In a pole attachment dispute, the FCC partially granted a complaint filed by BellSouth Telecommunications, LLC doing business as AT&T Florida, an incumbent Local Exchange Carrier, against electric utility Duke Energy Florida. AT&T alleged the rates it pays to use Duke’s poles are unjust and unreasonable. The agency resolved several issues in order to help AT&T and Duke Energy negotiate what it called a new, “reasonable” pole attachment rate and calculate the refund owed to the telecom.
AT&T and Duke Energy are parties to a Joint Use Agreement that the original signers, Florida Power Corporation and Southern Bell Telephone and Telegraph Company, inked in June 1969. The JUA contains the rates, terms and conditions for each party’s use of the other party’s utility poles. The original deal expired in 1979. Article X of the JUA sets out the method for determining each company’s annual pole attachment rates.
The FCC says in its decision that under the JUA, Duke charges AT&T pole attachment rates that are “substantially higher” than the rates Duke charges competitive LECs and cablecos to attach to the same poles. The actual rates are redacted. AT&T alleged that Duke has “long charged” AT&T “unjust and unreasonable” pole attachment rates and it’s entitled to a rate that doesn’t exceed the new rate promulgated by the Commission in 2011.
AT&T also seeks a refund for five years, dating to 2015, based on a five-year statute of limitation under Florida law. It also alleged the JUA’s “evergreen” provision, which renders the rates “effectively inescapable” even if AT&T terminated the JUA, helped Duke to charge AT&T unlawful rates. Duke disputes the claims.
The FCC agreed the rates are unreasonable and that the telecom is entitled to a rate that doesn’t exceed the old one. However, the agency determined AT&T is not entitled to the new rate (determined in 2018) because it receives benefits from the JUA that gives it benefits over other attachers. For example, the JUA allocates three feet of space on the parties’ joint poles for AT&T’s exclusive use and allows the telecom to expand beyond its allotted space if there’s available room.
Also, the JUA reserves the lowest position in the communications space on Duke’s poles for AT&T. Competitors must attach above or within AT&T’s space, subject to AT&T’s right to reclaim the space without cost to AT&T, notes the Commission. Duke asserts that position gives AT&T “‘ease of access’ to its attachments, as there is no need to work through the lines of other attaching entities” and “the ability to transfer its facilities to new poles for maintenance projects and operational upgrades faster and more easily than higher mounted communications attachments.”
Pole Position Makes a Difference
The FCC agreed with Duke on the benefits of the lowest pole position. The agency said: “the record reflects that, unlike its competitors, AT&T’s position on the pole is by choice and that choice has benefited AT&T by providing a consistent and predictable space on each pole in a position of its choosing.” When AT&T makes a new attachment to a Duke pole, “it will know in advance where its attachments will be placed and, unlike a competitive attacher, will not incur the make-ready expense involved in relocating or rearranging existing attachments in order to make space for its attachment,” said the agency.
Duke disputes AT&T’s claim that AT&T genuinely lacks the ability to terminate the JUA and obtain a new arrangement through negotiations with Duke. To the contrary, the FCC notes, “the record indicates that, after more than 15 months of negotiations, the parties failed to reach consensus on a new rate, and Duke’s one formal settlement proposal was transmitted only after AT&T had filed the complaint” with the Commission.
The FCC decided that AT&T showed the advantages it receives under the JUA don’t justify the pole attachment rates it’s been paying. The agency also found that AT&T showed its share of annual pole costs don’t decrease when a third party attaches to Duke’s poles. “Instead, Duke ‘continues to collect the full {[ ]} percent of pole cost from AT&T along with additional rents from third parties,’ which effectively reduces Duke’s cost-sharing responsibility, but not AT&T’s,” determined the Commission.
Duke and AT&T disagreed on many issues, including how much space AT&T uses on each pole. The FCC says AT&T proved it takes up one foot of space, and that Duke didn’t provide “reliable evidence” to dispute this.
The FCC says AT&T is entitled to an overpayment refund for five years, reflecting the statute of limitations in Florida, plus interest. Duke argued it should be for two years, but the agency said a narrow exception didn’t apply in this case.
In its decision, the agency says Duke may charge AT&T for attachments to Duke’s poles under the JUA may equal but not exceed the Old Telecom Rate. The FCC told both parties to negotiate a new reciprocal JUA “that reflects proportional reciprocal rates for Duke’s attachments to AT&T’s poles.”
How We Got Here
In 2011, the FCC reexamined the formula for calculating the section 224(e) attachment rate applicable to competitive LECs. That resulted in a new, lower pole attachment rate for competitive LECs. The Commission also concluded for the first time that section 224 authorized it to regulate the rates, terms, and conditions of incumbent LEC pole attachments.
The Commission explained that, while in the past, incumbent LECs were positioned to negotiate just and reasonable attachment agreements because they owned roughly as many poles as the electric utilities, incumbent LEC pole ownership had declined over time and “may have left incumbent LECs in an inferior bargaining position.” The agency also noted in 2011 that oversight of incumbent LEC attachment rates would promote broadband deployment, given that “the rates charged for pole access are likely to affect deployment decisions for all telecommunications carriers, including incumbent LECs.”
The 2011 Order instructed that the Old Telecom Rate be used as a “reference point” in complaint proceedings involving an incumbent LEC attacher that is not similar to other attachers on a utility’s poles. The 2018 Order made this rate a “hard cap” in order to “provide further certainty within the pole attachment marketplace” and “limit pole attachment litigation.” In complaint proceedings concerning agreements that advantage an incumbent LEC and that were entered into after the effective date of the 2011 Order but before the effective date of the 2018 Order (March 11, 2019), the Commission determined that the Old Telecom Rate will continue to serve as a reference point.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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