Court Upholds Mandatory Access to Poles and Rights-of-Way Provision of the 1996 Telecom Act

On Friday, March 6, a federal district court upheld the constitutionality of a provision of the Telecommunications Act of 1996 that requires utilities to provide cable and telecommunications operators with nondiscriminatory access to utility poles, conduit and rights-of-way. The United States District Court for the Northern District of Florida rejected utility arguments that the provision violates the Constitution’s prohibition on governmental takings of property without just compensation.

The case, Gulf Power Co v. United States, is the second case challenging the constitutionality of the pole attachment provisions of the Communications Act. In 1985, the Eleventh Circuit Court of Appeals ruled that the pole attachment provision amounted to a “per se” taking of utility property, even though the statute did not require utilities to lease space to cable operators. On appeal, the Supreme Court upheld the law as it then existed, on the grounds that the law merely regulated the rent that a utility could charge cable operators to whom the a utility had voluntarily rented pole space. The Court, however, explicitly stated that it did not reach the question of the law’s validity if it had required utilities to provide cable operators with space on the poles.

In 1996, Congress amended the law to add Section 224(f) of the Telecommunications Act. The new provision requires every investor-owned utility to “provide a cable television system or any telecommunications carrier with nondiscriminatory access to any pole, duct, conduit, or right-or-way owned or controlled by it,” with exceptions for reasons of safety, reliability and generally applicable engineering purposes. The law thus clarifies the concept, found in earlier antitrust law, that utility poles are essential facilities that may not be refused to a potential competitor.

The utilities immediately challenged the law as a “per se” taking of property, and also argued that the constitution does not allow Congress to delegate the determination of compensation to an agency such as the FCC, as it did with Section 224. The government, telecommunications and cable interests argued that utility poles and right-of-way are a unique form of property that would not exist as it does but for the power of eminent domain borrowed from the government. Because of their unique origin through government cooperation, the poles, conduits and rights-of-way carry a heavy public interest obligation for the utility owners, including the right to make those poles and rights-of-way available to others.

The court agreed with the utilities that Section 224(f) authorizes a permanent physical invasion of utility property by cable operators and telecommunications carriers, and therefore amounts to a “per se” taking of property under the Fifth Amendment and the Supreme Court’s 1983 Loretto decision. The court found the law to be constitutional, however, because the statute provides for just compensation through the FCC rate formula. The delegation of the power to set rates to the FCC is not only permissible within the Constitution, but in the court’s view, it is the most practical approach. According to the court, “The FCC is far more capable than the courts to make such determinations in an efficient and knowledgeable manner.” So long as the law allows a utility to obtain judicial review of any particular rate, as it does, it satisfies constitutional requirements.

This case has significant competitive implications to cable and telecommunications companies, particularly as electric utilities accelerate their nationwide investment in competitive fiber optic communications networks. We expect that the utilities will appeal this decision to the Eleventh Circuit Court of Appeals, and that eventually the case will be presented to the Supreme Court. If you have any questions or would like a copy of the court’s 23 page decision, please call.