Controversy Resurfaces Over Pole Attachment Rates

Time Warner Telecom Sparks Renewed Interest

Time Warner Telecom has reignited the debate over pole attachment rates. The Colorado-based CLEC earlier this year sent a white paper to the FCC, calling for an end to pole attachment prices charged by utilities that can run as high as $28 for telecom providers, while hovering as low as $3 for cable operators. Time Warner Telecom has said it shells out up to 272 percent more money than cable companies.

Indeed, the 23-page document spurred rural ILEC CenturyTel Inc. to again weigh in, about a year after commenting in support of pricing uniformity. CenturyTel, headquartered in Monroe, La., says it coughs up even more than CLECs and that charges continue to climb “unchecked.” CenturyTel has cited paying 50 percent more than CLECs. The situation impedes the company’s expansion, it says.

Both carriers say there’s a deeper ideology at stake. If the federal government wants to promote the intermodal competition it repeatedly touts, it needs to level the playing field among all providers. “If parity is a goal of the regulatory structures to encourage competition, then it should apply to pole attachment,” says Paul Jones, executive vice president and general counsel for Time Warner Telecom.

The flap over disparities in pole attachment pricing has been relatively dormant at the commission since late 2005. That was when USTelecom first asked the FCC to make a rule granting ILECs the same fee scale as cable companies. Rates are determined using a complicated set of formulas created by the FCC (see “How the FCC Determines Pole Attachment Rates” below). Utility interests opposed USTelecom’s effort, saying only Congress can restructure statutes in the 1996 Telecom Act. However, the Pole Attachment Act of 1978 does authorize the commission to determine pole attachment rates, terms and conditions. Some entities commented on USTelecom’s proposal in 2006 but dialogue dissipated as the FCC concentrated on Bell megamergers and pleas for regulatory relief. Industry insiders say Time Warner Telecom’s white paper, filed in January, has steered attention back to the issue.

Utilities are mum on the renewed discussion, relying instead on the documents they have submitted to speak for them. They want the FCC to deny the petition as “a false attempt to gain pole attachment rights to which ILECs are not entitled and which they do not deserve,” says FirstEnergy Corp., owner of seven electric utilities, in a 2005 FCC filing. The Utilities Telecom Council (UTC), formerly the United Telecom Council, says it is meeting with the FCC, but otherwise, it’s sitting back. “We’ve filed our comments,” says Brett Kilbourne, UTC’s director of regulatory affairs.

Meanwhile, David Cohen, USTelecom’s vice president of policy, commented to xchange: “This is an important issue to our members and we continue to encourage the FCC to take prompt action to address the unfair and exorbitant increases in pole attachment rates.”

Disagreements over pole rates date back at least to the Pole Attachment Act of 1978, when Congress said utilities had to lease pole space, at a sensible cost, to the nascent cable industry. In 1996, Congress added CLECs to the short list of providers allowed to attach to poles. Rates for telecom companies were higher than those for cable companies because the extra attachments would leave less usable space for the power company. The FCC was told to oversee any disputes.

Overlooked in those laws were incumbent phone companies, which typically own their own poles. Because of that, say industry experts, lawmakers apparently didn’t see the need for LECs to get pole attachment rates on par with competitors.

So, utility and phone providers have engaged in quid pro quo user agreements. But rural ILECs sometimes run into problems when they want to deploy networks in new areas in which they don’t own poles. “They’re being taken to the cleaners,” says Larry Drake, executive director of the Tennessee Telecommunications Association.

Max Cox, director of carrier relations support for CenturyTel, says its negotiations with utilities have lasted as long as six years and still resulted in rates 50 percent steeper than CLECs get. “There is a lack of legal guidelines and, consequently, it appears to be a revenue opportunity for pole owners,” Cox says.

Utility representatives scoff at accusations of price gouging. They say they calculate rates according to the FCC’s formulas, nothing more. “It’s nothing against the telecom providers,” Kilbourne says. “The statute says telecom is supposed to be paying for a portion of unusable space on the pole.” Hence, the less room, the more money charged.

Telecom providers seeking relief say their crusade is not just about pricing fairness, but about fostering competition and heeding President George W. Bush’s 2004 call for ubiquitous broadband — which was supposed to happen by this year. The FCC steadily has deregulated communications services, in part to motivate providers to expand their networks. But 2007 is half over and millions of Americans do not have high-speed Internet connections. The U.S. Government Accountability Office (GAO) in May 2006 reported that a mere 30 million Americans — out of more than 300 million — subscribe to broadband. The remaining 71 percent either use dialup (30 percent) or do not have access to the Internet at home (41 percent), the GAO’s study found. Without help from the federal government, CLECs and ILECs fear their growth will be limited.

As proof, CenturyTel says price discrimination is hindering its ability to roll out broadband fiber facilities and Wi-Fi services in rural areas. “[I]t is apparent that CenturyTel is paying a substantial penalty for its status as an ILEC, with significant harm to CenturyTel’s rural customers,” the carrier wrote in a Feb. 21, 2007, letter to the FCC.

Time Warner Telecom says its development so far is not threatened, but encroaching competition will pose problems if the feds don’t fix the issue.

The FCC will not say when it might address the USTelecom petition, and companies’ subsequent comments, for a rulemaking. A spokesperson speaking on background would commit only to a timeframe “in the near future.” The agency could face obstacles since utilities insist the FCC cannot set rates, just decide whether they are fair. Meanwhile, CLECs and ILECs are prepared to go over the FCC’s head if it does not address their concerns soon. Time Warner Telecom has been talking to lawmakers on the Hill; CenturyTel continues lobbying at the state and federal levels.

The FCC pushes utilities and communications providers to resolve pricing and access disputes on their own. But when they can’t, it will intervene.

The agency did just that in February, when it addressed a complaint filed by DQE Communications, a Pennsylvania CLEC, against North Pittsburgh Telephone Company (NPTC). The commission ordered NPTC to give DQE fair access to its poles, at fair prices.

DQE said NPTC was trying to deny access simply because DQE provides information services in addition to its telecommunications products. The FCC reaffirmed that if a company meets the definition of a telecom services provider, its data services also are entitled to pole access.

The case marked the first FCC intervention in a pole dispute since November 2006.

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