Petition for Writ of Certiorari — Ameren Corporation, et al., Petitioners v. Federal Communications Commission, et al.

No. _______

In The

Supreme Court of the United States

AMEREN CORPORATION, ET AL.,

Petitioners,

v.

FEDERAL COMMUNICATIONS COMMISSION,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Eighth Circuit

APPENDIX

Charles A. Zdebski

Counsel of Record

Brett Heather Freedson

Robert J. Gastner

Jeffrey P. Brundage

ECKERT SEAMANS

CHERIN & MELLOTT, LLC

1717 Pennsylvania Avenue, N.W.

12th Floor

Washington, D.C. 20006

(202) 659-6600

czdebski@eckertseamans.com

bfreedson@eckertseamans.com

rgastner@eckertseamans.com

jbrundage@eckertseamans.com

Eric B. Langley

Robin F. Bromberg

LANGLEY & BROMBERG LLC

2700 U.S. Highway 280

Suite 240 East

Birmingham, Alabama 35223

Phone: (205) 783-5750

eric@langleybromberg.com

robin@langleybromberg.com

Counsel for Petitioners

LANTAGNE LEGAL PRINTING

801 East Main Street Suite 100 Richmond, Virginia 23219 (800) 847-0477

App. 1

United States Court of Appeals

For the Eighth Circuit

____________________

No. 16-1683

Ameren Corporation; American Electric Power

Service Corporation; Centerpoint

Energy Houston Electric, LLC; Virginia Electric and

Power Company,

Petitioners,

v.

Federal Communications Commission; United States

of America,

Respondents,

COMPTEL, doing business as INCOMPAS; Level 3

Communications; National Cable &

Telecommunications Association; United States

Telecom Association,

Intervenors.

____________________

Texas Industrial Energy Consumers; Texas Office of

Public Utility Counsel Amici on Behalf of Petitioner

Petition for Review of an Order of the

Federal Communications Commission

Submitted: January 11, 2017

Filed: July 31, 2017

App. 2

Before WOLLMAN, MURPHY, and COLLOTON,

Circuit Judges.

WOLLMAN, Circuit Judge.

Ameren Corporation; American Electric

Power Service Corporation; CenterPoint Energy

Houston Electric, LLC; and Virginia Electric and

Power Company (collectively, Petitioners) petition

for review of a November 2015 order of the Federal

Communications Commission (FCC) governing the

rates that utility companies may charge

telecommunications providers for attaching their

networks to utility-owned poles. The FCC, the

United States, and intervenors COMPTEL d/b/a

INCOMPAS; National Cable & Telecommunications

Association; Level 3 Communications, LLC; and

United States Telecom Association oppose the

petition. We deny the petition.

I. Background

Under the Pole Attachments Act, 47 U.S.C. §

224, the FCC has the authority to ensure that rates

for attachments to utility poles by providers of cable

television services (cable providers) and providers

of telecommunications services

(telecommunications providers) are “just and

reasonable.” Id. § 224(b)(1). Section 224 initially

applied only to cable providers. The statute sets

forth a lower bound and an upper bound for “just

and reasonable” rates. The lower bound is a rate that

“assures a utility the recovery of not less than the

additional costs of providing pole attachments,” and

the upper bound is a rate that is “determined by

App. 3

multiplying the percentage of the total usable space .

. . which is occupied by the pole attachment by the

sum of the operating expenses and actual capital

costs of the utility attributable to the entire pole.” Id.

§ 224(d)(1). The FCC set the rate for this upper

bound (the Cable Rate) by multiplying three values:

the space factor (the space occupied by an

attachment divided by the total usable space on the

pole), the net cost of a bare pole, and a carrying

charge rate. 47 C.F.R. § 1.1409(e)(1).

Congress amended § 224 in 1996, expanding it

to cover pole attachments by telecommunications

providers. Section § 224(e) sets forth methods for

apportioning the cost of a pole among

telecommunications providers:

(2) A utility shall apportion the cost of

providing space on a pole, duct, conduit, or

right-of-way other than the usable space

among entities so that such apportionment

equals two-thirds of the costs of providing

space other than the usable space that would

be allocated to such entity under an equal

apportionment of such costs among all

attaching entities.

(3) A utility shall apportion the cost of

providing usable space among all entities

according to the percentage of usable space

required for each entity.

Id. § 224(e). This revision thus established a

separate formula for determining the rate for pole

attachments by telecommunications providers (the

Telecom Rate).

App. 4

Until 2011, the FCC determined “cost” for the

Telecom Rate the same way as for the Cable Rate

(net cost of a bare pole multiplied by a carrying

charge rate), and implemented § 224(e)(2) by

calculating the space factor differently, apportioning

two-thirds of the costs of the unusable space among

attaching telecommunications providers. Thus, the

Telecom Rate was typically higher than the Cable

Rate, because the values for the net cost of a bare

pole and the carrying charge rate were the same for

both the Cable Rate and the Telecom Rate, while the

value for the space factor was typically higher in the

Telecom Rate because it included two-thirds of the

unusable space on the pole.

In response to concerns that the risk of having

to pay the Telecom Rate may have deterred cable

providers from expanding their services, the FCC

adopted an order in April 2011 designed to equalize

the Cable and Telecom Rates. In the Matter of

Implementation of Section 224 of the Act, Report and

Order and Order on Reconsideration, 26 FCC Rcd.

5240 (2011) (the April 2011 Order). This Order

reinterpreted the term “cost” in § 224(e)(2) by

defining the “cost” for an urban-area pole as 66

percent of the pole’s fully allocated costs (the net cost

of a bare pole multiplied by the carrying charge

rate), and for a non-urban-area pole as 44 percent of

the pole’s fully allocated costs. Id. at 5304, ¶ 149.

Under the FCC’s rebuttable presumptions of 5

attachers to an urban-area pole and 3 attachers to a

non-urban-area pole, In the Matter of

Implementation of Section 224 of the Act, Order and

Further Notice of Proposed Rulemaking, 25 FCC

Rcd. 11864, 11913, ¶ 119 n.324 (2010), the new

App. 5

Telecom Rate under the April 2011 Order

approximated the Cable Rate.

The United States Court of Appeals for the

District of Columbia Circuit upheld the April 2011

Order against claims that it was inconsistent with §

224. Am. Elec. Power Serv. Corp. v. FCC, 708 F.3d

183 (D.C. Cir.), cert. denied, 134 S. Ct. 118 (2013).

The electric utilities’ petition for review argued that

“cost” in § 224(e) must mean the fully allocated costs

of a pole, not the April 2011 Order’s definition of

“cost” as either 66 or 44 percent of the pole’s fully

allocated costs. Id. at 189. The D.C. Circuit noted

that § 224(e) “is in important respects less specific

than § 224(d),” because “while § 224(e) prescribes the

apportionment criteria rather specifically, it

nowhere defines the term ‘cost.’” Id. at 188-89.

Evaluating the April 2011 Order under the standard

set forth in Chevron, USA, Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984), the court

held that the term “cost” as used in § 224(e) is

ambiguous and that the FCC’s interpretation of the

statute was reasonable in light of its policy interest

in eliminating market distortion caused by the

difference between the Cable Rate and the Telecom

Rate. Am. Elec. Power, 708 F.3d at 186, 189-90.

In November 2015, the FCC again altered the

Telecom Rate, adopting the order at issue in this

case. In the Matter of Implementation of Section 224

of the Act, Order on Reconsideration, 30 FCC Rcd.

13731 (2015) (the November 2015 Order). The FCC

found that the April 2011 Order had failed to

equalize the Telecom Rate and the Cable Rate,

because utilities frequently rebutted the

presumptions of 5 attachers in an urban area and 3

attachers in a non-urban area, which resulted in a

App. 6

higher Telecom Rate. Id. at 13738, ¶ 18. The FCC

was also concerned that its recent order classifying

retail broadband internet service as a

telecommunications service, In the Matter of

Protecting and Promoting the Open Internet, Report

and Order on Remand, Declaratory Ruling, and

Order, 30 FCC Rcd. 5601, 5734, ¶ 308 (2015), in

conjunction with the continued disparity between

the Cable Rate and the Telecom Rate, would lead to

rate increases for cable providers offering broadband

service. November 2015 Order at 13741, ¶ 21.

Further, the FCC was concerned that, because some

states that had elected to regulate pole attachments

under 47 U.S.C. § 224(c) used the Cable Rate, a

higher Telecom Rate would deter

telecommunications investment in states where the

FCC’s Telecom Rate applied. Id. at 13741-42, ¶ 22.

The November 2015 Order addressed these concerns

by eliminating the distinction between poles in

urban and non-urban areas, instead basing “cost” on

the average number of attachers to a pole within an

area: “cost” in areas with an average of 5 attachers is

defined as 66 percent of fully allocated costs, 56

percent for 4 attachers, 44 percent for 3 attachers,

and 31 percent for 2 attachers. Id. at 13756. In

service areas where the average number of attachers

is not a whole number, the percentage is

interpolated from the percentages assigned to the

nearest whole numbers. Id.

II. Discussion

We review the FCC’s interpretation of § 224(e)

under the two-step framework set forth in Chevron.

We first determine “whether Congress has directly

App. 7

spoken to the precise question at issue,” and if it has,

we “must give effect to the unambiguously expressed

intent of Congress.” Chevron, 467 U.S. at 842-43.

“[I]f the statute is silent or ambiguous with respect

to the specific issue, the question for the court is

whether the agency’s answer is based on a

permissible construction of the statute.” Id. at 843.

The agency’s view “governs if it is a reasonable

interpretation of the statute—not necessarily the

only possible interpretation, nor even the

interpretation deemed most reasonable by the

courts.” Entergy Corp. v. Riverkeeper, Inc., 556 U.S.

208, 218 (2009). Even when an agency policy

represents a change from past policy, the agency

generally need not demonstrate that “the reasons for

the new policy are better than the reasons for the old

one; it suffices that the new policy is permissible

under the statute, that there are good reasons for it,

and that the agency believes it to be better.” FCC v.

Fox Television Stations, Inc., 556 U.S. 502, 515

(2009).

We conclude that the term “cost” in § 224 is

ambiguous. “The fact is that without any better

indication of meaning than the unadorned term, the

word ‘cost’ in [a different statute], as in accounting

generally, is ‘a chameleon,’ a ‘virtually meaningless

term.’” See Verizon Commc’ns, Inc. v. FCC, 535 U.S.

467, 500 (2002) (citations omitted). Indeed, § 224(d)

uses the term “cost” in different ways. It sets forth as

a lower bound “the additional costs of providing pole

attachments.” It sets forth as an upper bound a rate

equal to the percentage of the pole’s usable space

occupied by the attachment multiplied by the

“operating expenses and actual capital costs of the

utility attributable to the entire pole.” In § 224(e), by

App. 8

contrast, Congress did not specify what type of “cost”

it meant, providing instead that, among

telecommunications providers, the “cost” of providing

usable space on a pole shall be apportioned according

to the percentage of usable space required for each

attacher, and the “cost” of providing unusable space

on a pole shall be apportioned to each attacher such

that its share equals two-thirds of the costs it would

be allocated under an equal apportionment of such

costs. Thus, while the Cable Rate under § 224(d)

must fall within a range defined by two different,

specified types of “cost,” § 224(e) does not specify

what type of “cost” must be used to determine the

Telecom Rate.

Petitioners argue that the November 2015

Order defies Congress’s intent to establish two

different rates in § 224(d)(1) and § 224(e). We

disagree that the statute evinces such an intent.

Section 224(d) requires that pole attachment rates

for cable providers fall within a certain range.

Section 224(e) requires that pole attachment rates

for telecommunications providers be calculated

according to a certain formula. Because the term

“cost” in § 224(e) is ambiguous, the same “cost”

definition need not be used to determine the upper

bound for cable rates under § 224(d) and the rate for

telecommunications providers under § 224(e).

Accordingly, the statute permits, but does not

require, the Cable Rate and the Telecom Rate to

diverge.

Likewise, we reject Petitioners’ argument that

the FCC’s interpretation of the statute renders §

224(e) superfluous. See Corley v. United States, 556

U.S. 303, 314 (2009) (“[A] statute should be

construed so that effect is given to all its provisions,

App. 9

so that no part will be inoperative or superfluous,

void or insignificant . . . .” (quoting Hibbs v. Winn,

542 U.S. 88, 101 (2004))). As set forth above, the

statute allows the Cable Rate and the Telecom Rate

to diverge, but does not require them to do so.

Whether or not the rates diverge, the Cable Rate

must fall within the range set forth in § 224(d) and

the Telecom Rate must be calculated according to

the formula set forth in § 224(e). Thus, the formula

for calculating the Telecom Rate under § 224(e) is

not superfluous.1

We conclude that the November 2015 Order

constitutes a reasonable interpretation of the

ambiguity in § 224(e).2 The FCC sought to eliminate

the disparity between the Cable and Telecom Rates

in order to avoid subjecting cable providers offering

broadband service to the higher Telecom Rate, and

to avoid rate disparity between states whose pole

attachment rates are regulated by the FCC and



1 In light of this conclusion, we need not address the FCC’s

argument that the alternative, cost-causation formula for

determining the Telecom Rate under 47 C.F.R. § 1.1409(e)

(2)(ii) prevents § 224(e) from becoming superfluous under

the November 2015 Order.

2 To the extent that Petitioners argue that the November

2015 Order resulted from arbitrary and capricious decision

making in violation of the Administrative Procedure Act, 5

U.S.C. § 706, their argument fails for the same reasons that

explain why the November 2015 Order is reasonable. See

Shays v. Fed. Election Comm’n, 414 F.3d 76, 96 (D.C. Cir.

2005) (“[O]ur inquiry at the second step of Chevron . . .

overlaps with the arbitrary and capricious standard . . . .”

(quoting Chamber of Commerce of the U.S. v. Fed. Election

Comm’n, 76 F.3d 1234, 1235 (D.C. Cir. 1996))).



App. 10

those states that had elected to regulate pole

attachment rates using the Cable Rate even for

telecommunications providers. Finding that the

April 2011 Order’s presumptions of five attachers in

urban areas and three attachers in non-urban areas

were inadequate to achieve these goals, the FCC

adopted the multiple cost allocators set forth in the

November 2015 Order. This approach represents a

“reasonable policy” choice, and thus we defer to the

FCC’s interpretation. See Verizon, 535 U.S. at 523.3

We find the D.C. Circuit’s decision in

American Electric Power to be persuasive.

Petitioners attempt to distinguish this case from

American Electric Power, noting that, under the

April 2011 Order upheld in that case, the Telecom

Rate did not vary based on the number of attachers

(instead varying based on urban or non-urban

location); that the April 2011 Order adopted only two

definitions of the term “cost,” as opposed to the

potentially infinite definitions in the November 2015

Order; and, “perhaps most importantly,” that under

the April 2011 Order it was at least possible for the

Cable and Telecom Rates to diverge. Petr’s’ Br. 2122. We conclude that those distinctions are of no

significance. The D.C. Circuit concluded that the

term “cost” was ambiguous and that the FCC’s



3 Petitioners contend that “[t]here is simply no evidence in

the record sufficient to support a determination” that

equating the Telecom Rate and the Cable Rate will

encourage the expansion of broadband services. Pet’rs’ Br.

39. This claim is time- barred under 28 U.S.C. § 2344 in

light of Petitioners’ failure to challenge that

determination within sixty days of the entry of the April

2011 order.



App. 11

choice to define “cost” so as to equalize the Cable and

Telecom Rates was reasonable. Am. Elec. Power, 708

F.3d at 188-90. That reasoning applies with equal

force here.

The petition for review is denied.

App. 12

Before the

Federal Communications Commission

Washington, D.C. 20554

WC Docket No. 07-245

GN Docket No. 09-51

In the Matter of

Implementation of Section 224 of the

Act

)

)

)

)

)

A National Broadband Plan for Our

Future

ORDER ON RECONSIDERATION

Adopted: November 17, 2015

Released: November 24, 2015

By the Commission: Commissioner Pai concurring

and issuing a statement.

TABLE OF CONTENTS

I. INTRODUCTION .................................................. 1

II. BACKGROUND ..................................................... 5

III.DISCUSSION ...................................................... 16

A. The Petitioners’ Proposal Solves the

Problem of Rate Disparity.............................. 17

B. The Reasons to Revise the Cost

Allocation System ........................................... 20

C. The Commission Has Authority to

Adopt the Revised Telecom Rate Rule........... 31

D. The Revisions to the Telecom Rate Rule

Are Procedurally Proper ................................ 44

IV. PROCEDURAL MATTERS ................................. 47

App. 13

A. Paperwork Reduction Act Analysis ............... 47

B. Regulatory Flexibility Analysis ..................... 48

C. Congressional Review Act .............................. 49

V. ORDERING CLAUSES ....................................... 50

I.

INTRODUCTION

1.

In this Order on Reconsideration

(Order), we build on the Commission’s prior efforts

to harmonize pole attachment rates that cable and

telecom service providers pay utility pole owners.

The Communications Act of 1934, as amended (Act),

contains two formulas for calculating pole

attachment rates, a formula adopted in 1978

applicable to cable television systems solely

providing cable service, and a formula adopted in

1996 applicable to telecommunications carriers

providing telecommunications service.1 Following

the implementation of the 1996 Act2 through 2011,

rates calculated using the telecom rate formula have

typically been higher than rates calculated using the

cable formula in similar circumstances. In 2011, the

Commission revised the formulas as described in

greater detail below to improve efficiency, reduce

potentially excessive costs of network deployment

1 47 U.S.C § 224(d) (describing the “cable rate formula”), 47

U.S.C § 224(e) (describing the “telecom rate formula”).

2 Telecommunications Act of 1996, Pub. L. No. 104-104, 110

Stat. 56 (1996) (1996 Act) (codified as amended in scattered

sections of 47 U.S.C.).

App. 14

and accelerate broadband buildout, and eliminate

the wide disparity between the telecom and cable

rate formulas. The 2011 revisions sought to bring

the telecom and cable rates into parity. In the

intervening time, we have seen that our revisions

did not fully achieve that objective. Today, we take

the next logical step in achieving the goals set forth

in 2011.

2.

As detailed below, we take these actions

in response to a Petition for Reconsideration or

Clarification in this proceeding.3 The rule revisions

we adopt amend our rules by defining “cost,” for the

purpose of calculating the rates that

telecommunications carriers pay for pole

attachments, as a percentage of fully allocated costs

that will depend on whether the average number of

attaching entities in a service area is 2, 3, 4, or 5.4

The rates that attachers pay to attach to poles are

currently determined, among other things, by

whether the attacher is a “cable television system

solely … provid[ing] cable service” or a

“telecommunications carrier providing

telecommunications services.”5 The Commission, in

3 Petition for Reconsideration or Clarification of the

National Cable and Telecommunications Association,

COMPTEL, and tw telecom inc., WC Docket No. 07-245, GN

Docket No. 09-51 (filed June 8, 2011)

http://apps.fcc.gov/ecfs/document/view?id=7021686399

(NCTA Petition).

4 See infra Appendix A.

5 See Implementation of Section 224 of the Act; A National

Broadband Plan for Our Future, WC Docket No. 07-245, GN

Docket No. 09-51, Report and Order and Order on

Reconsideration, 26 FCC Rcd 5240, 5246, para. 10 (2011)

(continued…)

App. 15

its 2011 Report and Order and Order on

Reconsideration in this proceeding (2011 Pole

Attachment Order), sought to bring parity to pole

attachment rates calculated using the telecom or

cable rate formula so that all attachments rates

would be at or near the cable rate formula level.6

The 2011 Pole Attachment Order adopted cost

allocators in the telecom rate formula that closely

approximate the treatment of cost in the cable rate

formula. However, these allocators applied only in

situations where poles have 5 attaching entities (66

percent of cost) or 3 attaching entities (44 percent of

cost).7 On June 8, 2011, the National Cable and

Telecommunications Association (NCTA),

COMPTEL, and tw telecom inc. (Petitioners) filed a

petition for reconsideration or clarification of the

rules adopted in the 2011 Pole Attachment Order,

asking the Commission either to clarify that 66

percent and 44 percent are “illustrations” of the new

rule, or to revise the rules to “provide corresponding

cost adjustments to other entity counts.” 8

3.

In response to NCTA’s petition, and to

the record developed in this proceeding, we now

introduce new cost allocators for poles with 2

(Continued from previous page)

(2011 Pole Attachment Order), aff’d sub. nom. Am. Elec.

Power Serv. Corp. v. FCC, 708 F.3d 183 (D.C. Cir. 2013)

(AEP), citing 47 U.S.C § 224(d),(e).

6 2011 Pole Attachment Order, 26 FCC Rcd at 5316-21,

paras. 172-81 (discussing harms associated with disparity

between cable and telecom rate formulas).

7 Id. at 5304-05, paras. 149-50.

8 NCTA Petition at 5-6.

App. 16

attaching entities (31 percent of costs) and 4

attaching entities (56 percent of cost). When the

average number of attaching entities is a fraction,

the percentage cost allocator will be located between

the whole numbers at the point where it most closely

approximates the cost used in the cable rate formula.

This flexible series of cost allocators should more

fully realize the intent of the Commission in its 2011

Pole Attachment Order to bring parity to pole

attachment rates at the cable rate formula level.9

We also adopt this definition of cost to prevent pole

owners from charging cable operators that also

provide telecommunications service (including

broadband Internet access service)10 pole attachment

rental rates that can be approximately 70 percent

higher than the cable rate under our existing rules.11

4.

We additionally act to support

incentives for deployment of broadband facilities,

particularly in rural areas, and to harmonize

regulatory treatment between states where the

Commission regulates the rates, terms, and

conditions for pole attachments and states where

9 See id. at Attach. A (illustrating that, at eight electric

utilities, the proposed cost methodology produces telecom

rates that approximate the cable rate equally well whether

the average number of attachers is 5, 3, or 2.6).

10 See Protecting and Promoting the Open Internet, GN

Docket No. 14-28, Report and Order on Remand,

Declaratory Ruling, and Order, 30 FCC Rcd 5601, 5734,

para. 308 (2015) (Open Internet Order).

11 See NCTA Petition at 5-6 (stating that rebutting the

presumptions with 2.6 attachers leads to rates that are 70%

higher than the cable rate).

App. 17

such matters are regulated by the state.12

Subjecting cable operators to higher pole attachment

rates merely because they also provide

telecommunications services, such as broadband

Internet access, could deter investment in states

subject to Commission pole regulation, which would

undermine the Commission’s broadband deployment

policy. By keeping pole attachment rates unified

and low, we further our overarching goal to

accelerate deployment of broadband by removing

barriers to infrastructure investment and promoting

competition.13

II.

BACKGROUND

5.

On April 7, 2011, in its 2011 Pole

Attachment Order, the Commission comprehensively

revised its rules governing the attachment of cable

and telecommunications facilities to utility poles.

The 2011 Pole Attachment Order contains a

comprehensive background section outlining pole

attachment policy developments through 2011.14 We

do not repeat that material herein. Instead, we

incorporate that history by reference here, and

preserve a brief background section outlining and

describing the provisions, orders, and cases germane

to this Order on Reconsideration.

6.

In 1978, Congress added section 224 to

12 47 U.S.C § 224(c)(1).

13 See 47 U.S.C. § 1302(b).

14 See 2011 Pole Attachment Order, 26 FCC Rcd at 5245-51,

paras. 9-18 (general background concerning pole

attachments); see id. at 5295-96, paras. 127-30) (background

specific to pole attachment rates).

App. 18

the Act.15 As established in 1978, section 224

directed the Commission to ensure that the rates,

terms, and conditions of attaching cable television

systems’ facilities to utility-owned poles were just

and reasonable.16 Section 224 also identified the

maximum rate for pole attachments as a percentage

of fully-allocated costs.17 In 1987, the U.S. Supreme

Court found that the cable rate formula adopted by

the Commission provides pole owners with adequate

compensation, and thus does not result in an

unconstitutional taking.18

7.

The 1996 Act expanded the definition of

pole attachments to include attachments by

providers of telecommunications service,19 and

granted both cable operators and

telecommunications carriers20 an affirmative right of

15 Pole Attachment Act of 1978, Pub. L. No. 95-234, 92 Stat.

33 (1978). Section 224 provides that the Commission will

regulate pole attachments except where “such matters are

regulated by a state.” 47 U.S.C. § 224(c)(1).

16 47 U.S.C. § 224(b)(1).

17 47 U.S.C. § 224(d)(1); see S. Rep. No. 580, 95th Congress,

1st Sess. at 19-21 (1977) (1977 Senate Report), reprinted in

1978 U.S.C.C.A.N. at 127–28; see also 2011 Pole Attachment

Order, 26 FCC Rcd at 5295-96, paras. 127-28; (defining

“fully allocated” costs to include operating expenses and

capital costs that a utility incurs in owning and maintaining

poles).

18 FCC v. Florida Power Corp., 480 U.S. 245 (1987).

19 47 U.S.C. § 224(a)(4).

20 For purposes of section 224, Congress excluded incumbent

local exchange carriers (LECs) from the definition of

“telecommunications carriers.” 47 U.S.C. § 224(a)(5).

App. 19

access to utility poles.21 The 1996 Act also included

a separate provision for calculating a cost-based rate

paid by telecommunications carriers—the telecom

rate formula—which incorporates “the cost of

providing space on a pole.”22 As implemented by the

Commission, the telecom rate formula generally

resulted in significantly higher pole rental rates

than rates derived from the cable rate formula.23

The Commission concluded that cable systems that

21 47 U.S.C. § 224(f)(1).

As a general matter, all references

to poles in this Order refer to attachments to utility poles

and do not include other components of the statutory

definition of “pole attachments,” including ducts, conduits

and rights-of-way, unless otherwise indicated. 47 U.S.C. §

224(a)(4).

22 47 U.S.C. 224(e)(2)-(3); see 2011 Pole Attachment Order,

26 FCC Rcd at 5296-98, paras. 130-131, 135 (describing zone

of reasonableness as not more than fully allocated costs, and

not less than marginal or incremental costs caused by the

attachment).

23 The Commission has stated that, under the cable formula,

each attacher, other than the pole owner, pays about 7.4% of

the annual cost of a pole. Under the telecom rate formula,

each attacher, other than the pole owner, pays between

about 11.2% of the annual cost of a pole in urban areas to

about 16.9% in non-urban areas. See Implementation of

Section 224 of the Act; A National Broadband Plan for Our

Future, WC Docket No. 07-245, GN Docket No. 09-51, Order

and Further Notice of Proposed Rulemaking, 25 FCC Rcd

11864, 11913-14, para. 11 (2010) (Order and/or Further

Notice) (sample telecom rates based on Commission’s

rebuttable presumptions of 37.5 feet for height of a pole, 24

feet for unusable space on a pole, 13.5 feet for usable space,

1 foot occupied by an attachment, 3 attachers in non-urban

areas, and 5 attachers in urban areas). See 47 C.F.R. §§

1.1417–1.1418.

App. 20

provided Internet access in addition to video services

should continue to pay the cable rate; that

conclusion was reversed on appeal but later upheld

by the Supreme Court.24

8.

In the intervening years, the

Commission considered a variety of possible reforms

to its pole attachment regulations in light of their

importance to the deployment of communications

networks. The Commission issued a Notice of

Proposed Rulemaking in 2007, to respond to

petitions for rulemaking regarding pole access and

incumbent LEC pole attachment issues, and to seek

comment on pole rate issues.25 In 2010, in response

to a directive in the American Recovery and

Reinvestment Act of 2009,26 the Commission

released the National Broadband Plan (NBP),

identifying access to rights-of-way—including access

to poles—as having a significant impact on the

24 Implementation of Section 703(e) of the

Telecommunications Act of 1996, Amendment of the

Commission’s Rules and Policies Governing Pole

Attachments, CS Docket No. 97-151, Report and Order, 13

FCC Rcd 6777 (1998) (1998 Implementation Order), aff’d in

part rev’d in part sub nom. Gulf Power v. FCC, 208 F.3d

1263 (11th Cir. 2000), rev’d sub nom. Nat’l Cable &

Telecommunications Ass’n v. Gulf Power, 534 U.S. 327

(2002) (Gulf Power).

25 Implementation of Section 224 of the Act; Amendment of

the Commission’s Rules and Policies Governing Pole

Attachments, WC Docket No. 07-245, RM-11293, RM-11303,

Notice of Proposed Rulemaking, 22 FCC Rcd 20195 (2007).

26 American Recovery and Reinvestment Act of 2009, Pub. L.

No. 111-5, 123 Stat. 115, § 6001(k)(2) (2009).

App. 21

deployment of broadband networks.27 Accordingly,

the NBP included several recommendations

regarding pole attachment access, enforcement, and

pricing policies to further advance broadband

deployment.28 Following on the recommendations in

the NBP, in its 2010 Further Notice the Commission

sought comment on a variety of measures to speed

access to poles and make pole rental rates as low and

close to uniform as possible consistent with section

224 of the Act.

9.

In the 2011 Pole Attachment Order, the

Commission sought, in pertinent part, to

significantly reform its telecom rate regulations by

reinterpreting the ambiguous term “cost” in the

telecom rate formula in section 224(e) of the Act to

yield telecom attachment rates “lowered to more

effectively achieve Congress’ goals under the 1996

Act to promote competition and ‘advanced

telecommunications capability’ by both wired and

wireless providers by ‘remov[ing] barriers to

infrastructure investment.’”29 In particular, the

Commission sought to “balance the goals of

promoting broadband [deployment] . . . with the

27 Omnibus Broadband Initiative, Federal Communications

Commission, Connecting America: The National Broadband

Plan at 109 (2010),

http://download.broadband.gov/plan/national-broadbandplan.pdf.

28 Id. at 109–13.

29 2011 Pole Attachment Order, 26 FCC Rcd at 5298-99,

para. 136.

App. 22

historical role that pole rental rates have played in

supporting the investment in pole infrastructure.”30

10.

In order to promote broadband while

ensuring that attaching entities continue to support

the poles on which they depend, the 2011 Pole

Attachment Order adopted alternative methods for

measuring cost, and provided that the method

producing the higher rate is the one the parties

use.31 Utilities thus receive the benefit of any

difference between the methods. In this way, the

Commission recognizes that telecommunications

attachers have historically contributed to the capital

30 Id. See also, e.g., id. at 5241, para. 1 (explaining that the

2011 Pole Attachment Order was “designed to promote

competition and increase the availability of robust,

affordable telecommunications and advanced services to

consumers throughout the nation”); id. at 5295, para. 126

(describing how the reform was intended to “enable

consumers to benefit through increased competition,

affordability, and availability of advanced communications

services, including broadband”); id. at 5303-04, para. 147

(citing commenters’ explanation “that reducing the telecom

rate would improve the business case for providing

advanced services, because it will reduce the expected

incremental cash outflows of providing such services,

thereby increasing the likelihood that the present value of

the expected incremental cash inflows will exceed the

present value of the expected incremental cash outflows”);

id. at 5316-21, paras. 172-81 (discussing how revising the

telecom rate will advance the goals of the Act).

31 See 47 C.F.R. § 1.1409(b)(2)(i)-(ii).

The revision in this

Order is to 47 C.F.R. § 1.1409(b)(2)(i), which is the

“percentage of fully allocated costs” approach. 47 C.F.R. §

1.1409(e)(2)(ii)—the “cost causation” approach—is not

affected.

App. 23

costs of the pole network, and that the new telecom

rate should not “unduly burden [utility]

ratepayers.”32 Balancing The Commission decided

under the first of two acceptable methodologies to

“allow the pole owner to charge a monthly pole

rental rate that reflects some contribution to capital

costs”33 while also reducing the telecom rate.34 The

Commission settled on an approach that defines

costs “in terms of a percentage of the fully-allocated

costs” of the pole – specifically, 66 percent of fullyallocated costs in urban areas and 44 percent in nonurban areas.35 This measure of cost produces a rate

that the Commission expected, based on the premise

that the Commission’s presumptive number of

attachers would not be rebutted, “[would], in

general, approximate the cable rate” and thereby

promote network investment and broadband

deployment.36

11.

The Commission also established a

second, alternative measure of cost that utilities may

32 2011 Pole Attachment Order, 26 FCC Rcd at 5304-05,

para. 149.

33 This amount is in addition to those costs recovered

through make-ready fees.

34 Id.

35 Id. (quoting 1977 Senate Report at 21).

36 Id. at 5304-05, para. 149, 5305, para. 150 n.453 (citing

Order and Further Notice, 25 FCC Rcd at 11913-14, para.

119 (explaining that the calculations were based on the

Commission’s presumptions)). See also, e.g., Order and

Further Notice, 25 FCC Rcd at 11930, Appx. A (setting forth

illustrative examples calculated based on the Commission’s

presumptions).

App. 24

use. This alternative approach is based on the

principle of “cost causation,” under which the

“customer – the cost causer – pays a rate that

covers” the costs for which it is “causally

responsible.”37 Under this approach, a pole owner

may recover its administrative and maintenance

costs through the telecom rate, but not capital costs

other than those associated with make-ready

expenses.38 The Commission also noted that capital

costs caused by a telecommunications attacher have

long been recovered through make-ready charges,39

which “the utility itself sets” without regard to “any

mandatory rate formula set by the Commission.”40

Other capital costs (i.e., rate of return, taxes, and

depreciation) are properly excluded under a costcausation approach because the pole owner would

have incurred those costs “regardless of the demand

for attachments.”41 Although the “percentage of

fully-allocated costs” measure of cost discussed above

will produce a higher telecom rate “in most cases,” if

the cost causation-based approach yields a higher

37 2011 Pole Attachment Order, 26 FCC Rcd at 5301, para.

143.

38 Administrative and maintenance expenses were included

because “it is likely that an attacher is causally responsible”

for at least some of those costs. Id. at 5302-03, para. 145.

Make-ready costs are recovered directly from the attacher.

39 Id. at 5301, para. 143.

40 Id. at 5322, para. 185.

41 Id. at 5301-02, paras. 143-44.

App. 25

rate, utilities are allowed to charge up to that rate.42

12.

On February 26, 2013, the U.S. Court of

Appeals for the D.C. Circuit (D.C. Circuit) rejected

utilities’ challenge to the Commission’s action to

bring the traditionally higher telecom rate more in

line with the cable rate, concluding that “[b]ecause

the Commission’s methodology is consistent with the

unspecified cost terms contained in § 224(e), and the

Commission’s justifications are reasonable, the

revision [to the telecom rate formula] warrants

judicial deference.”43 In particular, the court

observed that section 224(e) is “less specific” than

section 224(d) in prescribing how the statutory rate

formula should be implemented.44 The court agreed

with the Commission that “the term ‘cost’ in §

224(e)(2) and (3) is necessarily ambiguous, and could

thus ‘yield a range of rates from the existing fullyallocated cost approach at the high end to a rate

closer to incremental cost at the low end.’”45 The

D.C. Circuit thus affirmed the Commission’s

interpretation and implementation of section 224(e).

42 Id. at 5304-05, para. 149, 5305-06, para. 152, 5310-11,

para. 161.

43 AEP, 708 F.3d at 190.

44 Id. at 188.

45 Id. at 189 (quoting 2011 Pole Attachment Order, 26 FCC

Rcd at 5243-45, para. 8). See also id. at 189-90 (discussing

Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467, 500 (2002);

Transmission Access Policy Study Group v. FERC, 225 F.3d

667, 703-04 (D.C. Cir. 2000) (per curiam), aff’d 535 U.S. 1

(2002); Associated Gas Distribs. v. FERC, 824 F.2d 981,

1009-12 (D.C. Cir. 1987)).

App. 26

13.

On June 8, 2011, Petitioners filed the

NCTA Petition, seeking reconsideration or

clarification of the newly adopted cost allocation

rule.46 The NCTA Petition points out that, when

paired with the Commission’s presumptive numbers

of attachers (5 in urbanized and 3 in non-urbanized

areas), the 66 percent and 44 percent cost allocators

almost exactly reproduce the 7.4 percent of costs

used as an input in the cable rate formula.47 The

Petitioners report, however, that pole owners in fact

often rebut the Commission’s presumptions with

much lower average numbers. For example, if the

owner rebuts the urban presumption (5 attaching

entities) with an actual count average of 2.6

attaching entities, the telecom rate can be as much

46 See 47 C.F.R. § 1.1409(i) (defining cost in Urbanized

Service Areas as .66 x (Net Cost of a Bare Pole x Carrying

Charge Rate) and in Non-Urbanized Service Areas as .44 x

(Net Cost of a Bare Pole x Carrying Charge Rate).

47 NCTA Petition at 5 (citing 2011 Pole Attachment Order,

26 FCC Rcd at 5304-05, para. 149 and n.453):

Under the telecom rate formula, each

attacher, other than the pole owner, pays

approximately 11.2% of the relevant “cost”

of a pole in urbanized service areas and

about 16.9% in non-urban areas. Under

the definition of “cost” as 66% of fully

allocated costs in urban areas, the new

telecom rate recovers approximately 7.4%

of the fully allocated costs of the pole. By

defining “cost” as 44% of fully allocated

costs in non-urban areas, the new telecom

rate likewise recovers approximately 7.4%

of the fully allocated costs of the pole in

those areas. (internal citations omitted).

App. 27

as 70 percent higher than the cable rate.48 To

“achieve the Commission’s goal of providing pole

attachment rates that are close to uniform as

possible, and to ensure that all attachers contribute

similar costs to pole owners,” the Petitioners ask the

Commission to address this gap between the

intended effect of the cost allocators and their

function as applied by ceasing to distinguish

between urbanized and non-urbanized areas.49

14.

Specifically, the Petitioners ask the

Commission either to clarify that 66 percent and 44

percent are mere illustrations of the new rule, or to

revise the rule to “provide corresponding cost

adjustments to other entity counts.”50 The NCTA

Petition presents a model rule with additional cost

allocators for 4 and 2 attachments, each of which

aligns costs with the Commission’s cable rate

formula as effectively as the current rule does for the

Commission’s presumptive averages of 5 urbanized

and 3 non-urbanized attachments.51 In service areas

where the number of attaching entities is not a

whole number, petitioners’ proposed cost allocator

would be interpolated from the allocators of the

nearest whole numbers of attaching entities.52 On

48 Id. at 5-6.

49 Id. at 6.

50 Id. at 6.

51 Id. at Attach B (proposing cost allocators of 0.661 for 5

attachers; 0.556 for 4 attachers; 0.439 for 3 attachers; and

0.309 for 2 attachers).

52 Id. (“[I]n Service Areas where the number of Attaching

Entities is not a whole number = N x (Net Cost of a Bare

Pole x Carrying Charge Rate), where N is interpolated from

(continued…)

App. 28

June 20, 2011, the Commission sought comment on

the NCTA Petition.53

15.

On February 26, 2015, the Commission

adopted the Open Internet Order, which, among

other things, concluded that “retail broadband

Internet access service is best understood today as

an offering of a ‘telecommunications service.’”54 The

Open Internet Order made clear that it did “not itself

require any party to increase the pole attachment

rates it charges to attachers providing broadband

Internet access service.”55 A possible interpretation

of the Order, however, could be that cable systems

that also provide broadband Internet access service

and previously were subject to the cable rate formula

are now subject to the telecom rate formula. In the

Open Internet Order, the Commission noted that

Petitioners had already expressed concern that

revisions to the telecom formula only fulfilled the

Commission’s expressed intent in the limited

circumstances when there are either 5 or 3 attaching

entities on a pole.56 The Commission stated in the

Open Internet Order that, “[t]o the extent that there

(Continued from previous page)

the cost allocator associated with the nearest whole

numbers of Attaching Entities.”).

53 Petitions for Reconsideration of Action in Rulemaking

Proceeding, WC Docket No. 07-245, GN Docket No. 09-51,

Public Notice, Report No. 2931 (Cons. & Gov’t Affairs Bur.

2011); A National Broadband Plan for Our Future; Petition

for Reconsideration, 76 Fed. Reg. 44495 (July 26, 2011).

54 Open Internet Order, 30 FCC Rcd at 5734, para. 308.

55 Id. at 5832-33, para. 482.

56 Id. at 5833, para. 483.

App. 29

is a potential for an increase in pole attachment

rates for cable operators that also provide broadband

Internet access service, we are highly concerned

about its effect on the positive investment incentives

that arise from new providers’ access to pole

infrastructure.”57 In short, the Commission made

plain that it took seriously parties’ concerns that

reclassification could have unintended consequences

for pole attachment rates, and that this Petition

might present an effective vehicle for giving the

issue a closer look.58 In light of this development,

parties were asked to refresh the record with regard

to the NCTA Petition.59

III.

DISCUSSION

16.

We adopt the Petitioners’ proposal to

broaden the use of cost allocators in the telecom rate

formula. Specifically, we add cost allocators for poles

with 2 and 4 attaching entities to augment the

current cost allocators that target poles with 3 and 5

attaching entities. We also provide that, for

fractional attaching-entity averages, cost allocators

are to be interpolated from the whole-number cost

allocators. We take this step to further our goal of

promoting consistent, cross-industry attachment

57 Id. at para. 484.

58 Id. at paras. 483-84 & n.1415 (referencing the NCTA

Petition).

59 Parties Asked to Refresh Record Regarding Petition to

Reconsider Cost Allocators Used to Calculate the Telecom

Rate for Pole Attachments, WC Docket No. 07-245, GN

Docket No. 09-51, Public Notice, 30 FCC Rcd 4615 (Wireline

Comp. Bur. 2015), 80 Fed. Reg. 27626 (May 14, 2015).

App. 30

rates that encourage deployment and adoption of

broadband Internet access services by fulfilling the

Commission’s intent, expressed clearly in 2011 and

upheld in court in 2013, to bring cable and telecom

rates for pole attachments into parity at the cablerate level.

A.

The Petitioners’ Proposal Solves

the Problem of Rate Disparity

17.

The Petitioners maintain, and we

agree, that the cost allocators adopted in the 2011

Pole Attachment Order perform as intended, but only

if the actual average numbers of attaching entities

coincide with the Commission’s presumptive average

numbers of attaching entities.60 As NCTA

recognizes, the cost allocators in the 2011 Pole

Attachment Order reflect and embody these

presumptive averages.61 When 66 percent and 44

percent of fully-allocated costs are applied in tandem

with the Commission’s presumptions of 5 and 3

attaching entities in urban and non-urban areas,

respectively, the results approximate cable rate

60 NCTA Petition at 5 (“The Commission wrote the

illustration into rule, essentially addressing only the cases

of the presumed three and five attaching entities.”). The

Commission has routinely used the presumptions when

calculating applications of the telecom rate formula. See

Order and Further Notice, 25 FCC Rcd at 11930, Appx. A,

Pole Attachment Rates (showing 16 hypothetical telecom

rate formula attachment rates with each rate calculated

twice: once with 5 entities and once with 3 entities).

61 NCTA Petition at 5 (citing 2011 Pole Attachment Order,

26 FCC Rcd at 5304-05, para. 149 and n.453), Attach. A

(Utility Pole Attachment Rates, based on FERC Data).

App. 31

formula outcomes, as intended.62

18.

There is widespread agreement that the

real average number of attaching entities is

regularly far lower than the Commission’s

presumptions,63 and that this disparity causes rates

calculated with the telecom rate formula to be

around 70 percent higher than rates calculated with

the cable rate formula.64 NCTA also reports that, in

reality, pole owners routinely rebut the

Commission’s presumptions with averages such as

2.6 attaching entities.65 No commenter disputes

62 2011 Pole Attachment Order 26 FCC Rcd at 5244, para. 8

(“This new telecom rate generally will recover the same

portion of pole costs as the current cable rate.”).

63 See NCTA Petition at 5-6 (reporting that pole owners

often rebut the Commission’s presumptions with much

lower average numbers, e.g., average of 2.6 attaching

entities, which drives the telecom rate approximately 70

percent higher than the cable rate); see, e.g., Coalition of

Electric Utilities Reply at 7 (“[T]he fact that the average

number of attaching entities used to calculate the Telecom

Rate is often lower than presumptions set forth in the

Commission's rules demonstrates that the numbers of

service providers nationwide are not growing as the

Commission anticipated.”) (emphasis removed);

Many commenters confirm NCTA’s 70% higher rate

estimate. See, e.g., ITTA Comments at 4; ACA Comments at

3; COMPTEL and Level 3 Comments at 2; Comcast

Comments at 5-6.

64

65 See Electric Utilities Reply at 4-5 (stating that utilities

spend considerable time and money rebutting the

presumptions). As NCTA observes, because most cable

operators may become subject to the telecom rate, and

because of the large number of associated attachments that

are implicated, utilities would have increased incentives to

(continued…)

App. 32

NCTA’s claim or alleges that the number “2.6” is an

outlier. Verizon reports several similarly frequent

rebuttals to attacher numbers below three.66

Averages of 2.6 attaching entities rebut both the

urban and non-urbanized presumptions, which casts

doubt not only on the credibility of the presumptions,

but on the validity of the underlying urbanized/nonurbanized distinction as well. Rebuttals that

consistently show lower average numbers based on

tracking actual attachments may reflect the fact

that, under our rules, service territories count as

“urban” if any part of them is urban.67 This

approach dilutes the density of these nominally

urban areas, and undercuts the Commission’s

original assumption that such areas would likely

(Continued from previous page)

rebut the Commission’s presumed number of attachers in

areas where the utilities had not done so previously. NCTA

PN Comments at 6. See also NCTA PN Reply at 9 (“cable

operators are responsible for the substantial majority of pole

attachments”) (citing 2011 Pole Attachment Order, 26 FCC

Rcd at 5305, para. 151). As a result, this could lead to pole

rate increases not only for cable operators but also for preexisting telecommunications carriers in those areas.

66 Verizon PN Comments at 4-5 (reporting rebuttals of 2.4,

2.5, and 2.6). Comments that refresh the record in 2015 are

referred to herein as “PN Comments.”

67 See 47 C.F.R. section 1.1417(c) (“If any part of the utility’s

service area within the state has a designation of urbanized

(50,000 or higher population) by the Bureau of Census,

United States Department of Commerce, then all of that

service area shall be designated as urbanized for purposes of

determining the presumptive average number of attaching

entities.”).

App. 33

have a higher average of attaching entities.68

19.

Recognizing that the rate reforms of

2011 have failed to align the results of the two pole

attachment rate formulas as fully as intended, we

adopt the Petitioners’ proposal as a template for

corrective measures. By introducing new cost

allocators of 31 percent and 56 percent for poles with

2 and 4 attaching entities respectively, with

interpolated allocators between the closest whole

numbers for fractional averages, we bring parity to

pole attachment rates at the cable rate formula

level.69 The Petitioners’ proposed solution does not

require us to revisit the presumptions themselves;

these continue to perform as intended with the 66%

and 44% cost allocators that the Commission

68 2001 Reconsideration Order, 16 FCC Rcd at 12139-40,

paras. 70-72 (explaining that a higher presumption was

warranted in urban areas “in which we expect both

residential and business commercial competition to

flourish,” and where “competitive services are increasing.”).

The Commission credited the presumptions with little

accuracy when it created them, noting that “in some states,

and for some utilities, there may be no significant difference

in the number of attaching entities for rural areas and for

urban areas that are outside urbanized areas.” 2001

Reconsideration Order, 16 FCC Rcd at 12138, para. 67. It

was in later sample rate calculations that the Commission

began to treat the presumptions as though they were

reliable inputs. See, e.g., Order and Further Notice, 25 FCC

Rcd at 11930, Appx. A, Pole Attachment Rates.

69 NCTA Petition, Attach A. (illustrating that, at eight

electric utilities, the proposed cost methodology produces

telecom rates that approximate the cable rate equally well

whether the average number of attachers is 5, 3, or 2.6).

App. 34

adopted in 2011.70 We therefore retain the

presumptions for the same reasons the Commission

adopted them in 2011: to “expedite the process” and

to help utilities “avert the expense” of applying

demographic categories.71 Broadening the effect of

the cost allocation system as the NCTA Petition

proposes will greatly reduce the effect of, and the

need for, the rebuttals. This approach to defining

“cost” for purposes of the telecom rate formula

achieves results that are consistently close to the

cable rate.72 The new system also satisfies the

fundamental purposes for using presumptions: to

reduce reporting and recordkeeping requirements, to

70 Id. at 5.

No party suggests that the current presumptions

should be revised. Given that the current, discredited

urbanized/non-urbanized distinction replaced a prior failed

attempt to divide territories into rural, urban, and

urbanized service areas, it seems unlikely that new

demographic proxies for numbers of attaching entities would

be any more successful. See 1998 Implementation Order, 13

FCC Rcd at 6812, para. 77 (requiring each utility to

determine a presumptive average for its rural, urban, and

urbanized service areas); 2001 Reconsideration Order, 16

FCC Rcd at 12136, para. 64 (finding that utilities had been

unable to organize their territories into rural, urban, and

urbanized areas); 2001 Reconsideration Order, FCC Rcd 16

at 12139, paras. 69-70 (adopting rebuttable presumptive

average numbers of attaching entities for urbanized and

non-urbanized areas).

71 2001 Reconsideration Order, 16 FCC Rcd at 12139, para.

69-70.

72 NCTA Petition, Attach A. (illustrating that, at eight

electric utilities, the proposed cost methodology produces

telecom rates that approximate the cable rate equally well

whether the average number of attachers is 5, 3, or 2.6).

App. 35

minimize administrative burdens, and to provide a

level of predictability and efficiency in calculating

the appropriate rate.73

B.

The Reasons to Revise the Cost

Allocation System

20.

We adopt this multiple cost-allocator

approach for the same reasons that motivated the

initial (but ultimately incomplete) reforms in 2011:

to advance the deployment and adoption of

broadband Internet access, which remains a

fundamental policy goal that guides our

implementation of the telecom rate formula.74 We

recognize that pole rental rates are but one of many

considerations underlying marketplace deployment

decisions. That said, the Commission promotes

broadband deployment on numerous fronts, and has

sought public comment and advice on other

measures to advance this overarching policy.75

73 1998 Implementation Order, 13 FCC Rcd at 6811, para.

74.

74 See, e.g., 2011 Pole Attachment Order, 26 FCC Rcd at

5295, para. 126 (stating policy of removing pole attachment

market distortions that affect attachers’ deployment

decisions and increasing affordability and availability of

services).

75 Inquiry Concerning the Deployment of Advanced

Telecommunications Capability to All Americans in a

Reasonable and Timely Fashion, and Possible Steps to

Accelerate Such Deployment Pursuant to Section 706 of the

Telecommunications Act of 1996, as Amended by the

Broadband Data Improvement Act, 2015 Broadband

Progress Report and Notice of Inquiry on Immediate Action

to Accelerate Deployment, GN Docket No. 14-126, 30 FCC

Rcd 1375 (2015) (2015 Broadband Progress Report). See id.

(continued…)

App. 36

When discussing pole attachments policy, the

Commission refers consistently to incentives for

investment.76 By the same token, it remains our

policy to minimize disincentives to investment,

including artificially high pole attachment rates.77

Lower pole rental rates serve to encourage

broadband investment,78 and we continue to use our

section 224 authority as one of the tools we bring to

bear to on our broadband goals.79 The Commission

(Continued from previous page)

at 1387-1389, para. 17 (listing nine Commission actions

during 2014 aimed at expanding broadband deployment)

and at 1460-1463, paras. 153-163 (Notice of Inquiry on

Immediate Action to Accelerate Deployment).

76 See Further Notice, 25 FCC Rcd at 11913, para. 118;

(stating that increasing cable operators’ pole rental rates

would come at the cost of increased broadband prices and

reduced incentives for deployment); 2011 Pole Attachment

Order, 26 FCC Rcd at 5298, para. 135 (recognizing “the

historical role that pole rental rates have played in

supporting the investment in pole infrastructure”).

77 See Open Internet Order, 30 FCC Rcd at 5319-20, para.

179 (explaining that “the absolute level of pole rental rates

also is likely to be relevant to decisions regarding what

services are provided”); id. at 5833, paras. 483-84 (stating

concern that investment incentives could be affected by an

increase in pole attachment rates).

78 We remain persuaded that lower pole rental rates serve to

encourage broadband investment. See id. and infra note

104.

79 Indeed, in 2011 the Commission considered and rejected

proposals that would have achieved greater uniformity in

rates by increasing cable operators’ attachment rates, and

we are not persuaded that a different determination is

warranted now. See, e.g., 2011 Pole Attachment Order, 26

FCC Rcd at 5320, para. 180 & n.559. Given the policy

(continued…)

App. 37

also continues to support and subsidize deployment

of broadband Internet access in high-cost areas.80 In

contrast, increased pole attachment rates would

ultimately be recovered from consumers, and could

lead some consumers to cut back or even discontinue

their service.81 Thus, we view pole attachment rate

reform as part of the Commission’s fundamental

mission to advance the availability and adoption of

broadband in America.

21.

We also intend this action to avoid the

(Continued from previous page)

balancing described in this Order, we likewise reject

arguments that we should adopt other uniform rate options

that yield rates materially above the cable rate. See, e.g.,

Ameren et al. PN Comments at 3-5, 17-19 (suggesting that

the Commission consider a previously-identified option of a

uniform rate above the cable rate but below the thenexisting telecom rate); Ameren et al. PN Reply at 8 (same);

UTC PN Reply at 3 (discussing a 2010 proposal to modify

the presumptive number of attachers to be used in

conjunction with the then-existing telecom rate rule and

suggesting that “[t]he Commission might want to consider

this idea again”).

80 Connect America Fund et al., WC Docket No. 10-90 et al.,

Report and Order and Further Notice of Proposed

Rulemaking, 26 FCC Rcd 17663 (2011) (2011 USF/ICC

Transformation Order), pets. for review denied sub nom., In

re FCC 11-161, 753 F.3d 1015 (10th Cir. 2014). See, e.g.,

Connect America Fund et al., WC Docket No. 10-90 et al.,

Report and Order et al., 29 FCC Rcd 7051 (2014); Connect

America Fund, WC Docket No. 10-90, Report and Order, 28

FCC Rcd 15060 (Wireline Comp. Bur. 2013).

81 2015 Broadband Progress Report, 30 FCC Rcd at 1428,

para. 90 (relating adoption to “whether service is offered at

an affordable price and with features and functionalities

that cause consumers to want to purchase it”).

App. 38

unintended consequence of higher pole attachment

rates for cable providers that also offer broadband

Internet access service, in those cases where the

utility rebuts the Commission’s attaching party

presumptions. Comcast, for example, asserts that

“[a]bsent grant of the NCTA/COMPTEL Petition, a

costly and time consuming process will ensue

whereby utilities will seek to rebut the Commission’s

attaching entity presumptions, and cable operator

attachers will then seek to refute the utilities’

attachment studies.”82 And NCTA observes that,

because most cable operators may become subject to

the telecom rate, and large numbers of associated

attachments are implicated, utilities would have

increased incentives to rebut the Commission’s

presumed number of attachers in areas where they

had not done so previously.83 As a result, this could

lead to pole rate increases for both cable operators

and pre-existing telecommunications carriers in

those areas. In the Open Internet Order, the

Commission acknowledged that reclassification

could lead to attempted increases in pole attachment

rates, and stated its intention to avoid such an

increase.84 Aligning rates produced by the two rate

82 Comcast Comments at 6.

83 NCTA PN Comments at 6. See also NCTA PN Reply at 9

(“cable operators are responsible for the substantial majority

of pole attachments”) (citing 2011 Pole Attachment Order, 26

FCC Rcd at 5305, para. 151).

84 See Open Internet Order, 30 FCC Rcd at 5832, para. 482

(“[I]t is not the Commission’s intent to see any increase in

the rates for pole attachments paid by cable operators that

also provide broadband Internet access service, and we

(continued…)

App. 39

formulas forestalls this potential increase.85

22.

We also are concerned that unless we

close what one commenter refers to as the “telecom

formula loophole,”86 the resulting rate disparity

would, more broadly, frustrate the Commission’s

policy goals by artificially and incrementally

deterring investment in states subject to

Commission pole regulation in favor of investment in

areas with more favorable state-regulated pole

attachment regimes. As the Commission previously

has observed, “[c]ommenters report that many

[states that have elected to exercise jurisdiction over

pole attachments in lieu of the Commission] apply a

uniform rate for all attachments used to provide

cable and telecommunications services, and have

done so by establishing a rate identical or similar to

the Commission’s cable rate formula.”87 Thus, if the

Commission’s telecom rate frequently yielded rates

materially above the cable rate, telecommunications

service providers that operate in multiple states or

are deciding where to enter the marketplace, would

(Continued from previous page)

caution utilities against relying on this decision to that

end.”).

85 While some utility commenters assert that cable operators

have failed to pay the telecom rate even when required to do

so in the past, there is no support for or quantification of the

scope of any such issue to persuade us to reach a different

conclusion regarding the likely impact on cable attachers.

See, e.g., Ameren et al. PN Reply at 7-9.

86 Comcast Comments at 3.

87 2011 Pole Attachment Order, 26 FCC Rcd at 5319, para.

177.

App. 40

have an artificial disincentive to invest in states

governed by the Commission’s 2011 telecom rate rule

relative to states that established a uniform rate

identical or similar to the Commission’s cable rate

formula.88 Although our action in this Order will not

guarantee complete state-to-state uniformity,

seeking to address artificial marketplace distortions

in the manner that we do here, rather than via a

higher telecom rate, accords with our broadband

mandate and our overall policy balancing in this

context.89

88 Although state-to-state investment decisions likely would

be affected more by pole attachment rate levels, rather than

the underlying methodology per se, we are persuaded that

the rate yielded by section 1.1409(e)(2)(i) would, absent

reform, introduce material artificial distortions. For

example, Petitioners’ illustrative calculations for eight

utilities show that the rates yielded by section 1.1409(e)(2)(i)

(2011) in the case of an average of 2.6 attachers in an

urbanized area each would exceed the cable rate for any of

the eight utilities. Petition for Reconsideration, Attach. A.

Although the reforms we adopt would not fully eliminate

differences in rates among utilities (in the example or

otherwise), they address differences that would arise

artificially purely as a result of our pole attachment

regulations.

89 We are not persuaded that our policy objectives regarding

advanced services could be fully addressed by the

application of sections 201-204 and 251-252 of the Act, even

assuming they applied, nor do we find any basis to forego

relying on section 224, insofar as it is an available statutory

tool to advance those policies. Consequently, we do not find

the potential availability of those other provisions of the Act

after reclassification of broadband Internet access service to

moot any policy grounds for the rule change we adopt, as

(continued…)

App. 41

23.

Moreover, the record developed here

demonstrates that pole owners routinely rebut the

Commission presumptions with averages close to 2.6

attachers. This means that the Commission’s

standard examples of telecom rates, which

presuppose fully-allocated costs and use the

Commission’s presumptions, have seriously

underestimated the pre-reform disparity between

cable- and telecom-rate outcomes. In this

proceeding, the Commission has compared estimated

telecom costs of 11.2 percent in urban areas and 16.9

percent in non-urban areas with fixed cable costs of

7.4 percent.90 Applying the 2.6 cost allocator that

the record supports shows that the telecom rate

formula cost estimate would have been 19.1 percent

for both urban and rural areas. The discrepancy

between the presumed numbers of attachers (5 in

urban areas and 3 in rural areas) and actual

numbers of attachers used in pole owner rebuttals

and reported in the record (often at or close to 2.6)

illustrates the substantial problem attachers face

when applying the rate reform of the Commission’s

2011 Pole Attachment Order.

24.

Along with the forgoing policy

considerations, we continue to seek to balance the

“legitimate concerns of pole owners and other

parties” by preserving incentives to invest in poles

and avoiding the imposition of an undue burden on

(Continued from previous page)

some commenters contend. See, e.g., CenterPoint Energy et

al. PN Reply at 6.

90 See, e.g., Order and Further Notice, 25 FCC Rcd at 11913-

14, para. 119; 2011 Pole Attachment Order, 26 FCC Rcd at

5295, para. 150 n.453.

App. 42

utility ratepayers.91 In 2011, the Commission

ultimately concluded that the level of recovery

provided by the cable rate best balanced its

broadband deployment mandates and the concerns

of pole owners and utility ratepayers.92 Consistent

with that analysis, we explain above that the cable

rate frequently is lower than the telecom rate as it

previously had been implemented by the

Commission, and reducing the telecom rate to cable

rate level would further numerous policy goals.93

The Commission further observed that the cable rate

had not produced a “shortage of pole capacity,” and,

therefore, approximating that rate in the telecom

formula likely would not diminish pole owners’

“incentives to invest in poles.”94 The Commission

also found “persuasive the views of consumer

advocates . . . recommend[ing] that the cable rate

‘should be used for all pole attachments.’”95

25.

We thus remain persuaded that utility

91 2011 Pole Attachment Order, 26 FCC Rcd at 5243, para. 6,

5304-05 paras. 149, 151. As NCTA et al. point out, the

opportunity to charge the rate yielded by the calculation in

section 1.1409(e)(2)(i) thus is “designed to benefit the pole

owner, not to deny it fair compensation, and the

modification proposed by Petitioners preserves this

approach.” NCTA et al. Reply at 5-6.

92 2011 Pole Attachment Order, 26 FCC Rcd at 5243, para. 6,

5304-05 paras. 149, 151.

93 Id. at 5316-17, 5319-20, paras. 173, 179.

94 Id. at 5305, para. 151. See also, e.g., Comcast PN

Comments at 4 n.11.

95 2011 Pole Attachment Order, 26 FCC Rcd at 5303-04,

para. 147 (quoting comments from NASUCA).

App. 43

cost recovery at the level of the cable rate best

balances the relevant policy considerations.

Consequently, we reject arguments that the rule

revision, which will more consistently and accurately

ensure that the Commission’s policy goals are

achieved, will somehow upset the Commission’s

intended balance, unfairly burden utility ratepayers,

or undermine the sharing of infrastructure costs.96

Likewise, while some commenters observe that other

aspects of the 2011 Pole Attachment Order put

downward pressure on the revenues electric utilities

receive from incumbent LEC attachers,97the

Commission already accounted for that likelihood in

its weighing of policies and conclusion that it was

appropriate to permit capital cost recovery at the

same level as under the cable rate.98

26.

Utilities dismiss this policy balancing

on several grounds, none of which we find

persuasive. The Utilities Telecom Council (UTC)

argues that pole attachment rental is insignificant

96 See, e.g., EEI/UTC Opposition at 12; Ameren et al. PN

Comments at 9.

97 See, e.g., Ameren et al. PN Comments at 12-13.

98 2011 Pole Attachment Order, 26 FCC Rcd at 5304-05,

paras. 149, 151 (expressing concern about adopting an

approach that did not allow recovery of any capital costs

among other things because “our regulation of rates for

attachments by incumbent LECs could reduce the amount of

costs that utilities are able to recover from other sources”

and thus defining cost in a manner that the Commission

expected “generally will recover a portion of the pole costs

that is equal to the portion of costs recovered in the cable

rate”).

App. 44

compared to other operating costs of large cable

companies.99 Electric Utilities state that capital

expenditure, and not pole attachment rental, drives

deployment, and that pole attachment rental

accounts for less than 2 percent of the cost of

deploying fiber optic cable.100 UTC argues that there

has been only a slow rate of broadband deployment

since the telecom rate was adjusted in 2011, which

proves the futility of lowering pole attachment

rates,101 and that any cost savings from lower pole

attachment rates have not been passed on to

consumers, but rather, as a result of industry

consolidation, have been pocketed by providers

instead.102

27.

We are skeptical that sums alleged to

“unfairly and negatively impact utilities and their

ratepayers”103 are “insignificant”104 in the context of

broadband deployment. While the record does not

include quantifiable information regarding the exact

effect on deployment of pole attachment rates,

insofar as keeping attachment rates reasonable for

cable companies prevents them from shelving even a

small number of projects, we would not consider that

99 UTC PN Comments at 5.

100 Electric Utilities PN Comments at 8.

Utilities estimate

that pole attachment rentals are less than 1% of a

broadband provider’s operating expense. Id. at 5.

101 UTC PN Comments at 2.

102 Id. at 2.

103 Electric Utilities PN Comments at 9.

104 Id. at 7.

App. 45

result “insignificant.”105 There remains room for

improvement in the rate of broadband expansion,

and we cannot afford to dismiss the importance of

even potentially small increments.106 Commenters

state that cable companies continue to deploy

facilities, and we intend to avert any destabilization

of those plans that might arise from a large and

sudden pole attachment rate increase.107 We are

particularly mindful of the potential for harm to

rural areas, which are the least served areas in the

nation, and where the most additional pole

attachments are needed to reach additional

customers.108

105 See Further Notice, 25 FCC Rcd at 11913, para. 118;

(stating that increasing cable operators’ pole rental rates

would come at the cost of increased broadband prices and

reduced incentives for deployment); 2011 Pole Attachment

Order, 26 FCC Rcd at 5298, para. 135 (recognizing “the

historical role that pole rental rates have played in

supporting the investment in pole infrastructure”).

106 2015 Broadband Progress Report, 30 FCC Rcd at 1378,

paras. 4-6. (finding that advanced telecommunications

services are not being advanced in a reasonable and timely

fashion). The gap between Americans with and without

access to 25 Mbps/3Mbps closed by only 3% in the year prior

to the 2015 Broadband Progress Report. Id. at para 4.

107 NCTA PN Comments at 5-6 (stating that increased rates

would dampen the incentive to expand in rural areas, where

more poles are needed to reach customers). But see, e.g., PN

UTC Comments at 8 (questioning whether protecting cable

companies from pole attachment rate increases will affect

average consumers).

108 NCTA reports that “Vyve Broadband, a small cable

operator that serves predominantly rural areas, recently

received notice from one electric utility that its

(continued…)

App. 46

28.

Utilities further argue that granting

the NCTA Petition would unfairly reduce their

revenue from pole attachments.109 They argue that

the 2011 Pole Attachments Order has already

reduced their recovery from the telecommunications

rate,110 and expect that their revenue from

broadband-only Internet service providers will also

decline.111 We find these arguments unpersuasive.

Telecommunications carriers account for only a little

more that 10 percent of attaching entities.112

Leveling their rate down to the cable rate disrupts

settled expectations far less than leveling up the

rental rate for the much greater number of cable

attachments.113 Although it is true that the new

(Continued from previous page)

telecommunications attachment rate was increasing to a

level that is 81 percent higher than its cable attachment

rate. The increase would cover over 27,000 poles, in an area

where it takes more than three poles to reach each

subscriber. Requiring a rural cable operator to pay this

additional amount significantly increases the cost of

operating its existing network and reduces its ability to

expand the reach of that network to new customers.” NCTA

PN Comments at 8.

109 Electric Utilities PN Comments at 9.

110 Electric Utilities PN Comments at 11.

111 Electric Utilities PN Comments at 11-12.

112 Comments of Utilities Telecom Council, WC Docket No.

07-245 (filed Mar. 7, 2008) App. The Problem with Pole

Attachments: a White Paper at 10 (reporting that, of

attachments at regulated rates, 89% are CATV Attachments

(cable) and 11% are CLEC Attachments (telecom)) (UTC

White Paper).

113 See Electric Utilities Comments at 11-12 (stating that,

since 2011, the reduction in the telecom rate has caused

(continued…)

App. 47

system will tend to lower rates negotiated under the

telecom rate formula, they will settle at the level the

Commission aimed for in 2011, when its stated goal

was to “minimize the difference in rental rates paid

for attachments that are used to provide voice, data,

and video services.”114

29.

Utilities argue that increasing demand

for pole space should lead to increased prices, and

that any downward rate adjustment runs counter to

economic principles.115 We attach no significance to

this assertion. The express reason for the statutory

imposition of cost-based, regulated rates is to bypass

the economic principle that “‘public utilities by virtue

of their size and exclusive control over access to pole

lines, are unquestionably in a position to extract

monopoly rents . . . in the form of unreasonably high

(Continued from previous page)

AEP, Georgia Power Company as an operating company

subsidiary of Southern Company, and Oncor, to lose

$2,900,000, $5,240,000, and $820,000, respectively).

Comparing these four-year totals to the $150-$200 million

annual increases forecast by NCTA in a Jan. 22, 2015 letter

illustrates the difference in scale between cable- and

telecom-rate paying attachments. Letter from Steven F.

Morris, Vice President and Associate General Counsel,

NCTA, to Marlene H. Dortch, Secretary, FCC, GN Docket

No. 14-28, WC Docket No. 07-245, at 2 (Jan. 22, 2015)

(estimating that reclassification of broadband Internet

access could result in pole rent increases of $150-$200

million annually) (Jan. 22, 2015 NCTA Letter).

114 2011 Pole Attachment Order, 26 FCC Rcd at 5295, para.

126.

115 Electric Utilities PN Comments at 8.

App. 48

pole attachment rates.’”116 By enacting cost-based

rate formulas, Congress has already accounted for

the economics of scarcity that so favor pole owners.

Attachment rates agreed to by broadband-only

providers before reclassification may indeed be

called into question, but that is because these

entities are now within the ambit of Section 224, and

not because we revise the method of cost allocation

used in the telecom rate formula.117

30.

Utilities claim that “downward

pressure” on rates “weakens the predictability and

timeliness of the access process” but this argument

makes little sense.118 Attachers pay (and owners

recover) the entire cost of access through make-ready

fees paid before the attacher’s facilities are mounted

on poles.119 Because access costs have already been

recovered through make-ready fees, pole attachment

rental rates are concerned solely with the pole

owner’s recovery of operating costs; they should have

nothing to do with the “predictability and timeliness”

of access.120 In any case, a “downward pressure” on

rates to a parity with the cable rate formula level is

precisely the outcome that the 2011 Pole Attachment

Order sought to achieve and that we intend this new

116 2011 Pole Attachment Order, 26 FCC Rcd at 5242, para. 4

(citing 1977 Senate Report at 13).

117 Electric Utilities PN Comments at 10-11.

224(e).

See 47 U.S.C §

118 Electric Utilities PN Comments at 8.

119 See, e.g., 2011 Pole Attachment Order, 26 FCC Rcd at

5301-02, para. 144.

120 See, e.g., id..

App. 49

cost allocation system to implement.121

C.

The Commission Has Authority to

Adopt the Revised Telecom Rate

Rule

31.

The modified telecom rate rule adopted

in this Order is consistent with section 224(e) of the

Act. The fundamental purpose of section 224(e) is to

“ensure that a utility charges just, reasonable, and

nondiscriminatory rates for pole attachments” by

telecommunications carriers used to provide

telecommunications services.122 As described above,

in regulating cost-based telecom attachment rates

under section 224(e), Congress granted the

Commission substantial discretion to implement

section 224(e) based on the agency’s policy expertise

by leaving the definition of the relevant costs

ambiguous.123 Employing that policy expertise, we

build upon the underpinnings of the statutory

interpretation relied upon by the Commission in

2011 in the telecom rate rule adopted here.124

121 Id. at 5295, para. 126 (stating policy of removing pole

attachment market distortions that affect attachers’

deployment decisions and increasing affordability and

availability of services).

122 47 U.S.C. § 224(e)(1).

123 See supra para. 12; 2011 Pole Attachment Order, 26 FCC

Rcd at 5308, para. 156 aff’d AEP, 708 F.3d at 189-90.

124 See, e.g., NCTA PN Comments at 7; COMPTEL/Level 3

PN Comments at 4; NCTA PN Reply at 9-11; Jan. 22, 2015

NCTA Letter at 3; Letter from Joshua M. Bobeck, Counsel

for Lightower, to Marlene H. Dortch, Secretary, FCC, WC

Docket No. 07-245, GN Docket No. 09-51 at 3-5 (filed July

30, 2015). Because we adopt Petitioners’ primary proposal

(continued…)

App. 50

32.

The 2011 Pole Attachment Order began

by identifying a range of reasonable rates that could

result from different definitions of “cost” for purposes

of section 224(e).125 Within that range of permissible

outcomes, the telecom rate rule ultimately adopted

in 2011 involved the comparison of the rate yielded

by two calculations, with utilities permitted to

charge the higher of the two. Section 1.1409(e)(2)(i)

specifies the first calculation, which the Commission

anticipated would approximate the cable rate.126

Section 1.1409(e)(2)(ii) specifies the second

calculation, based on a cost-causation approach.127

33.

As a threshold matter, this Order

leaves unaltered the section 1.1409(e)(2)(ii) ‘costcausation’-based calculation. That calculation still

will be performed whenever the Commission’s

telecom rate rule is used, and even utility

commenters concede that it does “not do away with

apportioning the costs among all attaching entities”

in accordance with section 224(e).128 The definition

of cost for purposes of that provision excludes capital

costs and was designed to yield a rate that

(Continued from previous page)

(referred to for convenience herein simply as “Petitioners’

proposal” or the like), we need not and do not adopt their

alternative option for revising section 1.1409(e)(2)(i) of the

rules. See Petition for Reconsideration at 7.

125 2011 Pole Attachment Order, 26 FCC Rcd at 5299-301,

paras. 138-45.

126 See supra para. 10.

127 See supra para. 11.

128 EEI/UTC PN Comments at 6.

App. 51

approached the incremental cost of attachment.129

34.

The question of whether, and to what

extent, to allow utilities to go beyond the recovery

permitted by the section 1.1409(e)(2)(ii) telecom rate

calculation and recover some capital costs ultimately

depends on a further policy evaluation. As the

Commission explained in 2011, and as we reiterate

above, our implementation of section 224 is guided in

significant part by our mandate to encourage the

deployment of broadband.130 That policy, if

overriding other considerations, might counsel in

favor of relying solely on the rate yielded by the

‘cost-causation’ calculation in section 1.1409(e)(2)(ii),

rather than permitting higher rates as just and

reasonable under section 224(e).131 But the

Commission also sought—and continues to seek—to

129 2011 Pole Attachment Order, 26 FCC Rcd at 5300-03,

paras. 142-45.

130 2011 Pole Attachment Order, 26 FCC Rcd at 5303-06,

paras. 146-52, 5316-21, paras. 172-81; supra Section III.B.

See also, e.g., Gulf Power, 534 U.S. at 339 (The Commission

may implement section 224 in light of “Congress’ general

instruction to the FCC to ‘encourage the deployment’ of

broadband Internet capability.”) (quoting 47 U.S.C. §

1302(a)).

131 The D.C. Circuit observed in AEP that the utilities “do

not contest the Commission’s view that” the ‘cost causation’

option under the telecom formula satisfies the lower bound

cable rate, which “the constitutional bar on takings without

just compensation generally allows [to be applied], subject to

narrow exceptions” as found by an earlier decision by the

U.S. Court of Appeals for the Eleventh Circuit. AEP, 708

F.3d at 189 (citing Alabama Power Co. v. FCC, 311 F.3d

1357, 1367-71 (11th Cir. 2002)).

App. 52

balance the “legitimate concerns of pole owners and

other parties” by preserving incentives to invest in

poles and avoiding the imposition of an undue

burden on utility ratepayers.132

35.

As described above, in 2011 the

Commission adopted rules that it anticipated would

result in a telecom rate that generally approximated

the cable rate. In practice, however, the rule the

Commission adopted has only poorly reflected the

balancing of policy interests that the Commission

anticipated attaining in 2011 because the facts on

the ground differed significantly from the

Commission presumptions upon which the 2011 rule

was predicated.133 As a result, telecom rates

calculated based on the Commission’s rules

frequently were higher than the levels the

Commission generally sought to achieve as just and

132 2011 Pole Attachment Order, 26 FCC Rcd at 5243, para.

6, 5304-05 paras. 149, 151. As NCTA et al. point out, the

opportunity to charge the rate yielded by the calculation in

section 1.1409(e)(2)(i) thus is “designed to benefit the pole

owner, not to deny it fair compensation, and the

modification proposed by Petitioners preserves this

approach.” NCTA et al. Reply at 5-6.

133 See supra Section III.A. This is not to say that the 2011

changes to the telecom rate rule did not advance the

Commission’s policy goals at all or that the actions of

utilities insofar as they were exercising their rights under

the 2011 telecom rate rule somehow were unlawful or

otherwise impermissible under that legal framework. See,

e.g., Ameren et al. PN Reply at 3-5. Rather, we simply find

on the record here that further revisions to the telecom rate

rule are warranted to better advance our balancing of the

policy considerations.

App. 53

reasonable under section 224(e)—i.e., materially in

excess of the cable rate.134 The reclassification of

broadband Internet access service as a

telecommunications service brings this shortcoming

into greater focus.135 Adopting the changes to

section 1.1409(e)(2)(i) proposed by Petitioners will

bring the balance that the Commission anticipated

achieving in 2011, which we likewise are persuaded

is the appropriate outcome today.136

36.

Thus, we adopt Petitioners’ proposal

and modify section 1.1409(e)(2)(i) of the rules by

redefining the ambiguous term “cost” as a

percentage of fully allocated costs that depends on

whether the average number of attaching entities in

an area is 2, 3, 4, or 5.137 The specific percentage of

134 See supra Section III.A.

135 See supra Section III.B.

136 See supra Sections III.A, B.

See also, e.g., NCTA PN

Reply at 10. The Commission is free to change its

interpretation and implementation of the Act, as we are

doing here in our revisions to section 1.1409(e)(2)(i) of the

rules. See, e.g., FCC v. Fox Television Stations, Inc., 556

U.S. 502, 515 (2009). We thus reject suggestions that our

adoption of a different approach in 1998 undercuts our

ability to adopt the Petitioners’ proposal as a “dramatic

departure” from that earlier approach. See, e.g., EEI/UTC

Opposition at 10-11.

137 See infra Appendix A; (47 C.F.R. § 1.1409(e)(2)(i), as

amended). Although commenters take issue with the

specific average numbers of attachers identified by utilities,

see, e.g., Comcast PN Comments at 6-7, there is wide

agreement that the average number of attachers in a

relevant area frequently is below three; is unlikely to

approach five; or, at a minimum, that attachers are unlikely

(continued…)

App. 54

fully allocated costs that we adopt in each of those

instances will yield a rate under section

1.1409(e)(2)(i) that more closely and consistently

approximates the cable rate.138

(Continued from previous page)

as a practical matter to be able rebut utility claims to the

contrary. See, e.g., ACA PN Comments at 3; Comcast PN

Comments at 6-7; Verizon PN Comments at 4-5; UTC PN

Reply at 3; Frontier PN Reply at 3; Comcast Comments at 4;

Letter from Daniel Brenner, counsel for Bright House et al.,

to Marlene H. Dortch, Secretary, FCC, WC Docket No. 07245, GN Docket No. 09-51 at 2 (filed Step. 16, 2011). As a

result, contrary to the arguments of some commenters, we

see no need to address in section 1.1409(e)(2)(i) of the rules

what appears from the record to be the surpassingly

unlikely scenario of a demonstrated average number of

attachers in an area greater than five. See, e.g., Ameren et

al. PN Comments at 14.

138 See, e.g., Petition for Reconsideration at 6-7 & Attach. A.

In particular, under the 2011 version of this rule, there was

a 66% allocator in urbanized service areas (where the

Commission presumed there were an average of 5 attaching

entities) and a 44% allocator in non-urbanized service areas

(where the Commission presumed there were an average of

3 attaching entities). 47 C.F.R. § 1.1409(e)(2)(i) (2014).

Under the revised rule we adopt on reconsideration, the

allocators will be as follows— 66.1% in service areas with an

average of 5 attaching entities; 55.6% in service areas with

an average of 4 attaching entities; 43.9% in service areas

with an average of 3 attaching entities; and 30.9% in service

areas with an average of 2 attaching entities . See infra

Appendix A; (47 C.F.R. § 1.1409(e)(2)(i), as amended).

The relevant definition of cost is premised on the pole height

and amount of useable and unusable space going

unrebutted. See 47 C.F.R. § 1.1418 (specifying the

rebuttable presumptions). Although, conceptually, rebuttal

of those presumptions could result in rates that are slightly

(continued…)

App. 55

37.

Although our definition of cost is based

on an integer average number of attachers in an

area, consistent with the Commission’s efforts to

ensure that it implements section 224(e) in a

“readily administrable” manner,139 the proposal we

adopt incorporates a mechanism to allow parties,

should they so choose, to continue to rely on noninteger average numbers of attachers in a service

area by interpolating from the specified cost

allocators in section 1.1409(e)(2)(i) of the rules in a

manner that does not undermine the definition of

cost adopted above.140 In pertinent part, section

224(e)(2) is focused on allocating the “cost”—however

defined—of providing space on a pole other than

useable space.141 Although a given pole only will

have an integer number of attaching entities,142 for

administrability the Commission has long permitted

pole attachment rates to be calculated based on

surveys or averages of the number of attaching

entities in the relevant service area, which has the

(Continued from previous page)

higher or lower than the cable rate, the record does not

reveal any evidence or concerns—nor are we otherwise

aware of any—that this difference under likely scenarios

would materially undermine the policy balancing the

Commission is seeking to achieve in ensuring just and

reasonable rates under section 224(e).

139 2011 Pole Attachment Order, 26 FCC Rcd at 5304-05,

para. 149.

140 See infra Appendix A; (47 C.F.R. § 1.1409(e)(2)(i), as

amended).

141 47 U.S.C. § 224(e)(2).

142 See 47 C.F.R. §§ 1.1402(m) (defining “attaching entity’);

1.1417(b) (counting of attaching entities).

App. 56

potential to yield an average number of attachers

that is not an integer number.143 The use of a noninteger number of attaching entities in conjunction

with the new definition of cost adopted for areas

with 2, 3, 4, or 5 average attaching entities in

revised section 1.1409(e)(2)(i) of the rules would

result in similar, even if not always as extensive,

deviations from the cable rate as we found to result

under the version of the rule adopted in 2011.144 We

conclude that such deviation is at odds with the

balancing of policy interests we seek to achieve

through our revisions to section 1.1409(e)(2)(i) and

also anticipate that it would increase the likelihood

of disputes.145 We thus adopt the interpolation

143 See, e.g., 47 C.F.R. § 1.1417(d); Amendment of

Commission’s Rules and Policies Governing Pole

Attachments; Implementation of Section 703(e) of the

Telecommunications Act of 1996, CS Docket Nos. 97-98, 97151, Consolidated Partial Order on Reconsideration, 16 FCC

Rcd 12103, 12139, paras. 69-70 (2001) (2001 Reconsideration

Order) (discussing the options of utility-developed or

Commission-specified presumed numbers of attaching

entities).

144 See, e.g., Petition for Reconsideration, Attach. A

(comparing various rate calculations, including examples

based on the 2.6 average number of attachers put forward

by a utility).

145 See, e.g., Comcast PN Comments at 6-7; Verizon PN

Comments at 5-6; NCTA et al. Reply at 2, 6. Certain

commenters assert that the Petitioners’ proposal will not be

simple or expeditious to implement or could lead to

increased disputes, but do not explain the basis for those

assertions, instead largely reiterating their statutory

objections. See, e.g., EEI/UTC Opposition at 5, 9-10. We

find no basis to conclude that the revised version of section

(continued…)

App. 57

mechanism in Petitioners’ proposal, which will leave

parties free to continue using non-integer average

number of attachers should they choose to do so,

without undermining our ability to ensure just and

reasonable rates under section 224(e) in an

administrable manner.

38.

Insofar as the reclassification of

broadband Internet access service results in most

Commission-regulated attachments becoming

subject to the telecom rate, that counsels in favor of

our redefinition of cost, contrary to the claims of

some commenters. We recognize that the 2011 Pole

Attachment Order cited the marketplace distortions

resulting from disparate telecom and cable rates as

part of the policy rationale for the telecom rate

change adopted there. As identified there, these

distortions led to competitive disparities arising from

telecommunications carriers paying higher pole

attachment rates than their cable operator

competitors.146 The distortions also created

disincentives for cable operators to begin offering

advanced services that could newly subject them to

the telecom rate.147 Some commenters argue that

reclassification of broadband Internet access service,

insofar as it results in most cable operators now

(Continued from previous page)

1.1409(e)(2)(i) adopted here will be less simple or

expeditious to implement than the version of the rule

adopted in 2011, and as discussed above, we think that it

likely will reduce, rather than increase, disputes.

146 See, e.g., 2011 Pole Attachment Order, 26 FCC Rcd at

5317-19, 5320-21, paras. 174-78, 181.

147 Id.

See, e.g., 2011 Pole Attachment Order, 26 FCC Rcd at

5317-19, 5320-21, paras. 174-78, 181.

App. 58

being subject to the telecom rate, resolves concerns

about marketplace distortions and leaves the

Commission with little or no policy basis for

revisiting the definition of “cost” to better ensure

that the telecom rate is as low and close to uniform

with the cable rate as possible.148 We reject such

claims for the reasons already explained above.149 In

particular, the current telecom rate could lead to a

windfall for utilities by increasing rates for many

attachments without any offsetting benefits to cable

attachers. This not only would harm cable operators

and their customers, but more broadly would

undermine the Commission’s broadband policies by

creating artificial marketplace distortions and

disincentives for investment. Indeed, the

Commission made this point clear in the Open

Internet Order when it stated, “[t]o the extent that

there is a potential for an increase in pole

attachment rates for cable operators that also

provide broadband Internet access service, we are

highly concerned about its effect on the positive

investment incentives that [otherwise] arise from

new providers’ access to pole infrastructure.”150

39.

We also disagree with the suggestions

of some commenters that only certain types of policy

considerations can form the basis for our

interpretation and implementation of the ambiguous

term “cost” in section 224(e). As the D.C. Circuit

recognized in AEP, the Commission reasonably can

148 See, e.g., CenterPoint Energy et al. PN Reply at 4-5.

149 See supra Section III.B.

150 Open Internet Order, 30 FCC Rcd at 5833, para. 484.

App. 59

rely on policy rationales in giving meaning to the

term “cost.”151 We explain above the specific policy

rationales for the approach we adopt here, and find

no basis to conclude that those considerations cannot

form a sufficient justification for the interpretation

of the term cost in our implementation of section

224(e). For example, certain commenters assert that

there is no “economic reason” for the adopted

approach to defining cost, but do not explain what

they mean by an “economic reason,” or why the

policy considerations discussed above, including the

economic effects of alternative approaches to

defining cost, would not fall within that scope.152

151 AEP, 708 F.3d at 189-90.

See also id. at 190 (citing

Associated Gas Distribs. v. FERC, 824 F.2d 981, 1009-12

(D.C. Cir. 1987) for the proposition that “within the

framework of rates based on ‘cost,’ statutory mandates

against rate discrimination did not generally bar an agency

from allowing allocation of rates among classes of customers

on the basis of” policy considerations—in that case,

“elasticity of demand”). Given the precedent that “cost” can

be defined based on policy considerations, and given the

policy rationales identified above for our approach to

defining cost here, we reject arguments that we need to

identify prior instances of the same type of definitions of cost

as we adopt here in order to adopt the Petitioners’ proposal.

See, e.g., EEI/UTC Opposition at 8, 9.

152 See, e.g., EEI/UTC Opposition at 8.

Moreover, we adopt

a definition of cost recoverable through regulated pole rental

rates that varies with the number of attachers based on the

policy considerations explained in the preceding sections,

and not based on an assumption that the fully allocated cost

of a pole necessarily varies with the number of attachers, as

some commenter allege. See, e.g., Letter from Eric B.

Langley, Counsel to Ameren et al., to Marlene H. Dortch,

(continued…)

App. 60

Some commenters also criticize the Petitioners’

proposal for failing to provide a more favorable

outcome for attachers in rural areas, but fail to

explain why that is a necessary basis for

interpreting the term “cost.”153 To the extent that

those comments are premised on certain policy

arguments relied upon by the Commission in 2011 as

part of its explanation of the specific definitions of

cost adopted there, we find them unpersuasive.154

We find for the reasons explained above that the

version of section 1.1409(e)(2)(i) adopted in 2011 only

poorly advanced the Commission’s more

fundamental policy objectives, and to better advance

those fundamental policy objectives, and for the

other policy reasons relied on in this Order, we

depart from our prior approach that relied on

historical rules tied to urban/rural distinctions.

Moreover, we are not revisiting how cost is defined

under section 1.1409(e)(2)(i) to more consistently and

(Continued from previous page)

Secretary, FCC, WC Docket No. 07-245, GN Docket No. 0951, at 2 (filed Oct. 8, 2015).

153 See, e.g., EEI/UTC Opposition at 9.

154 See, e.g., EEI/UTC Opposition at 8 (discussing the 2011

Pole Attachment Order). Although EEI/UTC’s initial

Opposition to the Petition for Reconsideration argued that

adoption of Petitioners’ proposal would “remove any

pretense of legitimacy that might be accorded to the two

adjustment factors that the Commission has applied to

urban and rural areas, and would make the rate formula

even more vulnerable to attack on appeal,” EEI/UTC

Opposition at 11, in fact the D.C. Circuit in AEP relied on

the fundamental policy rationales that the Commission had

used in adopting its 2011 rule in affirming that rule. See

generally AEP, 708 F.3d at 189-90.

App. 61

accurately yield a rate the same or very similar to

the cable rate as an end unto itself, but because that

reflects the Commission’s intended policy balancing,

and we reject suggestions that that is not a valid

justification.155 More broadly, because we explain in

detail the legal and policy basis for our adoption of

Petitioners’ proposed revision to section

1.1409(e)(2)(i) of the rules, we reject general claims

that adopting that proposal would be arbitrary and

capricious.156

40.

Nor does our modification of the

telecom rate rule render section 224(e)(2) of the Act a

nullity, as some allege.157 For one, the Commission’s

telecom rate rule requires a comparison of the

output of two calculations, and as explained above,

even utilities appear to concede that the costcausation-based calculation in section 1.1409(e)(2)(ii)

gives meaning to section 224(e)(2).158 Moreover,

under revised section 1.1409(e)(2)(i) the

apportionment specified in section 224(e)(2) is given

meaning because it is only by applying that

apportionment to the definition of “cost” adopted

155 See, e.g., EEI/UTC Opposition at 10.

156 See, e.g., EEI/UTC Opposition at 10; Ameren et al. PN

Comments at 14. To the extent that commenters also

criticize the Petitioners’ proposal as not based on “pole cost

data,” they do not explain how or why such data themselves

should dictate the definition of “cost,” as opposed to being

used to implement a particular definition. See, e.g.,

EEI/UTC Opposition at 10.

157 See, e.g., EEI/UTC Opposition at 6-7; Ameren et al. PN

Comments at 14-15.

158 See supra para. 33.

App. 62

above that the resulting rate will closely

approximate the cable rate, and thus be just and

reasonable under the analysis above.159

41.

We also reject claims that our approach

to interpreting “cost” otherwise is at odds with

Congressional intent and the text and structure of

section 224.160 The 2011 Pole Attachment Order

explained why the statute does not require the

telecom rate necessarily to be higher than, or

otherwise different from, the cable rate and we find

nothing in the record here to undercut that

analysis.161 We acknowledge some commenters’

arguments that section 224(e)(2) could be read to

suggest that Congress envisioned the telecom rate

varying with the number of attachers, in contrast to

our revised approach to defining cost in section

1.1409(e)(2)(i) of the rules, under which the resulting

rate will be the same or very similar regardless of

159 See infra Appendix A; (47 C.F.R. § 1.1409(e)(2)(i), as

amended). See also, e.g., NCTA PN Reply at 9-10; NCTA et

al. Reply at 3-4.

160 To the extent that some commenters contend that the

adoption of Petitioners’ proposal would be arbitrary and

capricious for essentially the same reasons that they object

to the proposal on statutory grounds, we reject them for the

same reasons that we decline to adopt their statutory

interpretation. See, e.g., EEI/UTC Opposition at 10-11.

161 2011 Pole Attachment Order, 26 FCC Rcd at 5313-15,

paras. 167-71. See also id. at 5307-13, paras. 155-66

(discussing the text and legislative history of section 224).

We thus reject any commenters’ arguments that simply

disagree with elements of that analysis. See, e.g.,

CenterPoint Energy et al. PN Reply at 3-4.

App. 63

the number of attaching entities.162 At the same

time, although section 224(e)(2) provides for costs to

be apportioned in a manner that depends on the

number of attachers, it left undefined what costs

should be so apportioned.163 This is in contrast to

section 224(d)(1), which specifies both a cost-based

rate methodology and the defined scope of costs to be

used for purposes of the cable rate.164 In particular,

although, as some commenters observe, Congress did

not simply mandate the cable rate for all

attachments,165 neither did it specify a definition of

cost that would require an outcome under section

224(e)(2) that would, in practice, always vary with

the number of attaching entities. Congress thus

permitted the Commission to implement section

224(e) in a manner that yielded rates that vary with

the number of attachers—an outcome that would

depart from the cable rate, notwithstanding the

162 See, e.g., EEI/UTC Opposition at 5-7; EEI/UTC Reply at

24-25; CenterPoint Energy et al. PN Reply at 2-4. To the

extent that Ameren et al. assert more broadly that the

Commission cannot define cost in a manner that is linked to

the number of attachers (whether or not the ultimate rate

varies with the number of attachers), we likewise reject that

claim. See, e.g., Ameren et al. PN Comments at 14. Nothing

in the language of section 224 precludes the Commission

from defining cost in a way that is linked to the number of

attachers in the manner we do here, where doing so enables

us to strike the right policy balance in defining “cost.”

163 47 U.S.C. § 224(e)(2).

164 47 U.S.C. § 224(d).

See also AEP, 708 F.3d at 188

(“Section 224(e), the statutory basis for the telecom rate, is

in important respects less specific than § 224(d).”).

165 See, e.g., Ameren et al. PN Comments at 15-16.

App. 64

requirement in section 224(e)(1) that the rate be not

only just and reasonable but also

“nondiscriminatory.”166 But while permitting such

an outcome, we also conclude that Congress did not

require such an outcome as mandatory given its use

of the ambiguous term “cost.”167

42.

In implementing section 224(e) we

consider the broader purposes of section 224, as also

informed by other statutory goals and mandates. As

in the 2011 Pole Attachment Order, we find that our

interpretation and implementation of section 224(e)

here advances those objectives.168 The Commission

has concluded that “[t]he purpose of Section 224 of

the Communications Act is to ensure that the

deployment of communications networks and the

development of competition are not impeded by

private ownership and control of the scarce

infrastructure and rights-of-way that many

communications providers must use in order to reach

customers.”169 This also is borne out by the text of

166 47 U.S.C. § 224(e)(1).

167 For the reasons previously stated in the 2011 Pole

Attachment Order and affirmed by the D.C. Circuit, see, e.g.,

supra paras. 12, 31, we reject commenters’ arguments

insofar as they are premised on the view that “cost” must

mean fully allocated cost or on the view that the

Commission lacks significant discretion in interpreting and

applying that term. See, e.g., EEI/UTC Opposition at 5-8, 7;

EEI/UTC Reply at 24-25; CenterPoint Energy et al. PN

Reply at 3.

168 See 2011 Pole Attachment Order, 26 FCC Rcd at 5316-21,

paras. 172-81. See also, e.g., NCTA PN Reply at 10 & n.39.

169 1998 Implementation Order, 13 FCC Rcd. at 6780, para. 2

(citing 1977 Senate Report at 19, 20). See also id. at 6794,

(continued…)

App. 65

section 224, which emphasizes that the

Commission’s fundamental role is to ensure just and

reasonable rates, terms, and conditions of access.170

Other statutory provisions likewise counsel in favor

of such an understanding of section 224, as discussed

in greater detail in the 2011 Pole Attachment Order

and above.171 For the reasons explained in the

preceding discussion, we conclude that the revised

telecom rate rule we adopt is necessary to ensure

just and reasonable rates for pole access as a

backstop for when private negotiations fail. Because

we can achieve that outcome by how we define “cost”

under section 224(e), while still formally giving

meaning to all the language of that provision, we

conclude that our adopted approach reasonably

implements that provision as understood in the

context of section 224 as a whole.

43.

We also are not persuaded by

arguments that section 224(e)(2) limits the costs to

be borne by pole owners.172 As described above, the

(Continued from previous page)

para. 31 (“The purpose of the amendments to Section 224

made by the 1996 Act was similar to the purpose behind

Section 224 when it was first enacted in 1978, i.e., to remedy

the inequitable position between pole owners and those

seeking pole attachments.”) (also citing 1977 Senate Report

at 19, 20).

170 47 U.S.C. § 224(b)(1), (d)(1), (e)(1).

See also 47 U.S.C. §

224(c) (allowing states to elect to regulate rates, terms and

conditions of access in lieu of the Commission).

171 See, e.g., 2011 Pole Attachment Order, 26 FCC Rcd at

5316-17, para. 173 (discussing 1996 Act provisions); supra

Section III.B .

172 See, e.g., CenterPoint Energy et al. PN Reply at 3 n.11.

App. 66

Commission’s fundamental responsibility under

section 224(e) is to ensure that regulated rates “for

pole attachments used by telecommunications

carriers to provide telecommunications services” are

just, reasonable, and nondiscriminatory.173 Read in

that context, we interpret section 224(e)(2) only to

govern the apportionment of the “cost”—however

defined—of unusable space in the rates pole owners

charge to telecom attachers. It is true that the

methodology used to calculate the apportionment of

“cost” to a telecom attacher under section 224(e)(2)

involves a calculation of what “all attaching entities”

would bear assuming hypothetically that they all

bore an equal apportionment of such cost. But it

does not actually govern the cost to be borne by

entities other than telecom attachers—whether the

pole owner or other attachers.174

173 See, e.g., supra para. 42; 47 U.S.C. § 224(e)(1).

174 Indeed, under CenterPoint et al.’s proposed reading,

section 224(e)(2) and (3) seemingly would govern the costs

actually to be borne in practice by all attaching entities—not

only telecom attachers and pole owners, but also other third

party attachers, including non-communications attachers.

Such an outcome is at odds with section 224’s focus on

ensuring just and reasonable pole access for defined

categories of attachers. See, e.g., 47 U.S.C. § 224(a)(4),

(b)(1), (d)(1), (e)(1). In support of their argument,

CenterPoint et al. cite a discussion in paragraph 59 of the

2001 Reconsideration Order, but the actual decision made in

that paragraph bore only on what entities to count for

purposes of the calculation to be performed under section

224(e)(2), and in that regard is not inconsistent with our

interpretation above. CenterPoint et al. PN Reply at 3 n.11.

To the extent that paragraph 59 of the 2001 Reconsideration

Order also could be read to suggest that the right outcome,

(continued…)

App. 67

D.

The Revisions to the Telecom Rate

Rule Are Procedurally Proper

44.

Adopting this change to section

1.1409(e)(2)(i) of the rules is procedurally proper.

Following the Commission’s 2010 Further Notice

seeking comment on “establish[ing] rental rates for

pole attachments that are as low and close to

uniform as possible, consistent with section 224 of

the Act,”175 the 2011 Pole Attachment Order revised

the telecom rate rule in a manner that the

Commission anticipated would reflect its balancing

of policy concerns.176 The timely filed Petition for

Reconsideration identified flaws in the Commission’s

factual assumptions underlying section

1.1409(e)(2)(i) of the rules as adopted in the 2011

Pole Attachment Order that would cause that rule, in

practice, to only poorly reflect the Commission’s

(Continued from previous page)

as a matter of statutory interpretation, is one consistent

with what CenterPoint et al. advocate here, we disavow that

position both for the reasons stated in the text and because,

in pertinent part, the 2001 Reconsideration Order places

mistaken reliance on a portion of the Conference Report for

the 1996 Act describing the pole attachment provisions in

the House bill. Compare 2001 Reconsideration Order, 16

FCC Rcd at 12133-34, para. 59 n.204 (quoting a description

of the House bill from the Conference Report) with, e.g.,

2011 Pole Attachment Order, 26 FCC Rcd at 5311-13, paras.

162-66 (discussing legislative history of section 224, and

rejecting utilities’ proposed reliance on legislative history

associated with the House bill).

175 Further Notice, 25 FCC Rcd at 11874, para. 20.

generally id. at 11909-24, paras. 110-42.

176 See supra para. 34.

See

App. 68

intended balancing of policy objectives.177 The

Petitioners thus proposed that the Commission, on

reconsideration, revise that rule in a manner that

“increases the certainty that pole rates will be as

close as possible to the cable rate, meets the

Commission’s intended purposes, and makes the

calculation more readily administrable by

eliminating the need to distinguish urbanized and

non-urbanized areas.”178 Given that clear nexus to

the 2011 Pole Attachment Order, we find the request

in the Petition for Reconsideration to be squarely

within the scope of the order from which

reconsideration is sought, and we reject arguments

to the contrary.179 Furthermore, for the reasons

discussed in the preceding section, we find merit in

the Petitioners’ arguments, and thus conclude it is in

the public interest not only to consider their Petition

but also to grant their requested reconsideration.180

45.

We also reject claims that additional

notice and comment is needed before we can proceed

under the theory that the action in this Order

effectively would modify sections 1.1417(c) and (d) of

the rules.181 Section 1.1417(c) specifies the

Commission’s rebuttable presumptions of 5

177 Petition for Reconsideration at 4-7.

178 Id. at 6-7.

179 See, e.g., EEI/UTC Opposition at 3.

180 See, e.g., NCTA et al. Reply at 7-8.

We thus reject

arguments that we should not consider the facts or

arguments raised in the Petition for Reconsideration. See,

e.g., EEI/UTC Opposition at 3.

181 See, e.g., Ameren et al. PN Comments at 16-17.

App. 69

attaching entities in urbanized areas and 3

attaching entities in non-urbanized areas.182 Section

1.1417(d) describes how a utility can instead

establish its own presumptive average number of

attaching entities, subject to rebuttal.183 As a

threshold matter, we are not persuaded by

commenters’ claims that the Petitioners’ proposed

revision to section 1.1409(e)(2)(i) would render those

rules “moot.”184 Under the utilities’ own theory, the

Commission-specified presumptions in section

1.1417(c) would have increased, rather than

diminished, significance when performing the

section 1.1409(e)(2)(i) calculation because it would

obviate the need for utilities to expend the effort to

develop their own presumptive average numbers of

attachers if they believe that variation in the

number of attachers would not matter.185 Further,

although the result of the calculation in section

1.1409(e)(2)(i) frequently will be higher than that

yielded by the cost-causation-based calculation in

section 1.1409(e)(2)(ii), our rules provide for both to

be performed, with the possibility that there will be

cases where the section 1.1409(e)(2)(ii) calculation is

controlling. The outcome under section

1.1409(e)(2)(ii) unquestionably does vary with the

number of attaching entities, and thus the utilities’

182 47 C.F.R. § 1.1417(c).

183 47 C.F.R. § 1.1417(d).

184 Ameren et al. PN Comments at 17; Ameren et al. PN

Reply at 2.

185 See Ameren et al. PN Comments at 17.

See also, e.g.,

Ameren et al. PN Reply at 4-5 (asserting that rebutting the

presumptions requires time and money).

App. 70

ability to develop their own presumptive number of

attaching entities under section 1.1417(d) remains

important where the cost-causation-based

calculation would be, or could be, controlling.186

46.

Although we are not persuaded that

any implications of our change to section

1.1409(e)(2)(i) of the rules for sections 1.1417(c) and

(d) constitute substantive rule changes, even

assuming arguendo that they were viewed in that

manner, we find there was adequate notice and

opportunity to comment. As noted above, the

Commission’s 2010 Further Notice sought comment

on “establish[ing] rental rates for pole attachments

that are as low and close to uniform as possible,

consistent with section 224 of the Act,” seeking

comment on particular alternative approaches and

variations that might be adopted consistent with the

Commission’s statutory responsibilities.187 For

186 47 C.F.R. § 1409(e)(2)(ii).

To the extent that utilities

have in the past found it beneficial to elect, under section

1.1417(d) of the rules, to rebut the presumed number of

attachers, we conclude that they have already sufficiently

benefitted from such past actions under the rules that

applied at the time. Further, insofar as they undertook such

activities in the last few years, they did so against the

backdrop of the pending Petition for Reconsideration

seeking a change to the calculation under section

1.1409(e)(2)(ii). We thus reject suggestions that past,

unquantified efforts utilities have undertaken to rebut the

presumed number of attachers counsels against any rule

change that might somehow diminish the future value of

those past efforts. See, e.g., Ameren et al. PN Reply at 4-5.

187 Further Notice, 25 FCC Rcd at 11874, para. 20, 11909-24,

paras. 110-42, 11929, para. 158.

App. 71

example, the Further Notice included requests for

comment on a proposal to revise the telecom rate

rule so that it was the higher of a rate equal to the

cable rate or a cost-causation-based rate, including

regarding the administrability of such an approach

and how it would relate to other Commission

policies.188 Flowing from that Further Notice, the

2011 Pole Attachment Order adopted revisions to the

telecom rate rule, and the Petition for

Reconsideration requested reconsideration of the

resulting rule in various respects, all within the

scope of the underlying Order.189 The Commission

sought comment on the Petition for Reconsideration

at the time it was filed, and provided a further

opportunity to comment on the requested rule

changes subsequent to the Open Internet Order.190

We conclude that any implications for the continuing

significance of section 1.1417(c) and (d) resulting

from our adoption of the Petitioners’ proposal should

have been understood to be within the scope of

issues subject to comment—indeed, commenters

188 Id. at 11923-24, paras. 140-41.

189 We note that “the subject matter of petitions for

reconsideration of Commission action must relate to the

scope of the matters addressed in the underlying

proceeding.” Implementation of Section 302 of the

Telecommunications Act of 1996 Open Video Systems, CS

Docket No. 96-46, Order on Reconsideration, 13 FCC Rcd

14553, 14559, para. 13 (1998). Although the Petition for

Reconsideration was at times worded in terms of a

‘clarification’ of the 2011 rules as one option, it

unambiguously was requesting a change to the codified rule.

See generally Petition for Reconsideration.

190 See supra notes 55 and 61.

App. 72

themselves appear to suggest that the implications

for section 1.1417(c) and (d) are a necessary and

unavoidable consequence of the adoption of that

proposal.191 As a result, we concluded that even

assuming arguendo that notice and comment were

required regarding the effects of a change in section

1.1409(e)(2)(i) on the presumption rules in section

1.1417(c) and (d), that was satisfied here.192

IV.

PROCEDURAL MATTERS

A.

Paperwork Reduction Act Analysis

47.

This document does not contain new or

modified information collection requirements subject

to the Paperwork Reduction Act of 1995 (PRA),

Public Law 104-13. In addition, therefore, it does

not contain any new or modified information

collection burden for small business concerns with

fewer than 25 employees, pursuant to the Small

Business Paperwork Relief Act of 2002, Public Law

107-198, see 44 U.S.C. 3506(c)(4).

B.

Regulatory Flexibility Analysis

48.

As required by the Regulatory

191 See, e.g., Ameren et al. PN Comments at 16-17.

192 Given our findings that action is procedurally

appropriate, is within our existing authority, and is

warranted by the record here, we likewise are not persuaded

that, as a policy matter, we should elect to proceed by first

issuing a new Notice of Proposed Rulemaking, as some

suggest. See, e.g., Ameren et al. PN Comments at 17. For

those same reasons, we reject arguments that we should

defer taking the steps adopted here pending further action

by Congress. See, e.g., Ameren et al. PN Comments at 16.

App. 73

Flexibility Act of 1980 (RFA),193 the Commission

includes in Appendix B a Supplemental Final

Regulatory Flexibility Analysis (FRFA) relating to

this Order on Reconsideration.

C.

Congressional Review Act

49.

The Commission will send a copy of the

Order on Reconsideration, including the FRFA, in a

report to be sent to Congress and the Government

Accountability Office pursuant to the Congressional

Review Act.194

V.

ORDERING CLAUSES

50.

Accordingly, IT IS ORDERED that

pursuant to sections 1, 4(i), 4(j), 201(b), 224,

251(b)(4), and 303(r), of the Communications Act of

1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j),

201(b), 224, 251(b)(4), 303(r), this Order on

Reconsideration IS ADOPTED.

51.

IT IS FURTHER ORDERED, pursuant

to sections 1, 4(i), 4(j), 201(b), 224, and 303(r), of the

Communications Act, as amended, as amended, 47

U.S.C. §§ 151, 154(i), 154(j), 201(b), 224, 303(r), that

the Petition for Reconsideration or Clarification filed

by the National Cable and Telecommunications

Association, COMPTEL, and tw telecom inc., is

193 The RFA, see 5 U.S.C. § 601 et. seq., has been amended

by the Contract With America Advancement Act of 1996,

Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II

of the CWAAA is the Small Business Regulatory

Enforcement Fairness Act of 1996 (SBREFA).

194 See 5 U.S.C. § 801(a)(1)(A).

App. 74

GRANTED to the extent indicated herein, and

otherwise is DISMISSED.

52.

IT IS FURTHER ORDERED that Part

1 of the Commission’s rules IS AMENDED as set

forth in Appendix A.

53.

IT IS FURTHER ORDERED that,

pursuant to sections 1.4(b)(1) and 1.103(a) of the

Commission’s rules, 47 CFR §§ 1.4(b)(1), 1.103(a),

this Order on Reconsideration SHALL BE

EFFECTIVE 30 days after publication of a summary

in the Federal Register.

54.

IT IS FURTHER ORDERED that the

Commission’s Consumer and Governmental Affairs

Bureau, Reference Information Center, SHALL

SEND a copy of this Order on Reconsideration,

including the Supplemental Final Regulatory

Flexibility Analysis, to the Chief Counsel for

Advocacy of the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary





App. 75



CONCURRING STATEMENT OF

COMMISSIONER AJIT PAI

Re:

Implementation of Section 224 of the Act, WC

Docket No. 07-245; A National Broadband

Plan for Our Future, GN Docket No. 09-51.

In February, when the Commission scrapped

the twenty-year bipartisan consensus that we should

allow the Internet to flourish unfettered by

government regulation, it was clear that decision

would discourage investment in broadband

networks, especially in rural America. And we’ve

already seen marketplace evidence that Internet

service providers are pulling back.

One reason: the rising cost of pole

attachments. Before Internet service providers

(ISPs) can offer service to customers, they must

string fiber optics, coaxial cables, and other wires on

utility poles and through underground conduit. The

rates for such attachments are determined by one of

two formulas set forth in section 224 of the

Communications Act. The first applies to “cable

television systems” and has been historically lower

(the cable rate). The second applies to

“telecommunications services” and has been

historically higher (the telecom rate). By

reclassifying Internet access service as a

telecommunications service, the Commission gave

utilities the go-ahead to charge the higher telecom

rate to cable and other non-telecom ISPs, costing

American consumers up to $200 million a year



App. 76

1 in higher prices and slowing the deployment

of high-speed broadband.

Today, the Commission starts to repair some

of this damage by lowering the telecom rate to the

cable rate. That’s a good thing for all broadband

providers and their consumers.

But our work here is not done. For one, the

Order may be vulnerable in court because the legal

rationale for this new, lower rate is rather odd. To

achieve its result, the Order interprets the word

“cost” in the telecom rate2 to mean whatever

percentage of capital and operating expenses is

needed to equate the telecom and cable rates for any

number of pole attachments.3 So if there are five

pole attachments, the Order interprets “cost” in the

telecom rate to mean 66% of capital and operating

expenses; if there are two pole attachments, “cost”

means 31% of those expenses.4 The Order’s

interpretation of the same word (“cost”) in the same

provision (the telecom rate) to mean different things

in different circumstances appears to violate the



1 See Letter from Steven F. Morris, Vice President and

Associate General Counsel, NCTA, to Marlene H. Dortch,

Secretary, FCC, GN Docket No. 14-28, WC Docket No. 07245, at 2 (Jan. 22, 2015).

2 Communications Act § 224(e)(2)–(3) (explaining how

utilities must “apportion the cost of providing space on a

pole duct, conduit, or right-of-way” among attaching

telecommunications carriers).

3 Order at para. 36.

4 New Rule 1.1409(e)(2)(i) (establishing percentages for two,

three, four, and five attaching entities and stating that if the

number of attaching entities is not a whole number, the

percentage must be interpolated from the percentages

associated with the nearest whole numbers).





App. 77



canon of consistency.5 And the result that the two

statutory formulas always arrive at the same rate

appears to violate the canon against surplusage.6

For another, even after the Order, ISPs and

their customers will be paying too much for pole

attachments. That’s because the new telecom rate

still includes payments for the capital expenses of

the pole owner even when the pole owner has

already recovered them separately.7



5 See Clark v. Martinez, 543 U.S. 371, 378 (2005) (“To give

these same words a different meaning for each category

would be to invent a statute rather than interpret one.”); cf.

Frank Costanza and Elaine Benes, Seinfeld, “The Little

Kicks” (1996) (Frank: “What the hell does that mean?”

Elaine: “That means whatever the hell you want it to

mean.”), available at

https://www.youtube.com/watch?v=R95tj5O0voU. Notably,

we interpret the same word (“cost”) in that same provision

(the telecom rate) to have yet another meaning in certain

circumstances with our cost-causation-based principle. See

Order at para. 33; 47 C.F.R. § 1.1409(e)(2)(ii).

6 See Duncan v. Walker, 533 U.S. 167, 174 (2001) (“We are

thus reluctant to treat statutory terms as surplusage in any

setting.” (internal quotation marks and brackets omitted)).

Although the Order points to our cost-causation-based

principle in rule 1.1409(e)(2)(ii) to suggest the rates will

sometimes diverge, Congress itself included a costcausation-based principle in the cable rate. See

Communications Act § 224(d)(1) (setting the cable rate so

that “it assures a utility the recovery of not less than the

additional costs of providing pole attachments”).

7 See Implementation of Section 224 of the Act; A National

Broadband Plan for our Future, WC Docket No. 07-245, GN

Docket No. 09-51, Report and Order and Order on

Reconsideration, 26 FCC Rcd 5240, 5301, para. 143 (2011)

(“[I]f rearrangement or bracketing is performed to

accommodate a new attachment, the new attacher is







App. 78



As such, I would have preferred a different

course. I believe the word “cost” in the telecom rate

should be read to exclude all capital expenses. This

interpretation would lower pole attachment rates

even further, reducing broadband prices and spurrng

deployment. And it would comport with the canons

of statutory construction, interpreting the word

“cost” consistently regardless of the number of pole

attachments and ensuring that neither the telecom

rate nor the cable rate is surplusage.

Because the Order does not adopt this

interpretation, I can only concur, holding out hope

that the courts will allow us to mitigate the higher

pole attachment rates that the reclassification order

made possible.8



responsible for those costs. Likewise, pole owner recovers

the entire capital cost of a new pole through make-ready

charges from the new attacher when a new pole is installed

to enable the attachment.” (internal footnote omitted)).

8 Cf. American Electric Power Service Corp. v. FCC, 708 F.3d

183, 190 (D.C. Cir. 2013) (giving the Commission broad

deference to interpret the word “cost” in the telecom rate).



App. 79

47 U.S.C. §224. Pole attachments

(a) Definitions

As used in this section:

(1) The term "utility" means any person who is a

local exchange carrier or an electric, gas, water,

steam, or other public utility, and who owns or

controls poles, ducts, conduits, or rights-of-way used,

in whole or in part, for any wire communications.

Such term does not include any railroad, any person

who is cooperatively organized, or any person owned

by the Federal Government or any State.

(2) The term "Federal Government" means the

Government of the United States or any agency or

instrumentality thereof.

(3) The term "State" means any State, territory, or

possession of the United States, the District of

Columbia, or any political subdivision, agency, or

instrumentality thereof.

(4) The term "pole attachment" means any

attachment by a cable television system or provider

of telecommunications service to a pole, duct,

conduit, or right-of-way owned or controlled by a

utility.

(5) For purposes of this section, the term

"telecommunications carrier" (as defined in section

153 of this title) does not include any incumbent

local exchange carrier as defined in section 251(h) of

this title.

App. 80

(b) Authority of Commission to regulate rates, terms,

and conditions; enforcement powers; promulgation of

regulations

(1) Subject to the provisions of subsection (c) of this

section, the Commission shall regulate the rates,

terms, and conditions for pole attachments to

provide that such rates, terms, and conditions are

just and reasonable, and shall adopt procedures

necessary and appropriate to hear and resolve

complaints concerning such rates, terms, and

conditions. For purposes of enforcing any

determinations resulting from complaint procedures

established pursuant to this subsection, the

Commission shall take such action as it deems

appropriate and necessary, including issuing cease

and desist orders, as authorized by section 312(b) of

this title.

(2) The Commission shall prescribe by rule

regulations to carry out the provisions of this

section.

(c) State regulatory authority over rates, terms, and

conditions; preemption; certification; circumstances

constituting State regulation

(1) Nothing in this section shall be construed to

apply to, or to give the Commission jurisdiction with

respect to rates, terms, and conditions, or access to

poles, ducts, conduits, and rights-of-way as provided

in subsection (f), for pole attachments in any case

where such matters are regulated by a State.

App. 81

(2) Each State which regulates the rates, terms, and

conditions for pole attachments shall certify to the

Commission that(A) it regulates such rates, terms, and conditions;

and

(B) in so regulating such rates, terms, and

conditions, the State has the authority to consider

and does consider the interests of the subscribers of

the services offered via such attachments, as well as

the interests of the consumers of the utility services.

(3) For purposes of this subsection, a State shall not

be considered to regulate the rates, terms, and

conditions for pole attachments(A) unless the State has issued and made effective

rules and regulations implementing the State's

regulatory authority over pole attachments; and

(B) with respect to any individual matter, unless the

State takes final action on a complaint regarding

such matter(i) within 180 days after the complaint is filed with

the State, or

(ii) within the applicable period prescribed for such

final action in such rules and regulations of the

State, if the prescribed period does not extend

beyond 360 days after the filing of such complaint.

(d) Determination of just and reasonable rates;

"usable space" defined

App. 82

(1) For purposes of subsection (b) of this section, a

rate is just and reasonable if it assures a utility the

recovery of not less than the additional costs of

providing pole attachments, nor more than an

amount determined by multiplying the percentage of

the total usable space, or the percentage of the total

duct or conduit capacity, which is occupied by the

pole attachment by the sum of the operating

expenses and actual capital costs of the utility

attributable to the entire pole, duct, conduit, or

right-of-way.

(2) As used in this subsection, the term "usable

space" means the space above the minimum grade

level which can be used for the attachment of wires,

cables, and associated equipment.

(3) This subsection shall apply to the rate for any

pole attachment used by a cable television system

solely to provide cable service. Until the effective

date of the regulations required under subsection (e),

this subsection shall also apply to the rate for any

pole attachment used by a cable system or any

telecommunications carrier (to the extent such

carrier is not a party to a pole attachment

agreement) to provide any telecommunications

service.

(e) Regulations governing charges; apportionment of

costs of providing space

(1) The Commission shall, no later than 2 years after

February 8, 1996, prescribe regulations in

accordance with this subsection to govern the

charges for pole attachments used by

App. 83

telecommunications carriers to provide

telecommunications services, when the parties fail to

resolve a dispute over such charges. Such

regulations shall ensure that a utility charges just,

reasonable, and nondiscriminatory rates for pole

attachments.

(2) A utility shall apportion the cost of providing

space on a pole, duct, conduit, or right-of-way other

than the usable space among entities so that such

apportionment equals two-thirds of the costs of

providing space other than the usable space that

would be allocated to such entity under an equal

apportionment of such costs among all attaching

entities.

(3) A utility shall apportion the cost of providing

usable space among all entities according to the

percentage of usable space required for each entity.

(4) The regulations required under paragraph (1)

shall become effective 5 years after February 8,

1996. Any increase in the rates for pole attachments

that result from the adoption of the regulations

required by this subsection shall be phased in equal

annual increments over a period of 5 years beginning

on the effective date of such regulations.

(f) Nondiscriminatory access

(1) A utility shall provide a cable television system or

any telecommunications carrier with

nondiscriminatory access to any pole, duct, conduit,

or right-of-way owned or controlled by it.

App. 84

(2) Notwithstanding paragraph (1), a utility

providing electric service may deny a cable television

system or any telecommunications carrier access to

its poles, ducts, conduits, or rights-of-way, on a nondiscriminatory 1 basis where there is insufficient

capacity and for reasons of safety, reliability and

generally applicable engineering purposes.

(g) Imputation to costs of pole attachment rate

A utility that engages in the provision of

telecommunications services or cable services shall

impute to its costs of providing such services (and

charge any affiliate, subsidiary, or associate

company engaged in the provision of such services)

an equal amount to the pole attachment rate for

which such company would be liable under this

section.

(h) Modification or alteration of pole, duct, conduit,

or right-of-way

Whenever the owner of a pole, duct, conduit, or

right-of-way intends to modify or alter such pole,

duct, conduit, or right-of-way, the owner shall

provide written notification of such action to any

entity that has obtained an attachment to such

conduit or right-of-way so that such entity may have

a reasonable opportunity to add to or modify its

existing attachment. Any entity that adds to or

modifies its existing attachment after receiving such

notification shall bear a proportionate share of the

costs incurred by the owner in making such pole,

duct, conduit, or right-of-way accessible.

(i) Costs of rearranging or replacing attachment

App. 85

An entity that obtains an attachment to a pole,

conduit, or right-of-way shall not be required to bear

any of the costs of rearranging or replacing its

attachment, if such rearrangement or replacement is

required as a result of an additional attachment or

the modification of an existing attachment sought by

any other entity (including the owner of such pole,

duct, conduit, or right-of-way).

App. 86

Before the

Federal Communications Commission

Washington, D.C. 20554

WC Docket No. 07-245

GN Docket No. 09-51

In the Matter of Implementation of Section 224 of

the Act A National Broadband Plan for Our Future

REPORT AND ORDER AND ORDER ON

RECONSIDERATION

Adopted: April 7, 2011

Released: April 7, 2011

By the Commission: Chairman Genachowski and

Commissioners Copps, McDowell, Clyburn, and

Baker issuing separate statements.

EXCERPT FROM APRIL 2011 ORDER

I.

POLE RENTAL RATES

B.

The New Telecom Pole Rental Rate

135. After review of the extensive filings in

this proceeding, we adopt a modified form of the

Further Notice’s proposal as the new telecom rate.

Under this new approach, explained in detail below,

we revise the section 224(e) rental rate for pole

attachments used by telecommunications carriers to

provide telecommunications services. As we explain

in detail below in Part V.B.2, Congress gave the

Commission authority to interpret section 224(e),

including the ambiguous phrases “cost of providing

App. 87

space . . . other than the usable space” in section

224(e)(2) and “cost of providing usable space” in

section 224(e)(3). Exercising that authority, we

identify a range of possible rates, from the current

application of the telecom rate formula at the upper

end, to an alternative application of the telecom rate

formula based on cost causation principles at the

lower end. Within that range, we seek to balance

the goals of promoting broadband and other

communications services with the historical role that

pole rental rates have played in supporting the

investment in pole infrastructure, and thus define

the “cost of providing space” on that basis.

136. As explained below, we believe the

telecom rate should be lowered to more effectively

achieve Congress’ goals under the 1996 Act to

promote competition and “advanced

telecommunications capability” by both wired and

wireless providers by “remov[ing] barriers to

infrastructure investment,” and the broader procompetitive goals and policies that Congress directed

the Commission to carry out under the 1996 Act.410

Indeed, the Sixth Broadband Deployment Report

identified reform of the Commission’s pole

attachment rules as a means to advance the

deployment of broadband.411 Additionally, this rate

410 47 U.S.C. § 1302(a); Telecommunications Act of 1996,

Public Law No. 104-104, 110 Stat. 56.

411 See Inquiry Concerning the Deployment of Advanced

Telecommunications Capability to All Americans in a

Reasonable and Timely Fashion, and Possible Steps to

Accelerate Such Deployment Pursuant to Section 706 of the

Telecommunications Act of 1996, as Amended by the

Broadband Data Improvement Act; A National Broadband

(continued….)

App. 88

is readily administrable and consistent with the

“simple and expeditious” regulatory framework

Congress intended. Most importantly from a

consumer standpoint, the new rate methodology that

we implement will better serve the public interest by

making broadband and other advanced services

more widely available.

137. We also find this approach consistent

with the specific statutory framework governing pole

attachments. For one, as a matter of law, the new

telecom rate reflects a reasonable interpretation of

the ambiguous statutory language of section 224(e)

and remains true to the statutory requirements for

allocating cost between attachers and pole owners.

The rate is just, reasonable, and fully compensatory,

and our new methodology is grounded in sound

economic policies.

1.

Description of the New

Telecom Rate

138. Overall Approach. The new telecom rate

we adopt today originates from an initial proposal by

TWTC.412 Fundamentally, TWTC asserts that the

(Continued from previous page)

Plan for Our Future, GN Docket Nos. 09-51, 09-137, Sixth

Broadband Deployment Report, 25 FCC Rcd 9556, 9560–61,

9575, para. 7 & n.26, para. 29 & n.125 (2010) (Sixth

Broadband Deployment Report) (citing the 2010 Further

Notice). Such actions also were recommended by the

National Broadband Plan. NATIONAL BROADBAND PLAN at

109–11.

412 Further Notice, 25 FCC Rcd at 11915–17, paras. 123–128

(discussing Letter from Thomas Jones, Counsel for Time

Warner Telecom Inc., to Marlene H. Dortch, Secretary, FCC,

(continued….)

App. 89

Commission’s prior telecom rate included costs that

“bear no relation” to the cost of providing space for

an attachment and are not necessitated by the

language of section 224(e). In particular, TWTC

contends that “none of these ‘costs’ has anything to

do with actually providing ‘space’ on a pole for pole

attachments because a utility would incur these

costs ‘regardless of the presence of pole

attachments.’”413 Thus, TWTC proposes that those

costs should be eliminated from the telecom rate.414

TWTC suggests instead that utilities should

determine “how much extra a utility must incur to

provide non-usable and usable space on poles for

pole attachments (in both construction and

maintenance costs) and then fully allocate those

costs based on the cost-apportionment formulas

under Section 224(e)(2) and (3).”415 Drawing upon

this conceptual framework, the Further Notice

sought comment on a modified proposal designed to

ensure consistency with the statutory framework of

section 224. Based upon the record received in

response to the Further Notice, we adopt a revised

form of that proposal, as described below.

(Continued from previous page)

RM-11293, RM-11303, Attach. (filed Jan. 16, 2007) (TWTC

White Paper)).

413 See TWTC White Paper, RM-11293, at 20 (comparing 47

U.S.C. §§ 224(e)(2)–(3) with Amendment of the Commission’s

Rules and Policies Governing Pole Attachments, WC Docket

No. 07-245, Report and Order, 15 FCC Rcd 6453, 6477–91,

paras. 44–76 (2000) (2000 Fee Order)).

414 See TWTC White Paper, RM-11293, at 19–20.

415 Id. at 20.

App. 90

139. As a threshold matter, we note that the

Commission recognizes that “[r]ather than insisting

upon a single regulatory method for determining

whether rates are just and reasonable, courts and

other federal agencies with rate authority similar to

our own evaluate whether an established regulatory

scheme produces rates that fall within a ‘zone of

reasonableness.’ For rates to fall within the zone of

reasonableness, the agency rate order must

undertake a ‘reasonable balancing’ of the ‘investor

interest in maintaining financial integrity and

access to capital markets and the consumer interest

in being charged non-exploitative rates.’”416

140. We employ this approach and establish

an upper-bound and lower-bound telecom rate under

section 224(e). Specifically, depending upon the

relative magnitude of costs included, the telecom

rate formula will yield relatively higher or lower

rates. Identifying reasonable, albeit different

interpretations of the ambiguous term “cost” that are

consistent with the statute thus provides an upper

and lower limit on the possible telecom rates that

would be consistent with section 224(e). Although

any of the definitions of cost within that range

potentially could be adopted by the Commission, and

would therefore yield the “just and reasonable” rate

416 Long-Term Number Portability Tariff Filings, CC Docket

No. 99-35, Memorandum Opinion and Order, 14 FCC Rcd

11983, 12026–27, para. 98 (1999) (citing FERC v. Pennzoil

Producing Co., 439 U.S. 508, 517 (1979); AT&T v. FCC, 836

F.2d 1386, 1390 (D.C. Cir. 1988) (quoting Jersey Cent. Power

& Light v. FERC, 810 F.2d 1168, 1177 (D.C. Cir. 1987);

Wisconsin v. FPC, 373 U.S. 294, 309 (1963); FPC v. Natural

Gas Pipeline Co., 315 U.S. 575, 585–86 (1942)).

App. 91

for purposes of section 224(e), as discussed below we

adopt an approach that seeks to balance the goals of

increased broadband competition and availability

with the historical role that pole rental rates have

played in supporting the cost of pole infrastructure

consistent with the framework of section 224(e).

141. Upper-Bound Rate. To begin identifying

the range of reasonable rates that could result from

the telecom rate formula, we first identify the

present telecom rate as a reasonable upper bound.

The Commission’s current telecom rate formula is

based on a fully allocated cost methodology,417 which

recovers costs that the pole owner incurs regardless

of the presence of attachments.418 It includes a full

range of costs, some of which, as TWTC points out,

do not directly relate to or vary with the presence of

pole attachments.419 For this reason, this

417 See, e.g., Amendment of Commission’s Rules and Policies

Governing Pole Attachments; Implementation of Section

703(e) of the Communications Act, Amendment of the

Commission’s Rules and Policies Governing Pole

Attachments, CS Docket Nos. 97-97, 97-151, Consolidated

Partial Order on Reconsideration, 16 FCC Rcd 12103,

12131–32, para. 55 (2001) (2001 Order on Reconsideration).

The term “fully allocated cost methodology” is also

sometimes referred to as “fully distributed costs.”

418 See, e.g., Amendment of Rules and Policies Governing

Pole Attachments, CS Docket No.97-98, Notice of Proposed

Rule Making, 12 FCC Rcd 7449, 7455, para. 11 (1997)

(“Carrying charges are the costs incurred by the utility in

owning and maintaining poles regardless of the presence of

pole attachments.”).

419 TWTC White Paper at 19.

In particular, the

Commission’s current telecom rate formula, as with the

current cable rate formula, includes a component for the net

(continued….)

App. 92

interpretation of the statutory telecom rate formula

serves as the upper end of the range of reasonable

rates.

142. Lower-Bound Rate. As the Commission

observed in the Further Notice, “a rate that covers

the pole owners’ incremental cost associated with

attachment would, in principle, provide a reasonable

lower limit.”420 The Eleventh Circuit, in addressing

a takings challenge, has held that a pole attachment

rate above marginal cost can provide just

compensation,421 and marginal or incremental cost

(Continued from previous page)

cost of a bare pole and a carrying charge rate. 47 C.F.R. §

1.1409(e)(1), (2). The net cost of a bare pole is the initial

capital outlay, i.e., the investment, for a pole, minus

accumulated depreciation. The carrying charge rate is a

composite rate that reflects separate carrying charge rates

for the costs of owning and maintaining poles. See, e.g.,

1987 Rate Order, 2 FCC Rcd at 4391, para. 25; 2001 Order

on Reconsideration, 16 FCC Rcd at 12121, para. 28. The

carrying charges include a pole owner’s administrative,

maintenance, and depreciation expenses, a return on

investment, and taxes. 2001 Order on Reconsideration, 16

FCC Rcd at 12121, para. 28. The net cost of a bare pole is

multiplied by the carrying charge rate to determine the

annual cost of a pole.

420 Further Notice, 25 FCC Rcd at 11919, para. 133.

421 Legal precedent has established that a pole attachment

rate above marginal cost provides just compensation, and

marginal or incremental cost pricing can be an appropriate

approach to setting regulated rates. Alabama Power Co. v.

FCC, 311 F.3d at 1370. (“In some cases, then, marginal cost

will be sufficient to compensate the pole owner.”); id. at

1370–71 (“In short, before a power company can seek

compensation above marginal cost, it must show with regard

to each pole that (1) the pole is at full capacity and (2) either

(continued….)

App. 93

pricing can be an appropriate approach to setting

regulated rates more generally.422 Indeed, section

224(d) establishes such an approach as the low end

of permissible rates under the cable rate formula.423

However, the section 224(e) formulas allocate the

relevant costs in such a way that simply defining

“cost” as equal to incremental cost, as TWTC

initially proposed, would result in pole rental rates

below incremental cost.424

143. Thus, to identify a lower-bound rate that

is consistent with this statutory framework – and

(Continued from previous page)

(a) another buyer of the space is waiting in the wings or (b)

the power company is able to put the space to a highervalued use with its own operations. Without such proof, any

implementation of the Cable Rate (which provides for much

more than marginal cost) necessarily provides just

compensation.”). In this regard, we note that the statute

identifies a rate that allows the utility to recover its

marginal costs as the lowest permissible just and reasonable

rate under section 224(d). 47 U.S.C. § 224(d).

422 See, e.g., ALFRED E. KAHN, THE ECONOMICS OF

REGULATION: PRINCIPLES AND INSTITUTIONS 65–122 (vol. 1,

1970); CHARLES F. PHILLIPS, JR., THE REGULATION OF

PUBLIC UTILITIES 443–49 (1993).

423 See 47 U.S.C. § 224(d)(1).

Explaining the cable rate

formula, the Supreme Court stated, “The minimum measure

is thus equivalent to the marginal cost of attachments, while

the statutory maximum measure is determined by the fully

allocated cost of the construction and operation of the pole to

which cable is attached.” FCC v. Florida Power Corp., 480

U.S. at 253; see also 1977 Senate Report at 2, reprinted in

1978 U.S.C.C.A.N. at 110 (“The formula describes a range

between marginal and a proportionate share of fully

allocated costs within which pole rates are to fall.”).

424 See 47 U.S.C. § 224(e)(2)–(3).

App. 94

enables costs to be allocated based on the prescribed

cost-apportionment formulas – we rely on the basic

principles of cost causation that would underlie a

marginal cost rate without defining “cost” as

equivalent to marginal or incremental cost per se.

Under cost causation principles, if a customer is

causally responsible for the incurrence of a cost, then

that customer – the cost causer – pays a rate that

covers this cost.425 This is consistent with the

Commission’s existing approach in the make-ready

context, where a pole owner recovers the entire

associated capital costs through make-ready fees.426

For example, if rearrangement or bracketing is

performed to accommodate a new attachment, the

new attacher is responsible for those costs.427

425 That is to say, prices based on cost-causation principles

enable an allocation or a mix of goods to be produced that

buyers desire and are willing to pay for and so are socially

efficient, and enable an efficient firm to recover its costs.

See, e.g., Greg Houston and Hayden Green, NERA Economic

Consulting, Treatment of Operating Costs: A Report for

Meridian 65–75 (Aug. 6, 2010). The allocation of goods is

optimal in a perfectly competitive market. That is, no buyer

can be made better off by reallocating resources to produce a

different mix of goods without making other buyers worseoff. See, e.g., WALTER NICHOLSON, MICROECONOMIC

THEORY, BASIC PRINCIPLES AND EXTENSIONS 512–13 (2d ed.

1978).

426 See, e.g., Second Report and Order, 72 FCC 2d at 62–63,

72–73, paras. 8–9, 28–30 (defining make-ready cost). These

capital costs would not have been incurred “but for” the pole

attachment demand and the attacher—the cost causer—

pays for these costs.

427 The circumstances where bracketing is required are

discussed in greater detail below. See infra Parts VI.A, D, F.

App. 95

Likewise, a pole owner recovers the entire capital

cost of a new pole through make-ready charges from

the new attacher when a new pole is installed to

enable the attachment.

144. Under this approach, we apply cost

causation principles to each category of a pole

owner’s costs – broadly consisting of capital and

operating costs – for purposes of the pole rental rate,

as well.428 We recognize that, under traditional

ratemaking principles that we have applied in the

past, the telecom rate for pole attachments recovered

both operating expenses and capital costs, including

a rate of return, taxes, and depreciation.429 For

purposes of identifying a lower bound for the telecom

pole rental rate, however, we exclude capital costs

from the definition of “cost of providing space.”430 As

an initial matter, we note that if capital costs arise

from the make-ready process, our existing rules are

428 Specifically, as discussed below, given the section 224(e)

framework and Congress’ expectations regarding the

administrability of pole rental rate calculations, we cannot,

and do not, seek to define precisely the marginal costs

associated with pole attachments. Rather, in establishing

the lower bound telecom rate, we adopt an approach that

seeks to define “cost” in a manner that fully compensates

the utility for the marginal costs of attachment once the

statutory apportionments are applied.

429 See, e.g., CHARLES F. PHILLIPS, JR., THE REGULATION OF

PUBLIC UTILITIES 176–80 (1993).

430 As discussed below, the rate telecom attachers actually

would pay under this approach would either be equal to, or

in certain cases higher than, the rate yielded by the current

cable rate formula, which does include an allocation of

capital costs.

App. 96

designed to require attachers to bear the entire

amount of those costs.431 With respect to other

capital costs, as we explain more fully below, the

record demonstrates that the attacher is not the

“cost causer” of these costs.432 In the case here of

applying cost-causation principles to identify the

lower-bound telecom rate, the record includes

findings by economists and analysts that capital

costs are justifiably excluded from the lower-bound

rate because the attachers cause none or no more

than a de minimis amount of these costs, other than

those that are recovered up front through the makeready fees.433 Past investment in an existing pole

431 See, e.g., Second Report and Order, 72 FCC 2d at 72,

para. 29 (noting that make-ready, or non-recurring costs,

could include capital costs). Capital costs in the make-ready

context differ from the way in which capital costs

historically have been included in the telecom rate formula,

where they have included depreciation expense and a return

on investment.

432 See infra Part V.B.4.

433 Comcast Comments Attach. 1, Decl. of Timothy S. Pecaro

at 9, para. 15 (Comcast Pecaro Decl.); Comcast Comments at

13 (citing Comcast NPRM Comments Exh. 1, Report of

Patricia D. Kravtin at para. 79 (Comcast Kravtin Report)).

See infra Part V.B.4. (addressing contrary comments filed by

economists representing EEI/UTC). We agree with Pecaro,

as explained below, that it would typically not be

economically rational for utilities to build taller poles solely

for the possibility of accommodating attachers and therefore

incur unreimbursed capital costs: “[I]nstalling a pole that is

taller than necessary is strictly speculative and contrary to

efficient capital management. . . . Therefore, it would be

wholly irrational for the utility, as well as inconsistent with

a utility’s capital preservation obligations, to risk nonrecovery of these costs absent a direct economic benefit.”

(continued….)

App. 97

would have been incurred regardless of the demand

for attachments other than the owner’s attachments.

As a result, under a cost causation theory, where

there is space available on a pole, an attacher would

be required to pay for none of the capital costs of

that pole. Thus, we exclude capital costs from the

lower-bound telecom rate.

145. By contrast, we continue to include

certain operating expenses – namely maintenance

and administrative expenses – in the definition of

“cost” for purposes of the lower bound telecom rate

formula.434 This is generally consistent with cost

causation principles because it is likely that an

(Continued from previous page)

Comcast Pecaro Decl. at para. 17. Further, as discussed

below, in the comparatively few instances where a pole is

replaced to accommodate a new attachment, the attacher’s

make-ready fees are designed to recover those costs even

though the utility will own the pole. Id. Moreover, the

utilities did not submit data demonstrating unreimbursed

capital costs.

434 The Commission’s cost methodology under its current

application of the telecom rate formula requires an attacher

to pay for a portion of the operating expenses, specifically a

portion of the maintenance and administrative expenses.

See, e.g., 2000 Fee Order, 15 FCC Rcd at 6479–83, paras. 46–

54. As noted above, for purposes of the lower-bound telecom

rate, we likewise include operating expenses in the pole

rental rate, which recovers the recurring costs of the pole, as

opposed to the non-recurring costs recovered through makeready charges. See generally Second Report and Order, 72

FCC 2d at 59 (distinguishing between non-recurring costs

that are designed to be fully recovered through make-ready

charges and ongoing, routine expenses incurred by the

utility to maintain existing attachment facilities, which

could be recovered through the pole rental rate).

App. 98

attacher is causally responsible for some of the

ongoing maintenance and administrative expenses

relating to use of the pole. Although the attacher

might not be the cost causer with respect to all the

operating costs that would be included in the lower

bound telecom rate, Congress’ intention was that the

Commission not “embark upon a large-scale

ratemaking proceeding in each case brought before

it, or by general order” to establish pole rental

rates.435 Thus, under our methodology to determine

the lower-bound telecom rate, we include

maintenance and administrative expenses.436

146. Determining the New Just and

Reasonable Telecom Rate. From within the range of

possible interpretations of the term “cost” for

435 See 1977 Senate Report at 22, reprinted in 1978

U.S.C.C.A.N. at 130. The pole attachment methodology does

not purport to be a precise ratemaking tool. Congress

recognized there would be “difficulties . . . in determining

some cost components associated with erecting and

maintaining pole line plant, and allocating those costs,” and

understood that the considerable flexibility it gave to the

Commission in making its “best estimate” of some costs for

determining just and reasonable pole attachment rates also

carries with it an element of imprecision. Adoption of Rules

for the Regulation of Cable Television Pole Attachments, CC

Docket No. 78-144, Notice of Proposed Rulemaking, 68

FCC2d 3, 9, 11, paras. 15, 20 (1978) (1978 Pole Attachment

NPRM). In keeping with Congress’s directive, our policy has

been that not every detail of pole attachment cost must be

accounted for, nor every detail of non-pole attachment cost

eliminated from every account used. See, e.g., 2000 Fee

Order, 15 FCC Rcd at 6463–64, para. 12.

436 See 1977 Senate Report at 22, reprinted in 1978

U.S.C.C.A.N. at 130.

App. 99

purposes of section 224(e), we adopt a particular

definition of cost, and therefore a particular rate as

the appropriate just and reasonable telecom rate.

The definition of cost we select is based on a

balancing of policy goals. As discussed in greater

detail below, we seek to ensure that the

Commission’s policies promote the availability of

broadband services and efficient competition for

those services.437 We also recognize, however, that

pole rental rates historically have helped support the

investment utilities make in their pole

infrastructure, and acknowledge utilities’ policy

concerns about shifting that burden to utility

ratepayers.438

147. We agree with commenters who explain

that today, the telecom rate is sufficiently high that

it hinders important statutory objectives. For

example, commenters explain that reducing the

telecom rate would improve the business case for

providing advanced services, because it will reduce

the expected incremental cash outflows of providing

such services, thereby increasing the likelihood that

the present value of the expected incremental cash

inflows will exceed the present value of the expected

437 See infra Part V.B.3.

438 See, e.g., Coalition Reply at 22; Letter from Aryeh B.

Fishman, Director, Regulatory Legal Affairs, and John

Caldwell, Director of Economics, EEI, to Marlene H. Dortch,

Secretary, FCC, WC Docket No. 07-245, GN Docket No. 0951, Supp. Decl. of Jonathan Orszag and Allan Shampine, at

paras. 10–11 (filed Dec. 14, 2010) (EEI Orszag, Shampine

Supp. Decl.).

App. 100

incremental cash outflows.439 In addition to

reducing barriers to the provision of new services,

reducing the telecom rate can expand opportunities

for communications network investment, as

discussed in greater detail below.440 We thus

conclude that lowering the telecom rates will better

enable providers to compete on a level playing field,

will eliminate distortions in end-user choices

between technologies, and lead to provider behavior

being driven more by underlying economic costs than

arbitrary price differentials.441 We also find

persuasive the views of consumer advocates in this

respect. Notably, “NASUCA members are interested

in keeping the costs of pole attachments down, so as

to keep the costs of the[se] services . . . down. But

NASUCA members also . . . are interested in

ensuring that pole attachment rates appropriately

compensate the owners of the poles, so that other

services are not required to subsidize the

439 See infra paras. Error! Reference source not found.–

Error! Reference source not found. (discussing

commenters’ evidence in this regard). Based on wellestablished economic principles, investment in offering a

product or service is likely to be undertaken if the present

value of the expected incremental cash inflows exceeds the

present

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