FCC Proposes Vast Changes to the Federal Regulatory Scheme Governing Cable, Broadband and Telecommunications Pole Attachment Rates, Terms and Conditions

By Maria T. Browne, Jill M. Valenstein, James W. Tomlinson, and Chris Fedeli
[November 2007]

On Nov. 20 the FCC released a Notice of Proposed Rulemaking (NPRM) addressing pole attachment rental rates, certain terms and conditions of pole access, and whether Incumbent Local Exchange Carriers (ILECs) are entitled to the protections of Section 224 of the Communications Act ("Pole Act"). The NPRM puts in play long-standing FCC rules and regulations, including the well-established "cable rate" formula, and proposes to reconsider and possibly revise significant aspects of the long-settled cost-based approach to setting pole rates. Although the FCC reached different conclusions in earlier rulemakings, the momentous changes and rate increases proposed in the NPRM are purportedly based on the FCC's obligation to promote competition and the deployment of broadband infrastructure.

The NPRM was adopted in response to two separate rulemaking petitions. The first petition, submitted in Oct. 2005 by the United States Telecommunications Association (USTA), requests the FCC to permit ILECs to seek recourse at the FCC when negotiations with electric pole owners fail, and to adopt the "telecom rate" formula as the "just and reasonable" default rate for ILECs when attaching their facilities to electric utility poles. The second petition, filed by Fibertech Networks in Dec. 2005, requests that the FCC adopt "seven standard practices" to facilitate pole and conduit access for third-party attachers. In addition, Time Warner Telecom, Inc. filed a "White Paper" earlier this year in both proceedings, advocating a single rate formula for cable and telecommunications attachments "in order to remove regulatory bias from investment decisions regarding deployment of broadband and other services."

Pole attachment rates

The NPRM tentatively concludes that the rate for pole attachments used for "broadband Internet access service" should be a single rate that is "higher than the cable rate, yet no greater than the telecommunications rate." This proposal, if adopted, would result in higher rates for cable operators providing video and cable modem service and would reverse the FCC's 1998 decision (upheld by the Supreme Court in the Gulf Power decision) to apply the cable rate to attachments by cable operators offering broadband Internet access services. The NPRM appears to preserve the "cable rate" for attachments "solely used to provide cable service."

The Commission asks for extensive data relevant to its reassessment of pole attachment rental rates. Specifically, the Commission requests data about the difference in pole attachment rates paid by cable operators, CLECs and ILECs, as well as the number of poles being used by these entities. The Commission also requests data on the average number of attaching entities on utility poles-a figure that has a strong and direct bearing on calculating telecom pole attachment rates because that rate includes additional allocation of costs related to unusable space based on the number of attachers. Poles with more attachers have lower rates than poles with fewer attachers.

The NPRM asks whether the cable rate fairly compensates pole owning utilities and should continue to apply when cable operators provide services in addition to cable. However, the Supreme Court, the D.C. and Eleventh Circuits, the FCC, and an FCC ALJ have all answered these questions in the affirmative (indeed finding in some cases that the cable rate more than justly compensates pole owning utilities for hosting third-party attachments) as utility challenges to FCC rules and adjudications on rates, terms and conditions have been raised over the years. Nevertheless, the NPRM expresses an assumption that the cable rate is somehow a "subsidized" rate.

The NPRM also seeks comment on how a single rate for both cable and telecom attachments could be implemented when the statute calls for two rates, citing heavily to arguments raised by Time Warner Telecom in its White Paper. While the FCC dismisses Time Warner Telecom's argument that the single rate it proposes should be the cable rate, the FCC does cite to TWT's argument that the statute requires nondiscrimination in rates as support for the FCC's own proposal to adopt a single rate, however a rate that would fall somewhere above the cable but goes no higher than the telecom rate. In a separate statement, Commissioner Mc Dowell expressed concern that the FCC's statutory obligations be met, recognizing that Section 224 contemplates two different rental rates for cable system and telecommunications carrier attachments.

The Commission also inquires about how pole attachment rates affect the deployment of broadband services, and how the differences in pole attachment fees paid by the various communications providers affect competition-e.g., between cable and telecom companies.

The NPRM does not address whether VoIP should be classified as a telecommunications service for pole attachment rental purposes. However, the issue would be rendered moot for pole rental purposes if the FCC ultimately rules that the provision of cable broadband Internet service subjects all system attachments to a single higher pole attachment rate.

ILEC rights and rates under section 224

In response to the USTA Petition, the FCC asks whether ILECs are correct that they are eligible to invoke the FCC's complaint procedures and obtain the same telecommunications pole rate as other non-ILEC third party attachers. Although the Pole Act excludes ILECs from specific protections of Section 224, and the ILECs' ownership of poles themselves has historically provided protection against electric utility abuses, USTA argued that non-parallel terms in certain sections of Section 224 indicated that Congress did not intend to exclude ILECs from all rights to just and reasonable pole attachment rates, terms and conditions under Section 224. The FCC asks for comment on this interpretation and its authority to grant ILECs relief.

Wireless attachments

The FCC has previously ruled that devices used by wireless and telecommunications providers, such as antennas and related equipment, constitute "attachments" that are entitled to the protections of Section 224, a decision that was upheld by the U.S. Supreme Court in NCTA v. Gulf Power. In the NPRM, the Commission requests comment on the rates applied to wireless attachments, specifically whether it should adopt a rate formula specifically for wireless pole attachments or whether a wireless pole attachment rate should be a multiple of the per foot telecommunications rate based upon the amount of space occupied. The Commission also asked if pole owners should receive a higher attachment rate for pole-top access. As discussed below, the Commission also requested broad comment on safety and reliability issues pertaining to third-party attachments as well as make-ready and access conditions, which may impact wireless providers' access to poles and specifically pole-tops.

Make-ready and access conditions

The FCC's pole regulations currently have limited provisions regarding the terms and conditions of access and the process of modifying poles and conduit to accommodate third party attachments-i.e., the make-ready process. Such matters typically have been determined on a case-by-case basis through adjudications at the FCC. Fibertech raised the reasonableness of utilities' pole access conditions, citing poor performance by utilities including delayed response times and the prohibition of certain construction techniques. The Commission broadly requests comment on a number of issues relating to make-ready and the terms and conditions of access, including: surveys of poles and conduits; timeliness in the performance of make-ready; the use of specific construction practices such as boxing and extension arms; the use of contractors to perform make-ready work; access to in-building ducts, conduits and rights-of-way; the use of drop poles; and other issues pertaining to the process of obtaining access to utility poles. In addition the FCC seeks comment on whether it should modify the process by which attachers have signed agreements to gain access, but are still afforded the right to challenge rates, terms and conditions in order to not be forced to forego access and the ability to provide service while the FCC adjudicates a complaint.

The Commission also requests broad comment on "practices of attachers that have the potential to adversely impact the safety and reliability" of electric power delivery, including the prevalence of unauthorized attachments. The Commission requests comment on whether the Commission should adopt and enforce specific safety requirements or safety codes such as the NESC. Finally, the Commission requests comment on whether rules, presumptions and guidelines are preferable to case-specific adjudications on safety issues. As a final matter on the adjudications issue, the NPRM requests comment on how the FCC might expand the use of pre-complaint mediation to help resolve pole attachment disputes without the need for commencing the adjudicative process.

Comments are due 30 days after publication of the NPRM in the Federal Register, which has not yet occurred. Davis Wright Tremaine will be filing comments in this proceeding on behalf of its clients. Please let us know if you would like further information regarding the NPRM, and if you would like to participate in comments we will be filing with the FCC.

For more information, please contact:

Paul Glist, Washington, D.C., (202) 973-4200, paulglist@dwt.com
Wes Heppler, Washington, D.C., (202) 973-4200, wesheppler@dwt.com
John Seiver, Washington, D.C., (202) 973-4200, johnseiver@dwt.com
Jay Ireland, Washington, D.C., (202) 973-4200, jayireland@dwt.com
Maria Browne, Washington, D.C., (202) 973-4200, mariabrowne@dwt.com
Scott Thompson, Washington, D.C., (202) 973-4200, scottthompson@dwt.com
Jill Valenstein, Washington, D.C., (202) 973-4200, jillvalenstein@dwt.com
James Tomlinson, Washington, D.C., (202) 973-4200, jimtomlinson@dwt.com
Chris Fedeli, Washington, D.C., (202) 973-4200, chrisfedeli@dwt.com
Mark Trinchero, Portland, Oregon, (503) 241-2300, marktrinchero@dwt.com

This advisory is a publication of the Communications Group of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent developments in the communications industry. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may be given only in response to inquiries regarding particular situations. Attorney advertising. Prior results do not guarantee a similar outcome.

Copyright © 2007, Davis Wright Tremaine LLP.

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