Legal Issues Concerning the Use of Transportation Facilities to Generate Revenue for State DOTs (2020)

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NCHRP LRD 81 31 Legal Instruments to Manage Revenue Generation Four tolling authorities responded: two are using leases to manage communications utilities in the rights-of-way, one toll- ing authority uses permits, and one tolling authority responded that it was unaware of the legal instrument being used. Further Comments and Concerns Three tolling authorities provided additional comments, stressing the need to develop policies that work for both utility owner and tolling authority. IV. STAKEHOLDER INTERVIEWS: RECOMMENDATIONS, BEST PRACTICES, AND IMPLEMENTATION EXPERIENCES Following the survey of state DOTs and tolling authorities, researchers conducted seven interviews with state DOT officials to discuss noteworthy practices and procedures. The state DOTs that participated in the interviews were from Maryland, Ohio, Oregon, Texas, Virginia, Washington, and Wisconsin. Researchers sent an interview guide to interviewees approxi- mately two weeks before the interview. Appendix C provides a copy of the guide sent to participants and used during the inter- views. Researchers conducted interviews in-person or by video conference. Interviews with state DOT officials provided insight into practices the states use to manage communications utilities that generate revenue for the state, the legal instruments used to generate that revenue, plans for changes to current processes in light of recent rule changes, and other issues that state DOTs authority generates revenue from macrocell towers through a lease fee. Process to Assess the Value of Rights-of-Way Four tolling authorities responded to the question, of which two have a defined method, and two responded they do not have a process or method. Both tolling authorities that responded af- firmatively described a process for assessing the right-of-way value for the installation of longitudinal communications lines. One tolling authority responded that they use prior or master agreements with communications providers, and the other toll- ing authority uses a predetermined fee or a negotiated share of resources. Both tolling authorities do not include a premium for continuous longitudinal access. One agency stated that annual rates are solely based on the number of fiber strands accommo- dated and the length of the installation. Regarding discounts or lesser amounts, one tolling authority responded that it does not consider a lesser amount, the other respondent responded that the fee can be reduced or eliminated if the applicant participates in a shared resource agreement. Plans for Revisions to Revenue Generation from Communications Utilities This question was posed to the two tolling authorities that indicated they currently do not generate any revenue or benefit from communications utilities or microcells. One of them re- sponded that they do not have plans to generate revenue from communications utilities in the future, and the other tolling au- thority did not provide a response. Figure 17. Type of communications utilities that generate revenue for tolling authorities.

32 NCHRP LRD 81 that accepted fiber, services, or equipment in lieu of monetary compensation. In-kind compensation is possible if it meets the needs of the state and is in the best interest of the state. Pursuant to the findings of an internal state audit con ducted in 2018,122 MDOT (MD) and other state agencies were not treating agreements for telecommunications installation work on non-controlled access roads as resource sharing agreements; thus resulting in a lost opportunity to maximize compensa- tion.123 MDOT (MD)’s response was to ensure that it would work to establish resource sharing agreements that include pro- visions for compensation from all qualified transportation busi- ness units in accordance with state law.124 Texas In Texas, an agreement to accommodate private commu- nications lines longitudinally on state rights-of-way is negoti- ated and the fee is usually charged by the foot. The fee is usu- ally charged in the form of an annual lease fee and the amount varies. The state uses appraisals or a rate schedule comparison with University Lands125 to determine the valuation of the rights-of-way for use by private communications lines. Virginia The state charges an annual fee of $250 per mile for longi- tudinal communications lines in limited access rights-of-way.126 The fee for communications lines crossing limited access rights- of-way is $50 per crossing.127 Alternatively, VDOT and the com- munications provider may decide to execute a resource sharing agreement to offset some or all of the monetary compensation. As part of the resource sharing agreement, the carrier may pro- vide dark fiber to VDOT. However, VDOT allows longitudinal installations in controlled-access rights-of-way only if the utility cannot be accommodated otherwise. Wisconsin The state created a policy in the 1990’s to allow longitudi- nal communications lines in controlled-access rights-of-way. WisDOT’s Highway Maintenance Manual lists the controlled- access highways where longitudinal communications lines are allowed to be installed along with applicable fees.128 The fee structure is based on installation length and average daily traf- 122 Thomas J. Barnickel, Performance Audit Report, Maryland Department of Information Technology and Selected Agencies: Telecommunications Resource Sharing Agreements, (Maryland Department of Legislative Services, Office of Legislative Audits, August 2018). 123 Id. at 28-30. 124 Id. Appendix 125 University Lands manages surface and mineral interests of over 2 million acres of land across nineteen Texas counties for the benefit of the Permanent University Fund of Texas, www.utlands.utsystem.edu/ Home/AboutUs. 126 24 Va Admin. Code §30-151-730 (2019) (Accommodation Fees). 127 Id. 128 Highway Maintenance Manual 09-15-40, Section 2.3, Table 1 (July 2019). deal with for accommodating and generating revenue from communications utilities in the rights-of-way. Generation of Revenue from Communications Utilities Revenue from Longitudinal Communications Lines in Controlled-Access Rights-of-Way Of the states represented in the interview, Maryland, Texas, Virginia, and Wisconsin generate revenue from the accom- modation of longitudinal communications installations on controlled-access rights-of-way, while Ohio, Oregon, and Washington do not generate such revenue. Interviewees from Maryland, Texas, and Virginia reported the use of resource sharing agreements. Virginia and Wisconsin use a fee schedule for longitudinal communications installations. Maryland In Maryland, the state’s resource sharing process is defined by state statute. If a communications provider wants to locate facilities in the state’s controlled-access rights-of-way, the pro- vider must receive approval for a request from a state legisla- tive policy committee. Once approved, the agreement must be reviewed by the state’s Board of Public Works and further by the State Comptroller and the State Treasurer. The current rates for rights-of-way access are established by the Maryland Department of Information Technology.119 Longitudinal installation rates are determined by use of the following formula: Annual Fiber Fee = (Annual Rate · Number of Strands) · Installation Length [feet]200 The annual rate for longitudinal fiber installations in cur- rently $3.75.120 A separate formula applies for empty conduits: Annual Empty Conduit Fee = Annual Rate · Number of Conduits · Installation Length [feet] The annual rate for empty conduit is currently $3.75121 There are several installations that have been in place for quite a long time. If agreements are re-negotiated for these in- stallations, MDOT (MD) applies the new fee schedule. Even though the current resource sharing agreements focus on monetary compensation, MDOT (MD) can accept in-kind compensation. In fact, MDOT (MD) has several agreements 119 Maryland Department of Transportation, State Highway Administration, Communications Resource Sharing. https://www.roads. maryland.gov/Index.aspx?PageId=872. 120 Maryland Department of Transportation, State Highway Administration, Fiber Optic Standard Pricing Schedule, July 2019, https://www.roads.maryland.gov/OOC/Fiber-Resource-Sharing- Standard-Pricing-Schedule.pdf. 121 Id.

NCHRP LRD 81 33 state rights-of-way.134 The latter statute authorizes wireless tele- communications facilities to locate in the state rights-of-way regardless of the nature, the type of rights-of-way, or the type of ownership. In everyday practice, the only restrictions to wireless communications facilities are the availability of sufficient space to ensure that the facilities are installed in a safe location. For macrocell towers, the state charges an initial and annual fee per site based on a variety of factors, including location. The agreement with communications providers allows the state to use the towers for equipment, such as radio equipment used for emergency communications owned by the Ohio DOT or other state agencies. Macrocells have been installed in Ohio for more than 20 years, and it is unclear how the fee structure was initially developed. The fee structure and annual escalation has evolved and changed several times since it was first developed. The line- of-sight tower, which was under construction as of June 2019, is unique and the state charges significantly more than for use of typical wireless towers. In addition to the initial fee, the state charges about $50,000 annually for use of the tower. Oregon Oregon generates revenue from macrocell communications utilities. Macrocells are not allowed inside the operating rights- of-way unless they are located on a third-party utility structure. ODOT (OR) has a few sites that wireless providers have used for their facilities in the past, but these sites are not located on the rights-of-way adjacent to roads, but rather are located at main- tenance facilities or stockpile sites. ODOT (OR) is required to collect fair market value for cer- tain types of uses of the rights-of-way by third parties. The cur- rent agreement uses a fee schedule for the type of use and an escalation clause to keep the fee consistent with market values. The fee schedule is determined from an initial fair market value appraisal. This base value is revisited every five years to ensure consistency with market rates. ODOT (OR) may receive the fee for the estimated fair market value in alternate forms of consid- eration besides monetary payment, including dark fiber, infor- mation technology system infrastructure, and maintenance. For macrocell installations, the cost of a lease is based on the type of equipment to be installed and the population center it serves. The lease rates range from $500 to $60,000 annually. Texas The state allows wireless communications providers to in- stall macrocell towers, which may include multiple carriers, on surplus property. Macrocell towers are accommodated through an annual lease fee. The rates for macrocell towers are negoti- ated and usually provide additional revenue for each communi- cations provider that collocates on the tower. The state uses ap- praisals or a rate schedule comparison with University Lands to determine the valuation of the rights-of-way for use by private communications lines and macro towers. 134 Id. § 5501.311(E) (2019) (Lease, easement, or license in trans- portation facility). fic. The fees are prorated when the installation length is less than a half of a mile. For longer installations, the fee can be as much as $12,000 per mile for a 20-year period, which corresponds to an annual flat fee of $600 per mile for that period. Fees for bridge attachments are also included in the table and can range from $10,000 to $500,000. 129 The state also generates revenue from leasing out conduit for longitudinal communications installations. WisDOT may accept in-kind compensation in lieu of mon- etary payment. This may be in the form of dark fiber or tower space. The dark fiber may be used to feed state-owned cameras or dynamic message signs. Tower space may be requested the by the State Patrol if they have a need in the area. WisDOT repre- sentatives also mentioned that the 20-year fee for longitudinal communications installations may be waived if the installation provides service to unserved or underserved areas of the state. Revenue from Macrocells All state DOT’s interviewed reported that they create rev- enue from the installation of macrocell towers in the state’s rights-of-way. Maryland In Maryland, the rates for rights-of-way access are estab- lished by the Maryland Department of Information Tech- nology.130 The cost for a macrocell tower permit is determined by the type of the equipment and traffic in the area of installa- tion. The state uses a graduated scale of Level 1 through 4 for equipment and traffic counts.131 The average annual fee is in the range of $30,000 to $50,000 annually, plus a 3 percent rent esca- lation increase.132 Ohio The State of Ohio generates revenue from communications cell towers or macrocells, including the installation of a direct line-of-sight tower in the state rights-of-way that is part of a wireless connection from New York to Chicago. Most of the macrocell towers are located in the center of cloverleaf inter- changes. Two statutes are relevant in the context of rights-of-way available for wireless communications facilities: a general per- mitting statute that allows communications utilities in the state rights-of-way,133 and a statute that provides specific authoriza- tion to have telecommunications facilities installed within the 129 Id. 130 Maryland Department of Transportation, State Highway Administration, Communications Resource Sharing, https://www.roads. maryland.gov/Index.aspx?PageId=872. 131 Maryland Department of Transportation, State Highway Administration, Macro Tower Standard Pricing Schedule, April 2019, https://www.roads.maryland.gov/OOC/Macro_Cell_on_Tower_ Resource_Sharing-Standard_Pricing_Schedule_Ver_03-29-2019.pdf. 132 Id. 133 Ohio Rev. Code Ann. 5515.01 (2019) (Permits granted to use or occupy portions of road or highway).

34 NCHRP LRD 81 value, so the state attempts to determine the value and recovers that cost.139 In Washington, macrocells could potentially be accom- modated in any type of rights-of-way, including sundry sites that are used for stockpiling, maintenance, and similar uses. WSDOT reviews each request for installation by a communi- cations utility or personal wireless provider specifically to en- sure that the installation meets WSDOT’s future needs, safety rules, access requirements, and several other considerations that could impact the safety or needs of the traveling public. In general, there are few limits on the location of macro- cell towers. A large macrocell tower is located alongside I-5 in Lynnwood, outside of downtown Seattle. In practice, many of the towers are located on sundry sites, and communications companies often make use of WSDOT’s existing infrastructure. For example, the state has towers that were built for WSDOT’s radio equipment that often can support additional equipment and can be used by communications providers. If tower capacity is reached, this sometimes results in wireless companies making upgrades to WSDOT towers so that the towers can hold addi- tional weight and equipment. Washington has several options to receive benefits and meet the federal “fair market value” requirement. One option is to receive a type of rent, another is an in-kind form of con- sideration. Frequently, communications companies approach WSDOT with ideas to meet the fair market value requirement. In practice, if a communications company approaches WSDOT with a request for a new macrocell tower, the company will ask if WSDOT has a need for the infrastructure. WSDOT checks with other internal groups and if there is a need, the project can move forward. WSDOT will give the communications com- pany a credit for the use of the tower by WSDOT, which will be d educted from the lease fee. The communications provider can lease the remaining tower capacity to other parties. The revenue or lease fee generated from a tower is calculated using a rate calculator that considers tower height, how much equipment is going to be installed, location, value of the prop- erty, and amount of traffic in that location.140 As a result, loca- tion is typically more important than the type of rights-of-way to determine fair market value. Washington is reviewing the rate calculator method and comparing it to appraisals that have been recently generated to determine if the methodology is useful in all cases. In some in- stances, there has been disagreement between WSDOT and the communications company on the results of the rate calculation. If the parties cannot come to an agreement, WSDOT will use a third-party appraisal. WSDOT has used appraisals in a few areas of the state, in particular very expensive areas, but found that appraisals are usually too costly and time consuming. According to statute, WSDOT can lease rights-of-way to wireless service facilities, but receives fair market value of each right-of-way and the direct administrative expenses incurred 139 Id. § 710.403. 140 WSDOT Wireless Lease Process/Fee Schedule, RES 447, Rev. 12/2015. Virginia Virginia generates revenue from wireless support structures. The wireless support structures may support macro or small cell installations. The state also charges a collocation fee for macro- cell installations. The collocation fee also applies to installations on other VDOT owned structures, such as buildings. Wireless support structures can be located in any type of right-of-way. The annual fees to install a wireless support structure or tower in both limited and non-limited access rights-of-way are as follows: • $1,000 for structures at or below 50 feet in height, unless used for small cell installation, which varies by location; • $3,000 for structures between 50 and 120 feet in height; • $5,000 for structures above 120 feet; • $1 per square foot for associated facilities located on the ground.135, The annual fee for a macrocell collocation site is half of the fee to install a wireless support structure, excluding equipment mounted to an existing wooden utility pole. The annual collo- cation fees are as follows: • $1,000 for structures less than 50 feet in height. • $1,500 for structures between 50 and 120 feet in height. • $5,000 for structures above 120 feet.136 Washington In the State of Washington, communications utilities that are regulated by the FCC, including macrocells and microcells, are not considered a utility by definition of state law. Wireless trans- mitters that transmit data and operate under a certain frequency limit are not regulated by the FCC and are therefore not consid- ered a utility facility under state rules. In Washington, a com- munications company that uses macrocells is considered a per- sonal wireless provider. Since personal wireless pro viders are not considered a utility, the right-of-way and real estate provisions of 23 C.F.R Part 710 apply, 137 instead of the utility provisions in 23 C.F.R Part 645.138 As a result, macrocells can still be accom- modated in the state rights-of-way but under different statutory provisions. Agreements for the non-highway use of real property inter- ests by public entities or private parties must be in accordance with C.F.R. §710.403 (Management) and are described in C.F.R. § 710.405 (ROW Use Agreements). From the state’s perspec- tive, the wireless installations can be accommodated using an airspace lease and a right-of-way use permit. Section 710.403 requires that all non-highway use must be charged fair market 135 Va. Code Ann. § 56-484.32 (2019) (Wireless support structure public rights-of-way use fee); 24 Va. Admin. Code § 30-151-730 (2019) (Accommodation Fees). 136 Id. 137 23 C.F.R. Part 710 (Right-Of-Way and Real Estate). 138 Id. Part 645 (Utilities).

NCHRP LRD 81 35 Small Cell Resource Sharing Program, MDOT (MD) charges an application fee of $500 for microcell installations on existing poles, which includes the first five nodes or attachments, and $100 for each additional attachment. 145 The application fee for new poles is $1,000, including any nodes or attachments to that pole.146 In addition, MDOT (MD) charges an annual fee per node of $270 and no rent escalation.147 Ohio In Ohio, microcells are installed primarily in the state’s non- controlled access rights-of-way, but a few are installed in limited access rights-of-way. Installations in limited access rights-of- way are allowable as long as they are in a safe location, but not many communications providers have requested such access. Installations that are currently located in limited access rights- of-way are in areas where the right-of-way does not necessarily appear like a typical limited access right-of-way, such as, a state route that looks like a major city street. For microcell installations, Ohio charges a one-time $1,500 application fee for a master license agreement between a com- pany and the state. In addition to the one-time fee, the state charges an annual fee of $1,500 for each site license agree- ment. The site license fee is increased by 2 percent each year. To deter mine the fee for microcell installations, the state re- viewed fee structures of other states and Ohio municipalities, and requested feedback from the industry. In addition, the state requested a valuation study that was completed in 2015 and up- dated in 2016.148 For collocation, Ohio charges a flat fee for carriers on towers that use the tower in addition to the main or licensed carrier. The state used to focus more on revenue sharing but found that revenue sharing required a great deal of administrative over- head and became unsustainable. The state found it difficult to acquire an accurate account of revenue from communications pro viders, or had to engage in estimating the inventory, for ex- ample, by counting the number of antennas owned by a commu- nications provider. The state found that a flat fee per additional carrier is much more sustainable because it is simpler to manage both for the state and for the communications providers. Texas Texas started a Small Cell Pilot Program in spring 2018, and a few districts across the state, mainly metro areas, have been included in the pilot program. Phase one of the pilot program 145 Maryland Department of Transportation, State Highway Admin- istration, Small Cell Standard Pricing Schedule, April 2019, https://www. roads.maryland.gov/OOC/Micro_Cell-Small_Cell_Resource_Sharing- FCC_Standard_Pricing_Schedule_rev2019.pdf. 146 Id. 147 Id. 148 Ohio Department of Transportation, Telecommunications Benchmarking Study, KPMG; Report to the Ohio Department of Transportation, Findings and Recommendations Regarding Fair Market Value of Fiber Optic, Cellular Rates and Related Revenue- Generating Activities, KPMG. (Documents are on file with author and will be made available upon request). by WSDOT in processing the lease application.141 WSDOT is not required to collect the fee only in the form of a monetary payment but can also accept alternative forms of consideration. Because of the statutory requirement, lesser amounts or dis- counts are usually not feasible. However, in some cases a credit or discount might apply if a governmental agency uses the wire- less tower for its own emergency radio needs. For example, the Washington State Patrol owns multiple sites where WSDOT needed access, so WSDOT and the Washington State Patrol ex- changed towers for use of each other’s sites. Wisconsin In Wisconsin, the type of right-of-way is factored into the highway category portion of the fee schedule.142 Since wireless communications are not considered a utility, the state created a policy to let cellular installations into the rights-of-way for a fee. There was not a lot of interest to install macrocell towers when the decision was originally made, but there were a few who installed towers. The state attempts to accommodate wire- less companies if they request a specific location. For cellular occupations of the state rights-of-way in Wisconsin, applicable fees are laid out in the fee schedule.143 The fees include two categories, the cellular site description and the highway category. The cellular site description provides four types of cellular groups ranging from lattice towers and tall monopoles to small cell on third-party poles. The highway category also provides four groups. These include the type of right-of-way and Annual Average Daily Traffic (AADT). The in- clusion of AADT helps capture more revenue for higher traffic areas, which is assumed to be a more desirable location. The groups range from non-controlled access rights-of-way with less than 2,000 AADT to controlled-access rights-of- way with an AADT of over 100,000. The fees range from $300 to $15,000 per year. The fees are fixed in four 5-year terms for a total of 20 years. After the initial 5-year term, the rate in creases for the next 5-year term are based on the Consumer Price Index.144 The state tried to determine a fair value for the use of the rights-of-way by cellular installations. When calculating the values, WisDOT researched what cities and other states were charging and further interviewed tower consulting companies that manage sites for municipalities and develop agreements with wireless carriers regarding their client’s revenue. Revenue from Microcells and Small Cells All of the state representatives that were interviewed except Oregon reported that they create revenue from the installation of microcell towers in the states’ rights-of-way. As part of the 141 Wash. Rev. Code § 47.04.045 (2019) (Wireless Service Facilities-Right-of-way leases – Rules). 142 Fee Schedule for Cellular Occupations On WisDOT Highway Right-Of-Way, Effective 9-4-2018 (Documents are on file with the author and will be made available upon request). 143 Id. 144 Id.

36 NCHRP LRD 81 is seeing increased interest by communications providers in mi- crocell installations. Plans and Considerations for Changes to Revenue Generation All state DOTs interviewed offered some insight into changes states are planning to introduce into their procedures to gener- ate revenue from communications utilities. Center to many dis- cussions were the FCC 2018 Declaratory Ruling and its impact on a DOT’s ability to charge fees or maintain current fee sched- ules.155 The following summarizes comments provided by state DOT officials from Maryland, Ohio, Oregon, Texas, Virginia, Washington, and Wisconsin with regard to plans for changes to revenue generation. Maryland The Maryland legislature recently introduced two bills on small cells, which were diverted to committee.156 Both bills in- cluded wording similar to the FCC 2018 Declaratory Ruling and included review period limits or shot clocks. The state intends to balance the needs of the communications companies with a process to determine and address MDOT (MD)’s implementa- tion and safety considerations. Maryland noted that its rate charts for communications re- source sharing have only recently been developed and are cur- rently being finalized and approved by the Maryland Depart- ment of Information Technology. It is possible that the values will be adjusted in the future. Further, MDOT (MD) might review its right-of-way valuation process. MDOT (MD) is re- viewing internal processes for ways to streamline the valuation process. Ohio The Ohio code allows the Ohio DOT to charge for longitu- dinal communications facilities in controlled-access rights-of- way, but the state currently does not have a policy to implement such installations. The state is currently reviewing its process and policy with regard to charging for longitudinal fiber. Ohio is also reviewing its policy for microcell installations in light of some carriers who requested to have multiple carriers within the same microcell structure, which was technically not possible when the Ohio policy was initially developed. Oregon Oregon is working toward changing the process to allow micro cells on third-party poles in the state rights-of-way from permitted use to a master/site license agreement system. The process for macrocells is changing from a lease to a similar master/site license agreement format. The master license agree- ment will be executed with vendors that would like equipment installed on the rights-of-way, and a site license agreement would be required for each installation. 155 FCC 2018 Declaratory Ruling ¶ 71. 156 Maryland SB 1188 cross-filed with HB 1767 (Wireless Facilities – Permitting and Siting) (2018). involves new pole installations and third-party pole colloca- tion. As of June 2019, TxDOT has received over 300 small cell applications. TxDOT’s Small Cell Pilot Program has a rent schedule for microcell installations: The initial fee is $500 for a small cell installation, $1,000 for a new pole installation, and $336 for a backhaul installation. The annual fee is $250 for each small cell and $336 for each backhaul installation. The annual fee in- creases at a rate of 50 percent of the increase of the consumer price index. The recurring annual fee applies to small cell and backhaul installations; it does not apply to pole installations.149 Virginia The State of Virginia generates revenue from wireless sup- port structures, which may support macrocell or small cell in- stallations. Wireless support structures can be located in any type of right-of-way. Annual fees to install a wireless support structure or tower for small cells are the same as for macrocells. The fees for small cell installations on existing third-party struc- tures are $750 for districtwide permits, covering work for two years. If a districtwide permit is not available, the fee is $150 for a single use permit with no annual fee.150 For small cell instal- lations on VDOT-owned poles, the annual fee is the actual cost of the use of the pole.151 The annual fee for installations on other VDOT owned structures, such as buildings, is the market rate. Washington In the State of Washington, a communications company that uses microcells is considered a personal wireless provider. Since personal wireless providers are not considered a utility, the right-of-way and real estate provisions of 23 C.F.R. 710152 apply, instead of the utility provisions in 23 C.F.R. 645,153 Micro- cells are accommodated in the state rights-of-way but under the same statutory provisions as macrocells using an airspace lease and a right-of-way use permit. Provisions in 23 C.F.R. §710.403 require that all non-highway use must be charged fair market value for the use, so the state attempts to determine the value and recovers that cost. Wisconsin In Wisconsin, applicable fees for cellular occupations of the state rights-of-way are laid out in the fee schedule.154 The fee structure applies to both macrocell and microcell uses. The state 149 Texas Department of Transportation Wireless Siting Pilot Rent Schedule.) (Document is on file with the author and will be made avail- able upon request). 150 Va. Code Ann. § 56-484.28 (2019) (Access to public rights-of- way operated and maintained by the Department for the installation and maintenance of small cell facilities on existing structures). 151 Id. § 56-484.31. (Attachment of small cell facilities on government-owned structures). 152 23 C.F.R. Part 710 (Right-Of-Way and Real Estate). 153 Id. Part 645 Utilities. 154 Fee Schedule for Cellular Occupations on WisDOT Highway Right-Of-Way, Effective 9-4-2018 (Document is on file with author and will be made available upon request).

NCHRP LRD 81 37 Washington The State of Washington indicated that the state’s rules need to evolve along with the constantly evolving communications technology. For example, in the past the most important factors in determining fair market value were the height of a macrocell tower and the total amount of traffic passing the tower. The cur- rent calculation is much more nuanced and takes into consider- ation many more factors. Another issue that WSDOT noted is the subleasing of sites by the main lessee. WSDOT is conducting discussions as to whether every party on the rights-of-way should have their own lease, or if subleasing would be allowable. WSDOT is evaluat- ing whether it would be feasible to capture a portion of the rent that the sublessee is paying to the main lease holder. WSDOT is working with other governmental agencies in the state to determine the best way to capture fair market value efficiently. One idea that is being evaluated is the sharing of each other’s resources and the use of past appraisals as comparable value estimates. Wisconsin Wisconsin is considering a fee waiver for short distance longitudinal occupation of controlled-access rights-of-way in hardship situations. A hardship situation could be a situation where a provider is unable to perform a crossing at a specific location due to a protected site such as a park, cemetery, etc. The hardship waiver would allow for a short longitudinal installation to allow the crossing to take place at a near site. In addition, due to the recent FCC 2018 Declaratory ruling, the fee schedule the state is using for microcell installations may change. WisDOT has requested the Wisconsin Office of General Council to re- view how the FCC ruling will affect the current procedures. Other Issues Noted by State DOTs Several states offered comments about other issues related to the generation of revenue from communications utilities, as summarized below. Exclusion of Wireless Providers from Definition of Utility Oregon has relied on its existing definition for utilities that exclude non-traditional carriers such as wireless providers from the current utility accommodation statutes. The wireless carriers in the state would like to be added to the accommoda- tion statutes since that would allow them to use the rights-of- way free of charge. On the other hand, wireless carriers do not want to be fully treated like a utility either. That creates an im- passe that hopefully can be worked out sometime in the future. Wireless providers usually maintain or at least connect their networks to wired networks. WSDOT noted that it is common that a wireless provider wants to install its own poles instead of using the poles of a third-party. This often creates confusion, because under state rules the wireless provider is not a utility, therefore the poles are not considered a utility-related facility. As a result, the state cannot grant a utility permit and has to refer the provider to WSDOT’s Real Estate Services Section. The Oregon Department of Justice has approved the master license agreement. The next step in the process is to finalize the fee structure, which will be based on a statewide appraisal study. The Oregon Department of Justice is concerned that the FCC’s recent rule revisions will affect these proposed changes.157 The state is arguing against the FCC ruling based on the fact that the state is required to collect fair market value. Third-party fiber providers in Oregon, who are not classified as a utility, are approaching ODOT (OR) to install their fiber infrastructure on the rights-of-way. ODOT (OR) is negotiating with the third-party fiber providers to create a right-of-way use agreement, which would allow the providers to install the non- utility fiber infrastructure in the state rights-of-way.158 ODOT (OR) is looking for in-kind values from the providers including dark fiber, hand holes, and last mile fiber installation to mainte- nance facilities and ITS infrastructure. Texas Texas has plans to release design guidelines for its Small Cell Pilot Program by the end of 2019. Further, the state plans to split backhaul permits from the small cell lease agreements so they can be handled separately. Finally, the state plans to start phase two of the small cell pilot program, which will involve the installation of small cells on TxDOT-owned structures. Leas- ing access to communications providers on TxDOT-owned macro towers is a potential opportunity for the state to generate revenue. The state has avoided the practice in the past due to concerns about interference of new installations with existing TxDOT radio communications. The state believes that commu- nications technology has evolved to where the issue of interfer- ence could be managed. Allowing communications provider installations using available space on existing TxDOT towers would provide benefits to both TxDOT and the communica- tions industry. TxDOT is also in the process of starting a re- search project focusing on the valuation of rights-of-way for use by utilities and third-party companies and has plans to conduct research for best practices in fiber partnerships. Virginia Virginia recently evaluated its wireless support structure fees to comply with the FCC 2018 Declaratory ruling. Guidance was sought from the State’s Attorney General’s office. Due to a law passed by the Virginia General Assembly,159 the rates for a new installation were less than collocation on third-party structures. VDOT revised the fee structure for non-small cell wireless col- locations on third-party structures to make it more reasonable to collocate rather than have a new installation.160 157 Id. 158 23 C.F.R. § 710.405. 159 Va. Code Ann. § 15.2-2316 (2019) (Validation of zoning ordi- nances prior to 1971). 160 Id. § 56-484.32. (2019) (Wireless support structure public rights- of-way use fee).

38 NCHRP LRD 81 stallations fit in with other users of the rights-of-way. Similarly, education of wireless providers is critical, and TxDOT has spent a lot of time with wireless customers to ensure good applications are submitted. These efforts reduce review time and time spent returning the applications for corrections and re-review. Differ- ent regions of the state have different company coordinators. As a result, a company might submit high quality applications in one part of the state and inadequate applications in other parts of the state. Competing Parties for Same Surplus Property Location Texas noted an issue in the case where there is more than one party interested in a surplus property location. If there are competing interests for a surplus property location, the process changes slightly in that third parties must provide sealed bids. Prescriptive Rights-of-Way VDOT maintains the majority of the roads in the state, which includes many secondary roads. Many secondary roads in the state are subject to prescriptive easements where VDOT does not own the rights-of-way. If a carrier wishes to install communications lines or equipment on a prescriptive easement right-of-way, VDOT can give the carrier a permit but also states that the carrier needs to attain permission from the underlying fee simple owner of the right-of-way. Assessment of Technical Issues During Permit Review VDOT noted that it is relying on the wireless communica- tions industry to provide stamped engineering documents with their application for a permit. This alleviates time constraints of the staff reviewing the application. Shot Clock Provisions and Review Period Limitations The Code of Virginia provides limits to the time VDOT has to review a permit to install and maintain small cell facilities. Specifically, the department has 30 days from the permit ap- plication date to issue a district-wide permit, otherwise the application is deemed granted.163 Further, VDOT has 10 days after receipt of the application to notify the applicant if the ap- plication is incomplete and to specify any missing information, otherwise the application is deemed complete. VDOT may require a single use permit to install and maintain small cell f acilities under certain conditions, e.g., working within a travel lane, disturbing pavement, placement in limited access, etc. In this case, VDOT has 60 days to approve or disapprove the ap- plication.164 The review period may be extended, if a request is submitted in writing within 30 days. The application is approved if VDOT does not approve or disapprove the application within the allowed time. 163 Va. Ann. Code § 56-484.28 (2019) (Access to public rights-of- way operated and maintained by the Department for the installation and maintenance of small cell facilities on existing structures). 164 Id. Definition of Small Cell Versus Microcell The Virginia state code differentiates between a small cell facility and a micro-wireless facility.161 All micro-wireless facili- ties are small cells facilities, but to be considered “micro”, it must be a facility not larger in dimension than 24 inches in length that can be installed by a utility company under existing VDOT district connection permits.162 Surplus Property Use TxDOT has two options to deal with surplus property, or property that currently is deemed not needed for transportation projects: (a) sell the property or (b) retain it. If TxDOT decides that it is in the state’s best interest to sell the property, it follows a statute that controls the order of the right to buy. If it is in the state’s best interest to hold the property for a future use, TxDOT can lease the property to a third party, including wireless com- munications providers, until it is needed. TxDOT typically re- views planning projections for the next 10 to 20 years to see if the property is needed anytime soon and to set the lease term. Each lease contains a cancellation clause that allows the depart- ment to end the lease and take back control of the property in case the property is needed before the end of the lease. Cell Companies Buying Fiber Companies In Texas, some of the wireless carriers are beginning to ac- quire fiber companies, which may change how TxDOT views wireless carriers. For example, one communications provider offers telephone service and wireless service in the state, so TxDOT classifies the provider as a public utility. If a wireless carrier begins to sell residential wired service, TxDOT will have to revisit its classification of the communications provider. Coordination with Cities and Local Governmental Agencies Texas empathized the importance of effective coordination between TxDOT and local municipalities. These governmental entities work well together as transportation partners and that should be reflected by their coordination on small cell instal- lations. There are still some unanswered questions about how “small cell” fits within the state legislative framework, especially in areas with overlapping jurisdictions. For example, it could be argued that when carriers install small cells in the state rights- of-way but within a city’s jurisdiction, the carrier should follow the city’s requirements. In this regard, TxDOT found that open coordination and communications is key to a successful project. Education of Process Participants Texas underscored that education of both wireless customers and TxDOT staff is important. TxDOT staff members are mak- ing decisions on company types, use types, and how wireless in- 161 Va. Code Ann. § 56-484.26 (2019); Va. Code Ann. §15.2- 2316.3 (2018) (Definitions). 162 Code of Virginia § 56-484.28. Access to public rights-of-way operated and maintained by the Department for the installation and maintenance of small cell facilities on existing structures.