High Court Hears Cable Pole Case

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Perhaps with the health of cable's Internet-access business on the line, the
Department of Justice Tuesday urged the U.S. Supreme Court to shield cable
operators from paying exorbitant rates to attach their wires to poles and ducts
controlled by power and phone companies.

In a one-hour hearing, DOJ attorney James Feldman argued that the Federal
Communications Commission had the authority under the Telecommunications Act of
1996 to regulate pole rates when cable offers both video programming and
Internet access.

'The FCC's construction of the act is entitled to deference,' Feldman
said.

The commission, backed by the cable industry, is trying to preserve its
rate-setting authority after a panel of the U.S. Court of Appeals for the 11th
Circuit agreed with power companies last year that they were free to charge
unregulated rates to cable operators that offer Internet service.

The cable industry fears that if it were to lose pole-rate protections, it
would face two stark alternatives: pay whatever pole owners demand or scale back
its Internet-access ambitions.

Thomas Steindler, the attorney for Gulf Power Co. and 14 other utilities,
said Congress specifically preserved the FCC's rate-setting authority when cable
offers cable video services, but stripped it when cable facilities are used to
provide video programming and Internet access.

Steindler explained that the FCC had rate authority over pole attachments in
connection with cable and telecommunications services. But since the agency has
never classified whether cable-modem service is a cable or telecommunications
service, the agency has no rate-setting power when cable offers Internet
access.

'[The FCC] has never made that classification,' Steindler said. He
acknowledged that if the commission ruled that cable-modem service is a cable
service, the agency could regulate cable pole rates and 'the game would be
over.'

Arguing for the National Cable & Telecommunications Association, lawyer
Peter Keisler said Congress gave the FCC power to regulate 'any' pole attachment
of a cable system without regard to the services provided.

The power companies, he added, were wrong in claiming that Congress intended
to remove the FCC's authority once cable entered the Internet business. 'That's
just not a plausible reading of the statute,' Keisler said.

Eight justices heard the case, as Justice Sandra Day O'Connor did not
participate. As a result, the DOJ and the cable industry need the votes of at
least five -- under court rules, a tie means the 11th Circuit's decision
stands.

The high court is not expected to issue a decision for several months.

Probably the strongest endorsement for cable's position was voiced by Justice
Ruth Bader Ginsburg in saying that the law did not appear to alter cable's rate
protections based on the type of service offered.

'What sense would it make to say, `Cable company, you go into the Internet
business, you are off the pole?'' she asked.

Justice Stephen Breyer suggested that Congress gave the FCC broad power to
promote competition, including the authority to set just and reasonable pole
rates. He suggested that the power companies might have trouble overcoming that
broad policy goal.

Justice Antonin Scalia, in comments suggesting support for the power
companies, indicated disagreement with cable's argument that the FCC's authority
over 'any' cable attachment ended any exploration into issues about rates.

The court, he said, did not know which pole rate would apply -- the lower
cable rate or the higher telecommunications rate -- because the FCC has remained
silent on the regulatory classification of cable Internet.

'We are talking about rates here. That's the fighting issue,' Scalia said. He
indicated that the statutory phrase 'any attachment' had to have some boundary
because no one seemed to be suggesting that cable could hang 'billboards' from
poles.

Justice David Souter pressed that point further by saying that the high court
was being asked to decide the case in a vacuum created by the FCC's
unwillingness to classify cable Internet service.

At one point, Souter said that maybe the court should overturn the 11th
Circuit with instructions that the lower court insist that the FCC provide an
answer to the classification question. 'We should know,' he added.

Sticking to his point that the FCC's general authority over any cable pole
attachment was sufficient, Keisler resisted sending the case back down to the
lower court or the FCC.

The stakes couldn't be higher for the cable industry. If the high court
decides that federal rate rules don't apply, cable operators will have to pay
whatever pole owners demand when MSOs decide to introduce high-speed Internet
access in a market.

According to the NCTA, millions of cable subscribers would likely see rates
rise by $1.50 per month, and millions more in rural areas -- where pole density
is higher -- could see rates go up even more.

The trade group said some power companies, in the wake of the 11th Circuit
decision, have demanded 500 percent increases over FCC-approved rates.

The power companies -- which control 85 percent of the nation's 34 million
poles -- claim that cable operators are among the largest companies in the
country and should not receive regulated rates when incumbent phone companies,
which also provide high-speed Internet service, do not.

'These cable companies are not mom-and-pop shops,' Steindler told the high
court.

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