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ACA: FCC's "Third Way" Broadband Policy Could Expose Small Providers To Much Higher Pole Fees, Greater State And Local Taxation

Many Industry Stakeholders Validate ACA's View On The Need For FCC Rulemaking Prior To Title II Reclassification

PITTSBURGH, August 13, 2010 - Applying common carrier regulations to small and mid-sized broadband Internet service providers would cause pole attachment fees to soar and expose these firms to a host of other burdensome and economically destructive regulations at all levels of government, the American Cable Association and many industry stakeholders told the Federal Communications Commission.

In reply comments filed Thursday at the FCC, ACA stressed that many industry participants agreed that common carrier regulation under proposed FCC "Third Way" broadband policies would open a Pandora's Box of harms to providers, including rising pole attachment fees and possibly higher franchise fees and state and local taxes.

ACA repeated that as a procedural matter, the FCC is legally required to conduct a rulemaking before it may reclassify the "Internet connectivity" component of broadband service as a telecommunication service, and to identify and assess means of minimizing disproportionate economic impacts on small providers.

ACA explained that broadband access providers had to be made aware in advance of the Title II provisions that would apply to their service and be given the opportunity to comment on means of minimizing these burdens for small providers. ACA added that the FCC should not allow any reclassification ruling to take effect until completion of required rulemakings and analyses under the Administrative Procedure Act and the Regulatory Flexibility Act.

"The FCC's effort to impose common carrier regulation on broadband Internet service providers runs the risk of producing a serious spike in pole attachment fees, putting severe financial pressure on many ACA members as well as causing retail broadband prices to rise in some rural communities.  ACA urges the FCC to act with great caution and recognize that Title II regulation will very likely lead to higher state and local taxes in addition to burdensome reporting requirements, regulatory fees and higher property taxes," ACA President and CEO Matthew M. Polka said.

ACA pointed out that FCC forbearance policy actually designed to lighten Title II burdens could do just the opposite in certain circumstances. For example, the FCC could inadvertently strip ACA members of their federal right to attach broadband facilities to poles owned by monopoly utility companies at regulated rates, forcing ACA members to pay much more in cases where they continued to have permission to access the poles.

Just as concerning is that FCC reclassification of broadband Internet access as a telecommunications service could cause cable Internet providers to pay higher pole attachment fees because under the FCC's pole attachment fee formula, telecommunications carriers pay higher rates than cable operators.

ACA member companies Wire Tele-View, SEMO Communications Corp. and NewWave Communications reported that if required to pay under the telecommunications formula, their pole attachment fees would jump as high as 400%. The impact of this change would be particularly punishing on rural broadband providers because they generally must attach their equipment to a greater number of poles than their urban counterparts, yet have fewer subscribers per mile over which to spread the costs.

"No doubt about it, FCC reclassification would have an immediate and significant economic impact on small broadband Internet service providers," Polka said. "That's why ACA believes it is essential for the FCC to compile a thorough record, with all the risks known, before reversing successful deregulatory policies put in place in 2002."

Along with many industry participants, ACA warned that reclassification would stimulate state and local governments to impose telecommunications requirements on broadband Internet providers, including the collection of telecommunications franchise fees and right-of-way fees. State public service commissions might try to use their authority to enforce telecommunication statutes to require broadband Internet providers to seek state certification, file tariffs, and submit service performance reports on a regular basis.

ACA asserted that reclassification may either automatically trigger state telecommunications tax assessments or encourage states to extend telecommunications taxes to broadband Internet service providers, increasing costs for small providers.

ACA noted that some industry stakeholders maintain that reclassification would mean broadband Internet providers would suddenly be at risk of losing the protection of the Internet Tax Freedom Act. 

About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7.6 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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