FCC Seeks Comments on Level 3 Petition Challenging Right-of-Way Fees

On July 23, 2009, Level 3 filed a Petition for Declaratory Ruling that Certain Right-of-Way Rents Imposed by the New York State Thruway Authority Are Preempted Under Section 253 (“Petition”) with the Federal Communications Commission (FCC). In the Petition, Level 3 claims that, because of the exorbitant annual rental rates charged by the New York State Thruway Authority (NYSTA), it has been effectively prohibited from installing any new fiber connections from its fiber-optic backbone network located in rights-of-way along the length of the New York State Thruway.

On Aug. 25, 2009, the FCC released a Public Notice, seeking comment on Level 3’s Petition. Comments are due on Sept. 24, 2009, and reply comments will be due on Oct. 15, 2009.

Level 3 argues that the lump-sum annual rents charged by the NYSTA are unreasonable because the rents do not even comply with NYSTA’s own rate schedule, and range from 180 to 725 times more than the prevailing rates. Level 3 also argues that the rents charged by NYSTA are discriminatory because NYSTA charges other entities annual rents according to its scheduled rates, which are consistent with prevailing rates.

As a result of the unreasonable and discriminatory rates charged by NYSTA, Level 3 argues that it has been effectively prohibited from deploying the infrastructure necessary to provide telecommunications services to small- and medium-sized communities along the Thruway. Level 3 argues that this effective prohibition “directly undermine[s] the middle-mile broadband deployment that the federal stimulus package plan seeks to encourage” because, even with federal stimulus support, NYSTA’s exorbitant rates make such a capital infrastructure investment uneconomical. Such effective prohibition is in violation of Section 253 of the federal Communications Act, and Level 3 therefore urges the FCC to preempt NYSTA’s rent provisions.

The issues presented in this proceeding are important for telecommunications providers, as the FCC has not previously addressed the limits on state or local right-of-way fees under Section 253. Thus, the FCC’s resolution of Level 3’s Petition could provide important guidance as to standards for the rates that cities can charge telecommunications providers.

Davis Wright Tremaine has extensive experience representing telecommunications providers on the issue of government right-of-way fees. If you would like a copy of Level 3’s Petition or have questions about the issue, please contact us.