Excessive Pole Rates are Stifling Rural Broadband Investment and Deployment
The majority of consumers today enjoy high-speed broadband in their homes, and America's cable operators have invested more than $290 billion over the past two decades to reach nearly every community. But deploying wireline broadband networks, especially to rural and remote areas, is a massive undertaking of cost, time, and effort. One box along the way that internet service providers must check before extending the network is the need to rent space on utility poles that provide electric or telephone service. Sparsely populated rural areas often contain more poles that ISPs need to rent because of the higher number of miles that separate homes.
Unfortunately, not all utility companies are subject to the same regulatory limits when it comes to pole attachment fees, and many are taking advantage of this discrepancy by charging rates that are two or three times higher, which could add up to hundreds of dollars per mile. The real world impact is that the higher rates are harming broadband deployment, network upgrades, and competition in rural areas, contributing to the digital divide between urban and rural areas. But Congress can do something about this.
NCTA recently filed with the FCC a report that examines the excessive pole attachment rates charged by municipal and cooperative electric companies and the negative effect of those rates on broadband deployment, especially in rural areas.
"The Economic Impact of Section 224 Exemption of Municipal and Cooperative Poles," written by former FCC Chief Economist Michelle Connolly, found that muni and co-op pole attachment rates are more than double or triple the rates charged by investor-owned utilities. These pole owners are not legally bound to abide by regulatory limits under Section 224 of the Communications Act—unlike investor-owned companies which are capped—and they can get away with charging high rates for pole rentals that are diverting tens of millions of dollars annually from actual broadband investment. To demonstrate, Connolly lays out the pole attachment cost rates of regulated versus unregulated companies:
The paper also explains that these excessive rates not only deter broadband deployment, but can be used to harm competitors in markets where private ISPs compete with munis or co-ops. Since the rates are unregulated, pole attachment costs could increase even after broadband facilities are deployed, negatively impacting expected profits in certain areas. Where munis and co-ops compete with a private ISP in the same market, those higher rates can be used to penalize the competition. On top of that, the report uncovers that these unregulated pole owners are seeking federal broadband subsidies to offer broadband services themselves, making competition all the more lopsided.
Congress can act by removing the Section 224 exemption for municipals and cooperatives in order to limit these pole owners to actual cost-based rates and to provide a fair and consistent representation of the market. And all operators that accept broadband funding, either through federal or state dollars, should be required to use the federal pole attachment formula under Section 224 when making their poles available and assigning rates. Doing so will increase overall investment in all communications networks that rely on pole attachments to deploy reliable and quality broadband service to the rural areas where connectivity is needed the most.