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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
RCN Telecom Services of )
Philadelphia, Inc. ) File No. PA 01-003
Complainant, )
)
v. )
)
PECO Energy Company and Exelon )
Infrastructure Services, Inc., )
Respondent
PHASE I ORDER
Adopted: December 17, 2002 Released: December 18,
2002
By the Chief, Enforcement Bureau:
1. In this Order we grant in part a complaint
("Complaint") filed with the Federal Communications Commission
("Commission") by RCN Telecom Services of Philadelphia, Inc.
("RCN") against PECO Energy Company and Exelon Infrastructure
Services, Inc. (together "PECO"), pursuant to Section 224 of the
Communications Act of 1934, as amended ("Pole Attachment Act")1
and Subpart J of Part 1 of the Commission's rules.2 On June 1,
2001, the Cable Services Bureau issued an Order, DA 01-1339,3
allowing RCN to amend its original complaint. The filing date
of the amended complaint is May 4, 2001. Upon review of the
filings in this matter, we have determined that it is in the
interest of justice to bifurcate the issues concerning the
annual pole attachment rate from the make-ready issues4 raised
by RCN. Therefore, in this Order, we grant the Complaint in part
and calculate a maximum just and reasonable annual pole
attachment rate and reserve resolution of the make-ready issues.
2. Pursuant to the Pole Attachment Act, the Commission has
general authority to regulate the rates, terms, and conditions
for attachments by a cable television system or provider of
telecommunications service to a pole, duct, conduit, or right-
of-way owned or controlled by a utility, except where such
matters are regulated by a State.5 The Commission shall provide
that such rates, terms and conditions are just and reasonable.6
The Commission is authorized to adopt procedures necessary to
hear and to resolve complaints concerning such rates, terms, and
conditions.7 Pursuant to this statutory authority, the
Commission has developed a formula methodology to determine
maximum allowable pole attachment rates to ensure that such
rates are just and reasonable.8 A utility may not charge more
than the maximum amount permitted by the formulas developed by
the Commission.
3. The formula developed to resolve complaints concerning
rates for attachments by cable systems is known as the Cable
Formula.9 The Telecommunications Act of 1996 ("1996 Act"),10
expanded the scope of Section 224 by applying the Cable Formula
to rates for pole attachments made by telecommunications
carriers11 in addition to cable systems,12 until the Commission
developed a separate formula13 for telecommunications carriers.
The Commission adopted a Telecommunications Formula ("Telecom
Formula"), which became effective February 8, 2001.14 It applies
to all attachments by telecommunications carriers and is to be
phased in at equal annual increments over a five-year period.15
The Commission's two formulas differ in only one respect, namely
their methodologies for determining the proportion of unusable
space on a pole that is attributable to the attachment. The
Cable Formula attributes unusable space to an attachment based
on the portion of usable space occupied by the attachment, while
the Telecom Formula attributes unusable space to a
telecommunications attachment based on the total number of
attaching entities.16
4. The present case concerns RCN's attachments to PECO's
poles for telecommunications services. As an initial matter,
PECO argues that RCN is neither a cable operator nor
telecommunications services provider and is not entitled to
coverage under the Pole Attachment Act. RCN responds that it
has cable franchises for all the territories within which it is
attached to PECO's poles and that its offers bundled services,
including telecommunications and broadband video services, as
well as high-speed Internet access to its customers. PECO
provides no evidence to dispute RCN's statements that RCN has
entered into cable franchise agreements with all of the
communities in which RCN has attached, or has requested
attachment, to PECO's poles. As a franchised cable operator,
RCN is a proper complainant in this proceeding.17 PECO also
asserts that the Commission does not have jurisdiction in this
matter because RCN provides its customers with high-speed
Internet access. As the Supreme Court concluded in NCTA v. Gulf
Power Co.18 the Commission does have jurisdiction over
attachments that are used to provide Internet access
simultaneously with cable or telecommunications service, as such
commingled services are within the ambit of the Pole Attachment
Act.
5. We also reject PECO's argument that because RCN has
entered into an agreement with PECO, it cannot complain about
the terms of the agreement to the Commission. An attacher may
file a complaint pursuant to the Pole Attachment Act challenging
the terms of an agreement after the contractual agreement has
been executed.19 Indeed, a pole attachment agreement that
includes a clause waiving statutory rights to file a complaint
with the Commission is per se unreasonable.20 Precluding RCN
from challenging the pole attachment fee after entering into the
contract would be tantamount to requiring RCN to waive its right
to file a complaint with the Commission. The Commission and the
Cable Services Bureau have repeatedly affirmed the policy that
an attacher cannot be forced to waive its right to federal,
state, or local regulatory relief as a condition of
attachment.21
6. As a final threshold issue, we reject PECO's argument
that it is entitled to charge a market rate for its attachments
because our existing formula does not provide just compensation.
In Alabama Cable v. Alabama Power22 the Commission concluded
that the Commission's pole attachment formulas, together with
the payment of make-ready expenses, provide compensation that
exceeds just compensation. In affirming this decision, the
Eleventh Circuit Court of Appeals concluded that absent proof
that each pole is at full capacity and evidence of either
another available buyer waiting to use the space or the power
company's ability to put the space to a higher-valued use with
its own operations (evidence lacking here), the Commission's
formula "(which provides for much more than marginal cost)
necessarily provides just compensation."23
7. We turn now to the appropriate pole attachment rate
here. Because the Complaint was filed on May 4, 2001, we apply
the Cable Formula plus one fifth of the differential between the
Cable Formula rate and the fully implemented Telecom Formula
rate to calculate the maximum rate.24 Regarding the number of
attaching entities, we follow the Commission's guidance in
Teleport v. Georgia Power,25 for the period from May 4, 2001
through July 30, 2001, and the presumptions adopted by the
Commission in the Consolidated Order26 beginning July 31, 2001.
In Teleport v. Georgia Power, the Commission concluded that the
presumptions of three or five attaching entities, proposed by
the complainant, were reasonable for the period prior to the
effective date of the Consolidated Order. Unlike Teleport v.
Georgia Power, however, in this case, RCN proffered an average
number of attachers of three and one-half.27 PECO failed to
provide any support for its alternative proposal of three
attaching entities28 and thus, we rely on RCN's proposal of
three and one-half attachers, in the absence of any evidence by
PECO in support of a different average number.29 Therefore, for
the period May 4, 2001 through July 30, 2001 the period after
the Complaint was filed but before the publication of the
Consolidated Order in the Federal Register, we use the
presumption of three and one-half attaching entities in our
calculation. For the period beginning July 31, 2001 we revert
to the presumptions of three for non-urbanized (less than 50,000
population) areas and five for urbanized (more than 50,000
population) areas as adopted in the Consolidated Order. Neither
party produced the type or extent of evidence required by the
Consolidated Order to overcome these presumptions for this time
period, such as a statistically valid survey or actual data.
Because the record does not reflect the specific geographic
areas involved, we have calculated rates for both three, three
and one-half, and five attaching entities and the rates should
be applied in the appropriate areas for the appropriate time
periods.
8. In calculating PECO's maximum rate, we calculate the
net cost of a bare pole by subtracting accumulated depreciation
and net deferred operating income taxes from the gross pole
investment in order to arrive at the net pole investment. As we
recently reiterated in NSCTA v. Nevada Bell, 30 when applying
the pole attachment formula to electric utilities, we generally
prorate the pole accumulated depreciation using publicly
available information about the plant accumulated depreciation.
We divide the gross pole investment by the gross plant
investment and multiply that figure by the plant accumulated
depreciation to determine what portion of the plant accumulated
depreciation is reasonably related to gross pole investment."31
That is precisely the methodology that we used in calculating
PECO's pole attachment rate.32 In its rate calculation, by
contrast, PECO calculated its pole accumulated depreciation by
subtracting its depreciable plant base from its gross pole
investment. PECO offers no explanation why we should deviate
from our standard methodology nor does PECO provide any analysis
in support of its deviation. Based on our review, we conclude
that PECO's proposed methodology does not provide an accurate
assessment of the pole accumulated depreciation and we therefore
reject it.
9. We calculate the maximum pole attachment rates using
data from PECO's 1999 FERC Form 1.33 Using this information and
applying the Cable Formula we calculate a maximum just and
reasonable annual cable rate of $6.79 per pole attachment.34
Using the same information and applying the Telecom Formula for
telecommunications attachments, we calculate a fully implemented
maximum just and reasonable annual rate of $10.26 for
attachments in areas with a presumptive average number of five
attachers;35 a fully implemented maximum just and reasonable
annual rate of $13.62 for attachments in areas with a
presumptive average number of three and one-half attachers;36
and a fully implemented maximum just and reasonable annual rate
of $15.48 for attachments in areas with a presumptive average
number of three attachers.37 For areas with an average of five
attachers, the first year rate is $7.48; for areas with an
average of three and one-half attachers, the first year rate is
$8.16; for areas with an average of three attachers, the first
year rate is $8.53. Consequently, we find that Respondent's
actual pole attachment rate of $47.25 is not just and
reasonable.
10. Accordingly, IT IS ORDERED, pursuant to Sections 0.111,
0.311 and 1.1401-1.1418 of the Commission's rules, 47 C.F.R. §§
0.111, 0.311 and §§ 1.1401-1.1418, that the relief requested in
the Complaint IS GRANTED TO THE EXTENT INDICATED HEREIN.
11. IT IS FURTHER ORDERED, pursuant to Sections 0.111,
0.311 and 1.1410 of the Commission's rules, 47 C.F.R. §§ 0.111,
0.311 and 1.1410, that the annual pole attachment rate of $47.25
IS UNREASONABLE and IS TERMINATED, effective upon the release of
this Order.
12. IT IS FURTHER ORDERED, pursuant to Sections 0.111,
0.311 and 1.1410 of the Commission's rules, 47 C.F.R. §§ 0.111,
0.311 and 1.1410, that the annual respective rates of $7.48,
$8.16 and $8.53 for each pole attachment ARE SUBSTITUTED for the
rate of $47.25, effective upon the release of this Order.
13. IT IS FURTHER ORDERED, pursuant to Sections 0.111,
0.311 and 1.1410 of the Commission's rules, 47 C.F.R. §§ 0.111,
0.311 and 1.1410, that Respondent SHALL REFUND to Complainant,
within thirty (30) days of the release of this Order, that
portion of the amount paid in excess of the respective rates
listed above, for the period from May 4, 2001 to the present,
plus interest to the date of refund.
14. IT IS FURTHER ORDERED, pursuant to Sections 0.111,
0.311 and 1.1401-1.1418 of the Commission's Rules, 47 C.F.R. §§
0.111, 0.311 and 1.1401-1.1418, that PECO and RCN SHALL
NEGOTIATE IN GOOD FAITH, maximum just and reasonable rates for
pole attachments for charges based on changes in PECO's FERC
Form 1, in accordance with the Commission's rules.
FEDERAL COMMUNICATIONS COMMISSION
David H. Solomon
Chief, Enforcement Bureau Attachment A
Pole Attachment Formulas and Calculations
Maximum Rate = Space Occupied by Attachment X Net Cost
of X Carrying
Total Usable Space
Bare Pole Charge Rate
Maximum Rate
Space Occupied by (A) 1
Attachment
Total Usable Space (B) 13.5
Net Cost of a Bare (C) $40.84
Pole
Carrying Charge Rate (D) 2.2442
Maximum Rate per (A\B) x C x D $6.79
Pole
Net Cost of a Bare Pole
(1) Gross Pole Investment $311,042,370
(2) Depreciation Reserve (Poles) $243,965,632
(3) Net Deferred Operating Income Taxes $2,238,042,911
(Electric Plant)
(4) Gross Plant Investment (Electric) $14,626,785,-
648
(5) Net Deferred Operating Income Taxes $47,592,560
(Poles)
((L(1)/L(4) x L(3))
(6) Net Investment (Poles) (L(1)-L(2)-L(5)) $19,484,178
(7) Net Investment (Bare Pole) (L(6) x .85 ) $16,561,551
(8) Number of Poles 405,570
(9) Net Cost of a Bare Pole (L(7)/L(8)) $40.84
Carrying Charge Rate
(1) Administrative Charge 0.3634
(2) Maintenance Charge 1.0683
(3) Depreciation Charge 0.3592
(4) Taxes 0.3410
(5) Return on Investment 0.1123
(6) Total Carrying Charge 2.2442
(L(1)+L(2)+L(3)+L(4)+L(5))
Administrative Charge
(1) Total G&A Expenses $332,918,874
(2) Gross Plant Investment $14,626,785,648
(3) Depreciation Reserve (Plant) $11,472,498,140
(4) Accumulated Deferred Taxes (Plant) $2,238,042,911
(5) Net Investment (Plant) $916,244,597
(6) Administrative Charge (L(1)/L(5)) 0.3634
Maintenance Charge
(1) Maintenance Expense $71,410,003
(2) Gross Investment (364, 365, 369) $1,067,045,574
(3) Depreciation Reserve (364, 365, 369) $836,935,651
(4) Accumulated Deferred Taxes (364, 365, $163,268,529
369)
(5) Net Investment (364, 365, 369) $66,841,394
(6) Maintenance Charge (L(1)/L(5)) 1.0683
Depreciation Charge
(1) Depreciation Rate 0.0225
(2) Gross Pole Investment $311,042,370
(3) Depreciation Reserve (Pole) $243,965,632
(4) Accumulated Deferred Taxes (Pole) $47,592,560
(5) Net Investment (Poles) $19,484,178
(6) Depreciation Charge (L(1) x 0.3592
(L(2)/L(5))
Taxes
(1) Total Current and Deferred Taxes $639,281,736
(2) Net Plant Investment $1,874,780,313
(3) Taxes (L(1)/L(2)) 0.3410
Return on Investment
Authorized by State Regulatory Commission 0.1123
Attachment B
Pole Attachment Formulas and Calculations
Maximum Rate
Space Occupied by (A) 1
Attachment
Total Unusable Space (B) 24.0
Pole Height (C) 37.5
Number of Attaching (D) 5.0
Entities (E) $40.84*
Net Cost of a Bare (F) 2.2442*
Pole
Carrying Charge Rate
Maximum Rate per [(A + 2/3 x $10.26
Pole (B/D))/C] x E x F
$10.26 - $6.79 = $3.47/5 = $0.69 + $6.79 = $7.48 as of 2/8/01
*See Attachment A calculation
Maximum Rate
Space Occupied by (A) 1
Attachment
Total Unusable Space (B) 24.0
Pole Height (C) 37.5
Number of Attaching (D) 3.0
Entities (E) $40.84*
Net Cost of a Bare (F) 2.2442*
Pole
Carrying Charge Rate
Maximum Rate per [(A + 2/3 x $15.48
Pole (B/D))/C] x E x F
$15.48 - $6.79 = $8.69/5 = $1.74 + $6.79 = $8.53 as of 2/8/01
*See Attachment A calculation
Maximum Rate
Space Occupied by (A) 1
Attachment
Total Unusable Space (B) 24.0
Pole Height (C) 37.5
Number of Attaching (D) 3.5
Entities (E) $40.84*
Net Cost of a Bare (F) 2.2442*
Pole
Carrying Charge Rate
Maximum Rate per [(A + 2/3 x $13.62
Pole (B/D))/C] x E x F
$13.62 - $6.79 = $6.83/5 = $1.37 + $6.79 = $8.16 as of 2/8/01
*See Attachment A calculation
_________________________
1 47 U.S.C. §224.
2 47 C.F.R. §§1.1401-1.1418.
3 RCN Telecom Services of Philadelphia, Inc. v. PECO Energy
Company and Excelon Infrastructure Services, Inc., DA 01-1339, 16
FCC Rcd 11857 (2001). Effective March 25, 2002, the Commission
transferred responsibility for resolving cable programming
services tier rate complaints from the former Cable Services
Bureau to the Enforcement Bureau. See Establishment of the Media
Bureau, the Wireline Competition Bureau and the Consumer and
Governmental Affairs Bureau, Reorganization of the International
Bureau and Other Organizational Changes, FCC 02-10, 17 FCC Rcd
4672 (2002).
4 "Make-ready" generally refers to the modification of poles or
lines or the installation of guys and anchors to accommodate
additional facilities.
5 47 U.S.C. § 224 (b) and (c). Pennsylvania has not certified
that it regulates rates, terms and conditions of pole
attachments. See Public Notice, "States That Have Certified That
They Regulate Pole Attachments," 7 FCC Rcd 1498 (1992).
6 47 U.S.C. §224 (b) (1).
7 47 U.S.C. § 224 (b) (1).
8 See Adoption of Rules for the Regulation of Cable Television
Pole Attachments, First Report and Order, 68 F.C.C. 2d 1585
(1978); Second Report and Order, 72 F.C.C. 2d 59 (1979);
Memorandum and Order, 77 F.C.C. 2d 187 (1980), aff'd, Monongahela
Power Co. v. FCC, 655 F.2d 1254 (D.C. Cir. 1985) (per curiam);
and Amendment of Rules and Policies Governing the Attachment of
Cable Television Hardware to Utility Poles, 2 FCC Rcd 4387
(1987). See also, Implementation of Section 703(e) of the
Telecommunications Act of 1996, 13 FCC Rcd 6777 (1998) and
Amendment of Rules and Policies Governing Pole Attachments, 15
FCC Rcd 6453 (2000), pet. for recon. denied in part, Amendment of
Commission's Rules and Policies Governing Pole Attachments, CS
Docket No. 97-98; Implementation of Section 703(e) of the
Telecommunications Act of 1996, FCC 01-170, 16 FCC Rcd 12103
(2001), appeal pending sub nom. Southern Company Services, Inc.
et al. v. FCC, Case No. 01-1326 (D.C. Cir., filed July 26, 2001).
9 47 C.F.R. §1.1409 (e) (1).
10 Pub. L. No. 104-104, 110 Stat. 56 (1996).
11 47 U.S.C. § 153 (44).
12 47 U.S.C. § 153 (8); 47 U.S.C. § 602 (5).
13 See Implementation of Section 703(e) of the Telecommunications
Act of 1996, 13 FCC Rcd 6777 at ¶¶ 116-130 (1998).
14 See 47 U.S.C. § 224 (d) (3) and 47 U.S.C. § 224 (e) (4);
Implementation of Section 703 (e) of the Telecommunications Act
of 1996, 13 FCC Rcd 6777 at ¶ 102 (1998).
15 See Amendment of Commission's Rules and Policies Governing
Pole Attachments, CS Docket No. 97-98; Implementation of Section
703(e) of the Telecommunications Act of 1996, CS Docket No. 97-
151, FCC 01-170, 16 FCC Rcd 12103 at ¶ 2 (2001).
16 Id. at ¶ 53-56.
17 See 47 USC § 224 (a) (4). ("The term `pole attachment' means
any attachment by a cable television system or provider of
telecommunications service to a pole, duct, conduit, or right-of
way owned or controlled by a utility.") Because we find RCN to
be a cable television system, we do not address the issue raised
by PECO concerning RCN's previous status as a certified open
video system provider.
18 534 U.S. 327, 338-339 (2002).
19 See 47 C.F.R. § 1.1404 (d) (requiring that a complaint be
accompanied by a copy of any existing pole attachment agreement).
See also S. Rep. No. 95-580, at 16 (1977), 1978 U.S.C.C.A.N. 109,
124 (anticipating Commission jurisdiction where the
communications space is already occupied by the cable television
system.)
20 See e.g., Letter from Meredith J. Jones, Chief, Cable Services
Bureau to Danny E. Adams, Esq., Kelley Drye & Warren LLP, 12 FCC
Rcd 942 (CSB 1997).
21 See Adoption of Rules for the Regulation of Cable Television
Pole Attachments, First Report and Order, 68 F.C.C. 2d 1585 at ¶
16 (1978); Implementation of Section 703(e) of the
Telecommunications Act of 1996, 13 FCC Rcd 6777, 6790 and n. 90
(1998); Cavalier Telephone, LLC v. Virginia Electric and Power
Company, 15 FCC Rcd 9563 (CSB 2000).
22 Alabama Cable Telecommunications Association, et al. v.
Alabama Power Company, 16 FCC Rcd 12209 at ¶¶ 32-61 (2001),
affirmed Alabama Power Company v. FCC, Case No. 00-14763 (11th
Cir., November 14, 2002).
23 Alabama Power Company v. FCC, Case No. 00-14763 (11th Cir.,
November 14, 2002).
24 See 47 U.S.C. § 224 (e) (4); Implementation of Section 703(e)
of the Telecommunications Act of 1996, 13 FCC Rcd 6777 (1998).
25 Teleport Communications Atlanta, Inc. v. Georgia Power
Company, FCC 02-270 (released: October 8, 2002).
26 Amendment of Rules and Policies Governing Pole Attachments,
FCC 01-170, 16 FCC Rcd 12103 (2001) ), appeal pending sub nom.
Southern Company Services, Inc. et al. v. FCC, Case No. 01-1326
(D.C. Cir., filed July 26, 2001).
27 Statement of Jonathan Troy Stinson, RCN's Reply at Exhibit C.
28 PECO's Response to Amended Complaint at p. 59 ("PECO has not
had the opportunity to develop a statistically valid survey").
29 47 C.F.R. § 1.1409 (a) ("Where one of the parties has failed
to provide information required to be provided by these rules or
requested by the Commission, or where costs, values or amounts
are disputed, the Commission may estimate such costs, values or
amounts it considers reasonable, or may decide adversely to a
party who has failed to supply requested information which is
readily available to it, or both.").
30 In the Matter of Nevada State Cable Television Association v.
Nevada Bell, 17 FCC Rcd 15534 at ¶ 13 (EB 2002).
31 Id. at ¶ 13.
32 In cases such as this, where the utility provides both
electric and other services, we use the total electric plant for
our calculations, except for the tax element. See Amendment of
Rules and Policies Governing the Attachment of Cable Television
Hardware to Utility Poles, 2 FCC Rcd 4387 at n. *** (1987).
33 While PECO has requested that certain of its financial
information be kept confidential, we do not need to reach the
issue of confidentiality because we use only publicly available
information to calculate PECO's maximum rate.
34 Our calculations are set forth in Attachment A to this Order.
35 Our calculations are set forth in Attachment B to this Order.
36 Our calculations are set forth in Attachment B to this Order.
37 Our calculations are set forth in Attachment B to this Order.