August 19, 2022

The FCC Should Reexamine the Economics of Pole Use in Light of New Technology

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Accelerating Wireline and Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment

Agency: Federal Communications Commission

Comment Period Opens: April 28, 2022

Comment Period Closes: August 26, 2022

Comment Submitted: August 12, 2022

Docket No. FCC 22-20; WC Docket No. 17-84; FRS 83033

 

The Fourth Branch project of the Mercatus Center at George Mason University is dedicated to advancing knowledge about the effects of regulation on society, commerce, and innovation. As part of its mission, the project conducts independent legal and economic analyses to assess agency rulemakings and proposals from the perspective of consumers and the public. In the past, it has published research related to broadband policy.

I welcome the opportunity to submit a reply comment in response to the proposed rule about how the Federal Communications Commission (FCC) should revise its policies toward poles used for broadband deployment. The FCC seeks “comment on when an upgrade or expanded use of a pole by a utility confers an incidental versus direct benefit to a utility.”

I served on the FCC’s Broadband Deployment Advisory Committee from 2017 to 2021 and worked on pole access issues with many representatives from industry. From that experience, I must conclude that the FCC is in a difficult position. As Johnny Kampis at the Taxpayers Protection Alliance puts it, “The FCC must . . . walk a fine line in its handling of this issue, working to facilitate broadband deployment while respecting the private property rights of pole owners.”

In the near term, the FCC needs to ensure that pole disputes are resolved quickly and fairly. At the very least, new attachers should not bear the full cost of replacement for a pole near the end of its expected lifespan. As Jeff Westling at the American Action Forum notes, excessive pole expenses and delays means “valuable taxpayer funds could be wasted while unserved Americans stay unconnected.” Conversely, pole networks require extensive maintenance and investment. The Broadband Development Advisory Committee has shown that significant progress can be made when members of industry sit down in good faith and negotiate best practices and policies.

New attachers to poles do raise costs to pole owners, necessitating maintenance. In some cases, the increased weight of a new attacher’s networks may necessitate the premature replacement of the pole. However, in other cases the pole is at the end of its useful life, has been fully depreciated, and is due for replacement anyway.

The policy difficulty is that pole access involves not only a mix of private property (electric lines, wood poles) and public property and easements (rights of way), but also the reality that pole usage by broadband and other companies is sequential and linear—if attachment to even a single pole is delayed or prevented, an entire network is unusable. This problem is exacerbated as the FCC and other federal agencies fund new and upgraded rural networks.

In the long term, the FCC needs new economic analysis of pole attachment issues. The FCC has made careful and technical decisions about pole costs and replacement fees in the past. I wish to raise two significant, newer trends not represented in those earlier pole access efforts: first, hundreds of millions of poles are near the end of their useful life, and second, new landline, wireless, and intelligent transportation services companies are expanding their use of utility poles.

Regarding this first trend—millions of poles were installed by electric utility or phone companies in the 1930s to 1960s, which means many poles are reaching the end of their useful life in the next decade or two. According to a trade research group, the predicted service life for wood utility poles that have not received remedial treatment is about 40 to 55 years. A wood utility pole that is inspected and treated has an expected lifetime of about 100 years.

Before the bulk of the poles are retired and replaced, the FCC and other public agencies should expressly endorse and encourage a policy of treating roadside real estate and “street furniture” (such as poles, vaults, conduit, and streetlights) as passive infrastructure. Korok Ray, associate professor at Mays Business School at Texas A&M University, and I outline this passive infrastructure policy proposal in a Mercatus Center research paper.

As we point out in our attached paper, poles are no longer single-industry infrastructure, and poles increasingly resemble “network hotels”—owners host and sell vertical pole space to multiple lessees.

A century ago, poles served only telegraph and phone companies. Then they served electric companies. Then cable TV companies. Today, 5G and other new technologies would benefit from rights of way access and proximity to roadway, highway, and sidewalk users. As Jeffrey DeCoux of the Autonomy Institute points out in his filing, there is industry and public-sector interest in so-called smart poles that house multiple services and service providers, including providers of 5G radio access networks, GPS, and lidar.

Poles and right-of-way infrastructure will increasingly be replaced and upgraded with more capable infrastructure. On the one hand, the new infrastructure is more expensive. On the other, it allows more revenue opportunities (more pole lessees). It’s unclear how those costs should be shared given the mix of benefits and costs to the pole owners and inability in most of the country to build competitive poles. The FCC should endorse the passive infrastructure approach outlined in the attached paper and ask the Office of Economics and Analytics to outline principles of fair cost sharing in this new world of network hotels.

In any case, in the immediate future, speedy resolution of pole disputes is needed, especially as tens of billions of federal dollars start to flow to broadband providers to bring high-speed coverage to all Americans. Fights over pole access are inevitable, but the FCC should transmit best practices to state officials and encourage rapid, fair resolution. The FCC should lead with reasonable deadlines, but not all of this responsibility needs to fall to the FCC. As Kristian Stout and Spencer Kahn of the International Center for Law and Economics note, “the Pennsylvania Public Utility Commission has created a Pole Attachment Working Group to streamline dispute resolution between utilities and pole attachers,” and states should consider shouldering more of the burden of pole disputes.

Thank you for the opportunity to comment.

Attachment

Korok Ray & Brent Skorup, Smart Cities, Dumb Infrastructure: Policy-Induced Competition in Vehicle-to-Infrastructure Systems, 25 Tex. Rev. L. & Pol’y 61 (2020).