On June 24, 2016, the Arkansas Public Service Commission (“Commission”) adopted a comprehensive set of new pole attachment rules that apply broadly to providers of electric, telecommunications, cable television, internet access, and other information services, and govern access to telephone, electric distribution and dual-use transmission poles, as well as conduit, owned by the state’s investor-owned and cooperatively-organized utilities. The rules were adopted pursuant to a year-long rulemaking that included dozens of electric companies and cooperatives, and the telecommunications and cable industries. In 2007, the Arkansas state legislature authorized the Commission to regulate in the area of pole attachments (i.e., to become a certified state that self-regulates pole attachments rather than relying on the Federal Communications Commission (“FCC”)), but the Commission failed to adopt rules, other than a complaint procedure, until now.
While the new rules adhere to certain long-standing FCC guidelines, such as the access standard and timeframes, described below, other rules conflict with important public policies promoting broadband deployment and competition. A prime example is the new rate formula adopted by the Commission. The new rate formula will likely produce rates that are 250 – 500 percent higher than the FCC’s formula—a formula that is also used in the vast majority of certified states. Arkansas is already among the lowest ranked states for broadband deployment and the new rules (especially the rate formula), may discourage additional investment in the state, to the extent they become effective in their present form.
The new rules apply in the absence of applicable provisions in a “voluntarily negotiated” pole agreement. Key rulings in the Commission’s Decision include:
- Pole Attachment Rate Formula: The FCC’s longstanding cable and “new” telecom rate formulas allocate approximately 7.4% of the total annual pole costs to an attacher. The Arkansas Commission’s new formula (which is the same for each type of attacher) allocates 19% of those costs to the attacher if the specific owner’s poles have an average of 3 attachers (the presumed number, which includes the pole owner and can be rebutted) and twice as much (i.e. 38%) if there is an average of only 2 attachers. A significant contributing factor to the excessive rent under the Arkansas formula is the Commission’s determination that the so-called “safety space” (the pole space separating electric and communications facilities) be designated as “unusable” – thereby driving up the rent as the one foot occupied is a higher percentage of the remaining usable space. The FCC and most states designate the safety space as usable because the safety space can be and is exclusively used by electric pole owners for the attachment of fiber, streetlights and other revenue-generating uses.
- Overlash Permits Required: For decades, the FCC has supported streamlined overlashing as an efficient, cost-effective and safe process to promote competition and broadband deployment, as well as to upgrade and repair plant. For these reasons, the FCC allows attachers to overlash their existing attachments without seeking additional approval from the pole owner. Despite this long-standing and accepted industry practice, the new Arkansas rules require attachers to obtain a permit prior to overlashing. This unnecessary requirement will slow broadband deployment and increase its cost.
- Sign and Sue Rejected: The FCC has long permitted attachers to challenge unreasonable terms and conditions in signed pole attachment agreements (i.e. “sign and sue”), as a check on pole owner leverage in pole attachment agreement negotiations. The FCC strongly supports “sign and sue” because it drastically reduces the number of pole attachment complaints, while ensuring that attachers are not hampered by the inability to enter into agreements. The Arkansas Commission nevertheless declined to adopt “sign and sue” finding that “if there is a dispute” the Commission’s “rules provide a “timely complaint proceeding to resolve disputes.” But, if parties enter into a “voluntarily negotiated” agreement, the Commission will enforce the agreement. As a result, this policy will likely increase the number of complaints brought to the Commission.
- Access Standard: A request for access may be denied only on a nondiscriminatory basis where there is insufficient capacity and for reasons of safety, reliability and generally applicable engineering standards. While this rule is nearly identical to the FCC’s access standard, the Arkansas rules go a step further and define the term “Insufficient Capacity,” as “the inability to accommodate a[n attacher] through the performance of Make-Ready Work.” The term “Make-Ready Work” is also defined and includes pole replacements, where feasible. Accordingly, if a pole owner is able to replace a pole to accommodate an access request (as opposed to merely performing some facility rearrangements), access may not be denied based on insufficient capacity.
- Access Timeframes: A pole owner is required to approve or deny (or approve with make-ready conditions) a request for access no later than 45 after a request is submitted that includes no more than 300 poles/20 manholes, and 60 days after requests involving up to 3,000 poles/100 manholes. Parties must negotiate timeframes for requests that exceed 3,000 poles/100 manholes. Pole owners must provide make-ready estimates within 14 days of approval; and the attacher must either accept and pay the estimate or note its disagreement within 15 days of receipt of the estimate. “Make-Ready Work” must be performed within 60 days of the make-ready payment for requests including no more than 300 poles/20 manholes, and within 75 days for requests involving up to 3,000 poles/100 manholes. Make-ready in the electric space (to accommodate the placement of wireless antennae) must be completed within 105 days of the make-ready payment. If the make-ready timeframes are not met, an attacher may hire an approved contractor to perform communications make-ready below the electric space. In order to force make-ready in the electric space, a party must file a complaint.
- Reservations of Space: A pole owner may “reserve space” on its poles for the future provision of its “core utility service,” but must allow an attacher to use the space until needed. The pole owner is required to give an attacher 60 days’ notice of its need for the space. The Arkansas rule explicitly requires that reservations of space be communicated to the attacher at the time of an access request.
- Modification Costs: Except in the case of reclaimed reserved space (discussed above), the cost causer, including the pole owner, is responsible to reimburse every other entity on the pole that is affected by the cost causer’s modification. For example, if the pole owner or another entity seeks access to a pole with an existing attacher, the existing attacher will be reimbursed for any costs incurred to accommodate the owner or other entity. Similarly, any entity, including the pole owner that cannot gain access without a pole replacement is responsible for the total cost of the new pole and the costs incurred by the other entities to transfer their attachments to the new pole.
Arkansas law requires that both the Governor and the Arkansas Legislative Council approve the rules before they can become effective. The new rules are subject to challenge on rehearing. Any such challenge must be filed by July 25. If the Commission denies rehearing or the Commission’s rehearing decision is not satisfactory to a party, then a party can appeal to the Court of Appeals within 30 days of the applicable Commission rehearing decision.
For more information about the rules, please feel free to contact Davis Wright Tremaine LLP.