FCC Record, Volume 26, No. 7, Pages 4843 to 5761, March 28 - April 08, 2011 Page: 5,300
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reasonableness, the agency rate order must undertake a 'reasonable balancing' of the 'investor interest in
maintaining financial integrity and access to capital markets and the consumer interest in being charged
140. We employ this approach and establish an upper-bound and lower-bound telecom rate
under section 224(e). Specifically, depending upon the relative magnitude of costs included, the telecom
rate formula will yield relatively higher or lower rates. Identifying reasonable, albeit different
interpretations of the ambiguous term "cost" that are consistent with the statute thus provides an upper
and lower limit on the possible telecom rates that would be consistent with section 224(e). Although any
of the definitions of cost within that range potentially could be adopted by the Commission, and would
therefore yield the "just and reasonable" rate for purposes of section 224(e), as discussed below we adopt
an approach that seeks to balance the goals of increased broadband competition and availability with the
historical role that pole rental rates have played in supporting the cost of pole infrastructure consistent
with the framework of section 224(e).
141. Upper-Bound Rate. To begin identifying the range of reasonable rates that could result
from the telecom rate formula, we first identify the present telecom rate as a reasonable upper bound. The
Commission's current telecom rate formula is based on a fully allocated cost methodology,417 which
recovers costs that the pole owner incurs regardless of the presence of attachments.4" It includes a full
range of costs, some of which, as TWTC points out, do not directly relate to or vary with the presence of
pole attachments.419 For this reason, this interpretation of the statutory telecom rate formula serves as the
upper end of the range of reasonable rates.
142. Lower-Bound Rate. As the Commission observed in the Further Notice, "a rate that
covers the pole owners' incremental cost associated with attachment would, in principle, provide a
reasonable lower limit."420 The Eleventh Circuit, in addressing a takings challenge, has held that a pole
attachment rate above marginal cost can provide just compensation,42' and marginal or incremental cost
416 Long-Term Number Portability Tariff Filings, CC Docket No. 99-35, Memorandum Opinion and Order, 14 FCC
Rcd 11983, 12026-27, para. 98 (1999) (citing FERC v. Pennzoil Producing Co., 439 U.S. 508, 517 (1979); AT&T v.
FCC, 836 F.2d 1386, 1390 (D.C. Cir. 1988) (quoting Jersey Cent. Power & Light v. FERC, 810 F.2d 1168, 1177
(D.C. Cir. 1987); Wisconsin v. FPC, 373 U.S. 294, 309 (1963); FPC v. Natural Gas Pipeline Co., 315 U.S. 575,
417 See, e.g., Amendment of Commission's Rules and Policies Governing Pole Attachments; Implementation of
Section 703(e) of the Communications Act, Amendment of the Commission's Rules and Policies Governing Pole
Attachments, CS Docket Nos. 97-97, 97-151, Consolidated Partial Order on Reconsideration, 16 FCC Rcd 12103,
12131-32, para. 55 (2001) (2001 Order on Reconsideration). The term "fully allocated cost methodology" is also
sometimes referred to as "fully distributed costs."
418 See, e.g., Amendment of Rules and Policies Governing Pole Attachments, CS Docket No.97-98, Notice of
Proposed Rule Making, 12 FCC Rcd 7449, 7455, para. 11 (1997) ("Carrying charges are the costs incurred by the
utility in owning and maintaining poles regardless of the presence of pole attachments.").
419 TWTC White Paper at 19. In particular, the Commission's current telecom rate formula, as with the current
cable rate formula, includes a component for the net cost of a bare pole and a carrying charge rate. 47 C.F.R.
1.1409(e)(1), (2). The net cost of a bare pole is the initial capital outlay, i.e., the investment, for a pole, minus
accumulated depreciation. The carrying charge rate is a composite rate that reflects separate carrying charge rates
for the costs of owning and maintaining poles. See, eg., 1987 Rate Order, 2 FCC Red at 4391, para. 25; 2001
Order on Reconsideration, 16 FCC Rcd at 12121, para. 28. The carrying charges include a pole owner's
administrative, maintenance, and depreciation expenses, a return on investment, and taxes. 2001 Order on
Reconsideration, 16 FCC Rcd at 12121, para. 28. The net cost of a bare pole is multiplied by the carrying charge
rate to determine the annual cost of a pole.
420 Further Notice, 25 FCC Red at 1 1919, para. 133.
421 Legal precedent has established that a pole attachment rate above marginal cost provides just compensation, and
marginal or incremental cost pricing can be an appropriate approach to setting regulated rates. Alabama Power Co.
Federal Communications Commission
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United States. Federal Communications Commission. FCC Record, Volume 26, No. 7, Pages 4843 to 5761, March 28 - April 08, 2011, book, April 2011; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc52169/m1/472/: accessed July 26, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.