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FCC Administrative Law Judge Rules In Favor Of Cable Operators In Pole Attachment “Just Compensation” Decision

February 13, 2007

An FCC Administrative Law Judge (ALJ) has issued an Initial Decision in Florida Cable Telecommunications Association v. Gulf Power Company upholding the FCC’s pole attachment rate formula and denying claims by Gulf Power, an electric utility, for increases in pole rental rates from cable operator attachers.

The case was initiated by a 2000 pole attachment complaint brought by the Florida Cable Telecommunications Association on behalf of its members after Gulf Power had terminated the operators’ earlier pole attachment agreements and demanded new agreements with six-fold increases in rental rates which were not in line with the FCC’s standard cable attachment rate formula. Gulf Power argued that the mandatory pole attachment provisions of Section 224 of the Communications Act and the related FCC rules, including the FCC’s maximum rate formulas, constituted an unconstitutional “taking” and did not provide utility pole owners with “just compensation.”

While the complaint was pending at the Bureau, a series of decisions from the FCC and the Eleventh Circuit in another case, Alabama Cable Telecommunications Assoc. v. Alabama Power Co., negated the essence of Gulf Power’s Constitutional arguments, holding that the FCC’s rate formula provided “just compensation” and did not constitute a taking. The Eleventh Circuit left one caveat, however – in the limited circumstance where a pole owner could show that an individual pole was “full,” and where it could show lost opportunities to rent the space occupied by the attacher at rates higher than otherwise provided by the formula, it might have a basis to charge higher rates than those provided by the rate formula.

As a result of the Eleventh Circuit’s caveat, Gulf Power argued that the FCC should afford it the opportunity to present evidence in a formal hearing to show that it met the exception by demonstrating that its poles were in fact “full” and that it lost quantifiable opportunities to rent the space at rates higher than provided by the FCC’s rate formula. As a result of these arguments, the FCC designated the proceeding for hearing before an ALJ, which was held in April 2006.

In the decision, the FCC’s ALJ rejected Gulf Power’s claims. Most importantly, the ALJ held that: (1) the regular use of make-ready procedures to rearrange facilities on poles and to replace poles of insufficient height precludes Gulf Power’s claim that any of its poles were “full,” (2) utilities do not suffer out-of-pocket losses or unreimbursed costs in hosting attachments as all of the utilities make-ready costs are in fact reimbursed by attachers, and (3) the attachment rates produced by the FCC maximum rate formulas (combined with the full reimbursement of any make-ready costs) are more than sufficient to satisfy any “just compensation” requirements.

The decision is another in a string of decisions foreclosing utilities’ arguments that the pole attachment provisions of Section 224 of the Communications Act and the related FCC rules are unconstitutional takings. We fully expect Gulf Power to appeal the decision to the full Commission, and after an almost certain unfavorable decision there, to federal circuit court.

We would be pleased to respond to any questions regarding this matter.

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