Policy

Cable to Get a Break on Its Phone Bills

3/28/2011 12:01 AM Eastern

Washington — It looks like the Federal Communications
Commission is about to give cable operators a break on their
phone bills.

According to multiple sources, the commission’s draft order
on pole-attachment fees — what utilities can charge cable
to hitch a ride on their poles — will follow through on its proposal
to effectively lower the rates for telecom service to those
paid by cable operators. That includes services that the FCC
has yet to classify, such as voice-over-Internet protocol phone
service, as well as traditional circuit-switched voice service offered
by cable companies.

The move could save cable operators on the order of a halfbillion
dollars, by some estimates, over what they are paying
or might have to prospectively pay on services like VoIP or
other co-mingled telecom and cable offerings.

“That is the home run in the order,” said Daniel Brenner, a
veteran cable attorney with the firm Hogan & Hartson.

Added an FCC staffer familiar with the draft, “In most cases,
the telecom rate will be equal to the cable rate.”

The order does not classify VoIP service, but makes it clear
that the technology gets “the benefit of the lower rate,” said
one top commission staffer who had seen the draft.

But while the FCC will be giving a price break to industry,
its goal is to promote broadband deployment. In one meeting
with agency staffers, a would-be stimulus grant recipient
noted that the new
pole-attachment rules
would get it more bang
for its broadband-stimulus
buck.

That price break for
cable means less money
for utilities. That means
that when the FCC votes
April 7, look for utility
companies to challenge
the decision in court, according
to those same
sources, who are aides
to both Democratic and
Republican commissioners.

The order sets the
stage for that fight, by
establishing the FCC’s
authority for making the change and offering economic analysis
showing why utility ratepayers will not wind up subsidizing
telecom and broadband service.

The decision would retain the status quo for the current cable
rate, and give a price break to cable operators that pay the
higher telecom rate. “Cable operators are paying the telecom
rate where it is providing telecom services, and they are in lots
of fights with utilities who say VoIP should be at the telecom
rate,” Brenner said.

The FCC is looking to keep a lid on those disputes, as well
as lower the rate.

According to sources, the draft does not accept the utility
companies’ argument that reducing the rates they may charge
telecom carriers, including cable operators, will have no material
effect on the broadband rollout.

In its own comments earlier this month, the National Cable
& Telecommunications Association said that argument,
which even suggested lowering attachment rates might hurt
broadband adoption, was “bewildering,” as well as wrong. Cable’s
main lobby group said that without the FCC riding herd
on utility pole-attachment rates, it could be prohibitively expensive
to reach some of those outliers.

A source said capital costs will not be included in computation
of the new telecom rate. This also pleases cable operators
and independent local-exchange carriers, which had argued
that since the poles were put up without cable in mind, attachment
fees should not include those costs.

Cable operators already concede that payment is fair if a
new pole must be built to accommodate their needs. But defining what would trigger such a requirement is also a bone
of contention with utilities.

The new pole-attachment rules are still only a draft, but
one top aide to a commissioner said he didn’t foresee major
changes.

September