In late 2015, the Federal Communications Commission (FCC) issued an Order on Reconsideration updating the pole attachment formula for telecommunications carriers. The FCC modified the rates to bring parity to telecommunications carrier attachers and cable company attachers. The Order has been published in the Federal Register and the new formula will go into effect on March 4, 2016.
What does this mean for electric cooperatives and public utilities? The FCC Order will compound the recent industry trends and court rulings placing downward pressure on rental rates. Don’t be surprised if your attachers reach out to you asking you to comply with the FCC to adjust your rate downward, even if you are in a state not regulated by the FCC (if you are not sure, contact your attorney and/or a good consulting engineering firm).
This downward pressure means that now, more than ever, it is important to ensure that agreements with existing attachers are up to date, and to know and understand the provisions of those agreements.
What This Means for Utilities:
The Permitting Process is Essential
We often talk about the importance of phone and cable companies requesting permission to attach to the utility’s pole to make sure the correct pole is in place prior to phone or cable attaching (and so the attaching entity can pay for their portion of the costs). The permitting process provides the utility control of its poles and allows for it to collect the cost of its time to review the proposed attachment. When a utility fails to adhere to a sound permitting process, it is impossible to correctly enforce an agreement.
Charge for Make-Ready
When the permitting process reveals that changes must be made to a pole to accommodate an attacher, in most cases, it is the attachers’ responsibility to cover those costs – from crew and equipment time to engineering to new pole purchase and installation if necessary. This winds up being several thousand dollars each year of uncollected revenue for many utilities. Often, the Make-Ready cost for a pole is more than the rental revenue for the life of the pole. See the example to the right.
Inspect after Attaching
It is the attacher’s responsibility to ensure that they comply with the National Electric Safety Code (NESC) in attaching to your pole, but it is the utility’s responsibility to verify this is the case and attachers are not creating unsafe conditions on your system. Again, the utility should inspect and the attacher should bear the cost of this inspection.
Work in Good Faith with your Attachers
Trying to recover all costs through rental rates is difficult to justify and has the potential to strain relations with your attachers. It is far better to administer existing agreements effectively and resolve conflicts on the local level. If you’re going to share space on the same pole, you should be able to sit down and have a conversation in the same room. At the end of the day, all parties are trying to get service to their customers.
Keep Very Good Records
If good accounting records are not available, invest in a detailed Geographic Information System (GIS): poles, size, class, age, attachments per pole, etc. GIS is an important tool to track attachments per pole and pole characteristics. With available cloud platforms, good GIS records are much more affordable and useful than they used to be. Perform a pole attachment inventory on a regular basis (typically every 5 years) to insure the utility is collecting revenue on the correct attachments. Additionally, attachment inventories often pay for themselves day one. See chart at right.
It’s Not Too Late!
Even if you have never enforced your pole attachment agreements before, now it is essential to do so. A rock-solid permitting process is the foundation of accountable attachment provisioning. If you don’t have the staff or the time to enforce or administer the agreements, consider hiring a professional permitting firm to help you work in good faith with your attachers so they can accomplish their business objectives and you can recover the costs incurred by the attachers utilizing your distribution system.
Mr. Knowles is Vice President, Business Development, and Co-Owner at McLean Engineering.