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ONLINE DOCUMENT: CITIES BEGIN TO SEE DOLLARS IN FIBER OPTIC RIGHTS-OF-WAY

Talk to some folks in City Hall about streets and avenues, and pretty soon they start trying to sell you "access" and "rights-of-way," like the roads were paved with gold.

Well, asphalt is asphalt, but there's fiber optics in them thar streets. And faster than you can say telecommunications deregulation, there's going to be a heck of a lot more of it.Was a time you could dig up city streets and find nothing underneath but sewer, water, electricity and gas lines. Pretty straightforward; little controversy.

But fiber-optic line is the stuff from which an information revolution is made. There are myriad providers competing to wire the city.

And since most of the cable gets laid beneath public roadways - roads built at taxpayer expense - cities across America, large and small, are starting to see something of value beneath all that tar, something that until now has practically been given away.

"The dirt is free," said Leonard Krumm, a Minneapolis public works official. "It's the hole in the ground that costs a lot of money."

For cities like Minneapolis - caught between ever-tightening budgets and growing social needs - new franchise, licensing and permit fees for laying fiber-optic line are seen as a way to recoup costs, hold down taxes and possibly generate millions of dollars in new revenue to boot.

"We need to make it clear that this is something we own, somebody else is using it and that the taxpayers need to be compensated," said Ways and Means Chairwoman Joan Campbell during a recent City Council discussion.

Not surprisingly, telecommunications companies don't necessarily see it that way, and are likely to fight new fees and regulations.

US West Communications, for example, has tried to block legislative efforts to define cuts in the road as a commodity that must be paid for.

In a case that's being watched by city officials around the state, US West has sued the city of Redwood Falls, Minn., in an attempt to upend a 1990 ordinance regulating the installation of fiber-optic lines and imposing a tiny payment for the use of public right of way.

US West also has filed a petition with the Minnesota Public Utilities Commission (PUC) to request that the state assert exclusive jurisdiction over "substantive regulation" of phone, television and computer data lines, thus preempting local authority.

Because there's so much at stake for cities, the League of Minnesota Cities has joined the fight on behalf of Redwood Falls both in court and before the PUC.

"Our immediate concern is having some balance," said league representative Ann Higgins. "Cities need to be able to control and maintain an infrastructure they've been charged with taking care of."

From the cities' point of view, loss of local control could cost money. Minneapolis City Council Member Steve Minn said, "The public right of way is an asset."

By one recent estimate, the city's total right-of-way infrastructure - all the property under public streets, sidewalks and other thoroughfares - is worth some $2.2 billion.

Until now, city public works officials have tended to take a narrow view of the public right of way. Access has not been viewed as a commodity that can be sold or leased.

Fees for street work are typically a fraction of actual costs. For example, Minneapolis currently charges a flat $25 for each "cut," regardless of size. While utility companies must repair and resurface their work sites, digging up streets still shortens their useful life by years.

Meanwhile, recent federal deregulation has brought increased competition among telecommunications companies and more requests to dig up city streets.

Besides US West, several other firms are angling to lay fiber-optic lines in Minneapolis, officials say. They include AT&T, Sprint, MCI and others.

"Most cities are in the same boat we're in," said Assistant City Engineer Mike Monahan.

But for Minneapolis, the "Information Age" and its attendant street cuts couldn't have come at a worse time. The city is just completing a 30-year street-paving project.

And while city officials may want to minimize disruption to thoroughfares, some companies may want exclusive use of their own facilities, duplicating lines that are already there. Others, in an effort to stifle competition, may balk at leasing excess line capacity to competitors.

There's no master plan. So what's a city to do?

The city of Anaheim, Calif., for one, dug its own ditches, replacing 30-year-old copper wire connecting the city's electrical substations with a 50-mile loop of fiber-optic cable, three times more than the city needed for its own use.

It was a $6 million investment that the city expects to recoup by selling excess capacity to private companies that want to offer telephone, video and other telecommunications services.

Another advantage to a municipally owned fiber-optic system is that it reduces the need to open the streets to put in new lines every time a new telecommunications company enters the market.

Anaheim also is negotiating with a private contractor to take over the network and build additional fiber-optic loops tying in residential and commercial customers, including Disneyland.

The city reportedly is asking for a guarantee of $1 million annually, plus a percentage of the revenues. Governing magazine said that Anaheim hopes to take in as much as $10 million a year within the next five years.

While there's been some talk in Minneapolis of following the Anaheim model, it's far from clear what the city will do, particularly in view of the challenge from US West.

US West already has notified Minneapolis officials that it considers telecommunications regulation the province of state government. "There are laws and statutes in place that we have to work within," US West lobbyist George Blackwell recently told the council.

Also watching closely is Paragon Cable, which provides cable service to Minneapolis and several suburbs. "One concern is we are already paying a 5 percent franchise fee to the city, which translates to $1.3 million a year, and our competitors aren't paying that," said Paragon spokeswoman Kim Roden.

Some also question whether it is the city's role to get into the business of constructing its own telecommunications corridor. Others argue that it fits right in to the mission of local government.

Whichever argument prevails, the bottom line for many municipal officials is that the city at least be compensated for the costs of maintaining a public infrastructure.

With the rapidity of technological expansion, deregulation and ever newer innovations, public officials realize they must act soon if they're going to control events.

Another issue is that the fiber-optic wave may be over before cities find a way to cash in or at least be compensated. After all, some say, the next wave in the telecommunications revolution may indeed be wireless.

(Distributed by Scripps Howard News Service.)