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09/24/85 Alabama Power Company, v. Federal Communications

September 24, 1985

ALABAMA POWER COMPANY, PETITIONER

v.

FEDERAL COMMUNICATIONS COMMISSION AND UNITED STATES OF AMERICA, RESPONDENTS; TEXAS POWER & LIGHT COMPANY, GEORGIA POWER COMPANY, ET AL., MISSISSIPPI



Before: BORK and SCALIA, Circuit Judges, and HOGAN,* District Judge.

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT 1985.CDC.222

POWER & LIGHT COMPANY, GROUP W CABLE, INC., Intervenors

Petition for Review of an Order of the Federal Communications Commission

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE BORK

Opinion for the Court filed by Circuit Judge BORK.

BORK, Circuit Judge; Alabama Power Company petitions for review of a determination by the Federal Communications Commission that the pole attachment rates it had been charging Group W Cable, Inc. were higher than the maximum permitted by the Pole Attachment Act, 47 U.S.C. § 224 (1982). Because we find that the Commission did not fairly and accurately calculate the maximum allowable rate, we vacate its order and remand to the Commission for further proceedings consistent with this opinion. I. A.

It has been the general practice of the cable television industry since its inception to lease space on existing distribution poles owned by electric utilities and telephone companies in order to attach its coaxial cables and related equipment.*fn1 Cable operators typically enter into leasing agreements with the company owning the pole providing for the payment of a periodic fee plus reimbursement for all additional pole costs made necessary by the cable attachments. Concern over the ability of utilities and telephone companies to extract monopoly profits from cable operators in need of pole space led Congress, in 1978, to enact the Pole Attachment Act, Pub. L. No. 95-234, § 6, 92 Stat. 33, 35 (codified as amended at 47 U.S.C. § 224 (1982)), conferring jurisdiction on the FCC to:

regulate the rates, terms, and conditions for pole attachments to provide that such rates, terms, and conditions are just and reasonable, and . . . adopt procedures necessary and appropriate to hear and resolve complaints concerning such rates, terms, and conditions.

47 U.S.C. § 224(b)(1). A rate would be considered just and reasonable if it:

assure[d] 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. . . . 47 U.S.C. § 224(d)(1). It is the task of the Commission, therefore, to ensure that the pole attachment rates charged cable operators do not fall below the statutory minimum -- incremental costs -- or above the statutory maximum -- fully allocated costs.

Following passage of the Pole Attachment Act, the FCC instituted a complaint procedure that "focuses on the upper end of the zone of reasonableness." Brief for Respondents at 6. To calculate fully allocated costs, the Commission has adopted the following formulaic representation of the statutory definition:

Maximum Rate = Space Occupied by CATV /Total Usable Space [Operating Expenses Capital Costs of Poles] Teleprompter Corp. v. Alabama Power Co., Mimeo No. 1808 (released June 29, 1981) ("Bureau Order") at 2, Joint Appendix at 152; see also 47 C.F.R. § 1.1409 (1984). In practice, however, the Commission first determines the net cost of the pole, then multiplies that amount by a percentage figure that reflects operating expenses (also referred to as "carrying charges"), and then multiplies the product by the percentage of pole space used by the cable operator. See, e.g., Bureau Order at 3, J.A. at 153; Teleprompter Corp. V. Alabama Power Co., File No. PA-81-0014 (released Nov. 3, 1983)

Maximum Rate = Space Occupied by CATV/Total Usable Space X Net Cost of Pole X Carrying Charges

The Commission determines the cost of the pole by subtracting the depreciation reserve and the amount attributable to "non-cable-related investment" from the gross investment in pole plant, Brief for Respondents at 7, and the figure for carrying charges encompasses the costs of administration, maintenance, depreciation taxes, and capital.

B.

In December of 1980, Group W, *fn2 an owner and operator of cable television systems, filed a complaint with the Commission alleging that the pole attachment rates charged by Alabama Power were "unjust and unreasonable." J.A. at 1, 6. At the time, Group W was leasing space on approximately 22,000 poles owned by Alabama Power, most at the annual rate of $3.00 per pole. *fn3 Group W claimed in its pleadings that the maximum allowable rate was $1.45 per pole. Id. at 6. In an order issued in June of 1981, the Acting Chief of the Common Carrier Bureau held that the maximum annual rate that should be allowed Alabama Power was $1.13 per pole. Bureau Order at 8, J.A. at 158. The existing rates ...


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