Pole Riders Urge Maine to Align With Other States on Rates; Consolidated Resists FCC Formula

ISPs seeking pole attachment expanded calls for the Maine Public Utilities Commission to adopt the FCC rate formula, after Consolidated Communications and other pole owners reported they would have to charge much less using the federal method. Maine reverse pre-empted the FCC. Now, the PUC is weighing adopting in docket 2018-00010 the FCC newer method for setting rates (see 1807240019). Consolidated wants the PUC to keep Maine’s Chapter 880 formula allowing higher rates, even though it actually sets rates by private contract like other pole owners there.

The state commission seeks comments by Sept. 28 about pole owners’ rate calculations. “A Procedural Order should be issued shortly that establishes the schedule for this case,” a PUC spokesperson emailed Monday.

Attorneys for pole riders voiced outrage after reviewing owner data. “Almost no pole owner is following the PUC’s existing rules,” and pole owners’ estimates show there would be “a dramatic reduction” in rates under the FCC formula, said Tilson General Counsel Tim Schneider, consulting for Maine Fiber, in an interview. “The status quo is untenable.” Saving even a few dollars per pole in a rural state “can make a difference in the economic model about how far down that state road a provider can build,” said Sheppard Mullin cable attorney Dave Thomas.

Adopting the FCC formula would bring Maine in line with most other states, including many reverse pre-emption states that have adopted a rate formula similar to the FCC, Thomas said. A PUC decision may happen before 2019, he said. Maine isn’t the only state showing renewed interest in pole attachments, said Schneider, former Maine public advocate: “Everyone has woken up to realize that pole attachment is the key issue in broadband policy.”

“Pole infrastructure is expensive and time consuming to construct and maintain,” Consolidated wrote the PUC in an Aug. 9 letter included with its rate calculations. “Consolidated would be significantly harmed by the proposed improper cost shifting that is allowed through the most recent FCC formula. Unlike the rate of return regulated utilities that simply pass these costs on to consumers, Consolidated has no mechanism with which to recover the decreased cost recovery.” The proposed change “would be discriminatory,” requiring the company formerly known as FairPoint and Verizon Maine “to subsidize its competitors by shouldering a disproportionate share of the costs of shared infrastructure.” Maine’s formula “recognizes that all attachers are benefiting from pole investments and as a result, all pole attachers should share equitably in the costs,” it said.

Rates

“Our rates follow state guidelines and are set by contract,” said Consolidated Senior Director-Government Relations Sarah Davis. “The statute allows companies to enter into contracts for pole attachments.”

Maine allows Consolidated to annually charge cable companies at most $9.96 for a pole with three attachers or $18.47 with two, Consolidated said. If the state applied the FCC telecom formula as updated in 2015, the maximum annual rate for telecom attachers would be about $3.30 with either number of attachers. It would be about 50 cents using the FCC cable formula. Most Consolidated poles are jointly owned, and the number of attachers varies depending “on where the poles are located, whether an area has a cable provider, telecom competition, municipal attachers” and other factors, said Davis.

Consolidated’s Maine rates came from negotiations. The pole owner charges $12.60 annually for solely owned poles and half that for jointly owned poles, regardless of how many attachers, it said in a March 29 filing. “Consolidated’s base rates for wired communications attachments were originally set by Verizon and Consolidated does not have information regarding how those rates were derived,” it said. “Periodically, Consolidated reviews the Chapter 880 formula and determines if the rates need to be changed. If it appears that rates should be increased, Consolidated will increase rates.”

Central Maine Power (CMP) and Emera also would have lower rates under the FCC formula, the pole owners told the PUC. CMP rates would be about $20 less on poles with one attacher, about $10 less on a pole with two riders and about $6 less on a pole with three. Like Consolidated, the utilities based rates on private negotiations. “CMP has continued to use the negotiated rate approach given that 1) other parties have found the approach acceptable, 2) the resulting attachment rates are generally reasonable, and 3) it provides for a stable level of pole attachment revenues and expenses,” said an April 3 filing.

“It’s legal to charge rates that are negotiated between the parties,” with the state rule applying “only when there is a dispute between the attacher and the pole owner that is brought to the Commission,” the PUC spokesperson emailed. Chapter 880 states: “Notwithstanding anything to the contrary in this Chapter, pole owners and attaching entities may enter into negotiated agreements for attachment to joint-use utility poles that contain rates, terms, or conditions that differ from those described in this Chapter.”

Consolidated would have lower rates under the FCC formula partly because its pole net costs are below zero, said Thomas. He pointed to data in the company’s report showing the company invested $201.5 million gross in Maine poles last year while taking about $204.6 million in accumulated depreciation on the poles. The Maine rules allow higher rates because they assign more cost to attachers, the attorney said.

It's tough to negotiate low rates with pole owners, since users have nowhere else to go, Schneider said. No free market exists for pole attachments, said Thomas. “There’s typically one right of way corridor” and “one line of poles,” with it “economically or … legally infeasible to build your own pole network or to go underground,” he said. CMP and Emera didn’t comment.

Who Pays?

Consolidated needn’t pay for municipal pole replacements because they aren't make-ready work, the company replied last week in related Maine PUC docket 2018-00136. The agency asked if replacement of utility poles is make-ready under Section 7(A) of Chapter 880 of its rules, and if so, if such replacements are subject to that section’s exemption for “non-commercial, non-competitive use consistent with the police power of [a] municipality.”

Pole replacement is the costliest element of make-ready work, said Schneider. If the PUC finds replacement is make-ready, pole owners rather than municipalities would have to pay for it, he said. CenturyLink and other telecom companies said pole replacement is make-ready (see 1808060045).

Including pole replacements as make-ready requires an “overbroad” reading of state law, Consolidated replied. The municipal exemption applies only to rearranging facilities; forcing pole owners to pay for replacements would increase costs to ratepayers “to subsidize a competitive communications service.”

Consolidated’s "overly narrow reading" overlooks the purpose of exempting municipalities, said the Maine Municipal Association. Localities make upgrades for public safety, saving money for pole owners, it said. "Make-ready costs are minimized for pole owners and current users when those entities properly plan for the space and weight associated with municipal facilities,” MMA said. Rules clarify who should be allocated cost of rearranging facilities, but such language isn’t “aimed at establishing a new industry standard" that excludes pole replacement from make-ready costs.