Utilities Want Court to Punt Pole Case

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WASHINGTON -An array of electric power companies has asked the U.S. Supreme Court to reject review of a lower court ruling that could mean higher pole rates for cable operators.

Cable operators that transmit both video programming and Internet data to subscribers could face higher rates. As most leading MSOs do just that, higher rates are the almost certain result should the utilities prevail in court.

The legal clash heated up in April, when the 11th U.S. Circuit Court of Appeals held that cable operators that commingle Internet access and video programming were not covered by pole-attachment rates set by the Federal Communications Commission.

More than 20 years ago, Congress ordered the FCC to regulate pole fees to prevent monopoly utilities from impeding cable's ability to reach all the homes in a franchise area in an economically practical way.

But the 11th Circuit, construing the pole statute narrowly, said the law protected cable operators solely to the extent that they provide "cable service." The court concluded that Internet access proffered over cable plant was not a cable service.

As a result, cable operators that provide video and Internet services must pay free-market pole attachment rates, the court said.

The cable industry, backed by the Justice Department, wants the Supreme Court to take the case. Cable operators contend the federal pole law was designed to set rates for any cable attachment to a pole. Both said the case was of exceptional national importance because it could cause MSOs to halt deployment of broadband services.

Cable is taking on some of the nation's most powerful utilities from Texas, Florida, Virginia, Georgia and Alabama, including Duke Energy Corp., Potomac Electric Power Co. the Southern Co. and Florida Power & Light Co.

Some of these companies compete with cable operators for cable and Internet subscribers. Starpower-a joint venture of Pepco Communications LLC, a non-regulated subsidiary of Potomac Electric, and Princeton, N.J.-based RCN Corp.-competes against AT&T Broadband in the District of Columbia.

In a 21-page brief, Southern Co. subsidiary Gulf Power Co. told the high court the 11th Circuit's ruling was correct and consistent with Congress' intent to speed broadband deployment.

"Utility poles and conduits are almost never bottleneck facilities for the delivery of high-speed Internet services," Gulf Power said. "[The government's] predictions of dire consequences if the court of appeals' ruling is left standing are unfounded."

Gulf Power said cable operators should not enjoy a pole-fee subsidy when some of its Internet access competitors do not. In any case, it said pole fees were typically a small operating expense for cable operators.

Citing a 1999 Securities and Exchange Commission filing by Cablevision Systems Corp., Gulf Power said the MSO's pole fees were 0.3 percent of operating costs.

"Moreover, increased pole attachment rental costs will be offset by increased revenues generated by the new Internet service offered by the cable companies," Gulf Power's brief said.

The 11th Circuit's decision has not taken effect. But cable operators can expect to see higher rates almost immediately if the Supreme Court decides not to hear the case.

Because some cable operators expect their pole fees to rise by 500 percent if the courts continue to back the utilities, the National Cable Television Association is preparing to seek help from Congress.

"If they should not [take the case], then we may have to look at a legislative remedy basically just to restore the status quo," said NCTA president Robert Sachs.

The case could have larger ramifications for cable than setting the price operators pay for pole attachments, as 11th Circuit based its ruling on a finding that Internet over cable is not a cable service.

The FCC is studying whether it agrees with the 11th Circuit or a 9th Circuit ruling which held that data over cable is not a cable service, but is in part a telecommunications service and an information service. The agency is also considering a federal court ruling from Virginia that said cable-modem service is a cable service.

The commission's proceeding could lead to rules that require cable operators to provide non-discriminatory access to competing Internet-service providers.

In its brief, Gulf Power cited the FCC's
proceeding as another reason for the Supreme Court to reject cable's appeal.
The utility said the court should stay out of the cable-modem regulatory debate
until after the FCC has opined on the matter.

"This is simply the wrong case, and this court is the wrong forum," Gulf Power said. "The determination should be made in the first instance by the policy-making branches of government, on the basis of a full and complete record, not by this court."

The odds favor the power companies. Each year the Supreme Court receives about 5,000 requests for review, but the court decides to take only about 2 percent of those cases.

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