Another Wireless Tax Lives On

In a ruling that could have national repercussions, an Illinois court in January said that municipalities' infrastructure-maintenance fees (IMFs) on wireless-service providers violated the Illinois constitution.

More than 380 municipalities in Illinois charge right-of-way fees, which typically run 1% to 2% of a wireless-service provider's gross revenues. The city of Chicago, which reportedly generates about $10 million from the IMFs, is preparing to appeal the ruling before the Illinois Supreme Court. The city contends that the IMF is constitutional because wireless-service providers partly rely on wireline to complete calls. Together, wireless-service providers account for about one-quarter of Chicago's IMF revenues, said a spokesperson for the city's corporation counsel.

CTIA supports the argument that wireless-service providers use public rights-of-way only as customers of a LEC or cable company, said Michael Altschul, CTIA general counsel. Similar taxes have been defeated in Maryland and Texas, he said.

"We shouldn't be taxed for services that we don't require," Altschul said. "If we are not tearing up the streets or requiring permits to be granted, then we shouldn't be required to pay the same (as wireline)."

The problem with the Illinois IMFs is that the fees equate to a revenue-generating tax even though such assessments were supposed to be levied only to recover municipalities' costs of, for example, handling permit paperwork.

"If the purpose of (the IMFs) is actually to raise revenues, and the money has no relationship to the burden imposed by the utility, then it is an inappropriately applied tax," Altschul said.

The Circuit Court of Cook County has enjoined the city of Chicago from collecting the fees. PrimeCo argued that wireless-service providers should be exempt from IMFs because they don't use public rights-of-way to install their network infrastructure. Class-action lawsuits have been filed on consumers' behalf to develop a refund mechanism.

"It's actually the money that our customers paid, so we feel that we are obligated to do everything in our power to reimburse (them)," said Michael McDermo tt, PrimeCo state-government-affairs manager.

After earlier court decisions ruled that franchise fees are excessive and shouldn't be revenue-generating mechanisms for municipalities, the Illinois General Assembly replaced the franchise fee with the local IMF and decided to include wireless, McDermott said.

"All of our sites are on private property with leases or with municipalities on water towers or behind village halls," McDermott said. "But those are also instances where we are paying fair market value for those leases or that site. We do not occupy the right-of-way in any way."

The city of Chicago counters that IMFs apply to wireless-service providers because they rely on wireline to complete calls.

"I think that that argument doesn't hold water (because) we pay interconnection fees with the LEC, and we also have lease agreements for the T1s and T3s," McDermott said.

If the Illinois General Assembly considers legislation to clarify its intent with IMF, it would render the issue moot, McDermott said. In the meantime, PrimeCo is confident that the ruling will be sustained because the judge delivered a thorough opinion.

"(The judge) answered numerous questions that could be reversible and explained those out," McDermott said. "I think he basically boxed this issue of overinclusiveness."