FCC Enforcement Bureau Stays Pole Attachment Complaint Proceeding Pending Completion of Arbitration

In a March 16, 2015 Letter Ruling, the Market Disputes Resolution Division of the FCC’s Enforcement Bureau granted a request by Duke Energy Carolinas, LLC (“Duke”) for a stay in a pole attachment complaint proceeding brought by Frontier Communications of the Carolinas LLC (“Frontier”) so that the parties might complete arbitration of the dispute, as directed by a federal district court. After Duke filed an arbitration demand over unpaid pole rent in October 2013, Frontier sought a declaratory ruling from the United States District Court for the Eastern District of North Carolina, positing that the FCC had jurisdiction over the dispute.  Frontier then filed a pole attachment complaint with the FCC in January 2014, in which it argued that the pole rental rates set out in the parties’ agreements should be reduced in light of the FCC’s 2011 Pole Attachment Order.

In that Order, the FCC for the first time allowed incumbent local telephone companies (“ILECs”) (which also own poles), like Frontier, to seek pole attachment rental rate relief under the Pole Attachment Act and the FCC’s pole attachment rules. Nevertheless, the federal district court dismissed Frontier’s declaratory judgment action in August 2014 and compelled the parties to engage in arbitration. The FCC’s Letter Ruling gives effect to arbitration provisions in several “joint use” (meaning between two pole owners) pole attachment agreements between predecessors to Duke and Frontier dating back to the 1980s. Despite Frontier’s assertion that the FCC should resolve the parties’ rate dispute under its primary jurisdiction, the FCC relied upon the fact that the arbitration proceeding had already commenced following the federal district court’s ruling consistent with Supreme Court precedent regarding the enforceability of arbitration clauses, and held that the FCC may not “ignore a valid arbitration clause in administering section 224.” 

The FCC also pointed to its 2011 Pole Attachment Order, in which it noted that arbitration of pole attachment disputes was generally a reasonable dispute resolution procedure.  Significantly, however, the 2011 Pole Order also stated that it would be unreasonable for a party to insist, over the other party’s objection, that a forum other than the FCC is the only appropriate forum in which to resolve a pole attachment dispute. It is also significant to note that Frontier, an ILEC and pole owner itself, did not appear to raise arguments concerning unfair bargaining power, which is the basis for the FCC’s sign and sue rule, which allows the FCC to reform existing contracts. 

The arbitration provisions at issue were included in agreements that long predated the FCC’s 2011 ruling that ILECs are entitled to just and reasonable pole attachment rates, terms and conditions.  Nevertheless, given the Letter Ruling’s seeming endorsement of arbitration clauses, an attaching entity would do well to keep records of its objections to pole agreement provisions that mandate arbitration and that might effectively prevent bringing a pole attachment complaint to the FCC even if brought before any arbitration commenced.  Moreover, if possible, when negotiating a pole attachment agreement attaching entities should consider whether they would want to forgo their right to have matters resolved by the FCC