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.