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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $//ORDER, Petition for Special Relief, TCI OF SEATTLE, DA 96-170/$ $/76.922(d) Rates for the basic service tier, price cap requirements/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 96-170 In the Matter of: ) ) TCI of Seattle, Inc. ) CSR No. 4572-R ) Petition for Special Relief ) MEMORANDUM OPINION AND ORDER Adopted: February 12, 1996 Released: February 21, 1996 By the Chief, Cable Services Bureau: I. Introduction 1. On August 4, 1995, TCI of Seattle, Inc. ("TCI-S"), filed a Petition for Special Relief with the Cable Services Bureau requesting authorization to treat the pole attachment fees charged by the Seattle City Light Department ("City Light") as external costs for purposes of 47 C.F.R.  76.922(d)(3). On October 5, 1995, the City of Seattle ("City") filed an opposition to the petition for special relief, to which TCI-S replied on October 16, 1995. 2. In this Order, we find that TCI-S has failed to show that it would suffer significant economic hardship from City Light's increases in pole attachment fees as required by Section 76.922(d)(3) of the Commission's rules, and we therefore deny TCI-S's request to treat City Light's pole attachment fee increases as external costs. II. Facts 3. TCI-S states that it serves approximately 82,000 subscribers in the City of Seattle. City Light owns utility poles within TCI-S's service area to which TCI-S must attach its cable. TCI-S states that it could not provide cable television service to subscribers in the Seattle area without the ability to attach its cable to City Light's poles. 4. According to TCI-S, City Light notified TCI-S that on January 1, 1996 it would increase its rates for poles solely owned by City Light from $6.24 to $14.66, or 135 percent. The rate for a pole jointly owned by City Light and U.S. West will increase from $2.08 to $7.33, or 252 percent. TCI-S states that use of these poles is essential to its cable service, that City Light's pole attachment fees are not regulated on the federal or state level, and that it lacks bargaining power with City Light. TCI-S calculates that it will pay City Light $244,242 per year more in 1996 than it paid in 1995. 5. In its opposition to TCI-S's petition the City argues that TCI-S has failed to show that the rate increase would impose a "significant economic hardship," as required by the Commission, and that treatment of the rate increase as an external cost would not be in the public interest because it would result in higher cable rates for subscribers. The City explains that under a 1986 agreement entered into between the City and the cable operators, pole attachment rates would increase from 1986 through 1995 as follows: (a) City-owned poles: $6.00 to $6.24; (b) Jointly-owned poles: $1.50 to $2.08. The City states that in 1992, it established a rate for 1996 of $14.66 for solely-owned poles and $7.33 for jointly-owned poles. The City maintains that TCI-S did not challenge these rates, nor the methodology by which such rates were adopted, during the open public proceeding held by the Seattle City Council prior to its adoption of the increased rates. 6. In support of its contention that TCI-S has not shown significant economic hardship, the City argues that TCI-S has not provided any specific evidence regarding how the additional fees impose a "significant economic hardship" on TCI-S. The City argues that when the increase in expenses due to increased pole attachment fees is compared to TCI-S's total expenses for 1994, the amount is negligible. 7. The City also argues that if the Commission decides to grant the Petition, it should not permit TCI-S to treat the entire amount of the increase as external costs, but instead, should limit the amount to that portion of the increase that would exceed the greater of the maximum permitted amount City Light would be permitted to charge it if were subject to the state pole attachment law, or the highest pole attachment rate in the country charged by a utility subject to the Pole Attachment Act; or, the City argues, the Commission should permit TCI to pass through only the amount that such increase exceeds City Light's 1980 pole attachment rates as adjusted for inflation. 8. Finally, the City maintains that allowing TCI-S to treat the pole attachment fee increase as an external cost would not be in the public interest because TCI-S has stated that such a result would increase its per subscriber rate by $2.98 per year. The City asserts that if TCI-S is unable to earn a reasonable rate of return based on the benchmark rates established by the Commission, then it should file a cost-of-service showing. 9. TCI-S's reply to the City's opposition argues that the City's pole attachment rates are far above rates charged for identical poles made available by US West in Washington State ($3.75), and above the national average pole rate among electric and telephone companies combined ($4.73). TCI-S also references statements made by the keynote speaker at a NATOA conference in September, 1995, which TCI-S alleges "encourage[d] municipalities to profit through controlled licensing of their public rights of way." In addition, TCI-S argues that failure to allow it to recover this expense as an external cost would allow the local franchising authority to reduce TCI-S's earnings below their "lawful level," and that requiring TCI-S to file a cost-of-service showing compromises the statutory goal of administrative efficiency. III. Discussion 10. Section 76.922(d)(3), 47 C.F.R.  76.922(d), provides that permitted rates for regulated cable programming may be adjusted for inflation, changes in the number of regulated channels and changes in external costs. Section 76.922(d)(3) limits adjustments for changes in external costs to certain designated categories of costs. Changes in pole attachment fees are not among the designated external costs for which adjustments are permitted to subscribers' cable service rates. 11. However, in fashioning this rule the Commission considered the impact of increases in pole attachment fees and provided an instance when such increases may be considered external costs for purposes of section 76.922(d). In the Second Order on Reconsideration, Fourth Report and Order, and Fifth Notice of Proposed Rulemaking, MM Docket No. 92-266, 9 FCC Rcd 4119 (1994) (Second Order on Reconsideration), the Commission generally denied external cost treatment of pole attachment fees because, unlike franchise fees or taxes, pole attachment fees are not imposed by the government, nor are they a cost over which the legislative history of the 1992 Cable Act expresses explicit concern. In denying external cost treatment to pole attachment fees, however, the Commission noted that "some pole attachment fees are regulated under the 1978 Pole Attachment Act, 47 U.S.C.  224." The Commission stated that it will consider the need for special relief "in instances of significant hardship resulting from unusually large pole attachment fee increases imposed by utilities or other pole providers not subject to regulation under the Pole Attachment Act." The Commission stated that its standard for finding an instance of significant economic hardship in this regard may include, but will not be limited to, "showings regarding both the magnitude of the increases in pole attachment fees and the impact of the increase on the operator." 12. TCI-S points out that because City Light is an electric company owned and operated by the City of Seattle, a political subdivision of the State of Washington, it is not subject to regulation under the 1978 Pole Attachment Act. It also states that the City's pole attachment fees are not subject to regulation by the State of Washington. It argues that the 135 percent increase for poles owned solely by City Light and the 262 percent increase for jointly-owned poles are extraordinarily high, and that the rates are well above the rates charged by investor-owned utilities in the State of Washington. 13. We find that while TCI-S has indicated the magnitude of the fee increases, it has not provided any specific evidence regarding the impact of the increases upon TCI-S, nor has it provided any other evidence sufficient to show significant economic hardship resulting from the City's increases in pole attachment fees. We also note that the City has shown that the total increases amount only to approximately 0.6% of TCI-S's total expenses. In the absence of a showing of significant hardship, we do not have grounds to grant the relief sought. Accordingly, we deny TCI-S's petition for special relief requesting authority to treat the pole attachment fee increases imposed by City Light as external costs for purposes of our rules. IV. Ordering Clause 14. Accordingly, IT IS ORDERED, pursuant to 47 C.F.R.  76.922(d), that TCI of Seattle, Inc.'s Petition for Special Relief requesting authorization to treat pole attachment fee increases imposed by the Seattle City Light Department as external costs for purposes of rate adjustments IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau