The FCC determined that an electric utility in Maryland made Verizon pay unreasonable charges for attaching to their utility poles. The agency spelled out the maximum rate the utility company could charge the telecom.
Verizon Maryland filed a complaint with the Commission last fall, alleging the Potomac Edison Company was overcharging the telecom for utility pole access. Both companies have a Joint Use Agreement (JUA) that contains the rates, terms, and conditions for each party’s use of the other’s utility poles. Verizon complained the rates it was charged by Potomac Edison are “significantly higher” than the rates that Potomac Edison charges competitive local exchange carriers (LECs) and cable providers to attach to the same poles. Though the financial figures in the FCC’s decision were redacted, it shows Verizon pays more than its competitors.
Verizon contends that Potomac Edison used its “four-to-one pole ownership advantage” to charge Verizon rates that are more than the New Telecom Rate. It asked the agency to find the rates its being charged are “unjust and unreasonable,” require the utility to charge the telecom the New Telecom Rate prospectively and order Potomac Edison to give the telecom a refund of overages.
The FCC agreed Verizon was being overcharged, and is entitled to a rate that doesn’t exceed the Old Telecom Rate. The agency did not agree with Verizon on one point; it said the telecom is not entitled to the New Telecom Rate because the telecom receives benefits under the JUA that give it advantages over other attachers. Those include guaranteed access and space allocation.
The FCC said the JUA guarantees Verizon space on Potomac Edison’s poles, including “new poles,” and Potomac Edison cannot deny attachment on the grounds that a pole is not strong or tall enough. “Verizon’s competitors are not guaranteed space on any pole to which they are not already attached and can be denied access ‘where there is insufficient capacity or for reasons of safety, reliability and generally applicable engineering purposes,’” states the agency in its decision.
Under the JUA, Verizon pays for a certain space on Potomac Edison’s poles, while competitors are restricted to other areas of the poles and must pay to use more space. That means Verizon has the needed space to add new attachments without additional expense, according to the Commission.
There are no make-ready provisions in the JUA, whereas several of Verizon’s competitors do have those obligations in their license agreements. The agency also explains: “Verizon does not pay any fees for post-attachment inspections, safety violations or unauthorized attachments; administrative or application fees; or additional charges for anchors or guy wires. Its competitors must pay these fees and charges. Verizon also pays its annual rental fee in arrears, while many of its competitors are required to pay in advance or semiannually.”
The Commission determined Verizon can’t get a lower rate under the JUA without Potomac Edison agreeing to that. It notes the utility has refused to offer “meaningful” rate reductions for existing attachments. The fact that Potomac Edison has a four-to-one pole ownership advantage likely places Verizon in “an inferior bargaining position,” according to the agency, which agrees Verizon has shown it can’t terminate the current JUA and get a new one. “[P]rotracted negotiations between the parties have failed to yield a mutually agreeable, just and reasonable rate,” states the Commission in the decision.
Potomac Edison disputes Verizon’s claim that it lacks the ability to terminate the JUA and sign a new one. While conceding its nearly four-to-one pole ownership advantage in Maryland, Potomac Edison claims it’s not in a superior bargaining position.
Potomac Edison argues it has no bargaining leverage over Verizon because the terms of the JUA prevent it from removing Verizon’s facilities from its poles without the parties’ mutual agreement. Legal and financial impediments make it difficult for Potomac Edison to remove its facilities from Verizon’s poles and redeploy them elsewhere, the utility asserts. The FCC disagreed with the utility.
Verizon contends that the properly-calculated Old Telecom Rate for the 2017, 2018, and 2019 rental years is $9.04, $9.20, and $9.17, respectively. In contrast, Potomac Edison maintains that the properly-calculated Old Telecom Rate for 2019 is $16.07.
The FCC decided the maximum rate Potomac Edison can charge Verizon for attachments to Potomac Edison’s poles under the JUA is the Old Telecom Rate, calculated to be $12.12 per year. The Commission told both parties to negotiate a new reciprocal JUA that reflects this rate, and determine a refund for Verizon, plus interest, for the three years before the complaint was filed.