On March 30, 2017, the FCC released a draft of a combined Notice of Proposed Rulemaking, Notice of Inquiry and Request for Comment designed to facilitate and accelerate the deployment of next generation broadband networks. The draft Notice was released as part of Chairman Pai’s new practice of sharing drafts of the items currently circulating among the Commissioners that are scheduled for a vote at the next FCC open meeting. The draft Notice addresses Chairman Pai’s announced priority to advance broadband investment and deployment, in this case by proposing new and amended rules for pole attachments and exploring potential FCC preemption of state and local laws that delay broadband deployment.

The draft NPRM proposes:

• Speeding up access to poles for new entrants by accelerating the permit application and make-ready processes;
• Reexamining pole make-ready pricing to reduce costs;
• Lowering pole rent costs for all attachers, including ILECs; and
• Streamlining the FCC’s complaint procedures.

The draft NOI seeks comment on whether the Commission should exercise its authority under Section 253 to enact rules preempting state and local government moratoria, excessive fees, unreasonable Right-Of-Way access terms, delays and other laws that increase costs and delay broadband deployment. The draft RFC (not covered in this Advisory) seeks comment on amending FCC rules concerning the process for considering carriers’ proposed discontinuance of services. A separate draft item (not covered in this Advisory) proposes reforms to facilitate tower and antenna siting approvals.

The draft NPRM also proposes to expedite the transition from ILEC copper to new fiber networks, but this Advisory focuses on the Commission’s potential reform of pole attachment processes and rates and its continued consideration of preempting restrictive local laws.

The draft NPRM is currently scheduled for the Commission’s April 20 meeting with comments and replies due within 30 and 60 days after Federal Register publication.

1. Speeding Access to Poles – Proposed Permit and Make-Ready Process Reforms

In its 2011 Pole Order, the Commission took a number of steps to streamline and improve the pole attachment application and make-ready processes to promote broadband deployment and competition. The 2011 Order established shorter deadlines for completing make-ready work to accommodate new attachers and allowed a new attacher to engage pole-owner approved contractors to complete make-ready if deadlines are missed.

The Commission is concerned that the 2011 reforms still leave “significant barriers to broadband infrastructure deployment” and that further reform will “increase broadband availability and competition in the provision of high-speed services.” The draft NPRM seeks comment on specific proposed revisions to pole attachment application processing and make-ready deadlines, and requests comment on alternative approaches to streamlining and accelerating access to poles.

a. Proposed revisions to existing permit application and make-ready deadlines.

The draft NPRM proposes to compress the application and make-ready timeframes as follows:

*Longer timeframes generally apply with respect to wireless attachments that often require access to pole space above the traditional communications space. “Large orders” are up to the lesser of 3000 or 5% of the total number of poles owned by the utility in the state. Above those levels good-faith negotiation is required.

The draft NPRM also seeks comments on how timeframes could be further streamlined in ways that “balance the benefits to society from greater speed of deployment and cost savings versus the need to ensure that safety and property concerns are not compromised.”

b. Alternative pole attachment processes.

The draft NPRM also seeks comment on alternative approaches to streamline make-ready processes that would represent a substantial change in industry practices, could expose existing communications networks to substantial damage, and may conflict with the Pole Attachment Act.

For example, the draft NPRM seeks comment on the “one touch” make-ready procedures in Nashville and Louisville. Those procedures generally authorize the new attacher to complete “routine” make-ready on other parties’ existing attachments using pole owner approved contractors. Louisville’s procedure allows the make-ready to be performed without notifying existing attachers in advance that their facilities are about to be moved.

Other alternatives offered for comment would provide a 30 day period for a utility to process an application and a relatively short window for existing attachers to complete make-ready (e.g. 45 days), with substantial penalties (e.g. $500/pole/month) to incentivize timely completion.

The draft NPRM is open to other suggestions that would combine elements of various approaches, including a mechanism allowing incumbents to handle “complex” make-ready, establishing indemnities to cover service outages and network damage caused by a new attacher, and establishing lists of approved utility approved contractors.

While the draft NPRM is interested in gaining efficiencies, it recognizes that such proposals raise substantial issues including potential damage to competitors’ networks, service outages and reputational harm, liability for damage, safety, and Fifth Amendment property interests. The draft NPRM seeks specific evidence of problems with the quality of the work done and associated network damage arising from one-touch processes. It also seeks comment on steps that could be taken to minimize potential one-touch damages such as requiring agreement among attachers on the contractor that could be used for make-ready and allowing existing attachers an opportunity to observe make-ready work being conducted for the new attacher.

2. Re-examining Rates for Make-Ready Work and Pole Attachments

The draft NPRM also proposes to re-examine annual pole attachment rental rates and make-ready charges.

First, the draft NPRM proposes to codify in rule the Commission’s prior decisions that pole owners must set rates for third-party attachers that exclude capital costs that utilities already recover directly in the form of make-ready charges and reimbursements. The item questions whether utilities have actually done this or instead have engaged in double recovery of these costs. It goes on to suggest excluding other capital costs that exceed the incremental cost of attachments to utilities, and questions whether the Commission should revisit both the cable and telecom formulas, or adopt a new rate formula for commingled services, to exclude capital costs.

Second, the draft NPRM proposes to revise rules governing rates that incumbent local exchange carriers (ILECs) pay for their attachments on electric IOU poles. When the Commission first addressed this issue in 2011, it chose to consider ILEC rates on a case-by-case basis to evaluate whether ILECs enjoyed rights that might justify rates higher than the telecom rate, as explained in our 2011 Advisory. ILECs have since filed a number of complaints against rental rates on electric IOU poles. The draft NPRM would presume that the telecom rate should apply, but permit the electric company to rebut the presumption with evidence on the ILEC’s more favorable terms and conditions, number of poles owned by the ILEC, or ILEC bargaining power in the service area. As part of its consideration, the draft NPRM seeks comment on the current levels of pole ownership between electric utilities, ILECs and others.

Third, the draft NPRM seeks comment on proposals to reduce make-ready costs and to make these costs more transparent, such as by requiring pole owners to adopt unit cost pricing schedules. It seeks to determine whether today’s make-ready costs are excessive and represent a barrier to broadband infrastructure deployment. The draft NPRM asks whether it should adopt a formula for setting make-ready charges or uniform pricing for common make-ready projects. The draft NPRM seeks information about existing attachment agreements that provide the necessary discipline and transparency for make-ready pricing. One alternative advanced for comment would be to set a fixed per-pole charge for make-ready that would eliminate negotiations over what costs are recoverable from the attacher. Among other questions posed by the draft NPRM are whether (and how) a utility should reimburse attachers for a portion of make-ready expenditures when the utility subsequently benefits from added pole space, either for its own use or for third-party rentals. Finally, the draft NPRM asks whether its existing complaint process should be reformed to provide a more effective forum for attachers that seek to challenge excessive make-ready fees.

3. 180-day “Shot Clock” and Other Procedural Reforms

The draft NPRM proposes to establish a 180-day shot clock for the Commission to resolve pole access complaints, similar to the 180-day “shot clock” that Section 224 imposes for “certified” States. Not surprisingly, the proposal would be an “informal target” and would leave the Commission with authority to “pause” the clock for significant discovery, informal dispute resolution, and other circumstances. The draft NPRM also asks whether it should adopt the shot clock for other pole complaints as well.

The draft NPRM also proposes to require parties to resolve procedural issues, protective orders, discuss discovery, narrow the factual and legal issues, and agree on case management issues before the complaint is filed.

4. Reciprocal Access to Poles Pursuant to Section 251

Currently, Commission rules provide competitive LECs with the right to demand access to ILEC poles, but that right is not reciprocal. The draft NPRM seeks comment on whether the Communications Act can be interpreted to create a reciprocal set of infrastructure rules so that incumbent LECs could also demand access to competitive LECs poles. However, the draft NPRM also seeks data on how frequently ILECs seek access to infrastructure controlled by competitive LECs, and how often they are denied access in order to determine whether the provisions as currently interpreted have an impact on competition and broadband deployment.

5. Notice of Inquiry - Prohibiting State and Local Laws Inhibiting Broadband Deployment

The draft NOI investigates but does not yet propose rules concerning state and local regulations that pose a significant barrier to broadband infrastructure deployment. The draft NOI seeks comment on whether the Commission has authority under Section 253 to enact rules preempting state and local laws that pose a barrier to broadband deployment and, if so, whether it should exercise such authority.

• The draft NOI suggests prohibiting local moratoria on telecommunications deployment. The NOI requests examples of moratoria adopted by localities and the impediments to broadband deployment they have created.
• The draft NOI seeks examples of excessive delays in permitting facilities in the rights of way and the associated harms caused. The draft NOI suggests implementing a shot-clock or other rules to eliminate excessive delays, and looks to commenters to share examples or propose details for potential solutions.
• The draft NOI suggests adopting rules to prohibit excessive fees that inhibit broadband deployment. The item offers a wide range of options for evaluating whether fees are “excessive,” ranging from costs of processing applications to a sizeable percentage of gross revenue.
• The draft NOI solicits examples of unreasonable conditions for deployment, such as costs unrelated to right of way management or in-kind service requirements. The NOI requests examples of bad faith negotiation tactics and ways to address them. Finally, the NOI seeks other instances of state or local laws that materially inhibit a provider from “compet[ing] in a fair and balanced legal and regulatory environment.”

The draft NPRM and NOI are among several significant items proposed for adoption at the FCC’s April 20 open meeting.