D.C. Circuit Dismisses Utility's Pole Attachment Challenge in Public Service Company of Colorado v. FCC
On Friday, May 16, 2003, the U.S. Court of Appeals for the D.C. Circuit released its decision in Public Service Company of Colorado v. FCC, in which it rejected Public Service Company of Colorado's ("PSCo") appeal of the unauthorized attachment penalty fee established by the FCC in a prior Order. In that earlier ruling, the FCC voided PSCo's $250 per pole penalty charge.
This case represents an important victory for cable and telecommunications attachers against one utility's efforts to circumvent the FCC's jurisdiction over pole attachments and to implement onerous unauthorized attachment penalties and audit practices. Most immediately, it sets a reasonable rule for unauthorized attachment penalties at five times back rent, plus interest (in this case, approximately $18.85 per pole, plus interest). In the longer term, it reaffirms and strengthens the Commission's jurisdiction over pole attachment rates, terms and conditions and places a significant brake on utilities' attempts to bypass the FCC in favor of state courts.
In 1995, after nearly 15 years without performing a complete audit of attachments to its poles, PSCo abruptly notified TCI that it was changing its pole attachment agreements, and TCI had 90 days to accept the new terms and conditions or PSCo would terminate the agreements, along with TCI's pole attachment rights. PSCo's new agreements imposed a unilateral increase in the penalty for "unauthorized" attachments from $50 to $250 per attachment. PSCo then invoiced the cable operator for many thousands of so-called unauthorized attachments (including, significantly, "drop" or "service" poles) at the $250 unit rate. TCI refused to pay the invoices, which totaled several million dollars, and filed a complaint at the FCC alleging that certain terms and conditions of its pole attachment agreement with PSCo were unjust and unreasonable and that the practices of PSCo in implementing those terms and conditions were unreasonable. PSCo filed a breach of contract action in Colorado state court. The FCC's Cable Bureau decided the case in TCI's favor, and the full Commission subsequently affirmed. PSCo appealed the FCC's decision to the D.C. Circuit.
D.C. Circuit Decision
The D.C. Circuit flatly rejected PSCo's main argument that the FCC exceeded its jurisdiction in determining the application of unauthorized attachment charges to drop poles. The Court rejected the notion that the dispute was strictly a contract interpretation case that belonged in state court, relying on the plain language of 47 U.S.C. § 224(b)(1) giving the Commission authority to regulate the "rates, terms, and conditions for pole attachments...." The Court held that the Commission's determination of a lawful unauthorized attachment charge unquestionably involved the regulation of rates, terms, and conditions. The Court rejected PSCo's claim that the FCC, in ordering PSCo to recalculate its number of unauthorized attachments, usurped the state court's role of calculating damages. Rather, it observed that the FCC's authority includes the ability to direct how disputed rates should be calculated and that the state court could still determine damages.
The Court also rejected PSCo's contention that the FCC's calculation of an unauthorized attachment rate of five times the annual attachment rate, plus interest, was arbitrary and capricious. The Court held that, based on the evidentiary record, the FCC reasonably determined that (1) the rate was consistent with industry standards, (2) TCI presented convincing, unrefuted expert testimony regarding industry practices, and (3) it was unreasonable to impose unauthorized attachment fees on TCI for the 10 years before TCI even owned the systems. The Court noted that the FCC properly accounted for PSCo's safety and deterrence concerns, observing that it drew a reasonable balance between an effective remedy for utilities and an incentive for utilities to be more diligent about audits of unauthorized attachments.
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