The National Broadband Plan suggested that it would encourage the development of broadband in the United States for pole attachment rates to be as uniform as possible.1 In 2011, the Federal Communications Commission (“Commission” or “FCC”) acted on this suggestion and promulgated new regulations to introduce rate parity between cable and telecommunications companies for pole attachments.2 The FCC also extended some regulatory protection to local telephone companies for the first time. The D.C. Circuit recently affirmed the Commission’s pole attachment regulations.3
I. Legislative History of Pole Attachment Regulation.
In the 1970s, utility poles were often jointly owned by electric and telephone utilities. As demand grew for cable television, rates for attaching to those poles spiraled upward. Congress regulated rates for cable companies in 1978 with the Pole Attachment Act, which it added as Section 224 to the Communications Act.4 The Act delegated to the Commission the authority to regulate just and reasonable rates, terms and conditions for pole attachment. The Commission created a cable rate formula based on the upper and lower “bounds” for just and reasonable rates in the Act.5
The Telecommunications Act of 1996 expanded the scope of the 1978 Act and granted new authority to the Commission to regulate a “telecom rate” for pole attachment. The 1996 Act extended the Act to more carriers by amending the definition of pole attachment to include any attachment by a “provider of telecommunications service,” although it specifically excluded Incumbent Local Exchange Carriers (“ILECs”) from the increasing pool of §224 beneficiaries.6
II. A New Era for Pole Attachment Regulation.
In its rulemaking, the Commission created rate parity between telecommunications providers and cable operators by amending the telecommunications formula to produce rates comparable to the cable formula. According to the Commission, the change would encourage broadband development by eliminating potential rate increases associated with new services and reducing the perceived incentive for pole owners to dispute the legal classification of communications services provided by a particular attacher.7 The Commission announced that its action provided regulatory certainty for broadband providers seeking to provide service to unserved communities while fairly compensating pole owners.8
Power companies (“Petitioners”) facing a substantial loss of revenue sought judicial review of the FCC regulations. Three questions were presented to the D.C. Circuit for consideration. First, the Petitioners argued that the Commission exceeded its authority under 47 U.S.C. §§ 224(b) and (c) when it modified its formula for computing the cost of providing space on a pole for telecommunications attachments. Second, the Petitioners argued that the Commission exceeded its discretion in concluding that ILECs are providers of telecommunications service under 47 U.S.C. § 224(a)(4) and thus are subject to the benefits of a lower ceiling commonly used for cable companies. Finally, the Petitioners challenged the Commission’s determination that a successful pole attachment complainant is entitled to refunds based on the applicable statute of limitations rather than the date of the complaint.9
A. ILECs May Share Benefit of Lower Pole Attachment Rates.
The Commission recognized significant shifts in pole ownership away from telephone companies (ILECs) and the resulting diminishing incentive to share access to expand the application of cable rate to telecommunications carriers, including ILECs.10 Petitioners argued that the Commission exceeded its authority by allowing ILECs access to the benefits of § 224. The Commission did not guarantee ILECs the protection of the telecommunications rate, but did reserve the right to regulate rates, terms and conditions of ILEC pole attachments to ensure that they are just and reasonable. Since the Commission did not regulate ILEC pole attachments previously, this change represents a significant extension of regulatory authority.
The standard of review only required the court to find that “there are good reasons” for the Commission’s choice and “that the Commission believes the new interpretation to be better.”11 To evaluate the Commission’s choices, the D.C. Circuit examined the definitions of telecommunications carrier and provider of telecommunications service in § 224 and §153 to determine that the Commission appropriately used its discretion to expand §224(b) to include ILECs.12
B. The Telecommunications Rate for Pole Attachments Was Lowered.
The Commission revised the telecommunications rate for pole attachments to be roughly equivalent to the lower cable rate.13 The court found that the statutory basis for the telecommunications rate in § 224(e) is less specific than the basis for the cable rate found in §224(d).14 Petitioners argued that since section 224(e) includes the word “cost” the Commission must use the fully allocated cost of the pole rather than an incremental cost to determine the telecommunications rate, but the court rejected that argument.15 The court upheld the FCC’s reinterpretation of § 224(e) and held that the mere use of “cost” does not preclude the Commission from redefining the apportionment of telecommunications cost to resemble the cable rate structure.
C. Pole Owners Must Pay Refunds Subject to Statute of Limitations.
The court outright dismissed Petitioners’ argument that refunds should be limited by the date a complaint is filed rather than the applicable statute of limitations.16 It concluded the argument had “no serious statutory basis.” The court held that the Commission has the authority to establish any reasonable period for overcharges or refunds.17
1. See Connecting America: The National Broadband Plan, GN Docket No. 09-51, at 109-10 (2010) (“National Broadband Plan).
2. See Implementation of Section 224 of the Act, WC Docket No. 07-245, Report and Order and Order on Reconsideration, 26 FCC Rcd 5240 (2011) (“Order”).
3. American Electric Power Service Corp. v. FCC, No. 11-1146, __ F.3d __ (D.C. Cir. Feb. 26, 2013).
4. American Electric Power Service Corp.,__ F.3d __ at *4.
5. American Electric Power Service Corp.,__ F.3d __ at *4. The upper bound is the “fully allocated cost of construction and operations of the pole” and the lower bound is the “marginal cost of the attachments.” Id. Citing 47 U.S.C. § 224(d)(1).
6. American Electric Power Service Corp., __ F.3d __ at *5.
7. Order at para. 8.
8. Order at paras. 172-81.
9. American Electric Power Service Corp., __ F.3d __ at *3.
10. Order at para. 206.
11. American Electric Power Service Corp., __ F.3d __ at *9 (quoting FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009)).
12. American Electric Power Service Corp., __ F.3d __ at *7-8.
13. Order at paras. 214-20.
14. American Electric Power Service Corp., __ F.3d __ at *10.
15. American Electric Power Service Corp., __ F.3d __ at *11.
16. American Electric Power Service Corp., __ F.3d __ at *13.
17. American Electric Power Service Corp., __ F.3d __ at *13.