Federal
Communications Commission (FCC), also arguably defined universal services as the new
objective of providing telephone service to everyone or pushed it in that direction. 18
When MCI began competition in the 1970’s, it was able to offer long distance service for
less than the rates charged by AT&T because of the subsidization of local phone service.
This caused AT&T to ramp up its efforts to maintain its monopoly of the
telecommunications market. Some have argued that this is when the universal service
argument became the strongest, because AT&T could claim that without a monopoly,
subsidization could not occur. However, the monopoly came to an end in the 1980s.
Concern over the monopoly of AT&T did not begin in the 1980s. The Justice Department
filed an anti-trust lawsuit against AT&T as early as 1912 after AT&T began buying up local
phone companies. In 1913 AT&T entered into a consent decree agreeing not to buy other
local telephone companies and to allow interconnection of the independent local phone
systems with AT&T’s long distance system.
In 1949, the government again filed an action against Western Electric and AT&T alleging
that they had monopolized and conspired to restrain trade in the manufacture, distribution,
sale, and installation of telephones, telephone apparatus, equipment, materials, and
supplies in violation of the Sherman Anti-Trust Act. The government basically wanted
divestiture by AT&T of Western Electric. The government, however, did very little with the
case. Eventually, citing protection of critical defense projects, the government agreed to a
consent order resulting in an injunction preventing AT&T and its affiliates from engaging in
any other business than the provision of common carrier communications services and
precluding Western Electric from manufacturing equipment other than the equipment for its
Bell operating system.
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In 1974, the government filed a separate anti-trust action once again alleging that AT&T,
Western Electric, and Bell Telephone Laboratories, Inc. had monopolized and conspired to
restrain trade. The government initially sought divestiture of the 22 Bell operating
companies and dissolution of Western Electric. This lawsuit was finally settled in 1982
when the parties entered into a consent decree known as the Modification of Final
Judgment (MFJ). It was a modification of final judgment because it technically modified the
judgment issued in the 1949 lawsuit. The following excerpt from Paul Valle-Riestra’s book,
TELECOMMUNICATIONS, THE GOVERNMENTAL ROLE IN MANAGING THE CONNECTED COMMUNITY
(Solano Press) (2002), explains the outcome of the modification of final judgment,
The MFJ required AT&T to reorganize by 1984. Most significantly, AT&T was
required to divest itself of its 22 local telephone companies, known as Bell
Operating Companies (BOCs). Ownership of the BOCs was transferred to
seven regional holding companies, otherwise known as regional Bell Operating
Companies (RBOCs): Ameritech, Bell Atlantic BellSouth, NYNEX, Pacific
Telesis, Southwestern Bell Communications and U.S. West (now Qwest). The
MFJ split the country into 160 local access and transport areas (LATAs). It
also made a distinction between “telecommunications” and “information”
services in placing limitations on the ability of BOCs to provide information
services. . . . The BOCs were permitted to provide local and toll service within
LATAs. However, because of concern that they could use their control of the
local system to gain a competitive advantage in providing other services, the
BOCs were prohibited from providing information services, long distance (i.e.,
inter-LATA service), manufacturing and selling telecommunications equipment,
and manufacturing telephones and other customer premises equipment.
AT&T was permitted to provide long distance services and to manufacture and
sell telephone and central office systems. However, AT&T was not permitted
to provide local telephone service.
In subsequent years, the restrictions on BOCs providing information services
were modified, allowing them to provide additional services such as voicemail.
In exchange, the BOCs opened up a number of their network features to
competitors, such as call forwarding to competitor’s voice mail systems. 19
The result of the modification of final judgment was that long distance and local telephone
services were separated. However, as will be discussed infra, the 1996
Telecommunications Act has changed that.
III.
State and Federal Regulation of Telecommunications: Rights of Way
Management.
A. Post Roads Act.
The telegraph was developed by Samuel F. B. Morse in the 1840’s and grew rapidly with
more than 50 telegraph companies by 1851.20 In 1866, the Senate queried the Postmaster
General on the advisability of establishing a government-run telegraph system.21 When a
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report discouraging direct ownership returned, Congress enacted chapter 230, 14 Stat. 221,
which is commonly referred to as the Federal Post Roads Act.22
Some of the provisions of the Post Roads Act were explicitly intended to encourage
competition in the telegraph industry. In particular, the Act specified that any telegraph
company accepting its terms would be granted rights of way across public domain, post
roads, and navigable streams, and the privilege of taking land, timber, and stone from the
public domain to maintain stations and facilities.23 In exchange, any company accepting the
terms of the Act was required to interconnect and accept each other’s traffic. Western
Union, along with other companies, promptly accepted the conditions of the Act. The Act did
nothing to restrict Western Union’s growing monopoly power and, as a result of
consolidation, by 1880 Western Union carried 92 percent of messages and received
89 percent of revenue.24
The Federal Post Roads Act was supplemented in 1884, which declared that all public
roads and highways, while kept up and maintained as post routes became post roads for
purposes of the Federal Post Roads Act, allowing telegraph companies to use any such
public highway, street, or alley for its lines independent of any action or consent of the state
or municipal authorities.25 A telegraph or telephone company, which accepted the
provisions of the Federal Post Roads Act, was, in effect, granted a federal franchise subject
to the regulatory police powers of the states.26
The Post Roads Act provided as follows:
Any telegraph company now organized, or which may hereafter be organized,
under the laws of any state, shall have the right to construct, maintain and
operate lines of telegraph through and over any portion of the public domain
of the United States, over and along any of the military or post-roads of the
United States which have been or may hereafter be declared such by law,
and over, under, or across the navigable streams or waters of the United
States; but such lines of telegraph shall be so constructed and maintained as
not to interfere with the ordinary travel on such military or post-roads.27
The statute defines all letter-carrier routes established in any city or town for the collection
and delivery of mail matters as post roads. Thus, virtually all municipal rights of way were
declared post roads under the Post Roads Act.28 The amendment raised issues as to how
municipalities would be impacted.
The first cases in which such issues arose involved taxation.29 In Western Union Tel. Co. v.
Attorney Gen. of Massachusetts, the State of Massachusetts had imposed an excise tax on
the capital stock of Western Union. Western Union challenged the tax as a tax on the
franchise granted to it under the Post Roads Act. The Court found that,
This, however, is merely a permissive statute, and there is no expression in it
which implies that this permission to extend its lines along roads not built or
owned by the United States, or over and under navigable streams, or over
bridges not built or owned by the Federal government, carries with it any
exemption from the ordinary burdens of taxation.
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While the State could not interfere by any specific statute to prevent a
corporation from placing its lines along these post-roads, or stop the use of
them after they were placed there, nevertheless the company receiving the
benefit of the laws of the State for the protection of its property and its rights is
liable to be taxed upon its real or personal property as any other person would
be. It never could have been intended by the Congress of the United States, in
conferring upon a corporation of one State the authority to enter the territory of
any other State and erect its poles and lines therein, to establish the
proposition that such a company owed no obedience to the laws of the State
into which it thus entered, and was under no obligation to pay its fair proportion
of the taxes necessary to its support.30
This case and similar cases set the stage for the Court’s decision in St. Louis v. Western
Union Tel. Co.31
In St. Louis v. Western Union Tel. Co., Western Union challenged the right of a city under
the Post Roads Act to charge Western Union for the use of municipal rights of way. The
United States Supreme Court held that cities could require telegraph companies to pay
reasonable street rental franchise fee payments for the use of the public streets, as the
federal statute did not grant an unrestricted right to appropriate the public property of a
state.
The Court reasoned as follows:
It is a misconception, however, to suppose that the franchise or privilege
granted by the act of 1866 carries with it the unrestricted right to appropriate
the public property of a State. . . . While a grant from one government may
supersede and abridge franchises and rights held at the will of its grantor, it
cannot abridge any property rights of a public character created by the
authority of another sovereignty. . . . [I]t is not within the competency of the
national government to dispossess the State of such control and use, or
appropriate the same to its own benefit, or the benefit of any of its corporations
or grantees, without suitable compensation to the State. This rule extends to
streets and highways; they are the public property of the State. . . . [W]hen an
appropriation of any part of this public property to an exclusive use is sought,
whether by a citizen or corporation of the same or another State, or a
corporation of the national government, it is within the competency of the State,
representing the sovereignty of that local public, to exact for its benefit
compensation for this exclusive appropriation.32
Relying upon the Western Union Tel. Co. v. Attorney Gen. of Massachusetts decision, the
Court also held that,
If it is, as there [Western Union Tel. Co. v. Attorney Gen. of Massachusetts]
held, simply a permissive statute, and nothing in it which implies that the
permission to extend its lines along roads not built or owned by the United
States carries with it any exemption from the ordinary burdens of taxation, it
may also be affirmed that it carries with it no exemption from the ordinary
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burdens which may be cast upon those who would appropriate to their
exclusive use any portion of the public highways.33
Thus, the Court concluded that the use of the public right of way cannot be taken by virtue
of the Post Roads Act, without reasonable compensation to the state or municipality.
The U.S. Supreme Court further explained, in Western Union Tel. Co. v. Pennsylvania R.
Co., that the purpose of the Federal Post Roads Act was limited to preventing states from
creating monopolies,
. . . the act of 1866 was an exercise of the power of Congress over interstate
commerce and the power to establish post offices and post roads, and, like
other powers of the National Government, could be exercised “upon every
foot of territory under its jurisdiction.” It was held, therefore, that the act was
not a grant of rights only in the public domain, and the character of the rights
was made unmistakable. The statute, the court said, “in effect amounts to a
prohibition of all state monopolies” in commercial intercourse by
telegraph. . . .34
In 1912, the United States Supreme Court again considered the breadth of the Post Roads
Act in a case brought by Western Union against the City of Richmond, Virginia. 35 In this
case Western Union challenged the authority of a municipality to require Western Union to
obtain the consent of the City to enter into and upon and use the public rights of way. The
Court ultimately found that Western Union had no right, by virtue of the Post Roads Act, to
use the “soil of the streets.” Many of the issues raised in that case are again being raised
today.
Western Union complained that the City of Richmond could not impose conditions upon its
use of the right of way that were unreasonable and further that Richmond could only impose
reasonable regulations for use of the rights of way. The conditions that Western Union
generally complained of were requirements for approval of the facilities to be installed,
providing free capacity to the City, installation of additional conduit for City use, payment of
rent, undergrounding of facilities, limitation of the franchise to 15 years, and relocation of
facilities. The linchpin of the Western Union argument was that it was granted property
rights under the Post Roads Act.
The Court found first that the Post Roads Act conveyed no title. 36 Rather, the purpose of
the Act was to prevent a state from excluding a telegraph company from doing business in
the state because it was a foreign corporation or because the state desired to erect a
monopoly of its own.37 The Act is, thus, permissive only and is not a source of positive
rights,
The inability of the State to prohibit the appellant from getting a foothold
within its territory, both because of the statute and of its carrying on of
commerce among the States, gives the appellant no right to use the soil of
the streets, even though post roads, as against private owners or as against
the city or State where it owns the land.38
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The Post Roads Act, therefore, gives no property interest to telephone and telegraph
companies and no right to use municipally owned rights of way. Therefore, the Court found
Western Union must submit to the terms required by the City of Richmond. Thus,
according to the United States Supreme Court, the Federal Post Roads Act did not prevent
municipalities from requiring its consent to enter into the rights of way subject to reasonable
requirements in the exercise of its police powers.
Although the Post Roads Act was ultimately repealed in 1947, this Act was important in the
development of the law in Washington regarding use of public rights of way by
telecommunications companies. In 1909 the Washington Supreme Court considered the
meaning of the Post Roads Act to determine what rights it gave to telegraph and telephone
operators in Washington State. Specifically, the court was asked to determine whether or
not Pierce County could collect a tax upon the value of local franchises given to a telegraph
operator (Western Union) by a number of Pierce County cities, including the City of
Tacoma.39 These franchises were subject to a tax because Pierce County viewed these
franchises as granting Western Union the privilege of operating within the jurisdictions that
gave the franchises. Whether or not such a privilege was granted or necessary became a
central issue in this case.
Western Union argued that the ordinance of the City of Tacoma granting a franchise to
Western Union within the City limits was regulatory in nature and did not grant any benefit
or privilege to Western Union. This argument was based upon the idea that the Post Roads
Act granted permission to any telephone or telegraph company, accepting the provisions of
the Post Roads Act, the right to place its poles along and upon any public road or highway.
The Washington State Supreme Court agreed with the interpretation of the Post Roads Act
given by Western Union finding that the Post Roads Act granted a Federal franchise and
further found that,
. . . the ordinance of the city of Tacoma, relied on by appellant, conferred no
rights other than those already possessed by the company, but was in effect
a police regulation . . . .40
The Court held, therefore, that Western Union did not need a local franchise to establish its
right to locate its facilities in the rights of way. The franchise was viewed as a regulatory
ordinance and not as permissive; however, the court also found that the right of Western
Union to so construct its poles in the rights of way was not unlimited,
The company possessed, under its Federal franchise, the right to do business
upon all the roads and highways in the county of Pierce, whether within or
without incorporated cities and towns. This right could not be denied. The
power of the city was limited to its right to regulate the use of the privilege
granted by Congress. It might provide that poles and wires should be carried
over certain streets; that the wires should be carried on poles or buried in the
ground; that travel should not be unreasonably obstructed, and that poles
should be of a certain height, and other like incidents. Beyond this it had no
power to go.41
This 1909 ruling confirmed that telephone and telegraph companies accepting the
provisions of the Post Roads Act obtained a Federal Franchise allowing such companies to
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place poles in and upon all public rights of way. Cities, such as Tacoma, could not refuse
use of the right of way but retained their regulatory police powers to control use of the rights
of way and condition such use upon compliance with regulatory requirements.
B. State Law Authority to Manage Rights of Way.
1. Right of Way Management in General.
In 1889, the Washington State Constitution was ratified and Washington became the 42nd
state of the Union. Article XII of the new state Constitution, in a similar manner to the Post
Roads Act, provided for the right of telephone and telegraph companies to construct and
maintain telephone and telegraph lines as follows:
Any association or corporation, or the lessees or managers thereof, organized
for the purpose, or any individual, shall have the right to construct and
maintain lines of telegraph and telephone within this state, and said
companies shall receive and transmit each other’s messages without delay or
discrimination and all of such companies are hereby declared to be common
carriers and subject to legislative control. Railroad corporations organized or
doing business in this state shall allow telegraph and telephone corporations
and companies to construct and maintain telegraph lines on and along the
rights-of-way of such railroads and railroad companies, and no railroad
corporation organized or doing business in this state shall allow any telegraph
corporation or company any facilities, privileges or rates for transportation of
men or material or for repairing their lines not allowed to all telegraph
companies. The right of eminent domain is hereby extended to all telegraph
and telephone companies. The legislature shall, by general law of uniform
operation, provide reasonable regulations to give effect to this section.42
(Emphasis added.)
Among other things, Article XII required the legislature to enact general laws establishing
reasonable regulations giving effect to this constitutional provision. In December of 1889
through March of 1890, the first legislature of the state of Washington convened and began
approving and enacting the news laws of the state. One of the new laws, laws of 1890
p 292 § 5; RRS § 11352, established the constitutionally mandated telegraph regulations.
This statute, relatively unchanged since 1890, provides as follows:
Any telecommunications company, or the lessees thereof, doing business in
this state, shall have the right to construct and maintain all necessary
telecommunications lines for public traffic along and upon any public road,
street, or highway, along or across the right-of-way of any railroad
corporation, and may erect poles, posts, piers, or abutments for supporting
the insulators, wires, and any other necessary fixture of their lines, in such
manner and at such points as not to incommode the public use of the railroad
or highway, or interrupt the navigation of the waters: PROVIDED, That when
the right-of-way of such corporation has not been acquired by or through any
grant or donation from the United States, or this state, or any county, city or
town therein, then the right to construct and maintain such lines shall be
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secured only by the exercise of right of eminent domain, as provided by law:
PROVIDED FURTHER, that where the right-of-way as herein
contemplated is within the corporate limits of any incorporated city, the
consent of the city council thereof shall be first obtained before such
telecommunications lines can be erected thereon. (Emphasis Added.)
RCW 80.36.040.
This statute provides among other things that telephone and telegraph companies must
obtain municipal consent to the use of the rights of ways before the lines may be installed
within the corporate limits.
In 1901, in a case arising out of the City of Spokane, the Washington State Supreme Court
had its first opportunity to consider the meaning and intent of Article XII, § 19 and
RCW 80.36.040.43 In this case, the City of Spokane had refused to give consent to the
plaintiff to install facilities and operate within the rights of way of the City of Spokane. The
plaintiff filed suit to compel Spokane to authorize plaintiff’s use of the rights of way arguing
that the Washington State Constitution prevents a municipality from granting an exclusive
franchise, which would be the result if its franchise was refused. The Court disagreed
finding first that, although exclusive grants were prohibited, the Washington State
Constitution did not require a municipality to give consent to use of its rights of way.
The Court, in analyzing the meaning of Article XII, § 19, first observed that the rights that
had been granted by the Constitution to construct telegraph and telephone lines throughout
the state could have been granted by the state legislature. The Court next observed that
although Article XII, § 19, required railroads to allow telephone and telegraph operators to
use railroad rights of way, no such affirmative duty or prescriptive right was imposed upon
local government. These two factors led the court to conclude that the right to erect poles in
the streets was not self-operating and the establishment of the right or privilege to use of
the roads, highways, and streets was left to the state legislature. In other words, Article XII,
§ 19, was implemented to impose a duty upon the legislature to enact laws that in its
determination were appropriate to enable use of the rights of way by telegraph and
telephone companies. The legislature met its obligation by enacting such laws, specifically
what is now codified as RCW 80.36.040.
As a prelude to the courts analysis of the meaning of RCW 80.36.040 and other legislation,
the Court set forth its conclusions and understanding relating to management of the rights
of way as follows:
The legislature, within constitutional limitations, has sovereign control of the
streets and highways of the state and the cities. The primary purpose for
which highways and streets are established and maintained is for the
convenience of public travel. The use of such highways and streets for water
mains, gas pipes, telephone and telegraph lines is secondary and
subordinate to the primary use for travel, and such secondary use is
permissible only when not inconsistent with the primary object of the
establishment of such ways. It would seem that, within the fundamental
limitations mentioned, the legislative control of ways and streets for its
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secondary use is absolute, and that the legislative discretion in this regard is
not subject to judicial intervention. That the legislature may delegate to
municipalities such powers and act through their instrumentality is
unquestioned. The city streets are limited in dimension. It is apparent that
the secondary uses of the streets are physically restricted. When such limit is
approached or reached must be determined by some competent authority.
The inconvenience, too, of the obstruction of the streets for any secondary
uses, and also the breaking up of the solid surface, which is frequently of
stone and other expensive material, all suggest the propriety of the control of
such uses in the discretion of the municipality.44 (Citations Omitted.)
Five important points are made by the court: (1) that the state has sovereign authority over
the streets and highways;45 (2) that the state may delegate such authority to municipalities;
(3) that local governments are better suited than the state to control the use of the streets;
(4) that streets and highways are physically restricted; and (5) that travel is the primary
purpose of such streets while other uses are secondary. These concepts are embodied
within the legislation enacted in 1890 and are as true today as they were in 1901.
The court found that the implementing statute reserved the necessary power of police
regulation everywhere in the state and conferred it as well upon the cities. 46 Further, the
Court found that a corollary of the power of a municipality to give consent is the power to
refuse.47 Thus, the Court found that the telephone and telegraph operator has the absolute
right to construct and maintain its poles upon public rights of way, but that it must obtain the
consent of the city before it may do so within the city limits.48 The city could refuse if the
operator would not agree to the terms and conditions imposed by the city upon such use.
The decision is left to local government because,
The people of a municipality, who incur and pay the expenses for the
construction and maintenance of their streets and who largely use them, are
usually most capable of exercising discretion in the secondary and
subordinate purposes for which their streets shall be used.49
The Spokane decision was followed in 1914 by the Tacoma Railway and Power Company
case.50 The Tacoma Railway case reinforced the Spokane decision and, in addition,
interpreted the meaning of another statute enacted in 1890.
At the same time that the state legislature enacted regulatory provisions implementing
Article XII § 19, it also granted the authority to first-class cities to regulate and control use of
the public streets,
Any such [first class] city shall have power:
To lay out, establish, open, alter, widen, extend, grade, pave, plank, establish
grades, or otherwise improve streets, alleys, avenues, sidewalks, wharves,
parks, and other public grounds, and to regulate and control the use thereof,
and to vacate the same, and to authorize or prohibit the use of electricity at,
in, or upon any of said streets, or for other purposes, and to prescribe the
terms and conditions upon which the same may be so used, and to regulate
the use thereof.51
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The foregoing statute, RCW 35.22.280(7), has remained unchanged since it was approved
and enacted by the legislature of the new state of Washington on March 24, 1890.52
In the Tacoma Railway case the court found that this statute broadly authorizes first-class
cities to prescribe the terms and conditions upon which streets may be used,
In respect to the first question, there seems little room for a difference of
opinion. The statute quoted (Rem. & Bal. Code, @ 7507, subd. 7) expressly
empowers cities of the first class to regulate and control the use of streets,
and to ‘authorize or prohibit’ the use of electricity at, in, or upon any of the
streets, ‘and to prescribe the terms and conditions upon which the same may
be used, and to regulate the use thereof.’ Broader language could hardly be
used. It is obvious that the Legislature intended to, and did, vest the city with
the whole of the state’s police power touching the subject-matter. . . .
Authority from the Legislature to regulate and control the use of the streets, to
vacate them, to authorize or prohibit the use of electricity upon the streets,
and to prescribe the terms and conditions upon which the same may be used,
and to regulate the use thereof, is so broad in its nature that it is clear the
Legislature intended to empower cities of the first class to hedge any such
privileges with all the conditions that the state itself could impose.53 (Citations
omitted.)
First-class cities are, therefore, granted all powers of the state to impose conditions upon
the use of the right of way.54 The only limitation is that no conditions can be required that
are specifically prohibited by law. As stated more recently by Washington Supreme Court,
use of the right of way by a third party is a privilege and not a right,
The basic rule applicable to this case is that there is no inherent right in a
private individual to conduct private business in the public streets. The
streets and highways belong to the public. They are built and maintained at
public expense for the use of the general public in the ordinary and customary
manner. The state, and the city as an arm of the state, has absolute control
of the streets in the interest of the public. No private individual or corporation
has a right to the use of the streets in the prosecution of the business of a
common carrier for private gain without the consent of the state, nor except
upon the terms and conditions prescribed by the state or municipality, as the
case may be. The use of the streets as a place of business or as a main
instrumentality of business is accorded as a mere privilege and not as a
matter of natural right.55
The streets and highways are built and maintained at public expense for the use of the
general public in the ordinary and customary manner.56 The state, and the cities as an arm
of the state, has absolute control of the streets in the interest of the public.57 The federal
courts have, in the past, recognized this power as absolute holding that,
The city has the power to permit the streets to be occupied at sufferance or
by license. If at sufferance it may under its general police power regulate the
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occupancy in the interest of the common welfare and for the general public
good, or it may limit the manner or use within its general power as a condition
to its occupancy for the common welfare. . . .58
Thus, it would appear that local governments have been delegated broad authority to
regulate and permit the use of the rights of way in a manner that supports the public interest
and common good. Local governments have discretion to grant or deny a franchise for the
use of the right of way depending upon the public interests to be served.59 However, as will
be discussed infra, it is clear from the 9th Circuit Court of Appeals decision in Auburn v.
Qwest interpreting Title 47 U.S.C. § 253, the Communication Act, that this discretion has
been limited to consideration only of conditions that relate to the management of the right of
way and no other important public interests. Further, conditions that relate to management
of the right of way appear to be limited to those conditions that control activities within the
right of way.
2. Franchise Fees.
Cities and towns are currently prohibited by state law from imposing a franchise fee upon
the telephone business. The applicable statute provides in pertinent part as follows:
(1) No city or town may impose a franchise fee or any other fee or
charge of whatever nature or description upon the . . . telephone business, as
defined in RCW 82.04.065, or service provider for use of the right of way,
except:
...
(b) A fee may be charged to such businesses or service providers that
recovers actual administrative expenses incurred by a city or town that are
directly related to receiving and approving a permit, license, and franchise, to
inspecting plans and construction, or to the preparation of a detailed
statement pursuant to chapter 43.21C RCW;60
Thus, telecommunications companies are exempt from payment of franchise fees to the
extent that such companies are engaged in the telephone business as defined under
RCW 82.04.065. This statute basically defines telephone business as providing access to a
local telephone network or providing transmission of voice, video or data for hire. 61 Thus,
revenues from most activities that a telecommunications company is engaged in will be
exempt from imposition of franchise fees.62
3. Chapter 35.99 RCW.
In 2000, the state Legislature enacted Substitute Senate Bill (SSB) 6676, later codified, in
part, as Chapter 35.99 RCW. This bill was initiated as an attempt to address a number of
issues the telecommunications industry had with the issuance of permits for use of and
construction within the public rights of way, siting of wireless antenna towers, and relocation
of facilities for public projects. The bill that was passed was a compromise bill supported by
the Association of Washington Cities. Some of the important features of this bill, as
generally stated, are as follows:
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1.
Master permits for use of the right of way (a franchise) must be issued
within 120 days of an application.
2.
A use permit (authorization to do work in the right of way) must be
issued within 30 days of application.
3.
A telecommunications company with a state-wide grant63 cannot be
required to obtain a master use permit but can be required to obtain a
use permit.
4.
Denial of a master permit must be supported by substantial evidence
contained in a written record. A service provider adversely affected may
commence an action within 30 days of denial to seek relief but is limited
to injunctive relief.
5.
Service providers are required to relocate their facilities within the public
rights of way at the expense of the service provider when reasonably
necessary for construction, alteration, repair, or improvement of the right
of way for purposes of public welfare, health, or safety. Note that the
service provider may seek reimbursement if the relocation is required
within five years of a previous relocation of the same facilities or if
relocation is solely for aesthetic purposes.
6.
Cities and towns cannot require additional conduit or ducts as a
condition of use of the right of way except pursuant to a separate
contract with the service provider.
7.
Limitations on wireless facilities moratoriums.
8.
Requirements for public notice of plans to open the public right of way.
9.
Restrictions upon the city or town regulating services, denying use of the
right of way, enacting regulations in violation of 47 U.S.C. § 253.
10. Requires service providers to obtain all permits required by the city,
comply with applicable ordinances, cooperate with the city to ensure that
the installation of facilities does not inconvenience the public use of the
right of way, and provide information and plans to cities.
Any city or town that issues authorization for a service provider to do work in and use the
public right of way, must enact ordinances to do so that are consistent with Chapter 35.99. 64
Thus, if your city or town does not have an ordinance in place, it should consider enacting
an ordinance to provide the enabling authority for issuance of permits, licenses, franchises,
and other authorizations for service provider use of the public rights of way. More
importantly, the procedures that are implemented should ensure timely response to an
application for any such authorization. It is clear that the industry does not believe that
SSB 6676 has achieved the goal of reducing the amount of time and the expense of
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applying for authorization to do work within and use the public rights of way. Thus, we may
see more legislation proposed in the near future.
IV.
Regulation of Service and Rates.
A. The 1934 Communications Act.
The Post Roads Act provided for use of military and post roads and exchange of traffic, but
it did not regulate services or rates. Thus, in 1910, Congress enacted the Mann-Elkins Act
placing interstate telephone and telegraph services under the supervision of the Interstate
Commerce Commission (ICC).65
The Mann-Elkins Act required services to be provided upon request at reasonable and
nondiscriminatory rates. However, by the 1920’s, there was broad support for regulatory
controls and, in 1933, President Franklin D. Roosevelt called for the convening of a
committee to study government regulation of electronic communications. 66 As a result of
the committee’s recommendation, President Roosevelt, in 1934, asked Congress to create
the FCC. Congress agreed, and enacted the Communications Act of 1934, creating the
FCC for the following purpose, as described in Section 1 of the Act:
For the purpose of regulating interstate and foreign commerce in
communication by wire and radio so as to make available, so far as possible,
to all the people of the United States a rapid, efficient, Nation-wide wire and
radio communication service with adequate facilities at reasonable charges, for
the purpose of national defense, for the purpose of promoting safety of life and
property through the use of wire and radio communication, and for the purpose
of securing a more effective execution of this policy by centralizing authority
heretofore granted by law to several agencies and by granting additional
authority with respect to interstate and foreign commerce in wire and radio
communication, there is hereby create a commission to be known as the
“Federal Communications Commission,” which shall be constituted as
hereinafter provided and which shall execute and enforce the provisions of this
Act.
Thus, the new FCC took over the roles previously undertaken by the Federal Radio
Commission (established in 1927) and the ICC and its mandate has remained relatively
unchanged since 1934.67
Title I of the 1934 Act established the FCC.68 Title II of the 1934 Act granted the FCC the
authority over common carriers engaged in the provision of interstate or foreign
communication services and gave the FCC jurisdiction over all interstate and foreign
communications by wire and radio and all persons engaged within the United States in such
communication. This part of the 1934 Act retained many of the provisions formerly
administered by the ICC.69 Title III of the 1934 Act governs broadcasting and basically
incorporates the Radio Act of 1927. The FCC’s general jurisdiction is, however, restricted
to that reasonably ancillary to the effective performance of the FCC’s various
responsibilities under Title II and Title III of the Act.
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The 1934 Act established, among other things, a system of dual state and federal regulation
over telephone service.70 Domestic telephone service was divided into two hemispheres:
one comprised of interstate service, over which the FCC has plenary authority; and the
other made up of intrastate service, over which the states retain exclusive jurisdiction. 71
However, as pointed out by U.S. Supreme Court in its 1986 decision in Louisiana Public
Service Com. v. FCC, this division in regulation of services has not, in practice, been,
. . . a clean parceling of responsibility. This is so because virtually all
telephone plant that is used to provide intrastate service is also used to provide
interstate service, and is thus conceivably within the jurisdiction of both state
and federal authorities. Moreover, because the same carriers provide both
interstate and intrastate service, actions taken by federal and state regulators
within their respective domains necessarily affect the general financial health of
those carriers, and hence their ability to provide service, in the other
“hemisphere.”
The issues raised by the Louisiana Public Service Commission caused the Supreme Court,
in light of the complexities of dual jurisdiction, to analyze whether the 1934 Act preempted
state law with respect to the Commission’s efforts to use different depreciation methods
than those applied by the FCC. For the most part, the analysis hinged on the meaning of
47 U.S.C. § 152(b), which provides in pertinent part that,
. . . nothing in this chapter shall be construed to apply or to give the
Commission jurisdiction with respect to (1) charges, classifications, practices,
services, facilities, or regulations for or in connection with intrastate
communication service. . . .
The Court found that, “[b]y its terms, this provision fences off from FCC reach or regulation
intrastate matters -- indeed, including matters ‘in connection with’ intrastate service.” This is
explained more fully by the Court in the following passage,
While it is certainly true, and a basic underpinning of our federal system, that
state regulation will be displaced to the extent that it stands as an obstacle to
the accomplishment and execution of the full purposes and objectives of
Congress (citation omitted) it is also true that a federal agency may pre-empt
state law only when and if it is acting within the scope of its congressionally
delegated authority. This is true for at least two reasons. First, an agency
literally has no power to act, let alone pre-empt the validly enacted legislation of
a sovereign State, unless and until Congress confers power upon it. Second,
the best way of determining whether Congress intended the regulations of an
administrative agency to displace state law is to examine the nature and scope
of the authority granted by Congress to the agency. Section 152(b)
constitutes, as we have explained above, a congressional denial of power to
the FCC to require state commissions to follow FCC depreciation practices for
intrastate ratemaking purposes. Thus, we simply cannot accept an argument
that the FCC may nevertheless take action which it thinks will best effectuate a
federal policy. An agency may not confer power upon itself.72
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The court ultimately concluded that to the extent that the systems can be separated, the
FCC would lack regulatory authority over intrastate systems. However, when local services
are inseparable from or substantially affect interstate communications FCC jurisdiction may
extend into the intrastate realm.73
B. The 1996 Telecommunications Act.
Telecommunications regulation was substantially altered when the 1934 Act was amended
by Congress in the 1996 Telecommunications Act.74 The impact of the 1996 Act was to
eliminate the changes required under the modification of final judgment that resulted in the
break-up of AT&T. The 1996 Act was intended to open up local and long distance markets
to competition by allowing long distance companies, cable companies, wireless service
operators, gas utilities, and electric utilities to sell local telephone service. The local
telephone companies were required to offer resale of local services and interconnection to
their facilities by others. In addition, the local phone companies (BOCs) were permitted,
under certain conditions, to sell long distance services and to manufacture products. 75 The
1996 Telecommunications Act, thus, “fundamentally restructure[d] local telephone
markets.”76
A critical new provision of the 1996 Act is 47 U.S.C. § 253. Section 253(a) is a general
preemption provision that, in effect, acts as a limitation upon the role of local government in
its stewardship of the public rights of way. Section 253 provides in pertinent part as follows:
§ 253. Removal of barriers to entry
(a) In general. No State or local statute or regulation, or other State or local
legal requirement, may prohibit or have the effect of prohibiting the ability of
any entity to provide any interstate or intrastate telecommunications service.
(b) State regulatory authority. Nothing in this section shall affect the ability of
a State to impose, on a competitively neutral basis and consistent with
section 254 [47 U.S.C. § 254] requirements necessary to preserve and
advance universal service, protect the public safety and welfare, ensure the
continued quality of telecommunications services, and safeguard the rights of
consumers.
(c) State and local government authority. Nothing in this section affects the
authority of a State or local government to manage the public rights-of-way or
to require fair and reasonable compensation from telecommunications
providers, on a competitively neutral and nondiscriminatory basis, for use of
public rights-of-way on a nondiscriminatory basis, if the compensation required
is publicly disclosed by such government.
(d) Preemption. If, after notice and an opportunity for public comment, the
Commission determines that a State or local government has permitted or
imposed any statute, regulation, or legal requirement that violates
subsection (a) or (b), the Commission shall preempt the enforcement of such
statute, regulation, or legal requirement to the extent necessary to correct such
violation or inconsistency.
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As described by attorney Tillman Lay in the Cities’ Petition for Certiorari to the Supreme
Court, in Auburn v. Qwest,77 47 U.S.C. § 253,
. . . represents Congress’ effort to balance the 1996 Act’s general goal of
promoting competition in telecommunications markets, see H.R. Confer. Rep.
No. 458, 104th Cong., 2d Sess. 113 (1996), with the longstanding principle
that the federal government not unduly intrude upon the sphere of functions
reserved to state and local governments in our system of federalism, Gregory
v. Ashcroft, 501 U.S. 452, 457 (1991). Section 253 strikes this balance by
preempting state and local regulations that “prohibit or have the effect of
prohibiting the ability of any entity” to provide telecommunications services,
47 U.S.C. § 253(a), while, at the same time, carving out safe harbors that are
immune from attack under § 253(a). One of those safe harbors is § 253(c),
which provides that “[n]othing in [Section 253] affects the authority of a State
or local government to manage the public rights-of-way or to require fair and
reasonable compensation from telecommunications providers, on a
competitively neutral and nondiscriminatory basis, for use of public
rights-of-way. . . .”
The purpose of § 253 is to protect and preserve management and control of the right of way
and is a reservation of rights not a limitation of rights.78 The meaning of 47 U.S.C. § 253
has, however, been litigated extensively including in the 9th Circuit Auburn v. Qwest
decision mentioned above.
In Auburn v. Qwest, Qwest, in its counterclaim, challenged a number of municipal
telecommunications regulatory ordinances claiming that the ordinances, in whole or in part,
violated § 253. The 9th Circuit Court of Appeals first found that § 253(a) preempts
regulations that not only prohibit outright the ability of any entity to provide
telecommunications services, but also those that may have the effect of prohibiting the
provision of such services.79 The Court found that each of the ordinances contained
requirements that other courts had found constituted a barrier to entry. This resulted in the
following amended80 ruling,
Taken together, these requirements have the effect of prohibiting Qwest and
other companies from providing telecommunications services . . . and create
a substantial and unlawful barrier to entry into and participation in the
Counterclaim Cities telecommunications markets.81
The ordinance requirements that the Court found, “taken together,” had this effect were:
(1) the “lengthy and detailed” nature of the application form that had to be completed to
apply for a franchise; (2) the requirement of a public hearing before a franchise was
granted; (3) that the ordinances authorized the city to exercise discretion in deciding
whether to grant, deny, or revoke a franchise; (4) that transfers of a franchise or of
ownership of a franchisee required city approval; (5) that the ordinances allowed the cities
to impose certain fees that were not based on the “costs of maintaining the right-of-way”;
and (6) that the ordinances contemplated the imposition of penalties for their violation.
While there was no evidence in the record remotely suggesting that Qwest could not comply
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with each of these requirements, or that Qwest would exit the market rather than doing so,
or that, if Qwest were to comply with these requirements, the cities would not grant it a
franchise, in the view of the Court of Appeals these requirements, nevertheless, collectively
“creat[ed] a substantial and unlawful barrier to entry into and participation in
telecommunications markets.”
Therefore, in the view of the Court, no single requirement created a barrier, and it is the
combination of some or all of the cited requirements that led the Court to believe that a
barrier existed. Although it is helpful that the Court did not find that any single provision
created a barrier to entry, the court still failed to set forth a clear and objective standard for
determining at what point a regulatory provision or combination of provisions constitutes a
barrier to entry.
Ultimately, what one must deduce is that the court will find that regulatory provisions that
give discretion to grant or deny a franchise based upon criteria unrelated to management of
the rights of way have the effect of being a barrier to entry if the provisions are found to be a
“substantial” barrier. The Court, having found that the ordinances created a barrier to entry,
next turned to § 253(c), the safe harbor provision. In so doing, the Court focused on what it
described as four significant features that, in the view of the Court, violate § 253(c).82
These features are described below:
1.
Application form that includes information requirements that do not
relate to management of public rights of way:
a.
b.
c.
d.
2.
Reporting requirements and controls that do not relate to management
of public rights of way:
a.
b.
3.
Regulation of ownership and transfer not tied to how the ownership
affects the rights of way.
Specifically, stock transfers extend far beyond management of the
rights of way.
Conditions within the franchise unrelated to management of public rights
of way:
a.
b.
4.
Legal, technical, and financial qualifications to provide
telecommunications services.
Description of services to be provided now or in the future.
Requirements to satisfy unnamed/unspecified criteria/conditions.
Description of systems/plans/facilities to be utilized.
Most-favored-community-status (best available rates, conditions,
and terms).
Free or excess capacity for use of the cities or other users.
Unfettered discretion to require unspecified franchise terms and
terminate/revoke/grant based upon unnamed factors. Cannot
terminate/revoke/grant based broadly upon anything that may be in the
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public interest. (Arguably this means such authority must be related to
management of the rights of way.)
The Court identified these four categories as regulations unrelated to right of way
management, based upon its understanding of the congressional record,83 guidelines set
forth by the FCC in the Troy84 and Classic Telephone85 decisions and the nebulous and
unformulated standard of “common sense.”86 The linchpin for the Court was that the
regulatory provisions must control the right of way and not the companies with facilities in
the right of way. In other words, the ordinances did not constitute permissible right of way
management under § 253(c) because they “establish franchise systems that regulate the
telecommunications companies themselves, not merely the rights-of-way.” If this is the test
then, for example, local government could establish insurance, bonding and construction
requirements to ensure that local government had a mechanism to ensure that work in the
right of way was completed properly; however, it could not look at past performance or
ability to perform the work as an indicator of whether or not the work would be performed
properly because this would be a provision that regulated the company. This is the
so-called “common sense” approach the Court took.
The problem, inter alia, is that in the real world, local government would be foolish not to
look at past performance and qualifications of the company to determine if the company is
fit to operate within the right of way and when setting or negotiating the bond or insurance
limits or other financial security. It is apparent that the court has no understanding of the
important right of way management purposes that are represented in the provisions that the
Court finds to be offensive. This lack of understanding is based upon the fact that the cities
had no opportunity to introduce evidence explaining the justifications for the ordinance
requirements at issue and the Court felt no need to defer to the experience and expertise of
local government in right of way matters.
The good news is that the majority of the regulatory provisions of the counterclaim cities
ordinances likely fit within the right of management category acceptable to the Court. Cities
can still require conditions such as:
Execution of a franchise.87
Recovery of administrative costs that are connected with right of way
management.
3.
Recovery of street degradation costs.
4.
Coordination of construction schedules.
5.
Compliance with building, fire, safety, and other construction-type
codes.
6.
Compliance with zoning regulations.
7.
Compliance with permit requirements.
8.
Financial assurances such as bonding, insurance, financial security, and
indemnities.
9.
Tracking the facilities in the rights of way to prevent interference.
10. Controlling the time and location of excavation.
1.
2.
The foregoing is not an exhaustive list and illustrative only.88
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The real question is how will the Court view regulatory provisions that relate both to right of
way management and, in the Court’s view, also regulate business activities or services? It
is clear that if the Court believes that the connection between right of way management is
“too tenuous,” the provision will fail. The example given was the regulation of stock
ownership. The argument advanced by the cities was that stock ownership is linked to a
company’s financial well-being, which may affect its continued existence, or its ability to pay
fees or other necessary costs, which may ultimately affect its use of the right of way. The
Court found this was,
. . . simply too tenuous a connection to the management of rights of way.
Under the semantic two-step, § 253(c) would have no limited principal. The
safe harbor provisions would swallow whole the broad congressional
preemption. Municipalities could regulate nearly any aspect of the
telecommunications business.89
The Court would, thus, strike down any provision that, in its view, had “too tenuous” a
connection to rights of way management. What is “too tenuous” is subject to debate. The
telecommunications industry would likely argue that the regulatory provision must solely
relate to management of rights of way and cannot, in any manner, regulate the business
activities of the company or the services provided. This is, in fact, what Qwest argued in its
Brief in Opposition to the Petition for Certiorari, in the Auburn case,
The court then determined that petitioners’ ordinances regulate not merely
the rights of way, but also the telecommunications companies themselves,
and therefore fall outside the scope of this savings clause.90
Qwest appears to argue that the two are mutually exclusive. In other words, if a
requirement regulates, in any way, services or business activities, it will not fall within the
safe harbor. This is not, however, a fair view of the 9th Circuit opinion. The court has
allowed for some overlap. In the example given, it was the tenuous nature of the basis for
regulation that the Court found troubling. The Court believed that regulation of stock
transfers extended far beyond management of rights of way.91 This is not a blanket
prohibition on all regulations that may also regulate business activities or services provided.
Thus, the door is still open, but how wide is unknown.
The bottom line is that until Congress acts or the U.S. Supreme Court decides what
Congress intended, the Auburn decision is controlling law for 9th Circuit jurisdictions despite
its conflict with the apparent congressional intent and the decisions in other circuits. Thus,
9th Circuit jurisdictions must comply with the principles set forth in the Auburn opinion and
ensure that its practices, regulatory ordinances, franchises, and other right of way use
authorizations are consistent therewith.
C. Washington Utilities and Transportation Commission.
As mentioned supra, state law provides that municipal consent is required for a
telecommunications company to enter upon and use the right of way to erect and install
telephone lines.92 The courts have likewise determined that municipalities have broad
authority to control use of the public right of way. However, aside from the apparent
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limitations under Title 47 U.S.C. § 253, there are state law limitations that are important to
keep in mind.
The task of regulation of intrastate telecommunications service has been delegated by the
legislature to the Washington Utilities and Transportation Commission (WUTC). The
WUTC has, inter alia, jurisdiction over regulation in the public interest of the rates, services,
facilities, and practices of all persons engaging within this state in the business of supplying
telecommunications to the public for compensation.93 Note that the WUTC does not have
authority unless the services are offered: (1) to the public; and (2) for compensation.
Telecommunications are regulated under Chapter 80.36 RCW.
An important provision of Chapter 80.36 RCW is the right of telecommunications companies
to file tariff schedules. A tariff schedule shows the rates, tolls, rentals, and charges for
services, equipment, and facilities.94 The tariff schedule shall also state any rules or
regulations that may change, affect, or determine any of the aggregate of the rates, tolls,
rentals, or charges for service.95 The importance of the tariff schedule is that it has the
force and effect of law.96 The reason is that the fixing of rates and the regulation of such
rates is a legislative matter that has been delegated to the WUTC. Thus, when the tariff
schedule is filed as required by law, it becomes a part of the law. 97 The importance of
understanding this relationship is that the tariff can impact the obligation to pay for
expenses of relocation.
V.
Conclusion.
Convergence of services is creating a regulatory quagmire for federal, state, and local
governments and regulatory bodies. With the cross over between traditional
telecommunications and cable services and now information services, it is becoming
increasingly difficult for local governments to understand their role in the voice, video, and
data world. In the view of some, the regulatory models are not working and Congress is
debating the wisdom of the 1996 amendments to the Communications Act. Furthermore,
the telecommunications industry is spending untold millions of dollars lobbying federal,
state, and local governments, public services commissions (WUTC), and the FCC to
convince them that local government is the problem, to-wit: that local governments are
standing in the way of progress with their burdensome regulatory processes and imposition
of costs and request for franchise fees. There are, however, a few basic principles that
probably will not change significantly in the near future and may be helpful to the municipal
practitioner.
Municipalities are required under state and federal law to grant telecommunications
companies the right to use of the public rights of way subject to and conditioned upon
reasonable right of way management requirements. State law prohibits the imposition of
franchise fees upon revenues derived from telephone business services. Municipalities
should adopt regulatory ordinances that establish procedures for issuance of authorization
to use the public rights of way that meet the timelines set forth in state law and that contain
requirements that are related to management of the public rights of way.
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The FCC is empowered to regulate long distance services while the WUTC is empowered
to regulate local telephone services. When the facilities subject to regulation are used for
both local and long distance services, the FCC may have overriding jurisdiction. Local
governments are not authorized to regulate telephone business services.
Hopefully, the information provided herein will help guide you in the right direction.
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ENDNOTES
1
Frequency represents the number of times that an electromagnetic wave oscillates back and forth in a
complete cycle.
2 PAUL VALLE-RIESTRA, TELECOMMUNICATIONS, THE GOVERNMENTAL ROLE IN MANAGING THE CONNECTED
COMMUNITY (Solano Press), at 1 (2002).
3 THOMAS G. KRATTENMAKER, TELECOMMUNICATIONS LAW AND POLICY, at 343 (2d ed. 1997).
4 Id. at 344.
5 Id. at 344.
6 Id. at 344.
7 TELECOMMUNICATIONS, THE GOVERNMENTAL ROLE IN MANAGING THE CONNECTED COMMUNITY, at 2.
8 Id. at 1.
9 Id. at 1.
10 Id. at 2.
11 Id. at 3.
12 Id. at 3-4.
13 Id. at 4.
14 Id. at 4-5.
15 TELECOMMUNICATIONS LAW AND POLICY, at 347.
16 Id. at 348.
17 Id. at 348-349.
18 Id. at 351.
19 TELECOMMUNICATIONS, THE GOVERNMENTAL ROLE IN MANAGING THE CONNECTED COMMUNITY, at 11-12.
20 Stuart Brotman, Communications Law and Practice, LAW JOURNAL PRESS, § 1.04, at 1-19.
21 Alexander J. Field, The Regulatory History of A New Technology: Electromagnetic Telegraphy, LAW
REVIEW OF MICHIGAN STATE UNIVERSITY DETROIT COLLEGE OF LAW , Summer 2001, at 248.
22 This statute was later embodied in Rev St. §§ 5263-5269, 47 U.S.C.A. §§ 1-6, 8, and then repealed
July 16, 1947, pursuant to c. 256 § 1, 61 Stat. 327.
23 The Regulatory History of A New Technology: Electromagnetic Telegraphy, at 248.
24 Communications Law and Practice, § 1.04, at 1-20.
25 See, Western Union Telegraph Co. v. City of Richmond, 178 F. 310, 319 (E.D. VA., 1909).
26 Id. at 319, see also, Western Union Telegraph Co. v. Hopkins, 116 P. 557, 560, 160 Cal. 106, 113
(1911); Postal Telegraph-Cable Co. v. Railroad Commission of California, 254 P. 258, 259, 200 Cal. 463,
468 (1927); and City of Seattle v. Western Union, 21 Wn. 2d 838, 856 (1944).
27 U.S. Rev. Stats. @ 5263.
28 St. Louis v. Western Union Tel. Co., 148 U.S. 92, 100 (1893).
29 Western Union Tel. Co. v. Attorney Gen. of Massachusetts, 125 U.S. 530, at 545-546 (1888).
30 Id. at 548.
31 St. Louis v. Western Union Tel. Co., 148 U.S. 92, 100 (1893).
32 Id. at 100-101.
33 Id. at 102.
34 Western Union Tel. Co. v. Pennsylvania R. Co., 195 U.S. 540, 562; 25 S. Ct. 133; 49 L. Ed. 312 (1904).
35 Western Union v. City of Richmond, 224 U.S. 160, 32 S. Ct. 449 (1912).
36 Id. at 169.
37 Id. at 169.
38 Id. at 169.
39 Western Union v. E.M. Lakin, 53 Wash. 326 (1909).
40 Id. at 336.
41 Id. at 335.
42 W ASH. CONST., art. XII, § 19.
43 Spokane and British Columbia Telephone & Telegraph v. City of Spokane, 24 Wash. 53 (1901).
44 Id. at 59-60.
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See also, Ste ex. Rel. Walker v. Superior Court, 87 Wash. 582, 584 (1915) (“The power to grant
franchises is a sovereign power, and resides primarily in the state Legislature. The subordinate agencies
of the state, such as cities and counties, have not the power to grant franchise, unless that right has been
expressly conferred by legislative action.”); Winkenwerder v. Yakima, 52 Wn. 2d 617, 626 (1958) (“. . . the
state has absolute control over the streets – limited only by the constitution.”).
46 Spokane, at 61.
47 Id. at 59 and 61.
48 It should be noted that interpretations of the intent of the Post Roads Act make it clear that a
municipality cannot refuse access for the purpose of creating or supporting a monopoly.
49 Spokane, at 62.
50 Tacoma Ry. & Power Co. v. City of Tacoma, 79 Wash. 508 (1914).
51 Laws of Washington (1890), Chapter VII, § 5, at 218.
52 Compare RCW 35.22.280(7).
53 Tacoma Ry., at 514-515.
54 Second-class cities and towns and optional code cities have similar authority although the statutory
language varies significantly from the authority granted to first-class cities. See generally RCW 35.23.380,
35.23.440(37), 35.27.330(4) and (12), and 35A.47.040.
55 Baxter-Wyckoff Co. v. Seattle, 67 Wn.2d 555, 560 (1965).
56 Schoenfeld v. City of Seattle, 265 F. 726, 731 (W.D. Wa. 1920).
57 Id. at 731.
58 State of Washington ex. Rel. City of Seattle v. Pacific Telephone & Telegraph Co. et. al., 1 F. 2d 327,
330 (1924).
59 See generally, Washington Fruit & Produce Co. v. Yakima, 3 Wn.2d 152 (1940).
60 RCW 35.21.860.
61 Telephone business, network telephone service, and competitive telephone service are defined under
RCW 82.04.065 as follows: "’Telephone business’ means the business of providing network telephone
service, as defined in subsection (2) of this section. It includes cooperative or farmer line telephone
companies or associations operating an exchange.” “(2) ‘Network telephone service’ means the providing
by any person of access to a local telephone network, local telephone network switching service, toll
service, or coin telephone services, or the providing of telephonic, video, data, or similar communication or
transmission for hire, via a local telephone network, toll line or channel, cable, microwave, or similar
communication or transmission system. ‘Network telephone service’ includes interstate service, including
toll service, originating from or received on telecommunications equipment or apparatus in this state if the
charge for the service is billed to a person in this state. ‘Network telephone service’ includes the provision
of transmission to and from the site of an internet provider via a local telephone network, toll line or
channel, cable, microwave, or similar communication or transmission system. ‘Network telephone service’
does not include the providing of competitive telephone service, the providing of cable television service,
the providing of broadcast services by radio or television stations, nor the provision of internet service as
defined in RCW 82.04.297, including the reception of dial-in connection, provided at the site of the internet
service provider.” (Emphasis Added) “(1) ‘Competitive telephone service’ means the providing by any
person of telecommunications equipment or apparatus, or service related to that equipment or apparatus
such as repair or maintenance service, if the equipment or apparatus is of a type which can be provided
by persons that are not subject to regulation as telephone companies under Title 80 RCW and for which a
separate charge is made.”
62 Many telephone companies lease or license use of dark fiber. It is an open question as to whether or
not such provisioning is exempt from franchise fees. Arguably, dark fiber does not, itself, provide access
and, thus, does not meet the definition of “Telephone Business”; however, the telephone company will
argue that the fiber provides is part of the network that ultimately allows and, thus, provides access. In
other words, without the fiber you could not get access to the network; thus, the fiber provides access.
Another argument is that provisioning of dark fiber is a “service provider” business activity and is, thus,
exempt from franchise fees. When the addition of the service provider exemption was adopted in 2000,
the bill included a definition of service provider; however, this definition was in another section of the bill
codified at Chapter 35.99 and it appears that through drafting over-sight no definition was included here.
“Service provider,” as defined at RCW 35.99.010, means every corporation, company, association, joint
stock association, firm, partnership, person, city, or town owning, operating, or managing any facilities
45
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used to provide and providing telecommunications or cable television service for hire, sale, or resale to the
general public. Service provider includes the legal successor to any such corporation, company,
association, joint stock association, firm, partnership, person, city, or town. Arguably, this definition should
apply, which should limit the meaning of the term “service provider” for purposes of the exemption from
franchise fees.
63 Qwest and the BOCs argue that when the state enacted what is now codified as RCW 82.36.040, the
state granted a permanent franchise to all telephone/telegraph companies that had facilities in the rights of
way at that time. This argument is supported by the decision of the Washington Supreme Court in Seattle
v. Western Union Tel. Co., 21 Wn. 2d 838 (1944). This case is of dubious authority. For example, the
state Constitution provides that ”No law granting irrevocably any privilege, franchise or immunity, shall be
passed by the legislature.” W ASH. CONST. art. I, § 8. This provision was never discuss in the foregoing
case and, had it been, it is doubtful that the Court would have decided the case the way that it did.
64 RCW 35.99.020.
65 Mann-Elkins Act, Pub. L. No. 61-218, 36 Stat. 539 (1910).
66 Communications Law and Practice, § 1.02, at 1-11.
67 The Commission originally had seven members (now reduced to five) all appointed by the President
and confirmed by the Senate. No more than three members may be appointed from the same political
party. Each appointee serves a five-year staggered term. In addition, the President appoints a chairman
who sets the agenda for the FCC.
68 The 1934 Act is codified under Chapter 5 of Title 47 of the United States Code.
69 CHARLES D. FERIS & FRANK W. LLOYD, TELECOMMUNICATIONS REGULATION: CABLE, BROADCASTING,
SATELLITE, AND THE INTERNET, § 1.04, 107 (Matthew Bender, 2002).
70 Louisiana Public Service Com. v. FCC, 476 U.S. 355, 360, 106 S. Ct. 1890; 90 L. Ed. 2d 369 (1986).
71 Id. at 360.
72 Id. at 374.
73 When intrastate and interstate aspects of a common carrier communications system can be separated,
state and federal jurisdiction may be divided along those lines. See 47 U.S.C. §§ 152(b), 221(b) (1976 and
Supp. V 1981); Smith v. Illinois Bell Tel. Co., 282 U.S. 133, 148, 75 L. Ed. 255, 51 S. Ct. 65 (1930);
McDonnel Douglas Corp. v. General Tel. Co., 594 F. 2d 720, 724 (9th Cir.), cert. denied, 444 U.S. 839, 62
L.E.d 2d 50, 100 S. Ct. 77 (1970). However, when local services are inseparable from or substantially
affect interstate communications, FCC jurisdiction extends into the intrastate realm. See Computer &
Communications Indus. Ass’n v. FCC, 224 U.S. App. D.C. 83, 639 F. 2d 198, 215 (D.C. Cir. 1982), cert.
Denied, 461 U.S. 938, 103 S. Ct. 2109, 77 L. Ed. 2d 313 (1983); New York Tel. Co. v. FCC, 631 F.2d
1059, 1064-66 (2d Cir. 1980); Puerto Rico Tel. Co. v. FCC, 553 F.2d 694, 699-700 (1st Cir. 1977); North
Carolina Util. Comm'n v. FCC, 552 F.2d 1036, 1045-48 (4th Cir.), cert. denied, 434 U.S. 874, 54 L. Ed. 2d
154, 98 S. Ct. 222, 98 S. Ct. 223 (1977) (NCUC II); North Carolina Util. Comm'n v. FCC, 537 F.2d 787,
793-95 (4th Cir.), cert. denied, 429 U.S. 1027, 50 L. Ed. 2d 631, 97 S. Ct. 651, 97 S. Ct. 652 (1976)
(NCUC I).
74 Pub. L. No. 104-104, 110 Stat. 70 (1996).
75 TELECOMMUNICATIONS, THE GOVERNMENTAL ROLE IN MANAGING THE CONNECTED COMMUNITY, at 12-13.
76 AT&T v. Iowa Utilities Board, 525 U.S. 366, 371 (1999).
77 Auburn et. al. v. Qwest, 247 F. 3d 966 (9th Cir.), amended, 260 F. 3d 1160 (9th Cir. 2001), cert. denied
sub. nom. City of Tacoma v. Qwest, 122 S. Ct. 809 (2002).
78 The Miller & Van Eaton, P.L.L.C. Washington D.C. law firm has prepared an excellent congressional
history of the rights of way provisions in the FTA, including § 253.
79 Auburn, at 1175.
80 The cities petitioned the Court for rehearing that resulted in an amended opinion. In the earlier opinion
of the Court, it found that these requirements each constituted a barrier to entry. Upon request for
reconsideration, the Court amended its opinion resulting in the above-cited holding.
81 Auburn, at 1176.
82 Although the Court found these provisions to violate § 253(c), this author would argue that the violation
is of § 253(a) because § 253(c) is a safe harbor and (a) is the preemptive provision.
83 Quoting 141 Cong. Rec. S8172 (daily ed. June 12, 1995) (statement of Sen. Feinstein, quoting letter
from the Office of City Attorney, City and County of San Francisco).
84 In re TCI Cablevision of Oakland County, Inc., 12 FCC Rcd 21396 (F.C.C. 1997).
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85
In Re Classic Telephone, Inc., 11 F.C.C.R. Rcd 13082 (F.C.C. 1996).
Auburn, at 1178. “Applying these guidelines, coupled with common sense, it is apparent that the
ordinance establish franchise systems that regulate the telecommunications companies themselves, not
merely the rights-of-way.”
87 A city may still require a franchise as a condition of entry into the right of way; however, its regulatory
provisions must fall within the safe harbor provisions of § 253(c).
88 For a more thorough review of acceptable regulatory requirements, see Recent Developments In
Rights-Of-Way Management: Auburn et. al. v Qwest – F. 3d --, 2001 U.S. Ap. LEXIS 15518 (9th Cir.
2001), by Carol Arnold, Preston Gates & Ellis LLP, August 23, 24, 2001.
89 Auburn, at 1180.
90 Respondent’s Brief in Opposition, Auburn, No. 01-596 (U.S. Sup. Ct.), at 5.
91 Auburn, at 1180.
92 RCW 80.36.040.
93 RCW 80.01.040.
94 RCW 80.36.100.
95 RCW 80.36.100.
96 General Tel. Co. of Northwest, Inc. v. Bothell, 105 Wn.2d 579, 538 (1986).
97 Allen v. General Tel. Co., 20 Wn. App. 144, 148 (1978).
86
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