New York lawmakers are pushing to repeal a controversial state broadband fee that’s disrupted several high-speed internet expansion projects across regions of rural upstate — especially as internet connectivity remains essential during the coronavirus pandemic.
The state Department of Transportation started charging fees this year to fiber-optic cable installers who build lines in a state-controlled highway right-of-way. The 2019-20 state budget contained language that enacted a right-of-way tax or use and occupancy fee, allowing the DOT to require installers to enter annual fee-bearing permits to charge corporations per foot, per cable, for fiber optic lines they own.
The fee does not apply to other utilities in the same area, including phone, water or sewer lines. The extra cost applies to lines constructed before the fee went into effect this year.
Assemblyman Mark Walczyk, R-Watertown, sponsors bill A10932 to repeal corresponding provisions of state highway and transportation corporations law to reduce the cost of expanding broadband access. It has remained in the Corporations, Authorities and Commissions Committee since Aug. 17.
“People are upset,” Walczyk said. “I view this tax as excessive, unreasonable and unfair. When we get back to session, whether that’s in a special session (this fall) or back in January, I hope to finally repeal this thing because it lacks common sense.”
DOT charges corporations three types of fiber optic permit fees depending if they are underground, aerial or cross a highway right-of-way. Companies are typically charged when they pass through privately owned right-of-ways.
Fiber optic-owning corporations in the north country, Twin Counties and Batavia are annually charged $200 per foot, per cable for up to 96 strands; $316 per foot between 216 and 431 strands and $549 per foot for 432 strands or more when cable lines cross a highway right-of-way. The fee is significantly lower for aerial liens at $0.26 per feet, per cable for up to 96 strands; $0.42 per foot for 97 to 216 strands; and $0.80 per foot for 217 aerial strands or greater, according to dot.ny.gov.
Fiber optics utility companies are prohibited from passing the new DOT fee costs to consumers.
The north country assemblyman spoke with DOT commissioner Marie Therese Dominguez about the legislation to repeal the fee, which was projected to raise as much as $30 million this fiscal year.
“The commissioner said, ‘I read your bill, it was very straightforward; I understand where you’re coming from,’” Walczyk recounted Friday. “We’ve made great strides with DOT and they’ve kept an open line of communication, which I appreciate.”
The fee is based on formulas that consider the length and amount of fiber installed and location of fiber within the state, according to a statement Friday from a DOT spokesperson. Payment amounts and due dates vary based on the particular projects.
Department representatives declined to comment on the pending legislation.
Fee rates will increase by 2% each year and may be adjusted when DOT renews a permit. Fee-bearing permits are required for existing fiber optic line occupancies and new installations, according to dot.ny.gov.
Upstate New Yorkers have grappled with lacking high-speed broadband connectivity for more than a decade. Gov. Andrew Cuomo and many representatives have argued internet access is no longer a luxury, but an essential utility comparable to electricity or water lines — especially as people have largely depended on working from home or attending school online during the COVID-19 pandemic.
“...The governor needs to be reminded of his promise to expand rural broadband,” the assemblyman said.
Cuomo launched the Broadband For All initiative in summer 2015, investing more than $550 million through three rounds of grants to secure high-speed internet upgrades for the most rural, underserved parts of the state.
Projects funded with a state grant award through the Broadband For All program are exempt from the DOT fee. Broadband For All projects are the fee’s lone exemption.
Republican lawmakers who negotiated the 2019-20 budget have repeatedly said the broadband tax was covertly inserted into the state’s spending plan.
“I think this is one of the Albany sausage-making things,” Walczyk said. “I think (representatives) were thinking of a way for some revenue, and I think they’ve overshot here. Until we raised the alarm, I don’t think they were aware of how oppressive this tax is.”
State Sen. Pamela Helming, R-Geneva, sponsors bill S8858, or the Senate counterpart to Walczyk’s bill to repeal the fee. Senate Minority Leader Robert Ortt, R-Lockport; and Sen. George Borrello, R-Jamestown; co-sponsor the measure, which was referred July 31 and remains in the Senate’s Rules Committee.
Borrello released a statement Tuesday drawing attention to the bill and questioning the accuracy of the state’s claim the $500 million Broadband For All program has expanded connectivity to 98% of the state population. The senator highlighted a recent independent Common Sense Media report that found 726,000 K-12 students in New York lacked adequate internet access during the pandemic, or 27% of all students.
“I’d like to know how much revenue has been generated by this,” Borrello said Friday of his recent inquiry to state Comptroller Tom DiNapoli’s office. “It’s killed projects and scaled back projects. They might very well not have the revenue they projected from this fee. That in itself is a good reason to just cancel it and repeal it and let’s get people back to having some standing broadband.”
The fee has delayed or halted broadband expansion projects statewide, including a 2-mile Slic Network Solutions project on Route 37 in the town of Louisville that was in the works for two years. Construction was expected to begin last fall, but the corporation halted the installation after finding out about the DOT’s required fee-bearing permit.
The Development Authority of the North Country immediately halted outstanding fiber installation projects in January because it could not afford paying about $2,000 per mile for a total of $1.6 million on its roughly 830 miles of existing owned fiber.
“We have been proceeding with both types of projects — both in state rights-of-way and outside of state rights-of-way,” according to a statement Friday from Laurie Marr, DANC’s director of communications and public affairs. “For the new builds within the state rights-of-way, we have been paying the fees in protest.”
The fee costs providers more than the price to install fiber-optic broadband cable lines, Borrello said, which has caused a lag, or for providers to be delayed securing high-speed access to thousands of underserved New Yorkers. Borrello detailed a recently halted Armstrong Communications project that stopped a phase III fiber-optic build-out in Cattaraugus and Allegany counties, and other counties in the Southern Tier. The project would have connected about 35,000 homes in the area, which currently lack access to high-speed broadband connectivity.
“The more that they pay in the (DOT) fee, the less homes they’re going to be able to service,” Borrello said. “That’s just something they can’t absorb.”
Providers cannot pass the new DOT fee costs to consumers, but if they could, lawmakers have said it would amount to an estimated $21 to $25 per user, per month.
“This is the case with a lot of revenue projections — they just assume people are going to suck it up and pay it and that’s not going to happen,” Borrello said. “... This is about spending money to get as many homes and businesses with high-speed internet access as possible.”
Tension has mounted for negotiations between utility companies that own utility poles and broadband providers, with recent spikes in access fees.
“Access to a pole was roughly $2,500 — it’s going up to $25,000 per pole,” Borrello said. “You have to ask yourself, why is that? It’s speculation on my part, but I believe because this fee was much less on a pole than it is underground, utility companies were taking advantage of that and charging a higher price because they knew the (fee) was going to be less on overhead lines.”
Cuomo’s administration is fully committed to expanding broadband throughout the state, which is why it invested $500 million in its Broadband For All program, Freeman Klopott, spokesman for the state Budget Division said in a statement Saturday.
“The FY 2020 Budget, as approved by the Legislature, simply enabled the state to recognize the full value of its assets by authorizing the Department of Transportation to enter into agreements with fiber-optic utility companies to use state rights of way, offsetting costs for taxpayers,” Klopott said.
Both bills are sponsored and co-sponsored by Republicans, which Walczyk attributed to conservative lawmakers traditionally representing the state’s rural areas, which have been most affected by the fee. The legislation is a clear way forward, Walczyk said.
“It’s going to be turning Albany’s nose and attention to this issue and making sure it’s on the negotiating session or when we get back to the budget,” he added. “There’s a revenue component here. I don’t think this is the way to squeeze revenue out of people.”
Democrats are likely to support the measure, Walczyk said, because the need to secure high-speed internet access for all New Yorkers — especially in rural areas of upstate — is not a political issue.
“This is not a partisan issue whatsoever,” Walczyk said. “There’s Democrats that have the same issues and the same gripes. It affects all New Yorkers. Think of the political dynamic and the competition of getting high-speed internet in New York City. This is an upstate issue through and through. This is a rural issue through and through. That’s where you’re going to find the most support for it.”
DOT and DANC officials continue to be at an impasse over the department’s new broadband fee.
The authority has been exempted from DOT fees or assessments since it established a telecommunications open-access network more than 12 years ago. When the authority was created in 1985, the Legislature voted to exempt its property, income and operations from taxation or assessments of every kind and nature under state Public Authority Law § 2713 and 2702(10).
This spring, DOT Commissioner Marie Therese Dominguez disagreed with DANC’s interpretation of Public Authority Law in an April 22 letter, saying the laws refer to real property the authority controls or owns — not the installation of utilities on state-owned land under the DOT’s jurisdiction. The department argued companies are not required to install fiber optic lines in state-owned rights-of-way.
DANC and DOT officials met in person in August as the department continues to review the disagreement over the fee.
“It was a very cordial meeting,” DANC Executive Director Carl Farone Jr. said. “I think they understand our issues. They’re sensitive to the topic. They understand telecommunications is a very critical element in our business and industry and education system and healthcare.”
DANC representatives are working with the state to come up with a logical solution and evade a lawsuit.
“I’m sure that’s not where DOT wants to go,” Farone said. “We’re in a holding pattern ... waiting for them to see what they come back with.
“This just isn’t the best policy in imposing a fee. This is a huge issue for the industry.”
DOT continues to review DANC’s argument the state legally developed the authority to be exempt from taxes and assessments. The department is studying the entire fee structure and has not set a timeline for the review.
“We are in a dialogue with the fiber optic industry including DANC regarding requirements for installation, fee structure, process enhancements and the development of fiber and broadband in New York state,” according to a statement from the DOT.
DANC estimates the DOT fee would wipe out about 25% of the network’s annual projected, generated revenue of $6 million with $1.6 million in additional charges. The authority also budgeted $2 million for infrastructure equipment replacement between April 1, 2020 and March 31, 2021.
“There will be very little left with the $1.6 million,” Farone said. “We should be focusing on building out our fiber to build out our access. Jefferson and St. Lawrence (counties) are a huge area — we need to focus on providing services to students in those local areas and not being overly concerned about this $1.6 million fee.”
DOT has not invoiced DANC for its estimated $1.6 million fee charge on its 830 miles of fiber-optic lines, but has paid about $5,000 to date “in protest.” DANC halted its planned broadband expansion projects in January because Marr said the authority cannot afford it.
“We have changed our plans for some projects to avoid being in a state right-of-way,” she added.
Farone has appealed for Walczyk and state Sen. Patricia Ritchie, R-Heuvelton, who co-sponsors the senate measure, to advocate on the authority’s behalf and work to repeal the fee.
“We are still trying to work with the state to come up with a practical solution that will result in a positive outcome for the residents of Northern New York,” Marr said. “Our telecommunications infrastructure is vital to schools, hospitals, libraries and emergency management across northern New York.”
DANC, a public-benefit corporation, works to meet Northern New York and the 10th Mountain Division at Fort Drum’s infrastructure needs in water, sewer, housing, solid waste management and telecommunications. The authority’s extensive telecommunications network is linked to every school and hospital in Jefferson, Lewis, St. Lawrence and surrounding counties, in addition to several higher-learning institutions, including SUNY Canton, SUNY Potsdam and Clarkson and St. Lawrence universities. The authority also links a public emergency network of 911 centers across 13 Northern New York counties and connects 39 libraries in the North Country Library System to the library hub in Watertown.
Representatives from Cuomo’s office did not respond to multiple requests for comment.