A 5% tax on telecom provider gross revenue isn’t ‘reasonable comp...

on Puerto Rico Telephone Co. (PRTC) by the municipality of Guayanilla could be prohibitive, especially if other municipalities levy similar amounts. “We agree with PRTC that [the ordinance] will negatively affect PRTC’s profitability,” the court wrote in a June 7 ruling. “While we recognize the difficult task that municipalities face when enacting ordinances that regulate public rights of way, we conclude that the ordinance in this case is preempted” by Sec. 253(a) of the Telecom Act, which bars state or local statutes prohibiting entry by telecom companies. Wiley, Rein & Fielding, which represented PRTC, said the case marks “the first Circuit-level precedent defining the limits on municipal authority to condition access to public rights-of- way on the payment of gross revenue fees. The opinion “contains a strong endorsement of the principle that any rights-of-way fees imposed by a municipality must bear a direct relationship to a telecommunications carrier’s use of those rights-of-way and that a municipality’s costs of maintaining the rights-of-way are ‘an essential part of the equation,'” the law firm said. The decision also embraced “the important principle that once a municipal fee is shown to be a potential barrier to providing service under Section 253(a), the burden of proof shifts to the municipality to show that the fee meets the definition of ‘fair and reasonable compensation'” -- Puerto Rico Telephone Company v Municipality of Guayanilla (05-1400), it said.