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Ninth Circuit Issues a Disposition in Challenge by Time Warner Telecom and Qwest of Actions by Portland, Oregon under Franchise Agreements

April 15 , 2009
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The United States Court of Appeals for the Ninth Circuit (the “Court”) issued an unpublished disposition on an appeal of the decision of the United States District Court for the District of Oregon relating to certain actions by the City of Portland, Oregon (the “City”) under franchise agreements with Time Warner Telecom of Oregon, LLC (“TWT”) and Qwest Communications Corporation (“Qwest”).

Specifically, TWT had challenged the City’s five percent gross revenue fee included in its franchise agreement and the City’s classification of certain TWT information services as “telecommunications services” and thus subject to the fee. The Court affirmed the lower court’s holding that the gross revenue fees were taxes within the meaning of the Tax Injunction Act, thus depriving the lower court of jurisdiction to review the specific provisions of the franchise agreement. The Court also found that the lower court committed no error in deciding that the information services provided by TWT fit within the definition of “telecommunications services” in the franchise agreement. Finally, the Court reversed the lower court’s determination that TWT’s in-kind requirements violated Section 253(a) of the Federal Telecommunications Act. (47 U.S.C. § 253(a) provides that: “No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.”)

Qwest, for its part, had challenged the City’s franchise fee based on per-foot usage and the “in-kind” provisions of its franchise agreement. The Court held that the in-kind provisions, which had been provided to the City for twelve years, did not vest the City with broad discretion and did not prohibit the provision of telecommunications services, as demonstrated by Qwest’s continued operation. Thus, the requirements did not violate Section 253(a) of the Telecommunications Act. Similarly, the Court found that the annual fees, calculated on per-foot usage, did not have the effect of prohibiting Qwest from providing telecommunications services and hence complied with Section 253(a).

The Court’s unpublished disposition is not precedent for cases other than the TWT and Qwest cases before the Court, as provided in 9th Cir. R. 36-3.

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