Monday, March 03, 2008

Pole Attachments and Broadband Deployment

With all the focus on the continued expansion of broadband deployment, including the position of the United States relative to other developed countries, little attention has been paid to a proceeding pending before the FCC that could have a material impact on broadband deployment. The FCC is conducting a rulemaking (WC Docket No. 07-245) that will determine the rates that cable and telecommunications companies pay to attach their equipment to utility poles. Not surprisingly, the facilities that cable and telco companies wish to attach in this day and age are used not merely to provide “cable” services or “telephone” services, but rather to provide broadband Internet access services.

There is a long history to the FCC’s regulation of pole attachment rates, one involving much litigation and some legislative activity. The history comes replete with mind-boggling formulations that have been developed to determine the rates that utilities may charge for access to their poles. Unless you write to request a personal tutorial, I will spare you the pain of all the history, and you should thank me for it. Just take my word that there are now separate rates for attachments used to provide “cable services” and attachments used to provide “telecommunications services,” and the cable rate is lower than the telcom rate.

In the current rulemaking the Commission is asking a couple questions that ought, as a matter of policy, to have pretty simple answers. The agency is asking whether there should be a single pole attachment rate for both cable systems and telecommunications carriers in order to remove regulatory bias from investment decisions regarding deployment of broadband and other services. In its rulemaking notice, the Commission tentatively concludes that, due to the importance of promoting broadband deployment and technological neutrality, “all categories of providers should pay the same pole attachment rate for all attachments used for broadband Internet access service….” In a marketplace environment characterized by technological convergence and competition among providers, this conclusion makes sense.

But, of course, the attachment rate matters too. After explicitly referencing “the critical need to create even-handed treatment and incentives for broadband deployment,” the Commission tentatively concludes the uniform rate should be higher than the current cable rate, yet no higher than the current telecommunications rate.

Perhaps in some way this is supposed to be an appealing split-the-baby Solomonic compromise. But compromise for what purpose? To me, it appears problematic in the sense of running counter to the national policy, to which the Commission pays lip service in the notice, to provide incentives for broadband deployment. I definitely am not suggesting that the cable and telecom providers should not be charged a reasonable rate for attaching their facilities to the utilities’ poles. But the rate that is charged cable operators already has been found to be fully compensatory by the FCC and the courts. (Recall the litigation to which I referred above.) Standing alone, the fact that broadband Internet services are now being provided over the cable attachments does not impact the costs incurred by utilities in allowing pole access.

Unless there is a very convincing economic case to be made otherwise, which is not apparent to me, the FCC should adopt the lower compensatory cable rate as the uniform rate to be paid by all broadband providers, regardless of regulatory classification. Competitive neutrality will be promoted. But more importantly, adoption of the lower pole attachment rate will promote continued expansion of broadband deployment in furtherance of national policy. This is especially so in more rural areas in which broadband penetration may lag behind. I think even Solomon would agree there is no reason to split the baby in this instance.

In my view, the single-most important thing the FCC can do right now to promote broadband deployment is to firmly reject any further attempts to impose investment-stifling net neutrality-like mandates on broadband providers. But, at the same time, it should not neglect other actions that may affect broadband deployment -- such as not increasing the cost to broadband providers of pole attachments.