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A Big Win for Telecom! Court Sides with FCC in Pole Attachment Order

Posted by Andrew Regitsky

Aug 4, 2017 10:00:00 AM

telecom towers blue.jpgThe telecommunications industry got a big victory this week when the Eighth Circuit Court of Appeals upheld the FCC’s 2015 Pole Attachment Order which mandated rules equalizing the pole attachment rates paid by telecommunications providers and cable owners. Cable company rates are calculated separately under rules ratified by the U.S. Supreme Court in 1987 and have historically been lower than rates paid by telecoms. The decision is extremely important to telecommunications companies because of the large amounts of money involved. By some estimates, pole attachment rentals, comprise up to 1 percent of operating costs for some companies.  Moreover, telecom companies have asserted for years that high pole attachment rates delay broadband deployment and force prices out of the reach of many consumers.

Here is what led to the Court’s decision.

Section 224(B) (1) of the Telecommunications Act provides the Commission with the authority over pole attachment rates. It states that:

[T]he 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.

The FCC tried to equalize the pole attachment rates for telecom providers and cable companies for years without success. The agency found that its previous Pole Attachment Order in 2011 failed to equalize the telecom rate and the cable rate, because utilities frequently rebutted the presumption that 5 entities attached to poles in an urban area while only 3 entities attached to poles in a non-urban area, frequently resulting in higher telecom rates.

The FCC issued an Order on Reconsideration in November 2015 which addressed this issue by eliminating the distinction between poles in urban and non-urban areas, instead basing “cost” on the average number of entities attached to a pole within an area. That Order largely succeeded in bringing pole attachment rates in near-harmony between telecom and cable companies.

As always in our industry, the Order was immediately appealed to the Eighth Circuit by a group of electric utilities, including Ameren Corporation, American Electric Power Service, CenterPoint Energy Houston Electric, and Virginia Electric and Power Company. The utilities argued that the November 2015 Order defied Congress’s intent to establish different rates for telecom and cable companies in section 224(d)(1) and section 224(e) of the Telecommunications Act. The Court disagreed:

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, so that no part will be inoperative or superfluous, void or insignificant . . . .” 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. (July 31, 2017 Opinion of the Eighth Circuit Court of Appeals, No. 16-1683, p. 7).

Significantly, the Court rejected the Petitioners arguments based on the Chevron deference. It found that the FCC’s definition of “cost” was a reasonable interpretation of an ambiguous term. The Chevron deference is one of the most important principles of administrative law. It was established in 1984 when the Supreme Court held that courts should defer to agency interpretations of statutes unless they are unreasonable.  

Under Chevron, a court performs a two-step process. It first determines if Congress has provided an unambiguous intent to a statute. If so, then the Congressional intent must prevail. However, if the language is ambiguous:

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. 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.” (Id., p. 6.).

Chevron is extremely important in the current net neutrality proceeding. Based on Chevron, the DC Circuit found that the FCC’s 2015 classification of broadband Internet access service (BIAS) as a telecommunications service was reasonable. It will be fascinating to see if the same liberal-leaning Court gives the now conservative-leaning FCC’s current interpretation (that BIAS is an information service) the same deference.

By Andy Regitsky, CCMI

Telecom Under Trump

Topics: regulatory updates, FCC

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