10th Circuit Affirms That Santa Fe’s 2% Franchise Fee Not Preempted by Federal Law

The 10th U.S. Circuit Court of Appeals affirmed the district court’s summary judgment in favor of Santa Fe, New Mexico, denying wireless ISP NMSurf's challenge that the city’s 2% franchise fee for installing a wireline fiber network in a public right-of-way is preempted by sections 253 and 332 of the Communications Act, in an order and judgment Tuesday (docket 22-2131).

CTIA and USTelecom supported nonmember NMSurf, saying in a Jan. 27 amicus brief it's "well-established" that excessive municipal fees “can hamper communications infrastructure deployment” (see 2301300001).

NMSurf wrongly contends that the district court erred in granting summary judgment in Santa Fe’s favor, said the 10th Circuit order. NMSurf argues Santa Fe’s ordinance violates Section 253 because the fees it imposes “are unrelated to the actual costs that Santa Fe incurs as the result of the use of the public right-of-way,” it said. NMSurf argues any imposition of fees based on revenue rather than actual costs is a per se violation of Section 253, warranting a finding of preemption, it said.

In support, NMSurf cites the FCC’s 2018 “barriers” order saying fees are permitted only to the extent they're nondiscriminatory and reasonably approximate the locality’s reasonable costs, said the order. But that order “addresses small-scale wireless infrastructure, not the wired internet infrastructure at issue in this case,” it said. Though NMSurf argues the FCC’s reasoning is broad enough to apply to this case, “we decline to adopt the reasoning of the order under the circumstances presented here,” it said.

In short, “we agree with the district court that NMSurf did not carry its burden of showing that Santa Fe’s ordinance is materially prohibitive,” said the order. “Accordingly, we need not determine the applicability” of the safe harbor provision of Section 253, which allows a local government to manage public rights-of-way and to require fair and reasonable compensation from telecommunications companies if it’s competitively neutral and nondiscriminatory, it said.