Knowledgebase-Telephone Franchise Regulation


Information Product

Title:Telephone Franchise Regulation
Summary:MTAS was asked whether the local telephone company should be paying franchise fees and what recourse city residents have if they want to use another telephone company.
Original Author:Ashburn, Melissa
Co-Author:
Product Create Date:10/30/2006
Last Reviewed on::05/23/2017
Subject:Telephones--Tennessee; Telecommunications--Right of way; Franchises
Type:Legal Opinion
Legal Opinion: Telephone Franchise Regulation public.doc

Reference Documents:

Text of Document: October 30, 2006



Re: questions regarding phone service

Dear City Manager

Your Municipal Consultant forwarded your email dated October 24 concerning telephone services in your area, in which you ask some questions about the operations of phone companies in our state, and whether there is any recourse for citizens wanting to use other phone companies.

I will first answer your question about telephone franchises, and franchise fees. Telephone companies are treated differently under our laws than other utilities or service providers using the right of ways. The State has essentially granted a state- wide franchise to all telephone companies through T.C.A. 65-21-101, which grants telephone companies the right to use public right of ways for installation of lines and maintenance of infrastructure. The law prohibits local governments from preventing phone companies from “constructing, maintaining and operating” lines in those areas, but does permit “reasonable” regulation. T.C.A. 65-21-103.

It is under this statute, T.C.A. 65-21-103, that cities are permitted to charge a “rental” for use of the right of ways by a phone company, but our courts have ruled that any funds a city receives from a phone company for “renting” or using the right of ways can only be applied to maintenance of those right of ways. Bellsouth Telecom. v. City of Memphis, 160 S.W.3d 901 (Tenn. App. 2004). For that reason, most cities do not pursue rentals or fees from phone companies. If a city does charge such rentals or fees, those amounts must be accounted for separately and only used for maintenance of the right of ways.

So, to answer your question about the local Telephone Company, they are not required to pay a franchise fee to the your City. The City may be able to negotiate a rental or fee for use of the right of way, but you will have to determine what the actual costs of such use will amount to, and only apply funds received to maintaining those right of ways. It is my understanding that very few cities charge such fees.

Your other questions concern the recourse of city residents who want to use another phone company. Telephone companies are regulated by the Tennessee Regulatory Authority (TRA). The TRA primarily handles complaints about unfair billing practices and discrimination in offering services. I do not believe that the TRA can solve your problem of having only one phone company. Another company must first express interest in serving the area, and file an application with the TRA for permission to provide service to the area. The TRA will then hold a public hearing and issue a certificate of convenience and necessity if the application is approved.

I have enclosed in the mailing of this letter a copy of the Rules of the Tennessee Regulatory Authority for Telephone Companies (1220-4-2) and Local Telecommunications Providers (1220-4-8). The rules primarily address customer complaints over service, and the procedure for companies applying for permission to provide service. If many customer service complaints are filed concerning your local carrier, it should make the application process by a competing company successful.

I wish I had more helpful information to share to help you address your citizen’s problems with the phone company. Perhaps the TRA will address the problems, or better yet, another company will apply to serve your City.

Sincerely,


Melissa A. Ashburn
Legal Consultant

Please remember that these legal opinions were written based on the facts of a given city at a certain time. The laws referenced in any opinion may have changed or may not be applicable to your city or circumstances.

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