News

Rural Ops are Still Feeling Pole-Axed

3/24/2002 7:00 PM Eastern

Cable operators hope they won't see big increases in pole-attachment fees, now that the courts and the Federal Communications Commission have solidified that agency's ability to regulate such levies.

But Comcast Corp. of Kentucky's vice president and general manager Ed Mount does not hold out such hope. Like a significant number of cable operators throughout the United States, his system relies on municipal or cooperative utilities, and federal law specifically excludes such entities from FCC and state utility regulation.

Paducah Power, the utility in Mount's area, wants to nearly quadruple the fees that Comcast will pay over the next three years.

As Mount sees it, he has only three options: Pay the pole fees and have Comcast absorb a huge cost increase; pay it and pass 70 to 80 cents a month through to consumers; or go to court and sue the utility.

The rate hike will take Comcast's cost from $4.88 per pole per year to $19.95 for the same attachment. By comparison, the company pays an average of $6.50 per year per pole to other, for-profit utilities such as BellSouth Corp. and Kentucky Utilities, he said.

"It's hard to believe [Paducah Power] thinks it can justify such an exorbitant rate," Mount said in disgust.

But some other operators are having an even tougher time than Comcast. One Co-op in South Carolina has proposed that Time Warner pay a rate of $30 a year per attachment. There would be separate charges for support wires and plant, and the total could run as high as $120 per pole.

"And in South Carolina, we have 70,000 co-op poles," said Bud Tibshrany, vice president of public affairs for Time Warner's South Carolina division.

Negotiation has been "fruitless," he said. There's ongoing litigation but Tibshrany declined to discuss it or name the co-op.

"There's no rhyme nor reason to" the increases, he said. "And they're not proposing, they're demanding."

SUMTER SOLUTION

The situation became so dire in Sumter, S.C., that Time Warner took its plant off the poles and — at great expense — buried it underground.

"We couldn't set a precedent," Tibshrany said. "If we paid, then all of them would jump on us."

Lease increases have been particularly exorbitant in Wisconsin — where one muni reportedly proposed a 760 percent hike — and in Virginia, South Carolina, Kentucky and Florida, according to the National Cable & Telecommunications Association.

Operators are angry about the proposed rates, but many are loath to talk in detail about them, or name their adversaries, for fear of hardening an already firm negotiating stance.

The power companies are even less willing to talk.

When asked why a non-profit company needs such a huge increase from pole lessees, Paducah Power executive Dave Clark said tersely, "We're in discussions," and hung up.

Across the industry, increases have been tied to the introduction of services beyond traditional video delivery. Because cable companies are now Internet and telephone service providers, utilities have argued that cable should pay the higher fees that apply to telecommunications service providers.

Combatants have gone all the way to the U.S. Supreme Court, seeking a definitive label for Internet service.

In January, voting 6-2 in a final appeal of a case brought by Gulf Power Co. and other utilities, the court decided to let the FCC set the rules.

But when the 1978 version of the federal Telecommunications Act was passed, municipal power companies and co-operatives were excluded from regulatory oversight, attorney Paul Glist of Cole, Raywid & Braverman said.

At the time, their rates were among the lowest in the country and utilities had no competitive ambitions. "Now, they're among the highest," he said.

Power companies justify the current hikes by arguing that previous rates were artificially low.

Few cable companies litigate, Glist said. Cable's strategy, traditionally, has been to break out the charge as a separate line item and "embarrass the muni back into reason," he said.

Operators report utilities are using FCC guidelines for setting rates, but using the highest figure in each category resulting in the high rates.

VIRGINIA ACTION

But Virginia systems have fought back in the state legislature. Last year, the Virginia Cable Telecommunications Association supported legislation that allows the State Corporation Commission to mediate disputes between cable and municipal and co-op utilities.

The bill was prompted by rate increases by an electric co-op proposed to three MSOs operating in the state, VCTA president Kathryn Falk said.

The co-op proposed a six-fold increase, which would have meant $200 per pole in some places.

The utility also proposed buying one cable company's fiber plant, then leasing it back to the operator.

Other co-ops charge between $6 and $35 per pole and munis charge $15 to $20, she said. The exorbitant rate proposal held up upgrades by the involved operators for a year-and-a-half, she said.

Meanwhile, the co-op became a distributor of EchoStar Communication's Corp.'s Dish Network. The co-op's advertisements offer free DBS hardware to consumers who present their cable bill to the utility.

Passing the bill was a "shot across the bow" of the utility, Falk said.

Since its passage, two of the MSOs have negotiated an agreement. And one may use the new legislation and file a complaint with the FCC, she said.

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