Arizona Cities Sued Over Rights-of-Way Fees

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Telecommunications firms have marched to court in Phoenixto challenge municipal fees for the use of rights-of-way that the businesses said put aburden on them for such unrelated uses as desert preservation.

So far, U S West Inc. and AT&T Corp. have sought reliefin Arizona Tax Court in Phoenix from a 'rights-of-way rental fee' enacted by thecities of Mesa, Phoenix, Tucson, Tempe, Peoria, Yuma and Gilbert.

The fees range from 4.7 percent of gross revenue in Phoenixto 3 percent in some of the smaller towns. The telcos believe that the fees are excessiveand, since the firms can pass the levy through, that they amount to a hidden tax onconsumers.

More suits are possible. Cox Communications Inc. will notconfirm the possibility of a suit, but David Andersen, Cox's vice president of publicaffairs, said, 'We share U S West's concerns.'

Phone companies and cable operators, working as the ArizonaCompetitive Telecommunications Providers Association, tried to head off this range war bynegotiating jointly last year with the League of Arizona Cities and Towns. Talks brokedown last spring because the cities wanted too much money, according to Susan BitterSmith, executive director of the Arizona Cable Telecommunications Association.

Some cities decided to adopt a telecommunicationsrights-of-way compensation model adapted from an ordinance in Chattanooga, Tenn. That lawconsiders the telecommunications fee as rent, and not as a tax.

The Arizona cities named in U S West's complaint eachadapted the model as their own. Phoenix passed its ordinance in December, and some membersof the council told the local press that about one-third of the proceeds will fundfranchise management, with the balance supporting 'desert preservation.'

In similar suits, cities cited Section 253c of the 1996Telecommunications Act, which specifically allows municipalities to charge a reasonablefee for the use of public rights-of-way. This 'safe-harbor' provision hasalready protected Tucson in one lawsuit.

But Manny Lerma Jr., director of government relations for US West in Arizona, said the section presupposes that local governments have theconstitutional authority to assess taxes, 'and they don't have it.' Some ofthe defendant cities have laws requiring approval by the people for new taxes, he added.

U S West already received a temporary restraining order,preventing the cities from collecting the disputed funds until the issues are resolved incourt.

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