Supreme Court Reverses 11th Circuit in NCTA v. Gulf Power - Cable Systems' Internet Attachments Regulated Under Pole Act
The U.S. Supreme Court today ruled that cable television systems may deliver high-speed Internet access and remain within the protections of the federal Pole Attachment Act. National Cable & Telecommunications Assoc. v. Gulf Power Co., Nos. 00-832 and 00-843, 534 U.S. ___ (Jan. 16, 2002). The Court further held that the Pole Attachment Act also protects attachments of wireless antennas, lines and associated equipment. The Court reversed the 11th Circuit’s decision to the contrary and sustained the Federal Communications Commission’s (“FCC”) decision that applied the Pole Attachment Act’s rate formula to cable television systems’ attachments over which commingled cable television and cable modem services are provided, as well as to wireless telecommunications carriers’ pole attachments.
Following Congress’s passage of the Telecommunications Act of 1996, the FCC conducted a series of rulemakings to implement that Act’s amendments to the Pole Attachment Act. These amendments expanded the FCC’s jurisdiction to include attachments by telecommunications carriers. The FCC had ruled in other proceedings that “Internet” was not a telecommunications service, but had not officially classified it as a “cable” or other service. In its pole decisions, the FCC held that cable systems’ attachments used for the provision of Internet nonetheless would remain subject to the Pole Attachment Act and that utilities could not charge cable operators more in pole attachment rents than the regulated pole rent for cable systems providing video services only. A panel of the United States Court of Appeals for the 11th Circuit disagreed and reversed.
In its April 2000 decision, the 11th Circuit held that the Act only specifies two rate formulas for pole attachments: one for attachments used “solely for cable service,” and one for attachments used for telecommunications service. The 1th Circuit then held that because “Internet” was neither, it was essentially an “unregulated” service. Thus, the FCC had no authority to regulate a cable operator’s attachments over which (regulated) cable television and (unregulated) cable-modem services were provided together. That decision had been stayed, pending Supreme Court review. For a complete analysis of the 11th Circuit’s decision, the stay of that decision, and the Supreme Court’s grant of certiorari, see our advisories dated April 12, 2000, Oct. 16, 2000, and Jan. 22, 2001.
The Supreme Court rejected every utility argument. The Court began its opinion by explaining that the utilities are seeking “to charge monopoly rents.” Later, it reiterates that poles constitute a “bottleneck” facility. The Court recites how cable systems have evolved to offer a variety of services over and above video, and cites approvingly the FCC’s original decision in Heritage (Texas Utils. Elec. Co. v. FCC, 997 F.2d 925 (D.C. Cir. 1993)) that a cable system remains a cable system even when it delivers non-cable services. The Court writes:
If one day its cable provides high-speed Internet access, in addition to cable television service, the cable does not cease, at that instant, to be an attachment “by a cable television system.” The addition of a service does not change the character of the attaching entity . . . .
As new services are delivered over cable systems that may be neither “cable” nor “telecommunications services,” “the FCC must prescribe just and reasonable rates for them without necessary reliance upon a specific statutory formula” assigned to pure cable or to telecommunications services. Given the basic purpose of the Act to promote the deployment of competitive services, “[t]he attachments at issue in this suit—ones which provide commingled cable and Internet service and ones which provide wireless telecommunications—fall within the heartland of the Act. The agency’s decision, therefore, to assert jurisdiction over these attachments is reasonable and entitled to our deference.”
The Court lambastes the utility position as having no foundation in the Act.
On their view, if a cable company attempts to innovate at all and provide anything other than pure television, it loses the protection of the Pole Attachments Act and subjects itself to monopoly pricing. The resulting contradiction of longstanding interpretation—on which cable companies have relied since before the 1996 amendments to the Act—would defeat Congress’ general instruction to the FCC to “encourage the deployment” of broadband Internet capability and, if necessary, “to accelerate deployment of such capability by removing barriers to infrastructure investment.”
Justices Thomas and Souter concurred, arguing that while the FCC’s decisions ultimately might have been correct, it should have first decided whether Internet over cable was cable or telecommunications service.
The Court’s decision today ends one part of the current electric-industry campaign to remove itself from pole attachment regulation. It also frees the FCC to resolve thorny issues relating to the regulatory classification of Internet service over cable without risking its pole jurisdiction. Nonetheless, the utilities surely will continue to prosecute an alternative theory that the actual pole rents set by the FCC under the Pole Attachment Act do not yield “just compensation.” The Court’s deference to the FCC today should be of assistance in defending against utility arguments that the FCC’s pole attachment formulas do not provide just compensation. Today’s decision will also be submitted to the 11th Circuit, which is considering two other challenges to the FCC’s pole attachment regulations and decisions. See our advisories dated Nov. 6, 2001, and May 29, 2001.