On Sept. 29, 2003, the United States Court of Appeals for the 11th Circuit issued its decision in Georgia Power Co. v. FCC, upholding the FCC’s application of its pole attachment rate regulations and the telecommunications rate formula provided for under 47 U.S.C. § 224. The case principally concerned the rate calculations for telecommunications attachments and a constitutional “just compensation” challenge to the telecommunications pole attachment rate formula, essentially a repeat of the challenge that was rejected in the Alabama Power Co. v. FCC decision from the 11th Circuit in November 2002 (and for which Alabama Power is currently seeking review in the Supreme Court on certiorari). This latest decision also confirmed other aspects of the FCC’s pole attachment regulatory process. The Georgia Power decision is
significant because it is the first decision by a federal court of appeals to evaluate the FCC’s application of its Telecom Rate Formula to a specific pole rate charged by a utility to a telecommunications provider.
In October 2000, Georgia Power notified Teleport Communications of Atlanta that the utility was setting the annual telecom pole attachment rate at $53.35. After some fruitless negotiations with Georgia Power, Teleport filed a complaint with the FCC’s Cable Services Bureau (“Bureau”) challenging Georgia Power’s assessment as being several times greater than the maximum rate permissible under the Pole Attachment Act and the FCC’s regulations. On Nov. 14, 2001, the Bureau concluded that Georgia Power’s rates were unreasonable and ordered the substitution of lower rates based upon the FCC’s Telecom Rate Formula of between $6.56 and $8.24.
Georgia Power applied for review to the full Commission and, instead of awaiting a decision from the full Commission, prematurely filed a petition for review with the 11th Circuit. In an Oct. 8, 2002, Order, the FCC affirmed the Bureau’s ruling that Georgia Power’s telecommunications pole rate was unreasonable. Georgia Power then filed a second petition for review of the full FCC’s order.
The 11th Circuit’s Decision
The court denied Georgia Power’s petition for review of the Commission’s ruling, thereby upholding the Oct. 8, 2002, Order.1
The court noted initially that the 11th Circuit “has become the locus for pole attachment disputes.” In 1999, the 11th Circuit rejected the utilities’ claim that Section 224 (as amended by the Telecommunications Act of 1996 to include mandatory access) was facially unconstitutional, holding that, while Section 224(f) does constitute a “per se taking,” the statute provides a sufficient mechanism for payment of just compensation, with a determination by the FCC subject to judicial review. See Gulf Power Co v. United States, 187 F.3d 1324 (11th Cir. 1999)(“Gulf Power I”). The following year, the 11th Circuit rejected a facial challenge to the FCC’s regulations for computing pole rents, ruling that pole owners had failed to demonstrate that the FCC’s regulations would not provide constitutionally sufficient compensation. See Gulf Power Co v. FCC, 208 F.3d 1263 (11th Cir. 2000)(“Gulf Power II”).2 In June 2002, the 11th Circuit affirmed FCC pole attachment guidelines concerning reservation of pole space, scope of access, use of third party line workers, and pole modifications, but denied the FCC’s jurisdiction over electric transmission facilities and held pole owners had a statutory right to deny attachments for reasons of “insufficient capacity.” Last November, in Alabama Power Co. v. FCC, 311 F.3d 1357 (11th Cir. 2002), the 11th Circuit upheld the FCC’s application of the pole attachment formula to specific rents for cable operators’ attachments, rejecting a utility claim that the Commission’s regulations failed to provide “just compensation” to pole owners under the Fifth Amendment.3
On the merits here, the court rejected the entirety of Georgia Power’s appeal. First, the court agreed with the FCC that Georgia Power had not met its burden to justify its proposed rate of $53.35. Georgia Power proposed an average number of attaching entities (1.5922) that was not plausible, was not supported with any explanation or documentation, and was predicated upon “replacement” costs rather than the FCC’s long-established historical cost methodology. Second, the court noted that, because Georgia Power had not established a valid average number of attaching parties, the FCC acted reasonably in using presumptive average numbers of attaching entities (three attachers in rural areas and five attachers in urbanized areas) to calculate the applicable rates under the Telecom Rate Formula. Third, the court found that the FCC did not act arbitrarily in denying a motion by Georgia Power to submit additional information regarding the average number of attaching entities after the close of the three-part pleading cycle for pole attachment complaints set forth at 47 C.F.R. §§ 1.1404, 1.1407, particularly in light of Georgia Power’s continuing effort to use a replacement cost methodology rather than the FCC’s historical cost method. Finally, the court rejected an attempt by Georgia Power to interpret the term “attaching entities” in Section 224(e) narrowly to mean only cable operators and telecommunications services providers. Instead, the court agreed that the FCC had reasonably construed “attaching entities” to include all entities with attachments to a pole, including utilities themselves and government agencies. The FCC’s interpretation is important, because it increases the total number of attachers, thereby reducing the rent that can be imposed on each individual attaching entity
In addition to the court’s findings that the FCC had reasonably applied its Telecom Rate Formula, the court rejected two other arguments raised by Georgia Power. The first concerned Georgia Power’s claim that the FCC should not have accepted Teleport’s complaint on the ground that there had been no “real negotiation” between the parties over the pole rent. The court refused to accept this reasoning, noting both that the FCC’s jurisdiction is not limited to cases in which extensive rate negotiations have taken place and that Georgia Power’s demand for further negotiations was unpersuasive in light of its unilateral announcement that it was raising its pole rate to $53.35. The second argument involved Georgia Power’s contention that the rate calculated by the FCC under its Telecom Rate Formula did not provide “just compensation.” In rejecting this contention, the court relied upon its earlier decision in Alabama Power, explaining that since “the cable rate provided more than just compensation in Alabama Power, then the higher rate set by [the] FCC in this case provides just compensation to Georgia Power.”
Please let us know if you have any questions concerning this or any related matter or would like a copy of the 11th Circuit’s decision.
1 In a separate decision, the court dismissed Georgia Power’s first petition for review from the Bureau ruling as “incurably premature” because the Bureau’s order was not a final agency action. The court then proceeded to resolve Georgia Power’s second petition for review of the full Commission’s order affirming the Bureau’s order.
2 Gulf Power II also held that the FCC lacked jurisdiction to regulate pole attachments where the cable operators also offered Internet service. That holding was reversed by the Supreme Court in Nat’l Cable & Telecomm. Ass’n v. Gulf Power Co., 534 U.S. 327 (2002).
3 After losing a bid for the 11th Circuit to reconsider that ruling, Alabama Power sought further review in the U.S. Supreme Court. It is expected that the Court will determine whether to accept or refuse further review of the Alabama Power decision at the beginning of the Supreme Court’s new Term next week.