#1Davis Wright Tremaine LLP DEFINING SUCCESS TOGETHER Mark Trinchero Pole Attachments 101 July 17, 2018 Anchorage Bellevue Los Angeles New York Portland San Francisco Seattle Shanghai Washington, D.C. www.dwt.com#2Pole Attachments Pole Attachments - The Essentials 2 Davis Wright Tremaine LLP#3What is a Pole Attachment? Communications attachments (telephone and cable) Guys and Guy Markers Anchors (behind fence) 3 High Voltage Power Lines Secondary Power Lines Telco Video Electronics 17 Davis Wright Tremaine LLP#4Cable Pole Attachment STOP AHEAD CATV TELCO FIBER Cable fits into surplus space POWER PRIMARIES 回 4 DROP POWER SECONDARIES LICENSEE CABLE 12 IN MINIMUM TELEPHONE CABLE 0-8700 VOLTS NOT LESS THAM 40 IN. DROP Davis Wright Tremaine LLP#5Small Cell v. Macro Cell Mediem.com сл 5 AMC SAFIR di Davis Wright Tremaine LLP#6Pole Clearances 40 POLE CLEARANCES Power 12 TV Cable Telephone 6 ☐ 18 ft 17 Davis Wright Tremaine LLP#7Access to Conduit and Rights of Way Conduits are underground pipes made of plastic concrete or, in some cases, wood Conduits may be divided with a number of plastic or fiberglass ducts ranging in size from one to six inches in diameter and further divided using "inner duct" Conduit rent calculated per foot of ½ innerduct Rights-of-Way is a term applied to pathways or corridors of access that utilities have secured for installing their facilities and delivering their services 7 17 Davis Wright Tremaine LLP#8Legal Framework History of Pole Attachment Regulation Electric and Incumbent Local Exchange Carrier ("ILEC") dominance over pole facilities arose as a result of public policies to establish widespread availability of electric services Utility pole networks have been paid for over the years by utility ratepayers, as intended, for whom the networks were built and are maintained ■ Most attachers, including cable operators and wireless companies, did not have the same opportunity to construct their own networks under rate of return regulation 8 Davis Wright Tremaine LLP#9Legal Framework Monopoly abuses led to regulation 1978 Pole Attachment Act - 47 U.S.C. § 224: • Covers Investor-Owned • • Utilities (Electric and ILECS) Protects "Cable Television Systems" Only Ensures just and reasonable rates, terms and conditions • Establishes "Cable Rate · Formula" Allows states to opt out and self-regulate • Telecommunications Act of 1996 - Amends § 224 To mandate access to poles, conduits and rights-of-way • Extends protections to providers of telecommunications service, including wireless • Establishes "Telecom Rate Formula" 9 Davis Wright Tremaine LLP#10Certified States Alaska Arkansas California Connecticut Delaware District of Columbia Idaho Illinois Kentucky Louisiana Maine Massachusetts Michigan New Jersey New Hampshire New York Ohio Oregon Utah Vermont Washington 10 Davis Wright Tremaine LLP#11States That Regulate Municipalities Colorado Alaska California Delaware Indiana (FCC) (FCC) Louisiana Massachusetts Missouri New York North Carolina (FCC) Oregon Texas (FCC) Vermont Washington 11 Davis Wright Tremaine LLP#12States That Regulate Coops Alaska Arkansas California Delaware Indiana Kentucky Louisiana Michigan (FCC) North New Hampshire Carolina (FCC) Oregon Texas Utah Vermont Virginia (FCC) Washington 12 Davis Wright Tremaine LLP#13States That Regulate Both Alaska California Delaware North Indiana Louisiana Carolina (FCC) (FCC) Oregon Vermont Washington Davis Wright 13 Tremaine LLP#14State Regulation Nearly all states have adopted a variation of the cable formula - Few (VT example) have two formulas – one for telecom and one for cable 14 Davis Wright Tremaine LLP#15Pole Attachment Basics FCC Pole Attachment Fundamentals 15 Davis Wright Tremaine LLP#16Nondiscriminatory Access Scope of Federal Pole Attachment Act Covered Entities: Cable systems, CLECs, Wireless and BIAS entitled to non-discriminatory access to distribution poles, conduit and rights-of-way owned and controlled by utility Cable, CLECS, wireless and BIAS and ILECs entitled to just, reasonable rates, terms and conditions 16 Davis Wright Tremaine LLP#17Access Standards Access may be denied ONLY on a nondiscriminatory basis where there is insufficient capacity and for reasons of safety, reliability and generally applicable engineering reasons Access denials must be in writing and detail how the denial relates to reasons of insufficient capacity, or safety, reliability and generally applicable engineering reasons 17 Davis Wright Tremaine LLP#18Access-Insufficient Capacity "Insufficient capacity" should not exist where request can be accommodated using traditional methods of make-ready NESC is primary standard governing access decisions Utilities may adopt their own reasonable standards but these cannot frustrate access, be applied retroactively or be discriminatory An electric utility may reserve space consistent with a "bona fide development plan that reasonably and specifically projects a need for that space in the provision of its core utility service" Must allow use of space prior to need An ILEC may not reserve space for future use 18 Davis Wright Tremaine LLP#19Access-Pole Replacements Should Replace Poles On a Nondiscriminatory Basis Some pole owners claim pole replacements not required Higher Construction Standards Arguably allow, but should be reasonable and nondiscriminatory 19 Davis Wright Tremaine LLP#20The Application Process Access Requests Made by Submitting an Application for a Permit Application may include information to allow the pole owner to perform a pre-construction survey (under "its" procedures) Fight unreasonable requests (such as PE Stamp, analysis of all attachments on pole, other unnecessary engineering) Application fees: Reject up-front, flat fees • Actual Cost for Preconstruction surveys and make-ready engineering permitted • Pole loading fees can be high 20 Davis Wright Tremaine LLP#21The Application Process-Timeframes Maximum Access Timelines (Poles only) ■ Preconstruction Survey (and access denials): 45 days (+15 days for large jobs). Make-Ready Estimate: 14 days to provide/accept. Make-Ready Performance 60 days after payment (+30 days for wireless above communications space, +45 days for large jobs). ◉ Pole owner must notify existing attachers (upon payment of make-ready estimate) of planned make-ready. Large job: Lesser of 5% of pole owner's poles in a state or 3,000 poles (counted every 30 days) 21 Davis Wright Tremaine LLP#22Remedies for Failure to Meet Timelines Hire Contractor to Perform Survey and Make-Ready (in "communications space") Pole owner must provide list of approved contractors. ■ Must notify pole owner of decision to use contractor Temporary Attachments If Utility allows for anyone, must allow for you File complaint Wireless Attachments above communications space/Make- Ready in electric space 22 22 Davis Wright Tremaine LLP#23Make-Ready Cost Rules Make-Ready Costs are paid for by the benefitting party-must reflect reasonable, actual cost May charge up-front estimates Must provide detailed breakdown upon request The pole owner may not require attacher to pay to correct existing violations caused by others. (including owner) in order to gain access May not require existing attacher to pay make- ready costs if pole owner or third party requires make-ready for own benefit 23 Davis Wright Tremaine LLP#24Overlashing Rules Overlashing does not constitute another "attachment" for rental purposes Attaching entities may overlash without pole owner "approval" Overlashing must comply with applicable standards Third parties may overlash onto attacher's permitted facilities without permission from the owner If the overlashed wire/fiber delivers "telecommunications services," now including BIAS, the attachment is a telecommunications attachment for rental rate purposes 24 Davis Wright Tremaine LLP#25Safety Inspection Rules Post construction Inspections Must be performed in a reasonable timeframe following installation or may not charge Periodic Inspections Should not be inspections of attacher plant alone-includes all entities, including owner "Cost" Recovered in the Annual Rent Non-periodic Suspicion of attacher non- compliance May Charge (if non-compliance found) 25 Davis Wright Tremaine LLP#26Addressing Non-Compliance Attacher may be charged to correct violations caused by that attacher only Cost-sharing may be reasonable if fault not capable of determination and all parties agree Pole owner often blames attacher due to "but for" rule- not legal Penalties not permitted (on recon) 26 26 Davis Wright Tremaine LLP#27■ Attachment Counting "Audits" To count "billable" attachments in order to update billing. records and discover unauthorized (i.e., non-permitted) attachments Frequency: Typically limited to no more than once every five (5) years Audit costs should be very low Recent audits charged at between $3-$6 per pole. Should include all attachers 27 Davis Wright Tremaine LLP#28Unauthorized Attachment Penalty An Unauthorized Attachment is an attachment installed without a permit for which a permit was required Until April 2011, the FCC limited penalties to 5 years back rent ■ New standard: 5 years back rent if self-reported or found in joint audit or plus $100 if given opportunity to participate and don't Pole owner should provide specific notice (pole number and location) for verification purposes (i.e., cannot provide mere pole count) and prior to assessment of penalty 88 28 Davis Wright Tremaine LLP#29Conduit FCC formula limits rates that can be charged Norm is less than $1 per foot ½ duct occupancy presumption No "unusable" space Maintenance spare ■ Just and reasonable terms and conditions 29 Davis Wright Tremaine LLP#30Pole Attachment Rates Rate Formulas 30 30 Davis Wright Tremaine LLP#31Statutory Expression-Cable Formula "[A] rate is just and reasonable if it assures a utility the recovery of not less than the additional costs of providing pole attachments, nor more than an amount determined by multiplying the percentage of the total usable space .. which is occupied by the pole attachment by the sum of the operating expenses and actual capital costs of the utility attributable to the entire pole. . . .” 224 (d)(1) " 31 Davis Wright Tremaine LLP#32Attributes of the FCC Cable Formula ■ FCC formula = fully allocated cost standard ■ Relies on publicly available historical costs that utilities keep as a matter of course in their accounting records (including munis and coops) FERC Form 1-Electric Utilities ARMIS Report-ILECS ■ RUS Form 7 and annual state tax filings in Virginia ■ Relies on presumptions Simple plan, minimum of staff and paperwork-avoid full- blown rate case ■ Parties can determine without regulatory intervention 32 Davis Wright Tremaine LLP#33Cable Rate Presumptions 37.5 foot • pole 24 feet 13.5 feet • usable space • usable space (18 feet of clearance, 6 feet of burial depth) 1 foot 11.25% 15% space occupied by cable attachment Rate of Return appurtenance reduction-electric utility 5% appurtenance reduction-ILECS 33 33 Davis Wright Tremaine LLP#34Cable Rate-3 Major Components Net Investment Per Bare Pole Carrying Charge Factor Space Allocation Factor (a.k.a. Use Factor) 34 Davis Wright Tremaine LLP#35FCC-Cable Formula Section 224(d) Cable Formula for Determining Maximum Rate For Use of Electric Utility Poles Using FERC Accounts Maximum Rate Space Occupied Net Pole Investment Carrying I x 0.85 x Charge per Pole Usable Space Total Number of Poles Rate Where: Space Occupied 1 foot (presumed, but rebuttable) Usable Space 13.5 feet (presumed, but rebuttable) And: Net Pole Gross Pole Accumulated Accumulated Deferred Investment Carrying Charge Rate Investment (Account 364) Depreciation (Account108) (Poles) Income Taxes (Account190, 281-283) (Poles) Administrative + Maintenance + Depreciation + Taxes + Retum Administrative Total General and Administrative Element Gross Plant Investment (Electric) Accumulated Depreciation (Account108 Electric) Accumulated Deferred Taxes (ElectricPlant) (Accounts190, 281-283) Maintenance Element Pole Investment in Accounts 364, 365, & 369 - Account 593 Depreciation (Poles) Related to Accounts 364, 365, & 369 Accumulated Deferred Income Taxes related to Accounts 364, 365, & 369 Depreciation Gross Pole Investment (Account 364) Element Net Pole Investment Taxes Element Depreciation Rate X for Gross Pole Investment Accounts 408.1 +409.1410.1 +411.4411.1 Gross Plant Investment Accumulated Depreciation Accumulated Deferred Taxes (Plant) (Account190,281-283) (TotalPlant) (Account108) Return Element Applicable Rate of Return (default = 11.25%) 35 Davis Wright Tremaine LLP#36FCC-Cable Formula Section 224(d) Cable Formula for Determining Maximum Rate For Use of LEC Utility Poles Using FCC ARMIS Accounts Maximum Rate Space Occupied per Pole Where: - Space Occupied Usable Space Net Pole Investment Total Number of Poles Carrying x 0.95x Charge Rate 1 foot (presumed, but rebuttable) Usable Space =13.5 feet (presumed, but rebuttable) And: Gross Pole Net Pole = Investment Accumulate d Depreciati on Investment (Account 2411) (Account 3100)(Poles) Accumulate d Deferred Income Taxes (Account 4100+ 4340)(Poles) Carrying Charge Rate = Administrative + Maintenance + Depreciation + Taxes + Return Administrative Element Total General and Administrative (Accounts 6710 & 6720) Gross Plant Investment Accumulated Depreciation (Account 2001) (Account 3100) Accumulated Deferred Taxes (Plant) (Accounts 4100 +4340) = Maintenance Account 6411 - Rental Expense (Poles) Element Net Pole Investment Depreciation, Gross Pole Investment (Account 2411) Element Net Pole Investment Depreciation Rate for Gross Pole Investment Taxes Element Gross Plant Investment (Account 2001) Operating Taxes (Account 7200) Accumulated Depreciation (Account 3100) Accumulated Deferred Taxes (Plant) (Accounts 4100 + 4340) Return Element Applicable Rate of Retum (default = 11.25%) 36 Davis Wright Tremaine LLP#37Pre June 2011 Telecom Rate Maximum Rate = Space Factor x Net Cost of Bare Pole x [Carrying Charge Rate] Where Space Factor = [Space Occupied] + [2/3 x Usable space/No. of Attaching Entities] Pole Height 37 Davis Wright Tremaine LLP#38June 7 2011 Telecom Rate New Telecom Rate Formula Rate = Space Factor x Cost Where Cost in Urbanized Service Areas = 0.66 X (Net Cost of a Bare Pole x Carrying Charge Rate) ■ in Rural Service Areas = 0.44 x (Net Cost of a Bare Pole x Carrying Charge Rate) 38 Davis Wright Tremaine LLP#39June 7 2011 Telecom Rate Lower Bound Rate Formula Rate= Space Factor x Net Cot of Bare Pole x [Maintenance and Administrative Carrying Charge Rate] Where Space Factor = [Space Occupied] + [2/3 x Usable space/No. of Attaching Entities] Pole Height 39 Davis Wright Tremaine LLP#40Recent Developments Significant Activity At the FCC In Congress At State PUCS - There is an emphasis on wireless attachments – 5G Deployment 40 40 Davis Wright Tremaine LLP#41FCC Third Report and Order Proposed One Touch Make Ready Regime The FCC draft Third Report and Order and Declaratory Ruling in the Wireline and Wireless Accelerated Broadband Deployment dockets 2nd Meeting - on Agenda for August ■ Would establish a new "One Touch Make-Ready" (OTMR) process to streamline the deployment of 5G 41 Davis Wright Tremaine LLP#42FCC OTMR PROCESS One Touch Make Ready Chairman Pai's Blog Statement: "Spectrum's not the only key to 5G. We'll also have to make network deployment-and in particular the smaller, denser infrastructure of 5G networks-easier. . . . Instead of having multiple parties sequentially prepare poles for a new attacher, as is current practice, the process can be much quicker if a single construction crew does all the make- ready work at once. By making it quicker and cheaper to attach to poles, we can accelerate network buildout and make it easier for new entrants to provide more broadband competition." 42 42 Davis Wright Tremaine LLP#43FCC Ban on Local Moratoria Declaratory Ruling Draft Third Report and Order also Declares Local Moratoria on Facilities Deployment (express and de facto) Barred by Section 253(a): ◉ Concludes that state and local moratoria on telecommunications services and facilities deployment are barred by section 253(a) of the Communications Act because they "prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service." ■ Directs the Wireline Competition Bureau and Wireless Telecommunications Bureau to act promptly on petitions challenging specific alleged moratoria. 43 Davis Wright Tremaine LLP#44Congressional Activity STREAMLINE Small Cell Deployment Act Bill introduced by Senators Thune and Schatz would prohibit states and localities from delaying approval for "placement, construction, and modification of Small Personal Wireless Service Facilities" ■ Would apply to attachments of small personal wireless devices 44 Davis Wright Tremaine LLP#45Activity in the States Several States are also actively pursuing new pole attachment policies ■ Recent examples include California and Massachusetts 45 45 Davis Wright Tremaine LLP#46New California Pole Access Rules In 1998, the California Public Utilities Commission (CPUC) granted CLECs access to attach On April 27, 2018, in Decision 18-04-007, CPUC provided CLECs expanded nondiscriminatory access to public utility infrastructure for the purpose of installing antennas and other wireless telecommunications equipment. In 2016, CPUC granted wireless carriers access to attach The amended ROW Rules go into effect August 24, 2018 46 Davis Wright Tremaine LLP#47Massachusetts DTC NOI ■ On June 25, 2018, the Massachusetts Department of Telecommunications and Cable (DTC) issued a Notice of Inquiry (NOI) to investigate telecommunications carrier accounting practices and record keeping to ensure the DTC can properly carry out its attachment authority. DTC investigation prompted by FCC relaxation of accounting and reporting requirements, leaving data vacuum for DTC 47 Davis Wright Tremaine LLP#48Davis Wright Tremaine LLP DEFINING SUCCESS TOGETHER [email protected] (503) 778-5318 Anchorage Bellevue Los Angeles New York Portland San Francisco Seattle Shanghai Washington, D.C. www.dwt.com