OCA Audit Reports

Issued: May 2009

This report presents the results of the Telecommunications Access Line Fee audit. The purpose of this audit is to determine if the Office of Telecommunications and Regulatory Affairs (TARA) ensures that certificated telecommunications providers (CTPs) remit fees for all access lines within the Austin city limits. Currently 66 CTPs operate within the Austin city limits. We selected the ten largest CTPs, representing just over 98 percent of all the access lines in Austin. We completed an audit of five CTPs for Phase I. Phase II will include the remaining five and will be presented at a future Audit and Finance Committee meeting.

The City of Austin does not have franchise agreements with the CTPs. Instead, CTPs pay access line fees for use of City right-of-ways (ROW) for their communication lines. The Public Utility Commission of Texas (PUCT) establishes the rates for each municipality. The CTPs collect access line fees and pay the City.

The projected competitive landscape is changing with mobile phone usage up and landline use declining. Even with a growing population, Austin is experiencing a decline in revenue from access line fees due primarily to wireless penetration. Fewer access lines equal less revenue from access line fees for the City.

We found access line fees not remitted to the City of Austin total $58,111 for the CTPs examined. We discovered 559 access lines that were mistakenly identified as either being outside the city limits or not recognized by the CTPs as owing the access line fee to Austin.

Further, we found while the City has no legal requirement to directly notify CTPs of annexations, TARA does notify the PUCT of Austin annexations, and this information is available to all the CTPs via the PUCT website. However, updates by the PUCT are not timely. TARA also, as a policy, notifies the three largest CTPs directly of annexations. The fact that the CTPs we audited had not remitted all access line fees due to the City in full purpose annexed areas may be attributable, at least in part, to a lack of direct notification from TARA about new annexations that affect the payment of these fees.

We found that TARA has never conducted a municipal authorized review of access line fees. We also found the PUCT rules would make it challenging for TARA to complete such reviews. This is in part because the standard for the type of information that CTPs must share with cities is open to varying and selective interpretation by the CTPs.

We have issued four recommendations for TARA as a result of our audit work. Specifically, we recommended that TARA:

• work to ensure that delinquent access line fees revenue identified in the audit is collected;
• conduct consistent reviews of CTPs;
• verify PUCT posting of annexation notices; and
• work with the City’s Office of Intergovernmental Affairs to seek changes to the PUCT rules to improve the processes related to conducting municipal authorized reviews.

Management has concurred with three of the four recommendations and partially concurred with one recommendation.

Download the entire text of our Telecommunications Access Line Fees in Adobe Acrobat. You will need Adobe's Acrobat Reader to view these files. Or request a hard copy of this audit report, No. AU08105, by submitting this audit report request form.

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