Bill soon due

Dallas beat the telecoms, but guess who pays the price?

When you open your phone bill on June 1, don't be surprised to see a vaguely worded statement explaining why you need to open your wallet a little wider.

The changes in your phone bill are the result of a battle fought between Texas cities and telecom companies in Austin. The state stepped in last year with legislation aimed at standardizing the way cities collected fees from telecommunication companies for the work/damage they do when, say, tearing up a street to lay telephone cable. But now Dallas officials have used this new collection method as a way to gain millions in annual revenue, even charging these companies more than the state recommended for the right to use public property.

"What we're doing is gearing up to educate our customers, telling them that this isn't an increase our own company came up with, but what the cities came up with," says Nancy Krabill, director of regulatory and external affairs for NextLink, a telecommunications provider that emphasizes business clients. "The changes depend on how much you paid before. It will be different for all our customers." (Most Dallas businesses will see a significant increase in the amount of municipal fees they pay, while many residential customers may shrug off the expected less-than-25-cent increase.)

Dallas City Councilman Alan Walne is just happy the city and Southwestern Bell made nice-nice--even though it now means a rate hike for many customers.
Martin Menocal
Dallas City Councilman Alan Walne is just happy the city and Southwestern Bell made nice-nice--even though it now means a rate hike for many customers.

The fight over municipal fees was particularly ugly in Dallas. Last August, Southwestern Bell terminated an agreement to pay $5.14 million in fees every three months, threatening the city with the possibility of tax hikes or layoffs. Dallas sued the company and convinced a judge that SWB had to pay the fees while the matter was being contested. Mayor Ron Kirk called the company's actions "absolutely abominable" and "outrageous."

Oh, what a difference a year makes. Under the new law, signed last year and taking effect this month, the city won an annual increase in revenue of $16.9 million because of the change in collection method, according to city controller Eric Kaalund. The total amount contributed by the telecoms will rise to approximately $40 million a year. The majority of that money will come from customers of Southwestern Bell, the area's dominant telecommunications company.

The city has been quiet about its victory over Southwestern Bell, though--maybe because officials realize their success was gained at the expense of their constituents' bank accounts. Because now, even though the companies and the politicians say everything is resolved, the only thing clear is that consumers will be the ones paying the bill for the expensive catfight. Cities such as Dallas are shrugging this off as the cost of doing business (and looking forward to the windfall). Meanwhile, the phone companies are, if not happy about the outcome, at least resigned to making customers pay for the telecoms' failures.

Says Bill Maddox, Southwestern Bell's Texas press officer: "We simply serve as a collection agency for the city."


Municipal fees primarily offset the expensive toll the communications industry takes on public property. Every trench dug to bury a gas pipe or fiber-optics cable weakens a street, chopping years off its life span. The utility cuts cause roads to age prematurely, requiring top-to-bottom reconstruction sooner and adding millions annually to the cost of maintaining streets.

But after the money for these fees leaves your wallet, it goes straight through your provider and into the city coffers. The money doesn't go back into the street department budget to pay for improvements but goes to the city's general fund. There it can be spent on things like salary increases, construction, and park projects.

Some business customers may find the municipal fees lower on their bills, especially clients that pay extra for optional services, according to GTE spokeswoman Biana Gowing. Since the former system granted the city 5 percent of the money customers paid to their telecom providers, while the new system simply counts the number of access lines, the new fees may be the same or even less. For those without the optional services that drive up their overall bill, the municipal fees will likely increase. "One reason we fought these increases is because they will be passed on to our customers," Gowing says.

As of April 27, Dallas began collecting money based on the number of access lines installed as opposed to the old method, which skimmed 5 percent of the company's gross revenue for right-of-way fees. Large facilities that use what phone companies call "point-to-point" lines--used when organizations such as hospitals or universities need dedicated phone lines between buildings--face the largest increase.

"Most of this construction is being done to serve business customers. We wanted to make sure the [residential] customers weren't paying for this," says Janee Briesemeister, senior policy analyst in Austin for Consumers Union. "The cities wanted to make sure they weren't losing any money and the telecommunication companies wanted a fair collection. I didn't know fees were going to increase."

The telecommunications companies pay more than the amount of damage they do to streets because they essentially rent space from the city to lay their lines. To the horror of telecommunications companies, the Federal Communications Commission has previously ruled that the amount a city charges in municipal fees is also based on the value of the use of that public space, increasing the amount they pay over the tangible cost of street damage they cause. In essence, the city is not only recouping damage costs but also renting its public space to the telecom companies for profit. Each city collected municipal fees in different ways, generating acrimony and lawsuits.

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