Minnesota Municipal Utilities AssociationLegal Seminar

November 6, 2014

Sean Stokes The Baller Herbst Law Group, P.C.

2014 P Street, N.W.Washington, D.C. 20036

(202) 833-0166sstokes@baller.com

www.Baller.com

• National Issues

• Background on Federal Law

• National Broadband Plan and FCC Order

• Federal Access Rules

• Federal Attachment Formulae

• APPA Work Book

• WireIess

• Section 224 of Communications Act of 1978; Was Re-enacted and extended in 1996 (47 U.S.C. 224)

• Regulates rates, terms and conditions of access to utility poles, ducts and conduits for attachments by “telecommunications carriers” and “cable systems”

• Applies to Wireless Providers

• Does not apply to stand-alone broadband or dark fiber

• States can “reverse preempt” and adopt own rules; 21 have done so; many follow federal framework and apply FCC rulings as benchmarks

• Minnesota has not reverse preempted

“Pole Attachment”

“The term ‘pole attachment’ means any attachment by a cable television system or provider of telecommunications service to a pole, duct, conduit, or right-of-way owned or controlled by a utility.”

47 U.S.C. § 224(a)(4).

• The term ''utility'' means any person who is a local exchange carrier or an electric, gas, water, steam, or other public utility, and who owns or controls poles, ducts, conduits, or rights-of-way used, in whole or in part, for any wire communications. Such term does not include any railroad, any person who is cooperatively organized, or any person owned by the Federal Government or any State.”

• “The term ''State'' means any State . . . or any political subdivision, agency, or instrumentality thereof.”

47 U.S.C. §§ 224(a)(1), (a)(3).

• Congress in both 1978 and 1996 said that rates a local decision; municipalities and coops have their own processes to allocate costs and are politically responsible to consumer-owners

• Therefore, municipalities and coops not subject to federal access or rate requirements -- FCC affirmed in April 2011, Report and Order, 07-245.

• Also not subject to federal procedural requirements

• timing and content of responses

• FCC complaint processes

• Some states incorporate federal standards into state law – e.g., Missouri, Texas and Colorado

• Minnesota does not regulate attachments to municipal poles

• Federal standards often invoked by state PSCs, courts and attachers

• Section 253 barriers to entry related to use of public rights-of-way (47 U.S.C. 253)

• Municipal providers have rights as attachers

• In some instances FCC rates are higher than utility currently gets

• FCC has recommended in NBP that Congress remove the municipal exemption (more on this next slide)

• NBP– “Poles and Holes” are barriers to wider broadband availability and use

• Basic assumption: Lower infrastructure costs => lower broadband fees => greater adoption of broadband

• Proposed Federal/State/Local government Task Force to address ROW issues – to start soon

• NBP recommends that the FCC “establish rental rates for pole attachments that are as low and close to uniform as possible, consistent with [s]ection 224 of the [Act], to promote broadband deployment.”

• Proposed removal of municipal and coop exemption to achieve uniformity, and predictability – this would require Congressional action.

Before the R&O, the FCC had relied on guidelines and case-by-case enforcement

Now, specific rules of broad, general applicability

Specifically, the FCC has adopted a four stage process: (1) survey; (2) estimate; (3) attacher acceptance; (4) performance; and, if needed, attaching entity self-help

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FCC adopted a 4-stage process:

◦ Survey -- 45 days from complete application

◦ Estimate – 14 days

◦ Applicant response – 14 days

◦ Make ready – 60 days (105 days large orders)

90 days for wireless above electric

◦ Attaching entity may perform make-ready itself if deadlines not met, but not wireless above electric

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Utility is required to notify all existing attaching entities whose attachments may be affected: Specify where and what make-ready will be done; Indicate that make-ready must be completed within 60 days after notification (105 days for larger orders) for attachments in the communications space, or 90 days for wireless attachments (135 days for larger orders);

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If a utility does not meet deadline to complete a survey or make-ready, an attacher may use contractors tocomplete work in the communications space.A utility must make available a current list of contractors that it authorizes to perform surveys or make-ready on its polesIf a utility fails to provide a list of approved contractors, attachers may use contractors that have the “same qualifications, in terms of training, as the utility’s own workers.” Contractors subject to supervision and direction by both utilities and attachers; if disputes, utility prevails

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Cable systems providing “only” cable service use “cable formula” under Section 224(d)(3)

Cable systems do not lose the benefit of the cable formula by providing “information services,” including Internet access

Telecommunications carriers and cable systems that provide telecom services use “telecommunications formula” under Section 224(e)(1) (but what is VoIP?)

Telecommunications formula yields substantially higher rates than cable formula, but neither yields full cost recovery

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Average height of pole is 37.5 feet Average usable space is 13.5 feet Cable and telecom attachments occupy 1 foot of

usable space 40” clearance between electric and communications

space charged to electric utility “Net cost of bare pole” calculated by formula in

Appendix B to FCC R& O, 2 FCC Rcd 4387 (1987) “Carrying charges” are expenses of owning and

maintaining poles without pole attachments, including administrative, maintenance and depreciation expenses, a return on investment, and taxes

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NBP concludes that high pole attachment rates deter broadband deployment, adoption, and use

NBP recommends that the FCC “establish rental rates for pole attachments that are as low and close to uniform as possible, consistent with [s]ection 224 of the [Act], to promote broadband deployment.”

NBP finds that “[a]pplying different rates based on whether the attacher is classified as a ‘cable’ or a ‘telecommunications’ company distorts attachers’ deployment decisions.”

NBP recommends eliminating municipal exemption 1

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Section 224(e) won’t let FCC move everyone to cable rate, so FCC modifies telecom formula to exclude portion of capital costs of the pole

• Assumes that capital costs arising from the make-ready process are already captured

• Assumes attachers only responsible for a de minimis portion of other capital costs, because pole owner would have incurred most of such costs anyway

• FCC removes or reduces capital, depreciation, return on investment, and taxes from “carrying charges”

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In urban areas utilities can recover 66% of the pre-existing telecom rate;

In non-urban areas utilities recover 44% of the pre-existing telecom rate

New rate yields an amount that is approximately the same as the cable rate formula

Rate applies to wireless

Not clear whether new rate is retroactive to existing agreements

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R&O affirms general principle of nondiscrimination

• Attaching entities have right to space and cost saving practices – e.g., “boxing” and “bracketing” (extension arms) – if utility uses/allows them in similar circumstances for communications attachments

• Utilities retain right to limit use when necessary to ensure safety, reliability, and sound engineering

• Presumption in favor of use that utility can rebut on a pole-by-pole or class-of-pole basis

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Prior to filing a complaint there must be “executive-level discussions” between the parties.

Unauthorized attachments penalties up to five times the current annual rental fee per pole

“Sign and Sue” rule retained ILECs have right to “just and reasonable”

rates and can file complaints with the FCC

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If they want broadband so bad why don’t the municipals just get out of the way and let us build?

Reasoned approach that gives public power utilities flexibility to meet their own unique needs/circumstances

Process

• APPA Oversight (Kumar, Hyland, Waterhouse)

• APPA Member Task Force

• Baller Herbst, Baker Tilley, Atlantic Engineering

• Policy discussions, drafts, conference calls, reach out to utilities in litigation, etc.

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Contents of New Workbook

• Model Agreement

• Instructions

• Rate Calculator

• Permitting Process

• Engineering Documents and Diagrams

• State-by-State summary of state laws

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Model Agreement is a master agreement subject to individual permits.

Agreement is revocable, non-exclusive, license providing non-discriminatory access for similar attachments.

Unlike FCC, Agreement provides access for pure broadband or dark fiber providers

Provides for far greater flexibility than FCC rules in processing applications and completing make-ready work. Gives utility more discretion.

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The shared-cost recovery formula charges the same rate for all similar attachments.

The shared-cost recovery formula allocates the safety space to all users of the pole as common space and apportions the common space evenly among all pole users, including the pole owner.

The updated Rate Calculator automatically calculates rates under the shared-cost recovery formula and the FCC’s formulas.

Work Book provides rationale for choices and examples.

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Applies to all wireline attachments – cable, telecom, broadband, dark fiber

Starts with FCC Original Telecom Formula but allocates the safety space as support space shared by all users

Allocates support space among all users including pole owner on per capita basis

Up to utility whether to apply rate to wireless

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Wireless carriers are increasingly looking to place wireless attachments on utility poles and street lights

◦ DAS – Distributed Antenna Systems (above electric)

◦ Small Cell

Different operational issues

◦ Safety, interference, space, power

Different rate issues

◦ Occupies greater space, may preclude additional use

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TA 96 Act preserves state/local authority on wireless zoning – Section 704 (47 U.S.C. § 332(c)(7).)

◦ Denials be in writing and supported by substantial evidence

◦ Shot clock – act on tower co-location siting requests within 90 days all others within 150 – Upheld, City of Arlington v. Federal Communications Comm’n, 133 S. Ct. 1863 (2013).

Section 6409(a) of the Middle Class Tax Relief and Job Creation Act of 2012, 47 U.S.C. § 1455(a),◦ Local gov. must approve requests to modify existing wireless

tower or base station that does not involve a substantial modification

◦ FCC Report and Order WT Docket No. 13-238◦ Does not apply to access to local government owned

facilities such as poles or street lights

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