Revisiting regulatory hurdles to broadband expansion
In January 2015, we highlighted two cases pending before the Public Service Commission of Wisconsin (PSC) with potentially significant implications for broadband expansion in the state. Since that time, recent decisions in both cases have contributed to the evolving regulatory landscape for broadband expansion in Wisconsin, and the potential costs and risks to broadband providers.
Facility relocation costs
In August 2014, the PSC issued a decision declaring unreasonable the City of Milwaukee’s effort to impose facility relocation costs on utility providers to accommodate the proposed Milwaukee Streetcar Project. The project includes the construction of a fixed-rail streetcar system in downtown Milwaukee, requiring the relocation of electric, gas, steam, and telecommunications facilities located beneath city streets. The city appealed the decision to the Milwaukee County Circuit Court, arguing that utility providers should pay the full cost of facility relocation caused by the streetcar project.
In a decision issued in February 2016, the court partially affirmed and partially reversed the PSC decision. The court upheld the portion of the PSC decision finding that the city’s utility relocation ordinance and the resolution authorizing the streetcar project are void to the extent they require utility providers to pay facility relocation costs caused by the project. The court reasoned that state law prohibits a municipality from enacting a municipal regulation that requires providers to pay such costs.
The city argued that it had independent authority, even outside of a municipal regulation, to require providers to relocate facilities. However, the court concluded, “There is no authority for the City to require the utilities and companies to relocate or modify their facilities, except by ‘municipal regulation.’ Absent a municipal regulation, the utilities and companies are under no obligation to relocate or modify their facilities.” The court disagreed with the portion of the PSC decision that invalidated future city regulations.
The decision is potentially significant for broadband providers because it confirms that a municipality must formally adopt regulations establishing the terms and conditions of facility relocation before requiring a utility provider to relocate its facilities. Such regulations remain subject to review by the PSC to determine whether the regulation is reasonable in relation to the costs of relocation and the purpose of the municipal project.
Municipal pole attachments
In February 2016, the PSC issued a decision in another case potentially implicating regulatory roadblocks to broadband expansion. In that case, Charter Cable, Time Warner Cable, and the Wisconsin Cable Communications Association alleged that the city of Oconomowoc was charging broadband providers five times the rate established under a federal rate formula for providers to install facilities on municipal poles.
In general, the rates utilities can charge telecommunications and cable providers to use poles are established by the Federal Communications Commission (FCC) pursuant to the Pole Attachment Act of 1978 under which the FCC sets a “Cable Rate” and a “Telecom Rate.” However, municipal utilities are exempt from FCC regulation of pole attachment rates.
The city had been allocating pole costs on a fixed basis — 60% to the city and 40% among the providers installing pole attachments. The actual cost to a provider depended on the number of providers attaching to a pole (i.e., a single provider could be allocated the full 40% of the pole cost). On the other hand, the FCC Cable Rate is variable based on the number of pole attachments a provider makes and how much space the provider occupies on the pole.
The PSC essentially rejected both the city’s 60/40 allocation and the providers’ proposal to adopt the variable FCC Cable Rate for municipal utilities. The PSC instead adopted a “compromise position” that allocates 75% of pole costs to the municipal utility and 25% of pole costs to attaching entities, concluding the allocation reasonably balances the interests of the municipal utility in recovering its costs and the state’s interest in broadband deployment and expansion.
These two cases demonstrate the evolving regulatory landscape for broadband expansion in Wisconsin. Issues such as the costs of municipal pole attachments and the use of municipal rights-of-way, and the costs of facility relocation caused by municipal projects, will continue to be key parts of decisions broadband providers make in determining where to invest resources in broadband deployment and expansion.
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