[Editor’s Note: Robert Primosch is a Partner with the Washington, D.C.-based, communications law firm Wilkinson Barker Knauer, LLP]
OK, I’ll admit it – the title doesn’t scream “beach reading.” That being said . . .
1. So what’s happening?
The FCC recently lowered the rates providers of telecommunications services pay to utilities for pole attachments. It created new deadlines by which the various stages of the attachment process must be completed, and tweaked how attachment disputes are resolved. Also, wireless providers were given some clarity about their pole attachment rights. A copy of the FCC’s Order is available at http://tinyurl.com/3tjf5bk.
Much of this is traceable to the FCC’s National Broadband Plan. There, the FCC found that “the expense of obtaining permits and leasing pole attachments and rights-of-way can amount to 20% of the cost of fiber deployment. These costs can be reduced directly be cutting fees. The costs can also be lowered indirectly by expediting processes . . . .” Regarding the latter, the FCC observed that “make-ready” work (i.e., the work necessary to prepare a pole for a new attachment) “can be a significant source of cost and delay in building broadband networks.”
2. Do the new rules apply in every state?
No. The FCC does not have jurisdiction to regulate pole attachments in states that have certified that they do it themselves. The following have made the required certification: Alaska, Arkansas, California, Connecticut, Delaware, the District of Columbia, Idaho, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Utah, Vermont, and Washington.
3. How much money is at stake?
A lot. According to the FCC, providers of telecommunications services had been paying about 11.2% of pole costs in urbanized areas and 16.9% in non-urban areas. Under the new telecom rate formula, the FCC estimates that those percentages fall to 7.4% in both urbanized and non-urbanized areas (meaning that in most cases telecom providers will be paying roughly the same attachment rates as cable operators). And, at least in theory, both telecom and cable providers will realize savings from the FCC’s “time bracketing” of the make-ready process.
4. What is the new telecom rate formula, and when can telecom providers take advantage of it?
I won’t give chapter and verse on this, out of sympathy for anyone who has helped their children with their algebra homework. For the specific formula, see Appendix A of the FCC’s Order, rule section 1.1409(e)(2)(i).
The overriding concept, however, is relatively simple. Under the new telecom rate formula, telecom providers in urbanized areas pay 66% of the pole costs they were paying under the old formula, 44% in non-urbanized areas. For this purpose, an urbanized area is one with a population of at least 50,000; a non-urbanized area is one with a population of less than 50,000. In no event may the rate calculated under the new telecom formula be lower than the rate necessary to assure the pole owner 100% recovery of its administrative and operating expenses associated with the pole.
The new telecom rate formula is scheduled to go into effect on June 8, 2011. Pole attachment agreements entered into after that date will be covered by the new formula. Although the Order is not entirely clear about this, it appears that existing agreements are not covered unless they have a “change of law” provision that permits a telecom attacher to take advantage of new FCC rules.
Important exceptions apply where the attaching party is an incumbent local exchange carrier (ILEC). An ILEC attacher may challenge a rate in an existing joint use agreement or in a new agreement by filing a complaint with the FCC. This does not mean that an ILEC will automatically be entitled to the new telecom rate if its complaint is successful. Rather, the ILEC is only entitled to a “just and reasonable” rate, which may be the new telecom rate or some other rate depending on the surrounding circumstances. The FCC has strongly hinted that an ILEC may have a steep uphill climb if it chooses to challenge an existing joint use agreement.
Neither the new telecom rate formula nor the existing cable rate formula applies to make-ready costs. The FCC only requires that those costs be “reasonable,” and a pole owner may insist that they be paid up front.
5. Does the new telecom rate apply where a telecom provider is also providing broadband and/or cable services? What about wireless services?
As to the first question, yes. Also, cable operators that offer a triple play of cable, telecom and broadband services will pay the new telecom rate. Cable operators that offer broadband but not telecom services will continue to pay the cable rate. The FCC has yet to declare that service providers that only offer broadband have any right to the new telecom rate (or, for that matter, any pole attachment rights at all under federal law).
The FCC confirmed that wireless providers have the same attachment rights under federal law as wireline providers (including the right to the new telecom rate). It also confirmed that a wireless provider’s rights of attachment extend to pole tops.
6. How do the FCC’s new make-ready timelines work?
The general rule is that the entire make-ready process for wireline telco and cable providers must be completed within 148 days of the pole owner’s receipt of a complete pole attachment application from the attaching party. For wireless attachments above a pole’s communications space, the timeline is 178 days. ILECs do not have mandatory pole access rights under the federal pole attachment statute (though they are entitled to just and reasonable attachment rates). Thus, they do not get the benefit of the FCC’s new make-ready timelines.
For both wireline and wireless attachments, the make-ready process has four stages, each with its own deadline. Stage 1, the “survey” stage, must be completed within 45 days; Stage 2, the “estimate” stage, 14 days; Stage 3, the “acceptance” stage, 14 days; and Stage 4, make-ready work, 60 to 75 days, depending on whether existing attachers cooperate with the pole owner in rearranging their attachments as necessary. For wireless attachments above the communications space, an additional 30 days is added to Stage 4. Longer timelines may apply for attachment orders of more than 300 poles.
If a utility does not complete the survey or make-ready stages on time, an attacher may bring in an outside contractor that is on the utility’s pre-approved list. This remedy is not available for wireless attachments above the communications space – in that case, the attaching party must file a complaint with the FCC.
The new timelines will not go into effect on June 8. Because the timelines and associated FCC rules impose certain information collection requirements, they cannot go into effect until they are approved by the Office of Management and Budget.
7. What remedies are available if an attaching party files a pole attachment complaint with the FCC and wins?
First, it should be remembered that a pole attachment complaint can be a long and expensive endeavor. This is why the FCC usually encourages parties to settle their disputes.
If, however, an attaching party files a complaint, stays the course and wins, the FCC may award that party a refund of any excess fees paid to the utility, and may also rewrite the disputed pole attachment agreement so that it complies with the FCC’s rules. Refunds generally are available dating back to whatever date is permitted under the applicable statute of limitations (previously, refunds were available dating back only to the date the complaint was filed). Compensatory damages are not available.
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The above is just a snapshot of the FCC’s new pole attachment rules. There are many more details that interested telecom or cable providers need to be aware of. A full reading of the FCC’s Order thus is recommended. Just not at the beach.