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Sacramento Bee (California)
Jan 07, 2007 - 01:00 AM

by John Hill, Bee Capitol Bureau

Governor drops freeway fees to accelerate fiber-optic lines

For telecommunications companies and other broadband providers, California's freeways will be just that -- free -- after a decision by Gov. Arnold Schwarzenegger to eliminate fees for installing high-speed Internet conduit along state rights of way.

"It's going to be a very important thing for this state to bring us up to the world standard," said Sunne Wright McPeak, president of the California Emerging Technology Fund, which is promoting broadband Internet access in rural and other underserved areas with money from telecommunication company mergers. McPeak was Schwarzenegger's secretary of the Business, Transportation and Housing Agency.

But others wonder why Schwarzenegger didn't demand something in return for relinquishing the fees, which had been in place since 2000.

"They're giving away something substantial to these telecom and broadband companies," said Judy Dugan, research director for the Foundation for Taxpayer & Consumer Rights in Santa Monica. "They're getting absolutely nothing in return."

The amount of money at stake right now is minuscule by the standards of the $131 billion state budget -- a mere $108,000 in annual fees for about three miles of cable laid along California's freeways.

But that revenue would likely have shot way up, especially considering that the state is poised to embark on a major highway building program and telephone companies are expected to install more fiber-optic lines as the result of a bill that allows them to provide cable television service.

"This is going to be worth a whole lot more" than what the state is now collecting in fees, Dugan said.

The administration says the move, part of an Oct. 27 executive order by the governor, is key to opening up rural parts of the state and underserved areas in cities to broadband Internet access, allowing everything from distance learning to telemedicine.

In a better-wired state, a translator could be connected to a rural emergency room hundreds of miles away, so that a patient who spoke only Hmong, for instance, could describe symptoms, said Barbara O'Connor, a California State University, Sacramento, communications studies professor who serves on a Broadband Task Force created by Schwarzenegger.

O'Connor, also a board member of the California Emerging Technology Fund, said it makes economic sense for the state to encourage high-speed Internet access and growth of the telecommunications industry.

"I would rather have the barriers gone and then tax them normally in the marketplace," she said.

Schwarzenegger's decision to end the right-of-way fees was the culmination of a seven-year debate about what fees, if any, companies should pay to bury high-speed Internet lines along freeways.

The state was prevented by an 1800s statute from charging for right-of-way use along state roads. But Caltrans decided that freeways and expressways, which came along a century later, were not covered by that prohibition. A 1996 federal law bolstered the department's view that it could impose the fees.

In 2000, when Level 3 Communications wanted to install high-speed conduit along Highway 101, the state negotiated a one-time fee of $6.40 per foot. That was on top of hourly fees that Caltrans has charged since the 1980s to review plans and inspect the work that companies do in the state right of way.

The state wanted to charge that same per-foot fee to other companies. Pacific Bell, which sought access to the right of way in the North Coast, went to court to challenge it.

Caltrans prevailed in federal court, but also hired a consultant to recommend a fee based on fair market values on nearby private land. In the meantime, AT&T, Pacific Bell's successor company, appealed the court decision.

Based on the consultant's work, Caltrans proposed a sliding scale between $1 and $8 per foot, depending on whether the highway was rural or urban and other factors, and that the fee be charged annually instead of just once.

That set off howls from the industry. McPeak said that when she was appointed secretary of the Business, Transportation and Housing Agency, SBC Communications asked her to look at it, arguing that it was unfair.

McPeak said she backed Caltrans' proposal. After months of back and forth with the Governor's Office, however, the administration decided around March that it wasn't going to charge any fees, except for the hourly rate in place since the 1980s allowing the state to recover its costs, she said.

McPeak said she was approached a couple of months later to serve as president of the Emerging Technology Fund. AT&T and Verizon finance the fund and also appointed some of its board members. Until she left the administration, she said, she recused herself from any deliberations about the broadband right-of-way policy to avoid even the appearance of a conflict of interest.

In October, Schwarzenegger made the new, no-fee policy official in an executive order that also set up a Broadband Task Force.

"The governor made the decision to remove the excess fees and red tape" to clear the way for broadband access and its benefits throughout the state, spokesman Darrel Ng said.

A 2003 report by TechNet, a national network of technology company executives, found that right-of-way permitting was one of the primary hurdles that states could remove to spur broadband development.

But Dugan, of the Foundation for Taxpayer & Consumer Rights, said she is troubled by the state's failure to get anything in return for giving up the fees. It could have demanded a commitment to lay cable in rural areas, she said, or that the telecommunications companies give up their opposition to some municipalities setting up free wireless service.

"It's simply giving away something that will be a huge profit enabler," she said.

She also questioned the state's inability to say how much the fees would have generated in the future, as more companies use the state rights of way.

"By failing to estimate the value, they're able to underestimate dramatically what they're giving away," she said.

But Sacramento State's O'Connor said the move will encourage companies to build, will promote competition and will avoid lawsuits from groups that argue that state policy blocked their access to such essentials as education and health care.

"It was really designed to encourage people to build," she said.
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The Bee's John Hill can be reached at (916) 326-5543 or jhill@sacbee.com.




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