Property Rights, Federalism, and the Public Rights-of-way

Publication year2002
CitationVol. 26 No. 02

SEATTLE UNIVERSITY LAW REVIEWVolume 26, No. 3WINTER 2003

ARTICLES

Property Rights, Federalism, and the Public Rights-of-Way

Frederick E. Ellrod III and Nicholas P. Miller(fn*)

Table of Contents

I. Introduction.................................................................477

A. How Section 253 Works.................................................478

B. The Importance of Maintaining Local Authority Has Increased Since 1996......................................................481

II. What Is at Stake: Local Communities' Property Rights...............................................................................483

A. Local Communities Have a Property Interest in the Public Rights-of-Way....................................................483

B. Local Communities Authorize Private Parties to Use the Public Rights-of-Way Through Franchises.......................485

C. Local Communities Should Charge Market Value for Use of the Public Rights-of-Way by Private Parties..........488

1. Local Communities Are Entitled to Recover the Fair Market Value of Locally Owned Land..............489

2. Local Communities Incur Sizable Costs Due to Communications Use of the Public Rights-of-Way.. 491

3. The Value of the Public Rights-of-Way Is Not Confined to Costs....................................................494

4. Sound Economic Policy Supports Allowing Local Communities to Charge Fair Market Value for Property Used.........................................................497

5. Reading Section 253 to Prevent Local Communities from Charging Fair Market Value Would Result in an Unconstitutional Taking...........500

D. The Principle of Federalism Is Implemented by Upholding Local Property Rights.....................................501

III. Opponents of Local Authority Confuse Property With Regulation........................................504

A. Failure to Distinguish Property Rights from Regulation Leads to Mischaracterizations.........................................504

B. The FCC Has Confused Property Rights With Regulation.....................................................................505

C. Other Commentators Confuse Property Rights With Regulation.....................................................................506

IV. The Legislative History of Section 253....................513

A. The Senate Bill: S. 652..................................................513

B. The House Bill: H.R. 1555.............................................518

C. The Conference Agreement..............................................524

D. The Legislative History of Section 253 Supports a Property-Rights Approach..............................................525

E. Related Sections of the 1996 Act......................................526

1. Section 302: Open Video System..............................526

2. Section 303(a): Telecommunications Services Under a Cable Franchise.........................................528

3. Section 303(b): Cable Franchise Fees.......................531

4. Section 601(c): Restriction on Preemptive Effect.......532

V. Section 253 in the Courts............................................533

A. The OVS Court Rebuffs the FCC's Attempt to Give Away Local Public Rights-of-Way..................................534

B. Section 253 Decisions from a Property Rights Perspective .. 535

1. FCC Decisions Under Section 253...........................535

2. Court Decisions Through 1999................................537

3. The Sixth Circuit's Dearborn Decision.....................541

4. The Grant County Decision.....................................543

5. The Silver Star Appeal............................................544

6. The Chattanooga State Law Action..........................545

7. Minimal Requirements in the Mobile Decision.........546

8. Denverv. Qwest.......................................................547

9. The New Jersey Payphone Decision...........................548

10.The Auburn Decision and Its Ninth Circuit Progeny...................................................................549

11.The Bristol Decision on Municipal Entry.................552

12.Palm Beach and Coral Springs.................................552

13.The Prince George's County Decisions......................553

14.The City of Eugene Cases.........................................555

15.The San Marcos Case..............................................557

16.Central Puget Sound.................................................558

17.Municipal Competition in the Missouri Municipal League Decisions.....................................................558

18.Qwest v. Santa Fe....................................................559

19.White Plains and Colonie..........................................560

20.Statewide Authority in the Maryland Heights Case ... 563

21.Summary: Judicial Results Depend on Acknowledgment of Property Rights.......................563

VI. Conclusion.....................................................................564

I. Introduction

When private communications companies use public rights-of-way to conduct their business, the conditions of use are often described as "regulation." In fact, it is not regulation that is at issue, but rather property rights. In the last several years, this issue has been raised most forcefully in the context of section 253 of the Telecommunications Act of 1996 ("the Act").(fn1) This Article proposes an analysis that recognizes the importance of local property rights, and reviews the court and agency decisions to date under section 253 from that standpoint.

The issue of property rights in the telecommunications context has been obscured because the property rights in question are those of local communities such as cities and counties, not those of private parties. Although property owned by local governments has the same constitutional protection as property owned by private parties, it is not customary to think about it in the same way. Moreover, it is often in the interest of litigants to present the problem as one of regulation, presumptively considered a bureaucratic interference with free enterprise, rather than as a matter of property, which is itself the medium and driving engine of the free market. The aim of this Article is to show that section 253 must be understood in terms of property rights, and that a property rights perspective provides an effective tool for evaluating court and agency decisions with respect to that section.

This introductory section describes how section 253 works, and notes that the importance of local right-of-way management has increased since September 2001. Section II of the Article identifies the fundamental property rights at issue, their implications for compensation requirements, and their relationship to constitutional federalism. Section III then looks briefly at the characteristic mistake made by many analysts: construing local communities' control of their public rights-of-way as purely regulatory and ignoring the property aspect. Section IV explores in more depth the way in which section 253 fits into the structure of property rights, regulation, and federalism, by detailing the legislative history of the provision. Finally, Section V reviews the significant agency and judicial decisions to date in light of that analysis.

A. How Section 253 Works

Section 253 of the 1996 Act is titled "Removal of Barriers to Entry."(fn2) Although its structure is relatively straightforward, that structure has not always been fully understood by the courts. Section 253(a) forbids any state or local legal requirement that would "prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service."(fn3) Subsections (b) and (c) of section 253, however, create "safe harbors" for certain types of state and local requirements.(fn4) Even if a rule would "prohibit or have the effect of prohibiting" under subsection (a), it will not be preempted by section 253 if it falls within the scope of (b) or (c). Finally, subsection (d) grants the Federal Communications Commission (FCC) authority to review issues under subsections (a) and (b) alone, but not to review issues under subsection (c).(fn5)

The full text of section 253 is as follows: § 253 REMOVAL TO BARRIERS OF ENTRY.(a) IN GENERAL. No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. (b) STATE REGULATORY AUTHORITY. Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254 [relating to universal service], requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers. (c) STATE AND LOCAL GOVERNMENT AUTHORITY. Nothing in this section affects the authority of a State or local government to manage the...

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