The Federal Communications Commission (FCC) has announced that the new pole attachment rate formula recently adopted by the agency will go into effect on March 4, 2016.
The FCC amended its pole attachment rate formula to bring the “telecom rate” for pole attachments down closer to the “cable rate.” In particular, and as discussed below, the FCC changed its telecom rate formula by eliminating the current distinction between “urban” and “non-urban” service areas and establishing new cost allocators based on the actual number of attaching entities on a pole. As a result, utilities who have been utilizing the 66% and 44% “urban/non-urban” allocators will now need to recalculate their pole attachment rates under the revised telecom formula effective March 4, 2016.
In its 2011 Pole Attachment Order, the FCC held that the maximum “just and reasonable” rate for attachments by a telecommunications provider or a cable operator providing telecommunications services is the higher of the rate yielded by two formulas. Under the first telecom rate formula, costs that can be recovered under the formula include maintenance and administrative carrying charges, but exclude capital costs such as a rate of return, taxes and depreciation. Under the second formula, costs are adjusted to 66 percent of the fully allocated costs (including capital costs) in urban areas and 44 percent of the fully allocated costs in rural areas.
Shortly after the 2011 Pole Attachment Order was adopted, the National Cable & Telecommunications Association (NCTA), COMPTEL, and tw telecom filed a joint Petition for Reconsideration urging the FCC to further revise the telecommunications attachment rate. The FCC took no action on this petition until May 2015, when the FCC requested additional public comment in order to “refresh the record.”
The FCC’s renewed interest in the petition coincided with the agency’s concern that its recent decision to reclassify broadband Internet access service as a “telecommunications service” may result in an increase in the pole attachment rates paid by cable providers who also provide Internet access. In fact, the FCC expressly stated when describing the new rate formula that the agency adopted the new definition of “cost” described below “to prevent pole owners from charging cable operators that also provide telecommunications service (including broadband Internet access service) pole attachment rental rates that can be approximately 70 percent higher than the cable rate under our existing rules.”
As noted above, the FCC’s rules allow pole owners to charge telecommunications service providers the higher of the rates yielded under two alternative formulas. The first of these formulas – which allows the recovery of costs for maintenance and administrative carrying charges but excludes capital costs – remains unchanged. The second formula, however, has been changed and now reads as follows:
Rate = Space Factor × Cost
Where Cost:
The FCC stated that this new “flexible series of cost allocators should more fully realize the intent of the Commission … to bring parity to pole attachment rates at the cable rate formula level.” The FCC further stated that keeping pole attachment rates unified and low will further the agency’s “overarching goal to accelerate deployment of broadband by removing barriers to infrastructure investment and promoting competition.”
The complete text of the FCC’s order adopting the new telecom rate formula is available here.
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