Firms fear proposed CDOT fee imperils Colorado broadband expansion

Rights of way along state roads such as this highway in western Colorado are viewed as crucial to expanding broadband statewide.

Gov. Jared Polis’ goal to extend broadband to 99% of Coloradans is facing a potential hurdle — a proposed Colorado Department of Transportation fee that telecommunications companies warn could make it infeasible to run fiber to more remote rural areas.

The fee, which is scheduled for consideration by the Colorado Transportation Commission at its Dec. 21 meeting, is for use of rights of way owned by the state agency, which are key to running the middle-mile fiber needed to connect residents in less populous areas. Polis ordered the department in February 2022 to develop a fee structure to facilitate non-governmental access to these plots of land, adding to an existing CDOT public-private initiative option in which companies compensate the state with infrastructure such as buildings.

The push for creation of such a fee comes as the state is considering how to disperse $826 million in federal grants for broadband infrastructure that must be spent fully before the end of 2027. The money is meant to connect areas now without broadband lines, which typically are more rural communities whose lack of infrastructure has imperiled economic development but also include more populated enclaves that are adjacent to cities and towns but lack broadband.

A shifting proposal from CDOT

CDOT officials offered an initial fee proposal in March that telecommunications firms and rural government leaders bemoaned as being outrageously expensive. They returned with a lower-cost plan in May, but that plan too was shelved after criticism of its costs.

The latest plan, detailed at the Nov. 15 CTC study session, would charge telecom firms a one-time permitting fee of five cents per foot of fiber, as well as annual fees of three cents per foot in rural counties and 10 cents per foot in counties with populations of more than 200,000. CDOT Intelligent Transportation Systems Manager Alexandra Axley noted that the total expected costs to companies have decreased 90% from the March proposal.

A slide from the Nov. 15 Colorado Transportation Commission study session explains the proposed fees for private firms to use state-road rights of way to run broadband fiber.

While telecom leaders appreciate the reduction in costs in the latest plan, they say the fees are still so high that they could stop broadband expansion to a significant number of areas, as the cost that would be passed on to customers from fees would make broadband service infeasible. And they say that CDOT is wrong in its assertions of why it believes it must structure the fee as it’s proposing to do.

Axley told the CTC that federal and state law requires CDOT to be compensated at fair-market value for allowing use of the rights of way by private companies. The department hasn’t tried to define that fair-market value before, instead working with firms on a case-by-case basis to determine compensation, and this new structure is meant to simplify procedures prior to the expected onslaught of land-use requests by telecom companies.

“Really, all we’re offering is a secondary path,” Axley told the CTC. “From our perspective, it’s in our best interest to get these fees out there and adopted.”

Pushback from telecom firms

A coalition of companies and business groups — including Lumen Technologies, Viaero Wireless, SECOM, Luminate Broadband, Elevate, the Colorado Cable Telecommunications Association, the Colorado Telecommunications Association and Action 22 — disagree with CDOT’s premise.

In comments filed with the CTC earlier this year, the coalition said that it couldn’t find a federal statute requiring fair-market value compensation and noted the Federal Highway Administration does not require fair-market-value fees for rights-of-way access to federal highways. And a Colorado statute cited by CDOT to justify its fee-setting appears to apply only to department property that is sold or exchanged, not to property that CDOT will maintain, the filing said.

The proposed fees also could violate the Taxpayer’s Bill of Rights because they provide revenues beyond those needed to cover cost of permitting use of the land, the filing said. They will be used for activities, according to CDOT, that include roadway surfacing and snow removal. Under TABOR, fees must go directly to the purpose for which they are charged — in this case, reviewing permit applications for use of rights of way — or else they are considered a tax that must be approved by voters, according to the letter.

And both Polis’ 2022 order to create the fees and a law passed last year requiring CDOT to develop a right-of-way fee structure explicitly prioritize broadband deployment in Colorado — something the proposed fee structure would affect negatively, the coalition argues. While CDOT officials have argued they must balance the need for fair-market-value compensation with expansion of broadband infrastructure, none of the other documents alludes to a requirement for any such balance, it wrote.

Why rights of way are needed for broadband

Geographic impediments like mountains and hodge-podge ownership of private land mean that CDOT rights of way are the only way to connect existing infrastructure to many further-flung areas, said Carrie Hackenberger, Colorado Telecommunications Association executive director.

If small-budgeted rural telecom firms — the type that the Colorado Broadband Office has said it wants to receive many of the grants to connect rural areas — must pay ongoing fees that could run tens of thousands of dollars to run fiber to areas of limited population, the price may be too high to sell broadband service and could negate such expansions happening at all, she said.

Local government officials have begun working through Colorado Counties Inc. to craft a bill for the 2024 legislative session that would bar state agencies from charging annual fees for broadband-infrastructure installation along state rights of way. La Plata County Commissioner Matt Salka said he understands the need for CDOT to recover costs of permitting, but he believes the annual fees are unnecessary and could be deal breakers for small companies and local governments trying to connect more of the state to broadband.

“Every dollar of annual right-of-way fee paid to CDOT will result in fewer unserved locations receiving new service,” Salka told the CTC during public comments at its Nov. 16 meeting. “Creating artificially high operating costs is the exact opposite of what rural Colorado needs.”

Transportation leaders stand firm

But in addition to arguing for the need for fair-market compensation, some state transportation officials wonder exactly what CDOT’s role in the expansion of broadband services is required to be. Colorado Transportation Commissioner Eula Adams on Nov. 15 compared broadband expansion to expansion of cable lines decades earlier and said objectives of the private sector are different than objectives of a state agency specifically tasked with improving transportation.

“The purpose of this is not to run a large fiber business. It’s to pay for the use of our marginal right of way,” CDOT Executive Director Shoshana Lew said at the same study session. “We’re comfortable with our methodology (for the newest fee proposal), but this is at the very, very low end of our comfort level.”

Axley noted that while CDOT doesn’t charge recurring fees to utilities to use rights of way, fiber companies are not regulated as utilities in Colorado.

Potential effect on broadband expansion?

However, in a letter sent this month to CDOT policy director Herman Stockinger, lobbyist Jason Hopfer, representing many of the coalition members behind the previous outreach letter to the CTC, wrote that federal and state transportation rules define a utility for purposes of right-of-way accommodations to include communications and cable infrastructure.

“It is non-sensical to us that internet infrastructure like fiber optic cables — which is by definition ‘communications’ under federal and state law — is not treated (as) a utility infrastructure and accommodated as such,” Hopfer wrote.

Colorado Transportation Commissioner Mark Garcia, who represents the southwestern corner of the state, added at the Nov. 15 study session that telecom companies could find alternate ways to deploy broadband fiber, such as hanging it on telephone poles. But he said that would represent a “lost opportunity” for CDOT to offer its rights of way for the infrastructure, and he asked officials to reconsider the cost burden of the latest proposal.