Open Internet Rules Become Effective June 12: Impact on Pole Attachments

by Davis Wright Tremaine LLP
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Powerline sunsetOn Friday, June 12 – barring a judicial stay – many of the FCC’s “Open Internet” rules will become effective. A significant consequence of the reclassification of retail broadband Internet access service (BIAS) as a “telecommunications service” under Title II is the potential impact on pole attachment fees cable operators pay in FCC-regulated states, as well as in the handful of states that have adopted a telecom rate formula. In addition, the reclassification of BIAS establishes pole attachment access rights and regulated attachment rates for BIAS providers that otherwise did not qualify as cable operators or telecommunications carriers entitled to access under federal law previously.

With respect to pole attachment rates, the FCC’s 2011 Pole Attachment Order eliminated most of the rate differential that previously existed between the cable formula and telecom formula rates. However, under the telecom formula a utility can obtain higher telecom rates if it is able to rebut the FCC’s presumptions regarding the average number of entities attached to the utility’s poles. Where the utility can establish that its average number of attaching entities is lower than the FCC’s presumed number, the telecom formula rate can be significantly more than the rate yielded by the cable formula. As described in our March advisory, some pole owners may attempt to impose higher telecom attachment fees after June 12 despite the FCC’s intent to avoid “an outcome in which entities misinterpret today’s decision as an excuse to increase pole attachment rates of cable operators that provide [BIAS].”

Recently, the FCC also took a step that could preclude higher telecom formula attachment rates by seeking to refresh the record (see Public Notice) regarding the Petition for Reconsideration filed by the National Cable & Telecommunications Association (NCTA), COMPTEL, and tw telecom (now Level 3 Communications) in June 2011. That Petition proposes to change certain aspects of the FCC’s telecom formula to make the telecommunications and cable pole attachment rates equivalent even when the number of attaching entities differs from the Commission’s presumptions. As described in our May 6 Advisory, on the day the Public Notice was released, FCC Chairman Tom Wheeler delivered a speech suggesting that the Commission may be inclined to revisit the changes it made in 2011 and again revise the telecom rate formula to achieve rate parity. (Comments were filed in response to the Public Notice on June 4, and reply comments are due Monday, June 15.)

Despite the FCC’s clear message discouraging increases in the telecom formula rates, some pole owners have already begun raising telecom rates based on purported lower attaching entity averages. Third-party attachers should be on the lookout for pole rate increase notices and keep in mind that FCC rules require at least 60 days’ advance written notice of any rate increase. In addition, attachers have the right under FCC rules to receive back-up calculations used to compute pole attachment rates from pole owners and the methodology and information used to compute of the average number of attaching entities.

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