Will Texas’ new telecom law save you money? Cities, state disagree over benefits
A coalition of nearly 60 Texas cities and towns are seeking to stop a recent state law that they argue provides telecom providers millions in savings that won’t be passed on to their residents.
For years, telecom providers paid two separate fees to run cable and phone lines through city-owned strips of land, known as rights-of-way. Customers might have seen one of those fees disappear from their bills after Jan. 1 because of a new state law authored by Sen. Kelly Hancock, R-North Richland Hills. The law allows companies to pay only the higher of the two fees.
Judge Lora Livingston, who presides over the 261st District Court in Travis County, heard arguments Wednesday as attorneys representing cities as large as Dallas, Austin and San Antonio argued that the new law violates sections of the Texas Constitution that prohibit the Legislature from directing local municipalities to make gifts or grants to a corporation.
Previously, telecom providers paid a franchise fee to cities of up to 5% of the gross revenue earned from cable or phone services in order to use the right-of-way. But because the law waives the lower of the two fees, it essentially grants companies a “two-for-one” deal, said Robert Heath, an attorney arguing on behalf of the cities.
Meanwhile, attorneys for the state argued that the Texas Legislature has the authority to charge just one fee, and that customers should see savings as a result.
“Definitely the cities are getting less money, but this loss comes at the customers’ gain,” said Drew Harris, an attorney with the Texas Attorney General’s Office who argued on behalf of the state.
But Don Knight, a senior assistant city attorney for Dallas and chairman of the Texas Coalition of Cities for Utility Issues’ board, testified Wednesday that he was skeptical that was the case.
Knight noted that amendments that would have ensured that savings are passed onto consumers were struck down when the bill was debated before lawmakers last spring, and he cited his own AT&T U-verse bill increasing by about $5 even though one of the fees was dropped.
Livingston expressed doubts about the state’s “us and them argument,” noting that if a city benefits, the citizens of that city are likely to benefit as well.
Harris said the previous multiple fee structure “ignores current reality,” and that today’s technology allows multiple services, like cable, phone and internet to all be delivered over the same line.
“It’s all just data being transmitted through the same cable,” Harris said.
He likened it to how a toll road operates, charging a fee per car that passes through, rather than a fee based on the number of passengers in each car.
But Knight pushed back, and said cities are measuring a right-of-way’s value not by how much space is taken up, but rather by how much revenue is generated from use of that space.
“It is requiring the city to give access to the public’s right-of-way for less than the value of that right-of-way,” Knight said.
Cities anticipate losing millions as a result of the law. Houston, which joined the lawsuit as a third party, previously pinned its potential losses as high as $27 million, more than any other city.
Fort Worth anticipates losing $4 million to $5 million — a small fraction of the city’s $1.8 billion budget for 2020.
It was a larger point that Harris seized on, noting that the losses cities estimate are often a very small percentage of their total budgets, and that by reinstating the two fees, cities would be “effectively charging their own residents a tax twice.”
But Knight stressed that less city revenue could hurt residents in tangible ways, and is likely to translate to less resources for cities to provide essential.
For example, in Fort Worth, where the median salary for a police officer is $74,152, the $4 million to $5 million loss would translate to the salaries of roughly 53 to 67 officers.
The estimated losses in city revenue from the law are just a slice of the millions Texas cities anticipate losing because of additional laws passed this legislative session that banned red light cameras and imposed a revenue cap on property taxes.
In an email Monday, Michelle Gutt, a spokeswoman for Fort Worth, said the city is in discussions with McAllen, the city leading the lawsuit, and has yet to formally join.
It will likely be at least a few weeks until Livingston issues a ruling on whether to temporarily block the law from continuing to go into effect.
While Wednesday’s hearing on whether to grant a temporary injunction was only in relation to the 2019 law slashing right-of-way fees, the cities’ lawsuit also challenges a 2017 law — which was also authored by Hancock — that regulates how network nodes, or small cells, used for wireless services can be used in right-of-ways.
Hancock chairs the Senate Business and Commerce committee, and since 2006, telecom providers — some who stand to potentially cut costs due to Hancock’s bill — have contributed over $200,000 to Hancock’s campaign, according to the National Institute on Money in Politics.
In a statement Wednesday, Hancock stressed that SB 1152 aligns state law with technological advances and benefits customers the most.
“While some municipal governments would prefer to ignore the fact that technology has changed and keep charging a duplicative, antiquated business tax, SB 1152 updates our laws and passes the savings along to consumers,” Hancock said.
This story was originally published February 19, 2020 at 5:03 PM.
