“We have never in history seen so dynamic and potentially liberating a technology as this,” Federal Communications Commission chairman Michael Copps said last month as he launched the broadband policy inquiry, posing more questions than a year of Jeopardy! episodes.
The National Telecommunications and Information Administration and the Rural Utilities Service will conduct a “Publishers Clearing House Broadband Sweepstakes” for unserved and underserved America.
Amid the consensus for ubiquitous, affordable, high-capacity broadband, there’s a hitch: charges to use poles owned by electrical and telephone cooperatives.
Mentioning pole rates at cable cocktail parties guarantees buzz kill. Still, as Amos Hostetter used to say, cable’s success rested on three P’s: people, programming … and poles ! Congress gave cable access to most poles and authorized the FCC to regulate rates when states didn’t. The FCC’s cable-modem pole rates, affirmed by the U.S. Supreme Court in Gulf Power, paved the way for the industry’s fast rollout.
But federal law excludes co-op poles from regulation. In theory, not-for-profit co-ops pass savings onto users and pole attachers. And co-ops welcomed cable at first because it provided the only TV in some communities, and pole rents were found money.
“Co-op” resonates because of its association with small-town agricultural collectives. No pastoral farmer’s markets today, electrical co-ops alone own over $100 billion in assets.
Co-ops have had a one-issue Washington agenda: Leave our poles alone. They’ve won (so far). Less than a handful of states regulate rates. Regulated rates may run $4 to $7 per pole, per year, and regulated co-op rates even less (because of lower costs to operate in rural areas). But unregulated co-op rates? Take Perryville and Greer’s Ferry, Ark. The cable operator Alliance Communications served nearly 1,000 customers. First Electric, the co-op, raised rates in 2007 to more than $15. Alliance shut down the systems.
The same co-op charged another operator sky-high inspection fees, leading to another dismantling. North Carolina, Tennessee and Virginia have their own co-op horror stories.
Now, the stimulus bill elevates the stakes. Co-ops and rural telcos, long recipients of RUS loans, have received well over a billion dollars for broadband since 2000 (cable companies are eligible but loans don’t often get made to them). That’s before the 2009 Recovery Act’s $2.5 billion for RUS loans.
For all of this young century, co-ops haven’t just been pole landlords, they’ve been competitors, with plans for triple-play service. Co-ops sweeten their revenue pot with take-it-or-leave-it rates. Now they can use this Plinko pole pricing to pluck off broadband competitors — while loading up on their share of the RUS $2.5 billion subsidy. Co-ops win, but competition loses. So do customers.
Public policy should promote broadband competition, including co-ops (even though many co-op broadband loans defaulted). What’s unacceptable is to leave them exempt from pole regulation. RUS and NTIA should require co-ops to agree to regulated pole rates if they want Recovery Act money. It’s only fair.