FCC Emphasizes Limits On Local Fees For Small-Cell Facilities

Wireless telecom providers have been deploying new small-cell technology and equipment for 5G service across the nation.  Deployment often requires the providers to obtain access to public rights of way to put their small-cell equipment on cities’ or municipalities’ utility poles (or use underground ducts or conduit).  Cities and municipalities, of course, seek compensation for allowing this access to public equipment and rights-of-way.  The FCC addressed this compensation issue in 2018, setting safe-harbor caps on local fees but allowing higher charges if they meet certain requirements.  Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, 33 FCC Rcd 9088 (2018).  The Ninth Circuit upheld that decision in relevant part.  City of Portland v. FCC, 969 F.3d 1020 (9th Cir. 2020).

Clark County, Nevada (home of Las Vegas) adopted an ordinance with annual fees well above the FCC’s safe harbors.  The ordinance required holder of a Master Use License Fee to pay 5% of gross revenues each calendar quarter, plus a Wireless Site License Fee of $700 to $3,960/year/facility (with annual increases of 2%), plus an Annual Inspection Fee of $500 per Small Wireless Facility in county rights-of-way.  Verizon challenged that ordinance at the FCC as being preempted by 47 U.S.C. 253(d) because it effectively prohibited Verzon from providing service.  The FCC, through its Wireless Telecommunications Bureau, recently dismissed Verizon’s complaint without prejudice in light of Clark County having adopted a new ordinance.  Petition for Declaratory Ruling That Clark County, Nevada Ordinance No. 4659 is Unlawful Under Section 253 of the Communications Act as Interpreted by the Federal Communications Commission and is Preempted, WT Docket No. 19-230, DA 21-59 (rel. Jan. 14, 2021).   In doing so, however, the FCC emphasized three key aspects of its rules that certainly will bear on any pending or future disputes between wireless providers and other municipalities that seek to impose fees above the FCC’s safe harbors.  These points appear directed at preventing other state or local authorities from making some of the same arguments Clark County was making.

First, the FCC clarified that once a wireless provider makes a prima facie showing that fees exceed the safe harbor, it is the local government that bears the burden of proving why fees above the safe harbor should not be preempted.  Id., ¶ 7.

Second, the FCC clarified that local fees can be deemed to effectively prohibit an entity from providing telecommunications service (and thus run afoul of 47 U.S.C. 253(d)), even if the entity is nevertheless providing service, if the state or local fee materially inhibits the provider from engaging in other relevant activities, such as filling coverage gaps, densifying its wireless network, introducing new services, or improving existing services, or if the fee effectively prohibits the provider from providing telecommunications service in another area.  Id., ¶ 8.

Third, the FCC emphasized that right-of-way fees based on gross revenues generally will not pass muster, as they are not designed to reflect the locality’s actual costs associated with the entity’s use of the public right-of-way.  Thus, any revenue-based fee that exceeds the safe harbor level would violate 47 U.S.C. 253(d) unless the fee can be proven by the local authority to be a reasonable approximation of its actual costs and meets all the FCC’s other criteria.  Id., ¶ 9.

Through this rule, the FCC seems keen to emphasize that the limits on local fees it established in 2018 are to be taken seriously, and thus to discourage future attempts to avoid those limits without clear factual support.