The cable industry is fighting to ensure that the federal government retains control over setting pole attachment rates when multiple system operators offer broadband so they don’t face higher fees and a dizzying array of regulations at the state level.
At present, the Federal Communications Commission sets the pole rates for the cable business in 31 states. The fees govern attachment of cable service wires to utility poles.
But that authority is under attack from utilities, which argue that Congress never granted the FCC the power to set pole rates for cable-delivered broadband.
Last year, a federal appeals court sided with the utilities and ruled the FCC has no such authority.
But the decision was stayed, and the cable industry and the federal government appealed to the U.S. Supreme Court, which heard oral arguments Oct. 2 on the matter.
The high court is expected to rule in three to six months, but its decision will only affect the 31 states for which the FCC sets pole attachment rates. The remaining 19 states set pole attachment rates on their own and will not be impacted.
The cable industry favors the FCC as its rate-setter partly because it’s easier for the industry to deal with one regulatory body than 31.
If the matter is left to the states, there could be a hodgepodge of fees and regulations, and some states might not regulate pole attachments at all, leading to potential price gouging by utilities.
Some states also might classify broadband as a telecommunications service, subjecting it to higher rates and more regulation.
If the FCC loses jurisdiction, cable customers will pick up the tab, shelling out an extra $1.50 a month for cable services, the industry says.
“Most subscribers would say that’s a lot of money for no new services,” said Dan Brenner, senior VP of law and regulatory policy at the National Cable and Telecommunications Association.
Another reason why cable favors the FCC: The agency subjects broadband to the same rates it applies to cable-delivered video. Those rates are lower than the ones it imposes on telecommunications services.
If broadband is defined as a telecom service, it could be subject to far-reaching open-access requirements, meaning numerous competing Internet providers would have a presence on broadband systems.
The FCC is applying the cable rate to broadband even though it hasn’t decided if the service is cable or telecom.
At last week’s oral argument, the FCC’s lack of clarity on this matter was a point of concern. Justice David Souter said the court might have to send the case back to the agency with instructions to clarify what broadband is. “Doesn’t it make sense to say to the agency, `You’ve got to at least explain what your jurisdictional basis is for this’?” he asked.
Justice Antonin Scalia said he thinks Congress views cable as a video service, and “anything else that cable does is telecommunications.”
But U.S. Justice Department attorney James Feldman said any new service offered by cable should be regulated as cable. “They concluded that cable is not telecommunications,” he said of the FCC.
Thomas Steindler, a lawyer representing the utilities, said Congress was careful to limit the scope of the FCC’s authority and never intended for it to set broadband rates.
Justice Ruth Bader Ginsburg did not seem convinced. She said it’s hard to believe that Congress, which wanted to encourage development of broadband, would take steps to impede it. Justice Stephen Breyer said Congress decided to regulate pole rates because utilities are monopolies and it didn’t want them stifling new services.
Meanwhile, a few sources predicted that the court would side with the cable industry and the government and allow the FCC to retain jurisdiction.
“We believe the Supreme Court appears to be leaning slightly in favor of upholding FCC regulation that keeps cable pole attachment rates down, which would be good for the cable industry,” wrote Legg Mason analysts. Nevertheless, observers also cautioned it’s always difficult to predict what the court will do.
The court is not expected to resolve what kind of service broadband is, but it may discuss the matter in its decision.
On a related note, Justice Sandra Day O’Connor recused herself from the case because of a potential conflict of interest involving an investment in AT&T, NCTA officials said. A Supreme Court spokeswoman did not return phone calls.
In the event of a 4-4 split decision, the appeals court ruling would stand.