A Boston City Council committee has taken the rare step of shooting down a mayoral plan to assess a 5 percent fee on gross telecommunications revenue.
The committee on government operations, chaired by city councilor Maureen Feeney, determined that Boston would face "significant legal complications" if it attempted to collect such funds from AT&T Broadband, Verizon Communications and other telecommunications providers.
The committee presented its "do not pass" recommendation to the City Council June 26, and the council then rejected the measure.
Mayor Thomas Menino's gross-revenue proposal could have raised an estimated $9 million a year from telecommunications providers. It was part of an overall strategy to reduce a projected $100 million budget gap.
Cities across the U.S. have examined the imposition of telecommunications fees, assessed for the use of the public rights-of-way. The fees are commonly assessed as a percentage of gross revenue; or on the provider's physical plant on a cents-per-foot basis.
But telecom companies argue that the fees are a barrier to deployment — especially when levied as a percentage of gross revenue — and therefore violate Section 253c of the federal Telecommunications Policy Act. That provision allows localities to charge a "fair and reasonable" amount for right-of-way usage.
Telephone companies in particular protest the gross-revenues charge. They argue that services such as call waiting and call forwarding generate additional revenue for providers without placing further strain on public rights-of-way.
According to the City Council committee, Massachusetts Commonwealth General Law 166 gives cities authority over only the placement of telecom plant, and does not address "imposing fees unrelated to the management of [rights-of-way]." The state's Supreme Court has ruled that municipalities can only raise money to cover expenses, according to the committee report.
Because of that, the city would have no authority to approve the mayor's ordinance, the committee decided.
Several legal challenges to the safe-harbor provision in Section 245c of the U.S. Telecom Policy Act are now working their respective way through the legal system, the committee also noted. There are precedents for both broad fee-setting power and for curbs on municipal fee-setting authority, but the committee decided that the bulk of the court decisions weigh against a gross-receipts fee.
But in their report, councilors said their greatest concern such a fee would be passed directly through to consumers.