Six years ago, the Federal Communications Commission adopted an order designed to harmonize the regulated rates paid by various telecom providers to attach equipment to utility poles. Unfortunately, that effort hasn’t worked out as well as the agency had hoped. In fact, USTelecom recently surveyed a broad range of our members about the pole attachment rates they pay to investor owned utilities (IOUs) and found that the rates charged to incumbent local exchange carriers (ILECs) have increased even as the pole attachment rates charged by ILECs to competitive carriers and cable companies have significantly decreased.
In a filing submitted to the FCC today, USTelecom provided the agency with a detailed analysis of a recent survey of its members. The filing shows that the “wide disparity in pole rental rates,” that the FCC recognized as a barrier to broadband deployment in 2011 has unfortunately only widened. For example, on average, ILECs surveyed in the 2017 USTelecom Survey pay IOUs nearly 9 times what ILECs charge cable providers, and almost 7 times the pole attachment rates ILECs charge CLECs – results even more imbalanced than those from a similar USTelecom survey from 2008. In dollar terms, these ILECs pay an average of $26.12 to IOUs today in Commission-regulated states, compared to cable and CLEC provider payments to ILECs, which average $3.00 and $3.75, respectively. These findings clearly demonstrate that the Commission’s 2011 Pole Attachment Order has not achieved its desired goal of ensuring just and reasonable pole attachment rates for ILECs.
The results of the 2017 USTelecom Survey show that the Commission should expeditiously move forward with its proposal to create a presumption that ILECs are entitled to competitively neutral rates when attaching to investor-owned utility (IOU) poles.
The survey also showed that the imbalance between the number of IOU poles to which ILECs attach verses the number of ILEC poles to which IOUs attach. This imbalance gives ILECs inadequate bargaining power with IOU pole owners to obtain just and reasonable pole attachment rates. In the 46 states surveyed, USTelecom’s data show that for every ILEC pole to which IOUs attach, ILECs attach to three IOU poles (i.e., ILECs attach to approximately 13.9 million IOU poles, whereas IOUs attach to only 4.6 million ILEC poles). With ILECs needing to attach to so many more IOU poles than the reverse, bargaining power is heavily skewed to the IOUs.
Despite the fact that electric utility attachments occupy well over five times the average amount of space occupied by ILEC attachments, IOUs pay nearly the same rates on average. Thus, ILECs paid aggregate pole attachment rates of approximately $351.8 million to IOUs in 46 states but received only $125.8 million from IOUs.
The survey also illustrates the troubling decision by the Tennessee Valley Authority (TVA) that could significantly undermine the important federal policy goals of accelerating and promoting broadband deployment. Specifically, TVA’s decision to adopt a resolution that substantially increases pole attachment rates charged by electric cooperatives will exacerbate an already challenging rate structure for broadband providers operating in TVA states. What is even more problematic is that the TVA’s service territory – covering seven states – largely covers rural areas of the country where the need to deploy broadband is greatest.
In all but one TVA state, the rates charged by cooperatives for ILEC attachments exceed the national average cooperative rate of $21.05, and in four TVA states, the rates charged by cooperatives significantly exceed the national average of $25.23 charged by IOUs to ILEC attachers. TVA’s decision will increase pole attachment rates to an average of $30, involving more than 150 rural electric cooperatives covering more than 9 million consumers. Given the location of electric cooperatives, the TVA’s unilateral decision will have a particularly acute impact on rural consumers.
Despite the well-intentioned goals of the Commission’s 2011 Pole Attachment Order, USTelecom’s survey shows that the agency’s goal of greater rate harmonization has not been achieved. Consequently, USTelecom believes the FCC should expeditiously move forward with its proposal to institute a presumptive just and reasonable rate formula for ILEC attachers.