Click here for Adobe Acrobat version
Click here for Microsoft Word version
********************************************************
NOTICE
********************************************************
This document was converted from Microsoft Word.
Content from the original version of the document such as
headers, footers, footnotes, endnotes, graphics, and page numbers
will not show up in this text version.
All text attributes such as bold, italic, underlining, etc. from the
original document will not show up in this text version.
Features of the original document layout such as
columns, tables, line and letter spacing, pagination, and margins
will not be preserved in the text version.
If you need the complete document, download the
Microsoft Word or Adobe Acrobat version.
*****************************************************************
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
Nevada State Cable Television )
Association, Complainant ) File No. PA 96-001
)
v. )
Nevada Bell, )
Respondent/Petitioner )
)
ORDER ON RECONSIDERATION
Adopted: August 6, 2002 Released:
August 8, 2002
By the Chief, Enforcement Bureau:1
1. In this Order, we deny a petition for reconsideration
("Petition") of Cable Services Bureau Order, DA 98-1175 ("Bureau
Order").2 The Bureau Order granted a pole attachment complaint
filed by Nevada State Cable Television Association ("NSCTA")
against Nevada Bell, pursuant to Section 224 of the
Communications Act of 1934, as amended ("Pole Attachment Act")3
and Subpart J of Part 1 of the Commission's rules.4 In the
Bureau Order, the Cable Services Bureau found Nevada Bell's pole
attachment rates to be unjust and unreasonable and calculated a
just and reasonable pole attachment rate. NSCTA filed an
Opposition and Nevada Bell filed a Reply. We affirm the Bureau
Order.
2. Pursuant to the Pole Attachment Act, the Commission has
the 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.5 The Pole Attachment Act
grants the Commission general authority to regulate such rates,
terms and conditions, except where such matters are regulated by
a State.6 The Commission is authorized and has adopted
procedures necessary to resolve complaints concerning such rates,
terms, and conditions.7 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. The Commission has
concluded that "where onerous terms or conditions are found to
exist on the basis of the evidence, a cable company may be
entitled to a rate adjustment or the term or condition may be
invalidated."9
3. In its Petition, Nevada Bell raises two issues
concerning the Cable Services Bureau's calculation of Nevada
Bell's maximum permitted rate. First, Petitioner asserts that
the Bureau Order "failed to explain how the rate it adopted
applies to jointly owned as opposed to solely owned poles".10
Nevada Bell claims that, because the poles in issue were jointly
owned with another utility ("electric utility"), the electric
utility is entitled to charge a separate rental fee based on the
Common Carrier Bureau's decisions in Continental Cablevision11
and Teleprompter Corporation.12 Nevada Bell argues that the
Cable Services Bureau should have set a maximum rate that allowed
Nevada Bell to be compensated for the electric utility's costs in
addition to Nevada Bell's costs. NSCTA responds that Nevada Bell
is not entitled to collect a pole attachment rate on behalf of
the electric utility, citing Nevada Bell's Joint Pole Agreement
with the electric utility, which states that Nevada Bell may
retain any rental fees from attachments in the communications
space of the jointly owned poles.13
4. The record does not support Nevada Bell's argument. As
NSCTA points out, Nevada Bell's Joint Pole Agreement with the
electric utility states that Nevada Bell may retain any rental
fees from attachments in the communications space of the jointly
owned poles. Indeed, in its Response to the Complaint, Nevada
Bell stated that it did not propose to set a pole attachment rate
for the electric utility.14 There is no evidence in the record,
which includes the pole attachment agreements between NSCTA's
members and Nevada Bell, that supports Nevada Bell's claim that
it is collecting pole attachment fees on behalf of the electric
utility.
5. In fact, the issue of joint ownership was considered by
the Cable Services Bureau ("Bureau") in its calculation of the
maximum rate Nevada Bell was entitled to charge. The Bureau
accepted Nevada Bell's proposed number of equivalent poles as the
total pole count to be used in the formula.15 Because an
equivalent pole count was used in the rate calculation, Nevada
Bell is able to recover its fully allocated costs associated with
the pole attachments, in accordance with the Pole Attachment Act.
In the Bureau Order, the Bureau determined that Nevada Bell may
charge a maximum per pole attachment rate of $1.26 for poles for
which Nevada Bell's ownership interest is 100 percent. To the
extent Nevada Bell seeks to clarify that it may collect only a
proportionate amount of the maximum $1.26 rate per pole, based on
its ownership interest percentage, we clarify as follows: For
solely owned poles, the maximum attachment rate is $1.26; for
jointly owned poles in which Nevada Bell owns a 50 percent
interest, the maximum attachment rate is $0.63; and for jointly
owned poles in which Nevada Bell owns a 40 percent interest, the
maximum attachment rate is $0.50.16 Because Nevada Bell used an
equivalent pole count in calculating the rate per pole, Nevada
Bell will fully recover its costs despite the reduction in rate
for the jointly owned poles.17
6. Nevada Bell's reliance on Continental Cablevision and
Teleprompter Corporation to support its claim for additional fees
is misplaced. In Continental Cablevision, the Common Carrier
Bureau merely noted that the utility could only collect its
portion of the maximum rate based on its ownership percentage.18
Although the Common Carrier Bureau stated that it was possibility
that a joint owner could collect a separate rental fee for its
share of the poles, in the instant case, no other entity is
sharing in the fees and Nevada Bell may not collect an additional
fee on such entity's behalf. Likewise, in Teleprompter
Corporation, the Common Carrier Bureau did calculate rates based
on the separate costs of the individual utilities. Unlike this
case, however, in Teleprompter Corporation both utilities were
parties to the case and both utilities separately collected pole
attachment fees. The Bureau Order is consistent with both of
these decisions. Based on the record evidence, we affirm the
Cable Services Bureau conclusion that Nevada Bell is not entitled
to receive an additional fee over its maximum permitted rate.
7. Nevada Bell's second issue concerns the Cable Services
Bureau's decision not to depart from its standard formula, which
relies on publicly filed and verifiable data, to allow Nevada
Bell to substitute an internally generated number in the formula
for pole investment accumulated deferred taxes ("Pole ADT"),
rather than using a prorated number calculated from the publicly
available and independently verifiable data reported to ARMIS.19
Nevada Bell argues that the internally generated figure is more
accurate because the Cable Services Bureau used a pole investment
related accumulated depreciation ("Pole AD") figure in its
calculation and the two numbers are linked. Nevada Bell argues
that this is the type of inconsistency frowned on by the court in
Alabama Power.20 Nevada Bell argues that the Pole Attachment Act
requires the use of actual figures and a prorated figure is not
an actual figure. Nevada Bell argues that the proration method,
although applied by the Common Carrier Bureau in American
Cablesystems21 and TCA Management,22 is not an established part
of the pole attachment formula.
8. NSCTA responds that Nevada Bell should not be able to
pick and choose specific internal accounts to substitute in the
formula when it results in a lower rate calculation. NSCTA
argues that selective use of internal accounts results in an
"unbalancing" of the formula. NSCTA also argues that reliance on
internal records significantly increases the likelihood of
factual disputes and reduces an attacher's ability to calculate
the maximum rate using publicly available information. NSCTA
explains that using internal accounts would result in a more
complicated formula but would not be any more accurate than
relying on publicly available information. NSCTA argues that
Nevada Bell misconstrues Alabama Power, which did not in fact
disapprove of using proration as a methodology for allocating
costs. NSCTA also disagrees with Nevada Bell's contention that
the Common Carrier Bureau's restatement of the pole attachment
formula in American Cablesystems23 and TCA Management24 has no
precedential value for this case.
9. To determine a just and reasonable pole attachment
rate, Congress directed the Commission to institute an
expeditious program "which will necessitate a minimum of staff,
paperwork and procedures consistent with fair and efficient
regulation."25 To that end, Congress noted that although there
may be some difficulty in determining the components of the
operating expenses and actual capital costs of the utility,
special accounting measures or studies should not be necessary
since the majority of the cost and expense items attributable to
the utility pole plant are already established and reported to
various regulatory bodies and therefore the information is
already a matter of public record.26 The Commission has stated,
"we expect to continue to use a methodology which utilizes
publicly available data, does not require ratemaking proceedings,
and lends itself to an expeditious resolution of disputes. It is
our intent to conform to the will of Congress and to avoid
protracted proceedings, special studies, or submissions of
internal corporate data to the maximum extent possible."27
10. The Commission has expressed a preference for using
publicly available data to calculate the maximum pole attachment
rate.28 In Television Cable Service, Inc. v. Monongahela Power
Co.,29 the Commission expressed its preference for "data
developed for regulatory purposes."30 Nevertheless, we do not
require that only publicly available data be used. The
provisions in the rules requiring utilities to provide data to
attachers anticipate that some data may be available only from
the utility. However, in complaint proceedings, where the
Commission may take notice of information in publicly available
filings made by the parties, it is our practice "in the absence
of supported carrying charges . . . to use the figure from
publicly available information."31
11. For regulatory purposes, utilities depreciate equipment
over its estimated useful life using straight line
depreciation.32 For tax purposes, however, a utility might claim
higher depreciation expense in the early years of the service
life of an asset and lower depreciation in later years, through
accelerated depreciation and investment tax credits.33 This
results in lower tax payments with respect to the early years
which are offset by increased tax payments in later years. The
amount of income taxes deferred through the use of accelerated
depreciation is recorded for accounting purposes in an
accumulated deferred tax reserve and represents funds provided
for capital investment. The majority of regulatory commissions
which follow tax normalization practice deduct the depreciation
related deferred income taxes from the utility's rate base, to
prevent the utility from earning a return on the portion of its
investment financed by the reserve.34
12. The Commission has stated that "[i]t is essential that
a uniform method for the normalization of taxes be utilized to
permit interested parties to independently verify, from publicly
available data, the reasonableness of a utility's procedure for
determining the tax component of the carrying charge. Consistent
with our goal of utilizing a simple and predictable approach, we
have chosen formulas which are both reasonable and straight-
forward. . . . We have also determined that our application of
tax normalization should include an adjustment to reflect the
state regulatory commissions' treatment of accumulated deferred
tax reserve. . . . If the state regulatory commission treats
deferred taxes as a rate base deduction the formula for
determining pole attachment rates should include a deduction of
the accumulated tax reserve from the utility's pole
investment."35 Therefore, consistent with the appropriate state
commission's treatment of the accumulated deferred tax reserve,
when determining the net cost of a bare pole, we reduce the
utility's pole investment by subtracting accumulated depreciation
and accumulated deferred taxes to prevent the utility from
earning a return on the accumulated deferred tax reserve.36
13. The pole attachment formula requires the use of
proration in several contexts. For example, when calculating the
administrative portion of the carrying charges, we divide the
total plant administrative expenses by the net plant investment,
which results in a percentage reflecting the ratio of total
administrative expenses to net plant investment. We then apply
that percentage to the net pole investment, in essence, prorating
the administrative charges from net plant investment to net pole
investment to yield a reasonable estimate of the administrative
expenses related to poles. This methodology was approved by the
court in Alabama Power.37 In order to determine net plant
investment, we subtract the plant related accumulated deferred
taxes ("Plant ADT") and plant related accumulated depreciation
("Plant AD") from the gross plant investment. Likewise, we
determine net pole investment by subtracting the Pole ADT and
Pole AD from the gross pole investment. When applying the pole
attachment formula to electric utilities, we generally prorate
both the Pole AD and the Pole ADT, using publicly available
information about the Plant AD and the Plant ADT. We divide the
gross pole investment by the gross plant investment and multiply
that figure by the Plant AD and Plant ADT to determine what
portion of the Plant AD and Plant ADT is reasonably related to
gross pole investment. For telephone utilities, we prorate the
Pole ADT but not the Pole AD because the Pole AD figure is
available in the ARMIS report. Because we have a more accurate,
publicly available and verifiable figure, we use that in the
formula.
14. Nevada Bell would like to substitute an internally
generated negative number for its Pole ADT figure in the formula.
When subtracted from Nevada Bell's gross pole investment, this
would actually increase the net cost of a bare pole and increase
the pole attachment rate. If we were to accept Nevada Bell's
proposal, we would be required to inquire and investigate why
Nevada Bell has a negative Pole ADT. Although Nevada Bell
provides a spread sheet that totals negative $1,060,000, Nevada
Bell offers no detailed explanation of its spread sheet and no
reconciliation with the Plant ADT figure available in the ARMIS
report, which is a positive figure. While Nevada Bell does offer
a general explanation of how it obtained a negative Pole ADT, it
provides no specific details that would help clarify this anomaly
or explain how this negative number is reflected in its gross
pole investment.
15. Nevada Bell does raise an interesting point concerning
the relationship of the Pole AD and Pole ADT figures. However,
rather than arguing that we use a prorated Pole AD figure, as we
would use with an electric utility, instead of the more accurate
Pole AD figure as reported in ARMIS, Nevada Bell rejects this
argument out of hand.38 In addition, although we agree with
NSCTA that use of the internal Pole ADT figure might affect or
require additional adjustments to other formula calculations,39
just as any change in one input to the formula will affect the
overall pole attachment rate, our goal is to use the most simple,
expeditious and accurate formula that will result in a maximum
just and reasonable rate. Therefore, the Commission has
concluded that the more accurate Pole ADT figure may be used in
the formula, once that figure is publicly reported in ARMIS.40
Additional issues relating to the telephone utilities' regulatory
accounting reporting requirements can be addressed as they
arise.41 For purposes of this case, however, we affirm the
Bureau Order. Nevada Bell has not provided sufficient
information or explanation to support its use of an internally
generated report.
16. Accordingly, IT IS ORDERED, pursuant to Sections 0.111,
0.311 and 1.106 of the Commission's rules, 47 C.F.R. §§ 0.111,
0.311 and 1.106, that the petition for reconsideration of Nevada
State Cable Television Association v. Nevada Bell, PA 96-001, DA
98-1175, 13 FCC Rcd 16774 (CSB 1998), IS DENIED.
17. IT IS FURTHER ORDERED, pursuant to Sections 0.111 and
0.311 of the Commission's rules, 47 C.F.R. §§ 0.111 and 0.311,
that Nevada State Cable Television Association v. Nevada Bell, PA
96-001, DA 98-1175, 13 FCC Rcd 16774 (1998), IS CLARIFIED TO THE
EXTENT INDICATED HEREIN.
FEDERAL COMMUNICATIONS COMMISSION
David H. Solomon
Chief, Enforcement Bureau
_________________________
1 Effective March 25, 2002, the Commission transferred
responsibility for resolving pole attachment 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).
2 Nevada State Cable Television Association v. Nevada Bell, PA
96-001, DA 98-1175, 13 FCC Rcd 16774 (CSB 1998).
3 47 U.S.C. § 224.
4 47 C.F.R. §§1.1401-1.1418.
5 47 U.S.C. § 224 (b) (1).
6 47 U.S.C. § 224 (b) and (c). Nevada 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).
747 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).
9Amendment of Rules and Policies Governing the Attachment of
Cable Television Hardware to Utility Poles, Memorandum Order and
Opinion on Reconsideration, 4 FCC Rcd 468, 471 at ¶ 26 (1989).
10 Petition at p. 1.
11 Continental Cablevision of New Hampshire, Inc. v. Concord
Electric Company, PA 82-0074, Mimeo No. 5536, 1985 FCC Lexis 3023
(CCB 1985).
12 Teleprompter Corporation v. New England Telephone and
Telegraph Company, et al., PA 79-0044, Mimeo No. 002016 (CCB,
released July 14, 1981).
13 See Joint Pole Agreement, Complaint Exhibit E at Section VIII.
14 Response at p. 8, n. 4.
15 In determining the cost of a bare pole, an element of the pole
attachment formula, the pole investment is divided by the total
number of poles owned or controlled by the utility. The total
number of poles must be adjusted to the total number of
equivalent poles if some of the utility's poles are jointly owned
by another entity. The number of equivalent poles equals the
number of solely owned poles plus the sum of the products of the
numbers of jointly owned poles times their ownership percentages.
For example, if a utility owns 100 percent of 10 poles and 50
percent of 20 poles, that utility owns 20 equivalent poles.
Where, as here, both parties to the proceeding stipulate to the
number of equivalent poles, the staff does not inquire further
about the number of jointly owned poles.
16 See Joint Pole Agreement, Complaint Exhibit E at Section X.
17 E.g., if a utility owns 20 poles and 50 percent of 20
additional poles, its equivalent pole count is 30. Assuming its
total net pole investment and carrying charges are $300.00, the
per pole rate is $10.00. If it collects for an attachment on
every pole, it will collect 20 x $10.00 and 20 x $5.00 = $300.00
for a full recovery.
18 Continental Cablevision at n. 11.
19Automated Reporting and Management Information System.
20 Alabama Power Company v. Federal Communications Commission,
773 F.2d 362 (D.C. Cir. 1985).
21 American Cablesystems of Florida, Ltd., et al. v. Florida
Power & Light Company and TCA Management Co. v. Southwestern
Public Service Co., PA 91-0012, 10 FCC Rcd 10934 (CCB 1995).
22 TCA Management Co., et al., v. Southwestern Public Service
Company, PA 90-0002, 10 FCC Rcd 11832 (CCB 1995).
23 American Cablesystems of Florida, Ltd., et al. v. Florida
Power & Light Company and TCA Management Co. v. Southwestern
Public Service Co., PA 91-0012, 10 FCC Rcd 10934 (CCB 1995).
24 TCA Management Co., et al., v. Southwestern Public Service
Company, PA 90-0002, 10 FCC Rcd 11832 (CCB 1995).
25 See S. Rep. No. 95-580, 95th Cong., 1st Sess. at 21 (1977).
26 Id. at 19-20.
27 Notice of Proposed Rulemaking, Amendment of Rules and Policies
Governing the Attachment of Cable Television Hardware to Utility
Poles, CC Dkt. No. 86-212, FCC 86-274 (released June 6, 1986).
28 See Amendment of Rules and Policies Governing the Attachment
of Cable Television Hardware to Utility Poles, 2 FCC Rcd 4387 at
¶¶ 37, 47, and 52 (1987).
29 Television Cable Services, Inc. v. Monongahela Power Co., 88
F.C.C. 2d 63 (CCB 1981), modified in part, FCC 81-488, 88 F.C.C.
2d 56 (1981).
30 Id. at ¶ 20.
31 Teleprompter v. C&P of West Virginia, FCC 80-372, 79 F.C.C. 2d
232 at ¶ 17 (1980). See also Texas Cable and Telecommunications
Association v. GTE Southwest Incorporated, DA 99-348, 14 FCC Rcd
2975 at ¶¶ 26-29 (CSB 1999).
32 Amendment of Rules and Policies Governing the Attachment of
Cable Television Hardware to Utility Poles, 2 FCC Rcd 4387 at ¶¶
45-52 (1987).
33 Id.
34 Id.
35 Id. at ¶ 52.
36 Id.
37 773 F.2d at 369-370.
38 Petition at p. 7.
39 See, e.g., Comments of SBC Communications, Inc. at pp. 19-22
(filed June 27, 1997) and Reply Comments of National Cable
Television Association , et al. at pp. 33-34 (filed August 11,
1997) in CS Docket No. 97-98, concerning the administrative
carrying charge calculation.
40 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, FCC 01-170, 16 FCC
Rcd 12103 at ¶ 104 (2001), appeal pending sub nom. Southern
Company Services, Inc. et al. v. FCC, Case No. 01-1326 (D.C.
Cir., filed July 26, 2001).
41 See, e.g., discussion concerning when net pole investment is
zero or negative, id. at ¶¶ 26-42.