A legal battle brewing in upstate New York over the use of municipal utility poles could have nationwide repercussions as private telecom companies seeking to build fifth-generation wireless networks contend with city governments that say they aren’t being fairly compensated.
A lawsuit filed by Verizon against the city of Rochester last month marks the latest in a string of cases pitting telecom giants against cities that want more autonomy over fees charged for the deployment of small cells on poles controlled by local governments.
Unlike current, fourth-generation wireless technology, which uses existing cell towers and can send signals across long distances, implementation of the next stage, known as 5G, will require installation of new cells. They’re smaller than previous ones — sometimes the size of a backpack — but 5G requires that hundreds be deployed, in close proximity to each other.
This means that cities that want faster connectivity must grapple with more frequent use of their utility poles and other infrastructure and more construction on roads where companies want to bury fiber optic cables. And companies who want to win the so-called “race to 5G” must navigate an uneven regulatory landscape in which municipalities have a range of requirements for use of utility poles and other types of public infrastructure.
Verizon’s suit against Rochester claims that an ordinance passed by its city council in early February violates a 2018 order by the Federal Communications Commission that limits the annual fees a city may charge for deployment of small cells on utility poles to $270 per piece of equipment. The city’s ordinance allows fees of $1,500 for the use of each utility or light pole.
In its lawsuit, Verizon claims Rochester’s fees would effectively prohibit the company from doing business there. But Justin Roj, a city spokesman, told CQ Roll Call that the city is “dedicated to ensuring its infrastructure is protected and maintained to benefit taxpayers.”
“Other communications providers are complying with the law while building out their networks and paying the necessary fees,” said Roj. “The city is confident in our position against this frivolous lawsuit.”
The case in Rochester represents an increasingly common public-private struggle in the race to 5G as the Republican-led FCC seeks to remove what Chairman Ajit Pai says are burdensome local regulations that could cause the United States to fall behind China. But in paving the way for 5G networks, he has been criticized for favoring the companies who will profit from them.
The 2018 order on which Verizon’s suit against Rochester rests was the centerpiece of Pai’s efforts to remove local regulatory barriers to 5G. He argued that some local laws violate a federal statute that says fees charged by states and cities for the use of their poles cannot be discriminatory or designed to fill budget holes unrelated to telecommunications.
“To be sure, there are some local governments that don’t like this order,” Pai said at a meeting last September. “They would like to continue extracting as much money as possible in fees from the private sector and forcing companies to navigate a maze of regulatory hurdles in order to deploy wireless infrastructure.”
But the numerous municipalities that opposed Pai took issue with his characterization, arguing that the order would impede their ability to oversee public property and ensure the safety and well-being of their residents.
“The decision will transfer significant local public resources to private companies, without securing any guarantee of public benefit in return,” the National League of Cities said in a statement.
In Rochester, for instance, where the winters can have brutal effects on roads maintained by the local government, installations of underground wireless technology can mean extra costs for cities. By raising more money from fees, Rochester claims it can better maintain its property.
“This is a serious problem with people digging up the same right of way every other day and not repairing it,” the city’s attorney, Tim Curtain, told The Democrat & Chronicle, a local newspaper.
Samir Saini, New York City’s former chief information officer, says giving municipalities authority over their interactions with wireless companies is a “win-win.”
“It empowers cities to protect public property, dramatically expand wireless coverage, guarantee safety and aesthetic protections for their streets, and bring in pole rental revenue,” he wrote in a post on Medium last year. “Meanwhile, telecommunications companies densify their networks, expand their footprint, and grow their revenue.”
In response to the $270 limit on utility pole fees, around 20 cities and counties sued the FCC — that case is proceeding in the Ninth Circuit Court of Appeals — and Democrats in Washington rushed to their aid. In June, Sen. Dianne Feinstein, D-Calif., introduced legislation to nullify the FCC order and “restore state and local control of these decisions, where it belongs.”
A tale of two cities
Though Rochester and other cities have chosen to oppose the FCC’s ruling, not every local government is mimicking their response to the arrival of 5G. Fewer than 100 miles away, the city of Syracuse is seeking to become the nation’s first fully 5G city by striking a deal with Verizon that will allow the company to install around 600 small cells on light poles in the next five years.
The deal, approved by the city council in May, is a priority for Mayor Ben Walsh’s “Syracuse Surge” campaign to drive economic growth through better technology. But it was struck at the levels dictated by the FCC in 2018 after the city repealed a previous policy that would have garnered $950 per small cell, according to the Syracuse Post-Standard.
Assuming Verizon deploys all 600 pieces of hardware, the deal will generate $162,000 in annual fees for the city, plus an additional $300,000 in application fees, the Post-Standard reported. Under its old policy, Syracuse would have made $570,000 on annual fees alone.
Some observers have questioned whether Syracuse could have struck a better deal even in spite of the FCC order, which limited the city’s bargaining power. Ken Schmidt, an upstate New York resident who consults with landowners and local governments on cell tower lease negotiations, says the situations in Rochester and Syracuse couldn’t be more different.
“Syracuse appears to have signed almost exactly what was put in front of them by Verizon without contending it. And they entered into a sub-standard deal,” Schmidt told CQ Roll Call. “Contrast that with Rochester, which seems to be sticking to its guns.”
Schmidt suggested that Rochester’s ordinance, which was passed almost six months after the FCC order, almost appears to be an attempt to test the federal government’s limits. A court may allow Rochester’s fees to remain in place, he said, as long as the city can “demonstrate why the additional charges are fair.”
But given the laws undergirding the FCC’s order, Schmidt isn’t confident Rochester’s ordinance can withstand Verizon’s challenge.
“The burden is on the city to demonstrate conclusively that those fees are justified by actual cost,” said Schmidt. “It doesn’t appear that they did.”