FCC Record, Volume 26, No. 7, Pages 4843 to 5761, March 28 - April 08, 2011 Page: 5,301
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pricing can be an appropriate approach to setting regulated rates more generally.422 Indeed, section
224(d) establishes such an approach as the low end of permissible rates under the cable rate formula.423
However, the section 224(e) formulas allocate the relevant costs in such a way that simply defining "cost"
as equal to incremental cost, as TWTC initially proposed, would result in pole rental rates below
143. Thus, to identify a lower-bound rate that is consistent with this statutory framework - and
enables costs to be allocated based on the prescribed cost-apportionment formulas - we rely on the basic
principles of cost causation that would underlie a marginal cost rate without defining "cost" as equivalent
to marginal or incremental cost per se. Under cost causation principles, if a customer is causally
responsible for the incurrence of a cost, then that customer - the cost causer - pays a rate that covers this
cost.425 This is consistent with the Commission's existing approach in the make-ready context, where a
pole owner recovers the entire associated capital costs through make-ready fees.426 For example, if
rearrangement or bracketing is performed to accommodate a new attachment, the new attacher is
responsible for those costs. 27 Likewise, a pole owner recovers the entire capital cost of a new pole
through make-ready charges from the new attacher when a new pole is installed to enable the attachment.
144. Under this approach, we apply cost causation principles to each category of a pole
owner's costs - broadly consisting of capital and operating costs - for purposes of the pole rental rate, as
well.428 We recognize that, under traditional ratemaking principles that we have applied in the past, the
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v. FCC, 311 F.3d at 1370. ("In some cases, then, marginal cost will be sufficient to compensate the pole owner.");
id. at 1370-71 ("In short, before a power company can seek compensation above marginal cost, it must show with
regard to each pole that (1) the pole is at full capacity and (2) either (a) another buyer of the space is waiting in the
wings or (b) the power company is able to put the space to a higher-valued use with its own operations. Without
such proof, any implementation of the Cable Rate (which provides for much more than marginal cost) necessarily
provides just compensation."). In this regard, we note that the statute identifies a rate that allows the utility to
recover its marginal costs as the lowest permissible just and reasonable rate under section 224(d). 47 U.S.C.
422 See, e.g., ALFRED E. KAHN, THE ECONOMICS OF REGULATION: PRINCIPLES AND INSTITUTIONS 65-122 (vol. 1,
1970); CHARLES F. PHILLIPS, JR., THE REGULATION OF PUBLIC UTILITIES 443-49 (1993).
423 See 47 U.S.C. 224(dX 1). Explaining the cable rate formula, the Supreme Court stated, "The minimum measure
is thus equivalent to the marginal cost of attachments, while the statutory maximum measure is determined by the
fully allocated cost of the construction and operation of the pole to which cable is attached." FCC v. Florida Power
Corp., 480 U.S. at 253; see also 1977 Senate Report at 2, reprinted in 1978 U.S.C.C.A.N. at 110 ("The formula
describes a range between marginal and a proportionate share of fully allocated costs within which pole rates are to
424 See 47 U.S.C. 224(e)(2)3).
425 That is to say, prices based on cost-causation principles enable an allocation or a mix of goods to be produced
that buyers desire and are willing to pay for and so are socially efficient, and enable an efficient firm to recover its
costs. See, e.g., Greg Houston and Hayden Green, NERA Economic Consulting, Treatment of Operating Costs: A
Report for Meridian 65-75 (Aug. 6, 2010). The allocation of goods is optimal in a perfectly competitive market.
That is, no buyer can be made better off by reallocating resources to produce a different mix of goods without
making other buyers worse-off. See, e.g., WALTER NICHOLSON, MICROECONOMIC THEORY, BASIC PRINCIPLES AND
EXTENSIONS 512-13 (2d ed. 1978).
426 See, e.g., Second Report and Order, 72 FCC 2d at 62-63, 72-73, paras. 8-9, 28-30 (defining make-ready cost).
These capital costs would not have been incurred "but for" the pole attachment demand and the attacher-the cost
causer-pays for these costs.
427 The circumstances where bracketing is required are discussed in greater detail below. See infra Parts VI.A, D, F.
428 Specifically, as discussed below, given the section 224(e) framework and Congress' expectations regarding the
administrability of pole rental rate calculations, we cannot, and do not, seek to define precisely the marginal costs
associated with pole attachments. Rather, in establishing the lower bound telecom rate, we adopt an approach that
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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/m1/473/: accessed February 25, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.