Valuation and Compensation for Accommodating Utility and Communications Installations in Public Rights-of-Way (2023)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

4 Chapter 1. Introduction 1.1 Background The co-location of utilities and roadways emphasizes the need for resolute guidance on accommodating utility and telecommunication facilities in public right-of-way (ROW). Departments of Transportation (DOTs), as often the managers of this ROW, need to understand their rules and options in accommodation and possible compensation. Beyond telecommunications, new demands for DOT ROW by renewable energy projects, various cellular technologies (which need fiber optic access), and the needs that will arise for connected and autonomous vehicles are beginning to test the limits of ROW accommodation policies. All the while, the expansion of the more common utilities of electric, water, gas, and sewer are also in need of accommodation. Utility firms provide necessary services to the public. Their installation along the ROW of public roads and streets is not only due to the low cost of accommodation but because these streets follow their users. If the utilities were not allowed to use the ROW, they would be required to purchase land themselves, driving up the overall cost to the utility organizations. This would then increase the costs to the public. Because of this, and as a rule, the Federal Highway Administration (FHWA) has noted that the use of highway ROW in accommodation of utilities is in the public interest. The history of this practice is well captured within the NCHRP Synthesis of Highway Practice 224. (Williams, 1996) The advent of access control occurred in the late 1950s and led to more restrictive controls on utility use of highway ROW, especially in longitudinal accommodations. As part of a major update of the utility regulations in 1985, FHWA wanted to establish procedures for handling both the accommodation of utilities and the use of highway ROW by private-use lines. It was decided that private-use line crossings could be handled under the utility regulations contained in 23 CFR 645 subpart B, but that private-use longitudinal lines could not. This accommodation would be according to 23 CFR 710. (Williams 1996) These unified stances on ROW use provided by FHWA were part of regulation until 1988, when accommodation became at the state’s discretion according to an approved accommodation policy. DOTs were enabled to have more restrictive legislation and a more restrictive definition of a “utility.” Some DOTs did not recognize cable TV or certain other telecommunications as “utilities.” The Telecommunications Act of 1996 and associated guidance of “Freeway Accommodation Policies” indicated DOTs could charge fees at their discretion for longitudinal utility use of their ROW, but there was little FHWA guidance on this. The 2003 FHWA Program Guide, 6th Edition, states: It has been the FHWA’s policy for many years to allow States to charge fees for utility use of highway right-of-way if they desire, and to allow them to use the proceeds as they see fit. In the past, fees charged for utility use were generally just

5 enough to cover the cost of processing permits. Now, with the advent of fiber optics and wireless telecommunications, opportunities exist for the States to make substantial profits. In such cases, the FHWA has informally encouraged the States to use such revenues for transportation purposes. 1.2 Problem Statement The impetus of the synthesis by Williams (1996) was in response to the rapid growth of telecommunications accommodations for fiber optic technologies. The findings noted multiple approaches to accommodation hinting at a dispersion from a unified understanding or stance on utility accommodation relative to the access control of a route. Nearly 20 years later, a 2017 FHWA Memo from the Associate Administrator for Infrastructure was issued as a refresher of accommodation policy in response to rapid growth in the deployment of cellular technologies. From the 1988 FHWA “deregulation” to allow DOTs to have discrete accommodation policies, these operations have moved into the Fourth Industrial Revolution with the rapid spread of 5G and small/microcellular structures, deployment of broadband initiatives, and other alternative uses of highway ROW such as renewable energy facilities. There are significant issues in building consistency within approaches to accommodating utilities and telecommunications in highway ROW. There have been substantial changes in requests for DOT ROW. The FHWA “deregulation,” or easing of access control policies, allowed for many variances in accommodation rules by DOTs, not the least of which is in accommodation fees. In the past, fees charged for utility accommodation were generally just set to cover the cost of processing permits and other actual costs (fee neutral). Yet, these fees seldom cover even the minimum cost of processing permits and certainly do not cover costs for meeting FHWA requirements to inspect all installations within ROW or to manage the ROW. With the advent of fiber optics and wireless telecommunications, ROW space is rapidly being expanded, and opportunities exist for the DOTs to look at more lucrative valuations of their ROW. The question of valuation and compensation for accommodating utility and communication installations in public ROW is complicated by federal, state, and local policy and regulations, the growing political nature of telecommunications infrastructure, and the various environmental (rural-urban classification, access control, etc.) scenarios surrounding accommodation cases. DOTs looking to generate revenues from their ROW are meeting pushback from the utility sector. The Broadband Deployment Advisory Committee of the Federal Communications Commission (FCC) issued a 2018 Report on Rates and Fees advocating the cost-based approach (revenue neutral) for accommodations in the general interest to broadband deployment. When West Virginia passed legislation for leasing their ROW, the West Virginia Broadband Enhancement Council commissioned a 2018 report showing that proposed rates and fees were 384% of construction costs and would be passed on to customers. By governor decree, West Virginia set the ROW costs for broadband to the fair market value of $0. In general, DOTs are not advocating for increased costs to broadband users, but there is a need to gain control of rampant accommodations of utilities

6 without the consideration of the losses being incurred to the DOT. There is also displeasure in practices such as installing “dark fiber,” where broadband installers place unused fiber-optic lines that are later rented to others and in essence generating revenue through the rent of services on public ROW. The line and conduit ownership and subsequent rental or lease agreements become difficult, if not impossible to track for a DOT. These same concepts bleed over to the cellular technologies being installed on public ROW. The use of railroad ROW generally has entailed significantly higher costs for occupancy, and this provides support for DOTs to investigate their valuations more deeply. Public ROW is increasingly being consumed by utilities and specifically telecommunication technologies. DOTs need guidance in protecting their ROW assets, and their human resources expended to manage the ROW, or be reasonably compensated for these expenses, considering the best interest of the public and while being mindful of their present and future operational needs. An assortment of DOTs has varying set fees for cellular technology accommodations. Some vary by structure type and installation method (mountings on DOT structures versus stand-alone), while others are still developing the approach they intend to use for these accommodations. While many states had fee considerations underway, the FCC issued “The New FCC Rule,” developed as the Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment ruling adopted September 26, 2018. This ruling placed timelines (shot clocks) for review and issuance of permits as well as limited fees for applications and permitting. This rule is still evolving, and its outcomes must be carefully considered within this research. As a central point to this study, the congestion of public ROW is an ever-growing concern. As rulings and policies dictate more and more accommodations, DOTs are losing control of the ROW as a public asset. This is while the need to appropriately manage the ROW on behalf of the public is on the rise. This is not just in relation to telecommunication accommodations, but the accommodation of all utilities. With the mix of active, inactive, and abandoned facilities all competing for space, there is an extreme need for guidance to assist DOTs in the protection of ROW for their operational and future needs while accommodating fee-paying utilities, especially those necessary for the health, safety, and welfare of the public.

7 As previously mentioned, fees charged for utility use of DOT ROW are at a state’s discretion and may be used as desired, though some state legislation may preclude this possibility. In regard to utility companies, some prefer an annual fee based on previous year’s activities rather than a fee for each permit. Though when private contractors perform their work, the individual permit fees are more appropriate. From a DOT’s perspective, some are charging fees with a focus on being revenue neutral, but FHWA allows for more fiscally advantageous approaches. There are three general approaches to fee structures for ROW accommodation (with examples) shown in Figure 1.1. It is within this context that this research began to categorize state DOT approaches. From this general categorization, the research turned to considering the spectrum of valuation approaches. Sharing Right-of-Way for Telecommunication Guidance and Institutional Issues. These valuation approaches include: • Competitive auction, • Valuation of adjacent land, • Cost of the next best alternative (potential competition with the railways), • Needs-based compensation, • Historical experience, and • Market research. Most state laws authorize public utilities to use road ROW, provided they do not obstruct or hinder the usual travel, adversely affect public safety, or obstruct the legal use by other utilities. However, state laws also provide cities and municipalities with the ability to establish rules and regulations Revenue Generating • Lease and rental alternatives, considering ROW valuations Revenue Neutral • Cost-based, possibly with ROW valuation Non-Revenue Generating • Cost-based for permitting process only Figure 1.1 General approaches to ROW accommodation fee structures

8 governing the use of their public right-of-way. In general, these rules and fees must be competitively neutral and not unreasonable, punitive, or discriminatory to utility companies. However, states do experience differences between the fees and accommodation approaches at the state level versus local jurisdictions. Depending on legislation, DOTs allowing accommodations may charge for installations in the form of fees, rental, leases, in-kind resource sharing, bartering arrangements, and multiple other approaches. These variations are due to the complexities of individual state legislation, the complex makeup of state population and land use, the variations in access control of roadways, the multiple approaches to valuation, and others. This research is needed to assist DOTs in the development of guidance on everything from navigating these complexities to valuation approaches and compensation structures selected within the confines of their applicable legislation. 1.3 Research Objectives The objectives of NCHRP 15-70 are to identify best practices and prepare guidelines for DOTs regarding valuation and compensation approaches for the accommodation of utility and communication installations on public ROW. These guidelines are to include guidance for fee approaches in comparing fees, leasing, and in-kind trading used by other DOTs; guidance for setting fees through analyzing fee structures used by other DOTs and standardizing and normalizing these fees with explanation for the variation among the fees, valuation methods, and other factors; a decision support framework inclusive of the means and approaches necessary to execute a fee or leasing schedule for occupancy of both general utilities and for telecommunications facilities and; guidance for identifying and supporting policy or legislation needs stemming from a DOT’s decision to execute a fee or leasing structure. 1.4 Report Structure The remaining research report includes the following three chapters, in addition to appendices: • Research Approach – an explanation of the research methodology employed during the study, • Finding and Applications – a description of the findings in literature, legislation and policy review, the survey of state DOTs, and case studies, as well as a presentation of the state DOT categorization approach and Decision Report Tool for searching the collected information, and • Conclusions and suggested research – a description of the conclusions, limitations, and future needs related to this topic.