UNITED STATES OF AMERICA

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FEDERAL COMMUNICATIONS COMMISSION

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PUBLIC FORUM ON

RIGHTS-OF-WAY ISSUES

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WEDNESDAY,

OCTOBER 16, 2002

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The Public Forum was held at 445 12^th^ Street, S.W., Washington, D.C.
20554, at 9:30 a.m.

[COMMISSIONERS PRESENT]{.underline}:

MICHAEL POWELL, CHAIRMAN

KATHLEEN ABERNATHY

MICHAEL COPPS

KEVIN MARTIN

[EMCEE]{.underline}:

K. DANE SNOWDEN, CHIEF, CONSUMER & GOVERNMENTAL AFFAIRS BUREAU

[ALSO PRESENT]{.underline}:

NANCY VICTORY, ASSISTANT SECRETARY FOR COMMUNICATIONS AND INFORMATION,
U.S. DEPARTMENT OF COMMERCE

[PANEL I]{.underline}:

JANE MAGO, MODERATOR

LISA GELB, DEPUTY CITY ATTORNEY, SAN FRANCISCO, CALIFORNIA

CHRIS MELCHER, CORPORATE COUNSEL, QWEST COMMUNICATIONS

PAM BEERY, PARTNER, BEERY & ELSNER

TERESA MARRERO, SENIOR ATTORNEY - FEDERAL ROW ISSUES, AT&T

[PANEL II]{.underline}:

BILL MAHER, MODERATOR

SANDY SAKAMOTO, ASSISTANT GENERAL COUNSEL AND ASSISTANT ATTORNEY
SBC/PACIFIC TELESIS

DON KNIGHT, ASSISTANT CITY ATTORNEY, DALLAS, TEXAS

KELSI REEVES, VICE PRESIDENT, FEDERAL GOVERNMENT RELATIONS, TIME WARNER
TELECOM

LARRY DOHERTY, DIRECTOR, SITE DEVELOPMENT, WEST REGION, SPRINT PCS

BARRY ORTON, PROFESSOR OF TELECOMMUNICATIONS, UNIVERSITY OF WISCONSIN 
MADISON

[PANEL III]{.underline}:

KEN FERREE, MODERATOR

KEN FELLMAN, MAYOR, ARVADA, COLORADO

DORIAN DENBURG, CHIEF RIGHTS-OF-WAY COUNSEL, BELLSOUTH, CORPORATION

BOB CHERNOW, CHAIR, REGIONAL TELECOM COMMISSION

ALEXANDRA WILSON, VICE PRESIDENT, PUBLIC POLICY, COX ENTERPRISES, INC.

BOB NELSON, COMMISSIONER, MICHIGAN PUBLIC SERVICE COMMISSION

C-O-N-T-E-N-T-S

Introduction 4

Panel One - Jurisdictional Issues Relating

to Local and Federal Authority

Jane Mago, Moderator 21

Lisa Gelb 24

Chris Melcher 29

Pam Beery 36

Teresa Marrero 41

Panel Two - Fair and Reasonable Compensation

for the Use of Rights-of-Way

Bill Maher, Moderator 72

Don Knight 83

Kelsi Reeves 91

Larry Doherty 98

Barry Orton 104

Panel Three - Managing the Rights-of-Way

Ken Ferree, Moderator 147

Bob Chernow 148

Dorian Denburg 155

Ken Fellman 160

Alexandra Wilson 167

Bob Nelson 173

P-R-O-C-E-E-D-I-N-G-S

9:31 a.m.

MR. SNOWDEN: Good morning. We appreciate your making your way here
through our Nor\'easter this morning. I\'d like to welcome you to the
Commission\'s Public Forum on Rights-of-Way Issues. My name is Dane
Snowden, and I\'m the Chief of the Consumer and Governmental Affairs
Bureau here at the FCC, and it is my pleasure to be the emcee for the
day.

As everyone knows, rights-of-way issues have been lurking around for
many, many years. They are extremely important issues that often raise
considerable emotions among the interested stakeholders. The Commission
holds this program today in an effort to facilitate discussion among
those interested stakeholders, stakeholders as local authorities, state
regulators, and, of course, the industry.

Today, we hope to explore where the stakeholders might develop consensus
positions and to identify principles and practices that all parties
believe can be a model for access to and management of rights-of-way
with respect to the communications industry. We are very excited to have
a number of distinguished panelists and guests today, and we thank you
for taking the time out of your busy schedules to be with us.

Our discussion today is divided into three different panels. The first
panel will address jurisdictional issues relating to local and federal
authority and will be moderated by the Commission\'s general counsel,
Ms. Jane Mago. The second panel will address issues relating to fair and
reasonable compensation for the use of rights-of-way. Bill Maher, Chief
of the Wireline Competition Bureau, will moderate this panel. Our third
panel and final panel will be moderated by Ken Ferree, Chief of the
Media Bureau, and this panel will be on looking ahead. We\'re also
extremely pleased to have Nancy Victory, Assistant Secretary for
Communications and Information at the Commerce Department, provide us
with administration\'s perspective on rights-of-way issues.

As you can see from our agenda, we have a lot of ground to cover today,
and we will try hard to abide by the schedule that we have established
in order to allow everyone a reasonable opportunity to speak. Time
permitting, we will allow questions from the audience at the end of each
panel. We ask that you keep your questions brief, so that everyone has
an opportunity to participate. A number of you may be flying out this
afternoon, so we will try our best to close at the exact time. One final
piece of housekeeping: assisted listening devices are available for
those that may require one, and should you need one, just let us know.

Now it is my pleasure to turn the program over to Chairman Powell, then
Commissioners Abernathy, Martin, and Copps, who will each make opening
remarks. So without further ado, Chairman Michael Powell.

CHAIRMAN POWELL: Good morning to everyone and welcome to the FCC. It\'s
my good fortune and privilege to have you all here. You will make a very
critical contribution to continuing policy questions, and I appreciate
you taking the time.

You know, rights-of-way challenges have been with us forever. I mean,
they are ancient in orientation, and there is nothing new about that.
They seem to accompany every new iteration of technological progress.
Even centuries ago, after the Norman evasion, there was the invention of
new forms of agriculture and husbandry, and it was interesting that one
of the consequences of that was the rise of hedges used to keep
livestock in, and one of the consequences of those hedges, I guess, the
foreshadowing of telephone poles they were, in order to keep livestock
in was the closing off of what had become common in roots of passage.
Ultimately, hundreds of years later, the government had to come up with
a balance, a balance between the rights of property holders and farmers
and the rights of the public to transgress rights-of-way.

More recently, we saw, certainly with the invention of the telephone,
the creation of franchise rights in order to facilitate the construction
and deployment of telephone poles, lines, and infrastructure, so there
is nothing new about that. And here we are today in another period of
unprecedented technological development, which, again, calls on the
government and stakeholders to find balance in order to protect the
historical importance of rights-of-way while simultaneously facilitating
the deployment of new and critical infrastructures that our citizens
want and demand.

So that\'s why we are here. We have attempted to gather the various
constituencies to focus on the kinds of questions that are presented by
current rights-of-way challenges but, most importantly, and I want to
emphasize, to focus on solutions. Today, given the limits of time, we
necessarily don\'t have the ability to focus on every possible
right-of-way question. There are many. Many important questions will not
be the subject of today\'s discussion, but it\'s important to note this
is just one installment, one installment of what I envision to be an
ongoing and continuing dialogue among these constituents in search of
solutions.

So today is just as much a beginning as an end. Our goal is to continue
this dialogue with every stakeholder that has an interest.

You know, historically, state and local governments have had a primary
role in the establishment of policy, which must be understood by all and
respected by all. They are a vital part and they will continue to be a
vital part of any and all solutions. Similarly, however, the Congress of
the United States has established an aggressive development blueprint
for new infrastructures and new technologies and has commanded all of us
to use the tools at our disposal to advance those objectives.

These are challenges that we must balance, but I am 100% confident that
we can and will strike the right balance between the sovereign
prerogatives of states and the paramount objectives of the federal
government in a way that benefits all the citizens of the United States.

This is our challenge. I believe it is one that we are up to. I welcome
all of you again and look forward to today as a productive installment
in that continuing dialogue, as we search for a way to provide new
communication services to the citizens of the United States. Thank you.

COMMISSIONER ABERNATHY: Thank you, Mr. Chairman. And I\'m not as
familiar with the historical context around negotiating rights-of-way. I
am aware, though, that, for about the past month, I\'ve been negotiating
with my daughter for a right-of-way through her bedroom, and I have not
been successful yet, but I\'m aware of the importance of rights-of-way,
and I do want to thank the Chairman for taking a leadership role here,
for Dane Snowden and his team for putting this together, for all of the
representatives from the states who have taken their time and energy to
come together and talk about this very, very important issue.

Ensuring rights-of-way access on reasonable terms, clearly, is critical
to our effort at the federal level to promote broadband deployment and
facilities-based competition. And, at the same time, there is no
question that the states and the municipalities, clearly, have a
legitimate interest in regulating use of public rights-of-way and
ensuring fair compensation for that use. So what we\'re talking about
really is balancing the interest of service providers and local
governments, and this balancing effort has, at times, been very
contentious, and I\'m afraid sometimes there\'s been more heat than
light in the prior discussions, so I\'m hopeful that today\'s forum will
help us reach common ground where consensus is possible. And where there
are differences of opinion that cannot be bridged, I\'m hopeful we will
identify those areas, so we an assess whether intervention by this
Commission is necessary or not.

Now, the panels, as you\'re aware, scheduled for today address many of
the critical issues surrounding the debate. For example, we need to
obtain a clearer sense of the scope of federal jurisdiction. In
addition, I\'m pleased that there\'s going to be a discussion of what
constitutes fair and reasonable compensation for use of rights-of-way.
There\'s been considerable debate over whether the Communications Act
requires cost-based compensation or permits other types of fees, such as
fees that are based on a percentage of revenues or on profits, and I
think that we will all benefit from hearing the different perspectives
on that question, as we struggle with where we should ultimately end up.

Some other topics that I hope will get discussed by the panelists
include the appropriate scope of right-of-way regulation and guidelines
for timely processing of applications for permits. It doesn\'t do you
much good to have regulations in place if it takes you two years to
negotiate the process. And these are areas that have proved contentious,
but it would seem that local governments and industry groups could find
common ground in developing best practices, and, based on prior
discussions I\'ve had with both parties, it seems like this will be a
fruitful area of discussion.

So I look forward to hearing from the panelists, and I\'ll be here at
different points throughout the day, and I hope this begins a dialogue
that will bring us closer to fulfilling the Congressional goal of
encouraging the deployment of advanced telecommunications capabilities
to all Americans. Thank you very much.

COMMISSIONER COPPS: Well, I, too, want to thank the Chairman for
convening this panel, to the Bureau for its hard work in putting it
together, and, most of all, to all of you for joining us on this wet
Wednesday to bring some new thinking to an old dilemma: how to open
rights-of-way for critically-important infrastructure development
without upending painstakingly constructive balances among a host of
public sector/private sector interests. It\'s really, as a chairman, so
interestingly depicted in an old kind of problem wrapped in the promise
of exciting new technologies, and it cries out for some creative
thinking. Maybe we should have called this not the rights-of-way forum
but the creative thinking forum. But whatever it is, I\'m pleased to see
so many people from so many venues here today dedicated to working
constructively on solutions. It\'s a naughty problem; it is not an
unsolvable problem.

Broadband, I believe, is central to the rebound of the telecom sector.
More than that, it represents an infrastructure built out of historic
proportions, and its promise for America is only beginning to be
understood. That promise is profound and it is transformative, affecting
almost every aspect of how we will live, work, play, care for ourselves,
probably even how we will govern ourselves. All these things will be
changed before broadband is through. So any impediments to the rapid
deployment of broadband services and broadband networks need to be
addressed, tackled, and resolved. One such barrier highlighted by a
variety of providers, incumbents and competitors, cable providers and
wireless, as well as by our state colleagues is rights-of-way access.
These parties argue that unnecessary constraints on access to public
rights-of-way are retarding the deployment of new broadband networks
that are integral to America\'s future. They finger unreasonable fees,
unnecessary delays, and even discriminatory treatment of certain
competitors in the market as major culprits in broadband\'s delayed
expansion. And there have been, in truth, some horror stories out there.

On the other side are governments and, in particular, local governments,
emphasizing their historical and legitimate and important role in
managing rights-of-way and public lands, as they seek to minimize
disruption to their citizens from torn-up streets and the need to obtain
appropriate compensation for access to these public resources. This is
not a history and a heritage to be lightly considered or to run rough
shot over. I believe that the overwhelming majority of local governments
are sincerely trying to balance their obligations to manage the
public\'s rights-of-way with their desire to bring new advanced services
to their communities. The devil, of course, is in the details, but these
thorny rights-of-way issues do strike me as being ripe for some good
public sector and private sector collaboration. Hence, this forum.

I love these kinds of initiatives and forums. As a matter of fact, I
spent most of my eight years at the Department of Commerce during the
Clinton Administration trying to put together partnerships like this,
where public sector and private sector representations come together to
tackle problems where both industry and government have to be involved,
and I\'m a believer and a true believer in that kind of cooperative
endeavor. When we toss aside all the old shibboleths and fears, we begin
to realize that government and the private sector can accomplish a whole
lot more by working together than by emphasizing our differences.

This kind of, perhaps, non-traditional cooperation is especially useful
in the world of broadband, as we move from the established legal
framework to an unregulated Title I environment, where there is a lack
of clarity and jurisdictions, rights, and obligations, and where we
don\'t have a lot of statutory guidance or regulatory precedence to
guide us. But we do have some commonalties. I think we all agree that
broadband is important, and we need to get it deployed. Local, state,
and federal governments, generally, all seem to recognize this. Indeed,
some local jurisdictions are building their own broadband systems, where
the private sector has been reluctant to go in. Broadband is a national
priority. Congress told us exactly that in Section 706, which directs us
to promote the deployment of advanced services to all Americans.

We\'re also committed, I trust, to the competition that Congress sought
to create in the 1996 Act. With competition among multiple providers,
consumers reap the many benefits of lower prices, better services, and
greater innovation.

And we all believe, as Americans, that no problem is unsolvable and that
for every great national challenge, there is just about always a
reasonable, doable solution. Usually, that solution is fashioned and
formed through the art of compromise resulting, first, from a clear
statement of the problem and then a discussion of alternatives. So I am
pleased to see that collaborative efforts are being undertaken in
various fora.

At the state level, NARUC has established a study committee on public
rights-of-way to develop recommendations on these issues, and their work
is a significant contribution to flushing out the issues which must be
decided. At the local level, NATOA has played an important role in
initiating a dialogue when it convened an advisory counsel to facilitate
a cooperative dialogue on rights-of-way issues between municipal
governments and service providers. Thanks to them, also.

And as for our efforts at the FCC, I first want to commend our local
state government advisory committee that has been working with us on
these difficult issues. That\'s a venue of tremendous value for such
discussions. Here at the FCC, we have begun to highlight the importance
of this issue to the future or broadband deployment on our most recent
Section 706 report. We need to keep the spotlight focused on this until
the job is done.

That brings us to today and this forum. Your challenge is to voice a new
thought or, at least, bring consensus to some of the better proposals
and practices that have already been deployed or developed. As part of
this effort, a good place to begin is to look closely at what diverse
communities across this country are doing to tackle the problem,
identify lessons learned, and then go on to develop some best practices
that can be shared and implemented. Maybe a few such practices could be
developed and used even before a more comprehensive solution is found.
Maybe, who knows, best practices is the solution. Even if they are not,
sometimes milestones along the way and little deliverables along the way
make the road to a more comprehensive solution much easier to travel.

This is surely not a problem where some simplified theory of government
or one-size-fits-all theory of regulation or a particular ideology holds
out any promise at all, so I hope and trust that we can all avoid
knee-jerk reactions to one another\'s suggestions. We need to put all
that aside and get a handle on meeting one of the most important
challenges we face as a country today, a challenge made even more
important by our current economic sluggishness.

With a collaborative effort, I am optimistic that we can make great
strides to ensure that all Americans have access to the best, most
accessible and cost-effective telecommunication system in the world.
That\'s a winner for business, that\'s a winner for governments and,
most important of all, a winner for the American people. So I thank you,
again, for being with us today, for listening, for working on this, and
good luck to all of you as you proceed.

CHAIRMAN POWELL: Thank you, Commissioner. Commissioner Martin?

COMMISSIONER MARTIN: Good morning, everyone. I, first, would like to
express my appreciation and gratitude to the chairmen and to Dean
Snowden for organizing this and to all the panelists who will be with us
today for taking the time out of their busy schedule to come and share
some of their experiences and thoughts on this important topic.

The availability of advanced telecommunications and broadband is
critical to the economy, and particularly in the current downturn, but
the economy in general in the 21st Century, and I think that all of us
need to do all that we can to continue to promote the broadband
deployment. The topic of today\'s discussion, rights-of-way and the
management of those, is critical to encouraging and facilitating the
further deployment of advanced services and broadband facilities.

The public rights-of-way are an invaluable resource and create the
pathway for the nation\'s telecommunications network infrastructure, and
it is used to reach all of our end users, and the access to these vital
arteries is critical to the modernizing and deploying of the
distribution and last-mile broadband facilities that will be used
throughout the country.

Now, I\'ve said many times before that I think it\'s important that the
government, at all levels, should commit itself to trying to exercise
self-restraint and placing additional burdens on broadband and then
trying to facilitate and streamline all the permeating processes that
can sometimes act as a hindrance or deterrents to those deployments. I
know that state and local governments and the federal government, to the
extent that they\'re managing federal lands, need to be proactive in
trying to facilitate deployment by attempting to streamline those
permeating processes, and I, too, look forward to trying to see whether
or not there\'s a series of best practices that can be extracted out of
today\'s meeting that we can try to facilitate and encourage others to
adopt.

So with that, I particularly look forward to hearing from Nancy Victory
this afternoon as she tries to present the administration\'s proactive
efforts on federal rights-of-way policy and, also, particularly pleased
and appreciate that Bob Nelson is here with us today. I\'ve been able to
see first-hand his effort and his dedicated leadership in trying to
promote cooperation through all of his work at NARUC, and I look forward
to hearing what experiences and ideas he has as a result of that effort.
And I, also, do appreciate Ken Fellman with us today. I know that his
work at LSJC has also been critical, as we try to address these issues.

So, again, I think the task of identifying and eliminating potential
burdens and trying to facilitate easier management of rights-of-way to
facilitate deployment is critical and that we can attempt to try to
identify some best practices out of this will be important as an
opportunity for us. So I will look forward to having some productive
discussions as we go through today. Thank you.

MR. SNOWDEN: Thank you very much, Mr. Chairman and commissioners. As we
get ready for the next panel, we appreciate you all coming down and
speaking with us, and I\'m sure you\'ll be watching it from your offices
the rest of the day. As we get ready for our next panel, I wanted to let
everyone know that this rights-of-way forum is also being simulcast
throughout the Commission, on the internet, and also through George
Mason University. So without further ado, it is my pleasure to bring to
the podium Jane Mago, our general counsel, and her panel on the
jurisdictional question.

MS. MAGO: Thank you. Can I ask the panelists to please come on up. I
think Janice will tell you where you\'re supposed to sit, right? Thank
you very much. My name is Jane Mago. I\'m the general counsel of the
Federal Communications Commission, and this panel today - is it not
working too well? It\'s because I\'m short, I know.

This panel is focused on the scope of the federal authority under
Section 253 of the act. We\'re the lawyers. We\'re going to talk about
the statute and how to figure out, you know, how all of this fits
together, just exactly what it is that Congress did in enacting Section
253. And I\'m going to start by giving a short, you know, my cast on all
of this and then ask each of my panelists to speak for five to seven
minutes or so and give their perspective on the issues that we have. And
then, hopefully, we\'re going to open this up to the floor, let you ask
a couple of questions. I have some, but I\'d like to get some input so
that we can focus this on where you, in the audience, are interested in
focusing.

So let\'s start. Let me give a quick overview, and I\'ll start off by
saying that Section 253, like so many portions of the 1996 Telecom Act,
has a few problems in terms of clarity. To quote the Third Circuit
opinion that came out earlier this year, Section 253 is quite inartfully
drafted and has created a fair amount of confusion. The Third Circuit is
known for understatement.

The Commission and, for the most part, the courts have interpreted
Section 253(a) as a broad prohibition against barriers to entry. The
Commission and courts have also interpreted Section 253(b), which states
that the states may still have some authority to regulate in the
interest of universal services.

And Section 253(c), which provides the state and local governments
authority to manage the rights-of-way and require fair and reasonable
compensation, is safe harbors to this generalized prohibition. Section
253(d) directs the Commission to preempt any statute, regulation, or
legal requirement that violates Sections A or B. There is no mention of
Section C in there, and since we are lawyers, what that means is that we
automatically start saying, so what does that mean? Perhaps, we should
turn to the legislative history; perhaps, we shouldn\'t; and I think
that some of the panelists will be talking to us about that.

There is some legislative history that makes it clear that the deletion
of C from D was intentional. It was a kind of a compromise, and I\'ll
let the panelists speak a little bit more about that. Of course,
whenever there is this kind of uncertainty, what that means is that we
have differing opinions that come out. Now, the Commission, for its
part, has not attempted to resolve any rights-of-way disputes under
253(c), although people have tried to bring those to us. We have taken
the position that we have the authority to determine whether a
particular contention is a bona fide claim under Section 253(c) that
would bring us to that preemption, and I think that that will also be a
topic of discussion as we go forward here.

So the courts, for their part, are split in their opinions. Some think
that there is the jurisdiction of the Commission; other says perhaps
not. So with that, let me go ahead and let the panelists do the real
discussing because you don\'t want to hear this from me, we want to hear
it from them, and start off by saying that our first panelist is Lisa
Gelb. Lisa is the Deputy City Attorney with the city of San Francisco,
where she specializes in telecommunications and cable matters. Now, some
of you may see Lisa as a familiar face since she spent a fair amount of
time here at the Commission. In fact, she was involved in the
development of the first local competition rules after the \'96 act and
also on universal service issues. With that, let me turn this over to
Lisa to give us some information.

MS. GELB: Thank you, Jane, and I want to thank the FCC, generally, for
hosting this forum. I do know from personal experience that a huge
amount of work goes into hosting these. I think this is a great
opportunity for different views to be aired in one place and one time. I
know that the FCC hears frequently from the industry about how things
are working or not working regarding industry efforts to enter or
continue to provide service in the marketplace. I also know that the FCC
hears far less often from local governments about these issues and so,
perhaps, is less familiar with all of the concerns and competing
interests that local governments are trying to accommodate.

The FCC doesn\'t necessarily understand the impact that local
governments face when, for example, a telecom company installing
facilities in the rights-of-way hits a water main or a gas pipe or when
a telecom company goes bankrupt and abandons its facilities in city
streets. This forum is a great opportunity to start drawing a fuller,
more balanced picture of the concerns that local governments face.

It\'s also important to bear in mind that there are countless other
parties who have a huge stake in the proper management of public
rights-of-way, and those people aren\'t sitting up here today. They
include all of us as individual citizens who use the streets and
sidewalks to get to work or school or the grocery store. They include
businesses, who critically depend on utilities and other services
functioning appropriately at all times. And they include the electrical
utilities, water, and sewer service providers, subway and trolley
services, and all of the other entities that want to use the streets or
put facilities on, above, or below the rights-of-way. Local governments
have to balance all of these interests when they set the ground rules
for companies that want to place facilities in the streets.

Thus, the question local governments face is not simply do we want
high-speed broadband services for our citizens. Of course we do. The
question is how do we balance the desire for those services with all of
the other important interests at stake?

As Chairman Powell mentioned, it is useful to, in analyzing the Telecom
Act, and Section 253 in particular, to consider some of the history of
right-of-way regulation. Under the Constitution, all rights not
expressly delegated to the federal government are reserved to the
states, and states, of course, have broad authority to delegate their
powers to local governments.

States have long recognized that local governments are in the best
position to manage the use of local roads and public rights-of-way. For
at least 150 years, the Supreme Court has upheld the local governments\'
authority to set rules for private businesses and individuals who want
to use the rights-of-way.

In 1893, in the city of St. Louis versus Western Union Telegraph, the
Supreme Court said if the city gives a right to use the streets or
public grounds, it simply regulates the use when it prescribes the terms
and conditions upon which they shall be used. The court also said that
the word \"regulate\" is one of broad import.

Subsequent decisions, including Blair versus the City of Chicago in
1903, City of Owensboro in 1913, and New Orleans Public Service in 1930
confirmed that cities have broad discretion to manage and regulate
public rights-of-way.

The kinds of regulations that are being considered right now by courts
in Section 253 challenges are precisely the kinds of regulations that
local governments have been using for years to ensure that rights-of-way
are used in a safe and efficient manner and that valuable and limited
resources are used in a way that best serves all interested parties.

For example, in St. Louis versus Western Union, the Supreme Court found
that the city could require a telegraph company to pay compensation as
rent for use of the right-of-way and that such requirements simply
constituted regulation of the right-of-way. In the city of Owensboro,
the Supreme Court recognized that the city\'s rights to regulate the
right-of-way included the right to grant a franchise to the telephone
company.

In that case, the court also indicated that the city had authority if it
chose to exercise it to preclude the company from transferring the
franchise to another entity. In Hodge Drive It Yourself Company, a 1932
Supreme Court case, the court held that the city ordinance that required
taxi cabs to deposit insurance policies or bonds with the city was also
just a mode of the right-of-way regulation.

The point is this: the obligations of this sort have been opposed by
local governments for 150 years. They\'ve been upheld by the Supreme
Court as legitimate right-of-way regulation, and Congress must be
presumed to have known of these types of requirements when it created a
safe harbor for right-of-way regulation through 253(c). Indeed, it was
these types of regulations that Congress was intending to preserve.

Finally, it\'s worth noting that Congress only authorized preemption of
regulations that prohibit or have the effect of prohibiting the
provision of telecom service. This is a very stringent standard to meet.
In other places in the Telecom Act, for example in 251(b)(1) and
251(c)(4)(b), Congress made a distinction between prohibitions unless
severe restrictions, such as unreasonable conditions or limitations. And
in Section 257, Congress talked about barriers to entry, as opposed to
prohibitions.

Thus, the courts, generally, have not given the appropriately rigorous
review to local requirements. Had they done so, they would have, in
most, if not all, cases, have concluded that the regulations at issue
did not constitute prohibitions or effective prohibitions on services,
and the courts need never have reached the issue of whether the
requirements were preserved under Section 253(c).

MS. MAGO: An extremely timely presentation, exactly as the red light
went on. Truly amazing, Lisa. Our next panelist is Chris Melcher. Chris
is the Executive Director for Policy and Law for Qwest Communications,
where he is responsible for the municipal relationships and network
deployment for the entire Qwest system. As you might guess, he may have
a slightly different perspective on this than Lisa, and so let me just
turn it over to Chris and let him get started.

MR. MELCHER: Thank you, Jane. And I also would like to thank the
Commission for having this forum. This is a wonderful opportunity for
industry and local, state, and federal government officials and
representatives to get together to discuss these issues. These are, as
the Chairman and commissioners mentioned, somewhat contentious but
extremely important, and I think that today\'s a great opportunity to
find common ground and seek to understand the viewpoints of each side
and, hopefully, find that there really aren\'t two sides, but we\'re
working together on this.

I would like to talk about the jurisdiction issues and focus on 253. I
do have some views about the comments of Lisa, which I can share later
during Q and A. It\'s something that I think there\'s been a lively
debate on.

Historically, jurisdiction to regulate the rights-of-way has vested in
local and, to some degree, state governments. The Telecommunications Act
of 1996, and Section 253 in particular, do not seek to usurp local
governments\' jurisdiction over the rights-of-way and transfer it to the
federal government. Local governments remain responsible for regulating
the management of the rights-of-way. The FCC has recognized this in
several prior decisions.

TCI Cable Vision of Oakland County, Senator Feinstein recognized this in
legislative history, and I want to underscore the industry recognizes
this and has recognized this ever since there was an industry. Local
governments and municipalities have a critical role in managing the
right-of-way, and I think the key issue or the key distinction, really,
is managing the right-of-way, not managing telecommunication companies.

It has been clear and without debate that the appropriate management of
telecommunications companies is that the federal level with the
Commission and at the state level with the state public utility
commissions, and some municipalities have endeavored to regulate
telecommunication companies. I think that has led to some of the
difficulties. But everyone agrees local municipalities have a very
important responsibility to regulate the right-of-way.

The 1996 Act, in many respects, seeks to balance respect for traditional
areas of local regulation with the recognition by Congress that there is
a national interest in ensuring the development of competition in all
telecommunications markets, including local markets, and that some
degree of federal oversight is required to ensure the realization of
that national goal.

Section 253 preserves local jurisdiction over rights-of-way but with
federal oversight. The language of Section 253 clearly indicates that
Congress understood that such authority, if exercised over-broadly,
could threaten the national policy of encouraging competition and
promoting deployment of facilities. Section 253, accordingly, seeks to
define the appropriate balance. The Congressional policy of eliminating
barriers to the development of competition is paramount in the Act.

Subsection 253(a) bars state and local requirements that prohibit or
have the effect of prohibiting the provision of telecom services. I
think it\'s also important to recognize, as the court did in the Ninth
Circuit in Auburn and the Second Circuit in White Plains that a Section
253(a) violation does not require that the company is actually
completely locked out of the market or has to go bankrupt in order to
prove that it is a true barrier. I think the Second Circuit recognized
that material limitations on the provision of services do constitute a
violation of 253(a), and I think the courts are recognized in that, and
I think the Commission has recognized that.

Subsection 253(c) creates a safe harbor from the reach of subsection
253(a). While that safe harbor is designed to preserve traditional local
jurisdiction of a rights-of-way, it is narrow. A local right-of-way
regulation falls within the safe harbor of 253(c) only if it actually
relates to management of the public rights-of-way or recovers fair and
reasonable compensation for use of the rights-of-way, and it must do so
on a competitively neutral and nondiscriminatory basis.

The debate has really focused, or one of the debates has focused on the
limits in subsection 253(c) and what they mean, who should define them,
and who should enforce them. Some cities have suggested a broad reading
of 253(c) and a narrow reading of subsection 253(a). I believe what
should guide the interpretation and application of the whole of Section
253 is the overarching purpose of the \'96 Act: the development of
telecommunications competition and the deployment of a robust national
telecommunications infrastructure. The entire \'96 Act is an effort to
achieve that goal and gives the FCC authority to guide that process.

The FCC has been somewhat cautious to exercise what we believe it\'s
full authority under Section 253 has been given to them and rightfully
so. There was a concern that it might, if it acted too quickly, tread on
areas of traditional local jurisdiction, but the FCC\'s jurisdiction to
interpret and enforce Section 253 is no different from the FCC\'s
dictating the pricing methodology that guides local wireline competition
or various other similar issues.

In both cases, Congress indicated that the FCC was to be the ultimate
arbiter of what was necessary to remove barriers and ease the way to
competition. In neither case did Congress suggest that all local
authority be entirely usurped, and I think enough time has passed that
the FCC, the industry, the localities have had a chance to see how the
1996 Act was intended to be implemented, how Section 253 was intended to
be implemented, and what are the issues that really need further
leadership and guidance under Section 253.

Now, some of the debate has also focused on the jurisdiction of the FCC.
I would, without going into too much detail, refer everyone to the
Second Circuit\'s opinion in White Plains. I think, and I think a lot of
folks agree, that that was a very reasoned review of the interplay
between Section 253(c) and A and also D, and I gave quite, I thought, a
very informative analysis of the FCC\'s role.

The real key point was it would really be something of an oddity in
quite awkward if the FCC were allowed to make determinations that there
was a 253(a) violation but, yet, not be able to make a determination
whether or not 253(c) safe harbor applied, and so we think that,
clearly, the FCC does have jurisdiction under 253(c), as well as A, and
should exercise that jurisdiction where appropriate.

I\'ll close by simply saying that another key question is how should the
FCC meaningfully exercise its jurisdiction under Section 253? As have
been recognized by Commissioner Copps and others, there clearly are some
abuses. There had been some problems with deployment of facilities
around the country. The majority of cities, I think, have worked with
the industry quite well, but there are problems, and how do those get
handled? The question is when, and we believe the answer is now. The
time has gone by, and the economy and the telecommunications industry
are very much in need of guidance and need to deploy the broadband
facilities necessary for our recovery, and we think the FCC needs to act
now on that.

How should the FCC act? There are several avenues. The most definitive
would be a formal rulemaking. I understand, as the FCC referred to in
their brief to the Second Circuit, that there are also certain
proceedings going on right now, but we think that the FCC could provide
guidance through a policy statement, and that would be extremely useful.
The FCC has jurisdiction to do so, and I believe the industry and the
localities would benefit if the FCC were to take that opportunity to do
so. Thank you very much.

MS. MAGO: Thank you, Chris. Our next panelist is Pam Beery. Pam is a
partner in the law firm of Beery & Elsner. Ms. Beery represents the
Metropolitan Area Communications Commission, which is a coalition of 14
local governments in Washington County and a number of cities in
franchise administration. Cellular facility siting, and renewal
negotiations with cable providers are some of the topics that she
covers. She was appointed by Chairman Powell to the FCC\'s local and
state advisory committee in January of 2002. Thank you for joining us.

MS. BEERY: Thank you. I\'d like to begin, as everyone else had, by
thanking the Chairman the commissioners for this important opportunity
to present local government views on this topic. I especially want to
add thanks to Jane Mago for her clear and consistent vision and her
careful legal work in this area. I think it\'s been a real benefit to
the dialogue.

According to this panel\'s description, it is our responsibility to
provide insights into just what authority the FCC has to regulate the
areas of state and local government right-of-way management practices. I
will look forward, during the question and answer period, to responding
to some of Mr. Melcher\'s comments. I\'ve had the benefit of sharing the
podium with him many times. I will look forward to that.

What I want to do is present another view of Section 253. I want to add
Section 601 to that dialogue. As Ms. Mago described, part of our job
this morning is to educate, and so I\'m going to start with that
foundation. I\'m going to quickly cover some FCC and court decisions and
then cover my basic theme, which is this: the FCC and the courts are
operating effectively, currently, based on a well-reasoned view of the
sphere of authority that each occupies. Given the vast changes
engendered by the Telecommunications Act, it\'s not really surprising
that it would have taken some time for this clear pattern to emerge, but
it has emerged. It may not be fully to the liking of all interests, but
I believe a full course, a prudent course has been set, and that we need
to stay that course.

Other speakers have given a good overview of Section 253. What I would
like to call folks\' attention to is a recent decision out of New
Mexico, where the court, I think, very succinctly and accurately
described what 253 is all about. The court said that it represents a
carefully-crafted balance between deregulating the telecommunications
market at the federal level and preserving state and local authority to
regulate in certain prescribed areas.

As the other speakers have pointed out, when courts interpret a statute,
they first look to its text, and, as Jane has already mentioned, the
text leaves some unanswered questions. So, as lawyers, once we get the
text in mind, we turn to the legislative history. I have appended to my
testimony, which, thanks to NATOA, is available on the public comment
table, an exhaustive description of the legislative history. Others have
referred to it generally, but I want to make a couple of points about
that legislative history.

First, it\'s clear that Congress specifically rejected the notion that
local governments needed to travel to Washington, D.C. every time one of
their regulations was being disputed, and that\'s clear in the documents
that I\'ve appended to my talk.

Second, as Lisa said, it was also clear that Congress intended to leave
undisturbed the traditional local authority to manage the rights-of-way.
On that topic, we are fortunate, indeed, to have, for the record today,
a letter to Chairman Michael Powell dated October 8 from Congressman
Bart Stupak, who, as many of you know, is the author of subsection C,
the safe harbor.

I just want to read a couple of sentences from Congressman Stupak\'s
letter. Of course, he was the author of subsection C. His statement is,
Without the amendment, the bill would have raised serious concerns
regarding unfounded mandates, federal intrusion into local authority,
and unfair taxpayer burden. My amendment passed the house, and
provisions on this issue were ultimately included in the Act.

Congress has definitively stated its intent that states and
municipalities should have authority over these issues, and I do not
believe future additional federal regulation is warranted. I don\'t know
how much clearer you could get than from the author of the Section than
that. You might wonder why Congressman Stupak is still interested in
this issue so many years later. His wife is the mayor of Menominee,
Michigan, and so I\'m sure he hears about these issues on a regular
basis.

One thing I want to add to what Chris said about the FCC. He\'s
suggesting that the FCC, in fact, issue something. Well, the FCC did
that. Another issue that is often overlooked is that the FCC did issue a
guideline in 1998. It\'s widely available. It\'s called \"Suggested
Guidelines for Petitions for Ruling Under Section 253.\" It\'s starting
to be cited to the courts. In the Qwest v. Portland case that I\'m
currently litigating at the Ninth Circuit, the court was impressed by
that document. The court cited to it and relied upon it, and I think we
don\'t need any further guideline. The FCC took that leadership four
years ago. So the point that I want to make clearly is - actually, I
want to back up for a second.

I forgot to mention Section 601. 601 is another Section of the Act that
I\'m kind of surprised doesn\'t get cited more often. It\'s starting to
appear in some of the decisions. It was enacted at the same time as 253.
It provides specifically that the Act will not be construed to modify,
impair, or supercede federal, state, or local law, unless expressly so
provided; again, a very clear Congressional statement.

I would close by saying that I, surprisingly, to some extent, agree with
Mr. Melcher on the White Plains decision. I had a little different spin
on what I think the court held there that I\'ll be happy to share, if we
get a chance, in questions. And thank you.

MS. MAGO: Our final panelist today is Teresa Marrero. Teresa is a Senior
Attorney with AT&T. She\'s been practicing in the field of
telecommunications law for over 11 years, and she is responsible for
AT&T\'s work on managing federal rights-of-way issues, as well as
certain other local competition issues before the FCC. Thank you very
much.

MS. MARRERO: AT&T\'s view that the Commission\'s authority to issue
orders preempting state and federal local laws regarding public
rights-of-way is broader than the cities assert, and the Commission\'s
preemption jurisdiction is largely concurrent with the federal courts.
More importantly, our focus cannot be narrowly limited, however, to the
various provisions of Section 253 of the Act because the Commission has
broad rulemaking authority under Section 201(b) that can be evoked to
create efficient and uniform national solutions to many of the problems
that have arisen over rights-of-way access.

The cities, generally, take the position that, to the extent barriers to
entry, through a barrier to entry claim brought under Section 253 of the
Act raises any right-of-way issue the Commission is precluded from
deciding the issue. The basic premise that has been laid out by some of
the earlier speakers is that 253 does not expressly address right-of-way
management compensation, and 253 reserves certain state and local
authority, regardless of 253(a). Second, they assert that 253(d) only
permits the Commission to preempt state or local requirements that
violate 253 A or B but not C. The Commission appears to take a slightly
less restrictive position concerning its jurisdictional authority over
253(c).

In a supplemental brief filed with the Second Circuit in the White
Plains case, the Commission implied that it had concurrent jurisdiction
with the courts but only if a 253(c) defense to a claim brought under A
does not rise to the level of a bona fide claim to defense. The
Commission noted that it had not yet had the occasion to address a bona
fide 253 defense and, in those instances, believes that it has the
discretion to decide not to preempt, even if the action violates Section
253(a).

However, the Commission\'s authority to assert jurisdiction over
rights-of-way matters is broader than merely issue a declaratory ruling
when C is raised as a defense to A.

First, to the extent that rights-of-way issues under 253(c) are
presented as defenses to barrier to entry claims under A, the
Commission, under D, has express authority to preempt such violations.
This is expressly stated in the Prince George County decision. The Ninth
Circuit has also opined on this issue.

Second, regardless of the scope of the Commission\'s adjudicatory
authority to preempt specific state and local laws under 253(d), the
Commission has broad authority over 201(b) to adopt rules carrying out
any provision of the Communications Act, as the Supreme Court found in
the Iowa Utilities Board case. This necessarily includes 253(c).

In the Iowa case, the state\'s arguments closely paralleled the city\'s
positions concerning rights-of-way. In the Iowa case, the states argued
that, because the Act expressly provides that state commissions shall
establish the interconnection and network element rates, that the FCC
lacked the jurisdiction to issue rules construing the rate-making
requirements of the Act. The Supreme Court rejected the state\'s
argument and held that the FCC, indeed, had authority to issue pricing
rules that would be binding upon the states and upon federal courts and
appeals cases concerning wholesale pricing issues.

Specifically, the Supreme Court held that 201(b), which broadly provides
that, quote, \"The Commission may prescribe such rules and regulations
as may be necessary in the public interest to carry out the provisions
of this Act gives the Commission authority to adopt rules implementing
all of the provisions of the \'96 Act,\" which, of course, would include
Section 253.

The Supreme Court, in the Iowa case, rejected the lower court\'s holding
that the Commission\'s rulemaking authority applies only to statutory
provisions that the Commission directly administers. Under this
analysis, the city\'s position that the Commission has no jurisdiction
over rights-of-way issues because 253(a) does not expressly mention
rights-of-way would be rejected. The Iowa court further held that, even
though the states have the express authority under the Act to set the
rates for interconnection on network elements, the Commission still has
the authority to adopt the binding interconnection and network element
pricing rules.

Section 201(b) means what it says and explicitly gives the FCC
jurisdiction to make rules governing matters over which the 1986 Act
applies. Thus, under Iowa, the Commission has jurisdiction to set rules
concerning municipalities\' rights-of-way management, regardless of the
scope of the Commission\'s authority under 253(d). The FCC has yet to
address the use of Section 201(b) powers in this context, but it should
use its authority over rights-of-way issues to set rules that would
provide uniform standards by which public rights-of-way may be managed
in a competitively neutral and nondiscriminatory manner. These uniform
standards should address issues such as what constitutes fair and
reasonable fees charged for public rights-of-way, a topic covered by our
next panel; the right to gain access to public rights-of-way within a
reasonable timeframe; and what constitutes actual use of the
rights-of-way.

Thank you very much. Thank you for this opportunity, Jane.

MS. MAGO: Thank you, Teresa. Well, it sounds like we have some divergent
views on the panel, and maybe I should start by taking the lazy
moderator approach in saying to the panel does anyone have a specific
comment they want to make in response to some of the other comments from
the panelists? Lisa, I suspect you have something to say to Teresa about
that last point.

MS. GELB: Well, actually, I have to confess that there\'s a certain
irony in the Supreme Court decision jurisdiction ruling now being
somehow used against me, since I very much supported the Supreme Court
decision when it came out when I was working here. You know, I think
it\'s a nice argument; I don\'t think it works for a couple of quick
reasons.

First is, I think, what Pam was saying, which is there\'s 601. I mean,
there\'s a general presumption, a very, very strong presumption, against
preemption, and then there\'s an explicit declaration that nothing shall
be deemed to preempt local, state, or federal jurisdiction or law,
except to the extent expressly provided. Clearly, subsection C, I mean,
there\'s a big distinction between A and B and then C in Section 253, so
the presumption is it\'s not simply silent. There\'s a clear statement
that 253 is not to be preempted, at least by the FCC.

And I think the other problem is you\'re really mixing two provisions.
251 is a provision that was designed - you know, I went back to look at
it as she was speaking. One thing is it\'s an affirmative obligation to
set up rules of the road that have never been established. Section 253
is a negative. It says there can\'t be prohibitions or effective
prohibitions. There\'s no directive to the FCC to set up rules here, and
that is a distinction.

Also, obviously, 251(d) expressly requires the FCC to do a rulemaking
proceeding, and, clearly, there\'s nothing like that in 253. So, you
know, I think it\'s clever, but it doesn\'t actually hold water.

MS. MAGO: Do we have a direct response to that?

MS. MARRERO: Yes. I would like to say that the interpretation you\'re
making is if C is brought as a separate violation, then I think your
points are well taken. But if C is viewed as a safe harbor, as many of
the courts have seen, then it relates back to A, and there is express
authority, indeed, for the Commission to preempt A. And I think if you
don\'t take that into account, I think the Second Circuit in the White
Plains case saw this very well, that you create a procedural oddity
whereby the defense to the claim determines the jurisdiction where the
claim will be held. So I think that the difference is whether or not C
is brought as an independent claim, where your points would hold up, or
whether it\'s brought as a safe harbor defense to A.

MS. MAGO: I think that puts directly into focus the tension of just
exactly what is the status of the B and C exemptions. Are they safe
harbors? And Pam, I think you had a view on that. Do you want to comment
here?

MS. BEERY: I do. You know, this forum, I have to preface my comments by
saying, is an opportunity, a soapbox if you will, and so you\'re getting
the expected, usual commentary, and I hope that in future opportunities,
perhaps hosted by this organization, we\'ll have an opportunity for more
constructive dialogue.

But that said, I think one thing that hasn\'t been talked about, and
folks\' eyes are glazing over hearing the lawyers quote statutes and so
forth, is the policy that we ought to be thinking about, and the last
panel today is going to talk about a going forward approach. But I think
there are three things that are going on already that dictate against
the FCC taking jurisdiction.

First is the LSGAC is meeting currently with the Industry Rights-of-Way
Working Group, and we are hashing out line-by-line, issue-by-issue
right-of-way management issues in great detail. A lot of folks are
putting a lot of energy into that. I think that effort should not be
overlooked or ignored. Secondly, this forum is a good start and your 706
proceeding. Certainly, it\'s an opportunity that you have and a legally
sufficient one, I think, rather than a formal rulemaking. And finally, I
think we need to focus back on what Lisa said, and that is that 253(a)
uses the word \"prohibit\" or had the effect of prohibiting a service
and, at least in the district court in Oregon, the case I\'m litigating,
the court found that that word meant something. It\'s a high burden.
253(a) is the first step in the analysis, and I think we ought to be
mindful of that.

MS. MAGO: Chris, do you want to respond to that? I think that that was
one of your points, too.

MR. MELCHER: Yes. I think there\'s a couple of points. One is that I
think the FCC got it right in their amicus brief to the Second Circuit
that, obviously, if C is raised as a defense, it would make no sense
whatsoever to first make a declaration that there\'s a violation of A
and then refer C back somewhere else. If the FCC has a claim or a
petition making an argument that there\'s a violation of A, then I think
the better view, of course, is that the FCC also has the jurisdiction to
determine whether or not there\'s a safe harbor under C. I just want to
throw that out there.

As to Pam\'s point about other forums or addressing this, I have to
respectfully disagree. I think there\'s been, certainly, some dialogue
with the LSGAC, but, unfortunately, I don\'t think that\'s really going
anywhere. We\'ve kind of been bogged down with any agreement on whether
or not there\'s even problems with right-of-way, and I think the
Chairman and the commissioners have recognized of course there\'s been
problems. It\'s not a majority of the cities, it\'s a minority, but
there have been problems. And so everyone has recognized that. NARUC\'s
recognized that, the courts have recognized that. What do we do about
those problems? And that\'s really where this jurisdiction is so
important. What do we do about the problems, and where do we go to try
to find solution for the problems?

I think it\'s clear that federal courts have jurisdiction, obviously,
and that they have been resolving some of these disputes, but there, as
well all know, something of an imperfect forum because it takes so long.
Litigation is a very drawn out process. It\'s time-consuming, it drains
money, it really is not the best way to resolve this for an industry or
for municipalities.

We have litigated, and Pam mentioned the magistrate\'s decision in
Portland, which really is quite remarkable, I won\'t digress, but
clearly will be reversed. The magistrate tells the Ninth Circuit that
they\'re wrong, which I haven\'t quite seen before. It makes an easy
appeal brief. But the Second Circuit approvingly cited the Ninth Circuit
in Auburn. I think Auburn and White Plains will become the standards on
those issues. But we\'ve been in Portland for I don\'t know how long now
in court, and we\'ll be going to the court of appeals and then we\'ll go
back down. Look at White Plains. AT&T or TCG started in \'92, and the
court recognized in \'97, you know, the ball really got rolling, and
here we are five years later with no resolution.

So yes, the courts have jurisdiction, but the FCC has concurrent
jurisdiction, and it\'s vital for the FCC to step in, use that
concurrent jurisdiction, and try to lead on this issue. And I would
suggest that the ways to lead would be through a policy statement or
through some of the ongoing proceedings, but Chairman Powell\'s
comments, some of the commissioner comments in different forums around
the country have been extremely helpful. The court has noted that.

I think there is a national consensus that right-of-way disputes have to
be resolved. We have to move on. We can\'t let folks go out of business,
like Velocita and others, go bankrupt due to right-of-way disputes, and
we can\'t see the broadband deployment slow down because, obviously, the
industry and the economy are desperate to see it advance.

So, jurisdictionally, where does that leave us? It leaves us with the
FCC with a leadership opportunity, and I think, with a policy statement,
that would be extremely useful. I have comments, obviously, on what that
policy statement should say: eliminate third-tier regulation, set up a
fair standard on compensation, and a few other issues; but that\'s for
other panels.

MS. MAGO: Teresa?

MS. MARRERO: I think the courts would welcome the Commission\'s views on
some of the issues that have not been addressed. They have consistently
given deference to the Commission\'s free works set up in the Troy
decision and in classic, and the Second Circuit specifically requested a
supplemental brief. So I think that, you know, the courts are looking to
you to, you know, give them some guidance on some of the issues that
Chris has mentioned.

MS. BEERY: I\'d just like to follow-up, if I could, Jane, on the White
Plains issue. I think that the Second Circuit decision, I would agree
with Chris, represents a very thoughtful analysis and was informed, as
you point out, Teresa, by the supplemental briefing from the FCC. But I
think it\'s important to note that the court drew together the competing
interests in its opinion and determined that the FCC should be granted
deference in its interpretations. There\'s no question there. The court
did not conclude that the FCC\'s decisions are controlling, and the
court did not seek further FCC formal proceedings. I think the court
understood clearly what your position was. And certainly, the other
important thing about White Plains, which I know will be talked about in
the next sessions, is what it did or didn\'t do on compensation, which I
think will be a very interesting discussion.

MS. GELB: One thing I wanted to say about the 253(a)(c) issue is White
Plains was right. There\'s something weird about the statute. I mean, it
doesn\'t make sense. I don\'t think that they necessarily got the
correct decision, you know, once they went through the analysis, but
there\'s no good answer.

I mean, one answer is what Chris is saying, which is, if it\'s before
the FCC, if somebody brings a 253(a) action to the FCC, the FCC has
jurisdiction. It doesn\'t then have to throw it away or give it up as
soon as somebody raises a 253(c) counterclaim. But if you take that
approach, then you\'re really not giving any deference or meaning to the
fact that Congress did eliminate subsection 253(c) in any references in
Section 253(d), and what the FCC and the courts and everybody involved
is being asked to do is which is the less of two strange results. One is
it\'s a strange jurisdictional thing to say FCC, you get part of this,
but if anybody raises the most obvious defense, you no longer have
jurisdiction. But that\'s probably a better and less offensive answer
than saying we\'re just going to read out the fact that Congress has A
and B written in D and specifically took out any reference to C with FCC
preemption. So there\'s no good solution; it\'s a question of which is
the best solution.

MS. MAGO: Let me respond and ask you a question on that, Lisa, because I
think what you\'re saying is that if the Commission has a case brought
to it under the 253(a) saying that there can be no local statutes or no
ordinances that create barriers to entry and a defense is raised that
this is a right-of-way issue, that raises the issue that, I think, came
up here a little bit about do we have to simply say, okay, that\'s it,
that\'s the end, don\'t think about this anymore, or does the Commission
have a basis for trying to determine whether this is, in fact, a bona
fide issue, as we were looking at in the classic case, for example,
where the Commission contended that there was merely a general assertion
of the right-of-way issue and how do we go about determining that? Can
you address that for a moment?

MS. GELB: I think then the FCC does lose jurisdiction at that point, and
I recognize that\'s an extremely strange position to be in. I mean,
Chris is laughing, but I don\'t think it\'s any less strange to say,
well, we have extremely strong legislative history from Congress saying
whether or not something is a legitimate right-of-way management tool is
not for the FCC to review and to read that out of the statute, as well.
So yes, I think it goes away from the FCC and it goes to a court.

MS. MAGO: Chris?

MR. MELCHER: Well, I have to laugh, I think we all have to laugh because
Lisa\'s right. It\'s a conundrum, it\'s a dilemma, but I think this
happens, I wouldn\'t say routinely, but it certainly happens in our
legal system, and it happens more often than we\'d like to admit that
the statute is drawn inartfully. So it is left to us, the courts, and to
folks affected by the statutes to try to figure out what was the intent
of Congress, whatever that means, because Congress, obviously, is a
large body and changes year to year or every two years. But what was
intended and what makes sense and what is consistent with our legal
precedent. I think the Second Circuit got it right, and this applies for
the FCC, as well. If you have a violation stated of Section 253(a),
logically, you must go to any safe harbor to determine whether or not
the harbor invalidates the preemption or invalidates the violation, so
it\'s logically, I guess, incomprehensible to me that you could have one
body determine that there\'s a violation of A and, yet, not let that
same body determine that a defense to the violation applies or does not
apply.

I think the second reason why it just doesn\'t make sense to have one
form for A and one form for C is that of course, you raise the
well-pleaded defense rule, where a defendant gets to determine the forum
through their pleadings, and that\'s what the Second Circuit recognized.
If the defendant pleads a safe harbor under C, then the defendant gets
to yank the dispute out of one forum and bring it to another. I don\'t
think anyone wants to see that, and the Second Circuit recognized
that\'s not appropriate.

I think the FCC got it right in the amicus brief. The courts have seen
that. Whatever form it\'s in, when an A violation is brought, that form
needs to determine both A and C, and I think that just makes sense, that
judicial economy, FCC economy, for all those reasons.

MS. GELB: I just wanted to say something quickly, which is it\'s weird
but it\'s not unprecedented, which is if somebody brought a state and
federal claim to a federal court, and the federal claims got dismissed
or, in some way, removed, the federal court would not retain
jurisdiction. I mean, this isn\'t an unprecedented event, it\'s just a
different form.

MR. MELCHER: They actually might retain jurisdiction if they determine
the judicial economy and fairness to the parties mandated that they keep
it. There is a doctrine that a federal court can, after dismissing the
federal claims that form the basis for federal jurisdiction, retain the
action and determine the outcome.

MS. MAGO: Pam?

MS. BEERY: I would just like to add that, you know, as I mention in my
opening remarks, and I\'d like to emphasize again that the system is not
broken. The matters are being litigated, the courts are being informed
by the FCC\'s guidelines and by your prior interpretations, and in the
case of White Plains, they asked additional information from you. To
create this bifurcated approach is, I think, dangerous and is going to
lead only to more cost and more delay. Again, I have to hearken back to
the legislative history and say that these arguments that the industry
is making now were made on the hill during the adoption of the act, and
they were not successful.

The way 253 is written is, you know, they often quoted provision or the
statement that I got yesterday from Mr. Orton, Justice Scalia\'s comment
it\'s not a model of clarity. That\'s because it\'s a compromise and
subsection D was inserted; everybody recognizes that, and, you know, as
lawyers, we like to tie things up in neat bundles and have nice clear
jurisdictional flow charts that we can follow. Well, you know, this is
an act of Congress, and I just think we have to recognize that, and we
have to move on. I think the FCC has provided clear guidance.

And I really have to take issue with Mr. Melcher\'s statement. I am on
the LSGAC. Mr. Melcher was not at our last meeting. We are making
progress. I know that Mr. Fellman will address that at the end of the
day, but I just could not let that remark go by. Sorry.

MS. MAGO: Chris, do you want to say anything about this issue before I
open the questions up to the floor?

MS. MARRERO: Just one more point. If you take the position that Lisa
contends and Pam, if you\'re just looking at the legislative history
without looking at the overall intent of the act and the language in A,
I think that that interpretation really cuts against the broad
prohibition set in A. The Commission is cut out from looking at any safe
harbor under C, and I don\'t think that was the intent of A.

MS. MAGO: Thank you. Can I open the questions up to the floor? It looks
like maybe there might be a couple here. Why don\'t we start there?
Please take the microphone and speak into that, so that we can have the
questions available to everybody.

MR. BRILL: My name is Robert Brill. I\'m an attorney from New York City.
I have two general questions or topics for you to expand on. One is that
the Second Circuit\'s opinion, in part, goes off on the issue of the
fact that they found that there was disparity in treatment in the
marketplace, that you had the incumbent, in effect, being treated more
favorably in their view under the statute than the other competitive
providers. So it seems to me, as a bright-line matter for the FCC,
shouldn\'t one of their focuses be look at municipal statutes that do
that and say, as a guideline matter, if you\'re going to treat one party
grossly disparate from others, creating competitive imbalances in the
marketplace, that regulation, as far as we\'re concerned, runs afoul of
the statute and is a preemptable, and that would send a bright-line test
that for every city in the municipality that they better get their acts
together. By the way, they get more revenue, probably, that way.

The second question has to do with delay to the market. You had two
commissioners today, directly, Commissioner Abernathy; and then,
indirectly, Commissioner Copps, saying delay to the marketplace, in
effect, impinges on competition. I think all providers know that. I\'m
sure Qwest appreciates that. And it seems to me that if the goal of the
FCC is to aid competition, bright-line guidelines saying to
municipalities you may not erect barriers in the processing of
applications to get to the marketplace in whatever fashion, whether
it\'s in the statute, the rules, the RFP, the way you get a DOT permit,
a Department of Transportation permit, they have to go by the board, if
you are, in effect, creating an imbalance in the marketplace. The
incumbent is there already; what about the competitors? So could you
comment on that?

MS. MAGO: Does somebody want to take that one on?

MS. BEERY: Thank you, Mr. Brill. Those are good questions. On the White
Plains discrimination case, you\'re absolutely right. It\'s one of the
classic bad-facts cases for local government. It took seven years in
that case, and TCG was still not in the streets. It\'s not a good
situation.

Also, it\'s true in that case that the incumbent was paying zero in
terms of compensation for the right-of-way, while the entrant, the new
market entrant, was going to be asked to pay a five-percent based on
gross revenue fee. That is probably one of the farthest end of the
spectrum situations that you will find, and really, in reality, my
contention in having represented local governments for 22 years now and
dealt with a lot of these issues for a long time, the bright line isn\'t
there. As Commissioner Copps mentioned this morning, the devil is in the
details. There are all kinds of shades of gray, and so for the FCC to,
in a vacuum of facts, try to pronounce what that line is, I think, would
be impossible.

As far as delay to the market goes, I would agree with you. None of us
in the government sector want to see delay to the market. It\'s in our
interest, as policymakers and representing our constituents to get
broadband deployment, no question about it. I do think that the bad
stories are the few. Certainly, we welcome more dialogue on that. Every
time we\'ve asked for details, we get a few stories, and I don\'t know
of much more than that.

I will say that in industry\'s comments to the FCC recently, they have
acknowledged that delay to the market is only one factor in their
problems with deployment in their own testimony to the Chairman, and
recent articles from the industry reflect that, in fact, 85 million
miles of fiber have been installed since 1980, two-thirds of those since
the \'96 Act was passed, so I don\'t think we\'re having a delay getting
into the streets is our main problem in deployment.

MS. MAGO: Chris?

MR. MELCHER: Well, I would agree that the TCG case did present as bad a
set of facts as you could possibly get if you were a city. I would say
that bright line and delay really are two good subjects to raise
together in this because delay is a significant problem, and, with all
due respect to Pam, the industry feels that it\'s one of the most
serious problems we\'ve had.

Velocita, which is now no longer in existence, directly attributed delay
in deployment of its facilities as a primary cause for its bankruptcy
and its demise and did so with NTI, and Nancy Victory, a month or so
ago, has done so in other filings with the FCC, and every industry play,
whether it\'s a CLEC, an ILEC, or whoever, has stories about tremendous
delay, and those are lessening, I think, now because the cities realize,
first of all, that the delay was deadly to a lot of the efforts.

Some cities, frankly, just didn\'t get facilities due to the delay
because the time was lost, the window closed, the provider voluntarily
or involuntarily went away. But delay is still a major problem, and I
think the bright line aspect of that, it could be solved fairly quickly.
I think the industry has suggested, and the FCC could act on this to
state as a policy or in some other way, that every city should deal with
franchise applications or deal with permits within a set period of time,
say 60 days, if the application is complete, and the industry certainly
understands if you submit an incomplete application, the clock doesn\'t
run, similar to other proceedings, but if the LSGAC wants to take that
up and agree that delay is something that we need to solve and work with
us on that I\'d love to see that; I\'d love to see the FCC act on that.

MS. MAGO: I think that we\'re all trying to get to some solutions and
maybe we can get there from here. The one other thing is I\'ll take a
little bit of moderator\'s privilege and point out that the Commission
in the White Plains case that we\'ve been talking about did submit a
brief to the court, where we pointed out that it was the agency\'s
position that it\'s required to treat all of the entrants on the same
playing field, that you have to have neutral regulations; you can\'t
treat the incumbent differently than the new entrants, and that\'s been
the Commission\'s position on this.

MS. GELB: Even in that decision, the court recognized that there is
different types of compensation, and so the question really was why
doesn\'t the FCC come out and set rules saying here\'s how to do it or
here\'s what you can\'t do, and I think, actually, if you read that
decision, it\'s not clear, I mean, it\'s pretty clear from the decision
that\'s not an easy or necessarily appropriate thing for the FCC to do
because the court did recognize, look, there are different ways of
getting compensation, and it doesn\'t mean that everybody has to pay
dollar-for dollar. You can factor the compensation in different ways
without it being discriminatory or unfair, and that\'s a difficult thing
to set a bright-line rule for.

Ms. MAGO: And I think we\'re going to be talking about the compensation
issues on the panel later today. Can I get another question from the
audience?

MR. CHERNOW: Thank you. Bob Chernow from the RTC in Wisconsin. Maybe
this is very obvious, but really what you\'re talking about is
regulations on telecommunication companies, not on cable companies.
Cable companies don\'t have problems with right-of-ways. They go through
a different system, and as unethical as many of them are, this is not
one of the problems that they have. This is not one of the difficulties
that they have. They go through cleanly, they cooperate with us, they
put their stuff in, and I\'m saying this as a financial advisor, someone
who controls about \$300 million, they probably have won the broadband
battle. So what we\'re doing is talking here about, from our point of
view as municipalities, bringing competition. The telecommunication
companies are talking about rights-of-way instead of sitting down and
cooperating with local communities to get the job done. Why does one
system work, and the other one doesn\'t? Perhaps, you can address that?
Thank you.

MR. MELCHER: Actually, I\'d love to address that. I\'m glad you raised
that because that has been a common assertion or question, really, why
one works and why one doesn\'t. It\'s actually pretty simple; one\'s
cable and one\'s telecom. And what I mean by that is cable made a deal,
cable made a bargain back in \'92 or the various time periods when the
act was amended, and the bargain was we\'ll pay five-percent of gross
receipts, and in exchange for five-percent of gross receipts we\'ll get
a local monopoly with, you know, the ability for entrants to come in.
But, in effect, there really is no competition in the cable industry; we
can see that. So really, you have a local monopoly that agrees to pay
five-percent, has sort of unfettered ability to pass that five-percent
on to its customers, so it\'s a pure pass-through, and, in exchange,
gets the permits. I think it\'s actually interesting to see how easily
permits can be issued and how quickly they can be issued when the
five-percent is paid, and a lot of the delay has been over negotiations
on, unfortunately, dollars. It\'s really come down to telecom companies
are being asked to pay five-percent of gross receipts. They\'re being
asked to pay linear foot charges. They\'re being asked to pay for this
access to the right-of-way, and that\'s really been the focus of the
delay, unfortunately. Cable companies don\'t have to negotiate. It\'s
already been said, it\'s already been bargained, they pass it through.
They don\'t have the competitive pressures that telecom companies do of
those kind of charges, so that really is the root of it. We\'d love to
see this move more quickly.

MS. MAGO: I don\'t think Pam\'s going to let us get away with that.

MS. BEERY: No, I won\'t. Chris, you probably haven\'t negotiated a cable
franchise lately. It takes a long time; it\'s very difficult, and the
cable industry probably would beg to differ with you on many of the
assertions you made. The one couple that I can\'t let go by are that, in
fact, we are prohibited from granting exclusive franchise by law, and so
they don\'t exist. Every franchise granted is non-exclusive. And
certainly, the cable industry has had to litigate a lot of issues
related to what is a pass-through and what isn\'t. We all do function in
that highly-regulated environment, but I would question highly, I\'ll
just leave it at that, your assertion that cable made a deal for
five-percent because it is highly regulated, and I\'ll just leave it at
that.

MR. MELCHER: Actually, I do represent Qwest on our cable business, so
I\'m a competitive cable provider, that I know exactly how much
competition there is or isn\'t, unfortunately, from firsthand
experience.

MS. MAGO: Okay. We\'ll take another question from over there.

MR. SILVERMAN: Rick Silverman from the National Cable and
Telecommunications Association. Well, first, I wanted to respond to,
well, take umbrage at the comment that cable companies are somehow
unethical and, yet, you yourself admitted that, in dealing with
rights-of-way issues, everything works very smoothly, so I\'m not sure
why the cheap shot here today. But I\'ve worked with Qwest quite a bit
and agree with him on many things. I do disagree on the competition side
because we face lots of competition from the DBS providers, and it\'s an
analogous situation where we are paying, typically five-percent, and
don\'t have any problems with that on the cable side, although, as Pam
mentioned, there are some cases about either pass-through or, you know,
what\'s in the gross revenue. But the DBS guys, generally, do not pay a
similar fee, so there is a competitive disparity, just as you\'re
raising. And as the most recent video competition report found, DBS is
now almost 25% of the multi-channeled video markets. So we do have
competition, there is a disparity in terms of the fees paid, and so
it\'s sort of an analogous situation, but I hope we can refrain from the
cheap shots at cable for the rest of the day.

MS. MAGO: On that, let me, let\'s see, Ken, did you want to ask one more
question and then we\'ll have to wrap up because we\'re running out of
time here.

MR. FELLMAN: Thank you, Jane. Ken Fellman, I\'m the mayor of Arvada,
Colorado and the chair of the Local and State Government Advisory
Committee. This isn\'t a question. I just wanted to set the record
straight on an issue. The entire panel spoke, and I was only shocked at
one comment.

MS. MAGO: Was it mine?

MR. FELLMAN: No, it wasn\'t yours. Chris knows. Chris made a comment
that the discussions between the Local and State Government Advisory
Committee and the Industry Rights-of-Way Working Group are not going
anywhere. I just want to point out for those who are interested in this
process while his company is represented in the working group, he has
not been present at the meetings. There are people here today who have
been present at the meetings. I hope that off-line, if they really think
that the process isn\'t going anywhere, they will tell me so we can stop
wasting their time and our time and the Commission\'s staff time for
coming to those meetings.

And the one other thing he said about that process that was inaccurate
is that the local government position is that there is no problem.
That\'s not true. The local government\'s position has been before we
talk about a broad national preemptive solution, we need to define the
problem, and what we see as a process problem is that the industry, at
times, comes to this agency and says we need a federal rule of
preemption before we take the necessary time to define the problem.
That\'s really the issue that we\'ve been discussing. These are not easy
issues, and I think the discussions have been productive, and I do think
they\'re going somewhere positive. We\'ll talk about that in a later
panel, but I wanted to set the record straight on what those discussions
have been.

MS. MAGO: Thank you. I want to take the opportunity to thank all of the
panelists for coming today and for addressing this important topic with
us. I think one of the things that we have tried to bring out of all of
this is to get an airing of the different views and, hopefully,
facilitate some opportunity for some dialogue off-line, which I think is
precisely what we should be having in talking with each other, which is
the purpose of the forum that we have today. It\'s not just to hear the
views of the panelists and get the chance for formal interchange but
also to have a little bit of informal interchange, so that we can all be
working towards what are the best possible solutions for dealing with
what we call recognize is something of a bit of a thorny issue that we
have to try to address.

So with that, I will say does anybody want to make a final comment on
the panel today? Hearing none. Oops, Chris?

MR. MELCHER: I just want to say thank you again for all your work and
your effort and thank the FCC and the commissioners for allowing us to
be here.

MS. MAGO: Thank you very much. And thank you to all of you.

MR. SNOWDEN: We\'re going to take a 15-minute break. We\'ll resume back
at 11:15.

(Whereupon, the foregoing matter went off the record at 10:56 a.m. and
went back on the record at 11:15 a.m.)

MR. SNOWDEN: I think we\'re going to go ahead and get started. The joke
earlier was that the lawyers were going to start everything off, and I
think they set a good tone for keeping us on schedule, so as we go
through the next set of panels, that will be our goal moving forward.

It is my pleasure to bring to the podium Mr. Bill Maher, who\'s new to
the Commission but not new to this industry or new to these issues. Bill
is the Chief of the Wireline Competition Bureau and, on this particular
panel, will be talking about compensation in the area of rights-of-ways.
Please welcome Mr. Bill Maher.

MR. MAHER: Thanks very much, Dane. I\'m happy to welcome all of you to
this morning\'s second panel. Our panel will discuss fair and reasonable
compensation for the use of the public right-of-ways and, of course,
that\'s key language in Section 253(c). In particular, I think this
panel will cover a broad ray of topics having to do with compensation,
including, for example, the relationship between compensation issues and
competition in local telecommunications markets.

We\'ll also discuss whether it\'s appropriate for governments and
parties to consider the history of services that have been provided to a
locality by incumbents when they\'re considering compensation issues.
And the panel will also look at under what circumstances, if any, fair
and reasonable compensation may include such types of fees as
revenue-based fees and, in kind, compensation. We\'ll discuss how
compensation should be related or could be related to actual costs and
how do you define those costs? And I also will be seeking input from the
panel, we heard it earlier this morning, on best practices that parties
and governments can use in discussing and agreeing upon compensation for
use of the public rights-of-way.

And with that, I think we\'ll star the presentations. Our first speaker
is Sandy Sakamoto, who is a general attorney and an assistant general
counsel who manages the Los Angeles Legal Department for SBC. Her
practice focuses on litigation, general business matters, network
operations, and issues dealing with rights-of-way. She began her career
with Pacific Telephone in 1976 working in network administration and
worked onto the legal field. She has been a presenter on right-of-way
case law updates at Law Seminars International presentations and is an
expert in the field. Sandy?

MS. SAKAMOTO: Thank you very much, Bill, and thank you to the Chairman
and the commissioners again for allowing the opportunity to speak today
and at least start the dialogue, as was mentioned earlier, about this
very important issue. We have the unenviable task here on the panel to
talk about a very provocative area in this whole right-of-way management
subject, and I\'m sure that many of the comments that I make and,
perhaps, comments made by other panelists will evoke some level of
emotion because I think we have some very differing points of view, and
so I\'m not sure that we will achieve a necessarily short-term
compromise on these issues but, perhaps, it will elicit a way to think
creatively, as was mentioned earlier by the commissioners, about how to
resolve, perhaps how to reach a compromise on some of these issues that
sort of keep us apart in terms of working together.

I do have a fair amount of ground to cover, and so I\'m going to motor
through some prepared remarks. As we\'ve heard, Section 253 of the
federal act was designed to eliminate barriers to entry that might be
erected by state and local governments. The charter of the act was the
promotion of robust competition, and, in recognition of such, Congress
wanted to ensure that local governments would not create unnecessary
obstacles that would effectively limit or, in severe cases, prohibit
competition in the deployment of new technologies.

At the core of the current debate over access to rights-of-ways is
subsection C of that statute, as you\'ve heard, and on the slide, we
have what it says, in fact, and it\'s very simple. It says that nothing
in the 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 telecom providers on a competitively and
nondiscriminatory basis for use of public rights-of-way on a
nondiscriminatory basis, if the compensation is publicly disclosed. Some
local governments have reveled in the notion that this provision is a
new grant of authority, something more expansive to charge compensation
in excess of what existing, more restrictive state laws allow. This
pre-emptive theory is fundamentally betrayed by the very language of
subsection C, lacking in any expression of granting authority. And while
some have viewed subsection C as a savings clause or a safe harbor for
states and local governments, if the outer limits of this subsection
provide for the creation of regulation and fees that go beyond the
economic realities of what some or most telecom providers may reasonable
withstand, Congress has done nothing more than giveth and taketh away,
creating no clear path for spurring on the rapid deployment of
telecommunications. Certainly, that was not the intent of Congress.

So what does subsection C really mean? 253(c) was Congress\' way of
recognizing local governments\' traditional existing police power
authority to manage the rights-of-way. Local governments were concerned
that the sweeping prohibitive language of 253(a) might preempt their
authority over the health, safety, and welfare of right-of-way
management. Careful not to preempt the status quo, the drafters of
253(c) did not include granting language that would enlarge the existing
police power authority held by local governments. They did, however,
include language that describes the outer most scope of state and local
government control; that is to manage the public rights-of-way to
require fair and reasonable compensation on a competitively and
nondiscriminatory basis for use of public rights-of-way if publicly
disclosed, as the section says.

What did Congress mean by fair and reasonable compensation? We believe,
in the industry, that it means fees directly related to local
government\'s actual and incremental cost to manage public rights-of-way
and for the provider\'s use of that right-of-way. Compensation means
restitution for losses or damages or to restore one to its prior
economic position. This entitles a local government to recoup its actual
and incremental costs to manage the right-of-way but not to profit from
it.

Furthermore, compensation under 253(c) must be for the actual use of the
right-of-way and may not, therefore, be accessed in unrelated grounds.
For the numerous legal and policy reasons, fees based upon gross
revenues, construction costs, per linear foot, or in kind services or
facilities are not permitted forms of compensation contemplated under
253(c). Fees based upon gross revenues is nothing less than a tax upon
the revenue stream of the provider or its business operations, bearing
no relationship whatsoever with the management or use of the
right-of-way, as this Commission recognized in its amicus brief filed in
the White Plains appeal. It is a regulation on the business and has
more, frankly, to do with the ability of the provider to market its
services than it does with any physical use of the streets or roads.

Fees based on a percent of gross costs or construction costs also bear
no relationship to the management or use of the right-of-way. How much
it costs a provider to build out a network is no measure of how much a
city has or will incur to manage it.

Fees charged on a per linear-foot basis might appear to be related to
use of the right-of-way, but if that is so, municipalities should be
able to demonstrate that, for each additional linear foot of
construction, the city incurs a set incremental cost. Frankly, I\'ve
never seen that sort of cost study documented, and it does seem somewhat
doubtful that a city would incur, for example, 500 times the cost to
review a permit application, review construction plans or traffic
management plans, and do inspections on a 5,000-foot construction
project as it would for a 10-foot construction project. More telling is
experience, unfortunately, to the opposite. What the industry has seen
in some cases is local government imposing arbitrary per linear-foot
fees, oftentimes premised on what the last provider was willing to pay
and negotiate for and, admittedly, not based on any real study of data
or costs.

In kind, exactions, whose economic value may vary enormously depending
on factors, such as connectivity to other facilities, the ability of the
city to operate or use those facilities, or whether the facilities will
be used to lease to others also have no relationship to the provider\'s
use of the right-of-way or the city\'s cost to manage access.
Accordingly, in kind exactions are arbitrary and cannot be effectively
imposed on a competitively neutral and nondiscriminatory basis.
Moreover, dedicating facilities to municipality may be, in fact,
benefiting a municipally-owned competitor.

What about fees upon fair market rents or value? After all,
municipalities have argued long and hard that they should be entitled to
the full value of the scarce property asset that they have paid to
acquire and maintain. The fallacies in this model abound.

First of all, using tax dollars, state and local governments acquire and
maintain public rights-of-way in trust for the public\'s use. More often
than not, streets are simply dedicated to the local government at no
charge for the public\'s use as a condition of approval for private
development. Regardless of the method by which a local government may
acquire or hold title over a street or a road, the role played by the
governmental entity is governmental in nature.

Managing the right-of-way is not a commercial endeavor, nor is it a
proprietary function. The fair market value model has no place in this
context. Fair market value is a model for valuation of privately-held
property, which fluctuates with market demand and only works when there
are free market forces between a willing seller and a willing buyer at
play. If a commodity is a public right-of-way, there are at least two
essential missing elements: number one, a free market; and number two,
demand from similarly-situated buyers. There is no free market forces at
work when the local governments are the monopolists standing as
guardians over public rights-of-way, which are the only cost effective
way for telecommunication providers to deliver their services to the
public. In this scenario, without limitations, the monopolists would be
free to set fees at the highest price a provider is willing to pay, and,
in fact, we\'ve seen this. Those fees, unfortunately, have sometimes
become the default floor for the charge of fees to all other subsequent
providers.

In regards to public rights-of-way, the so-called buyers consist of a
number of users, the traveling public, the municipality itself, public
utilities, and other public service providers are operating under
separate and distinct laws and regulatory regimes. For example, the
traveling public and, generally, the municipality are not locally
regulated and do not pay fees. And users, such as cable television, gas,
and electric companies developed community-based systems, and local
governments are granted authority, through the Cable Act and other state
laws, to franchise their operations, including access to rights-of-way.
Such regulatory schemes are inherently different than the state and
federal regulation of telecommunication companies.

The delivery of telecommunication services is a public benefit use and
compatible with other public uses of the rights-of-way. Compensation for
a compatible co-existing public use is in the nature of the incremental
loss or cost to that entity. There is no true market, in the truest
sense, or rental rate for an asset dedicated for the public use.

MR. MAHER: Sandy, it\'s about time to wrap up.

MS. SAKAMOTO: Okay. I do want to say that we believe that the proper
model under 253(c) must be based on incremental costs to make the
criteria fair and reasonable, and there are a number of reasons why we
believe that that\'s fair, why it is competitively neutral and
nondiscriminatory, and why it is reasonable, given the national priority
given to telecommunications deployment and the rapid advancement of
technologies. And I think that it\'s very important that that\'s the
common ground that we talk about and talk from in order to come up with
creative and/or compromised solutions to an issue I know that we don\'t
all see eye-to-eye on.

MR. MAHER: Our next speaker is Don Knight, who\'s with the City
Attorney\'s Office in Dallas, Texas. He advises and represents city
counsel and city officials on a variety of legal matters, including
telecommunications, cable, electric and gas utility regulation,
technology acquisitions, and electric supply agreements. He has a number
of major projects that include cable cases, 911 agreements, PUC
rulemakings, and rights-of-way proceedings. Mr. Knight has a long
experience in the field. He was also with the city attorney\'s office of
Irving, Texas. So welcome.

MR. KNIGHT: Thank you, Bill. As Bill said, I am an assistant city
attorney with the city of Dallas. I also serve as chair of the Texas
Coalition of Cities for Utility Issues. It\'s an organization that
includes 110 Texas cities of all sizes. Before I offer my testimony,
though, I would like to thank the FCC for your invitation to speak today
and, also, your willingness to consider local governments perspective,
as demonstrated by the make-up of the various panels.

While I represent the city of Dallas as an assistant city attorney, the
opinions that I share with you today are my own, based on nearly 20
years of experience in local government. Also, if you find yourself
wanting to laugh at any of my remarks, go ahead. Some of this is
supposed to be humorous. I have to admit right away compensation humor
is an oxymoron if I\'ve ever heard one.

Okay. So how do I tell the FCC everything you need to know about fair
and reasonable compensation in five to seven minutes? I started off by
putting together some examples of myths that float around this issue and
the corresponding realities.

Myth number one: courts have long held right-of-way fees must be
cost-based. The reality is this position confuses regulatory fees with
fees for use of public property or rent. Regulatory fees, such as fees
for inspections, say a building permit fee, should be based on the cost
of regulating. However, fees for rental of public property should be
based on the value of the property being rented.

Myth number two: reductions in right-of-way fees will curb wasteful
local government spending. The reality is local budgets are already so
lean, if they turned sideways, they\'d disappear. That was one of the
humorous parts.

Myth number three: right-of-way fees are really hidden taxes. The
reality: right-of-way fees are rental for the use of public property.
They are no more hidden taxes than the fee that is charged to rent a
publicly-owned auditorium for a musical concert. Just like telecoms, the
concert promoter recovers his cost of renting the facility in the price
of the ticket. The only different is the concert promoter doesn\'t
line-item concert hall rental fee on the receipt for your ticket, like
the phone company does on your phone bill where it says municipal fee or
right-of-way fee.

Myth number four: local governments make money on right-of-way fees. The
reality is, in most communities, the amount collected in right-of-way
fees is less than what they spend on an annual basis on building and
maintaining the right-of-way and related infrastructure.

Myth number five: fair and reasonable compensation means cost-based
fees. Well, the reality is I\'d be happy to put everyone believes that
to work for me. Of course, I will pay you fair and reasonable
compensation, which will only include your out-of-pocket expenses, like
the gas it costs you to get to work and your dry-cleaning bill, because
if I paid you for the value of your work, I\'d be letting you take
unfair advantage of me.

Myth number six: reducing right-of-way fees will cause telecoms to be
profitable and stop the current wave of bankruptcies. The reality is
right-of-way fees are a small percentage of the companies\' total
revenues and are passed through to customers and, therefore, do not
affect the companies\' bottom line. For one to totally eliminate
right-of-way fees, it would not change the fact that the industry
currently suffers from a massive over-supply of capacity. It\'s like
suggesting that enough duct tape in the right places could have kept the
Titanic from sinking.

All right. Myth number seven: Free or at-cost use of the right-of-way
will promote faster deployment of advanced services. In the state of
Texas, DSL service pays no right-of-way fee. During the entire broadband
deployment, up until March of this year, cable modem service paid
right-of-way fees; DSL did not. Despite this, in Texas, as in the rest
of the country, cable modem services have had a much higher rate of
deployment than DSL. The reason for this is that cities have required,
as a condition of cable franchise renewal, that cable companies upgrade
their cable system. This upgrade is what allows cable modem service to
be provided. And unlike DSL service, cable companies are required to
provide this upgraded system to every household. That makes cable modem
service possible city-wide, once the upgrade is completed.

Myth number eight: recent state legislation, such as House Bill 1777 in
Texas, has resulted in more uniform compensation schemes and
administrative simplicity for companies and cities. The reality is, in
Texas, many telecoms, some small, some large, have shown an
unwillingness or an inability to comply with House Bill 1777. The staff
at the Texas Public Utility Commission recently reported numbers to the
Commission that suggest less than half of the 400 or so telecoms
certificated in the state were complying with all the requirements of
the Act. Staff at the PUC, already working under a heavy workload, now
have new enforcement and information-gathering responsibility. Cities,
on the other hand, are regularly receiving incorrect compensation
reports but, to date, have been unable to audit any of them.

Now, for today\'s final myth: the FCC is a better choice to deal with
local right-of-way issues because they are a lot smarter than the people
in the 35,000 communities across this country that do it now. The
reality: FCC staffers have refused to submit to IQ tests until the
commissioners and the mayors take them first, so the jury is out on
whether that\'s a myth or reality.

So after running through a number of these myths, I realize that what
seemed like a daunting task was actually quite simple. All the
Commission really needs to know is one thing: it\'s not your job.
Section 253(d) specifically removes FCC jurisdiction over issues of what
is fair and reasonable compensation. The industry\'s argument that the
FCC has jurisdiction over the question of what is fair and reasonable
compensation if it constitutes a barrier to entry under section 253(a)
is merely an attempt to re-write the statute to say what it does not.
The fact is local government enjoys a safe harbor if the right-of-way
fee is fair and reasonable, and the determination of fair and reasonable
is reserved to the federal courts. And you needn\'t worry, the industry
can find its way to federal court, as my city can certainly attest.

So the local government may require fair and reasonable compensation,
even if it could be argued its actions are barrier to entry. How do we
know this? Well, you only need read Section 253(c), which says nothing
in this section, referring to all of Section 253, affects the authority
of a state or local government to manage the public right-of-ways or
require fair and reasonable compensation. Clearly, nothing in this
section means that Section A\'s barrier to entry prescription could
never limit the ability to require reasonable compensation, which makes
sense if you think about it. How could anyone argue that reasonable
compensation is a barrier to entry?

Jurisdictional issues aside, and I\'ll wrap up here, I think a more
fundamental question for the FCC is why the heck would you want to get
in the middle of this? Why insert yourself into an issue that you have
no expertise in or authority to resolve, when there are so many issues
out there on your plate right now that do fall within the Commission\'s
expertise and authority? So in light of this, what should the FCC be
doing when they hear complaints from the industry about right-of-way
fees? Personally, I think it\'s reasonable to suggest that the answer to
that question is nothing. It is literally none of your business, and,
believe me, I tried to think of a nicer way to say that, but it just
didn\'t ring true. Congress has not given the FCC authority to act on
this issue. In fact, the legislative history of the Act indicates just
the opposite. Republican Congressman Joe Barton, co-author of the
Barton-Stupak Amendment that added 253(c) language that became law in
the House Bill, made the following statement during the Florida debate,
where his amendment passed overwhelmingly, 338 to 86. Congressman Barton
said, The amendment explicitly guarantees that cities and local
governments have the right, not only to control access within their city
limits, but also to set the compensation level for the use of
right-of-way. The federal government has no business telling state and
local government how to price access to their local right-of-way.

Now, I realize that it\'s possible that the FCC, despite all this sees a
role as one of establishing dialogue between cities and the industry.
And if that\'s the case, then I have a simple, straightforward plan that
imposes little or no additional workload on the FCC, which, with your
current workload, should be good news. What the FCC must do is to get to
a meaningful dialogue by sending the following message to the industry
loudly and clearly: we, the FCC, have no authority over right-of-way
compensation and management issues. Do not come crying to us. Go to the
local government or other organizations and explain the problem to them.
Work out a solution you can both agree to. If this fails, you still have
the courts as a last resort. As long as the industry thinks that it has
a chance of getting the FCC to impose their preferred solution on local
governments, they will have no motivation to settle for anything else,
and meaningful dialogue with local government will not succeed.

In closing, I want to remind everyone that the natural result of
competition is survival of those best equipped to compete in the death,
also known as Chapter 7, of those who are not so well equipped. This is
the price of competition. However, the price of competition in the
telecommunications industry should never include loss of local
government services. If the industry\'s well-orchestrated effort to
reduce right-of-way fees from their current levels is successful, a loss
of local government services will be the inevitable result. Thank you.

MR. MAHER: Thanks, Don. Our next panelist is Kelsi Reeves. She\'s Vice
President, Federal Government Relations, for Time Warner Telecom. She
was named to this position in January 2000, and she is responsible for
all matters, including rights-of-way issues, affecting Time Warner
Telecom in the federal regulatory, legislative, and governmental
purviews. Kelsi?

MS. REEVES: Thank you. I really appreciate the fact that the FCC is
focusing on this. I think there are questions about jurisdiction,
obviously, and what the FCC can do. Having worked in and around this
issue for the past 10 years, there is no one simple, easy solution. The
FCC isn\'t going to be able to come down and solve all these problems.
But I think it is very important that the FCC recognize that it is a
significant problem.

At Time Warner Telecom, what we do is we go out and we build competitive
telecommunications networks. About 80% of the revenues that we earn
actually come over our own network. The other 20%, we buy, mostly
special access, from the incumbent local exchange company and,
essentially, re-sell services. What happens are barriers to entry. We
have a different focus. I\'m just so happy right now that we\'re
focusing on right-of-way. Maybe someday we\'ll get to focus on building
access. But for a facilities-based company, the two big barriers to
competition are access to the right-of-way, access to buildings, and
then I say we have three: access, access, access issues. The third one
is being able to get special access when we can\'t go out and build our
own facilities. So access, if you really want to see facilities-based
competition, access to the right-of-way is critical. There is just no
way of getting around the fact that these issues have to be solved.

I did an informal survey. We offer service in 44 MSA\'s in 21 states
across the nation, and I did an informal survey of all of the general
managers that operate in the different cities. In the 21 states that we
operate in, I heard back from seven of them that were having significant
problems with rights-of-way, so the other states are going okay.

But what you\'re going to see is, in the states where we\'re not having
problems with rights-of-way, we\'re going to be deploying more
facilities, customers are going to have access to more diverse services,
and we really do offer diverse services. I mean, a lot of the things
that we\'re trying to do and one of the reasons that we\'re somewhat
successful in today\'s marketplace is that we offer redundant
facilities. You have a lot of state and local governments. We\'ve got
Air Force bases, airports, hospitals, public schools that are coming to
use because they want alternative facilities into their offices, so that
if services goes down, like something happens on 9/11, something like
that happens, that there are redundant facilities in there. And if you
want to put redundant facilities, if you want to have true
facilities-based competition, you have to have access to the
right-of-way.

Well, what we, at Time Warner Telecom, focus on doing is building a
long-term, viable plan. I think it\'s interesting, when you talk about
doing something like having a percentage of our revenues go to the city
for access to the right-of-way, it really distorts, it distorts our
business plan for a number of different reasons. The first is we go out
- I was going to say something; I probably won\'t. Well, anyway, if you
were going to do based on, if we have to put five-percent of our
revenue, if we have to pass that through to our customers, what happens
quite often is you\'ll get into a negotiation with a very large
contract, and since it\'s not required, we\'re not in the cable arena
where you have a five-percent that everybody charges and everybody
passes through. What you have is just a patchwork of different
regulation and different applications. And so we can get into a
negotiation for a contract, and the incumbent can decide not to pass
franchise fees through. Well, if you\'re looking at, you know, a
million-dollar a month customer, you know, five-percent of a million
dollars is real money to a company like mine; we can\'t eat it, we
can\'t spread it out over a large rate base. So, you know, it will cause
us to lose contracts.

Another thing is, you know, a lot of our debt covenant, our ability to
stay in business right now is dependent on us making a profit. There are
a lot of CLEC\'s that have debt covenants that are dependent on things
like revenues. Ours aren\'t revenues; ours our actually on profits. We
can\'t just go out and sell the service at any price. We have to
actually sell the service at a price that recovers its cost, and we have
to pass through those franchise fees.

So you can put the slide up now and get onto the presentation. What I
wanted to talk about was the court cases, and I think what we really can
see is that there\'s not a clear answer out there. We have so many
different people involved. We\'ve got the FCC, we\'ve got state
jurisdictions, we\'ve got the courts, and we\'re getting contrary
results from all of them. The most recent circuit court\'s decision
interpreting a Section 253 was the TCG New York versus the City of White
Plains, and in that decision, the Second Circuit declined to reach the
issue of whether or not a franchise fee is based on percentage of the
provider\'s gross revenue or fair and reasonable compensation for the
use of the public right-of-way. Instead, the court struck down the
city\'s ordinance on the grounds that it was discriminatory.

The fatal point being is, as we\'ve discussed already, is that the
incumbent didn\'t have to pay the franchise fee. Well, when you have the
courts addressing these issues, in this situation, they completely get
around having to address whether or not what is fair and reasonable
compensation. So I think it is just very important that we have some
guidance from a regulatory body. There\'s no question that the states
are going to be critical in doing this, but I think it\'s very important
that we get some guidance from the FCC.

I was actually a staff member with the Texas Legislature when HB 1777
was negotiated, and the only reason that there was a bill is because
somebody with authority, Representative Woolens from the city of Dallas,
whose wife happens to be the mayor of Dallas now, you know, sat
everybody in a room and said, we\'re going to do something, I\'m passing
something, either you work something out or I\'m going to do what the
cities want to do, was essentially, you know, his position. So we all
negotiated, and we got something that is not, by no means, perfect, but
Texas is not a place where we\'re having issues getting into the
rights-of-way right now because of the system in place.

As you can see, all the panelists up here today talk, I thought your
presentation, Don, was very entertaining but very much just the city
perspective, and I think it\'s just critical that we get some guidance
from regulators and force this issue to be resolved because, if it\'s
not resolved, you\'re not going to see facilities-based competition. You
had mentioned, Don, that there was a over-capacity in telecommunications
facilities. Well, the over-capacity is in the long-haul sector of the
market, not in the short-haul. Time Warner Telecom is one of the only
companies actually going out and building local facilities, and we do it
not just in the major cities but in the suburbs. There is no
over-capacity there. In fact, if we could get in and build more, then
you would see some of the capacity in the long-haul markets actually
utilized effectively.

That\'s essentially what I wanted to say today.

MR. MAHER: Thank you, Kelsi. Our next speaker is Larry Doherty, who\'s
Director of National Site Development, the West Region, for Sprint
Spectrum. He\'s a land-use planner. He has 30 years of experience in all
related disciplines to land-use planning and project management. He
directs the current development of wireless applications within
rights-of-way throughout Southern California. This requires the design,
permitting, and construction, working with more than 20 state and local
jurisdictions, and this has involved, so far, more than 2500 pole
attachments. Larry?

MR. DOHERTY: Thank you. I\'d like to also thank the Commission for the
opportunity for wireless to be on this panel today. It\'s, to some
people, might be a bit strange, but we\'re a new entrant into the
right-of-way issue. So before I start, I would like to make one thing
clear: I\'m not an attorney. There are a few of us up here. But I do
have some real experience in the field, and I\'d like to share with you
today a little bit of that experience.

Some of the issues that we face, as a new entrant, into the right-of-way
development and deployment of our facilities.

Why right-of-way, why wireless? Well, our perspective is a little
different. Sprint and other wireless companies are starting to focus on
right-of-ways throughout the nation as an essential element to providing
the service throughout the country, the service that the public
rightfully demands. Traditionally, wireless is built on private
properties, and as we have done so, we have provided a pretty darn good
service throughout most all the commercial areas, as well as the major
thoroughfares.

However, we have seen a dramatic shift in the use of wireless by the
public to the residential sector. As a matter of fact, as you all
probably know, more than half the population currently subscribes to
wireless service, and as a Yankee Group report stated, I believe, just
last month or so that three-percent of the households throughout the
United States disconnected their wireline service to their homes and
rely entirely on wireless.

Sprint has observed that public is using wireless service more and more
in the late evening hours, when most Americans are at home. This is the
area where our service is not the best, this is the area where
facilities need to go, but it\'s my experience that local jurisdictions
often do everything possible to keep these facilities outside of the
residential areas and the suburbs.

On one hand, the communities and their citizens demand dependable,
uninterruptable, and high-quality wireless service throughout their
communities and deep into the residential areas. On the other hand, the
industry, the wireless industry is faced with an ever-increasing local
requirement and obstacles that delay our deployment into these areas. To
me, attaching to the infrastructure within the right-of-ways is a
no-brainer. The impact is minimal, the benefits are enormous.

Sprint believes in this so strongly that, over the past couple of years,
we have developed new technology, equipment, and construction techniques
to eliminate or significantly reduce the impact of our facilities on the
public right-of-way. As a matter of fact, if I can have the slides now,
I thought I\'d bring along a couple of photographs of what these
facilities look like.

This is a wireless facility in the right-of-way in the Los Angeles area,
and if you\'ll take a look at \-- there\'s two poles there, one is being
removed, the other one is a new pole, but you can see some cross-arms on
the pole and there are antennas hanging from that cross-arm. All the
equipment is vaulted below ground, and at the base of that street lamp,
there are a couple of ventilation tubes in order to circulate the air
through. This is what the sidewalk looks like. We don\'t impede traffic
whatsoever. It\'s a very innocuous kind of installation.

As a matter of fact, we had this open the day I took the pictures, and
several neighbors came across and were curious, they had their kids with
them. They were really curious about what we put underground, and with
Halloween coming up, the father told them, See? There are no spooks in
here. I thought that was clever.

This is opened up for servicing by technicians. You can see the antenna
up on the pole. This is a little different antenna configuration. We
left the antennas wide on purpose, so you could see them. We paint them
brown, and they pretty much disappear into the existing urban structure
there. And in this case, the cabinets are above-ground. This was an
early attempt, about five years ago or so, at wireless on a traffic
standard and streetlight in a very upscale urban community. I never
heard any complaints over this one. Again, antennas are attached to the
pole. The equipment is behind the sidewalk and right-of-way.

Our problem is access and probably equal access. We\'re treated much
differently than any other user of the right-of-way. We\'re required to
go through exhaustive discretionary processes with the local
jurisdiction, and when we do the research in the jurisdictions to
determine who else goes through these, we never find any of the other
users of the right-of-way applying for condition-use permits. It\'s only
the wireless that has to do this. These processes last anywhere from six
months to two years.

And, at the same time and shortly after that, then we must negotiate an
agreement to use the right-of-way with each and every jurisdiction that
we go into, and each and every jurisdiction has a whole different set of
criteria, a whole different definition of what reasonable compensation
might be.

As a matter of fact, I\'ve seen situations where we pay as little as a
few hundred dollars a year for one of those facilities that I showed you
to \$2,000 a month for one of those facilities I showed you, so it\'s
across the board, and it really doesn\'t make any sense to us. I don\'t
know if it really makes sense to the public either. The wireless
industry needs some help in working through the local jurisdictions, not
on a one-by-one basis but a basis that sets a level playing field for
all the users of the right-of-way.

Reasonable compensation, I\'m not really sure what that really is. We
talk about going back to the jurisdictions and paying them for their
out-of-pocket expenses. I think many of us do believe that that\'s the
right thing to do for the right-of-way that\'s held in trust for the
public. But, again, we see it across the board. There is no rhyme and
reason to it. We ask jurisdictions what\'s the basis for their fees or
use fees or license fees or whatever they may call them in the
agreements, and we just kind of get, well, that\'s what we charge, and
there\'s no real basis for it that we can find. In fact, in most
situations, we have to pay pole owners to attach to the poles, and
they\'re paying local fees, as well. So, in fact, the jurisdictions are
getting it from the pole owners, and they\'re also getting it from us;
sort of double-dipping the industry.

I\'d like to go ahead and close with asking the FCC, at the minimum, and
other federal entities to provide general guiding principles that we
call can look to. And Sprint would like to endorse or, at least, favor
the NTIA administrator, Nancy Victory\'s principles and those described
in PCUS. Thank you very much.

MR. MAHER: Thank you. Last, but not least, we have Dr. Barry Orton, who
is Professor of Telecommunications in the Department of Professional
Development and Applied Studies at the University of Wisconsin 
Madison. For 20 years, his primary duty at the University has been to
assist Wisconsin municipalities with broadband issues. Dr. Orton is an
original founder of NATOA, and he currently serves as president of the
Wisconsin chapter of NATOA. He directs the University of Wisconsin 
Madison\'s outreach seminars and local cable franchise administration
and is on the board of contributors of several legal newsletters and
industry publications. So without further ado, and he has a display, I
believe.

MR. ORTON: Thank you. Yes, I\'m also not a lawyer and also a city
planner, and that\'s maybe a first up here. The title of my presentation
is \"Local Public Rights-of-way:\" and, of course, us academics have to
have a colon, \"Users Should Pay the Real Value of Very Expensive Public
Property (Just Like Rights-of-Way on Federal Land)\" and this is the
most important part, \"It\'s Not Only Money That Matters.\"

No matter how high-tech the industry, we still have to dig in the dirt,
and that\'s a quote from Ed Coops, Engineering Vice President of
Next-Link, who, basically, and I think most of the industry understands
there is no one-size-fits-all answer to any of these questions because
all communities are different, all geological, geographical situations
are different, and, certainly, all rights-of-way are very different.

I seek to highlight today just how complex some of these decisions are
and how ill-equipped the Commission is to deal with them on a
case-by-case basis. Yes, I did bring a prop. I didn\'t bring it, Leonard
Crumb brought it here from Minneapolis and it\'s, in fact, a model of a
street under downtown Minneapolis, and if you could remove the street
and the fire truck, we have here, and this is actually an older model
with very little telecommunications facilities, Leonard assures me right
now it is much more crowded under the street on that particular
intersection thanks to increased telecommunications capacity. And each
piece of overcrowding or crowding makes the right-of-way more difficult
to excavate, it makes the right-of-way more difficult to maintain, and
Leonard had some sample pieces of sewer pipe that he was trying to put
under the system, digging as if he would be digging through, and the
problem is that, as it gets more crowded, the length of the pipe
doesn\'t change any, and you have to squeak it in under the things that
are already there.

Basically, this is a fairly simple one. I work for the city of
Milwaukee, and, in my presentation, I describe what\'s under the city of
Milwaukee streets, and that includes everything here, plus wooden ducts
dating back at least a hundred years, in some cases. Some of those
wooden ducts contain existing and operable electric power lines. Some of
them contain existing and potentially operable, we\'re not sure until we
cut them, telecommunications lines dating back to telegraph. Some of
them contain wires that used to support some of the trolley lines, and
some of them don\'t contain anything we really know about yet, and when
we cut them or when they get cut, we just find out if they contain
anything by how many people call and find out what went out.

So to finish that and to show how this one-size-fits-all model doesn\'t
work, the person who knew that system best in the city of Milwaukee
retired two years ago, and his replacement has a total of two years
experience on the job, so the maps supporting that are literally
thousands of them in tens of locations, and there is no one way to
understand what\'s under any individual street at any given point, and
that\'s not a unique situation.

So local government\'s first priority in all this is to really protect
the public\'s safety, and that really is the first priority. And without
the right to manage the rights-of-way with a one-size-fits-all uniform
priority, where you don\'t have patchwork systems, you\'re not
vulcanized, and, perhaps, you have some kind of federal mandate. Then
should any entity with a state CLEC certificate, a backhoe, and a spool
of fiber cable be allowed to open streets\' boreholes, interducts,
trench through subdivisions, and string wire between poles? Clearly not.

When construction is eminent, municipality has to have permits, has to
investigate who is going to open the street, what kind of insurance is
required, make sure there is indemnification, and I list a lot of those
steps; and they are not steps to make the industry suffer, they are not
steps to make it more unprofitable for the industry; they are protection
steps to protect one of the most valuable pieces of property the local
public owns and has developed: the rights-of-way. And this last
responsibility on safety is easily understood here in Washington, where,
I understand, a year and a half ago, matters got so bad that we had a
moratorium, so that we would actually have cars that went on the streets
rather than sinking into them.

The second thing cities have to do is they have to protect the public
property. And attached to my presentation is a list of just some horror
stories of gas lines, power lines, water mains, phone lines, steam
lines, sewer lines being, in some cases, exploded by wrong locates or
the abhorrent backhoe. Local government has to assure that the public
property is then restored to an equal or better condition, and that
really, again, involves expense on the local side. So the examples of
that kind of management are in the bill or in the statute, they\'re
certainly in the legislative history. We don\'t have to go through that
again.

Then the next part, which is the part that\'s getting controversial
here, is the reimbursing of the public. Specifics, because they vary
from state-to-state; states differ. The jurisdiction\'s immediate goal
is to get its out-of-pockets covered, and that we talked about; I don\'t
think there\'s any disagreement about that. But it\'s not just what you
paid in advance and what the city has to pay to get you in there. The
telecommunication industry tries to seek to limit the public
compensation of rights-of-way to these direct costs, labeling them fair
and reasonable, and everything else then, by comparison, is
unreasonable. I have a technical term for that assertion. It\'s called
\"chutzpah.\" And for those of you who are not familiar with it, the
definition of that technical term is the defendant, who upon charged
with the murder of his parents, throws himself on the mercy of the court
because he\'s an orphan. That\'s chutzpah. That\'s what we have in this
case.

We have significant real costs here. We have degradation costs of
additional users, and every time you dig it up and patch it over again,
the useful life decreases. You have a disruption factor, which are
serious factors. People have to go around excavations. Businesses lose
money while the excavation is going on. These are all real losses. The
sales tax loss and the loss of going around construction is only the
small part of that.

And then lastly and most important, you have rent. I know it\'s an evil
word here, but rent is what it is. If I want to rent space in a shopping
mall, I might pay an option fee, I might pay a per-square-footage fee,
and I might pay a rent based on the position in the mall based on the
economic value of what I am occupying. You cannot ignore those standard
economic factors when you look at right-of-way, unless you make the
argument that the federal government has declared this so important that
we don\'t compensate anybody and everybody develops anywhere, and we
don\'t do it that way. We certainly don\'t do it in the private sector,
and we don\'t do it in the federal government either.

I went to the Bureau of Land Management and found out when you want
rights-of-way on federal property, you pay a processing fee, you pay a
monitoring fee, and then you pay a fee called rental, payable before the
grant is issued based on the fair market rental value for the rights
authorized. The rental values are based roughly on the land values and
are sometimes even established by an appraisal. Why would the Congress
establish a different or more limited right for local governments?

Finally, while all these arguments are proceeding in the courts and the
Legislature and the Congress, local officials routinely enforce the
safe, basic requirements necessary to ensure the public rights-of-way
remain safe and functional with minimal financial burden to the
taxpayers. These requirements are enforced daily without fanfare,
without debate, as we all use the rights-of-way to heat and light our
homes, walk, drive, communicate, access information, bathe, and flush
our toilets. Thank you.

MR. MAHER: Thank you, and we will start a discussion now. I think the
format in the last panel worked very well, so I will open it and start
back down at the other end, if anyone has any comments on the other
presentations. Sandy, you can lead off.

MS. SAKAMOTO: I think our view, from the industry\'s perspective, is
that we do need some guidance from a policy-making body to urge and
encourage the national policy on telecommunications. And nobody in the
industry disputes that there is legitimate and valid right-of-way
management authority that local governments have. They have a very
important role, there is no doubt about it. They have a role to make
sure that their rights-of-way are managed in a way that is safe for the
traveling public and for other users of the right-of-way. And
businesses, like telecommunications and other users of the right-of-way,
also have that same interest. We have no desire to irresponsibly come
into a city because it\'s not good business, ultimately. So I think
there\'s some common ground there.

But what we have seen, unfortunately, are a minority, frankly, of
jurisdictions who have taken liberties, sort of, with this notion that
they can go beyond those traditional police-power authorities and begin
to create what we view as obstacles to proper construction and infuses
one area of that. And that\'s where we, I think, need the help.

I will say that, while, you know, there\'s a lot of dispute as to what
the right model is for fees, you know, how do you assess fees and on
what basis, I can say that if fees are somehow sanctioned, fair and
reasonable compensation under 253(c), is sanctioned either by the courts
or this Commission as being something that can be above cost. In other
words, revenue-producing or profit-making fees for local governments,
that the moment that occurs, quite frankly, and I wouldn\'t blame them,
every local government will certainly come to the well and want their
share of that new source of revenue. And I think we need to think very
carefully about whether that\'s the right policy. When we talk about
trying to create a very robust, competitive environment for
telecommunications, it will, in any given jurisdiction, out-price a
certain competitor or many competitors. Not every competitor, perhaps,
and that wouldn\'t be right, and no city would do that, but it will
out-price certain sets of competitors, and is that really what Congress
desired?

MR. MAHER: Don, what about it?

MR. KNIGHT: Thank you, Bill. One thing I wanted to respond to is
Kelsi\'s remark that there\'s no over-capacity in local neighborhoods,
and I couldn\'t agree more with that. One of the reasons that\'s true is
that local governments are powerless to require it, unlike cable, where
we can require it and cable extends to every household, you know, in the
community. The problem with that scenario is, if we\'re talking about
the kind of disruption that we saw in our major thoroughfares now in
every neighborhood in the community, we\'ve got to think about how
we\'re going to deal with that, as well.

There has been a lot of discussion about right-of-way management, as
well as just the compensation for it, and that cities need to be
restricted. It reminds me of a comparison to our traffic laws because
there\'s probably nobody in this room that likes to get a traffic
ticket, and there\'s a lot of people that might want to go a little
faster than the posted speed limit at any given time. But, yet, there
doesn\'t seem to be any national movement to do away with traffic
enforcement, and the reason for that is because, while we know we\'re
all safe drivers, we\'re worried about the rest of the guys on the road.
Okay. And that\'s the problem you have here, and it\'s why you heard
Sandy say, you know, they support right-of-way management. That\'s been
my experience. No one in the industry wants the cities to get out of the
right-of-way management business. They\'d like to see, you know, some
things not specifically applied to them but, you know, the other guys,
we\'re glad you\'re out there to keep them from damaging us.

So talking about fair and reasonable compensation, I keep asking myself
this because I keep hearing from the industry cost-based, if it\'s not
cost-based, it\'s not fair. What is unfair, what is unreasonable about
asking them to pay what it is worth? We\'re not hearing it\'s not worth
what cities are asking for it, they\'re saying that it should be
cost-based because if it\'s more than cost, it\'s unreasonable and
unfair.

Now, Sandy referred to new sources of revenue and that cities see the
Telecommunications Act is a chance to go out and get more money. I have
not seen that. All I have seen is that communities want to be able to
collect the compensation that they have collected for the last 100
years. This is nothing new. You know, what\'s unfair about the same
compensation that you\'ve been paying for a hundred years to use the
right-of-way?

And I realize the law may be different in other states. There\'s some
states where the incumbent doesn\'t pay a fee because they negotiated a
good deal a hundred years ago. That was pretty short-sighted, I think,
but, in Texas, we don\'t suffer from that. So let\'s not forget that
telecommunication companies have been paying usually a percentage of
gross revenues since they came into existence, so this is not an
argument that started after the Telecommunications Act of 1996 and
cities are not going out and saying, oh, boy, we\'ve got a windfall
here. We just want to do business the way we always have in the sense of
collecting compensation for value. Now there\'s a lot more people
wanting to get in there, and we want to treat them all the same. We want
to charge them the same amount. That\'s all I have. Thanks.

MR. MAHER: Okay. Kelsi?

MS. REEVES: I wish it was that simple. I mean, I don\'t think that it
is. I don\'t think that what we\'re going out and finding is that cities
just want to charge us a rent for the value of the property and you get
to just do that. But in Texas, what we found is that a bunch of
different cities had negotiated flat fees from the incumbents, and it
was hard to tell what they were based on, you know, what services and
what revenues they were based on. And so when you have to go in with
like what you have to do in Texas right now, it\'s based on access
lines, people measure access lines differently. I mean, no wonder Texas
is having a hard time implementing that law is because it\'s hard for, I
mean, we do it differently from the way other companies do it, and it\'s
hard for us to file those reports. It\'s impossible for, I think, the
cities to really know whether or not they are getting what they are
supposed to be getting, and to try to compare it to what other companies
are doing is just a really difficult task. So I don\'t think it is as
simple as just paying rent. If it were, then we wouldn\'t be here.

What you\'re finding is different things in every, you know, different
things in different cities, different things in different states, and
what we need is some consistency. I don\'t think anybody in the industry
would argue with the fact that the cities need to manage the
right-of-way, and I think that the work that we\'ve been doing on our
model ordinances recognize that, and what I hope we can do is recognize
that you need to manage the city, your resources should be focused
towards that, and get out of these, you know, two and three-year long
negotiations over price. I mean, we really are talking about money. If
we could resolve that issue, you could spend your time, the cities could
spend their time managing the right-of-way instead of negotiating these
ridiculous contracts.

MR. MAHER: Okay. Larry?

MR. DOHERTY: Again, I think, in my view, the real problem is there\'s
absolutely no definition that anybody agrees to. When I worked with the
jurisdictions, every jurisdiction has their own idea of what
compensation truly is. It\'s across the board, and it doesn\'t make any
sense. And for telecom to go in and have to negotiate these on a
one-by-one basis with virtually no insight as to what they\'re going to
end up, you can\'t sustain an operation like that. It becomes so
cost-prohibitive to go into certain areas. It becomes a barrier to
access to areas.

It is important to note, too, that all that does is drive up the cost
for the consumer, as well, because these costs are being passed through.
And so, in effect, we\'re charging, the jurisdictions are charging their
citizens for the use of the right-of-way, as well. So it goes on and on.
We\'re looking for some general principles. I think the industry and
local government and the FCC need to come together and devise some
common principles that we can all look towards. And I believe it\'s
going to take a lot of work, but I also believe it is possible.

MR. ORTON: I want to say that I don\'t think there\'s any other
situation where the owner of a valuable property is expected to charge
only the incremental cost of occupancy and not compensation reflecting
the value of the property or the value of the property to the user.
I\'ve asked my bagel store to cut back on the price of bagels and let
the mall owner only charge the cost of the electricity for the bagel
store, but it doesn\'t work that way.

MR. MAHER: I have a question, and it goes back to these revenue-based
fees. It\'s hypothetical, and you can consider me playing a devil\'s
advocate, but aren\'t there circumstances where these fees really make
sense, if you\'re thinking about telecommunications competition? I mean,
to the extent that a new entrant doesn\'t have to put up a big up-front
payment, aren\'t fees based on ongoing revenues one way to permit entry
into telecommunications? Or not? I\'d be interested.

MR. KNIGHT: Could I respond to that, Bill? Absolutely. You know, the
reason we have a percentage of gross revenue fee is because that\'s what
municipalities and the telephone company worked out, and the reason
it\'s a benefit to new entrants is that, until you start getting
revenue, you don\'t pay anything. You can put your facilities in the
right-of-way and pay nothing until you start generating revenue, and
then you only have to pay a percentage of that revenue. So as you build
your business, you pay more, but not until you generate more revenue.
And the access line fee statute in Texas is similarly structured so that
you only pay for the access lines that you sell to customers. So, again,
they can put facilities in the right-of-way at no charge until they
start using them to provide a service.

MR. MAHER: Any comments from the carriers?

MS. SAKAMOTO: Yes, I guess a couple of issues. First of all, while, in
fact, that may be one way of gaining compensation, it really is in the
form of a tax. What you\'re talking about is a fee based on the business
operations and revenue flow of that particular entity. We\'re not
talking about compensation for use of the right-of-way. They\'re two
very distinct and different things, and I don\'t think, if we look at
253(c), that that type of fee is contemplated because it has nothing to
do with use or management of the right-of-way. I\'m not saying that it
couldn\'t be imposed in proper situations or that it couldn\'t be a
proper form of some level of a tax revenue if properly enacted, but I
don\'t believe that it fits within the structure of what local authority
can do under its police powers in managing the right-of-way under
253(c).

MS. REEVES: And I would just add to that that it would be one thing if
that was a federal policy and it was applied across the board. Then
people would make it work. But right now what you have is, you know, the
pass-through is a significant deal. I mean, if not every competitor is
required to pass it through, there are a lot of companies that are in
many lines of business, and it\'s hard to tell what revenues you\'re
actually assessing. Different people offer different types of services.
The cities are always in arguments about which services should be taxed
and which services shouldn\'t be taxed, so that\'s not even a simple
fix.

MR. MAHER: Okay. I\'d like to open it up to the audience right now.
Right there.

MR. ASHBUM: Hi, my name is Garth Ashbum. I work for local government.
Just two comments here. One, I find it difficult to understand how
Southwestern Bell or SPC can advocate incremental costs when people are
trying to access their system and they have to pay fully-allocated
costs. The second thing is that, when we\'re looking at that this is
passed on, that this is a cost increase to the users, I think that you
fail to realize that the costs that are there are being borne by
taxpayers. And if there are costs that are associated with it and
they\'re going to be paid by taxpayers instead of the user, I don\'t
think that\'s fair to the folks in the community.

MR. MAHER: Any response?

MS. SAKAMOTO: Taxpayers are paying for the investment in the public
rights-of-way, indeed, and the cost-based model for compensation for use
of the right-of-way is to, in fact, reimburse and to make whole the
taxpayers loss or cost through the management by the city, who stands as
a trustee over those rights-of-way. So the taxpayer isn\'t losing out.

Nobody\'s suggesting, from the industry\'s side, that a loss or a cost
that\'s borne or incurred for use of the right-of-way should not be
compensated. What we\'re talking about, I think where the debate really
is, is whether or not fees above costs, fees that are really
profit-making in nature are appropriate when we talk about use of the
right-of-way.

Moreover, the right-of-way is dedicated and is there for the public\'s
use. It\'s dedicated for public use, and that provides an avenue for a
number of classes of users. It isn\'t just the traveling public we\'re
talking about, it is the subway systems and the public utilities and the
municipal utilities and the cable television. Everybody that has a
public service that they offer that needs that right-of-way to offer and
deliver those services is providing the kind of public benefit that that
right-of-way was intended to provide.

So I think when we talk about, you know, rental or paying for its value,
well, it\'s value is, as a right-of-way, to provide a public benefit.
Part of that use, a compatible, co-existing use, is telecom, just like
it is with water or just like it is with a trucking firm that uses it or
just like it is with any other user of the right-of-way. So why should
telecom be singled out or treated differently?

Moreover, I have to tell you that everyone of those classes of users
have different regulatory regimes. Right or wrong, whether you like it
or you don\'t, they developed in different ways. So, you know, you do
have a mixed bag when you talk about the different types of users that
take advantage of the public rights-of-way.

MR. MAHER: Don?

MR. KNIGHT: Thank you, Bill. First of all, if I understand what Sandy\'s
saying. She\'s saying, you know, the taxpayers pay taxes, the taxes go
to maintain the right-of-way. They\'ve already paid for it once, let\'s
not charge them for it again. And if that\'s what she\'s saying, I would
respond that the reality is that if we do away with right-of-way fees,
we\'re going to be talking about a lot more taxes than they\'re paying
right now. Many cities, 20 to 30% of their revenue comes from
right-of-way fees, and that means they don\'t have to raise tax money
for that 20 or 30%. Now that\'s all users of the right-of-way, that\'s
not just telecom.

You know, Sandy mentions that a lot of users use the right-of-way, and
that\'s true. Telecommunications companies, gas companies, electric
companies, water companies, they all pay to use the right-of-way, and
nobody is asking to use it for cost, except for the telecommunications
companies. Every other user of the public right-of-way pays the value of
that property when they use it.

You know, I think the argument that this is dedicated to public use and
it\'s preserved, it\'s held in trust for the public, therefore, we
shouldn\'t be charging for it. And this is the point that the
telecommunication companies are not the public, okay? The public is the
citizens within that community, and if the citizens within that
community want their local government to subsidize a telecommunications
company so they don\'t have a fee on their bill, they could let their
city council know that. But you know something? In all the years that
I\'ve been in local government, I have never heard a single citizen tell
me that we should be allowing these companies in the right-of-way for
free. I\'ve never heard a single citizen complain that they don\'t want
a charge for right-of-way use on their bill. They understand it\'s the
cost of doing business. Citizens are not upset about this, okay? It\'s
the telecommunications companies that are passing those costs to the
citizens that, for some reason, have a problem with it. The people that
are paying the bills don\'t.

MR. DOHERTY: Just a quick comment on that. I don\'t think the industry
has ever said that we\'re not willing to pay for the use of the
right-of-way. I just want to make that clear. We do expect to pay for
the use of the right-of-way. Our position is that unreasonable fees
should not be charged. We want fair treatment for the use of the
right-of-way, and I think that\'s what this forum is all about, not to
point the finger at one another and simply say that we don\'t want to
pay because that\'s not the case.

MR. MAHER: Okay. Question right here.

MR. BRILL: Yes, my name is Robert Brill. I guess, Professor Orton, I
have to respond to your use of the chutzpah analogy to say that the
question from the telecom perspective is are the cities and localities
acting as khazers, which is another response.

But, really, what we\'re talking about is line drawing. I agree that I
don\'t know anyone in telecom who says that there shouldn\'t be
recompense for the reasonable use of the right-of-way, in terms of the
cost to the municipality. The real question is what the Professor has
pinpointed, which is paying what it\'s worth. My response is or is it
paying all that the traffic will bear? The question is is the public
right-of-way a scarce commodity, as it were, that is, in effect, a
monopoly control of the locality? And the question is, to foster
competition, does that scarce resource have to be regulated and, hence,
to draw analogy from telecom before the 1996 Act, there has to be
someone who either sets some guidelines to what can be charged above the
cost, or it should be some type of regulated price, and somebody\'s got
to regulate that?

So, I mean, it seems to me the question of your shopping center is
there\'s always a shopping center somewhere else or a store somewhere
else that can compete, but how does a telecom provider in a particular
city find another access, except for private property which, in
wireless, is possible, but if you\'re a broadband provider, you have to
use the ground.

MR. MAHER: Barry?

MR. ORTON: Well, a couple of responses. I don\'t want to get into
Yiddish too heavily. I think the appropriate word for the industry in
this case are gonifs, which they\'re trying to steal something that
doesn\'t belong to them that the public built, that the public owns, and
want it at a bargain price because telecommunications, in the Telecom
Act, is something magical. It isn\'t. It\'s one part of our economic
development, but it\'s not a magic part. And so we don\'t douse local
government with magic dust so that, all of a sudden, the only thing that
costs are their out-of-pockets when you get an application. The cost of
building and maintaining a very complex situation, particularly in
larger cities, is enormous, and the taxpayers paid for that. So to argue
that the real cost is the incremental cost when we get there and when we
build is to ignore all the other costs that went into the whole process.

And it, also, I think, ignores, and we say it again and again, the
legislative history of the Telecom Act that got us here. I really think
you should read the detailed legislative history because there were
votes on these explicit issues both in the House and in the Senate. I
don\'t have the Senate numbers. I do have the House numbers, and it was
something like 338 to 86. The idea that this stuff would only be at
out-of-pocket costs was defeated really soundly, was very explicitly
argued in both houses and defeated soundly in both houses. You can\'t go
back and say, well, the Congress really meant to put a C in the list of
what the FCC did in Section D, but they just ran out of letters or
something, so we\'ll just pretend it was there. You can\'t do that. The
Congress debated this, and it was very explicitly voted on.

MR. MAHER: Okay. We have time for one last question. This panel has been
going very well, and we\'ll have to close.

MR. PINTO: My name is John Pinto. I\'m your right-of-way consultant, and
I\'ve dealt with the telecommunications industry and long-line
industries for about 20 years, and I just would like to pose to those
members of the panel that don\'t we have here somewhat of a
contradiction or an inconsistency when most, if not all, long-access
providers over the past 10, 15, 20 years ran to piggyback on existing
corridors of railways, pipelines, and other types of corridors, didn\'t
care what they had to pay, as long as they could get there ahead of the
other guy. And now they get to the gate of communities and say, gee, we
don\'t want to pay what the traffic will bear, we want it, essentially,
for a justifiable cost. That question was never posed to those owners of
corridors and other avenues to get you to where you are now in the
communities, so why do the communities have to bear an inequitable
participation in this process? Thank you.

MR. MAHER: Reactions from the carriers?

MS. SAKAMOTO: Well, I\'m no expert on railroad right-of-ways. The
right-of-ways, however, that railroads do own, I mean, they own them.
Those are their rights-of-way, and they were acquired for purposes of
their business for the railroad.

Now when those rights-of-way were abandoned because of disuse or other
reasons, and they wanted to either lease them out or sell them outright
or whatever, like a property owner, they could do that and charge what
was fair under some sort of rental, fair-market rental or fair-market
price for those rights-of-way.

We\'re talking about public rights-of-way that are streets and roads and
highways that were acquired for public use, dedicated for that purpose
using taxpayer dollars, for the most part, or dedicated to the city by
private developers because of the impact that their development was
going to have in the community. So I think there is a difference.

MS. REEVES: I would just say that, you know, there\'s just this false
idea there that we are all willing to pay reasonable prices for access
to the right-of-way. We just ask that they be reasonable and that they
be applied in a nondiscriminatory manner.

MR. MAHER: Okay. I\'d like to thank the panelists and also the audience
for your participation, and we will convene at 2:00. Thank you.

(Whereupon, the foregoing matter went off the record at 12:30 p.m. and
went back on the record at 2:06 p.m.)

MR. SNOWDEN: Don and fellows, can we take our seats? Welcome back from
lunch. I hope you enjoyed our fine cuisine in the two of our finest
dining facilities in Washington, D.C.

It is my privilege to introduce the next speaker. Nancy Victory has the
unusual distinction of playing two roles at once in the Bush
Administration. As Assistant Secretary of Commerce for Communications
and Information, she reports directly to Commerce Secretary Don Evans
and oversees the agency within the Commerce Department that manages the
federal government\'s use of spectrum. At the same time, she serves as
Administrator of the National Telecommunications and Information
Administration, or NTIA, and reports directly to the President on
communications policy matters. In her dual role, she has made spectrum
management and policy issues a priority.

Ms. Victory has also focused her attention on issues related to the
delivery of advanced internet services. In each role, Ms. Victory has
advocated competition, encouraged innovation, and promoted public safety
and security. Prior to her appointment to the Department of Commerce,
Ms. Victory was a partner in the Washington, D.C. law firm of Wiley,
Rein, & Fielding, where she focused on legal and regulatory issues faced
by communications companies. She received her BA from Princeton
University and her JD from Georgetown University Law Center.

It is my pleasure to welcome a public servant who wears multiple hats
and juggles several critical issues at one time, all with grace and
ease, Assistant Secretary Victory.

MS. VICTORY: Well, thanks for that great introduction, and I thank all
of you for coming out on such an awful weather day and for coming back
from lunch, too. I very much appreciate that. I saw how crowded it was
this morning, I just didn\'t know who\'d be back this afternoon, so good
for all of you.

I want to thank Chairman Powell and the FCC for convening this
rights-of-way forum. I know that you\'ve all been fortunate to hear from
state, local, and industry rights-of-way experts today, and I\'m pleased
to have the opportunity to share the Administration\'s view with you on
this very important issue.

Now in the world of telecom policy, we have a natural human tendency to
focus our attention on the high-tech, headline-grabbing issues of the
day. Whether it\'s broadband, the growth of Y-FI (phonetic) services,
advances in internet protocol, telephony, or something else, we\'re
instinctively drawn to these issues by the potential they hold for new
products and services and the threats that they represent to the status
quo. That\'s the challenge for our regulators. So it\'s understandable
that policymakers would devote time and effort to the subjects that are
going to shape the future of the telecom industry for a long time to
come.

But there is another subject that\'s equally important, perhaps even
more important, to telecom\'s future. Unfortunately, it\'s not
high-tech, it\'s not particularly sexy, and the press usually doesn\'t
write front-page stories about it; we\'ll see after this event. That is,
unless something goes terribly wrong. Now, of course, I\'m talking about
rights-of-way.

Rights-of-way, the term conjures up distant memories of dusty law books
and arcane legal terms like easements, leaseholds, and appurtenances.
Simply put, right-of-way is the legal right to pass through the property
owned by another. In the telecom arena, rights-of-way is about digging
trenches, laying fiber, constructing towers, submerging cables, and all
of the other things that are necessary to build out and upgrade of the
physical infrastructure for modern telecom networks. Sounds pretty
basic, doesn\'t it? And I can think of no issue more fundamentally
important to the widespread deployment of broadband and, really, just
about any other network technology than rights-of-way.

If fully deployed, broadband, which is also known as high-speed internet
access, has the potential to revolutionize commerce, education,
healthcare, national security, entertainment, and countless other areas
for the American people. As such, broadband is really a key to the
future economic growth of the telecom industry and to our economy as a
whole. But right now, only a relatively small segment of the American
population is enjoying the benefits of broadband.

In a report co-authored by NTIA and the Economics and Statistics
Administration titled \"A Nation Online: How Americans are Expanding
Their Use of the Internet,\" we found that 54% of Americans are
currently using the internet. However, of those users, only roughly 20%
have broadband access. Now, that\'s only about 11% of the overall
population. Well, data from the FCC and industry sources show that the
market for broadband service is continuing to grow. We still have a very
long way to go before realizing broadband\'s full potential, and
rights-of-way is a key ingredient in achieving that potential.

The Administration clearly recognizes the importance of broadband to
America\'s future. As President Bush has recently emphasized, in order
to make sure that the economy grows, we must bring the promise of
broadband technology to millions of Americans. Just a few weeks ago, the
President\'s Council of Advisors on Science and Technology, or the
PCAST, singled out rights-of-way management as a critical component of
broadband deployment. PCAST pointed out that if rights-of-way access is
unfairly denied, delayed, or burdened with unjustified costs, broadband
deployment is slowed, and our citizens are deprived of access to vital
communications facilities.

Now, as many of you know, NTIA has been focusing considerable attention
on rights-of-way management over this last year. We conducted a
broadband forum last fall and launched a broadband deployment proceeding
last winter, both of which raised rights-of-way as an issue. We\'ve
participated in NARUC\'s rights-of-way discussions, particularly its
Rights-of-Way Study Committee, and NTIA has also met with
representatives of cities and their associations, such as the National
Association of Telecommunications Officers and Advisors and the National
League of Cities, to identify means for improving and simplifying
current processes, where needed, while ensuring sufficient flexibility
for municipalities to best serve the needs of their citizens. Right now,
we\'re taking an in-depth look at some communities to learn, up close,
how they handle rights-of-way management at the state and local level,
and, later this year or early next year, we plan to issue a
rights-of-way report highlighting what we\'ve learned.

Now, while state and local rights-of-way policies will be crucial to
widespread broadband deployment, we\'re also acutely aware that the
federal government manages important rights-of-way over millions of
acres of federal land. To make sure that we\'re doing our part to
eliminate any unnecessary impediments in this area, the Administration
has formed a federal rights-of-way working group headed by NTIA, which
includes representatives from all of the federal agencies with major
rights-of-way management responsibilities.

The mission of the working group is to develop best practices for
federal rights-of-way management, particularly as it impacts broadband
deployment. Some of the primary participants in the working group
include the U.S. Forest Service from the Department of Agriculture, the
Bureau of Land management and the Bureau of Indian Affairs from the
Department of Interior, the Federal Highway Administration from the
Department of Transportation, the National Oceanographic and Atmospheric
Administration from the Department of Commerce, the Army, Navy, and Air
Force from the Department of Defense, and the General Services
Administration.

Now, the working group met for the first time in July. We\'ve been
pleasantly surprised by the enthusiasm with which the various agency
participants approached this effort. This is a group that is excited to
compare notes on rights-of-way experiences and eager to streamline and
simplify this process.

The working group has decided to focus its efforts in four basic areas.
First, information collection: broadband providers operating across
multiple jurisdictions are often required to supply the same information
in different applications to numerous permitting authorities. The
working group will be looking at ways to streamline and standardize
applications to save time and to reduce costs.

Second, timely process: broadband providers have an important need to
obtain rights-of-way permits on a timely basis. Otherwise, undue delay
can increase the cost of deployment and can sometimes prevent deployment
altogether. The working group will be examining rules and procedures
that help ensure timely and appropriate action on both rights-of-way
application and appeals.

Third, fees: this is, perhaps, the most contentious issue in the
rights-of-way debate. The nature and amount of fees charged to broadband
providers vary widely across different jurisdictions. We\'ll be
scrutinizing various fee structures, looking for approaches that are
appropriate and reasonable and that do not unfairly impede the
deployment of broadband networks.

And finally, remediation and maintenance: we fully recognize that
rights-of-way managers have a legitimate interest in ensuring that
broadband providers take appropriate action to repair and maintain the
rights-of-way that they use. We\'ll be looking for examples of
remediation and maintenance requirements that accomplish these important
objectives without placing undue burdens on broadband providers.

Now, at the suggestion of the agencies, we recently invited industry
representatives, large and small wireline and wireless, terrestrial and
marine, to meet with the working group last month and share their points
of view as to where, with respect to the federal government agencies,
things are working well and where more attention needs to be focused.
Next month, we plan to meet with some of the states and localities to
get their points of view. We\'ve learned that in some areas, like
highway construction and maintenance, state and local actions can play
an important role in the success or failure of federal rights-of-way
policies. We want to ensure that federal, state, and local land managers
all work together to address these common challenges.

And in the months ahead, the working group will be closely examining
federal rights-of-way practices and policies, looking for ways to
improve. We want to see the federal government lead by example and
create a model of cooperation that others can emulate. We plan to issue
a report with our findings, as well as recommendations for how the
federal government can reform its approach to rights-of-way to help
bring the promise of broadband to all Americans.

Now, while there is much work ahead of us and certainly plenty to learn,
I wanted to close by sharing with you some of my initial impressions
about rights-of-way. First, there are legitimate arguments on both sides
of this debate. On one side, the industry, everyone from Bell Operating
Companies, to rural carriers, to CLEC\'s, to cable companies, to
overbuilders, to wireless providers, our concern that restrictions and
fees imposed by federal, state, and local land managers on accessing
rights-of-way and tower sites might be inhibiting or, at least, delaying
broadband network construction. On the other side, land managers at all
levels of government are the stewards of public property and must ensure
that the rights-of-way are used appropriately. Recognizing that each
side has legitimate concerns is an important step in the right
direction.

Second, to make real lasting progress, the tenor of the relationship
between rights-of-way managers and the industry needs to change. Today,
federal, state, and local officials sometimes view broadband providers
as trespassers who should be kept out, rather than customers who should
be invited in. A more responsive customer-oriented approach to
rights-of-way management is essential to removing barriers to broadband
deployment. But just as storekeepers don\'t permit inappropriate
behavior in their stores, government officials must be allowed to place
reasonable limits on broadband providers\' activities.

Finally, to move forward on rights-of-way, we all need to work
cooperatively. One of the great attributes of modern networks is their
interconnectedness, which allows communications between individuals
across the street and around the world. At the same time, this means the
rights-of-way disputes can have a disproportionately adverse affect on
the roll-out of regional, statewide, national, or global networks. By
working with each other to address common problems, we can achieve
common solutions. Your participation in today\'s forum is a good sign
that we can, indeed, make progress on rights-of-way and bring the
promise of broadband to all Americans. Thanks, again, for inviting me to
speak today, and I\'m happy to address any questions you all might have.
Yes?

AUDIENCE MEMBER: The people that you\'re talking to, basically, are,
basically, either government or the industry. Are you bringing in any of
the people in the area whose lives you\'re affecting, such as people on
Indian reservations or the people who live on the military reservations.

MS. VICTORY: At this point, I think we would be happy to talk with some
of those folks. We\'re looking at process issues. I think, in most
cases, some of the municipalities or the states that we\'re talking to
would be representing some of those interests but, certainly, if there
were unique concerns among those populations, we\'d certainly be happy
to hear from them. Yes, sir?

MR. BRILL: Robert Brill from New York. With regard to the working group
and its proposals, what is the ultimate form that the Administration
feels it would like to see come out of that? Is that proposed
legislation, a proposal for rulemaking from the FCC, or what? Thank you.

MS. VICTORY: It may take a number of phases. I think, right now, we are
anticipating there will be a report with recommendations for
administrative changes in the way the federal agencies do their
business. Whether that\'s a common application, a common web portal,
articulated processes, or better information exchange, certainly we
would expect that that would come out of it.

In the course of our considerations, it may be that we identify areas in
which Congress can provide assistance in achieving those goals or where
the FCC could provide assistance in achieving those goals. I don\'t know
whether that will occur or not, but, certainly, the first items that I
mentioned, the report and then recommended changes and affected changes
to Administration processes, is what we first anticipate will come out
of this.

AUDIENCE MEMBER: Hi, may name is Marilyn Praisner (phonetic). I\'m a
council member in Montgomery County, Maryland and involved with the
national organizations. I guess I had some visceral reaction to your
comment that local government views the industry as trespassers. I\'ve
never heard of local government use that term at all, and I just would
like to offer the opportunity to follow-up with you because, if we have
some examples of that, then we certainly have to deal with it, but I
have never heard any local government use the term \"trespasser.\"

MS. VICTORY: Well, and I certainly hope that that\'s not a widespread
view of the communications industry. I think what I was trying to
highlight is, often, the debate between the land managers and the
industry, on the other hand, can be quite contentious, and I think we
should be looking at each other in a cooperative manner in order to
foster more of a buy or sell or customer/storekeeper relationship that
can ensure that the result is to the benefit of all. But I am certainly
hoping that that is not a widespread view among the federal agencies,
the localities, or the states. Clearly, that would be a particular
problem. Yes, ma\'am?

MS. BEERY: Hi, I\'m Pam Beery. I\'m an attorney in Oregon representing
local governments and, first of all, I want to thank you for taking the
time to be here today. It\'s important to us that you are here. I was
intrigued by a comment you made about your working group taking an
in-depth look at some communities.

I had a question about how those were selected and who they are, and the
follow-up how could governments across the country, who do cooperate in
national associations, get more information about the process that you
are involved in?

MS. VICTORY: Well, actually, that\'s not going to be the working group,
that\'s just going to be NTIA that will be taking a look at those, and
we\'ve actually solicited suggestions, both when I was at the NARUC
meeting from some of the state commissioners. I\'ve certainly solicited
it from industry and also from some of the representatives of localities
that I\'ve dealt with. We are still gathering information. We do not
have a finalized slate of communities at this point. If you have any
information you could provide to use with regard to communities or
geographic areas that do it right and why that\'s the case, we\'d be
very appreciative of the input. And specifics, we very much love
specifics. We sometimes get some general nominations, and that\'s just
not enough to base a case study on, but, certainly, it helps to focus
our attention. Yes, sir?

MR. MELCHER: Good afternoon, Assistant Secretary. I\'d also like to
thank you for being here and taking the time to spend with us on
right-of-way. My name is Chris Melcher. I handle right-of-way issues for
Qwest. I was curious, also, if NTIA had begun to look at the nature of
right-of-way as a property vis-à-vis other types of property and how
that might affect the management of the right-of-way, as well as the
charging of fees or addressing the costs of the use of the right-of-way.
And what I\'m thinking is has NTIA begun to think about whether
right-of-ways are held in the proprietary interests of a community or
whether they\'re held in trust for the public and if that affects the
analysis. My wife is a financial officer for the Colorado State Land
Board, and the state does actually hold land in an ownership interest. I
wonder if you have thoughts on that versus right-of-way, and how that
might affect the analysis.

MS. VICTORY: Certainly, the legal issues surrounding rights-of-way,
surrounding Section 253 are very complex and very interesting from a
legal scholar\'s point of view. I think, at this point, with respect to
our federal working group, we are trying to focus in on the
administrative processes that we can impact quickly.

But you are correct, there are very significant legal issues that need
to be looked at here. That may be something that we do in time. I think
our first order of business is focusing in on some of the processes that
we can improve that are already in place, some of the streamlining that
can be done.

I know that there\'s a long history of interest on the part of the FCC,
on the part of the states and localities, and on the part of the
Administration, as well, in looking at some of these issues, but
they\'re not ones that are going to be resolved particularly quickly,
and so, therefore, we\'re trying to focus, very practically, on where we
can make a difference quickly, and that tends to be on process and
procedure. Yes, sir?

MR. ASHBUM: My name is Garth Ashbum. I would hope that, when you\'re
looking at that, it would be in the same way that the government looked
at, for example, the auctioning of Spectrum, and how that would, you
know, the same type of interests of government would play in there.

MS. VICTORY: Well, yes, and I think, if I understand what you\'re
referring to, you need to look at it from a legal point of view and also
a policy point of view as to what makes sense. Any other questions? All
right. Thank you very much.

MR. SNOWDEN: Thank you very much for your remarks and your taking time
out of your busy schedule to be with us today. I\'d also like to
acknowledge the Chairman and the Commissioners Abernathy and Martin for
also being with us today.

We\'re ready to start our third and final panel. Ken Ferree, the Bureau
Chief for the Media Bureau, will be the moderator of that panel, and
they\'ll be looking at issues related to the policy of rights-of-way
management and looking ahead. So without further ado. Again, thank you,
Ms. Victory. Thank you, Mr. Chairman and commissioners. We\'re ready for
the third panel.

MR. FERREE: Thank you very much, Dane. We are going to start this
afternoon\'s panel, which deals primarily with issues associated with
managing the rights-of-way themselves. As Assistant Secretary Victory
just noted, we do hear a lot of complaints about this process. Some of
the complaints we hear depict rights-of-way management as a cumbersome,
time-consuming, confusing, and arbitrary process with burdensome
requirements imposed upon telecommunication providers.

On the other hand, we hear complaints that companies or their
subcontractors are doing careless work, providing inadequate
information, doing poor restorations to the streets and roads, and that
coordinating projects across multiple jurisdictions is difficult. Often,
one side or the other is depicting the other one as not cooperating.
Both sides seem to distrust each other. The local citizens are
inconvenienced and annoyed. Have I left anything out of this list?
Marilyn, have I left anything out of this list? And I can tell you, as a
motorcycle rider, the street restoration thing is very important to me.
The good news is that, in a lot of places, the process actually works
well. Existing facilities are upgraded, new facilities are built, and
the public gets new and better service.

This afternoon\'s panel will explore how those who manage rights-of-way
and those who use them can and have worked together to make
rights-of-way management a success. Our panelists come from local
government, state government, and industry, and all have considerable
experience with solving problems experienced in the field, and they\'re
here to share some of those experiences with us.

So I think my lead-off hitter today is Bob Chernow, a stockbroker for
more than 26 years, who\'s Vice President of RBC Dane Rauscher in
Milwaukee, I think I pronounced that correctly. Mr. Chernow chairs the
Regional Telecommunications Commission and the North Shore Cable
Commission in Southeastern Wisconsin. The RTC has 27 members, and its
communities make up about one-third of Wisconsin\'s population. Mr.
Chernow?

MR. CHERNOW: Thank you very much. Utilities have changed the way they
operate in the last several years. Much of their construction is
subcontracted out, and they make it a practice to lease much of their
equipment. In addition, competition has changed many of the utilities
that we deal with from being protectors of the communities to where
they\'re being very competitive of the utilities. This new approach has
been driven by economics and has both positive and negative results. It
also appears as if construction has increased over the last few years
because of competitive pressures, as well as the advent of new services,
such as broadband service.

Competitive pressures, however, have eased recently because of
over-capacity in the industry and also the failure of several industry
firms. Nonetheless, we see the future as one where business and consumer
demand for high-speed internet will continue to increase dramatically
over the next several years.

In our community, some 27 municipalities in metropolitan Milwaukee or
about one-third of Wisconsin\'s population, we have a very active
commission which handles telecommunications and, also, rights-of-way and
restoration issues. The first time I\'ve heard anything discussed on
restorations is in the introduction to our meetings here. In general,
what we\'ve done here is we make our contracts with utilities,
basically, as a group. We band together. We do this, in part, because
we\'re fairly cheap in Wisconsin, and it\'s fairly expensive to go out
and get outside experts and legal services. This is, basically, how we
started. We, basically, collect all our assets together and we,
collectively, work with the utilities. We have done this very
successfully in the past. Importantly, however, each locality, each
municipality has to approve what they\'re doing. I don\'t think this is
necessarily unique throughout the country, but it is very important to
us.

Where community is somewhat unusual, like the city of Milwaukee, where
they own their own conduits where telecommunications and other utilities
use their services, it\'s far different than the normal rights-of-way
that you would have in other communities, the base of the contract is
used and then they negotiate separately. In principle, again, we
negotiate as a group, but we approve contracts individually, and this
saves us a great deal of time and, also, the utilities.

In creating rights-of-ways and restoration standards, we use the same
principle. In the past, one of the problems that we recognize is that
utilities coming into our area, we\'re dealing with all different types
of restoration standards and all different types of rights-of-way
standards, and what we\'ve done here is we, basically, have made one
system that goes throughout our area and, also, one system of
restoration, so that all the utilities and their subcontractors are,
basically, working on a level plain; they know exactly what to expect;
very, very important. It seems like a very small issue. It took us about
two years to do this.

Our secret to success, however, is that we did not use municipal
officials, elected officials, basically, to do this. I was the only
elected official on this group. It was made up, basically, of inspectors
from the Department of Transportation, engineers, public works
supervisors, and other people, basically, who work on this on a
day-by-day basis. They are the ones who really know what the problems
are, what the real problems are and what the pretend problems are. They
are the ones who know, basically, which utilities give us difficulty and
which ones don\'t. And I emphasize that this practical aspect is
something that should be utilized in any dealings with the utilities.

One of the things that we discovered after we created these
rights-of-way and standards and restoration standards was that most of
our difficulties came from one utility, SBC Ameritech. And before you
think I\'m going to be critical over here, I want to be very
complimentary to them.

What we did, basically, is I picked the phone up, I called the president
of SBC Ameritech in Wisconsin, and I asked him if he would like to sit
down with a group of our people, basically, our engineers and people
from the DOT, and to work out the difficulties that we\'ve been having
in the past. About a month and a half later, we set up a meeting,
basically.

The first thing we did was we had an open and frank conversation of the
difficulties that we had on both sides because it\'s not just a one-way
street, it\'s a two-way street. And the solutions we came up with, I
think, were very good and, again, very obvious but rarely used in many
places around the country. First, to sign up a line of communications to
handle complaints. They had one single person that you could go to who
would handle the difficulties of backlog that we had.

One of the things here was that SBC had just taken over Ameritech, and
they had no real vested interest in the problems that had come in the
past. They needed to solve it. Also, capitalism was at work, and they
had lost a lot of business in the area. They had a major motivation to
solve the problems from the past.

The second solution was to have SBC Ameritech agree to put into their
contracts a requirement that all their subcontractors meet with the
local municipalities to coordinate construction before they started
construction. Again, something very obvious but had not been done
before. In addition, they agreed to hold money back from the
subcontractor until restoration was signed off by the local
municipality.

Now, what\'s interesting about this is that many of the subcontractors
they\'re using aren\'t from a suburb of Milwaukee, Wisconsin. They\'re
from Minnesota, Illinois, Michigan. And once they do their work and had
gotten paid, it\'s hard to go back and get them to do the work, so who
do we blame, of course? The local utility. This solved their problem, as
well as ours.

One area where there was a reluctance for cooperation, with an
understandable reason, is when and where future building was to be done.
Partly, this is because of the way the utilities plan in a more
marketing-like environment and, also, because of competitive reasons. We
understand this, and we\'ve not tried to force the issue. Instead, what
we\'ve tried to do, and we should have this completed here in the next
month or so, two months, is to work out a system so that we can let them
know, basically, how we operate, so that we let them know what our plans
are in the future so they can work with us.

Cooperation means win/win for all concerned over here. We have a working
relationship, also, with municipal electric utilities of Wisconsin. One
of their members, Reedsburg, wanted to get a high-speed internet for
their communities. They worked out a cooperative agreement with the
local telephone company. This is the type of thing where capital can be
provided from one group to the other to help out the community that
should be utilized.

We all want the same thing: good service at reasonable cost for our
communities. The Regional Telecommunication Commission has worked with
utilities to help accomplish this goal and a work in a win/win manner
for all concerned. And that\'s the thought I\'d like to leave with you.
Thank you.

MR. FERREE: Thank you, Bob. Our second panelist is Dorian Denburg, Chief
Rights-of-Way Counsel for BellSouth Corporation. Ms. Denburg manages
public and private rights-of-way issues for BellSouth\'s nine state
regions, overseeing analysis of telecommunications and permitting
ordinances, handling rights-of-way litigation at the federal and state
level, and participating in the development of legislation pertinent to
the telecommunications industry. Ms. Denburg?

MS. DENBURG: Thank you very much. I\'m very pleased to have an
opportunity to come full circle today and close the program where we
began. I\'d like to commend and thank the Commission for holding this
forum, which recognizes that significant problems exist in rights-of-way
because I think it presents an opportunity for a new language and a new
vocabulary in rights-of-way management: communication, collaboration,
and coordination.

In order to give force and effect to this new language, I think there\'s
been a lot of discussion today about guidelines, and I believe that the
FCC can, in fact, have an instrumental impact on this by promulgating
rules that delineate authority to regulate public rights-of-way, to
adopt an enforcement mechanism, it sounds like what Bob is talking about
at his local level for resolving problems, adopting uniform standards or
model regulations for access to rights-of-way, and, of course, in doing
so, recognizing the local governments\' police powers.

There are principles and practices for rights-of-way management in
preventing barriers to entry, which we all can and, I think, should
accept. It was mentioned earlier that, in the Commission\'s 706 report,
four key measures with respect to right-of-way access were noted, and
Assistant Commerce Secretary Victory alluded to these, as well.

Delay: we should allow right-of-way access to all entities providing
services or deploying facilities and issuing permits within a reasonable
and fixed time. And in response to Commissioner Abernathy\'s question, I
think that we would suggest that 30 days is, generally, a reasonable
time, unless there\'s an exigency.

I was going to speak about unreasonable fees, but I think that there\'s
been enough discussed about compensation and fees, and I\'ll move on.
Third tier of regulation: there is absolutely no question that local
governments have police power to regulate and manage use of the
rights-of-way. I believe it was mentioned earlier that nobody in the
industry doesn\'t want local governments not to manage the
rights-of-way, and, of course, this is true. We\'re citizens, and we
live and work in these communities. Local governments have the right and
responsibility to protect the traveling public, to ensure their
citizens\' health, safety, and welfare. Managing rights-of-way is
certainly legitimate, but regulating telecommunications providers is
not.

And lastly, discriminatory treatment: rights-of-way regulations should
be generally applicable to all telecommunications companies in the
rights-of-way. These principles are embodied in a concrete example that
I would like to address of moving beyond roadblock, and that is the
Florida Communications Services Tax Simplification Law.

We had numerous court cases in Florida and a plethora of problems. The
governor created a telecommunications task force, which worked with a
tax work group comprised of approximately 34 private sector companies.
The recommendations which came out of these two groups were sent to the
governor and the legislature. Florida forged a working coalition of key
stakeholders: the Florida Cable TV Association, the Florida League of
Cities, the Florida Association of Counties, and the Florida
Telecommunications Industry Association. There was clearly created an
atmosphere of trust and collaboration. There was strong leadership from
key state policymakers, who mobilized to accomplish their goals of fair
right-of-way management and equitable taxation. I\'m not going to
address the equitable taxation aspect of the legislation that was
created but, instead, I\'m just going to talk about the right-of-way
management.

The legislation says that no franchise, license, or agreement may be
required as a condition to using the right-of-way. Localities may not
use their right-of-way authority to assert regulatory control over
providers. Rights-of-way regulations must be generally applicable to all
rights-of-way users, and rights-of-way regulations must be reasonable
and include only those matters necessary to manage rights-of-way.

Yes, I am a member of the industry, but I would invite you to speak to
any of your colleagues in the municipalities, in the counties, or in the
industry in Florida. I believe all of us agree that this legislation has
been a tremendous success, and as a result of the legislation, we
produced, in collaboration, an ordinance. Do we today have problems? We
have isolated problems. They are isolated, they are not everyday
problems. And as a result, it has allowed us in the industry and those
in local government to focus on their poor business. For us, it\'s
telecommunication services, and in the government, it\'s tending to the
business of everyday government. We have had similar legislation in
South Carolina, similarly a success.

In conclusion, these are unprecedented times. Industry wants to work
with local government to help them protect their interest in managing
the rights-of-way and legitimately exercising police powers, while, at
the same time, enabling telecommunications providers to respond to the
demand for services leading to economic growth. Government and industry
are partners in this, whether we want to be or not. And by working
together and speaking the same language, communication, collaboration,
and coordination, government and industry can become partners in
progress and craft a solution that, as Commission Copps said this
morning, is a win for government, a win for industry, and, most
critically, a win for consumers. Thank you.

MR. FERREE: Thank you, Ms. Denburg. Our third panelist is Ken Fellman,
who is a partner in the Denver law firm of Kissinger & Fellman, PC. Mr.
Fellman works with municipalities in the development of
telecommunications policy documents, rights-of-way management, tower and
antenna siting, and other related telecommunications and land-use
issues. Mr. Fellman was elected as mayor of Arvada, Colorado in November
of 1999 and, before that, served two terms on the Arvada City Council.
I\'ve had the pleasure of getting to know Ken through his work on the
Local and State Government Advisory Committee for the FCC, in which
he\'s served since 1997, of which he is now Chairman of that committee.
Mayor Fellman?

MR. FELLMAN: Thank you, Ken. And I, too, would like to thank the
Commission for giving us the opportunity to have this discussion today.
We\'re supposed to talk on this panel about where do we go from here,
and I think before we talk about charting a course for where we\'re
going, we need to examine where we are.

I think where we are is the level of discourse between the industry and
state, federal, and local government, while some of it has been
positive, much of it has been less than stellar. All parties, really,
have been too willing to say no. All parties have been willing to
complain about another party to a third party. All parties have been too
willing to seek solutions in adversarial proceedings, rather than
talking and trying to hash out the difficult issues. And if we\'re going
to have discussions that are going to enable us to deal with these very
difficult issues, each party must make a real effort to understand the
foundational issues of importance to the other. I don\'t think we\'ve
done a very good job of that.

On the local government side, management of rights-of-way is, at its
core, a local government responsibility. As Lisa Gelb mentioned this
morning, local governments have to balance many factors, one of which is
telecommunications. It\'s important, but there are many factors that go
into the balancing of how you regulate this asset.

Section 253 really does, in our opinion, strike the proper balance, of
course, when it\'s interpreted correctly because it lets the government
that\'s closest to the people manage this very local public asset. It\'s
important to remember, and I agree with one of the industry
representatives this morning pointed out that Section 253 doesn\'t grant
any rights-of-way management authority. It doesn\'t. Rights-of-way
management authority pre-dates the Telecommunications Act. It\'s a
function of state and local law. It varies from state to state. And I
think if we remember that as part of our discussions, we\'ll be able to
make a lot more progress than we have.

Local governments strongly support the deployment of broadband services,
and we are committed to working with all interested parties and
committed to educating those of our members who need education on these
important concepts. Let me give you a couple of examples. Our national
associations, NATOA, National League of Cities, National Association of
Counties, U.S. Conference of Mayors, and the International Municipal
Lawyers Association got together and published this booklet, \"Local
Officials Guide to Telecommunications and Rights-of-Way.\" It\'s got
very helpful information about many of the issues that we\'re talking
about.

The Local State Government Advisory Committee, despite some of the
comments we heard this morning, I think has been having productive talks
with the Industry Rights-of-Way Working Group. They\'re difficult. There
are problems that come up that are very frustrating, but I think,
personally, those have been productive discussions. I hope they
continue, and I think we can get there from here if we do continue.

Local government national associations regularly invite industry and
state and federal representatives in the field of telecommunications to
our national conferences to engage in discussion about these issues.
Local governments also regularly request and sometimes bet the
opportunity to speak at industry and state and federal panels on these
same issues.

I think the FCC\'s role should be to facilitate discussions between the
parties, and, actually, the FCC has done that in the past and has done
it successfully. With the wireless industry, the FCC facilitated
discussions between local governments and the industry on the issue of
zoning moratoria, and the result of that was a voluntary withdrawal of a
preemption petition and a resolution of that problem. The FCC worked
with the LSGAC to come up with the radio frequency emissions guide that
is now very well known in local government circles, and you don\'t see
the issue of radio frequency emissions coming up at zoning hearings in
the way it did previously.

I think through education, cooperation, and respectful negotiation,
we\'re going to get to where we need to go faster than through
litigation and legislative lobbying. I want to give you one specific
example that we have in Colorado.

The Greater Metro Telecommunications Consortium is an agency of 28
counties and cities in the Denver metro area. The consortium got
together in the early 90\'s. In 2000, we decided that it might make
sense if we had similar rights-of-way regulations throughout all of our
different jurisdictions, so we put together a group to come up with a
model right-of-way ordinance. We invited the industry to the table, not
just the telecom industry but everyone that\'s in the right-of-way, gas,
electric, water. And some of that worked great and some of it was
problematic. What worked good about it was that a number of the folks
from the industry who really understood and wanted to respect the local
government issue said, We understand where you\'re going, but if you do
it this way, it hurts our business. We think you can do it this way. And
it made sense and changes were made, and we ended up with an ordinance
that I think has been very successful. One of the ways I judge the
success of that is that we haven\'t seen any litigation over it.

Do I recommend that everywhere? You know, we\'ve heard a lot of talk
today about best practices. No, I don\'t, and I think the most important
thing we can learn about best practices is that there are no best
practices that will work everywhere in the same way. There are good
practices, there are success stories that we need to take advantage of
and we need to learn from, but what works in Erie, Pennsylvania doesn\'t
necessarily work in Erie, Colorado.

I think we need to really focus on what can we learn from these best
practices without mandating them on anyone. This forum is part of the
process of sharing that information, but I would ask everyone to think a
little bit about the difference between disseminating information, which
I think we do well, and communicating, which I don\'t think we do very
well.

This rights-of-way book that I mentioned earlier has been distributed to
industry and the FCC and NARUC, and we haven\'t heard back. I talked to
the principal authors of it. No one has heard back, this is great
information, it\'s bad information, it\'s accurate, it\'s inaccurate. We
need to take these bits of information that we\'re sending back and
forth and really talk about what works and what doesn\'t work.

Let me close by just making a couple of comments. If we have a better
understanding and respect for where each side is coming from, if we take
sufficient time to educate each other and ourselves about what we need
to get accomplished, if we look at what has worked in other communities
and learn from it but don\'t expect somebody to mandate on you, whether
it\'s a guideline or a best practice or a regulation \-- actually,
there\'s always one exception to every rule, so let me make an exception
to that one. If Commissioner Abernathy can figure out a way to get a
right-of-way across her daughter\'s room that you talked about this
morning, I will mandate that in my household.

I think the FCC, and Congress to a lesser extent, can facilitate the
cooperative dialogue by sending a message that they will not get
involved in adversarial proceedings unless the parties have really taken
the time to work these issues out. I think a lot of times we spend too
much of our resources responding to adversarial proceedings or
responding to FCC questions or notices of inquiry, when we could be
sitting at the table trying to work these problems out.

The bottom line is, you\'ve heard from a number of speakers this
morning, that there\'s no federal jurisdiction to preempt local
rights-of-way practice. I believe that\'s what the statute says. That
being said, local governments are willing to come to the table and
discuss ways to streamline the process, but they won\'t stand for
getting steamrolled in that process. Thank you.

MR. FERREE: Thank you, Mayor Fellman. Our fourth panelists is Sandy
Wilson, the Vice President of Public Policy for Cox Enterprises, Inc. in
Washington, D.C. Before joining Cox in 1994, Ms. Wilson had a job
that\'s near and dear to my heart. She was Chief of the Cable Services
Bureau here at the FCC. And before that, she served as legal advisor to
Chairman Al Sikes. She should bring an interesting perspective of a
company that is both a cable operator and a competitive
telecommunications carrier. Sandy?

MS. WILSON: Thanks very much. I\'m happy to be here, and I was even
happier to be here after hearing some of the comments said about the
cable industry this morning. As many of you know, Cox Communications is
the fifth largest cable company in the country. We serve over six
million subscribers. What you might not know, though, is that this is
our 40^th^ year in the cable business, and that means, of course, that
it\'s our 40^th^ year of dealing with public rights-of-way issues. And
just as the business as evolved over time, so have the many
rights-of-way issues that we\'ve had to grapple with. When we first got
into the business in 1962, we just offered what I would call POTS, plain
old television service. And now 40 years later and six years after
passage of the Act, we are a full-service broadband provider. We offer
not only a range of video products, but also high-speed internet access
and local competitive residential phone service over the same integrated
plant. I\'m happy to say that all of these new products have been
eagerly embraced by our customers.

It\'s fair to say that Cox employees have faced enormous and
exhilarating challenges developing and deploying these new services over
our upgraded cable networks. Each service is unique and requires its own
distinct commitment of capital expertise in human resources. At the same
time, each service has to be closely coordinated with the other because
we have to provide an integrated seamless experience to our customers.

In many ways, I think policymakers face a similar challenge. As the
marketplace becomes increasingly competitive and lines between
incumbents and new entrants blur, government and industry must develop a
coordinated approach to rights-of-way management. It was policymakers
who asked us long ago to get out of our old lines of businesses and
start competing with other folks, and it\'s government policymakers who
have encouraged us to begin the deployment of broadband services. And
the cable industry, I think, has heeded those calls, and we are now at
the forefront of offering a range of services. But we do feel a little
bit lost in the regulatory woods when it comes to figuring out what the
rules of the road are when you\'re offering different types of services
over an integrated infrastructure.

So let me tell you a little bit about some of the challenges that we
face as cable operators and then give some suggestions on how we can
move forward. Although we\'re not unlike other rights-of-way users in
many respects, we are unique, I think, in two important respects. First,
the relationship between cable companies and local governments is more
extensive than is often the case with other rights-of-way users, such as
incumbent telephone companies. In addition to working closely with local
governments on rights-of-way management issues, cable television
services, traditionally, have been subjected to additional local
regulation, and, as a result, the cable industry has forced a unique
relationship with local government that is rarely shared by other
communication service providers. In fact, most cable operators see
themselves as partners with their local communities, and they work
extremely hard to foster close and strong relationships.

We are also unique, at this point in time, in another critical respect,
and that is that we are usually the only facilities-based provider in
our communities offering a range of services over one infrastructure. As
you all know, our video services or cable services regulated under Title
6. Our local phone services or telecommunication services is regulated
under Title 2, and we learned last March that our high-speed internet
access services or information services, which are governed by Title 1.
And the reality is we know, generally, what the rules of the road are
for video services. They\'re governed under Title 6, and we\'re starting
to get some greater clarity about what the rules of the road are for
Title 2 service providers, although there\'s obviously still a lot of
debate about that. But once you throw Title 1 services into the mix, you
get, you know, the regulatory debate gets even hotter.

So the result is that we\'ve spent a lot of time over the last six years
talking with our local regulators about how to resolve some of these
issues, and, in many cases, the discussions are cordial, and we\'ve been
able to move forward with very little resistance.

And I\'d just like to mention quickly our experience in Omaha, Nebraska
because I think it\'s an excellent example. With the extensive
cooperation of local government officials, we were able to deploy both
competitive phone service and high-speed internet access smoothly and
efficiently in Omaha. They did not enact new ordinances. They did not
require additional franchises. They relied on existing permitting
processes, and they moved things right along. And, indeed, they did the
same thing for Qwest, and we enjoyed very speedy action, as did Qwest,
and, as a result, we now have Qwest and Cox go head-to-head, providing
the full-range of services in Omaha. We\'ve got a very, very vibrant
competitive landscape there, and I think it\'s, in large part, thanks to
both the state of Nebraska statutes and, also, the commitment of local
regulators.

We do run into problems, however, in some communities, and they are
similar to the ones other face. And then we had the unique issues of,
you know, do you need to get another franchise if you\'re offering
telecommunication service and you already have a cable franchise? Do you
have to pay every time you roll out a new service? And we\'ve had a
particular problem placing some back-up power supply cabinets in
rights-of-way, which enhance the reliability of our networks.

But we have found that there are ways of working through these issues,
and I\'d like just to mention a few. First, I\'ll just add my voice,
another industry voice, to requesting that the FCC take up at least some
of the key questions involving interpretation of the Communications Act
provisions dealing with the interplay between Title 6, Title 2, and
Title 1. That would be great for cable operators and their local
regulators if we had some greater clarity there.

We very much believe we are longstanding users of the rights-of-way,
that a cooperative approach to dealing with the day-to-day management
issues is the best way to go, and we do lock ourselves into rooms with
local regulators when we get stuck sometimes and try to hash things out.
And often those cooperative efforts really do bear fruit, so we are very
much committed to that. We do like very much the fact that policymakers
at all levels of government are now getting greater visibility to these
rights-of-way issues and are talking about best practices, and, while it
may be that there\'s no one set of practices that every could follow, I
think the fact that we get more examples out there will be that much
more useful. And lastly, we are supportive, as an industry, of the
states\' efforts to take on these issues and adopt statewide measures
because the reality is certainty goes a long way, and even if you\'re
not in total agreement with the end result, at least you know how to
proceed, and we can all go about our business of providing new services
to customers. Thank you.

MR. FERREE: And our final panelist is Robert Nelson, who is a
commissioner at the Michigan Public Utility Commission serving a term
that ends in 2005. Mr. Nelson served as President of the Michigan
Electric and Gas Association from December 1987 until his appointment to
the commission in 1999. From 1979 to 1987, he was Director of the
Michigan Commission\'s Office of Regulatory and Consumer Affairs. Mr.
Nelson serves on NARUC\'s consumer affairs committee and the
telecommunications committee, of which he is co-vice chairman. Mr.
Nelson also is a member of the FCC\'s North American Numbering Council.

MR. NELSON: Thank you, Ken. Thank you to the members of the Commission,
who invited me here to speak today and also participate in this
conference and for giving me the last word, I guess, today on this very
vigorous and public-spurred debate. The purpose of this panel was to
offer positive recommendations, and many of the panelists have done so,
and I intend to do the same. I\'ll rely heavily on the NARUC Study
Committee report that was issued earlier this year, which did deal with
positive recommendations.

This is just a pictorial display of some construction of right-of-way
put together by Florida staff. This is a significant quote, which will
appear on the screen shortly. When Euclid theorized that the shortest
distance between two points is a straight line, he didn\'t take into
account that there might be public rights-of-way in between the two
points. I think that\'s pretty obvious from what we\'ve heard today.

There certainly, as Alexandra just mentioned, a significant role for the
states in this whole debate. We haven\'t heard a lot about that today,
but if you look at Section 706 of the 1996 Act, it does say that each
state commission shall encourage the deployment on a reasonable and
timely basis of advanced telecommunications capability to all Americans,
and that would include measures that remove barriers to infrastructure
investment. So we have the state role there.

Also, as we\'ve talked about earlier today, Section 253(a), on the other
side of the scale, makes sure that the states and local governments do
not have ordinances or requirements that prohibit or have the effect of
prohibiting the ability of any entity to provide intrastate or
interstate telecommunications service. Mr. Knight had indicated that
right-of-way humor was an oxymoron. This is, perhaps, an attempt to
belie that. If you can read the quote from the fellows walking across
the golf course, but the fellow who is not being hit by the golf ball
says, \"Stop moaning, Norman. There\'s a public right-of-way on this
golf course.\"

As we\'ve heard throughout most of the day today, there are a number of
problems that have been identified. Again, as NARUC discovered, this is
not true in all communities. In fact, not even a majority of
communities. But certainly, we have identified these various issues, as
well as others. The unreasonable delay in getting permits, the excessive
compensation, conditions unrelated to rights-of-way management,
requirements to waive legal rights in order to gain access, requirements
contrary to state law and discriminatory terms and conditions. This is a
graphic display of some of the right-of-way problems that some
communities are facing. I think it dates back to the turn of the last
century.

As a result of those problems that were identified, NARUC, in February
of last year, adopted a resolution, and it identified these problems in
the resolution and called for the creation of a study committee to deal
with these problems and bring forward recommendations. And that\'s where
we get the Study Committee. There were five topic areas for the topic
areas for the Study Committee, and each topic committee had a
commissioner, a state commissioner in charge of that particular topic
area: public lands, Commissioner Kjellander from Idaho; myself from
state legislation; state and local policy initiatives, Commissioner
Cartagena from right here in the D.C. area; federal legislative and
policy recommendations from Commissioner Deason from Florida; and
condemnation recommendations from Commissioner Burke of Vermont.

The Study Committee, after the resolutions adopted in February, had
several meetings, conference calls, e-mail exchanges, and created a
report which contained model state legislation and contained a number of
recommendations. Finally, the NARUC resolution was adopted this summer.
The participants in this Study Committee debate included all the players
that we\'ve heard from today, some of the major carriers, NATOA, NCTA,
and the National League of Cities.

I won\'t go into too much about this, except to say that the Study
Committee did bring forward this report, the NARUC reviewed it and,
although the NARUC did not endorse it all in respects, it did say that
it should be carefully reviewed. We have brought copies here today. We
encourage you to review it. It does have supplemental views from both
the cities, local governments, and from industry.

Public lands, as Nancy Victory talked about this afternoon, is a very
significant issue. I won\'t go into a lot of detail here, but the two
issues identified, as you can see on the screen, are the delays from
federal agencies and also the excessive fees some agencies charge at the
federal level.

State legislation: what we did was to survey 19 different states. Most
of these states had passed legislation since the \'96 Act, and we
identified the best ideas, developed a list of best practices, and,
again, I would accept Mr. Fellman\'s characterization of maybe not best
practices but some good practices, and we created some model state
legislation. Some of this legislation is modeled after the Michigan law
that passed earlier this year, but let me just very quickly highlight
some of the features in it that are relevant to the positive
recommendations. We dealt with timeframes, and not only did we have
specific timeframes that were recommended for a permit to be approved
but, also, during the course of a dispute, the state could order local
government to authorize that permit to be issued pending that dispute,
so that the construction could begin and the rest of the issues could be
resolved later on.

With regard to the fee, we had two choices. I think it\'s very
important. One is the fair and reasonable cost standard, and the other
is a fixed fee, which is what we adopted in Michigan. You may ask how do
we get all the local governments in Michigan or most of them and the
providers to agree to a fixed fee? Well, it was very simple because we
did maintain local control. Local governments in Michigan still have the
management of the right-of-way under their purview. The state
administers the fee process, however. And that fee is nondiscriminatory.
It meets the White Plains test, in my view.

We dealt with restoration, and we dealt with remediation, which I think
is important for getting groups together and solving problems absent
litigation. And just very quickly with the next slide because John Mann
would quick me if I didn\'t show this. Some federal legislative and
policy recommendations, and this is in the report, I\'ll just put it up
on the screen. Again, this is not intended to have the FCC preempt
states or local governments but to have the FCC promote best policies.
And that\'s what the FCC can do is to clarify their role here, add some
certainty to the process, and I think even if they do step in, it\'s
important that state and local governments work together in a
cooperative manner, and we must work together to remove barriers to
entry. Thank you very much.

MR. FERREE: Thank you. I see we have almost 20 minutes left, so we\'re
going to have some time for some questions. I think, as moderator, I
probably get to start. Dane asked me to moderate this panel. I said I\'d
be happy to be moderator, but I\'m often more comfortable in the role of
agitator, as opposed to moderator, so I\'m going to jump right into that
role now and start with Bob down there.

Bob, you suggested in your comments a rather limited role for local
elected officials, and I\'m sort of curious about that. I mean, it seems
to me a lot of this involves not just technical questions but, really,
policy questions, and these are the folks, after all, that hear the most
from their constituents and maybe best appreciate the value of the
property that we\'re talking about. So can you elaborate on that?

MR. CHERNOW: I\'m actually a local official myself, and we had one
other, when we met with Ameritech, we actually had one other elected
official. But the reality of it is that they are technical issues on a
local basis, and those are the problems that we run into on a
case-by-case basis. So my advice would be to continue to use this. Also,
importantly, they\'re the ones who actually enforce the regulations.

MR. FERREE: Libby?

MS. BAILEY: Hi, Libby Bailey with NATOA. Ms. Denburg, I wanted to ask a
question, and I\'m not sure whether or not you\'ll know, but I was
curious about whether or not you had had any success in collecting any
data in states such as Florida and South Carolina? I think Michigan is
probably too new in its legislation. But is the correlation between the
change in regulation and an increase in broadband deployment?

MS. DENBURG: (Inaudible).

MR. FERREE: Yes, sir?

AUDIENCE MEMBER: Hi, my name is David Milken (phonetic). I\'m with
Verizon, and I have a question for clarification for both Mr. Fellman
and Mr. Chernow. Under your scenarios, in your various communities or
your consortium of communities in which you had coordination,
communication, and cooperation, it\'s my understanding that that was
with respect to management of the rights-of-way issues and not issues
such as franchising authority or fees, of which I understand that in the
Colorado instance, the state statutes outline what your authority is
with respect to regulating telecommunication providers and granting
franchising, and in Wisconsin, with respect to the undertaking that\'s
being made at the Wisconsin PSC with regards to rulemakings.

MR. FELLMAN: As far as Colorado goes, you\'re correct. We have state
legislation which, basically, takes local governments out of the
franchising process and does not allow recovery of fees above the actual
cost of the use of rights-of-way. Actually, to tie that into Ms.
Bailey\'s question, there\'s no documented evidence, and that
legislation has been in place since 1996, there\'s no documented
evidence that we have a more wider roll-out of broadband services in
Colorado without having any of those franchise requirements or fees. So
take that for what it\'s worth.

But the issue that was actually our biggest hang-up, Dave, in that
discussion was not fees above costs, it was how do you determine the
costs? What are the degradation fees? How do you determine what to
charge every time a street is trenched?

And I mentioned some of the things that worked in the negotiation, and
we did have some very proactive and positive industry members who helped
us with this legislation. We also had some, and one of them,
confidentially, came up to me after the process and apologized and said,
Our instructions from our company was to participate in your process and
to do absolutely nothing that would bring this to consensus, so that\'s
why we were difficult to deal with through the process. And we got into
fights over, well, how did you determine how much those degradation fees
should be? Well, we looked at this study and that study, and, Well, we
don\'t like any of those studies. Well, if we do a new study, will you
accept that? Well, no. We\'ve actually never, we\'ve never seen a study
on degradation costs that we agree with. So we said, All right, how
about if you guys do a degradation study, and we\'ll examine it and take
it under consideration. The response was, Well, we\'re not the
government, we\'re not going to pay for a degradation fee study.

So, again, it\'s one bad example, and we still got a good product out of
this, but there is some difficult issues to deal with, despite the fact
that we never talked about franchises or franchise fees because we
don\'t have state authority to do that.

MR. CHERNOW: Well, actually, the people who have come to us have not
only been cable operators, but we\'ve had some interesting groups of
people who have come to us who want to be, basically, regulated as a
cable operation, even though they\'re also doing telecommunications and
they\'re also doing high-speed internet, and we do have the right to
work out an arrangement with them. We handle our restoration systems in
a somewhat different way. We have very strict restoration standards that
we want to have implemented, and we, basically, have the utility
implement it. If they don\'t, and we\'ve never had a case like this, we
will actually then go in after a period of time and do the work
ourselves and then charge back the utility. But we\'ve never had to go
to that extent to do that. To a great extent, it\'s letting people know
what the standards are that we want them to go to, and they\'re very
cooperative in that respect.

MR. FERREE: Mayor Fellman, your comments also made me think of something
else you said earlier about the FCC might have a role in fostering
discussions or sort of a mediation role. Is there any role like that for
state utility commissions as mediators in these sorts of, when disputes
arise?

MR. FELLMAN: You know, I think it depends on, it\'s probably a function
more of state law and how active the state commissions want to get. I
think state legislators can serve in a mediation role, governors offices
can serve. I don\'t dismiss any level of government or any office within
government from serving as a role to bring parties together and try to
get these issues resolved. But, you know, I think an important part of
that, and it\'s something that hasn\'t been mentioned here as we talk
about the scope of authority, I haven\'t heard any of the speakers
mention the 10^th^ Amendment yet and the principles of federalism.

MR. FERREE: I thought there were only eight.

MR. FELLMAN: Well, we went to different law schools. You know, really,
the issue is, before we talk about preempting, whether it\'s state
preempting local or federal preempting state or local, we need to
determine what really is the scope of the problem and is preemption
appropriate. I appreciate Commissioner Nelson\'s comment and I\'ve heard
some other speakers say that not all or even most local governments are
imposing problematic regulations. Well, if that examination of the
problem would indicate that there\'s no need for preemption, then any
level of government and any agency within the government that wants to
try to bring the parties together and do the harder work of resolving
these issues as they come, as opposed to a broad federal rule, yes, I
think it would be appropriate.

MR. FERREE: Commissioner Nelson, do you have a reaction?

MR. NELSON: Yes, I do have a reaction. We had a situation in Michigan
where we had one community that was holding up a major fiber deployment
project, and all the other communities had agreed very amicably to a fee
structure, etcetera, but this one community held us up for several
years, and I think that\'s the kind of issue that you want the state to
be able to jump in and try to mediate. We were able to, through the
Commission\'s efforts, turn that around by finding the community that
was involved. But I think the state has an important role here, and,
certainly, I would agree with Ken that we want to avoid federal
preemption, if at all possible, but I don\'t think the 10^th^ Amendment
talks about the states and the local government relationship.

MR. FERREE: Okay. Ms. Denburg, you look like you would like to -

MS. DENBURG: Yes, what I was going to say is I think that we discussed
jurisdiction and preemption a bit this morning, so I don\'t want to go
back to that. But just to pick up on Mayor Fellman\'s comment that no
best practices work everywhere and the example, you know, Erie
Pennsylvania doesn\'t work in Erie, Colorado, if you will. I think,
however, that still there can be a tremendous benefit in setting, if you
will, ceilings and floors and what is not acceptable and what is. And
it\'s really very critical, I think, that, particularly at a state
level, you can come together and figure out what works in the state, and
you cannot have one standard or 400 standards, let\'s say, in the
municipalities in Florida and a difference 750 in Georgia, for instance,
for BellSouth or any provider that\'s working in BellSouth\'s region.
And I think that\'s the key is that, you know, you\'re talking about,
well, you shouldn\'t have the fed preempt the state.

The bottom line is I think that there should be recognition that, in a
wholesale manner, we can accomplish a lot and come to agreement on
certain, you know, whether it\'s regulations or rules of deployment and
relationships, and I think that the broader scale they are, the more
their set out, the more everybody knows what the rules are, then you can
live within the rules. But if you have to guess every time you\'re in
it, and, of course, BellSouth is an incumbent provider so we don\'t have
some of these issues, but as a new entrant, if you have to guess at the
rules every time you\'re coming in, that\'s a cost of business that, in
and of itself, is a barrier.

MS. WILSON: And I thought it was interesting that, of all the examples
that were given by the panelists, that we were all talking about states
in which the states had adopted legislation that spelled out what the
rules of the roads were in Michigan, Nebraska was my example, Florida,
and Colorado.

MR. FERREE: Okay. Yes, I know you\'re all anxious. Just one second; I
got to get one more in here for Sandy. Why shouldn\'t you go into your
comments about your company\'s providing a lot of different services and
this question about, well, if we start providing a new service through
an existing right-of-way, should that be subject to new fees and new
regulation? From a competitive standpoint, just in terms of competitive
neutrality, why shouldn\'t you pay? If you\'re doing cable services,
you\'re regulated as a cable operator, you pay as a cable operator. When
you enter in the telecom market, why shouldn\'t you pay whatever other
telecom service providers are paying for that service and being
regulated as such?

MS. WILSON: I think it would be probably a big step forward in some
communities if that\'s what the rules of the road were. I mean, I think
we do pay probably more than any rights-of-way user through the cable
franchise fee, which is a nice chunk of change, and other in kind
benefits. So I think you certainly make a very good argument that the
payment that is made, regardless of whether you\'re offering your
services, is more than enough to compensate for our rights-of-way use.

But even if you were to put that to one side, what we often find is that
we are asked to pay five-percent of our revenue for every new service we
roll out. Let\'s say, for example, our local phone service. We had
communities where we were asked to pay five-percent on those revenues,
and the incumbent is not paying anything, and that is clearly a
competitive disadvantage.

MR. FERREE: Okay. Some of these folks definitely want to get another
shot in here. My friend from NCTA.

MR. SUMMERMAN: Rick Summerman from the National Cable and
Telecommunications Association. I actually wanted to tie, I guess, your
last question to Sandy and the Florida situation that Ms. Denburg
raised. Back to the last panel on compensation, and one of the
outstanding questions from that panel was, you know, why doesn\'t the
industry seem to want to pay the value or the worth or rent for
property? But I think what\'s missing in the debate, and I know it\'s
not really an FCC role, but is the tax question. I had the tremendous
pleasure of working on the National Tax Association Communications and
Electronics Commerce Project looking at tax simplification, and it turns
out, if I\'m recollecting correctly, that telecommunications comes right
after cigarettes and liquor as the most highly-taxed industry, whereas
we\'re not looking, you know, to the FCC to do something about
telecommunications taxes, I think you have to recognize when you say,
gee, you\'re not paying your fair share, telecommunications industry.
You have to say, well, what\'s happening on the tax front? And if it\'s
a tax of general applicability, that\'s one thing; but if it\'s a tax
burden only on telecommunications providers, that\'s another thing. So
to bring it back to the question to Sandy, you asked about
telecommunications, on telecommunications services, they pay the same
taxes when they\'re a CLEC or an ILEC -

MR. FERREE: Is there a question in here Rick somewhere?

MR. SUMMERMAN: There is for Ms. Denburg. I\'m wondering if Ms. Denburg
can, just in the Florida situation, describe how \-- the change they
made was not just about rights-of-way, they rolled in all
telecommunications taxes.

MS. DENBURG: Correct. The key of the Florida legislation, there were a
couple of points, and it\'s in my handout, but one of the things that
they did, it had revenue neutrality so that any local government getting
revenue kept the revenue. But it also, for our tax folks, had
administrative simplicity and ease, in terms of auditing, as well.
Instead of being audited by 400 municipalities, there\'s one centralized
audit.

But the key, in terms of what you\'re speaking about, Rick, is the
competitive neutrality. And what we moved away from was using the
rights-of-way for discriminatory franchise fees and, instead, moved to a
competitively neutral flat tax. We broadened the base. And, generally,
when I speak in front of other folks and talk about tax, I say that tax
is not a four-letter word. What the taxes on DBS, satellite, cable,
wireless, telephony, and it removes the right-of-way as the vehicle for
taxing, puts it on the services.

MR. FERREE: All right. It\'s been a very long day, and I think we need
to start to wrap this up. Let\'s do one more from the crowd. This
gentleman here.

MR. LLOYD: Frank Lloyd from Mintz Levin law firm representing cable
companies. Ken, this is a question to you.

MR. FERREE: You don\'t understand the format here.

MR. LLOYD: Has anything happened with the notice of inquiry on
rights-of-way regulation that was put out about three years ago and all
the comments -

MR. FERREE: That\'s in Dane\'s shop now.

MR. LLOYD: And there\'s a hesitancy on the part of the Commission to
have regulation in this area, wouldn\'t it be possible to have a number
of hoe-downs in this area, like the ones over the digital television
transition? It seems to me this is as important to the future economy of
this country as digital television, if not more so. And hoe-downs would
require your participation.

MR. FERREE: Fair enough. And, in some sense, maybe this is the first of
the hoe-downs, I don\'t know. But it\'s a fair point, well taken. I
think we have to wrap up. I\'m sorry, folks. Thanks.

MR. SNOWDEN: Thank you, Ken. As you can tell, he definitely does a good
job of being the agitator and passing the buck, as well.

I guess, to steal a line from Mr. Ferree, spring is probably the best
time we\'ll have something coming out. That\'s a little inside joke.

I want to thank the panelists today. Thank you very much for your
insight and thank all of you for participating today and all of you who
participated as panelists and speakers. As Chairman Powell said in his
opening remarks, we did not attempt to deal with all aspects of all
issues touching upon the use and management of rights-of-way. Indeed,
there are many other rights-of-way issues that impact other industries
and services. Today\'s forum should serve as a useful mechanism to move
forward in partnership with local and state governments and members of
industry in addressing the many difficult issues relating to the
management of rights-of-way. I think we\'re well on our way to a good
start.

Although we have focused primarily on the concerns of industry and local
governments, it would be remiss of me to allow this forum to conclude
without an acknowledgement of the many consumers that are affected by
the resolution of rights-of-way issues. Of course, as Chief of the
Consumer and Governmental Affairs Bureau, I have to put that in there. I
can assure you that the Commission remains cognizant of its
responsibilities to consumers in these matters. The quick and efficient
deployment of telecommunications services, along with the necessary
maintenance and upkeep of public rights-of-way, are important to every
citizen in our society. This is the thought that should guide us as we
move forward.

Now if you can allow me, as emcee, to take a point of privilege. I would
like to acknowledge two people who have allowed me to stand up here and
look good because they actually deserve all the credit for pulling off
this forum, and that is Linda Kinney from the Office of General Counsel,
and Chris Montief (phonetic) from my bureau, the Consumer and
Governmental Affairs Bureau, so thank both of them.

And with that, I send you out to the brave new world of the rain and
enjoy yourselves and thank you very much. We are adjourned.

(Whereupon, the foregoing matter was concluded at 3:33 p.m.)