The Association of U S West Retirees



Qwest loses its case on right of way
By Ken Alltucker
The Arizona Republic
Friday January 20, 2006 

A federal Appeals Court has rejected Qwest Communications' attempt to avoid paying millions of dollars in fees for the right to use its lines and cables across Arizona cities and towns.

The 9th U.S. Circuit Court of Appeals rejected the telephone company's argument that right-of-way fees assessed by Tucson and three other Arizona municipalities were unlawful and should be eliminated.  The court decision is the company's latest defeat in a years-long effort to avoid paying the annual fees.

Qwest officials described the court's decision, filed last Friday, as a setback for consumers because the fees are passed directly to the company's customers in Tucson, Globe, Miami and Nogales.

Qwest has paid more than $20 million in fees to these cities since 2001.  No other town or city in Arizona that Qwest services pays these fees, company spokesman Jeff Mirasola said.

"This ruling turns out to be a defeat for consumers," Mirasola said.  "There are millions of dollars in question.  We don't believe the fee should be levied.  We are considering what further action to take to best protect our customers."

No two ordinances are identical, but the fees range from 2 percent to 5 percent of the company's gross revenue derived from services offered to residents and businesses.   Tucson, for instance, assesses a 2 percent charge on all telecommunications providers and an additional 1.5 percent for right-of-way users such as Qwest.  Since 2001, Tucson has collected about $7.5 million but held off spending the money until the court case ended.

"This removes any reservation we would have over spending that money," said Mike Rankin, Tucson's city attorney.

Qwest has battled the issue for nearly a decade.

The telephone company's lobbyists persuaded lawmakers to pass a law in 1997 that made it more difficult for cities to collect the fees.

After the legislation was adopted, many cities dropped the fee.  Tucson and the other affected cities modified their ordinances to be in line with the legislation.  Surprise also had an ordinance but later dropped it, Mirasola said.

Qwest then took its fight to U.S. District Court, but it lost that battle, too, after the court ruled the charges amounted to a tax that the cities were allowed to levy.  Qwest appealed to the 9th U.S. Circuit Court of Appeals in San Francisco.

Qwest isn't the only company unsuccessful in attempts to rid itself of such municipal fees.

Cable representatives supported a bill in the Arizona Legislature last year that would have eliminated millions of dollars in right-of-way fees paid by companies to cities and towns.

Cable interests argued the industry and its customers are being singled out because they must pay cities for right-of-way access.  Cable groups add that satellite and wireless providers aren't stuck with a comparable tax or fee, so it effectively gives those services a competitive advantage. The legislation was defeated.