On Monday, July 31, 2017, the U.S. Court of Appeals for the Eighth Circuit, in a unanimous opinion, affirmed the FCC’s November 2015 Order on Reconsideration closing the “telecom formula loophole” to ensure that pole attachment rates for cable and telecom attachers are equivalent. In the FCC’s 2011 Order that was upheld by the D.C. Circuit, the FCC sought to align the telecom pole rate formula with the cable formula. In the 2011 Order the FCC added cost allocators of 66 percent in urban areas and 44 percent in non-urban areas, thereby matching the FCC’s presumption of 5 attachers in urban areas and 3 in non-urban areas and bringing telecom rates down to cable rates. But it had not accounted for disparities that arose in rates when utilities had fewer attaching entities on their poles than the presumptions, yielding telecom pole attachment rates as much as 70 percent higher than rates yielded by the cable formula. (See our advisories dated April 8, 2011, Feb. 26, 2013, May 6, 2015, and November 30, 2015). This loophole had become especially significant with the reclassification of broadband service as a Title II telecom service and utility efforts to apply substantially higher telecom rates to considerably more broadband attachments. To eliminate this loophole, the 2015 Order added new cost allocators to the telecom rate formula that adjusted according to the number of attaching entities (even interpolating allocators for fractional numbers of attaching entities).

A group of electric utilities sought review in the Eighth Circuit, hoping that a different Circuit would be less deferential to the FCC than the D.C. Circuit. But the Eighth Circuit panel, like the D.C. Circuit, rejected each argument raised by the utilities and found “cost,” as used in the Pole Attachment Act to describe the telecommunication rate, to be an ambiguous term that the Commission reasonably interpreted to equalize with the cable rate. The Eighth Circuit even cited the earlier D.C. Circuit ruling as persuasive, saying its “reasoning applies with equal force here” – nullifying the utilities’ effort to shop for a better outcome in a different Circuit.

Time remains open for the electric utility petitioners to seek panel or en banc rehearing, or to seek certiorari as they did (unsuccessfully) after the D.C. Circuit affirmed the 2011 Order.

DWT represented NCTA – The Internet & Television Association in seeking the 2015 reconsideration order with INCOMPAS and Level 3 Communications. DWT also represented NCTA in intervening in support of the FCC at the Eighth Circuit along with INCOMPAS, Level 3 and USTelecom; and in defending the FCC’s Order in oral argument.