What Can A City Collect? A Primer on Fees Allowed for A Utility’s Use of Municipal Rights-of-Way

by Jamie L. Mauldin

It is longstanding and well-established law that municipalities have the exclusive right to control and manage access for the use of their public rights-of-ways and receive compensation for use of those rights-of-ways.¹ The Texas Constitution explicitly prohibits cities from giving away city property.² Municipalities also retain police powers to manage their rights-of-way. Statutes throughout the Local Government, Transportation, and Utilities Codes protect these rights and ensure that municipalities receive compensation for use of their rights-of-ways. A home-rule municipality may “prohibit the use of any street, alley, highway or grounds of the city by any telegraph, telephone, electric light…gas company, or any other character of public utility without first obtaining the consent of the governing authorities expressed by ordinance and upon paying such compensation as may be prescribed and upon such condition as may be provided by any such ordinance.”³ General law cities have “exclusive control over the highways, streets, and alleys of the municipality.”⁴ So why has determining what fees to collect from telecom and internet providers gotten so confusing? Because the compensation a city receives depends on the type of services being provided.

Municipalities have historically negotiated franchise agreements with electric, gas, water, and telecommunications utilities to operate within the city’s rights-of-way and receive a negotiated compensation amount for the use of those rights-of-way. However, changes to state law and deregulation in recent history have changed the applicability and legality of “franchise fees” with respect to telecommunications utilities. As such, city staff are often confronted with different types of agreements to negotiate, laws to follow, and fees to collect with respect to phone/cable/internet/fiber providers. Below is a primer on the types of agreements and fees a city may collect, based on the type of utility service that city is allowing to operate in its rights-of-way.

Franchise Agreements and Franchise Fees: Under Texas law, certain electric, gas, and water utilities operating within a city must do so pursuant to a franchise agreement and compensation is paid to the city under the terms of that agreement. These agreements are negotiated between cities and utilities and address compensation, and permitting requirements; and regulate utility behavior in the rights-of-way. The city will collect franchise fees pursuant to the agreement.

Certificated Telecommunications: Providers and Access Line Fees: Under the Public Utility Regulatory Act (“PURA”), no one can provide telecommunications service without obtaining a certificate of authority from the Public Utility Commission of Texas (“PUC”). A provider may not provide local exchange telephone service, basic local telecommunications service, or switched access service unless the provider obtains: (1) a certificate of convenience and necessity; (2) a certificate of operating authority (“COA”); or (3) a service provider certificate of operating authority (“SPCOA”).⁵ In 1999, the Legislature stopped municipalities’ ability to collect franchise fees for telecommunications providers and enacted Chapter 283 of the Local Government Code (“Chapter 283”). Under Chapter 283, if a provider has one of these certificates and is providing local exchange telephone or voice service, the provider will pay the city access line fees for use of the rights-of-way.⁶ These access line fees for each city are set annually by the PUC.⁷

Cable Providers and Gross Revenues: In 2005, the Legislature added Chapter 66 to the Utilities Code, which prevents municipalities from negotiating franchise agreements with cable providers. Under this statute, the PUC is the franchising authority and cable providers must receive a statewide certificate of franchising authority, or SICFA, from the PUC in order to provide service. Cable service providers are required to pay municipalities five percent (5%) of gross revenues in order to access municipal rights-of-way.⁸

However, in some instances, a city may not receive both cable fees under Chapter 66 of the Utilities Code and access line fees paid under Chapter 283. In 2019, the Legislature adopted SB 1152 which lets providers of both cable and telecom services pay only the higher of the two fees.

Network Node and Annual Public Right-of-Way Rate: In 2017, the Legislature adopted S.B. 1004, which created Local Government Code Chapter 284 (“Chapter 284”), and mandates that wireless infrastructure providers and wireless providers have access to public rights-of-way to locate their facilities. Under Chapter 284, the annual public rights-of-way rate may not exceed an amount equal to $250 multiplied by the number of network nodes installed in the public rights-of-way within the municipality’s corporate boundaries. If a network provider wants to connect a network node to the network, it may also obtain transport service from a person paying municipal fees to occupy the rights-of-way of not less than $28 per node per month. Chapter 284 provides a complex permitting process and shot clock system for approving network node permit applications. A municipality may also charge an application fee in certain instances, up to a certain amount.⁹

License Agreements and Fees: Cities are seeing a sharp increase in fiber or broadband providers seeking entry into the rights-of-way. Often, these providers do not hold a COA or SPCOA or provide voice services, so they are not CTPs who would pay access line fees under Chapter 283. Nor are these cable providers with a SICFA under Chapter 66 of the Utilities Code, or network node providers required to pay per network node under Chapter 284. As such, some cities are able to negotiate license agreements with these types of providers. These license agreements are similar to franchise agreements in that they dictate fees, permitting, and general permission to use the rights-of-way.

Got it? Great. Now it all may change. The Texas Supreme Court heard oral arguments on March 5, 2026, and will ultimately issue a decision that could impact the implementation and collection of these fees. After enactment of SB 1004 and SB 1152, groups of cities sued the State, arguing that the laws violate the Texas Constitution’s “Gifts Clause” barring governments from awarding anything of value to private companies without due consideration of public benefit. Cities further argue that the laws have harmed them by draining away money that otherwise could go to important public services.

The state, meanwhile, argues that public rights-of-way ultimately are state property and so the capped fees cannot constitute an unconstitutional gift from cities. The case, State v. City of McAllen et al., was brought before the high court at the state’s request after both a trial court and the Austin-based Third Court of Appeals ruled the laws unconstitutional. In briefing to the Court, the City of Houston told the court that implementation of these two bills has created a windfall of more than $45 million for service providers across the state. Meanwhile, the laws cost Houston between $17 million and $27 million the first year after they were enacted, according to the city. The case is State v. City of McAllen, Tex., No. 24-1060, 706 S.W.3d 503 (Tex. App. –Austin 2024), pet. granted (Jan. 16, 2026).

Unless and until the Texas Supreme Court rules otherwise, the statutory landscape for rights-of-way fees remains as stated in this primer. If you have questions about what types of compensation you may receive for the type of services being provided or offered in your city, please reach out.

¹Tex. Transp. Code §§ 311.001, 311.002; Tex. Util. Code 14.008; Tex. Util. Code 54.205; Tex. Util. Code 103.002; Tex. Water Code 13.081
₂Tex. Constitution Art. III, § 52; Art. XI, § 3.
³Tex. Loc. Govt. Code §590.001.
⁴Transp. Code 311.001(a).
⁵Tex. Util. Code § 54.001.
⁶See Tex. Loc. Govt. Code § 283.
⁷“Issues Related to Establishment of, and Annual Revisions to, Access Line Rates for Texas Municipalities” Project No. 24640 (Sept. 10, 2001).
⁸See Tex. Util. Code Ch. 66.
⁹See Tex. Loc. Govt. Code Ch. 284.

Jamie Mauldin is a Principal in the Firm’s Energy and Utility Practice Group. If you have any questions or would like additional information related to this article or other matters, please contact Jamie at 512.322.5890 or jmauldin@lglawfirm.com.