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DOT Fiber Tax Discourages Connectivity Investment

The coronavirus pandemic has underscored the need for reliable and fast internet access in all corners of the state, as connectivity is no longer a mere perk or frill but a veritable necessity of modern life.

Prior to the unprecedented public health crisis that forced us to shift so much of our daily lives online, my company, DFT Communications, was already working to bring high-speed broadband service to underserved rural areas of Chautauqua County.

That effort included the deployment of nearly 143 miles of new and upgraded fiber optic lines and was made possible by a grant from the state. Ironically, the state is at the same time undercutting its own connectivity goals and investments by instituting a new tax on fiber located in the rights of way on the public roads it owns and maintains.

As a result of this ill-conceived tax, included in the 2018-19 state budget, 200 homes and businesses in the Village of Fredonia will not be able to get the high-speed access they so desperately need and deserve. That may not seem like much, until you do the math and find that 200 represents approximately 5 percent of the entire local population.

DFT Communications planned to spend $1.2 million over the next year-and-a-half to bring fiber optic cable to the village in a continuation of our efforts to provide broadband services to those New Yorkers who need it most. But the right-of-way tax has forced us to reconsider our plan, as we look to bypass state roads to avoid the additional cost that companies are legally prohibited from passing on to their customers.

That includes Main Street, which bisects the heart of the village and is one of its primary business thoroughfares. By our calculations, the tax adds an additional $1,495 in unexpected annual cost to this project – a rate of about $100 per customer that we must absorb as a cost of doing business.

That is simply unrealistic for a small family-owned company like DFT Communications, which was founded around a single telephone in 1898 in Arthur R. Maytum’s grocery store and grew to offer an array of digital, phone, security, IT, computer and internet services throughout Western New York and parts of Pennsylvania.

According to the state’s own calculations, the overall cost of this new tax will range from $0.26 per foot of underground cable, or about $1,373 per mile; to an eye-popping $22.66 per foot, about $119,645 per mile.

These figures apply just to the borough of Manhattan. Imagine what final cost would be when multiplied across tens of thousands of miles of fiber spread out over the state. The industry simply cannot afford that burden – especially not small companies like ours.

As a result of the tax, we will be unable to provide hundreds of Fredonians with the kind of online service they need to successfully navigate the new normal wrought by the pandemic. Crucial services like telehealth and online education, as well as working and socializing remotely to continue curbing the COVID-19 infection rate require high-speed internet access.

The much-discussed digital divide is indeed real, and it is not limited to inner-city minority communities. A frequently overlooked reality is that rural residents also suffer from a distinct lack of connectivity due to geographic challenges that make getting them online cost prohibitive costs for many providers.

The state’s new right-of-way tax only applies to fiber optic providers and not to others currently operating in the same space, such as electric, gas and water utilities, even though many consider connectivity just as critical to everyday life. This flies in the face of the state’s longstanding practice of allowing utilities to operate for free in this space, which has helped encourage much-needed infrastructure investment.

We are thankful that the new tax does not apply to projects built under the New NY Broadband grant program, in which DFT Communications has participated. But that represents a very small number of total New York households and businesses – a mere 3 percent.

New York cannot fully recover from the economic damage wrought by the pandemic unless all residents, regardless of where they live, are able to fully participate in the online revolution that has now been accelerated as a result of the virus.

To disincentive key infrastructure investment necessary to achieving this goal will only hurt New York residents and businesses and leave them even further behind as the state transitions to next-generation connectivity via the advancement of 5G. It is long past time for the state to realize that the right-of-way fee is counterproductive and does not serve its long-term economic goals.

Wade B. Levan is the Senior Engineer/Carrier Fiber Networks at DFT Communications, which has been providing quality Internet, Phone and IT management services to businesses and homes in Chautauqua County for more than 120 years.

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