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Piggybacking on Poles

To the Editor:

Your recent article on pole attachments (“Pole-Fee Flap Could Prove Costly to Cable,” Multichannel News, May 22) presented a one-sided, cable-industry view of a two-sided story. While several utilities are quoted, the gist of the article is that the poor cable operators are being screwed to the wall by the big, bad electric utilities.

Noting that cable operators typically pay an average of only $6.63 per attachment per pole, per year (less than the cost of a single movie ticket), the article expresses grave concern that utilities might “play the Hurricane Katrina card” and charge rates in the $30 to $40 range.

Cable attorneys are quoted as arguing that cable operators should pay only 7.41% of the utility’s annual cost of pole ownership, since cable attachments occupy only that percentage of the pole’s usable space. In other words, cable operators should be allowed to “piggy-back” on the electric utilities’ systems for a negligible fee, without incurring any of the far greater costs of constructing or maintaining their own systems.

The costs that cable operators save by not having to construct their own systems far exceed the minimal charges currently allowed by FCC regulations. Under the FCC’s rules, electric utilities get to pay the lion’s share of constructing and operating the systems, then cable operators get to hop on board and take advantage of them for a small fraction of the costs.

The result, in effect, is a gross subsidy of the cable industry by the electric utility industry. For some reason, the FCC (which, after all, is the Federal Communications Commission, not the Federal Electric Utility Commission) finds this arrangement to be logical and consistent with sound public policy.

Unlike the FCC, fortunately, not all regulatory bodies buy into the cable industry’s argument that electric utilities and their rate payers should subsidize the cable industry with unreasonably low pole-attachment rates. Some state jurisdictions recognize that attachers would have to incur significant costs, far beyond the costs of simply attaching to the utility’s poles, if they were required (as other businesses are) to build and maintain their own distribution systems. These jurisdictions recognize the value of the utility’s distribution system to the cable attachers and have crafted rates that require cable operators to pay their fare share.

Cable is no longer the nascent industry that it was in 1978, when the original pole-attachment laws were enacted. “CATV” companies have transformed themselves into communications giants, offering not only cable-television service, but also video on demand, broadband Internet access and telephone services. Not only have the monthly rates for standard cable television services outpaced inflation, but additional new services have contributed to significantly higher monthly revenue streams for cable companies.

For instance, Comcast, the largest cable company in the country, now boasts a market capitalization of some $66 billion. Last year, the company reported $2.6 billion in free cash flow, based on an increase in monthly revenues per subscriber from $77 to $84. Most customers subscribing to Comcast’s video, Internet and telephone services pay $120 per month, and the number of those customers is growing rapidly. Profits are expanding.

So, please, before complaining about utilities “playing the Hurricane Katrina card,” look at both sides of this issue. It’s not as clear-cut or one-sided as your article would have us believe.

Jack Richards

Tom Magee

Keller and Heckman LLP Washington, D.C.