How Pole Fees Impact Rural Broadband Deployment

In March 2010, the American Cable Association (ACA) applauded the arrival of the National Broadband Plan (NPB), especially the recommendation that pole-attachment rental rates should be as low and as close to uniform as possible. Thirteen months later, the Federal Communications Commission (FCC) adopted the NBP’s key recommendation on pole fees, greatly improving the business case for rural broadband deployment that is so vital to spurring economic growth in hometown America.

Investing millions of dollars in rural broadband facilities is risky, with a return on capital never guaranteed. To improve the chances of success as well as to maintain leadership in deploying broadband to rural homes and businesses, ACA members need to access poles at low and stable prices if the price of high-speed Internet access is to remain affordable for all consumers.

Money wasted on unjustifiably high pole fees will result in the misallocation of capital that rewards rent-seeking pole owners at the expense of consumers yearning for the fastest and most affordable Internet download speeds possible.

It should surprise no one that hikes in pole fees have a financially punishing and disproportionate impact on rural broadband providers, which rely on poles far more heavily than do urban providers and which have far fewer subscribers to absorb the cost of rising fees. The NBP stated that the cost of obtaining various permits and leasing pole attachments can amount to 20 percent of the expense of a fiber-optic build, and it concluded lower pole fees could reduce deployment costs materially.

“It should surprise no one that hikes in pole fees have a financially punishing and disproportionate impact on rural broadband providers.”

The NBP’s conclusion – which should strike everyone as obvious – reflected ACA’s view that out-of-control pole fees will harm the economic case for driving broadband facilities deeper into rural markets and will serve to widen the data divide that leaves rural consumers without robust Internet speeds enjoyed by consumers in big cities.

Although ACA clearly supported the FCC’s 1978 effort to help ensure low and uniform pole-attachment rates, ACA strongly opposed any increase in the current cable rate. ACA greatly appreciated that the FCC agreed to retain the existing cable rate for cable operators providing commingled video and Internet services.

ACA also found encouraging that the FCC not only streamlined the process for gaining access to poles, but also minimized the payment of “make ready” fees, which are intended to compensate owners for preparing their poles to receive third-party attachments.

A cynic might say cable operators inflate the impact of various costs and fees in order to secure favorable regulations from sympathetic state and federal agencies. Nothing could be further from the truth.

Sadly, ACA members hit with requests for massive hikes in pole fees actually have shut down cable systems instead of yielding to pole owners’ outrageous demands. Cablecos forced to withdraw from the market under these circumstances have lost a business, but think about the consumers: They have lost their broadband providers and access to the Internet, an indispensable tool of learning, commerce and communication.

Let’s remember something: Stable pole fees give lenders and investors critical confidence in the cable companies they opt to support, which can mean only good things for rural broadband deployment. Unfortunately, the FCC lacks the authority to deal with such bad actors as electric cooperatives and municipal utilities that are exempt under the 1978 pole law. ACA agrees with the authors of the NBP that the time has come for Congress to close this loophole in the pole-attachment law once and for all.

Matthew M. Polka is president and CEO of the American Cable Association. Contact him at [email protected].