Ariz. Forbids Charging Telecom Rent


Arizona Gov. Jane Dee Hull is expected to sign a bill
forbidding cities from charging telecommunications "rent" for the use of public

Communities would still have the right to assess sales
taxes on telephone companies and other communications providers, but they wouldn't be
able to tack on extra-use fees.

Telecommunications providers heralded the passage of the
bill as a blow against unreasonable local fees. The legislation should rescind some
rights-of-way fees that were already enacted in Phoenix, Mesa and Yuma, but that were
immediately challenged in court.

Cable executives said they were pleased with the bill
because it mandates equal access to rights-of-way and it prevents preferential treatment
of any single applicant. This is important because the state's largest telephone
provider, U S West Communications, just applied to become a video provider in Phoenix.

"We're pleased with the way that the bill
looks," said Manny Lerma Jr., director of government relations for USWC in Arizona.
"We're pleased with the bill that we all negotiated."

The federal Telecommunications Act of 1996 specifically
protects the rights of cities and other governments to charge a "reasonable fee"
for the use of city streets and easements. When it became clear that Arizona cities would
take a cue from municipalities in other states and enact local fees, telecommunications
providers attempted to negotiate a statewide policy that would reimburse the cities for
the use of infrastructure. However, the talks broke down last year over the definition of
the term "reasonable."

At year's end, Phoenix, Yuma, Mesa, Tempe, Peoria and
Gilbert each passed rights-of-way rental-fee ordinances, seeking returns of between 2
percent and 4.7 percent on gross revenues.

Although officials from Cox Communications Inc. -- which
offers cable in the state, and which is moving into telephony in Phoenix -- said they were
concerned about the impact of the tax, it was AT&T Corp. and USWC that challenged the
cities' ordinances in state tax court.

USWC also went to the state legislature, as did a coalition
of telecommunications competitors, to stop further city action and to create a state
policy. They argued that since the rights-of-way fees would be passed through to
customers, they represented "hidden taxes," which are in violation of state

The cities apparently agreed to the state bill because it
leaves intact their ability to assess sales taxes on telecommunications services.
Telecommunications sales taxes generally stand at 2 percent or less in the state -- lower
than the rental fees that the cities enacted.