RightofWay Valuation

1
Right-of-Way Valuation
NATOA Annual Conference San Francisco,
California September 18, 2004
Frederick E. Ellrod III Miller Van Eaton,
P.L.L.C.
2
Valuing Public Rights-of-Way

• ROW franchisees gain 3 types of rights
• option to place facilities in ROW burden of
  potential use
• construction and maintenance rights for
  facilities actually installed actual burden
• use of ROW to do business
• In a free market, property owner has a right to
  charge a fair market price

3
Valuing Public Rights-of-Way

• Three kinds of compensation correspond to the
  three valuable rights
• annual option payment possibly fixed sum
• payment for facilities actually installed
  possibly linear or cubic measure
• fair market value for value derived by private
  user from public property possibly measured by
  gross revenue

4
Cost vs. Value

• Industry argues that under 47 U.S.C. 253
  compensation is limited to costs
• There is no reference to costs in 253
• The legislative history of 253 refers to gross
  revenues does not imply costs
• Nonetheless, some courts have succumbed to
  industrys access argument, ignoring property
  rights

5
Measures of ROW Value

• Where compensation is permitted, different ways
  of determining amount may be used (subject to
  state law)
• Linear foot fee
• Gross revenues-based fee
• Throughput-based fee
• Access line fee

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Measures of ROW Value

• Linear foot fee
• Reflects direct occupation of ROW
• Footage Per strand, per sheath, per conduit or
  duct (by size)
• Volume (cubic) measure might make more sense, but
  seldom used
• Requires access to map data for footage

7
Measures of ROW Value

• Gross revenues measure
• Reflects value realized by user
• Scales automatically to market share
• Requires access to revenue records
• Allocation issues where system extends beyond
  jurisdiction particularly where no service is
  provided in jurisdiction
• Reseller issue does lessee of fiber, or
  capacity, use the ROW?

8
Measures of ROW Value

• Throughput measure (bits per second)
• Could reflect value realized by user, without
  specifically involving revenues
• Avoids issue of defining how many cables, or how
  large a bundle, constitute a foot
• Requires technical data re throughput
• Seemingly plausible, but not often used

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Measures of ROW Value

• Access line measure
• e.g., Virginia state law
• Superficially plausible based on traditional
  telephone service
• Does not reflect contemporary technology, where
  connectivity is not always measured in access
  lines
• Yields no result when system is a transiting
  line with no local access lines

10
Examples

• State law regimes
• OR business privilege tax as percentage of
  revenues for LECs, or 3 per linear foot
  (point-to-point)
• WA cities, 6 business privilege tax
• KS 5 of revenues billed to local addresses, or
  2 per access line/month
• MI (2002-03) 0.02 per linear foot

11
Examples

• General ordinances
• St. Louis linear foot charge starting at 1.50
  in 1991 with inflation adj., now 1.88 (2004-05)
• Little Rock, AR 5 of gross revenues
• Particular agreements
• Los Angeles (through 2002) 5 per linear foot
  of 6 conduit 1.25 per linear foot overhead
• Eugene, OR 4-5 per linear foot, or in kind

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Examples

• Analogous fees
• Floridas charge for laying cable through coral
  reefs (2003) 5.44 per linear foot
• NOAAs charge for federal ROW (1997) over 18
  per linear foot
• Real estate leases motion picture theaters,
  8-12 of gross revenues
• Alaska oil royalties 12.5 of value at the
  wellhead

13
State Law and Costs

• Some state laws limit local governments to cost
  recovery
• Iowa management costs caused by utilitys
  occupation of the ROW
• Missouri limitations established by SB 369
  scope unclear some cities grandfathered
• others e.g., Alaska, Indiana, Minnesota

14
State Law and Costs

• In such cases, state law may govern the types of
  costs that may be considered
• Administrative or processing costs
• Inspection costs
• Costs of safety precautions for ROW work
• Costs of locates and conflict resolution
• Cost of repairing maintaining the ROW
• Construction costs for ROW improvements
• Costs to community from delays, etc.

15
State Law and Costs

• A cost study may be necessary to identify and
  support the costs
• Allocation of costs among users may also be
  critical

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Some Practical Guidelines

• Courts may be affected by how closely a measure
  (gross revenue vs. linear footage) maps to
  usage of ROW
• State law restrictions may not be as
  comprehensive as they appear
• Lines provided by contract to individual private
  entities may not be subject to same restrictions
  as public utilities

17
Some Practical Guidelines

• Ancillary issues such as application procedures
  may be more significant to a court than
  compensation levels
• Whether issue is presented to a court in terms of
  access or property rights may be crucial
• Vigilance at state legislatures is vital