Monday, June 01, 2015

Message to States: Don't Let High Pole Attachment Rates Become Barriers to Broadband

State and local governments have important policy roles to play in spurring deployment of next-generation broadband to their communities. One important thing that states can do to incentivize broadband growth is prevent unnecessary barriers to investment by keeping pole attachment rates low. For example, as explained below, a bill now pending in the North Carolina legislature dealing with what may seem like the arcane subject of "pole attachment rates," in fact, could adversely impact broadband deployment to the detriment of the states' citizens.
High costs charged to providers for leasing access to utility poles deter broadband deployments and inevitably drive up consumer prices. Local governments or utilities should be able to recover costs of maintaining utility poles. But the rates charged for pole attachments should be as low as reasonably possible. Keying pole attachment rates to the FCC's rate formula offers a sensible way for states to keep rates low while ensuring cost recovery for utility pole owners.
Congress and the FCC have recognized that local monopoly in ownership or control of poles puts utilities in a position to extract monopoly rents through unreasonably high rates. Indeed, the FCC's National Broadband Plan (2010) found that the cost of deploying a broadband network depends significantly on the costs that service providers incur to access poles and other infrastructure.
Section 224 of the federal Communications Act authorizes the FCC to "regulate the rates, terms, and conditions of pole attachments to provide that such rates, terms, and conditions are just and reasonable, and . . . adopt procedures necessary and appropriate to hear and resolve complaints concerning such rates, terms, and conditions." However, states retain broad discretion over pole attachment rates in many instances. Under Section 224's "reverse presumption" provision, states which certify that they regulate pole attachment rates are not preempted by the FCC. Further, Section 224 doesn't apply to utility poles owned by certain entities, like municipalities or cooperatives.
So how can states ensure that pole attachment rates are reasonable, and thereby avoid high rates that deter broadband growth? Setting rate standards can be a complex matter. Fortunately, even where states assume responsibility for setting pole attachment rates, states can consult the FCC's formula as a reliable guide for keeping rates low and reasonable. 
The FCC's formula for determining pole attachment rates for cable operators balances the need to keep rates low with the need to ensure that utility pole owners recover their costs. In 1987, the U.S. Supreme Court affirmed the FCC's formula for setting rates that are just, reasonable, and fully compensatory. For that matter, in 2011 the FCC revised its attachment rate standards for telecommunications providers to generally align with rates for cable providers. Of course, traditional "cable" and "telecommunications" providers now provide broadband Internet services through their upgraded networks. So pole attachment rates have a significant impact on the cost of delivering broadband.
That the FCC's Section 224 pole attachment formula is recognized for setting generally low rates makes a recent proposal to change one state's law troublesome. Now pending in the North Carolina House of Representatives is Senate Bill 88, a bill that was passed by its state's Senate. One of NC Senate Bill 88's so-called "technical changes" would eliminate a provision in North Carolina law requiring that pole attachment rate-setting include consideration of the FCC's Section 224 pole attachment formula. Existing North Carolina law does not mandate the federal formula as such. But it wisely requires the FCC's Section 224 formula to be considered in determining reasonable rates. By proposing to remove that provision from state law, the obvious inference is that NC Senate Bill 88 is intended to produce higher pole attachment rates.
State legislators unused to dealing with a subject like pole attachment rates can be forgiven for not realizing that such a "technical change" could negatively impact broadband deployment and network upgrades for their communities. NC Senate Bill 88 deserves another hard look by state legislators with the impact on broadband deployment in mind.  
Why make broadband networks more costly to deploy and upgrade? Why adversely impact citizen consumers with potentially higher prices by raising infrastructure costs? And why not at least consider an FCC-approved and Supreme Court-affirmed formula in trying to carry out a complex process? Adoption of low pole attachment rates – or at least serious attention paid to Section 224's lower rate standard – best promotes continued expansion of broadband. Accelerating broadband is in the best economic and social interests of every state and local community. This is certainly the case in rural areas where broadband penetration and capabilities stand the most in need of improvement.
States should use the FCC's Section 224 pole attachment formula as a valuable reference point for setting pole attachment rates. By doing so, states can minimize cost barriers to broadband expansion and avoid adverse consequences for their citizens' ability to pay for broadband.