HB 1777 was enacted by the 76^th Legislature (Spring 1999) as a mechanism to increase competition in the telecommunications industry by establishing a uniform method for certificated telecommunications providers (CTPs) to compensate municipalities for the use of public rights-of-way.

As competition increases in the state’s telecommunications industry, it is important that there are no barriers to competition for existing companies or new companies entering the marketplace. HB 1777 provides for fair compensation for cities while ensuring that fees are competitively neutral and non-discriminatory.

A CTP is any telecommunications provider that has been granted one of the following certificates by the Public Utility Commission of Texas (PUC) to provide telecommunications services in Texas:

COA – Certificate of Operating Authority
SPCOA - Service Provider Certificate of Authority
CCN – Certificate of Convenience and Necessity

The PUC will provide you with a list of CTPs.

Municipalities can no longer require CTPs to pay any compensation other than fees authorized in the bill for use of rights-of-way to provide telecommunication services in that municipality.

The bill went into effect on Sept. 1, 1999. Franchise agreements between CTPs and cities are not invalidated by HB 1777, but CTPs were allowed to opt out of existing agreements by Dec. 1, 1999. If the CTPs did not opt out, the franchise agreement is in effect until its expiration date.

Yes, the city can require a construction or inspection permit; however, it cannot charge a fee for the permits. The terms of the permits must be consistent with construction permits issued to other persons excavating in a public right-of-way.

Cities can no longer require CTPs to have a main office in their city. They can no longer require CTPs to file reports that are not related to right-of-way issues or require the provider to offer the city services or facilities free or at prices below market value. They cannot inspect business records of CTPs and they cannot require city approval of transfer of ownership or control of a CTPs business. Cities do have the authority to impose police-power regulations relating to the protection of public health and safety.

Beginning March 1, 2000, all telecommunications franchise fees in Texas will be based on a fee-per-access line method. Each category of access line will have a rate. The rate for each category will be multiplied by the number of lines in that category in the municipality to determine fees.

CTPs shall compensate municipalities quarterly an amount that is calculated monthly based on the access line rate by category established by the Commission.

There are three categories of access lines. Refer to your allocation form for these three categories.

The PUC will determine a "base amount" from information on a city’s 1998 compensation and allocation formula to determine a fee-per-access line rate for each city. In most cases, the base amount includes total compensation received from all CTPs in calendar year 1998. Some municipalities can include compensation from newly annexed areas, escalation provisions and in-kind services or facilities. The base amount will be used to determine the per-access-line fee. The rate may be different for each city.

In-kind services are valued at 1 percent of the 1998 revenues unless a municipality can establish that the services or facilities received in 1998 had greater value.

Cities that did not have a franchise agreement in effect on Jan. 12, 1999, cities that did not exist on Jan. 12, 1999, cities located in counties with a population of fewer than 25,000, and cities that did not receive any compensation from CTPs in 1998 can use one of the following options to determine their base amounts: The revenue generated by applying the statewide average fee per line on a per-category basis times the number of access lines; or The revenue received by a similarly sized city in the same or an adjacent county; or 1998 franchise revenues from CTPs.

Yes. Both cities must have the same dominant carrier. If AT&T is the dominant carrier in your city it must also be the dominant carrier in the city whose base amount you choose to mirror.

A city may change its allocation method once every 24 months.

If the city does not file a proposed allocation, the PUC will establish the allocation among the customer classes of access lines for that city.

The PUC must establish a per-access line rate by category for each city by March 1, 2000. CTPs are to make quarterly payments not later than 45 days after the end of the first quarter. Cities should expect their first payments in mid-August, 2000.

The compensation will be adjusted each quarter for access line growth in the previous quarter.

CTPs must submit a quarterly access line count update with increases or decreases and must compensate the municipality accordingly.

Yes. Beginning March 1, 2002, the PUC will adjust the access line fees annually. Compensation will be adjusted by half of the increase in the Consumer Price Index.

No. It applies only to certificated telecommunications franchise agreements. It does not include gas, electric, cable TV or other municipal franchise agreements. Non-certificated telecommunications providers in a municipality will be subject to any existing contracts or ordinances or franchise agreements they have with the city.

Absolutely No. The statewide average fee-per-line rates are calculated only for a CTP and not for a municipality. The only reason the statewide average rates are calculated is to determine the base amount for a municipality that chooses Option 1.