Dr. Michelle Connolly, a former Chief Economist at the FCC and a current member of the Free State Foundation's Board of Academic Advisers, has published a paper titled "The Economic Impact of Section 224 Exemption of Municipal and Cooperative Poles." Muni and co-op pole owners are exempt from rate limits established under Section 224 of the Communications Act. Dr. Connolly's paper found that municipal and electric co-op pole attachment rates are more than double or triple rates charged by investor-owned utilities.
As Dr. Connelly explains:
Because local regulations require that firms attaching to poles use existing utility facilities rather than install their own, removal of the Section 224 exemption for Coops and Munis is needed to prevent them from charging monopoly level pole attachment rates. Moreover, making these pole owners subject to the general Section 224 framework would create greater consistency in expectations over future pole attachment rates, reduce uncertainty and help increase overall investment in all communications networks that must rely on pole attachments. Such changes can be expected to offer particular benefits to rural areas where on average more poles must be passed to reach each consumer, and to competitive fairness as Coops and Munis would be prevented from using excessive rates which skew investments by broadband providers away from the areas in which the Coops and Munis are located.
This issue is even more important now that a number of municipalities and electricity co-ops have expressed interest in moving into the broadband market. Electricty co-ops, in particular, have sought to not only provide broadband Internet service but to obtain financing through taxes, bond issues, or subsidies, including the Universal Service Fund. A number of states have passed or considered legislation going that would authorize their electric utilities to enter the marketplace as a broadband Internet service provider.
I asked NCTA's Executive Vice President James Assey about this issue at the Free State Foundation's Eleventh Annual Telecom Policy Conference, held in Washington D.C. on March 26, 2019. Here is Mr. Assey's response:
With respect to electricity co-ops, the one glaring issue that really needs congressional action in addressing is the fact that they still have an exemption from the pole attachment regime that was set up. Back at the time the exemption was created, the thought was that pole attachment rates charged by municipal providers or co-ops were very low and that there were going to be incentives that they would stay low. And we have seen in actual practice that flipped on its head. It is hard for me to imagine a Congress and an FCC allowing co-ops to enter the business of broadband and being able to charge super-competitive rates for pole attachments that are different from the federal framework. So if co-ops are going to go into the business, that exemption needs to go.
Dr. Michelle Connolly's paper is worth reading and considering. It is available online here.
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