Addressing potential roadblocks to broadband expansion

When thinking about how to encourage broadband expansion — both in terms of geographic availability and level of quality — we often focus on funding. Particularly in rural areas, the cost of providing new broadband service or improving existing service can be cost-prohibitive because of the large distances between customers and the scarcity of customers who could be accessed by a proposed build-out.

To be sure, funding is critical. Under a Broadband Expansion Grant Program established in 2013, the Public Service Commission of Wisconsin (PSC) provides grant funding to reimburse providers for the construction of broadband facilities.

However, funding alone will not address the issues of broadband access and quality. At times, regulatory roadblocks can inhibit if not prohibit broadband expansion even where sufficient funding is available for the initial construction and installation of the facilities. Two recent cases before the PSC illustrate this issue. Together, these cases are shaping the legal landscape for overcoming regulatory roadblocks to broadband expansion in the state.

Milwaukee streetcar project

Initially proposed in 2011, the project would include the construction of a $65 million, 2.1-mile fixed-rail streetcar system in downtown Milwaukee, funded through approximately $55 million in federal grant funds and $10 million in city tax-increment financing. Since the initial proposal, the city has proposed an expansion that could expand the route and incorporate it within a proposed downtown development.

The issue for broadband providers is that the installation of a fixed-rail streetcar system requires excavating below the surface of city streets and moving utility facilities — including electric, gas, steam, and telecommunications facilities — that in many cases have been located below the streets for several years, if not several decades. The cost to relocate those facilities under the city’s original proposal was estimated to be upwards of $60 million. In other words, the cost to relocate utility facilities (including broadband facilities) could have been as much as the cost to construct the project itself. The cost of those relocations would have been covered entirely by utility providers.

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A citizens group filed a petition with the PSC in late 2011 asking the PSC to declare that it would be unreasonable for the city to require utility providers to pay those relocation costs to accommodate the proposed streetcar project and requesting that the PSC void any such municipal action. A number of utilities, including broadband providers such as AT&T, Time Warner Cable, Windstream, and TW Telecom, intervened in the case.

The PSC ultimately sided with utility providers in a decision in August 2014, but an appeal by the city is currently pending in Milwaukee County Circuit Court. The case, which has now proceeded for more than three years, illustrates one major issue area for broadband providers — the risk that a municipality could require providers to relocate broadband facilities, sometimes at significant cost.

City of Oconomowoc

A more recent case illustrates another potential roadblock for broadband providers — the cost of using municipal rights-of-way and pole attachments to install broadband facilities. In a complaint filed with the PSC in August 2014, Charter Cable, Time Warner Cable, and the Wisconsin Cable Communications Association allege that the City of Oconomowoc is charging broadband providers five times the rate charged by other utilities to access utility poles and five times the rate under a federal rate formula.

The issue is that broadband providers often have no option other than to use either municipal facilities or the facilities of another utility provider to provide broadband service. Constructing duplicate facilities is frequently cost-prohibitive and not preferred. Imagine, for example, a street where every utility provider had to construct its own poles to carry its lines and cables. The street would become a wall of wooden or metal poles. The question then becomes, what is a reasonable rate for the municipality or utility to charge for allowing that use? The PSC has scheduled a hearing for the case in May 2015, with a final decision to follow.

Together, these two cases illustrate the regulatory challenges broadband providers face in expanding and improving broadband offerings to customers. Even where sufficient capital funding is available for the initial construction and installation of broadband facilities, either the cost to access municipal facilities or the cost of relocating broadband facilities in response to municipal action could create roadblocks. Lawmakers and regulators at both the federal and state level are taking notice of these issues and will need to explore the appropriate balance between municipal authority and encouraging broadband expansion.

Jeffrey L. Vercauteren is an attorney with Whyte Hirschboeck Dudek S.C., where he practices in real estate, communications law, and technology law. He can be reached at jvercauteren@whdlaw.com.

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