Pole Attachment Rates, 5605-5618 [2016-01182]
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that Executive Order 13132, entitled
‘‘Federalism’’ (64 FR 43255, August 10,
1999) and Executive Order 13175,
entitled ‘‘Consultation and Coordination
with Indian Tribal Governments’’ (65 FR
67249, November 9, 2000) do not apply
to this action. In addition, this action
does not impose any enforceable duty or
contain any unfunded mandate as
described under Title II of the Unfunded
Mandates Reform Act (UMRA) (2 U.S.C.
1501 et seq.).
This action does not involve any
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(NTTAA) (15 U.S.C. 272 note).
Pursuant to the Congressional Review
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Environmental protection,
Administrative practice and procedure,
Agricultural commodities, Pesticides
and pests, Reporting and recordkeeping
requirements.
Dated: January 21, 2016.
Susan Lewis,
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Therefore, 40 CFR chapter I is
amended as follows:
PART 180—[AMENDED]
1. The authority citation for part 180
continues to read as follows:
■
Authority: 21 U.S.C. 321(q), 346a and 371.
2. In § 180.601, in the table in
paragraph (a):
■ a. Remove the entries for ‘‘Basil, dried
leaves’’ and ‘‘Basil, fresh leaves’’.
■ b. Add alphabetically entries for
‘‘Bulb vegetables, group 3–07’’ and
‘‘Herb subgroup 19A’’.
The additions read as follows:
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■
§ 180.601 Cyazofamid; tolerances for
residues.
(a) General. * * *
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Commodity
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Bulb vegetables, group 3–07 ...
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2.0
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Herb subgroup 19A ..................
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[FR Doc. 2016–01993 Filed 2–2–16; 8:45 am]
BILLING CODE 6560–50–P
47 CFR Part 1
[GN Docket No. 09–51, WC Docket No. 07–
25; FCC 15–151]
Pole Attachment Rates
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
In this document, the
Commission builds on its prior efforts to
harmonize pole attachment rates that
cable and telecom service providers pay
utility pole owners. The
Communications Act of 1934, as
amended (Act), contains two formulas
for calculating pole attachment rates, a
formula adopted in 1978 applicable to
cable television systems solely
providing cable service, and a formula
adopted in 1996 applicable to
telecommunications carriers providing
telecommunications service.
DATES: Effective April 1, 2016.
ADDRESSES: You may submit comments,
identified by WC Docket No. 07–245,
GN Docket No. 09–51 and FCC 15–151,
by any of the following methods:
• Federal Communications
Commission’s Web site: https://
apps.fcc.gov/ecfs/. Follow the
instructions for submitting comments.
• People with Disabilities: Contact the
FCC to request reasonable
accommodations (accessible format
documents, sign language interpreters,
CART, etc.) by email: FCC504@fcc.gov
or phone: 202–418–0530 or TTY: 202–
418–0432.
FOR FURTHER INFORMATION CONTACT:
Jonathan Reel, Wireline Competition
Bureau, Competition Policy Division,
(202) 418–0637, or send an email to
jonathan.reel@fcc.gov.
SUMMARY:
List of Subjects in 40 CFR Part 180
This is a
summary of the Commission’s Order on
Reconsideration in GN Docket No. 09–
51, WC Docket No. 07–245, and FCC
15–151, adopted November 17, 2015
and released November 24, 2015. The
full text of this document is available for
public inspection during regular
business hours in the FCC Reference
Information Center, Portals II, 445 12th
Street SW., Room CY–A257,
Washington, DC 20554. It is available on
the Commission’s Web site at https://
www.fcc.gov.
SUPPLEMENTARY INFORMATION:
Parts per
million
FEDERAL COMMUNICATIONS
COMMISSION
VII. Congressional Review Act
5605
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I. Introduction
1. In this Order on Reconsideration
(Order), the Commission builds on its
prior efforts to harmonize pole
attachment rates that cable and telecom
service providers pay utility pole
owners. The Communications Act of
1934, as amended (Act), contains two
formulas for calculating pole attachment
rates, a formula adopted in 1978
applicable to cable television systems
solely providing cable service, and a
formula adopted in 1996 applicable to
telecommunications carriers providing
telecommunications service. Following
the implementation of the 1996 Act
through 2011, rates calculated using the
telecom rate formula have typically
been higher than rates calculated using
the cable formula in similar
circumstances. In 2011, the Commission
revised the formulas as described in
greater detail below to improve
efficiency, reduce potentially excessive
costs of network deployment and
accelerate broadband buildout, and
eliminate the wide disparity between
the telecom and cable rate formulas. The
2011 revisions sought to bring the
telecom and cable rates into parity. In
the intervening time, the Commission
has seen that its revisions did not fully
achieve that objective. Today, the
Commission takes the next logical step
in achieving the goals set forth in 2011.
2. As detailed below, the Commission
takes these actions in response to a
Petition for Reconsideration or
Clarification in this proceeding. The
rule revisions that the Commission
adopts amend the Commission’s rules
by defining ‘‘cost,’’ for the purpose of
calculating the rates that
telecommunications carriers pay for
pole attachments, as a percentage of
fully allocated costs that will depend on
whether the average number of
attaching entities in a service area is 2,
3, 4, or 5. The rates that attachers pay
to attach to poles are currently
determined, among other things, by
whether the attacher is a ‘‘cable
television system solely . . . provid[ing]
cable service’’ or a ‘‘telecommunications
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carrier providing telecommunications
services.’’ The Commission, in its 2011
Report and Order and Order on
Reconsideration in this proceeding
(2011 Pole Attachment Order) 80 FR
27626–01, May 14, 2015, sought to bring
parity to pole attachment rates
calculated using the telecom or cable
rate formula so that all attachments rates
would be at or near the cable rate
formula level. The 2011 Pole
Attachment Order adopted cost
allocators in the telecom rate formula
that closely approximate the treatment
of cost in the cable rate formula.
However, these allocators applied only
in situations where poles have 5
attaching entities (0.66 percent of cost)
or 3 attaching entities (0.44 percent of
cost). On June 8, 2011, the National
Cable and Telecommunications
Association (NCTA), COMPTEL, and tw
telecom inc. (Petitioners) filed a petition
for reconsideration or clarification of the
rules adopted in the 2011 Pole
Attachment Order, asking the
Commission either to clarify that 66
percent and 44 percent are
‘‘illustrations’’ of the new rule, or to
revise the rules to ‘‘provide
corresponding cost adjustments to other
entity counts.’’
3. In response to NCTA’s petition, and
to the record developed in this
proceeding, Commission now
introduces new cost allocators for poles
with 2 attaching entities (0.31 percent of
costs) and 4 attaching entities (0.56
percent of cost). When the average
number of attaching entities is a
fraction, the percentage cost allocator
will be located between the whole
numbers at the point where it most
closely approximates the cost used in
the cable rate formula. This flexible
series of cost allocators should more
fully realize the intent of the
Commission in its 2011 Pole
Attachment Order to bring parity to pole
attachment rates at the cable rate
formula level. The Commission also
adopts this definition of cost to prevent
pole owners from charging cable
operators that also provide
telecommunications service (including
broadband Internet access service) pole
attachment rental rates that can be
approximately 70 percent higher than
the cable rate under its existing rules.
4. The Commission additionally acts
to support incentives for deployment of
broadband facilities, particularly in
rural areas, and to harmonize regulatory
treatment between states where the
Commission regulates the rates, terms,
and conditions for pole attachments and
states where such matters are regulated
by the state. Subjecting cable operators
to higher pole attachment rates merely
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because they also provide
telecommunications services, such as
broadband Internet access, could deter
investment in states subject to
Commission pole regulation, which
would undermine the Commission’s
broadband deployment policy. By
keeping pole attachment rates unified
and low, the Commission furthers its
overarching goal to accelerate
deployment of broadband by removing
barriers to infrastructure investment and
promoting competition.
II. Background
5. On April 7, 2011, in its 2011 Pole
Attachment Order, the Commission
comprehensively revised its rules
governing the attachment of cable and
telecommunications facilities to utility
poles. The 2011 Pole Attachment Order
contains a comprehensive background
section outlining pole attachment policy
developments through 2011.
Commission does not repeat that
material herein. Instead, Commission
incorporates that history by reference
here, and preserves a brief background
section outlining and describing the
provisions, orders, and cases germane to
this Order on Reconsideration.
6. In 1978, Congress added section
224 to the Act. As established in 1978,
section 224 directed the Commission to
ensure that the rates, terms, and
conditions of attaching cable television
systems’ facilities to utility-owned poles
were just and reasonable. Section 224
also identified the maximum rate for
pole attachments as a percentage of
fully-allocated costs. In 1987, the U.S.
Supreme Court found that the cable rate
formula adopted by the Commission
provides pole owners with adequate
compensation, and thus does not result
in an unconstitutional taking.
7. The 1996 Act expanded the
definition of pole attachments to
include attachments by providers of
telecommunications service, and
granted both cable operators and
telecommunications carriers an
affirmative right of access to utility
poles. The 1996 Act also included a
separate provision for calculating a costbased rate paid by telecommunications
carriers—the telecom rate formula—
which incorporates ‘‘the cost of
providing space on a pole.’’ As
implemented by the Commission, the
telecom rate formula generally resulted
in significantly higher pole rental rates
than rates derived from the cable rate
formula. The Commission concluded
that cable systems that provided
Internet access in addition to video
services should continue to pay the
cable rate; that conclusion was reversed
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on appeal but later upheld by the
Supreme Court.
8. In the intervening years, the
Commission considered a variety of
possible reforms to its pole attachment
regulations in light of their importance
to the deployment of communications
networks. The Commission issued a
Notice of Proposed Rulemaking in 2007,
to respond to petitions for rulemaking
regarding pole access and incumbent
LEC pole attachment issues, and to seek
comment on pole rate issues. In 2010, in
response to a directive in the American
Recovery and Reinvestment Act of 2009,
the Commission released the National
Broadband Plan (NBP), identifying
access to rights-of-way—including
access to poles—as having a significant
impact on the deployment of broadband
networks. Accordingly, the NBP
included several recommendations
regarding pole attachment access,
enforcement, and pricing policies to
further advance broadband deployment.
Following on the recommendations in
the NBP, in its 2010 Further Notice the
Commission sought comment on a
variety of measures to speed access to
poles and make pole rental rates as low
and close to uniform as possible
consistent with section 224 of the Act.
9. In the 2011 Pole Attachment Order,
the Commission sought, in pertinent
part, to significantly reform its telecom
rate regulations by reinterpreting the
ambiguous term ‘‘cost’’ in the telecom
rate formula in section 224(e) of the Act
to yield telecom attachment rates
‘‘lowered to more effectively achieve
Congress’ goals under the 1996 Act to
promote competition and ‘advanced
telecommunications capability’ by both
wired and wireless providers by
‘remov[ing] barriers to infrastructure
investment.’ ’’ In particular, the
Commission sought to ‘‘balance the
goals of promoting broadband
[deployment] . . . with the historical
role that pole rental rates have played in
supporting the investment in pole
infrastructure.’’
10. In order to promote broadband
while ensuring that attaching entities
continue to support the poles on which
they depend, the 2011 Pole Attachment
Order adopted alternative methods for
measuring cost, and provided that the
method producing the higher rate is the
one the parties use. Utilities thus
receive the benefit of any difference
between the methods. In this way, the
Commission recognizes that
telecommunications attachers have
historically contributed to the capital
costs of the pole network, and that the
new telecom rate should not ‘‘unduly
burden [utility] ratepayers.’’ Balancing
the Commission decided under the first
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of two acceptable methodologies to
‘‘allow the pole owner to charge a
monthly pole rental rate that reflects
some contribution to capital costs’’
while also reducing the telecom rate.
The Commission settled on an approach
that defines costs ‘‘in terms of a
percentage of the fully-allocated costs’’
of the pole—specifically, 66 percent of
fully-allocated costs in urban areas and
44 percent in non-urban areas. This
measure of cost produces a rate that the
Commission expected, based on the
premise that the Commission’s
presumptive number of attachers would
not be rebutted, ‘‘[would], in general,
approximate the cable rate’’ and thereby
promote network investment and
broadband deployment.
11. The Commission also established
a second, alternative measure of cost
that utilities may use. This alternative
approach is based on the principle of
‘‘cost causation,’’ under which the
‘‘customer—the cost causer—pays a rate
that covers’’ the costs for which it is
‘‘causally responsible.’’ Under this
approach, a pole owner may recover its
administrative and maintenance costs
through the telecom rate, but not capital
costs other than those associated with
make-ready expenses. The Commission
also noted that capital costs caused by
a telecommunications attacher have
long been recovered through makeready charges, which ‘‘the utility itself
sets’’ without regard to ‘‘any mandatory
rate formula set by the Commission.’’
Other capital costs (i.e., rate of return,
taxes, and depreciation) are properly
excluded under a cost-causation
approach because the pole owner would
have incurred those costs ‘‘regardless of
the demand for attachments.’’ Although
the ‘‘percentage of fully-allocated costs’’
measure of cost discussed above will
produce a higher telecom rate ‘‘in most
cases,’’ if the cost causation-based
approach yields a higher rate, utilities
are allowed to charge up to that rate.
12. On February 26, 2013, the U.S.
Court of Appeals for the D.C. Circuit
(D.C. Circuit) rejected utilities’
challenge to the Commission’s action to
bring the traditionally higher telecom
rate more in line with the cable rate,
concluding that ‘‘[b]ecause the
Commission’s methodology is
consistent with the unspecified cost
terms contained in section 224(e), and
the Commission’s justifications are
reasonable, the revision [to the telecom
rate formula] warrants judicial
deference.’’ In particular, the court
observed that section 224(e) is ‘‘less
specific’’ than section 224(d) in
prescribing how the statutory rate
formula should be implemented. The
court agreed with the Commission that
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‘‘the term ‘cost’ in section 224(e)(2) and
(3) is necessarily ambiguous, and could
thus ‘yield a range of rates from the
existing fully-allocated cost approach at
the high end to a rate closer to
incremental cost at the low end.’’’ The
D.C. Circuit thus affirmed the
Commission’s interpretation and
implementation of section 224(e).
13. On June 8, 2011, Petitioners filed
the NCTA Petition, seeking
reconsideration or clarification of the
newly adopted cost allocation rule. The
NCTA Petition points out that, when
paired with the Commission’s
presumptive numbers of attachers (5 in
urbanized and 3 in non-urbanized
areas), the 66 percent and 44 percent
cost allocators almost exactly reproduce
the 7.4 percent of costs used as an input
in the cable rate formula. The
Petitioners report, however, that pole
owners in fact often rebut the
Commission’s presumptions with much
lower average numbers. For example, if
the owner rebuts the urban presumption
(5 attaching entities) with an actual
count average of 2.6 attaching entities,
the telecom rate can be as much as 70
percent higher than the cable rate. To
‘‘achieve the Commission’s goal of
providing pole attachment rates that are
close to uniform as possible, and to
ensure that all attachers contribute
similar costs to pole owners,’’ the
Petitioners ask the Commission to
address this gap between the intended
effect of the cost allocators and their
function as applied by ceasing to
distinguish between urbanized and nonurbanized areas.
14. Specifically, the Petitioners ask
the Commission either to clarify that 66
percent and 44 percent are mere
illustrations of the new rule, or to revise
the rule to ‘‘provide corresponding cost
adjustments to other entity counts.’’ The
NCTA Petition presents a model rule
with additional cost allocators for 4 and
2 attachments, each of which aligns
costs with the Commission’s cable rate
formula as effectively as the current rule
does for the Commission’s presumptive
averages of 5 urbanized and 3 nonurbanized attachments. In service areas
where the number of attaching entities
is not a whole number, petitioners’
proposed cost allocator would be
interpolated from the allocators of the
nearest whole numbers of attaching
entities. On June 20, 2011, the
Commission sought comment on the
NCTA Petition.
15. On February 26, 2015, the
Commission adopted the Open Internet
Order, which, among other things,
concluded that ‘‘retail broadband
Internet access service is best
understood today as an offering of a
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‘telecommunications service.’ ’’ The
Open Internet Order made clear that it
did ‘‘not itself require any party to
increase the pole attachment rates it
charges to attachers providing
broadband Internet access service.’’ A
possible interpretation of the Order,
however, could be that cable systems
that also provide broadband Internet
access service and previously were
subject to the cable rate formula are now
subject to the telecom rate formula. In
the Open Internet Order, the
Commission noted that Petitioners had
already expressed concern that revisions
to the telecom formula only fulfilled the
Commission’s expressed intent in the
limited circumstances when there are
either 5 or 3 attaching entities on a pole.
The Commission stated in the Open
Internet Order that, ‘‘[t]o the extent that
there is a potential for an increase in
pole attachment rates for cable operators
that also provide broadband Internet
access service, we are highly concerned
about its effect on the positive
investment incentives that arise from
new providers’ access to pole
infrastructure.’’ In short, the
Commission made plain that it took
seriously parties’ concerns that
reclassification could have unintended
consequences for pole attachment rates,
and that this Petition might present an
effective vehicle for giving the issue a
closer look. In light of this development,
parties were asked to refresh the record
with regard to the NCTA Petition.
III. Discussion
16. The Commission adopts the
Petitioners’ proposal to broaden the use
of cost allocators in the telecom rate
formula. Specifically, the Commission
adds cost allocators for poles with 2 and
4 attaching entities to augment the
current cost allocators that target poles
with 3 and 5 attaching entities. The
Commission also provides that, for
fractional attaching-entity averages, cost
allocators are to be interpolated from the
whole-number cost allocators. The
Commission takes this step to further its
goal of promoting consistent, crossindustry attachment rates that
encourage deployment and adoption of
broadband Internet access services by
fulfilling the Commission’s intent,
expressed clearly in 2011 and upheld in
court in 2013, to bring cable and
telecom rates for pole attachments into
parity at the cable-rate level.
A. The Petitioner’s Proposal Solves the
Problem of Rate Disparity
17. The Petitioners maintain, and the
Commission agrees, that the cost
allocators adopted in the 2011 Pole
Attachment Order perform as intended,
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but only if the actual average numbers
of attaching entities coincide with the
Commission’s presumptive average
numbers of attaching entities. As NCTA
recognizes, the cost allocators in the
2011 Pole Attachment Order reflect and
embody these presumptive averages.
When 0.66 percent and .044 percent of
fully-allocated costs are applied in
tandem with the Commission’s
presumptions of 5 and 3 attaching
entities in urban and non-urban areas,
respectively, the results approximate
cable rate formula outcomes, as
intended.
18. There is widespread agreement
that the real average number of
attaching entities is regularly far lower
than the Commission’s presumptions,
and that this disparity causes rates
calculated with the telecom rate formula
to be around 70 percent higher than
rates calculated with the cable rate
formula. NCTA also reports that, in
reality, pole owners routinely rebut the
Commission’s presumptions with
averages such as 2.6 attaching entities.
No commenter disputes NCTA’s claim
or alleges that the number ‘‘2.6’’ is an
outlier. Verizon reports several similarly
frequent rebuttals to attacher numbers
below three. Averages of 2.6 attaching
entities rebut both the urban and nonurbanized presumptions, which casts
doubt not only on the credibility of the
presumptions, but on the validity of the
underlying urbanized/non-urbanized
distinction as well. Rebuttals that
consistently show lower average
numbers based on tracking actual
attachments may reflect the fact that,
under its rules, service territories count
as ‘‘urban’’ if any part of them is urban.
This approach dilutes the density of
these nominally urban areas, and
undercuts the Commission’s original
assumption that such areas would likely
have a higher average of attaching
entities.
19. Recognizing that the rate reforms
of 2011 have failed to align the results
of the two pole attachment rate formulas
as fully as intended, the Commission
adopts the Petitioners’ proposal as a
template for corrective measures. By
introducing new cost allocators of 0.31
percent and 0.56 percent for poles with
2 and 4 attaching entities respectively,
with interpolated allocators between the
closest whole numbers for fractional
averages, the Commission brings parity
to pole attachment rates at the cable rate
formula level. The Petitioners’ proposed
solution does not require us to revisit
the presumptions themselves; these
continue to perform as intended with
the 66% and 44% cost allocators that
the Commission adopted in 2011. The
Commission therefore retains the
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presumptions for the same reasons the
Commission adopted them in 2011: to
‘‘expedite the process’’ and to help
utilities ‘‘avert the expense’’ of applying
demographic categories. Broadening the
effect of the cost allocation system as
the NCTA Petition proposes will greatly
reduce the effect of, and the need for,
the rebuttals. This approach to defining
‘‘cost’’ for purposes of the telecom rate
formula achieves results that are
consistently close to the cable rate. The
new system also satisfies the
fundamental purposes for using
presumptions: To reduce reporting and
recordkeeping requirements, to
minimize administrative burdens, and
to provide a level of predictability and
efficiency in calculating the appropriate
rate.
B. The Reasons To Revise the Cost
Allocation System
20. The Commission adopts this
multiple cost-allocator approach for the
same reasons that motivated the initial
(but ultimately incomplete) reforms in
2011: To advance the deployment and
adoption of broadband Internet access,
which remains a fundamental policy
goal that guides its implementation of
the telecom rate formula. The
Commission recognizes that pole rental
rates are but one of many considerations
underlying marketplace deployment
decisions. That said, the Commission
promotes broadband deployment on
numerous fronts, and has sought public
comment and advice on other measures
to advance this overarching policy.
When discussing pole attachments
policy, the Commission refers
consistently to incentives for
investment. By the same token, it
remains the Commission’s policy to
minimize disincentives to investment,
including artificially high pole
attachment rates. Lower pole rental rates
serve to encourage broadband
investment, and Commission continues
to use its section 224 authority as one
of the tools it brings to bear to on its
broadband goals. The Commission also
continues to support and subsidize
deployment of broadband Internet
access in high-cost areas. In contrast,
increased pole attachment rates would
ultimately be recovered from
consumers, and could lead some
consumers to cut back or even
discontinue their service. Thus, the
Commission views pole attachment rate
reform as part of the Commission’s
fundamental mission to advance the
availability and adoption of broadband
in America.
21. The Commission also intends this
action to avoid the unintended
consequence of higher pole attachment
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rates for cable providers that also offer
broadband Internet access service, in
those cases where the utility rebuts the
Commission’s attaching party
presumptions. Comcast, for example,
asserts that ‘‘[a]bsent grant of the NCTA/
COMPTEL Petition, a costly and time
consuming process will ensue whereby
utilities will seek to rebut the
Commission’s attaching entity
presumptions, and cable operator
attachers will then seek to refute the
utilities’ attachment studies.’’ And
NCTA observes that, because most cable
operators may become subject to the
telecom rate, and large numbers of
associated attachments are implicated,
utilities would have increased
incentives to rebut the Commission’s
presumed number of attachers in areas
where they had not done so previously.
As a result, this could lead to pole rate
increases for both cable operators and
pre-existing telecommunications
carriers in those areas. In the Open
Internet Order, the Commission
acknowledged that reclassification
could lead to attempted increases in
pole attachment rates, and stated its
intention to avoid such an increase.
Aligning rates produced by the two rate
formulas forestalls this potential
increase.
22. The Commission also is concerned
that unless it closes what one
commenter refers to as the ‘‘telecom
formula loophole,’’ the resulting rate
disparity would, more broadly, frustrate
the Commission’s policy goals by
artificially and incrementally deterring
investment in states subject to
Commission pole regulation in favor of
investment in areas with more favorable
state-regulated pole attachment regimes.
As the Commission previously has
observed, ‘‘[c]ommenters report that
many [states that have elected to
exercise jurisdiction over pole
attachments in lieu of the Commission]
apply a uniform rate for all attachments
used to provide cable and
telecommunications services, and have
done so by establishing a rate identical
or similar to the Commission’s cable
rate formula.’’ Thus, if the
Commission’s telecom rate frequently
yielded rates materially above the cable
rate, telecommunications service
providers that operate in multiple states
or are deciding where to enter the
marketplace, would have an artificial
disincentive to invest in states governed
by the Commission’s 2011 telecom rate
rule relative to states that established a
uniform rate identical or similar to the
Commission’s cable rate formula.
Although the Commission’s action in
this Order will not guarantee complete
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state-to-state uniformity, seeking to
address artificial marketplace
distortions in the manner that it does
here, rather than via a higher telecom
rate, accords with the Commission’s
broadband mandate and its overall
policy balancing in this context.
23. Moreover, the record developed
here demonstrates that pole owners
routinely rebut the Commission
presumptions with averages close to 2.6
attachers. This means that the
Commission’s standard examples of
telecom rates, which presuppose fullyallocated costs and use the
Commission’s presumptions, have
seriously underestimated the pre-reform
disparity between cable- and telecomrate outcomes. In this proceeding, the
Commission has compared estimated
telecom costs of 11.2 percent in urban
areas and 16.9 percent in non-urban
areas with fixed cable costs of 7.4
percent. Applying the 2.6 cost allocator
that the record supports shows that the
telecom rate formula cost estimate
would have been 19.1 percent for both
urban and rural areas. The discrepancy
between the presumed numbers of
attachers (5 in urban areas and 3 in rural
areas) and actual numbers of attachers
used in pole owner rebuttals and
reported in the record (often at or close
to 2.6) illustrates the substantial
problem attachers face when applying
the rate reform of the Commission’s
2011 Pole Attachment Order.
24. Along with the forgoing policy
considerations, the Commission
continues to seek to balance the
‘‘legitimate concerns of pole owners and
other parties’’ by preserving incentives
to invest in poles and avoiding the
imposition of an undue burden on
utility ratepayers. In 2011, the
Commission ultimately concluded that
the level of recovery provided by the
cable rate best balanced its broadband
deployment mandates and the concerns
of pole owners and utility ratepayers.
Consistent with that analysis, the
Commission explains above that the
cable rate frequently is lower than the
telecom rate as it previously had been
implemented by the Commission, and
reducing the telecom rate to cable rate
level would further numerous policy
goals. The Commission further observed
that the cable rate had not produced a
‘‘shortage of pole capacity,’’ and,
therefore, approximating that rate in the
telecom formula likely would not
diminish pole owners’ ‘‘incentives to
invest in poles.’’ The Commission also
found ‘‘persuasive the views of
consumer advocates . . .
recommend[ing] that the cable rate
‘should be used for all pole
attachments.’ ’’
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25. The Commission thus remains
persuaded that utility cost recovery at
the level of the cable rate best balances
the relevant policy considerations.
Consequently, the Commission rejects
arguments that the rule revision, which
will more consistently and accurately
ensure that the Commission’s policy
goals are achieved, will somehow upset
the Commission’s intended balance,
unfairly burden utility ratepayers, or
undermine the sharing of infrastructure
costs. Likewise, while some commenters
observe that other aspects of the 2011
Pole Attachment Order put downward
pressure on the revenues electric
utilities receive from incumbent LEC
attachers, the Commission already
accounted for that likelihood in its
weighing of policies and conclusion that
it was appropriate to permit capital cost
recovery at the same level as under the
cable rate.
26. Utilities dismiss this policy
balancing on several grounds, none of
which persuade the Commission. The
Utilities Telecom Council (UTC) argues
that pole attachment rental is
insignificant compared to other
operating costs of large cable
companies. Electric Utilities state that
capital expenditure, and not pole
attachment rental, drives deployment,
and that pole attachment rental
accounts for less than 2 percent of the
cost of deploying fiber optic cable. UTC
argues that there has been only a slow
rate of broadband deployment since the
telecom rate was adjusted in 2011,
which proves the futility of lowering
pole attachment rates, and that any cost
savings from lower pole attachment
rates have not been passed on to
consumers, but rather, as a result of
industry consolidation, have been
pocketed by providers instead.
27. The Commission is skeptical that
sums alleged to ‘‘unfairly and negatively
impact utilities and their ratepayers’’ are
‘‘insignificant’’ in the context of
broadband deployment. While the
record does not include quantifiable
information regarding the exact effect on
deployment of pole attachment rates,
insofar as keeping attachment rates
reasonable for cable companies prevents
them from shelving even a small
number of projects, the Commission
would not consider that result
‘‘insignificant.’’ There remains room for
improvement in the rate of broadband
expansion, and the Commission cannot
afford to dismiss the importance of even
potentially small increments.
Commenters state that cable companies
continue to deploy facilities, and
Commission intend to avert any
destabilization of those plans that might
arise from a large and sudden pole
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attachment rate increase. The
Commission is particularly mindful of
the potential for harm to rural areas,
which are the least served areas in the
nation, and where the most additional
pole attachments are needed to reach
additional customers.
28. Utilities further argue that
granting the NCTA Petition would
unfairly reduce their revenue from pole
attachments. They argue that the 2011
Pole Attachments Order has already
reduced their recovery from the
telecommunications rate, and expect
that their revenue from broadband-only
Internet service providers will also
decline. The Commission finds these
arguments unpersuasive.
Telecommunications carriers account
for only a little more that 10 percent of
attaching entities. Leveling their rate
down to the cable rate disrupts settled
expectations far less than leveling up
the rental rate for the much greater
number of cable attachments. Although
it is true that the new system will tend
to lower rates negotiated under the
telecom rate formula, they will settle at
the level the Commission aimed for in
2011, when its stated goal was to
‘‘minimize the difference in rental rates
paid for attachments that are used to
provide voice, data, and video services.’’
29. Utilities argue that increasing
demand for pole space should lead to
increased prices, and that any
downward rate adjustment runs counter
to economic principles. The
Commission attaches no significance to
this assertion. The express reason for
the statutory imposition of cost-based,
regulated rates is to bypass the
economic principle that ‘‘ ‘public
utilities by virtue of their size and
exclusive control over access to pole
lines, are unquestionably in a position
to extract monopoly rents . . . in the
form of unreasonably high pole
attachment rates.’ ’’ By enacting costbased rate formulas, Congress has
already accounted for the economics of
scarcity that so favor pole owners.
Attachment rates agreed to by
broadband-only providers before
reclassification may indeed be called
into question, but that is because these
entities are now within the ambit of
Section 224, and not because the
Commission revises the method of cost
allocation used in the telecom rate
formula.
30. Utilities claim that ‘‘downward
pressure’’ on rates ‘‘weakens the
predictability and timeliness of the
access process’’ but this argument
makes little sense. Attachers pay (and
owners recover) the entire cost of access
through make-ready fees paid before the
attacher’s facilities are mounted on
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poles. Because access costs have already
been recovered through make-ready
fees, pole attachment rental rates are
concerned solely with the pole owner’s
recovery of operating costs; they should
have nothing to do with the
‘‘predictability and timeliness’’ of
access. In any case, a ‘‘downward
pressure’’ on rates to a parity with the
cable rate formula level is precisely the
outcome that the 2011 Pole Attachment
Order sought to achieve and that the
Commission intends this new cost
allocation system to implement.
C. The Commission Has Authority To
Adopt the Revised Telecom Rate Rule
31. The modified telecom rate rule
adopted in this Order is consistent with
section 224(e) of the Act. The
fundamental purpose of section 224(e)
is to ‘‘ensure that a utility charges just,
reasonable, and nondiscriminatory rates
for pole attachments’’ by
telecommunications carriers used to
provide telecommunications services.
As described above, in regulating costbased telecom attachment rates under
section 224(e), Congress granted the
Commission substantial discretion to
implement section 224(e) based on the
agency’s policy expertise by leaving the
definition of the relevant costs
ambiguous. Employing that policy
expertise, the Commission builds upon
the underpinnings of the statutory
interpretation relied upon by the
Commission in 2011 in the telecom rate
rule adopted here.
32. The 2011 Pole Attachment Order
began by identifying a range of
reasonable rates that could result from
different definitions of ‘‘cost’’ for
purposes of section 224(e). Within that
range of permissible outcomes, the
telecom rate rule ultimately adopted in
2011 involved the comparison of the
rate yielded by two calculations, with
utilities permitted to charge the higher
of the two. Section 1.1409(e)(2)(i)
specifies the first calculation, which the
Commission anticipated would
approximate the cable rate. Section
1.1409(e)(2)(ii) specifies the second
calculation, based on a cost-causation
approach.
33. As a threshold matter, this Order
leaves unaltered the section
1.1409(e)(2)(ii) ‘cost-causation’-based
calculation. That calculation still will be
performed whenever the Commission’s
telecom rate rule is used, and even
utility commenters concede that it does
‘‘not do away with apportioning the
costs among all attaching entities’’ in
accordance with section 224(e). The
definition of cost for purposes of that
provision excludes capital costs and
was designed to yield a rate that
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approached the incremental cost of
attachment.
34. The question of whether, and to
what extent, to allow utilities to go
beyond the recovery permitted by the
section 1.1409(e)(2)(ii) telecom rate
calculation and recover some capital
costs ultimately depends on a further
policy evaluation. As the Commission
explained in 2011, and as the
Commission reiterates above, its
implementation of section 224 is guided
in significant part by its mandate to
encourage the deployment of
broadband. That policy, if overriding
other considerations, might counsel in
favor of relying solely on the rate
yielded by the ‘cost-causation’
calculation in section 1.1409(e)(2)(ii),
rather than permitting higher rates as
just and reasonable under section
224(e). But the Commission also
sought—and continues to seek—to
balance the ‘‘legitimate concerns of pole
owners and other parties’’ by preserving
incentives to invest in poles and
avoiding the imposition of an undue
burden on utility ratepayers.
35. As described above, in 2011 the
Commission adopted rules that it
anticipated would result in a telecom
rate that generally approximated the
cable rate. In practice, however, the rule
the Commission adopted has only
poorly reflected the balancing of policy
interests that the Commission
anticipated attaining in 2011 because
the facts on the ground differed
significantly from the Commission
presumptions upon which the 2011 rule
was predicated. As a result, telecom
rates calculated based on the
Commission’s rules frequently were
higher than the levels the Commission
generally sought to achieve as just and
reasonable under section 224(e)—i.e.,
materially in excess of the cable rate.
The reclassification of broadband
Internet access service as a
telecommunications service brings this
shortcoming into greater focus.
Adopting the changes to section
1.1409(e)(2)(i) proposed by Petitioners
will bring the balance that the
Commission anticipated achieving in
2011, which the Commission is likewise
persuaded is the appropriate outcome
today.
36. Thus, the Commission adopts the
Petitioners’ proposal and modifies
section 1.1409(e)(2)(i) of the rules by
redefining the ambiguous term ‘‘cost’’ as
a percentage of fully allocated costs that
depends on whether the average number
of attaching entities in an area is 2, 3,
4, or 5. The specific percentage of fully
allocated costs that Commission adopts
in each of those instances will yield a
rate under section 1.1409(e)(2)(i) that
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more closely and consistently
approximates the cable rate.
37. Although this definition of cost is
based on an integer average number of
attachers in an area, consistent with the
Commission’s efforts to ensure that it
implements section 224(e) in a ‘‘readily
administrable’’ manner, the proposal the
Commission adopts incorporates a
mechanism to allow parties, should they
so choose, to continue to rely on noninteger average numbers of attachers in
a service area by interpolating from the
specified cost allocators in section
1.1409(e)(2)(i) of the rules in a manner
that does not undermine the definition
of cost adopted above. In pertinent part,
section 224(e)(2) is focused on
allocating the ‘‘cost’’—however
defined—of providing space on a pole
other than useable space. Although a
given pole only will have an integer
number of attaching entities, for
administrability the Commission has
long permitted pole attachment rates to
be calculated based on surveys or
averages of the number of attaching
entities in the relevant service area,
which has the potential to yield an
average number of attachers that is not
an integer number. The use of a noninteger number of attaching entities in
conjunction with the new definition of
cost adopted for areas with 2, 3, 4, or 5
average attaching entities in revised
section 1.1409(e)(2)(i) of the rules would
result in similar, even if not always as
extensive, deviations from the cable rate
as the Commission found to result
under the version of the rule adopted in
2011. The Commission concludes that
such deviation is at odds with the
balancing of policy interests it seeks to
achieve through its revisions to section
1.1409(e)(2)(i) and also anticipates that
it would increase the likelihood of
disputes. The Commission thus adopts
the interpolation mechanism in
Petitioners’ proposal, which will leave
parties free to continue using noninteger average number of attachers
should they choose to do so, without
undermining its ability to ensure just
and reasonable rates under section
224(e) in an administrable manner.
38. Insofar as the reclassification of
broadband Internet access service
results in most Commission-regulated
attachments becoming subject to the
telecom rate, that counsels in favor of its
redefinition of cost, contrary to the
claims of some commenters. The
Commission recognizes that the 2011
Pole Attachment Order cited the
marketplace distortions resulting from
disparate telecom and cable rates as part
of the policy rationale for the telecom
rate change adopted there. As identified
there, these distortions led to
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competitive disparities arising from
telecommunications carriers paying
higher pole attachment rates than their
cable operator competitors. The
distortions also created disincentives for
cable operators to begin offering
advanced services that could newly
subject them to the telecom rate. Some
commenters argue that reclassification
of broadband Internet access service,
insofar as it results in most cable
operators now being subject to the
telecom rate, resolves concerns about
marketplace distortions and leaves the
Commission with little or no policy
basis for revisiting the definition of
‘‘cost’’ to better ensure that the telecom
rate is as low and close to uniform with
the cable rate as possible. The
Commission rejects such claims for the
reasons already explained above. In
particular, the current telecom rate
could lead to a windfall for utilities by
increasing rates for many attachments
without any offsetting benefits to cable
attachers. This not only would harm
cable operators and their customers, but
more broadly would undermine the
Commission’s broadband policies by
creating artificial marketplace
distortions and disincentives for
investment. Indeed, the Commission
made this point clear in the Open
Internet Order when it stated, ‘‘[t]o the
extent that there is a potential for an
increase in pole attachment rates for
cable operators that also provide
broadband Internet access service, the
Commission is highly concerned about
its effect on the positive investment
incentives that [otherwise] arise from
new providers’ access to pole
infrastructure.’’
39. The Commission also disagrees
with the suggestions of some
commenters that only certain types of
policy considerations can form the basis
for its interpretation and
implementation of the ambiguous term
‘‘cost’’ in section 224(e). As the D.C.
Circuit recognized in AEP, the
Commission reasonably can rely on
policy rationales in giving meaning to
the term ‘‘cost.’’ The Commission
explains above the specific policy
rationales for the approach the
Commission adopts here, and finds no
basis to conclude that those
considerations cannot form a sufficient
justification for the interpretation of the
term cost in its implementation of
section 224(e). For example, certain
commenters assert that there is no
‘‘economic reason’’ for the adopted
approach to defining cost, but do not
explain what they mean by an
‘‘economic reason,’’ or why the policy
considerations discussed above,
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including the economic effects of
alternative approaches to defining cost,
would not fall within that scope. Some
commenters also criticize the
Petitioners’ proposal for failing to
provide a more favorable outcome for
attachers in rural areas, but fail to
explain why that is a necessary basis for
interpreting the term ‘‘cost.’’ To the
extent that those comments are
premised on certain policy arguments
relied upon by the Commission in 2011
as part of its explanation of the specific
definitions of cost adopted there, the
Commission finds them unpersuasive.
The Commission finds for the reasons
explained above that the version of
section 1.1409(e)(2)(i) adopted in 2011
only poorly advanced the Commission’s
more fundamental policy objectives,
and to better advance those fundamental
policy objectives, and for the other
policy reasons relied on in this Order,
the Commission departs from its prior
approach that relied on historical rules
tied to urban/rural distinctions.
Moreover, the Commission is not
revisiting how cost is defined under
section 1.1409(e)(2)(i) to more
consistently and accurately yield a rate
the same or very similar to the cable rate
as an end unto itself, but because that
reflects the Commission’s intended
policy balancing, and the Commission
rejects suggestions that that is not a
valid justification. More broadly,
because the Commissions explain in
detail the legal and policy basis for its
adoption of Petitioners’ proposed
revision to section 1.1409(e)(2)(i) of the
rules, it rejects general claims that
adopting that proposal would be
arbitrary and capricious.
40. Nor does modification of the
telecom rate rule render section
224(e)(2) of the Act a nullity, as some
allege. For one, the Commission’s
telecom rate rule requires a comparison
of the output of two calculations, and as
explained above, even utilities appear to
concede that the cost-causation-based
calculation in section 1.1409(e)(2)(ii)
gives meaning to section 224(e)(2).
Moreover, under revised section
1.1409(e)(2)(i) the apportionment
specified in section 224(e)(2) is given
meaning because it is only by applying
that apportionment to the definition of
‘‘cost’’ adopted above that the resulting
rate will closely approximate the cable
rate, and thus be just and reasonable
under the analysis above.
41. The Commission also rejects
claims that its approach to interpreting
‘‘cost’’ otherwise is at odds with
Congressional intent and the text and
structure of section 224. The 2011 Pole
Attachment Order explained why the
statute does not require the telecom rate
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necessarily to be higher than, or
otherwise different from, the cable rate
and the Commission finds nothing in
the record here to undercut that
analysis. The Commission
acknowledges some commenters’
arguments that section 224(e)(2) could
be read to suggest that Congress
envisioned the telecom rate varying
with the number of attachers, in contrast
to its revised approach to defining cost
in section 1.1409(e)(2)(i) of the rules,
under which the resulting rate will be
the same or very similar regardless of
the number of attaching entities. At the
same time, although section 224(e)(2)
provides for costs to be apportioned in
a manner that depends on the number
of attachers, it left undefined what costs
should be so apportioned. This is in
contrast to section 224(d)(1), which
specifies both a cost-based rate
methodology and the defined scope of
costs to be used for purposes of the
cable rate. In particular, although, as
some commenters observe, Congress did
not simply mandate the cable rate for all
attachments, neither did it specify a
definition of cost that would require an
outcome under section 224(e)(2) that
would, in practice, always vary with the
number of attaching entities. Congress
thus permitted the Commission to
implement section 224(e) in a manner
that yielded rates that vary with the
number of attachers—an outcome that
would depart from the cable rate,
notwithstanding the requirement in
section 224(e)(1) that the rate be not
only just and reasonable but also
‘‘nondiscriminatory.’’ But while
permitting such an outcome, the
Commission also concludes that
Congress did not require such an
outcome as mandatory given its use of
the ambiguous term ‘‘cost.’’
42. In implementing section 224(e),
the Commission considers the broader
purposes of section 224, as also
informed by other statutory goals and
mandates. As in the 2011 Pole
Attachment Order, the Commission
finds that its interpretation and
implementation of section 224(e) here
advances those objectives. The
Commission has concluded that ‘‘[t]he
purpose of Section 224 of the
Communications Act is to ensure that
the deployment of communications
networks and the development of
competition are not impeded by private
ownership and control of the scarce
infrastructure and rights-of-way that
many communications providers must
use in order to reach customers.’’ This
also is borne out by the text of section
224, which emphasizes that the
Commission’s fundamental role is to
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ensure just and reasonable rates, terms,
and conditions of access. Other
statutory provisions likewise counsel in
favor of such an understanding of
section 224, as discussed in greater
detail in the 2011 Pole Attachment
Order and above. For the reasons
explained in the preceding discussion,
the Commission concludes that the
revised telecom rate rule it adopts is
necessary to ensure just and reasonable
rates for pole access as a backstop for
when private negotiations fail. Because
the Commission can achieve that
outcome by how it defines ‘‘cost’’ under
section 224(e), while still formally
giving meaning to all the language of
that provision, the Commission
concludes that its adopted approach
reasonably implements that provision as
understood in the context of section 224
as a whole.
43. The Commission also is not
persuaded by arguments that section
224(e)(2) limits the costs to be borne by
pole owners. As described above, the
Commission’s fundamental
responsibility under section 224(e) is to
ensure that regulated rates ‘‘for pole
attachments used by
telecommunications carriers to provide
telecommunications services’’ are just,
reasonable, and nondiscriminatory.
Read in that context, the Commission
interprets section 224(e)(2) only to
govern the apportionment of the
‘‘cost’’—however defined—of unusable
space in the rates pole owners charge to
telecom attachers. It is true that the
methodology used to calculate the
apportionment of ‘‘cost’’ to a telecom
attacher under section 224(e)(2)
involves a calculation of what ‘‘all
attaching entities’’ would bear assuming
hypothetically that they all bore an
equal apportionment of such cost. But it
does not actually govern the cost to be
borne by entities other than telecom
attachers—whether the pole owner or
other attachers.
D. The Revisions to the Telecom Rate
Rule Are Procedurally Proper
44. Adopting this change to section
1.1409(e)(2)(i) of the rules is
procedurally proper. Following the
Commission’s 2010 Further Notice
seeking comment on ‘‘establish[ing]
rental rates for pole attachments that are
as low and close to uniform as possible,
consistent with section 224 of the Act,’’
the 2011 Pole Attachment Order revised
the telecom rate rule in a manner that
the Commission anticipated would
reflect its balancing of policy concerns.
The timely filed Petition for
Reconsideration identified flaws in the
Commission’s factual assumptions
underlying section 1.1409(e)(2)(i) of the
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rules as adopted in the 2011 Pole
Attachment Order that would cause that
rule, in practice, to only poorly reflect
the Commission’s intended balancing of
policy objectives. The Petitioners thus
proposed that the Commission, on
reconsideration, revise that rule in a
manner that ‘‘increases the certainty
that pole rates will be as close as
possible to the cable rate, meets the
Commission’s intended purposes, and
makes the calculation more readily
administrable by eliminating the need to
distinguish urbanized and nonurbanized areas.’’ Given that clear nexus
to the 2011 Pole Attachment Order, the
Commission finds the request in the
Petition for Reconsideration to be
squarely within the scope of the order
from which reconsideration is sought,
and the Commission rejects arguments
to the contrary. Furthermore, for the
reasons discussed in the preceding
section, the Commission finds merit in
the Petitioners’ arguments, and thus
concludes that it is in the public interest
not only to consider their Petition but
also to grant their requested
reconsideration.
45. The Commission also rejects
claims that additional notice and
comment is needed before it can
proceed under the theory that the action
in this Order effectively would modify
sections 1.1417(c) and (d) of the rules.
Section 1.1417(c) specifies the
Commission’s rebuttable presumptions
of 5 attaching entities in urbanized areas
and 3 attaching entities in nonurbanized areas. Section 1.1417(d)
describes how a utility can instead
establish its own presumptive average
number of attaching entities, subject to
rebuttal. As a threshold matter, the
Commission is not persuaded by
commenters’ claims that the Petitioners’
proposed revision to section
1.1409(e)(2)(i) would render those rules
‘‘moot.’’ Under the utilities’ own theory,
the Commission-specified presumptions
in section 1.1417(c) would have
increased, rather than diminished,
significance when performing the
section 1.1409(e)(2)(i) calculation
because it would obviate the need for
utilities to expend the effort to develop
their own presumptive average numbers
of attachers if they believe that variation
in the number of attachers would not
matter. Further, although the result of
the calculation in section 1.1409(e)(2)(i)
frequently will be higher than that
yielded by the cost-causation-based
calculation in section 1.1409(e)(2)(ii), its
rules provide for both to be performed,
with the possibility that there will be
cases where the section 1.1409(e)(2)(ii)
calculation is controlling. The outcome
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under section 1.1409(e)(2)(ii)
unquestionably does vary with the
number of attaching entities, and thus
the utilities’ ability to develop their own
presumptive number of attaching
entities under section 1.1417(d) remains
important where the cost-causationbased calculation would be, or could be,
controlling.
46. Although the Commission is not
persuaded that any implications of its
change to section 1.1409(e)(2)(i) of the
rules for sections 1.1417(c) and (d)
constitute substantive rule changes,
even assuming arguendo that they were
viewed in that manner, the Commission
finds there was adequate notice and
opportunity to comment. As noted
above, the Commission’s 2010 Further
Notice sought comment on
‘‘establish[ing] rental rates for pole
attachments that are as low and close to
uniform as possible, consistent with
section 224 of the Act,’’ seeking
comment on particular alternative
approaches and variations that might be
adopted consistent with the
Commission’s statutory responsibilities.
For example, the Further Notice
included requests for comment on a
proposal to revise the telecom rate rule
so that it was the higher of a rate equal
to the cable rate or a cost-causationbased rate, including regarding the
administrability of such an approach
and how it would relate to other
Commission policies. Flowing from that
Further Notice, the 2011 Pole
Attachment Order adopted revisions to
the telecom rate rule, and the Petition
for Reconsideration requested
reconsideration of the resulting rule in
various respects, all within the scope of
the underlying Order. The Commission
sought comment on the Petition for
Reconsideration at the time it was filed,
and provided a further opportunity to
comment on the requested rule changes
subsequent to the Open Internet Order.
The Commission concludes that any
implications for the continuing
significance of section 1.1417(c) and (d)
resulting from its adoption of the
Petitioners’ proposal should have been
understood to be within the scope of
issues subject to comment—indeed,
commenters themselves appear to
suggest that the implications for section
1.1417(c) and (d) are a necessary and
unavoidable consequence of the
adoption of that proposal. As a result,
the Commission concluded that even
assuming arguendo that notice and
comment were required regarding the
effects of a change in section
1.1409(e)(2)(i) on the presumption rules
in section 1.1417(c) and (d), that was
satisfied here.
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IV. Procedural Matters
A. Paperwork Reduction Act Analysis
47. This document does not contain
new or modified information collection
requirements subject to the Paperwork
Reduction Act of 1995 (PRA), Public
Law 104–13. In addition, therefore, it
does not contain any new or modified
information collection burden for small
business concerns with fewer than 25
employees, pursuant to the Small
Business Paperwork Relief Act of 2002,
Public Law 107–198, see 44 U.S.C.
3506(c)(4).
B. Regulatory Flexibility Analysis
48. As required by the Regulatory
Flexibility Act of 1980 (RFA), the
Commission includes in Appendix B a
Supplemental Final Regulatory
Flexibility Analysis (FRFA) relating to
this Order on Reconsideration.
C. Congressional Review Act
49. The Commission will send a copy
of the Order on Reconsideration,
including the FRFA, in a report to be
sent to Congress and the Government
Accountability Office pursuant to the
Congressional Review Act, 5 U.S.C.
801(a)(1).
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D. Final Regulatory Flexibility Analysis
50. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA).
51. An Initial Regulatory Flexibility
Analysis (IRFA) was included in the
Order and Further Notice in WC Docket
No. 07–245 and GN Docket No. 09–51.
The Commission sought written public
comment on the proposals in these
dockets, including comment on the
IRFA. This Final Regulatory Flexibility
Analysis (FRFA) conforms to the RFA.
E. Need for, and Objectives of, the
Proposed Rules
52. In this Order on Reconsideration,
the Commission further implements its
policy of bringing parity to pole
attachment rates at or near the 47 CFR
1.1409(e)(1) cable rate formula level,
including rates that are calculated using
the 47 CFR 1.1409(d)(2) telecom rate
formula. The 2011 Pole Attachment
Order adopted cost allocators in the
telecom rate formula that were intended
to closely approximate the treatment of
cost in the cable rate formula. However,
these allocators perform successfully
only where poles have 5 attaching
entities (0.66 percent of cost) or 3
attaching entities (0.44 percent of cost).
To build on that limited success, the
Commission now adds cost allocators
for poles with 2 attaching entities (0.31
percent of costs) and 4 attaching entities
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(0.56 percent of cost). When the average
number of attaching entities is a
fraction, the applicable cost allocator
will be interpolated from the two closest
whole numbers. In this way, this Order
on Reconsideration spares cable
operators that also provide a
telecommunications service (e.g.,
broadband Internet access service) from
having to pay attachment rates that
would be approximately 70 percent
higher than the rate they pay under the
existing rules. Pole attachment rate
parity at the cable rate level also
harmonizes regulatory treatment
between Commission-regulated states
and states that set their own pole
attachment rates, which prevents any
deterrence to investment in
Commission-regulated states. By
keeping pole attachment rates unified
and low, the Commission furthers its
overarching goal to accelerate
deployment of broadband by removing
barriers to infrastructure investment.
F. Summary of the Significant Issues
Raised by the Public Comments in
Response to the IRFA and Summary of
the Assessment of the Agency of Such
Issues
53. No comments relating to any of
the IRFAs have been filed since the
2011 Pole Attachment Order. In making
the determinations reflected in the
Order on Reconsideration, the
Commission has considered the impact
of its actions on small entities.
G. Description and Estimate of the
Number of Small Entities to Which the
Proposed Rules May Apply
54. The RFA directs agencies to
provide a description of, and where
feasible, an estimate of the number of
small entities that may be affected by
the proposed rules and policies, if
adopted. The RFA generally defines the
term ‘‘small entity’’ as having the same
meaning as the terms ‘‘small business,’’
‘‘small organization,’’ and ‘‘small
governmental jurisdiction.’’ In addition,
the term ‘‘small business’’ has the same
meaning as the term ‘‘small business
concern’’ under the Small Business Act.
A ‘‘small business concern’’ is one
which: (1) Is independently owned and
operated; (2) is not dominant in its field
of operation; and (3) satisfies any
additional criteria established by the
SBA.
55. Small Businesses. As of 2011,
there are a total of approximately 28.2
million small businesses, according to
the SBA.
56. Small Organizations. As of 2007,
there are approximately 1.6 million
small organizations. A ‘‘small
organization’’ is generally ‘‘any not-for-
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profit enterprise which is independently
owned and operated and is not
dominant in its field.’’
57. Small Governmental Jurisdictions.
The term ‘‘small governmental
jurisdiction’’ is defined generally as
‘‘governments of cities, towns,
townships, villages, school districts, or
special districts, with a population of
less than fifty thousand.’’ Census
Bureau data for 2011 indicate that there
were 90,056 local governmental
jurisdictions in the United States. The
Commission estimates that, of this total,
89,327 entities were ‘‘small
governmental jurisdictions.’’ Thus, the
Commission estimates that most
governmental jurisdictions are small.
58. The Commission has included
small incumbent local exchange carriers
in this present RFA analysis. As noted
above, a ‘‘small business’’ under the
RFA is one that, inter alia, meets the
pertinent small business size standard
(e.g., a telephone communications
business having 1,500 or fewer
employees), and ‘‘is not dominant in its
field of operation.’’ The SBA’s Office of
Advocacy contends that, for RFA
purposes, small incumbent local
exchange carriers are not dominant in
their field of operation because any such
dominance is not ‘‘national’’ in scope.
The Commission has therefore included
small incumbent local exchange carriers
in this RFA analysis, although it
emphasize that this RFA action has no
effect on Commission analyses and
determinations in other, non-RFA
contexts.
59. Incumbent Local Exchange
Carriers (‘‘ILECs’’). Neither the
Commission nor the SBA has developed
a small business size standard
specifically for incumbent local
exchange services. The appropriate size
standard under SBA rules is for the
category Wired Telecommunications
Carriers. Under that size standard, such
a business is small if it has 1,500 or
fewer employees. According to
Commission data, 1,311 carriers have
reported that they are engaged in the
provision of incumbent local exchange
services. Of these 1,311 carriers, an
estimated 1,024 have 1,500 or fewer
employees and 287 have more than
1,500 employees. Consequently, the
Commission estimates that most
providers of incumbent local exchange
service are small businesses that may be
affected by its proposed action.
60. Competitive Local Exchange
Carriers (‘‘CLECs’’), Competitive Access
Providers (‘‘CAPs’’), ‘‘Shared-Tenant
Service Providers,’’ and ‘‘Other Local
Service Providers.’’ Neither the
Commission nor the SBA has developed
a small business size standard
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specifically for these service providers.
The appropriate size standard under
SBA rules is for the category Wired
Telecommunications Carriers. Under
that size standard, such a business is
small if it has 1,500 or fewer employees.
According to Commission data, 1005
carriers have reported that they are
engaged in the provision of either
competitive access provider services or
competitive local exchange carrier
services. Of these 1005 carriers, an
estimated 918 have 1,500 or fewer
employees and 87 have more than 1,500
employees. In addition, 16 carriers have
reported that they are ‘‘Shared-Tenant
Service Providers,’’ and all 16 are
estimated to have 1,500 or fewer
employees. In addition, 89 carriers have
reported that they are ‘‘Other Local
Service Providers.’’ Of the 89, all have
1,500 or fewer employees.
Consequently, the Commission
estimates that most providers of
competitive local exchange service,
competitive access providers, ‘‘SharedTenant Service Providers,’’ and ‘‘Other
Local Service Providers’’ are small
entities that may be affected by its
proposed action.
61. Interexchange Carriers (‘‘IXCs’’).
Neither the Commission nor the SBA
has developed a small business size
standard specifically for providers of
interexchange services. The appropriate
size standard under SBA rules is for the
category Wired Telecommunications
Carriers. Under that size standard, such
a business is small if it has 1,500 or
fewer employees. According to
Commission data, 300 carriers have
reported that they are engaged in the
provision of interexchange service. Of
these, an estimated 268 have 1,500 or
fewer employees and 32 have more than
1,500 employees. Consequently, the
Commission estimates that the majority
of IXCs are small entities that may be
affected by its proposed action.
62. Wireless Telecommunications
Carriers (except satellite). This industry
comprises establishments engaged in
operating and maintaining switching
and transmission facilities to provide
communications via the airwaves.
Establishments in this industry have
spectrum licenses and provide services
using that spectrum, such as cellular
phone services, paging services,
wireless Internet access, and wireless
video services. The appropriate size
standard under SBA rules is for the
category Wireless Telecommunications
Carriers (except satellite). For that
category, a business is small if it has
1,500 or fewer employees. For this
category, census data for 2007 show that
there were 1,383 firms that operated for
the entire year. Of this total, 1368 firms
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had employment of fewer than 1000
employees. The Census data about firms
employing more than 1000 employees
does not identify the number of firms
that employed 1500 employees or less.
Thus under this category and the
associated small business size standard,
the Commission estimates that the
majority of wireless telecommunications
carriers (except satellite) are small
entities that may be affected by rules
proposed in the Notice.
63. Wireless Telecommunications
Carriers (except Satellite). Since 2007,
the Census Bureau has placed wireless
firms within this new, broad, economic
census category. Prior to that time, such
firms were within the now-superseded
categories of ‘‘Paging’’ and ‘‘Cellular and
Other Wireless Telecommunications.’’
Under the present and prior categories,
the SBA has deemed a wireless business
to be small if it has 1,500 or fewer
employees. Because Census Bureau data
are not yet available for the new
category, the Commission will estimate
small business prevalence using the
prior categories and associated data. For
the category of Paging, data for 2002
show that there were 807 firms that
operated for the entire year. Of this
total, 804 firms had employment of 999
or fewer employees, and three firms had
employment of 1,000 employees or
more. For the category of Cellular and
Other Wireless Telecommunications,
data for 2002 show that there were 1,397
firms that operated for the entire year.
Of this total, 1,378 firms had
employment of 999 or fewer employees,
and 19 firms had employment of 1,000
employees or more. Thus, the
Commission estimates that the majority
of wireless firms are small.
64. Wireless Telephony. Wireless
telephony includes cellular, personal
communications services, and
specialized mobile radio telephony
carriers. As noted, the SBA has
developed a small business size
standard for Wireless
Telecommunications Carriers (except
Satellite). Under the SBA small business
size standard, a business is small if it
has 1,500 or fewer employees.
According to Trends in telephone
Service data, 413 carriers reported that
they were engaged in wireless
telephony. Of these, an estimated 261
have 1,500 or fewer employees and 152
have more than 1,500 employees.
Therefore, more than half of these
entities can be considered small.
65. Broadband Personal
Communications Service. The
broadband personal communications
services (‘‘PCS’’) spectrum is divided
into six frequency blocks designated A
through F, and the Commission has held
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auctions for each block. The
Commission has created a small
business size standard for Blocks C and
F as an entity that has average gross
revenues of less than $40 million in the
three previous calendar years. For Block
F, an additional small business size
standard for ‘‘very small business’’ was
added and is defined as an entity that,
together with its affiliates, has average
gross revenues of not more than $15
million for the preceding three calendar
years. These small business size
standards, in the context of broadband
PCS auctions, have been approved by
the SBA. No small businesses within the
SBA-approved small business size
standards bid successfully for licenses
in Blocks A and B. There were 90
winning bidders that qualified as small
entities in the Block C auctions. A total
of 93 ‘‘small’’ and ‘‘very small’’ business
bidders won approximately 40 percent
of the 1,479 licenses for Blocks D, E, and
F. In 1999, the Commission reauctioned
155 C, D, E, and F Block licenses; there
were 113 small business winning
bidders.
66. In 2001, the Commission
completed the auction of 422 C and F
Broadband PCS licenses in Auction 35.
Of the 35 winning bidders in this
auction, 29 qualified as ‘‘small’’ or ‘‘very
small’’ businesses. Subsequent events,
concerning Auction 35, including
judicial and agency determinations,
resulted in a total of 163 C and F Block
licenses being available for grant. In
2005, the Commission completed an
auction of 188 C block licenses and 21
F block licenses in Auction 58. There
were 24 winning bidders for 217
licenses. Of the 24 winning bidders, 16
claimed small business status and won
156 licenses. In 2007, the Commission
completed an auction of 33 licenses in
the A, C, and F Blocks in Auction 71.
Of the 14 winning bidders, six were
designated entities. In 2008, the
Commission completed an auction of 20
Broadband PCS licenses in the C, D, E
and F block licenses in Auction 78.
67. Advanced Wireless Services. In
2008, the Commission conducted the
auction of Advanced Wireless Services
(‘‘AWS’’) licenses. This auction, which
as designated as Auction 78, offered 35
licenses in the AWS 1710–1755 MHz
and 2110–2155 MHz bands (‘‘AWS–1’’).
The AWS–1 licenses were licenses for
which there were no winning bids in
Auction 66. That same year, the
Commission completed Auction 78. A
bidder with attributed average annual
gross revenues that exceeded $15
million and did not exceed $40 million
for the preceding three years (‘‘small
business’’) received a 15 percent
discount on its winning bid. A bidder
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with attributed average annual gross
revenues that did not exceed $15
million for the preceding three years
(‘‘very small business’’) received a 25
percent discount on its winning bid. A
bidder that had combined total assets of
less than $500 million and combined
gross revenues of less than $125 million
in each of the last two years qualified
for entrepreneur status. Four winning
bidders that identified themselves as
very small businesses won 17 licenses.
Three of the winning bidders that
identified themselves as a small
business won five licenses.
Additionally, one other winning bidder
that qualified for entrepreneur status
won 2 licenses.
68. Narrowband Personal
Communications Services. In 1994, the
Commission conducted an auction for
Narrowband PCS licenses. A second
auction was also conducted later in
1994. For purposes of the first two
Narrowband PCS auctions, ‘‘small
businesses’’ were entities with average
gross revenues for the prior three
calendar years of $40 million or less.
Through these auctions, the
Commission awarded a total of 41
licenses, 11 of which were obtained by
four small businesses. To ensure
meaningful participation by small
business entities in future auctions, the
Commission adopted a two-tiered small
business size standard in the
Narrowband PCS Second Report and
Order. A ‘‘small business’’ is an entity
that, together with affiliates and
controlling interests, has average gross
revenues for the three preceding years of
not more than $40 million. A ‘‘very
small business’’ is an entity that,
together with affiliates and controlling
interests, has average gross revenues for
the three preceding years of not more
than $15 million. The SBA has
approved these small business size
standards. A third auction was
conducted in 2001. Here, five bidders
won 317 (Metropolitan Trading Areas
and nationwide) licenses. Three of these
claimed status as a small or very small
entity and won 311 licenses.
69. Cellular Radiotelephone Service.
Auction 77 was held to resolve one
group of mutually exclusive
applications for Cellular Radiotelephone
Service licenses for unserved areas in
New Mexico. Bidding credits for
designated entities were not available in
Auction 77. In 2008, the Commission
completed the closed auction of one
unserved service area in the Cellular
Radiotelephone Service, designated as
Auction 77. Auction 77 concluded with
one provisionally winning bid for the
unserved area totaling $25,002.
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70. Fixed Microwave Services. Fixed
microwave services include common
carrier, private operational-fixed, and
broadcast auxiliary radio services. At
present, there are approximately 22,015
common carrier fixed licensees and
61,670 private operational-fixed
licensees and broadcast auxiliary radio
licensees in the microwave services.
The Commission has not created a size
standard for a small business
specifically with respect to fixed
microwave services. For purposes of
this analysis, the Commission uses the
SBA small business size standard for the
category Wireless Telecommunications
Carriers (except Satellite), which is
1,500 or fewer employees. The
Commission does not have data
specifying the number of these licensees
that have no more than 1,500
employees, and thus are unable at this
time to estimate with greater precision
the number of fixed microwave service
licensees that would qualify as small
business concerns under the SBA’s
small business size standard.
Consequently, the Commission
estimates that there are 22,015 or fewer
common carrier fixed licensees and
61,670 or fewer private operationalfixed licensees and broadcast auxiliary
radio licensees in the microwave
services that may be small and may be
affected by the rules and policies
proposed herein. The Commission
notes, however, that the common carrier
microwave fixed licensee category
includes some large entities.
71. Local Multipoint Distribution
Service. Local Multipoint Distribution
Service (‘‘LMDS’’) is a fixed broadband
point-to-multipoint microwave service
that provides for two-way video
telecommunications. The auction of the
986 LMDS licenses began and closed in
1998. The Commission established a
small business size standard for LMDS
licenses as an entity that has average
gross revenues of less than $40 million
in the three previous calendar years. An
additional small business size standard
for ‘‘very small business’’ was added as
an entity that, together with its affiliates,
has average gross revenues of not more
than $15 million for the preceding three
calendar years. The SBA has approved
these small business size standards in
the context of LMDS auctions. There
were 93 winning bidders that qualified
as small entities in the LMDS auctions.
A total of 93 small and very small
business bidders won approximately
277 A Block licenses and 387 B Block
licenses. In 1999, the Commission reauctioned 161 licenses; there were 32
small and very small businesses
winning that won 119 licenses.
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72. Rural Radiotelephone Service. The
Commission has not adopted a size
standard for small businesses specific to
the Rural Radiotelephone Service. A
significant subset of the Rural
Radiotelephone Service is the Basic
Exchange Telephone Radio System
(‘‘BETRS’’). In the present context, the
Commission will use the SBA’s small
business size standard applicable to
Wireless Telecommunications Carriers
(except Satellite), i.e., an entity
employing no more than 1,500 persons.
There are approximately 1,000 licensees
in the Rural Radiotelephone Service,
and the Commission estimates that there
are 1,000 or fewer small entity licensees
in the Rural Radiotelephone Service that
may be affected by the rules and
policies proposed herein.
73. Broadband Radio Service and
Educational Broadband Service.
Broadband Radio Service systems,
previously referred to as Multipoint
Distribution Service (‘‘MDS’’) and
Multichannel Multipoint Distribution
Service (‘‘MMDS’’) systems, and
‘‘wireless cable,’’ transmit video
programming to subscribers and provide
two-way high speed data operations
using the microwave frequencies of the
Broadband Radio Service (‘‘BRS’’) and
Educational Broadband Service (‘‘EBS’’)
(previously referred to as the
Instructional Television Fixed Service
(‘‘ITFS’’)). In connection with the 1996
BRS auction, the Commission
established a small business size
standard as an entity that had annual
average gross revenues of no more than
$40 million in the previous three
calendar years. The BRS auctions
resulted in 67 successful bidders
obtaining licensing opportunities for
493 Basic Trading Areas (‘‘BTAs’’). Of
the 67 auction winners, 61 met the
definition of a small business. BRS also
includes licensees of stations authorized
prior to the auction. At this time, the
Commission estimates that of the 61
small business BRS auction winners, 48
remain small business licensees. In
addition to the 48 small businesses that
hold BTA authorizations, there are
approximately 392 incumbent BRS
licensees that are considered small
entities. After adding the number of
small business auction licensees to the
number of incumbent licensees not
already counted, the Commission finds
that there are currently approximately
440 BRS licensees that are defined as
small businesses under either the SBA
or the Commission’s rules. In 2009, the
Commission conducted Auction 86, the
sale of 78 licenses in the BRS areas. The
Commission offered three levels of
bidding credits: (i) A bidder with
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attributed average annual gross revenues
that exceed $15 million and do not
exceed $40 million for the preceding
three years (small business) will receive
a 15 percent discount on its winning
bid; (ii) a bidder with attributed average
annual gross revenues that exceed $3
million and do not exceed $15 million
for the preceding three years (very small
business) will receive a 25 percent
discount on its winning bid; and (iii) a
bidder with attributed average annual
gross revenues that do not exceed $3
million for the preceding three years
(entrepreneur) will receive a 35 percent
discount on its winning bid. Auction 86
concluded in 2009 with the sale of 61
licenses. Of the ten winning bidders,
two bidders that claimed small business
status won 4 licenses; one bidder that
claimed very small business status won
three licenses; and two bidders that
claimed entrepreneur status won six
licenses.
74. In addition, the SBA’s Cable
Television Distribution Services small
business size standard is applicable to
EBS. There are presently 2,032 EBS
licensees. All but 100 of these licenses
are held by educational institutions.
Educational institutions are included in
this analysis as small entities. Thus, the
Commission estimates that at least 1,932
licensees are small businesses. Since
2007, Cable Television Distribution
Services have been defined within the
broad economic census category of
Wired Telecommunications Carriers;
that category is defined as follows:
‘‘This industry comprises
establishments primarily engaged in
operating and/or providing access to
transmission facilities and infrastructure
that they own and/or lease for the
transmission of voice, data, text, sound,
and video using wired
telecommunications networks.
Transmission facilities may be based on
a single technology or a combination of
technologies.’’ The SBA has developed
a small business size standard for this
category, which is: All such firms
having 1,500 or fewer employees. To
gauge small business prevalence for
these cable services the Commission
must, however, use current census data
that are based on the previous category
of Cable and Other Program Distribution
and its associated size standard; that
size standard was: all such firms having
$13.5 million or less in annual receipts.
According to Census Bureau data for
2002, there were a total of 1,191 firms
in this previous category that operated
for the entire year. Of this total, 1,087
firms had annual receipts of under $10
million, and 43 firms had receipts of
$10 million or more but less than $25
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million. Thus, the majority of these
firms can be considered small.
75. Cable Television Distribution
Services. Since 2007, these services
have been defined within the broad
economic census category of Wired
Telecommunications Carriers; that
category is defined as follows: ‘‘This
industry comprises establishments
primarily engaged in operating and/or
providing access to transmission
facilities and infrastructure that they
own and/or lease for the transmission of
voice, data, text, sound, and video using
wired telecommunications networks.
Transmission facilities may be based on
a single technology or a combination of
technologies.’’ The SBA has developed
a small business size standard for this
category, which is: all such firms having
1,500 or fewer employees. To gauge
small business prevalence for these
cable services the Commission must,
however, use current census data that
are based on the previous category of
Cable and Other Program Distribution
and its associated size standard; that
size standard was: all such firms having
$13.5 million or less in annual receipts.
According to Census Bureau data for
2002, there were a total of 1,191 firms
in this previous category that operated
for the entire year. Of this total, 1,087
firms had annual receipts of under $10
million, and 43 firms had receipts of
$10 million or more but less than $25
million. Thus, the majority of these
firms can be considered small.
76. Cable Companies and Systems.
The Commission has also developed its
own small business size standards, for
the purpose of cable rate regulation.
Under the Commission’s rules, a ‘‘small
cable company’’ is one serving 400,000
or fewer subscribers, nationwide.
Industry data indicate that, of 1,076
cable operators nationwide, all but
eleven are small under this size
standard. In addition, under the
Commission’s rules, a ‘‘small system’’ is
a cable system serving 15,000 or fewer
subscribers. Industry data indicate that,
of 6,635 systems nationwide, 5,802
systems have fewer than 10,000
subscribers, and an additional 302
systems have 10,000–19,999
subscribers. Thus, under this second
size standard, most cable systems are
small.
77. Cable System Operators. The
Communications Act of 1934, as
amended, also contains a size standard
for small cable system operators, which
is ‘‘a cable operator that, directly or
through an affiliate, serves in the
aggregate fewer than 1 percent of all
subscribers in the United States and is
not affiliated with any entity or entities
whose gross annual revenues in the
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aggregate exceed $250,000,000.’’ The
Commission has determined that an
operator serving fewer than 677,000
subscribers shall be deemed a small
operator, if its annual revenues, when
combined with the total annual
revenues of all its affiliates, do not
exceed $250 million in the aggregate.
Industry data indicate that, of 1,076
cable operators nationwide, all but ten
are small under this size standard. The
Commission notes that it neither
requests nor collects information on
whether cable system operators are
affiliated with entities whose gross
annual revenues exceed $250 million,
and therefore the Commission is unable
to estimate more accurately the number
of cable system operators that would
qualify as small under this size
standard.
78. Open Video Systems. The open
video system (OVS) framework was
established in 1996, and is one of four
statutorily recognized options for the
provision of video programming
services by local exchange carriers. The
OVS framework provides opportunities
for the distribution of video
programming other than through cable
systems. Because OVS operators provide
subscription services, OVS falls within
the SBA small business size standard
covering cable services, which is
‘‘Wired Telecommunications Carriers.’’
The SBA has developed a small
business size standard for this category,
which is: all such firms having 1,500 or
fewer employees. To gauge small
business prevalence for such services
the Commission must, however, use
current census data that are based on
the previous category of Cable and
Other Program Distribution and its
associated size standard; that size
standard was: all such firms having
$13.5 million or less in annual receipts.
According to Census Bureau data for
2002, there were a total of 1,191 firms
in this previous category that operated
for the entire year. Of this total, 1,087
firms had annual receipts of under $10
million, and 43 firms had receipts of
$10 million or more but less than $25
million. Thus, the majority of cable
firms can be considered small. In
addition, the Commission notes that the
Commission has certified some OVS
operators, with some now providing
service. Broadband service providers
(‘‘BSPs’’) are currently the only
significant holders of OVS certifications
or local OVS franchises. The
Commission does not have financial or
employment information regarding the
entities authorized to provide OVS,
some of which may not yet be
operational. Thus, again, at least some
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of the OVS operators may qualify as
small entities.
79. Cable Television Relay Service.
This service includes transmitters
generally used to relay cable
programming within cable television
system distribution systems. This cable
service is defined within the broad
economic census category of Wired
Telecommunications Carriers; that
category is defined as follows: ‘‘This
industry comprises establishments
primarily engaged in operating and/or
providing access to transmission
facilities and infrastructure that they
own and/or lease for the transmission of
voice, data, text, sound, and video using
wired telecommunications networks.
Transmission facilities may be based on
a single technology or a combination of
technologies.’’ The SBA has developed
a small business size standard for this
category, which is: all such firms having
1,500 or fewer employees. To gauge
small business prevalence for cable
services the Commission must,
however, use current census data that
are based on the previous category of
Cable and Other Program Distribution
and its associated size standard; that
size standard was: all such firms having
$13.5 million or less in annual receipts.
According to Census Bureau data for
2002, there were a total of 1,191 firms
in this previous category that operated
for the entire year. Of this total, 1,087
firms had annual receipts of under $10
million, and 43 firms had receipts of
$10 million or more but less than $25
million. Thus, the majority of these
firms can be considered small.
80. Multichannel Video Distribution
and Data Service. MVDDS is a terrestrial
fixed microwave service operating in
the 12.2–12.7 GHz band. The
Commission adopted criteria for
defining three groups of small
businesses for purposes of determining
their eligibility for special provisions
such as bidding credits. It defined a very
small business as an entity with average
annual gross revenues not exceeding $3
million for the preceding three years; a
small business as an entity with average
annual gross revenues not exceeding
$15 million for the preceding three
years; and an entrepreneur as an entity
with average annual gross revenues not
exceeding $40 million for the preceding
three years. These definitions were
approved by the SBA. On January 27,
2004, the Commission completed an
auction of 214 MVDDS licenses
(Auction No. 53). In this auction, ten
winning bidders won a total of 192
MVDDS licenses. Eight of the ten
winning bidders claimed small business
status and won 144 of the licenses. The
Commission also held an auction of
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MVDDS licenses on December 7, 2005
(Auction 63). Of the three winning
bidders who won 22 licenses, two
winning bidders, winning 21 of the
licenses, claimed small business status.
81. Internet Service Providers. The
2007 Economic Census places these
firms, whose services might include
voice over Internet protocol (VoIP), in
either of two categories, depending on
whether the service is provided over the
provider’s own telecommunications
connections (e.g. cable and DSL, ISPs),
or over client-supplied
telecommunications connections (e.g.
dial-up ISPs). The former are within the
category of Wired Telecommunications
Carriers, which has an SBA small
business size standard of 1,500 or fewer
employees. The latter are within the
category of All Other
Telecommunications, which has a size
standard of annual receipts of $25
million or less. The most current Census
Bureau data for all such firms, however,
are the 2002 data for the previous
census category called Internet Service
Providers. That category had a small
business size standard of $21 million or
less in annual receipts, which was
revised in late 2005 to $23 million. The
2002 data show that there were 2,529
such firms that operated for the entire
year. Of those, 2,437 firms had annual
receipts of under $10 million, and an
additional 47 firms had receipts of
between $10 million and $24,999,999.
Consequently, the Commission
estimates that the majority of ISP firms
are small entities.
82. Electric Power Generation,
Transmission and Distribution. The
Census Bureau defines this category as
follows: ‘‘This industry group comprises
establishments primarily engaged in
generating, transmitting, and/or
distributing electric power.
Establishments in this industry group
may perform one or more of the
following activities: (1) operate
generation facilities that produce
electric energy; (2) operate transmission
systems that convey the electricity from
the generation facility to the distribution
system; and (3) operate distribution
systems that convey electric power
received from the generation facility or
the transmission system to the final
consumer.’’ This category includes
Electric Power Distribution,
Hydroelectric Power Generation, Fossil
Fuel Power Generation, Nuclear Electric
Power Generation, and Other Electric
Power Generation. The SBA has
developed a small business size
standard for firms in this category: ‘‘A
firm is small if, including its affiliates,
it is primarily engaged in the generation,
transmission, and/or distribution of
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5617
electric energy for sale and its total
electric output for the preceding fiscal
year did not exceed 4 million megawatt
hours.’’ According to Census Bureau
data for 2002, there were 1,644 firms in
this category that operated for the entire
year. Census data do not track electric
output and the Commission has not
determined how many of these firms fit
the SBA size standard for small, with no
more than 4 million megawatt hours of
electric output. Consequently, the
Commission estimates that 1,644 or
fewer firms may be considered small
under the SBA small business size
standard.
83. Natural Gas Distribution. This
economic census category comprises:
‘‘(1) establishments primarily engaged
in operating gas distribution systems
(e.g., mains, meters); (2) establishments
known as gas marketers that buy gas
from the well and sell it to a distribution
system; (3) establishments known as gas
brokers or agents that arrange the sale of
gas over gas distribution systems
operated by others; and (4)
establishments primarily engaged in
transmitting and distributing gas to final
consumers.’’ The SBA has developed a
small business size standard for this
industry, which is: all such firms having
500 or fewer employees. According to
Census Bureau data for 2002, there were
468 firms in this category that operated
for the entire year. Of this total, 424
firms had employment of fewer than
500 employees, and 18 firms had
employment of 500 to 999 employees.
Thus, the majority of firms in this
category can be considered small.
84. Water Supply and Irrigation
Systems. This economic census category
‘‘comprises establishments primarily
engaged in operating water treatment
plants and/or operating water supply
systems.’’ The SBA has developed a
small business size standard for this
industry, which is: all such firms having
$6.5 million or less in Annual receipts.
According to Census Bureau data for
2002, there were 3,830 firms in this
category that operated for the entire
year. Of this total, 3,757 firms had
annual sales of less than $5 million, and
37 firms had sales of $5 million or more
but less than $10 million. Thus, the
majority of firms in this category can be
considered small.
H. Description of Projected Reporting,
Recordkeeping and Other Compliance
Requirements
85. The new rule concerns a cost
allocation method that parties use in a
formula when negotiating just and
reasonable pole attachment rental rates.
Application of the cost allocation rule is
expanded but not altered from the cost
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allocation rule that parties currently
use. The Commission expects the cost of
complying with the revised cost
allocation rule to be minimal, and
compliance costs do not significantly
differ from requirements in place before
the adoption of this Order on
Reconsideration.
I. Steps Taken To Minimize Significant
Economic Impact on Small Entities, and
Significant Alternatives Considered
86. The RFA requires an agency to
describe any significant alternatives that
it has considered in reaching its
proposed approach, which may include
(among others) the following four
alternatives: (1) The establishment of
differing compliance or reporting
requirements or timetables that take into
account the resources available to small
entities; (2) the clarification,
consolidation, or simplification of
compliance or reporting requirements
under the rule for small entities; (3) the
use of performance, rather than design,
standards; and (4) an exemption from
coverage of the rule, or any part thereof,
for small entities. Cost allocation
methodologies used in pole attachment
rate formulas are by nature the same for
all entities that use them, regardless of
size. No party suggested that the
Commission develop alternative
approaches to cost allocation based on
entity size.
J. Federal Rules That May Duplicate,
Overlap, or Conflict With the Proposed
Rules
87. None.
V. Ordering Clauses
88. Accordingly, it is ordered that
pursuant to sections 1, 4(i), 4(j), 201(b),
224, 251(b)(4), and 303(r), of the
Communications Act of 1934, as
*
*
*
*
amended, 47 U.S.C. 151, 154(i), 154(j),
201(b), 224, 251(b)(4), 303(r), this Order
on Reconsideration IS ADOPTED.
89. It is further ordered, pursuant to
sections 1, 4(i), 4(j), 201(b), 224, and
303(r), of the Communications Act, as
amended, as amended, 47 U.S.C. 151,
154(i), 154(j), 201(b), 224, 303(r), that
the Petition for Reconsideration or
Clarification filed by the National Cable
and Telecommunications Association,
COMPTEL, and tw telecom inc., is
GRANTED to the extent indicated
herein, and otherwise is DISMISSED.
90. It is further ordered that Part 1 of
the Commission’s rules IS AMENDED as
set forth in Appendix A.
91. it is further ordered that, pursuant
to sections 1.4(b)(1) and 1.103(a) of the
Commission’s rules, 47 CFR 1.4(b)(1),
1.103(a), this Order on Reconsideration
shall be effective 30 days after
publication of a summary in the Federal
Register.
92. It is further ordered that the
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, shall send a copy of
this Order on Reconsideration,
including the Supplemental Final
Regulatory Flexibility Analysis, to the
Chief Counsel for Advocacy of the Small
Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary, Office of the Secretary.
Final Rule
For the reasons discussed in the
preamble, the Federal Communications
Commission amends 47 CFR part 1
Subpart J as follows:
PART 1—PRACTICE AND
PROCEDURE
1. The authority citation for part 1
continues to read as follows:
■
Authority: 15 U.S.C. 79, et seq.; 47 U.S.C.
151, 154(i), 154(j), 155, 157, 160, 201, 225,
227, 303, 309, 332, 1403, 1404, 1451, 1452,
and 1455.
Subpart J—Pole Attachment Complaint
Procedures
2. Section 1.1409 is amended by
revising paragraph (e)(2)(i) to read as
follows:
■
§ 1.1409 Commission consideration of the
complaint.
*
*
*
*
*
(e) * * *
(2) * * *
(i) The following formula applies to
the extent that it yields a rate higher
than that yielded by the applicable
formula in paragraph 1.1409(e)(2)(ii) of
this section:
Rate = Space Factor × Cost
Where Cost
in Service Areas where the number of
Attaching Entities is 5 = 0.66 × (Net Cost
of a Bare Pole x Carrying Charge Rate)
in Service Areas where the number of
Attaching Entities is 4 = 0.56 × (Net Cost
of a Bare Pole x Carrying Charge Rate)
in Service Areas where the number of
Attaching Entities is 3 = 0.44 × (Net Cost
of a Bare Pole x Carrying Charge Rate)
in Service Areas where the number of
Attaching Entities is 2 = 0.31 × (Net Cost
of a Bare Pole x Carrying Charge Rate)
in Service Areas where the number of
Attaching Entities is not a whole number
= N × (Net Cost of a Bare Pole × Carrying
Charge Rate), where N is interpolated
from the cost allocator associated with
the nearest whole numbers above and
below the number of Attaching Entities.
*
[FR Doc. 2016–01182 Filed 2–2–16; 8:45 am]
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BILLING CODE 6712–01–P
Agencies
[Federal Register Volume 81, Number 22 (Wednesday, February 3, 2016)]
[Rules and Regulations]
[Pages 5605-5618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01182]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 1
[GN Docket No. 09-51, WC Docket No. 07-25; FCC 15-151]
Pole Attachment Rates
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Commission builds on its prior efforts
to harmonize pole attachment rates that cable and telecom service
providers pay utility pole owners. The Communications Act of 1934, as
amended (Act), contains two formulas for calculating pole attachment
rates, a formula adopted in 1978 applicable to cable television systems
solely providing cable service, and a formula adopted in 1996
applicable to telecommunications carriers providing telecommunications
service.
DATES: Effective April 1, 2016.
ADDRESSES: You may submit comments, identified by WC Docket No. 07-245,
GN Docket No. 09-51 and FCC 15-151, by any of the following methods:
Federal Communications Commission's Web site: https://apps.fcc.gov/ecfs/. Follow the instructions for submitting comments.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
FOR FURTHER INFORMATION CONTACT: Jonathan Reel, Wireline Competition
Bureau, Competition Policy Division, (202) 418-0637, or send an email
to jonathan.reel@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order
on Reconsideration in GN Docket No. 09-51, WC Docket No. 07-245, and
FCC 15-151, adopted November 17, 2015 and released November 24, 2015.
The full text of this document is available for public inspection
during regular business hours in the FCC Reference Information Center,
Portals II, 445 12th Street SW., Room CY-A257, Washington, DC 20554. It
is available on the Commission's Web site at https://www.fcc.gov.
I. Introduction
1. In this Order on Reconsideration (Order), the Commission builds
on its prior efforts to harmonize pole attachment rates that cable and
telecom service providers pay utility pole owners. The Communications
Act of 1934, as amended (Act), contains two formulas for calculating
pole attachment rates, a formula adopted in 1978 applicable to cable
television systems solely providing cable service, and a formula
adopted in 1996 applicable to telecommunications carriers providing
telecommunications service. Following the implementation of the 1996
Act through 2011, rates calculated using the telecom rate formula have
typically been higher than rates calculated using the cable formula in
similar circumstances. In 2011, the Commission revised the formulas as
described in greater detail below to improve efficiency, reduce
potentially excessive costs of network deployment and accelerate
broadband buildout, and eliminate the wide disparity between the
telecom and cable rate formulas. The 2011 revisions sought to bring the
telecom and cable rates into parity. In the intervening time, the
Commission has seen that its revisions did not fully achieve that
objective. Today, the Commission takes the next logical step in
achieving the goals set forth in 2011.
2. As detailed below, the Commission takes these actions in
response to a Petition for Reconsideration or Clarification in this
proceeding. The rule revisions that the Commission adopts amend the
Commission's rules by defining ``cost,'' for the purpose of calculating
the rates that telecommunications carriers pay for pole attachments, as
a percentage of fully allocated costs that will depend on whether the
average number of attaching entities in a service area is 2, 3, 4, or
5. The rates that attachers pay to attach to poles are currently
determined, among other things, by whether the attacher is a ``cable
television system solely . . . provid[ing] cable service'' or a
``telecommunications
[[Page 5606]]
carrier providing telecommunications services.'' The Commission, in its
2011 Report and Order and Order on Reconsideration in this proceeding
(2011 Pole Attachment Order) 80 FR 27626-01, May 14, 2015, sought to
bring parity to pole attachment rates calculated using the telecom or
cable rate formula so that all attachments rates would be at or near
the cable rate formula level. The 2011 Pole Attachment Order adopted
cost allocators in the telecom rate formula that closely approximate
the treatment of cost in the cable rate formula. However, these
allocators applied only in situations where poles have 5 attaching
entities (0.66 percent of cost) or 3 attaching entities (0.44 percent
of cost). On June 8, 2011, the National Cable and Telecommunications
Association (NCTA), COMPTEL, and tw telecom inc. (Petitioners) filed a
petition for reconsideration or clarification of the rules adopted in
the 2011 Pole Attachment Order, asking the Commission either to clarify
that 66 percent and 44 percent are ``illustrations'' of the new rule,
or to revise the rules to ``provide corresponding cost adjustments to
other entity counts.''
3. In response to NCTA's petition, and to the record developed in
this proceeding, Commission now introduces new cost allocators for
poles with 2 attaching entities (0.31 percent of costs) and 4 attaching
entities (0.56 percent of cost). When the average number of attaching
entities is a fraction, the percentage cost allocator will be located
between the whole numbers at the point where it most closely
approximates the cost used in the cable rate formula. This flexible
series of cost allocators should more fully realize the intent of the
Commission in its 2011 Pole Attachment Order to bring parity to pole
attachment rates at the cable rate formula level. The Commission also
adopts this definition of cost to prevent pole owners from charging
cable operators that also provide telecommunications service (including
broadband Internet access service) pole attachment rental rates that
can be approximately 70 percent higher than the cable rate under its
existing rules.
4. The Commission additionally acts to support incentives for
deployment of broadband facilities, particularly in rural areas, and to
harmonize regulatory treatment between states where the Commission
regulates the rates, terms, and conditions for pole attachments and
states where such matters are regulated by the state. Subjecting cable
operators to higher pole attachment rates merely because they also
provide telecommunications services, such as broadband Internet access,
could deter investment in states subject to Commission pole regulation,
which would undermine the Commission's broadband deployment policy. By
keeping pole attachment rates unified and low, the Commission furthers
its overarching goal to accelerate deployment of broadband by removing
barriers to infrastructure investment and promoting competition.
II. Background
5. On April 7, 2011, in its 2011 Pole Attachment Order, the
Commission comprehensively revised its rules governing the attachment
of cable and telecommunications facilities to utility poles. The 2011
Pole Attachment Order contains a comprehensive background section
outlining pole attachment policy developments through 2011. Commission
does not repeat that material herein. Instead, Commission incorporates
that history by reference here, and preserves a brief background
section outlining and describing the provisions, orders, and cases
germane to this Order on Reconsideration.
6. In 1978, Congress added section 224 to the Act. As established
in 1978, section 224 directed the Commission to ensure that the rates,
terms, and conditions of attaching cable television systems' facilities
to utility-owned poles were just and reasonable. Section 224 also
identified the maximum rate for pole attachments as a percentage of
fully-allocated costs. In 1987, the U.S. Supreme Court found that the
cable rate formula adopted by the Commission provides pole owners with
adequate compensation, and thus does not result in an unconstitutional
taking.
7. The 1996 Act expanded the definition of pole attachments to
include attachments by providers of telecommunications service, and
granted both cable operators and telecommunications carriers an
affirmative right of access to utility poles. The 1996 Act also
included a separate provision for calculating a cost-based rate paid by
telecommunications carriers--the telecom rate formula--which
incorporates ``the cost of providing space on a pole.'' As implemented
by the Commission, the telecom rate formula generally resulted in
significantly higher pole rental rates than rates derived from the
cable rate formula. The Commission concluded that cable systems that
provided Internet access in addition to video services should continue
to pay the cable rate; that conclusion was reversed on appeal but later
upheld by the Supreme Court.
8. In the intervening years, the Commission considered a variety of
possible reforms to its pole attachment regulations in light of their
importance to the deployment of communications networks. The Commission
issued a Notice of Proposed Rulemaking in 2007, to respond to petitions
for rulemaking regarding pole access and incumbent LEC pole attachment
issues, and to seek comment on pole rate issues. In 2010, in response
to a directive in the American Recovery and Reinvestment Act of 2009,
the Commission released the National Broadband Plan (NBP), identifying
access to rights-of-way--including access to poles--as having a
significant impact on the deployment of broadband networks.
Accordingly, the NBP included several recommendations regarding pole
attachment access, enforcement, and pricing policies to further advance
broadband deployment. Following on the recommendations in the NBP, in
its 2010 Further Notice the Commission sought comment on a variety of
measures to speed access to poles and make pole rental rates as low and
close to uniform as possible consistent with section 224 of the Act.
9. In the 2011 Pole Attachment Order, the Commission sought, in
pertinent part, to significantly reform its telecom rate regulations by
reinterpreting the ambiguous term ``cost'' in the telecom rate formula
in section 224(e) of the Act to yield telecom attachment rates
``lowered to more effectively achieve Congress' goals under the 1996
Act to promote competition and `advanced telecommunications capability'
by both wired and wireless providers by `remov[ing] barriers to
infrastructure investment.' '' In particular, the Commission sought to
``balance the goals of promoting broadband [deployment] . . . with the
historical role that pole rental rates have played in supporting the
investment in pole infrastructure.''
10. In order to promote broadband while ensuring that attaching
entities continue to support the poles on which they depend, the 2011
Pole Attachment Order adopted alternative methods for measuring cost,
and provided that the method producing the higher rate is the one the
parties use. Utilities thus receive the benefit of any difference
between the methods. In this way, the Commission recognizes that
telecommunications attachers have historically contributed to the
capital costs of the pole network, and that the new telecom rate should
not ``unduly burden [utility] ratepayers.'' Balancing the Commission
decided under the first
[[Page 5607]]
of two acceptable methodologies to ``allow the pole owner to charge a
monthly pole rental rate that reflects some contribution to capital
costs'' while also reducing the telecom rate. The Commission settled on
an approach that defines costs ``in terms of a percentage of the fully-
allocated costs'' of the pole--specifically, 66 percent of fully-
allocated costs in urban areas and 44 percent in non-urban areas. This
measure of cost produces a rate that the Commission expected, based on
the premise that the Commission's presumptive number of attachers would
not be rebutted, ``[would], in general, approximate the cable rate''
and thereby promote network investment and broadband deployment.
11. The Commission also established a second, alternative measure
of cost that utilities may use. This alternative approach is based on
the principle of ``cost causation,'' under which the ``customer--the
cost causer--pays a rate that covers'' the costs for which it is
``causally responsible.'' Under this approach, a pole owner may recover
its administrative and maintenance costs through the telecom rate, but
not capital costs other than those associated with make-ready expenses.
The Commission also noted that capital costs caused by a
telecommunications attacher have long been recovered through make-ready
charges, which ``the utility itself sets'' without regard to ``any
mandatory rate formula set by the Commission.'' Other capital costs
(i.e., rate of return, taxes, and depreciation) are properly excluded
under a cost-causation approach because the pole owner would have
incurred those costs ``regardless of the demand for attachments.''
Although the ``percentage of fully-allocated costs'' measure of cost
discussed above will produce a higher telecom rate ``in most cases,''
if the cost causation-based approach yields a higher rate, utilities
are allowed to charge up to that rate.
12. On February 26, 2013, the U.S. Court of Appeals for the D.C.
Circuit (D.C. Circuit) rejected utilities' challenge to the
Commission's action to bring the traditionally higher telecom rate more
in line with the cable rate, concluding that ``[b]ecause the
Commission's methodology is consistent with the unspecified cost terms
contained in section 224(e), and the Commission's justifications are
reasonable, the revision [to the telecom rate formula] warrants
judicial deference.'' In particular, the court observed that section
224(e) is ``less specific'' than section 224(d) in prescribing how the
statutory rate formula should be implemented. The court agreed with the
Commission that ``the term `cost' in section 224(e)(2) and (3) is
necessarily ambiguous, and could thus `yield a range of rates from the
existing fully-allocated cost approach at the high end to a rate closer
to incremental cost at the low end.''' The D.C. Circuit thus affirmed
the Commission's interpretation and implementation of section 224(e).
13. On June 8, 2011, Petitioners filed the NCTA Petition, seeking
reconsideration or clarification of the newly adopted cost allocation
rule. The NCTA Petition points out that, when paired with the
Commission's presumptive numbers of attachers (5 in urbanized and 3 in
non-urbanized areas), the 66 percent and 44 percent cost allocators
almost exactly reproduce the 7.4 percent of costs used as an input in
the cable rate formula. The Petitioners report, however, that pole
owners in fact often rebut the Commission's presumptions with much
lower average numbers. For example, if the owner rebuts the urban
presumption (5 attaching entities) with an actual count average of 2.6
attaching entities, the telecom rate can be as much as 70 percent
higher than the cable rate. To ``achieve the Commission's goal of
providing pole attachment rates that are close to uniform as possible,
and to ensure that all attachers contribute similar costs to pole
owners,'' the Petitioners ask the Commission to address this gap
between the intended effect of the cost allocators and their function
as applied by ceasing to distinguish between urbanized and non-
urbanized areas.
14. Specifically, the Petitioners ask the Commission either to
clarify that 66 percent and 44 percent are mere illustrations of the
new rule, or to revise the rule to ``provide corresponding cost
adjustments to other entity counts.'' The NCTA Petition presents a
model rule with additional cost allocators for 4 and 2 attachments,
each of which aligns costs with the Commission's cable rate formula as
effectively as the current rule does for the Commission's presumptive
averages of 5 urbanized and 3 non-urbanized attachments. In service
areas where the number of attaching entities is not a whole number,
petitioners' proposed cost allocator would be interpolated from the
allocators of the nearest whole numbers of attaching entities. On June
20, 2011, the Commission sought comment on the NCTA Petition.
15. On February 26, 2015, the Commission adopted the Open Internet
Order, which, among other things, concluded that ``retail broadband
Internet access service is best understood today as an offering of a
`telecommunications service.' '' The Open Internet Order made clear
that it did ``not itself require any party to increase the pole
attachment rates it charges to attachers providing broadband Internet
access service.'' A possible interpretation of the Order, however,
could be that cable systems that also provide broadband Internet access
service and previously were subject to the cable rate formula are now
subject to the telecom rate formula. In the Open Internet Order, the
Commission noted that Petitioners had already expressed concern that
revisions to the telecom formula only fulfilled the Commission's
expressed intent in the limited circumstances when there are either 5
or 3 attaching entities on a pole. The Commission stated in the Open
Internet Order that, ``[t]o the extent that there is a potential for an
increase in pole attachment rates for cable operators that also provide
broadband Internet access service, we are highly concerned about its
effect on the positive investment incentives that arise from new
providers' access to pole infrastructure.'' In short, the Commission
made plain that it took seriously parties' concerns that
reclassification could have unintended consequences for pole attachment
rates, and that this Petition might present an effective vehicle for
giving the issue a closer look. In light of this development, parties
were asked to refresh the record with regard to the NCTA Petition.
III. Discussion
16. The Commission adopts the Petitioners' proposal to broaden the
use of cost allocators in the telecom rate formula. Specifically, the
Commission adds cost allocators for poles with 2 and 4 attaching
entities to augment the current cost allocators that target poles with
3 and 5 attaching entities. The Commission also provides that, for
fractional attaching-entity averages, cost allocators are to be
interpolated from the whole-number cost allocators. The Commission
takes this step to further its goal of promoting consistent, cross-
industry attachment rates that encourage deployment and adoption of
broadband Internet access services by fulfilling the Commission's
intent, expressed clearly in 2011 and upheld in court in 2013, to bring
cable and telecom rates for pole attachments into parity at the cable-
rate level.
A. The Petitioner's Proposal Solves the Problem of Rate Disparity
17. The Petitioners maintain, and the Commission agrees, that the
cost allocators adopted in the 2011 Pole Attachment Order perform as
intended,
[[Page 5608]]
but only if the actual average numbers of attaching entities coincide
with the Commission's presumptive average numbers of attaching
entities. As NCTA recognizes, the cost allocators in the 2011 Pole
Attachment Order reflect and embody these presumptive averages. When
0.66 percent and .044 percent of fully-allocated costs are applied in
tandem with the Commission's presumptions of 5 and 3 attaching entities
in urban and non-urban areas, respectively, the results approximate
cable rate formula outcomes, as intended.
18. There is widespread agreement that the real average number of
attaching entities is regularly far lower than the Commission's
presumptions, and that this disparity causes rates calculated with the
telecom rate formula to be around 70 percent higher than rates
calculated with the cable rate formula. NCTA also reports that, in
reality, pole owners routinely rebut the Commission's presumptions with
averages such as 2.6 attaching entities. No commenter disputes NCTA's
claim or alleges that the number ``2.6'' is an outlier. Verizon reports
several similarly frequent rebuttals to attacher numbers below three.
Averages of 2.6 attaching entities rebut both the urban and non-
urbanized presumptions, which casts doubt not only on the credibility
of the presumptions, but on the validity of the underlying urbanized/
non-urbanized distinction as well. Rebuttals that consistently show
lower average numbers based on tracking actual attachments may reflect
the fact that, under its rules, service territories count as ``urban''
if any part of them is urban. This approach dilutes the density of
these nominally urban areas, and undercuts the Commission's original
assumption that such areas would likely have a higher average of
attaching entities.
19. Recognizing that the rate reforms of 2011 have failed to align
the results of the two pole attachment rate formulas as fully as
intended, the Commission adopts the Petitioners' proposal as a template
for corrective measures. By introducing new cost allocators of 0.31
percent and 0.56 percent for poles with 2 and 4 attaching entities
respectively, with interpolated allocators between the closest whole
numbers for fractional averages, the Commission brings parity to pole
attachment rates at the cable rate formula level. The Petitioners'
proposed solution does not require us to revisit the presumptions
themselves; these continue to perform as intended with the 66% and 44%
cost allocators that the Commission adopted in 2011. The Commission
therefore retains the presumptions for the same reasons the Commission
adopted them in 2011: to ``expedite the process'' and to help utilities
``avert the expense'' of applying demographic categories. Broadening
the effect of the cost allocation system as the NCTA Petition proposes
will greatly reduce the effect of, and the need for, the rebuttals.
This approach to defining ``cost'' for purposes of the telecom rate
formula achieves results that are consistently close to the cable rate.
The new system also satisfies the fundamental purposes for using
presumptions: To reduce reporting and recordkeeping requirements, to
minimize administrative burdens, and to provide a level of
predictability and efficiency in calculating the appropriate rate.
B. The Reasons To Revise the Cost Allocation System
20. The Commission adopts this multiple cost-allocator approach for
the same reasons that motivated the initial (but ultimately incomplete)
reforms in 2011: To advance the deployment and adoption of broadband
Internet access, which remains a fundamental policy goal that guides
its implementation of the telecom rate formula. The Commission
recognizes that pole rental rates are but one of many considerations
underlying marketplace deployment decisions. That said, the Commission
promotes broadband deployment on numerous fronts, and has sought public
comment and advice on other measures to advance this overarching
policy. When discussing pole attachments policy, the Commission refers
consistently to incentives for investment. By the same token, it
remains the Commission's policy to minimize disincentives to
investment, including artificially high pole attachment rates. Lower
pole rental rates serve to encourage broadband investment, and
Commission continues to use its section 224 authority as one of the
tools it brings to bear to on its broadband goals. The Commission also
continues to support and subsidize deployment of broadband Internet
access in high-cost areas. In contrast, increased pole attachment rates
would ultimately be recovered from consumers, and could lead some
consumers to cut back or even discontinue their service. Thus, the
Commission views pole attachment rate reform as part of the
Commission's fundamental mission to advance the availability and
adoption of broadband in America.
21. The Commission also intends this action to avoid the unintended
consequence of higher pole attachment rates for cable providers that
also offer broadband Internet access service, in those cases where the
utility rebuts the Commission's attaching party presumptions. Comcast,
for example, asserts that ``[a]bsent grant of the NCTA/COMPTEL
Petition, a costly and time consuming process will ensue whereby
utilities will seek to rebut the Commission's attaching entity
presumptions, and cable operator attachers will then seek to refute the
utilities' attachment studies.'' And NCTA observes that, because most
cable operators may become subject to the telecom rate, and large
numbers of associated attachments are implicated, utilities would have
increased incentives to rebut the Commission's presumed number of
attachers in areas where they had not done so previously. As a result,
this could lead to pole rate increases for both cable operators and
pre-existing telecommunications carriers in those areas. In the Open
Internet Order, the Commission acknowledged that reclassification could
lead to attempted increases in pole attachment rates, and stated its
intention to avoid such an increase. Aligning rates produced by the two
rate formulas forestalls this potential increase.
22. The Commission also is concerned that unless it closes what one
commenter refers to as the ``telecom formula loophole,'' the resulting
rate disparity would, more broadly, frustrate the Commission's policy
goals by artificially and incrementally deterring investment in states
subject to Commission pole regulation in favor of investment in areas
with more favorable state-regulated pole attachment regimes. As the
Commission previously has observed, ``[c]ommenters report that many
[states that have elected to exercise jurisdiction over pole
attachments in lieu of the Commission] apply a uniform rate for all
attachments used to provide cable and telecommunications services, and
have done so by establishing a rate identical or similar to the
Commission's cable rate formula.'' Thus, if the Commission's telecom
rate frequently yielded rates materially above the cable rate,
telecommunications service providers that operate in multiple states or
are deciding where to enter the marketplace, would have an artificial
disincentive to invest in states governed by the Commission's 2011
telecom rate rule relative to states that established a uniform rate
identical or similar to the Commission's cable rate formula. Although
the Commission's action in this Order will not guarantee complete
[[Page 5609]]
state-to-state uniformity, seeking to address artificial marketplace
distortions in the manner that it does here, rather than via a higher
telecom rate, accords with the Commission's broadband mandate and its
overall policy balancing in this context.
23. Moreover, the record developed here demonstrates that pole
owners routinely rebut the Commission presumptions with averages close
to 2.6 attachers. This means that the Commission's standard examples of
telecom rates, which presuppose fully-allocated costs and use the
Commission's presumptions, have seriously underestimated the pre-reform
disparity between cable- and telecom-rate outcomes. In this proceeding,
the Commission has compared estimated telecom costs of 11.2 percent in
urban areas and 16.9 percent in non-urban areas with fixed cable costs
of 7.4 percent. Applying the 2.6 cost allocator that the record
supports shows that the telecom rate formula cost estimate would have
been 19.1 percent for both urban and rural areas. The discrepancy
between the presumed numbers of attachers (5 in urban areas and 3 in
rural areas) and actual numbers of attachers used in pole owner
rebuttals and reported in the record (often at or close to 2.6)
illustrates the substantial problem attachers face when applying the
rate reform of the Commission's 2011 Pole Attachment Order.
24. Along with the forgoing policy considerations, the Commission
continues to seek to balance the ``legitimate concerns of pole owners
and other parties'' by preserving incentives to invest in poles and
avoiding the imposition of an undue burden on utility ratepayers. In
2011, the Commission ultimately concluded that the level of recovery
provided by the cable rate best balanced its broadband deployment
mandates and the concerns of pole owners and utility ratepayers.
Consistent with that analysis, the Commission explains above that the
cable rate frequently is lower than the telecom rate as it previously
had been implemented by the Commission, and reducing the telecom rate
to cable rate level would further numerous policy goals. The Commission
further observed that the cable rate had not produced a ``shortage of
pole capacity,'' and, therefore, approximating that rate in the telecom
formula likely would not diminish pole owners' ``incentives to invest
in poles.'' The Commission also found ``persuasive the views of
consumer advocates . . . recommend[ing] that the cable rate `should be
used for all pole attachments.' ''
25. The Commission thus remains persuaded that utility cost
recovery at the level of the cable rate best balances the relevant
policy considerations. Consequently, the Commission rejects arguments
that the rule revision, which will more consistently and accurately
ensure that the Commission's policy goals are achieved, will somehow
upset the Commission's intended balance, unfairly burden utility
ratepayers, or undermine the sharing of infrastructure costs. Likewise,
while some commenters observe that other aspects of the 2011 Pole
Attachment Order put downward pressure on the revenues electric
utilities receive from incumbent LEC attachers, the Commission already
accounted for that likelihood in its weighing of policies and
conclusion that it was appropriate to permit capital cost recovery at
the same level as under the cable rate.
26. Utilities dismiss this policy balancing on several grounds,
none of which persuade the Commission. The Utilities Telecom Council
(UTC) argues that pole attachment rental is insignificant compared to
other operating costs of large cable companies. Electric Utilities
state that capital expenditure, and not pole attachment rental, drives
deployment, and that pole attachment rental accounts for less than 2
percent of the cost of deploying fiber optic cable. UTC argues that
there has been only a slow rate of broadband deployment since the
telecom rate was adjusted in 2011, which proves the futility of
lowering pole attachment rates, and that any cost savings from lower
pole attachment rates have not been passed on to consumers, but rather,
as a result of industry consolidation, have been pocketed by providers
instead.
27. The Commission is skeptical that sums alleged to ``unfairly and
negatively impact utilities and their ratepayers'' are
``insignificant'' in the context of broadband deployment. While the
record does not include quantifiable information regarding the exact
effect on deployment of pole attachment rates, insofar as keeping
attachment rates reasonable for cable companies prevents them from
shelving even a small number of projects, the Commission would not
consider that result ``insignificant.'' There remains room for
improvement in the rate of broadband expansion, and the Commission
cannot afford to dismiss the importance of even potentially small
increments. Commenters state that cable companies continue to deploy
facilities, and Commission intend to avert any destabilization of those
plans that might arise from a large and sudden pole attachment rate
increase. The Commission is particularly mindful of the potential for
harm to rural areas, which are the least served areas in the nation,
and where the most additional pole attachments are needed to reach
additional customers.
28. Utilities further argue that granting the NCTA Petition would
unfairly reduce their revenue from pole attachments. They argue that
the 2011 Pole Attachments Order has already reduced their recovery from
the telecommunications rate, and expect that their revenue from
broadband-only Internet service providers will also decline. The
Commission finds these arguments unpersuasive. Telecommunications
carriers account for only a little more that 10 percent of attaching
entities. Leveling their rate down to the cable rate disrupts settled
expectations far less than leveling up the rental rate for the much
greater number of cable attachments. Although it is true that the new
system will tend to lower rates negotiated under the telecom rate
formula, they will settle at the level the Commission aimed for in
2011, when its stated goal was to ``minimize the difference in rental
rates paid for attachments that are used to provide voice, data, and
video services.''
29. Utilities argue that increasing demand for pole space should
lead to increased prices, and that any downward rate adjustment runs
counter to economic principles. The Commission attaches no significance
to this assertion. The express reason for the statutory imposition of
cost-based, regulated rates is to bypass the economic principle that ``
`public utilities by virtue of their size and exclusive control over
access to pole lines, are unquestionably in a position to extract
monopoly rents . . . in the form of unreasonably high pole attachment
rates.' '' By enacting cost-based rate formulas, Congress has already
accounted for the economics of scarcity that so favor pole owners.
Attachment rates agreed to by broadband-only providers before
reclassification may indeed be called into question, but that is
because these entities are now within the ambit of Section 224, and not
because the Commission revises the method of cost allocation used in
the telecom rate formula.
30. Utilities claim that ``downward pressure'' on rates ``weakens
the predictability and timeliness of the access process'' but this
argument makes little sense. Attachers pay (and owners recover) the
entire cost of access through make-ready fees paid before the
attacher's facilities are mounted on
[[Page 5610]]
poles. Because access costs have already been recovered through make-
ready fees, pole attachment rental rates are concerned solely with the
pole owner's recovery of operating costs; they should have nothing to
do with the ``predictability and timeliness'' of access. In any case, a
``downward pressure'' on rates to a parity with the cable rate formula
level is precisely the outcome that the 2011 Pole Attachment Order
sought to achieve and that the Commission intends this new cost
allocation system to implement.
C. The Commission Has Authority To Adopt the Revised Telecom Rate Rule
31. The modified telecom rate rule adopted in this Order is
consistent with section 224(e) of the Act. The fundamental purpose of
section 224(e) is to ``ensure that a utility charges just, reasonable,
and nondiscriminatory rates for pole attachments'' by
telecommunications carriers used to provide telecommunications
services. As described above, in regulating cost-based telecom
attachment rates under section 224(e), Congress granted the Commission
substantial discretion to implement section 224(e) based on the
agency's policy expertise by leaving the definition of the relevant
costs ambiguous. Employing that policy expertise, the Commission builds
upon the underpinnings of the statutory interpretation relied upon by
the Commission in 2011 in the telecom rate rule adopted here.
32. The 2011 Pole Attachment Order began by identifying a range of
reasonable rates that could result from different definitions of
``cost'' for purposes of section 224(e). Within that range of
permissible outcomes, the telecom rate rule ultimately adopted in 2011
involved the comparison of the rate yielded by two calculations, with
utilities permitted to charge the higher of the two. Section
1.1409(e)(2)(i) specifies the first calculation, which the Commission
anticipated would approximate the cable rate. Section 1.1409(e)(2)(ii)
specifies the second calculation, based on a cost-causation approach.
33. As a threshold matter, this Order leaves unaltered the section
1.1409(e)(2)(ii) `cost-causation'-based calculation. That calculation
still will be performed whenever the Commission's telecom rate rule is
used, and even utility commenters concede that it does ``not do away
with apportioning the costs among all attaching entities'' in
accordance with section 224(e). The definition of cost for purposes of
that provision excludes capital costs and was designed to yield a rate
that approached the incremental cost of attachment.
34. The question of whether, and to what extent, to allow utilities
to go beyond the recovery permitted by the section 1.1409(e)(2)(ii)
telecom rate calculation and recover some capital costs ultimately
depends on a further policy evaluation. As the Commission explained in
2011, and as the Commission reiterates above, its implementation of
section 224 is guided in significant part by its mandate to encourage
the deployment of broadband. That policy, if overriding other
considerations, might counsel in favor of relying solely on the rate
yielded by the `cost-causation' calculation in section
1.1409(e)(2)(ii), rather than permitting higher rates as just and
reasonable under section 224(e). But the Commission also sought--and
continues to seek--to balance the ``legitimate concerns of pole owners
and other parties'' by preserving incentives to invest in poles and
avoiding the imposition of an undue burden on utility ratepayers.
35. As described above, in 2011 the Commission adopted rules that
it anticipated would result in a telecom rate that generally
approximated the cable rate. In practice, however, the rule the
Commission adopted has only poorly reflected the balancing of policy
interests that the Commission anticipated attaining in 2011 because the
facts on the ground differed significantly from the Commission
presumptions upon which the 2011 rule was predicated. As a result,
telecom rates calculated based on the Commission's rules frequently
were higher than the levels the Commission generally sought to achieve
as just and reasonable under section 224(e)--i.e., materially in excess
of the cable rate. The reclassification of broadband Internet access
service as a telecommunications service brings this shortcoming into
greater focus. Adopting the changes to section 1.1409(e)(2)(i) proposed
by Petitioners will bring the balance that the Commission anticipated
achieving in 2011, which the Commission is likewise persuaded is the
appropriate outcome today.
36. Thus, the Commission adopts the Petitioners' proposal and
modifies section 1.1409(e)(2)(i) of the rules by redefining the
ambiguous term ``cost'' as a percentage of fully allocated costs that
depends on whether the average number of attaching entities in an area
is 2, 3, 4, or 5. The specific percentage of fully allocated costs that
Commission adopts in each of those instances will yield a rate under
section 1.1409(e)(2)(i) that more closely and consistently approximates
the cable rate.
37. Although this definition of cost is based on an integer average
number of attachers in an area, consistent with the Commission's
efforts to ensure that it implements section 224(e) in a ``readily
administrable'' manner, the proposal the Commission adopts incorporates
a mechanism to allow parties, should they so choose, to continue to
rely on non-integer average numbers of attachers in a service area by
interpolating from the specified cost allocators in section
1.1409(e)(2)(i) of the rules in a manner that does not undermine the
definition of cost adopted above. In pertinent part, section 224(e)(2)
is focused on allocating the ``cost''--however defined--of providing
space on a pole other than useable space. Although a given pole only
will have an integer number of attaching entities, for administrability
the Commission has long permitted pole attachment rates to be
calculated based on surveys or averages of the number of attaching
entities in the relevant service area, which has the potential to yield
an average number of attachers that is not an integer number. The use
of a non-integer number of attaching entities in conjunction with the
new definition of cost adopted for areas with 2, 3, 4, or 5 average
attaching entities in revised section 1.1409(e)(2)(i) of the rules
would result in similar, even if not always as extensive, deviations
from the cable rate as the Commission found to result under the version
of the rule adopted in 2011. The Commission concludes that such
deviation is at odds with the balancing of policy interests it seeks to
achieve through its revisions to section 1.1409(e)(2)(i) and also
anticipates that it would increase the likelihood of disputes. The
Commission thus adopts the interpolation mechanism in Petitioners'
proposal, which will leave parties free to continue using non-integer
average number of attachers should they choose to do so, without
undermining its ability to ensure just and reasonable rates under
section 224(e) in an administrable manner.
38. Insofar as the reclassification of broadband Internet access
service results in most Commission-regulated attachments becoming
subject to the telecom rate, that counsels in favor of its redefinition
of cost, contrary to the claims of some commenters. The Commission
recognizes that the 2011 Pole Attachment Order cited the marketplace
distortions resulting from disparate telecom and cable rates as part of
the policy rationale for the telecom rate change adopted there. As
identified there, these distortions led to
[[Page 5611]]
competitive disparities arising from telecommunications carriers paying
higher pole attachment rates than their cable operator competitors. The
distortions also created disincentives for cable operators to begin
offering advanced services that could newly subject them to the telecom
rate. Some commenters argue that reclassification of broadband Internet
access service, insofar as it results in most cable operators now being
subject to the telecom rate, resolves concerns about marketplace
distortions and leaves the Commission with little or no policy basis
for revisiting the definition of ``cost'' to better ensure that the
telecom rate is as low and close to uniform with the cable rate as
possible. The Commission rejects such claims for the reasons already
explained above. In particular, the current telecom rate could lead to
a windfall for utilities by increasing rates for many attachments
without any offsetting benefits to cable attachers. This not only would
harm cable operators and their customers, but more broadly would
undermine the Commission's broadband policies by creating artificial
marketplace distortions and disincentives for investment. Indeed, the
Commission made this point clear in the Open Internet Order when it
stated, ``[t]o the extent that there is a potential for an increase in
pole attachment rates for cable operators that also provide broadband
Internet access service, the Commission is highly concerned about its
effect on the positive investment incentives that [otherwise] arise
from new providers' access to pole infrastructure.''
39. The Commission also disagrees with the suggestions of some
commenters that only certain types of policy considerations can form
the basis for its interpretation and implementation of the ambiguous
term ``cost'' in section 224(e). As the D.C. Circuit recognized in AEP,
the Commission reasonably can rely on policy rationales in giving
meaning to the term ``cost.'' The Commission explains above the
specific policy rationales for the approach the Commission adopts here,
and finds no basis to conclude that those considerations cannot form a
sufficient justification for the interpretation of the term cost in its
implementation of section 224(e). For example, certain commenters
assert that there is no ``economic reason'' for the adopted approach to
defining cost, but do not explain what they mean by an ``economic
reason,'' or why the policy considerations discussed above, including
the economic effects of alternative approaches to defining cost, would
not fall within that scope. Some commenters also criticize the
Petitioners' proposal for failing to provide a more favorable outcome
for attachers in rural areas, but fail to explain why that is a
necessary basis for interpreting the term ``cost.'' To the extent that
those comments are premised on certain policy arguments relied upon by
the Commission in 2011 as part of its explanation of the specific
definitions of cost adopted there, the Commission finds them
unpersuasive. The Commission finds for the reasons explained above that
the version of section 1.1409(e)(2)(i) adopted in 2011 only poorly
advanced the Commission's more fundamental policy objectives, and to
better advance those fundamental policy objectives, and for the other
policy reasons relied on in this Order, the Commission departs from its
prior approach that relied on historical rules tied to urban/rural
distinctions. Moreover, the Commission is not revisiting how cost is
defined under section 1.1409(e)(2)(i) to more consistently and
accurately yield a rate the same or very similar to the cable rate as
an end unto itself, but because that reflects the Commission's intended
policy balancing, and the Commission rejects suggestions that that is
not a valid justification. More broadly, because the Commissions
explain in detail the legal and policy basis for its adoption of
Petitioners' proposed revision to section 1.1409(e)(2)(i) of the rules,
it rejects general claims that adopting that proposal would be
arbitrary and capricious.
40. Nor does modification of the telecom rate rule render section
224(e)(2) of the Act a nullity, as some allege. For one, the
Commission's telecom rate rule requires a comparison of the output of
two calculations, and as explained above, even utilities appear to
concede that the cost-causation-based calculation in section
1.1409(e)(2)(ii) gives meaning to section 224(e)(2). Moreover, under
revised section 1.1409(e)(2)(i) the apportionment specified in section
224(e)(2) is given meaning because it is only by applying that
apportionment to the definition of ``cost'' adopted above that the
resulting rate will closely approximate the cable rate, and thus be
just and reasonable under the analysis above.
41. The Commission also rejects claims that its approach to
interpreting ``cost'' otherwise is at odds with Congressional intent
and the text and structure of section 224. The 2011 Pole Attachment
Order explained why the statute does not require the telecom rate
necessarily to be higher than, or otherwise different from, the cable
rate and the Commission finds nothing in the record here to undercut
that analysis. The Commission acknowledges some commenters' arguments
that section 224(e)(2) could be read to suggest that Congress
envisioned the telecom rate varying with the number of attachers, in
contrast to its revised approach to defining cost in section
1.1409(e)(2)(i) of the rules, under which the resulting rate will be
the same or very similar regardless of the number of attaching
entities. At the same time, although section 224(e)(2) provides for
costs to be apportioned in a manner that depends on the number of
attachers, it left undefined what costs should be so apportioned. This
is in contrast to section 224(d)(1), which specifies both a cost-based
rate methodology and the defined scope of costs to be used for purposes
of the cable rate. In particular, although, as some commenters observe,
Congress did not simply mandate the cable rate for all attachments,
neither did it specify a definition of cost that would require an
outcome under section 224(e)(2) that would, in practice, always vary
with the number of attaching entities. Congress thus permitted the
Commission to implement section 224(e) in a manner that yielded rates
that vary with the number of attachers--an outcome that would depart
from the cable rate, notwithstanding the requirement in section
224(e)(1) that the rate be not only just and reasonable but also
``nondiscriminatory.'' But while permitting such an outcome, the
Commission also concludes that Congress did not require such an outcome
as mandatory given its use of the ambiguous term ``cost.''
42. In implementing section 224(e), the Commission considers the
broader purposes of section 224, as also informed by other statutory
goals and mandates. As in the 2011 Pole Attachment Order, the
Commission finds that its interpretation and implementation of section
224(e) here advances those objectives. The Commission has concluded
that ``[t]he purpose of Section 224 of the Communications Act is to
ensure that the deployment of communications networks and the
development of competition are not impeded by private ownership and
control of the scarce infrastructure and rights-of-way that many
communications providers must use in order to reach customers.'' This
also is borne out by the text of section 224, which emphasizes that the
Commission's fundamental role is to
[[Page 5612]]
ensure just and reasonable rates, terms, and conditions of access.
Other statutory provisions likewise counsel in favor of such an
understanding of section 224, as discussed in greater detail in the
2011 Pole Attachment Order and above. For the reasons explained in the
preceding discussion, the Commission concludes that the revised telecom
rate rule it adopts is necessary to ensure just and reasonable rates
for pole access as a backstop for when private negotiations fail.
Because the Commission can achieve that outcome by how it defines
``cost'' under section 224(e), while still formally giving meaning to
all the language of that provision, the Commission concludes that its
adopted approach reasonably implements that provision as understood in
the context of section 224 as a whole.
43. The Commission also is not persuaded by arguments that section
224(e)(2) limits the costs to be borne by pole owners. As described
above, the Commission's fundamental responsibility under section 224(e)
is to ensure that regulated rates ``for pole attachments used by
telecommunications carriers to provide telecommunications services''
are just, reasonable, and nondiscriminatory. Read in that context, the
Commission interprets section 224(e)(2) only to govern the
apportionment of the ``cost''--however defined--of unusable space in
the rates pole owners charge to telecom attachers. It is true that the
methodology used to calculate the apportionment of ``cost'' to a
telecom attacher under section 224(e)(2) involves a calculation of what
``all attaching entities'' would bear assuming hypothetically that they
all bore an equal apportionment of such cost. But it does not actually
govern the cost to be borne by entities other than telecom attachers--
whether the pole owner or other attachers.
D. The Revisions to the Telecom Rate Rule Are Procedurally Proper
44. Adopting this change to section 1.1409(e)(2)(i) of the rules is
procedurally proper. Following the Commission's 2010 Further Notice
seeking comment on ``establish[ing] rental rates for pole attachments
that are as low and close to uniform as possible, consistent with
section 224 of the Act,'' the 2011 Pole Attachment Order revised the
telecom rate rule in a manner that the Commission anticipated would
reflect its balancing of policy concerns. The timely filed Petition for
Reconsideration identified flaws in the Commission's factual
assumptions underlying section 1.1409(e)(2)(i) of the rules as adopted
in the 2011 Pole Attachment Order that would cause that rule, in
practice, to only poorly reflect the Commission's intended balancing of
policy objectives. The Petitioners thus proposed that the Commission,
on reconsideration, revise that rule in a manner that ``increases the
certainty that pole rates will be as close as possible to the cable
rate, meets the Commission's intended purposes, and makes the
calculation more readily administrable by eliminating the need to
distinguish urbanized and non-urbanized areas.'' Given that clear nexus
to the 2011 Pole Attachment Order, the Commission finds the request in
the Petition for Reconsideration to be squarely within the scope of the
order from which reconsideration is sought, and the Commission rejects
arguments to the contrary. Furthermore, for the reasons discussed in
the preceding section, the Commission finds merit in the Petitioners'
arguments, and thus concludes that it is in the public interest not
only to consider their Petition but also to grant their requested
reconsideration.
45. The Commission also rejects claims that additional notice and
comment is needed before it can proceed under the theory that the
action in this Order effectively would modify sections 1.1417(c) and
(d) of the rules. Section 1.1417(c) specifies the Commission's
rebuttable presumptions of 5 attaching entities in urbanized areas and
3 attaching entities in non-urbanized areas. Section 1.1417(d)
describes how a utility can instead establish its own presumptive
average number of attaching entities, subject to rebuttal. As a
threshold matter, the Commission is not persuaded by commenters' claims
that the Petitioners' proposed revision to section 1.1409(e)(2)(i)
would render those rules ``moot.'' Under the utilities' own theory, the
Commission-specified presumptions in section 1.1417(c) would have
increased, rather than diminished, significance when performing the
section 1.1409(e)(2)(i) calculation because it would obviate the need
for utilities to expend the effort to develop their own presumptive
average numbers of attachers if they believe that variation in the
number of attachers would not matter. Further, although the result of
the calculation in section 1.1409(e)(2)(i) frequently will be higher
than that yielded by the cost-causation-based calculation in section
1.1409(e)(2)(ii), its rules provide for both to be performed, with the
possibility that there will be cases where the section 1.1409(e)(2)(ii)
calculation is controlling. The outcome under section 1.1409(e)(2)(ii)
unquestionably does vary with the number of attaching entities, and
thus the utilities' ability to develop their own presumptive number of
attaching entities under section 1.1417(d) remains important where the
cost-causation-based calculation would be, or could be, controlling.
46. Although the Commission is not persuaded that any implications
of its change to section 1.1409(e)(2)(i) of the rules for sections
1.1417(c) and (d) constitute substantive rule changes, even assuming
arguendo that they were viewed in that manner, the Commission finds
there was adequate notice and opportunity to comment. As noted above,
the Commission's 2010 Further Notice sought comment on ``establish[ing]
rental rates for pole attachments that are as low and close to uniform
as possible, consistent with section 224 of the Act,'' seeking comment
on particular alternative approaches and variations that might be
adopted consistent with the Commission's statutory responsibilities.
For example, the Further Notice included requests for comment on a
proposal to revise the telecom rate rule so that it was the higher of a
rate equal to the cable rate or a cost-causation-based rate, including
regarding the administrability of such an approach and how it would
relate to other Commission policies. Flowing from that Further Notice,
the 2011 Pole Attachment Order adopted revisions to the telecom rate
rule, and the Petition for Reconsideration requested reconsideration of
the resulting rule in various respects, all within the scope of the
underlying Order. The Commission sought comment on the Petition for
Reconsideration at the time it was filed, and provided a further
opportunity to comment on the requested rule changes subsequent to the
Open Internet Order. The Commission concludes that any implications for
the continuing significance of section 1.1417(c) and (d) resulting from
its adoption of the Petitioners' proposal should have been understood
to be within the scope of issues subject to comment--indeed, commenters
themselves appear to suggest that the implications for section
1.1417(c) and (d) are a necessary and unavoidable consequence of the
adoption of that proposal. As a result, the Commission concluded that
even assuming arguendo that notice and comment were required regarding
the effects of a change in section 1.1409(e)(2)(i) on the presumption
rules in section 1.1417(c) and (d), that was satisfied here.
[[Page 5613]]
IV. Procedural Matters
A. Paperwork Reduction Act Analysis
47. This document does not contain new or modified information
collection requirements subject to the Paperwork Reduction Act of 1995
(PRA), Public Law 104-13. In addition, therefore, it does not contain
any new or modified information collection burden for small business
concerns with fewer than 25 employees, pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4).
B. Regulatory Flexibility Analysis
48. As required by the Regulatory Flexibility Act of 1980 (RFA),
the Commission includes in Appendix B a Supplemental Final Regulatory
Flexibility Analysis (FRFA) relating to this Order on Reconsideration.
C. Congressional Review Act
49. The Commission will send a copy of the Order on
Reconsideration, including the FRFA, in a report to be sent to Congress
and the Government Accountability Office pursuant to the Congressional
Review Act, 5 U.S.C. 801(a)(1).
D. Final Regulatory Flexibility Analysis
50. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA).
51. An Initial Regulatory Flexibility Analysis (IRFA) was included
in the Order and Further Notice in WC Docket No. 07-245 and GN Docket
No. 09-51. The Commission sought written public comment on the
proposals in these dockets, including comment on the IRFA. This Final
Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
E. Need for, and Objectives of, the Proposed Rules
52. In this Order on Reconsideration, the Commission further
implements its policy of bringing parity to pole attachment rates at or
near the 47 CFR 1.1409(e)(1) cable rate formula level, including rates
that are calculated using the 47 CFR 1.1409(d)(2) telecom rate formula.
The 2011 Pole Attachment Order adopted cost allocators in the telecom
rate formula that were intended to closely approximate the treatment of
cost in the cable rate formula. However, these allocators perform
successfully only where poles have 5 attaching entities (0.66 percent
of cost) or 3 attaching entities (0.44 percent of cost). To build on
that limited success, the Commission now adds cost allocators for poles
with 2 attaching entities (0.31 percent of costs) and 4 attaching
entities (0.56 percent of cost). When the average number of attaching
entities is a fraction, the applicable cost allocator will be
interpolated from the two closest whole numbers. In this way, this
Order on Reconsideration spares cable operators that also provide a
telecommunications service (e.g., broadband Internet access service)
from having to pay attachment rates that would be approximately 70
percent higher than the rate they pay under the existing rules. Pole
attachment rate parity at the cable rate level also harmonizes
regulatory treatment between Commission-regulated states and states
that set their own pole attachment rates, which prevents any deterrence
to investment in Commission-regulated states. By keeping pole
attachment rates unified and low, the Commission furthers its
overarching goal to accelerate deployment of broadband by removing
barriers to infrastructure investment.
F. Summary of the Significant Issues Raised by the Public Comments in
Response to the IRFA and Summary of the Assessment of the Agency of
Such Issues
53. No comments relating to any of the IRFAs have been filed since
the 2011 Pole Attachment Order. In making the determinations reflected
in the Order on Reconsideration, the Commission has considered the
impact of its actions on small entities.
G. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules May Apply
54. The RFA directs agencies to provide a description of, and where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules and policies, if adopted. The RFA
generally defines the term ``small entity'' as having the same meaning
as the terms ``small business,'' ``small organization,'' and ``small
governmental jurisdiction.'' In addition, the term ``small business''
has the same meaning as the term ``small business concern'' under the
Small Business Act. A ``small business concern'' is one which: (1) Is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the
SBA.
55. Small Businesses. As of 2011, there are a total of
approximately 28.2 million small businesses, according to the SBA.
56. Small Organizations. As of 2007, there are approximately 1.6
million small organizations. A ``small organization'' is generally
``any not-for-profit enterprise which is independently owned and
operated and is not dominant in its field.''
57. Small Governmental Jurisdictions. The term ``small governmental
jurisdiction'' is defined generally as ``governments of cities, towns,
townships, villages, school districts, or special districts, with a
population of less than fifty thousand.'' Census Bureau data for 2011
indicate that there were 90,056 local governmental jurisdictions in the
United States. The Commission estimates that, of this total, 89,327
entities were ``small governmental jurisdictions.'' Thus, the
Commission estimates that most governmental jurisdictions are small.
58. The Commission has included small incumbent local exchange
carriers in this present RFA analysis. As noted above, a ``small
business'' under the RFA is one that, inter alia, meets the pertinent
small business size standard (e.g., a telephone communications business
having 1,500 or fewer employees), and ``is not dominant in its field of
operation.'' The SBA's Office of Advocacy contends that, for RFA
purposes, small incumbent local exchange carriers are not dominant in
their field of operation because any such dominance is not ``national''
in scope. The Commission has therefore included small incumbent local
exchange carriers in this RFA analysis, although it emphasize that this
RFA action has no effect on Commission analyses and determinations in
other, non-RFA contexts.
59. Incumbent Local Exchange Carriers (``ILECs''). Neither the
Commission nor the SBA has developed a small business size standard
specifically for incumbent local exchange services. The appropriate
size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a business
is small if it has 1,500 or fewer employees. According to Commission
data, 1,311 carriers have reported that they are engaged in the
provision of incumbent local exchange services. Of these 1,311
carriers, an estimated 1,024 have 1,500 or fewer employees and 287 have
more than 1,500 employees. Consequently, the Commission estimates that
most providers of incumbent local exchange service are small businesses
that may be affected by its proposed action.
60. Competitive Local Exchange Carriers (``CLECs''), Competitive
Access Providers (``CAPs''), ``Shared-Tenant Service Providers,'' and
``Other Local Service Providers.'' Neither the Commission nor the SBA
has developed a small business size standard
[[Page 5614]]
specifically for these service providers. The appropriate size standard
under SBA rules is for the category Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 1005 carriers have
reported that they are engaged in the provision of either competitive
access provider services or competitive local exchange carrier
services. Of these 1005 carriers, an estimated 918 have 1,500 or fewer
employees and 87 have more than 1,500 employees. In addition, 16
carriers have reported that they are ``Shared-Tenant Service
Providers,'' and all 16 are estimated to have 1,500 or fewer employees.
In addition, 89 carriers have reported that they are ``Other Local
Service Providers.'' Of the 89, all have 1,500 or fewer employees.
Consequently, the Commission estimates that most providers of
competitive local exchange service, competitive access providers,
``Shared-Tenant Service Providers,'' and ``Other Local Service
Providers'' are small entities that may be affected by its proposed
action.
61. Interexchange Carriers (``IXCs''). Neither the Commission nor
the SBA has developed a small business size standard specifically for
providers of interexchange services. The appropriate size standard
under SBA rules is for the category Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 300 carriers have
reported that they are engaged in the provision of interexchange
service. Of these, an estimated 268 have 1,500 or fewer employees and
32 have more than 1,500 employees. Consequently, the Commission
estimates that the majority of IXCs are small entities that may be
affected by its proposed action.
62. Wireless Telecommunications Carriers (except satellite). This
industry comprises establishments engaged in operating and maintaining
switching and transmission facilities to provide communications via the
airwaves. Establishments in this industry have spectrum licenses and
provide services using that spectrum, such as cellular phone services,
paging services, wireless Internet access, and wireless video services.
The appropriate size standard under SBA rules is for the category
Wireless Telecommunications Carriers (except satellite). For that
category, a business is small if it has 1,500 or fewer employees. For
this category, census data for 2007 show that there were 1,383 firms
that operated for the entire year. Of this total, 1368 firms had
employment of fewer than 1000 employees. The Census data about firms
employing more than 1000 employees does not identify the number of
firms that employed 1500 employees or less. Thus under this category
and the associated small business size standard, the Commission
estimates that the majority of wireless telecommunications carriers
(except satellite) are small entities that may be affected by rules
proposed in the Notice.
63. Wireless Telecommunications Carriers (except Satellite). Since
2007, the Census Bureau has placed wireless firms within this new,
broad, economic census category. Prior to that time, such firms were
within the now-superseded categories of ``Paging'' and ``Cellular and
Other Wireless Telecommunications.'' Under the present and prior
categories, the SBA has deemed a wireless business to be small if it
has 1,500 or fewer employees. Because Census Bureau data are not yet
available for the new category, the Commission will estimate small
business prevalence using the prior categories and associated data. For
the category of Paging, data for 2002 show that there were 807 firms
that operated for the entire year. Of this total, 804 firms had
employment of 999 or fewer employees, and three firms had employment of
1,000 employees or more. For the category of Cellular and Other
Wireless Telecommunications, data for 2002 show that there were 1,397
firms that operated for the entire year. Of this total, 1,378 firms had
employment of 999 or fewer employees, and 19 firms had employment of
1,000 employees or more. Thus, the Commission estimates that the
majority of wireless firms are small.
64. Wireless Telephony. Wireless telephony includes cellular,
personal communications services, and specialized mobile radio
telephony carriers. As noted, the SBA has developed a small business
size standard for Wireless Telecommunications Carriers (except
Satellite). Under the SBA small business size standard, a business is
small if it has 1,500 or fewer employees. According to Trends in
telephone Service data, 413 carriers reported that they were engaged in
wireless telephony. Of these, an estimated 261 have 1,500 or fewer
employees and 152 have more than 1,500 employees. Therefore, more than
half of these entities can be considered small.
65. Broadband Personal Communications Service. The broadband
personal communications services (``PCS'') spectrum is divided into six
frequency blocks designated A through F, and the Commission has held
auctions for each block. The Commission has created a small business
size standard for Blocks C and F as an entity that has average gross
revenues of less than $40 million in the three previous calendar years.
For Block F, an additional small business size standard for ``very
small business'' was added and is defined as an entity that, together
with its affiliates, has average gross revenues of not more than $15
million for the preceding three calendar years. These small business
size standards, in the context of broadband PCS auctions, have been
approved by the SBA. No small businesses within the SBA-approved small
business size standards bid successfully for licenses in Blocks A and
B. There were 90 winning bidders that qualified as small entities in
the Block C auctions. A total of 93 ``small'' and ``very small''
business bidders won approximately 40 percent of the 1,479 licenses for
Blocks D, E, and F. In 1999, the Commission reauctioned 155 C, D, E,
and F Block licenses; there were 113 small business winning bidders.
66. In 2001, the Commission completed the auction of 422 C and F
Broadband PCS licenses in Auction 35. Of the 35 winning bidders in this
auction, 29 qualified as ``small'' or ``very small'' businesses.
Subsequent events, concerning Auction 35, including judicial and agency
determinations, resulted in a total of 163 C and F Block licenses being
available for grant. In 2005, the Commission completed an auction of
188 C block licenses and 21 F block licenses in Auction 58. There were
24 winning bidders for 217 licenses. Of the 24 winning bidders, 16
claimed small business status and won 156 licenses. In 2007, the
Commission completed an auction of 33 licenses in the A, C, and F
Blocks in Auction 71. Of the 14 winning bidders, six were designated
entities. In 2008, the Commission completed an auction of 20 Broadband
PCS licenses in the C, D, E and F block licenses in Auction 78.
67. Advanced Wireless Services. In 2008, the Commission conducted
the auction of Advanced Wireless Services (``AWS'') licenses. This
auction, which as designated as Auction 78, offered 35 licenses in the
AWS 1710-1755 MHz and 2110-2155 MHz bands (``AWS-1''). The AWS-1
licenses were licenses for which there were no winning bids in Auction
66. That same year, the Commission completed Auction 78. A bidder with
attributed average annual gross revenues that exceeded $15 million and
did not exceed $40 million for the preceding three years (``small
business'') received a 15 percent discount on its winning bid. A bidder
[[Page 5615]]
with attributed average annual gross revenues that did not exceed $15
million for the preceding three years (``very small business'')
received a 25 percent discount on its winning bid. A bidder that had
combined total assets of less than $500 million and combined gross
revenues of less than $125 million in each of the last two years
qualified for entrepreneur status. Four winning bidders that identified
themselves as very small businesses won 17 licenses. Three of the
winning bidders that identified themselves as a small business won five
licenses. Additionally, one other winning bidder that qualified for
entrepreneur status won 2 licenses.
68. Narrowband Personal Communications Services. In 1994, the
Commission conducted an auction for Narrowband PCS licenses. A second
auction was also conducted later in 1994. For purposes of the first two
Narrowband PCS auctions, ``small businesses'' were entities with
average gross revenues for the prior three calendar years of $40
million or less. Through these auctions, the Commission awarded a total
of 41 licenses, 11 of which were obtained by four small businesses. To
ensure meaningful participation by small business entities in future
auctions, the Commission adopted a two-tiered small business size
standard in the Narrowband PCS Second Report and Order. A ``small
business'' is an entity that, together with affiliates and controlling
interests, has average gross revenues for the three preceding years of
not more than $40 million. A ``very small business'' is an entity that,
together with affiliates and controlling interests, has average gross
revenues for the three preceding years of not more than $15 million.
The SBA has approved these small business size standards. A third
auction was conducted in 2001. Here, five bidders won 317 (Metropolitan
Trading Areas and nationwide) licenses. Three of these claimed status
as a small or very small entity and won 311 licenses.
69. Cellular Radiotelephone Service. Auction 77 was held to resolve
one group of mutually exclusive applications for Cellular
Radiotelephone Service licenses for unserved areas in New Mexico.
Bidding credits for designated entities were not available in Auction
77. In 2008, the Commission completed the closed auction of one
unserved service area in the Cellular Radiotelephone Service,
designated as Auction 77. Auction 77 concluded with one provisionally
winning bid for the unserved area totaling $25,002.
70. Fixed Microwave Services. Fixed microwave services include
common carrier, private operational-fixed, and broadcast auxiliary
radio services. At present, there are approximately 22,015 common
carrier fixed licensees and 61,670 private operational-fixed licensees
and broadcast auxiliary radio licensees in the microwave services. The
Commission has not created a size standard for a small business
specifically with respect to fixed microwave services. For purposes of
this analysis, the Commission uses the SBA small business size standard
for the category Wireless Telecommunications Carriers (except
Satellite), which is 1,500 or fewer employees. The Commission does not
have data specifying the number of these licensees that have no more
than 1,500 employees, and thus are unable at this time to estimate with
greater precision the number of fixed microwave service licensees that
would qualify as small business concerns under the SBA's small business
size standard. Consequently, the Commission estimates that there are
22,015 or fewer common carrier fixed licensees and 61,670 or fewer
private operational-fixed licensees and broadcast auxiliary radio
licensees in the microwave services that may be small and may be
affected by the rules and policies proposed herein. The Commission
notes, however, that the common carrier microwave fixed licensee
category includes some large entities.
71. Local Multipoint Distribution Service. Local Multipoint
Distribution Service (``LMDS'') is a fixed broadband point-to-
multipoint microwave service that provides for two-way video
telecommunications. The auction of the 986 LMDS licenses began and
closed in 1998. The Commission established a small business size
standard for LMDS licenses as an entity that has average gross revenues
of less than $40 million in the three previous calendar years. An
additional small business size standard for ``very small business'' was
added as an entity that, together with its affiliates, has average
gross revenues of not more than $15 million for the preceding three
calendar years. The SBA has approved these small business size
standards in the context of LMDS auctions. There were 93 winning
bidders that qualified as small entities in the LMDS auctions. A total
of 93 small and very small business bidders won approximately 277 A
Block licenses and 387 B Block licenses. In 1999, the Commission re-
auctioned 161 licenses; there were 32 small and very small businesses
winning that won 119 licenses.
72. Rural Radiotelephone Service. The Commission has not adopted a
size standard for small businesses specific to the Rural Radiotelephone
Service. A significant subset of the Rural Radiotelephone Service is
the Basic Exchange Telephone Radio System (``BETRS''). In the present
context, the Commission will use the SBA's small business size standard
applicable to Wireless Telecommunications Carriers (except Satellite),
i.e., an entity employing no more than 1,500 persons. There are
approximately 1,000 licensees in the Rural Radiotelephone Service, and
the Commission estimates that there are 1,000 or fewer small entity
licensees in the Rural Radiotelephone Service that may be affected by
the rules and policies proposed herein.
73. Broadband Radio Service and Educational Broadband Service.
Broadband Radio Service systems, previously referred to as Multipoint
Distribution Service (``MDS'') and Multichannel Multipoint Distribution
Service (``MMDS'') systems, and ``wireless cable,'' transmit video
programming to subscribers and provide two-way high speed data
operations using the microwave frequencies of the Broadband Radio
Service (``BRS'') and Educational Broadband Service (``EBS'')
(previously referred to as the Instructional Television Fixed Service
(``ITFS'')). In connection with the 1996 BRS auction, the Commission
established a small business size standard as an entity that had annual
average gross revenues of no more than $40 million in the previous
three calendar years. The BRS auctions resulted in 67 successful
bidders obtaining licensing opportunities for 493 Basic Trading Areas
(``BTAs''). Of the 67 auction winners, 61 met the definition of a small
business. BRS also includes licensees of stations authorized prior to
the auction. At this time, the Commission estimates that of the 61
small business BRS auction winners, 48 remain small business licensees.
In addition to the 48 small businesses that hold BTA authorizations,
there are approximately 392 incumbent BRS licensees that are considered
small entities. After adding the number of small business auction
licensees to the number of incumbent licensees not already counted, the
Commission finds that there are currently approximately 440 BRS
licensees that are defined as small businesses under either the SBA or
the Commission's rules. In 2009, the Commission conducted Auction 86,
the sale of 78 licenses in the BRS areas. The Commission offered three
levels of bidding credits: (i) A bidder with
[[Page 5616]]
attributed average annual gross revenues that exceed $15 million and do
not exceed $40 million for the preceding three years (small business)
will receive a 15 percent discount on its winning bid; (ii) a bidder
with attributed average annual gross revenues that exceed $3 million
and do not exceed $15 million for the preceding three years (very small
business) will receive a 25 percent discount on its winning bid; and
(iii) a bidder with attributed average annual gross revenues that do
not exceed $3 million for the preceding three years (entrepreneur) will
receive a 35 percent discount on its winning bid. Auction 86 concluded
in 2009 with the sale of 61 licenses. Of the ten winning bidders, two
bidders that claimed small business status won 4 licenses; one bidder
that claimed very small business status won three licenses; and two
bidders that claimed entrepreneur status won six licenses.
74. In addition, the SBA's Cable Television Distribution Services
small business size standard is applicable to EBS. There are presently
2,032 EBS licensees. All but 100 of these licenses are held by
educational institutions. Educational institutions are included in this
analysis as small entities. Thus, the Commission estimates that at
least 1,932 licensees are small businesses. Since 2007, Cable
Television Distribution Services have been defined within the broad
economic census category of Wired Telecommunications Carriers; that
category is defined as follows: ``This industry comprises
establishments primarily engaged in operating and/or providing access
to transmission facilities and infrastructure that they own and/or
lease for the transmission of voice, data, text, sound, and video using
wired telecommunications networks. Transmission facilities may be based
on a single technology or a combination of technologies.'' The SBA has
developed a small business size standard for this category, which is:
All such firms having 1,500 or fewer employees. To gauge small business
prevalence for these cable services the Commission must, however, use
current census data that are based on the previous category of Cable
and Other Program Distribution and its associated size standard; that
size standard was: all such firms having $13.5 million or less in
annual receipts. According to Census Bureau data for 2002, there were a
total of 1,191 firms in this previous category that operated for the
entire year. Of this total, 1,087 firms had annual receipts of under
$10 million, and 43 firms had receipts of $10 million or more but less
than $25 million. Thus, the majority of these firms can be considered
small.
75. Cable Television Distribution Services. Since 2007, these
services have been defined within the broad economic census category of
Wired Telecommunications Carriers; that category is defined as follows:
``This industry comprises establishments primarily engaged in operating
and/or providing access to transmission facilities and infrastructure
that they own and/or lease for the transmission of voice, data, text,
sound, and video using wired telecommunications networks. Transmission
facilities may be based on a single technology or a combination of
technologies.'' The SBA has developed a small business size standard
for this category, which is: all such firms having 1,500 or fewer
employees. To gauge small business prevalence for these cable services
the Commission must, however, use current census data that are based on
the previous category of Cable and Other Program Distribution and its
associated size standard; that size standard was: all such firms having
$13.5 million or less in annual receipts. According to Census Bureau
data for 2002, there were a total of 1,191 firms in this previous
category that operated for the entire year. Of this total, 1,087 firms
had annual receipts of under $10 million, and 43 firms had receipts of
$10 million or more but less than $25 million. Thus, the majority of
these firms can be considered small.
76. Cable Companies and Systems. The Commission has also developed
its own small business size standards, for the purpose of cable rate
regulation. Under the Commission's rules, a ``small cable company'' is
one serving 400,000 or fewer subscribers, nationwide. Industry data
indicate that, of 1,076 cable operators nationwide, all but eleven are
small under this size standard. In addition, under the Commission's
rules, a ``small system'' is a cable system serving 15,000 or fewer
subscribers. Industry data indicate that, of 6,635 systems nationwide,
5,802 systems have fewer than 10,000 subscribers, and an additional 302
systems have 10,000-19,999 subscribers. Thus, under this second size
standard, most cable systems are small.
77. Cable System Operators. The Communications Act of 1934, as
amended, also contains a size standard for small cable system
operators, which is ``a cable operator that, directly or through an
affiliate, serves in the aggregate fewer than 1 percent of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' The Commission has determined that an operator serving
fewer than 677,000 subscribers shall be deemed a small operator, if its
annual revenues, when combined with the total annual revenues of all
its affiliates, do not exceed $250 million in the aggregate. Industry
data indicate that, of 1,076 cable operators nationwide, all but ten
are small under this size standard. The Commission notes that it
neither requests nor collects information on whether cable system
operators are affiliated with entities whose gross annual revenues
exceed $250 million, and therefore the Commission is unable to estimate
more accurately the number of cable system operators that would qualify
as small under this size standard.
78. Open Video Systems. The open video system (OVS) framework was
established in 1996, and is one of four statutorily recognized options
for the provision of video programming services by local exchange
carriers. The OVS framework provides opportunities for the distribution
of video programming other than through cable systems. Because OVS
operators provide subscription services, OVS falls within the SBA small
business size standard covering cable services, which is ``Wired
Telecommunications Carriers.'' The SBA has developed a small business
size standard for this category, which is: all such firms having 1,500
or fewer employees. To gauge small business prevalence for such
services the Commission must, however, use current census data that are
based on the previous category of Cable and Other Program Distribution
and its associated size standard; that size standard was: all such
firms having $13.5 million or less in annual receipts. According to
Census Bureau data for 2002, there were a total of 1,191 firms in this
previous category that operated for the entire year. Of this total,
1,087 firms had annual receipts of under $10 million, and 43 firms had
receipts of $10 million or more but less than $25 million. Thus, the
majority of cable firms can be considered small. In addition, the
Commission notes that the Commission has certified some OVS operators,
with some now providing service. Broadband service providers (``BSPs'')
are currently the only significant holders of OVS certifications or
local OVS franchises. The Commission does not have financial or
employment information regarding the entities authorized to provide
OVS, some of which may not yet be operational. Thus, again, at least
some
[[Page 5617]]
of the OVS operators may qualify as small entities.
79. Cable Television Relay Service. This service includes
transmitters generally used to relay cable programming within cable
television system distribution systems. This cable service is defined
within the broad economic census category of Wired Telecommunications
Carriers; that category is defined as follows: ``This industry
comprises establishments primarily engaged in operating and/or
providing access to transmission facilities and infrastructure that
they own and/or lease for the transmission of voice, data, text, sound,
and video using wired telecommunications networks. Transmission
facilities may be based on a single technology or a combination of
technologies.'' The SBA has developed a small business size standard
for this category, which is: all such firms having 1,500 or fewer
employees. To gauge small business prevalence for cable services the
Commission must, however, use current census data that are based on the
previous category of Cable and Other Program Distribution and its
associated size standard; that size standard was: all such firms having
$13.5 million or less in annual receipts. According to Census Bureau
data for 2002, there were a total of 1,191 firms in this previous
category that operated for the entire year. Of this total, 1,087 firms
had annual receipts of under $10 million, and 43 firms had receipts of
$10 million or more but less than $25 million. Thus, the majority of
these firms can be considered small.
80. Multichannel Video Distribution and Data Service. MVDDS is a
terrestrial fixed microwave service operating in the 12.2-12.7 GHz
band. The Commission adopted criteria for defining three groups of
small businesses for purposes of determining their eligibility for
special provisions such as bidding credits. It defined a very small
business as an entity with average annual gross revenues not exceeding
$3 million for the preceding three years; a small business as an entity
with average annual gross revenues not exceeding $15 million for the
preceding three years; and an entrepreneur as an entity with average
annual gross revenues not exceeding $40 million for the preceding three
years. These definitions were approved by the SBA. On January 27, 2004,
the Commission completed an auction of 214 MVDDS licenses (Auction No.
53). In this auction, ten winning bidders won a total of 192 MVDDS
licenses. Eight of the ten winning bidders claimed small business
status and won 144 of the licenses. The Commission also held an auction
of MVDDS licenses on December 7, 2005 (Auction 63). Of the three
winning bidders who won 22 licenses, two winning bidders, winning 21 of
the licenses, claimed small business status.
81. Internet Service Providers. The 2007 Economic Census places
these firms, whose services might include voice over Internet protocol
(VoIP), in either of two categories, depending on whether the service
is provided over the provider's own telecommunications connections
(e.g. cable and DSL, ISPs), or over client-supplied telecommunications
connections (e.g. dial-up ISPs). The former are within the category of
Wired Telecommunications Carriers, which has an SBA small business size
standard of 1,500 or fewer employees. The latter are within the
category of All Other Telecommunications, which has a size standard of
annual receipts of $25 million or less. The most current Census Bureau
data for all such firms, however, are the 2002 data for the previous
census category called Internet Service Providers. That category had a
small business size standard of $21 million or less in annual receipts,
which was revised in late 2005 to $23 million. The 2002 data show that
there were 2,529 such firms that operated for the entire year. Of
those, 2,437 firms had annual receipts of under $10 million, and an
additional 47 firms had receipts of between $10 million and
$24,999,999. Consequently, the Commission estimates that the majority
of ISP firms are small entities.
82. Electric Power Generation, Transmission and Distribution. The
Census Bureau defines this category as follows: ``This industry group
comprises establishments primarily engaged in generating, transmitting,
and/or distributing electric power. Establishments in this industry
group may perform one or more of the following activities: (1) operate
generation facilities that produce electric energy; (2) operate
transmission systems that convey the electricity from the generation
facility to the distribution system; and (3) operate distribution
systems that convey electric power received from the generation
facility or the transmission system to the final consumer.'' This
category includes Electric Power Distribution, Hydroelectric Power
Generation, Fossil Fuel Power Generation, Nuclear Electric Power
Generation, and Other Electric Power Generation. The SBA has developed
a small business size standard for firms in this category: ``A firm is
small if, including its affiliates, it is primarily engaged in the
generation, transmission, and/or distribution of electric energy for
sale and its total electric output for the preceding fiscal year did
not exceed 4 million megawatt hours.'' According to Census Bureau data
for 2002, there were 1,644 firms in this category that operated for the
entire year. Census data do not track electric output and the
Commission has not determined how many of these firms fit the SBA size
standard for small, with no more than 4 million megawatt hours of
electric output. Consequently, the Commission estimates that 1,644 or
fewer firms may be considered small under the SBA small business size
standard.
83. Natural Gas Distribution. This economic census category
comprises: ``(1) establishments primarily engaged in operating gas
distribution systems (e.g., mains, meters); (2) establishments known as
gas marketers that buy gas from the well and sell it to a distribution
system; (3) establishments known as gas brokers or agents that arrange
the sale of gas over gas distribution systems operated by others; and
(4) establishments primarily engaged in transmitting and distributing
gas to final consumers.'' The SBA has developed a small business size
standard for this industry, which is: all such firms having 500 or
fewer employees. According to Census Bureau data for 2002, there were
468 firms in this category that operated for the entire year. Of this
total, 424 firms had employment of fewer than 500 employees, and 18
firms had employment of 500 to 999 employees. Thus, the majority of
firms in this category can be considered small.
84. Water Supply and Irrigation Systems. This economic census
category ``comprises establishments primarily engaged in operating
water treatment plants and/or operating water supply systems.'' The SBA
has developed a small business size standard for this industry, which
is: all such firms having $6.5 million or less in Annual receipts.
According to Census Bureau data for 2002, there were 3,830 firms in
this category that operated for the entire year. Of this total, 3,757
firms had annual sales of less than $5 million, and 37 firms had sales
of $5 million or more but less than $10 million. Thus, the majority of
firms in this category can be considered small.
H. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements
85. The new rule concerns a cost allocation method that parties use
in a formula when negotiating just and reasonable pole attachment
rental rates. Application of the cost allocation rule is expanded but
not altered from the cost
[[Page 5618]]
allocation rule that parties currently use. The Commission expects the
cost of complying with the revised cost allocation rule to be minimal,
and compliance costs do not significantly differ from requirements in
place before the adoption of this Order on Reconsideration.
I. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
86. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include (among others) the following four alternatives: (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities. Cost allocation methodologies used in pole attachment rate
formulas are by nature the same for all entities that use them,
regardless of size. No party suggested that the Commission develop
alternative approaches to cost allocation based on entity size.
J. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
87. None.
V. Ordering Clauses
88. Accordingly, it is ordered that pursuant to sections 1, 4(i),
4(j), 201(b), 224, 251(b)(4), and 303(r), of the Communications Act of
1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 201(b), 224,
251(b)(4), 303(r), this Order on Reconsideration IS ADOPTED.
89. It is further ordered, pursuant to sections 1, 4(i), 4(j),
201(b), 224, and 303(r), of the Communications Act, as amended, as
amended, 47 U.S.C. 151, 154(i), 154(j), 201(b), 224, 303(r), that the
Petition for Reconsideration or Clarification filed by the National
Cable and Telecommunications Association, COMPTEL, and tw telecom inc.,
is GRANTED to the extent indicated herein, and otherwise is DISMISSED.
90. It is further ordered that Part 1 of the Commission's rules IS
AMENDED as set forth in Appendix A.
91. it is further ordered that, pursuant to sections 1.4(b)(1) and
1.103(a) of the Commission's rules, 47 CFR 1.4(b)(1), 1.103(a), this
Order on Reconsideration shall be effective 30 days after publication
of a summary in the Federal Register.
92. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Order on Reconsideration, including the Supplemental Final
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of
the Small Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary, Office of the Secretary.
Final Rule
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR part 1 Subpart J as follows:
PART 1--PRACTICE AND PROCEDURE
0
1. The authority citation for part 1 continues to read as follows:
Authority: 15 U.S.C. 79, et seq.; 47 U.S.C. 151, 154(i), 154(j),
155, 157, 160, 201, 225, 227, 303, 309, 332, 1403, 1404, 1451, 1452,
and 1455.
Subpart J--Pole Attachment Complaint Procedures
0
2. Section 1.1409 is amended by revising paragraph (e)(2)(i) to read as
follows:
Sec. 1.1409 Commission consideration of the complaint.
* * * * *
(e) * * *
(2) * * *
(i) The following formula applies to the extent that it yields a
rate higher than that yielded by the applicable formula in paragraph
1.1409(e)(2)(ii) of this section:
Rate = Space Factor x Cost
Where Cost
in Service Areas where the number of Attaching Entities is 5 = 0.66
x (Net Cost of a Bare Pole x Carrying Charge Rate)
in Service Areas where the number of Attaching Entities is 4 = 0.56
x (Net Cost of a Bare Pole x Carrying Charge Rate)
in Service Areas where the number of Attaching Entities is 3 = 0.44
x (Net Cost of a Bare Pole x Carrying Charge Rate)
in Service Areas where the number of Attaching Entities is 2 = 0.31
x (Net Cost of a Bare Pole x Carrying Charge Rate)
in Service Areas where the number of Attaching Entities is not a
whole number = N x (Net Cost of a Bare Pole x Carrying Charge Rate),
where N is interpolated from the cost allocator associated with the
nearest whole numbers above and below the number of Attaching
Entities.
[GRAPHIC] [TIFF OMITTED] TR03FE16.000
* * * * *
[FR Doc. 2016-01182 Filed 2-2-16; 8:45 am]
BILLING CODE 6712-01-P