Georgia Power v. Teleport Communications Atlanta

• Decision Date: 29 September 2003
• Docket Number: No. 02-15608.,02-15608.
• Citation: 346 F.3d 1033
• Parties: GEORGIA POWER COMPANY, Petitioner, v. TELEPORT COMMUNICATIONS ATLANTA, INC., Duke Energy Corp., American Electric Power Service Corp., Intervenors, Federal Communications Commission, United States of America, Respondents.
• Court: U.S. Court of Appeals — Eleventh Circuit

346 F.3d 1033

GEORGIA POWER COMPANY, Petitioner, v. TELEPORT COMMUNICATIONS ATLANTA, INC., Duke Energy Corp., American Electric Power Service Corp., Intervenors, Federal Communications Commission, United States of America, Respondents.

No. 02-15608.

United States Court of Appeals, Eleventh Circuit.

September 29, 2003.

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Charles A. Zdebski, Troutman Sanders, Washington, DC, for Petitioner.

Gregory M. Christopher, F.C.C., Robert B. Nicholson, Robert J. Wiggers, U.S. Dept. of Justice/Antitrust Div., Appellate Section, Washington, DC, for Respondents.

Thomas Peter Steindler, McDermott, Will & Emery, Paul Glist, Brian Josef, Felicia K. Watson, Geoffrey Charles Cook, John D. Seiver, Cole, Raywid & Braverman, LLP, Washington, DC, for Intervenors.

Petition for Review of an Order of the Federal Communications Commission.

Before BLACK and MARCUS, Circuit

Judges, and MIDDLEBROOKS^*, District Judge.

BLACK, Circuit Judge:

In this petition for review, Georgia Power Company challenges the Federal Communications Commission (FCC) order affirming a decision of the FCC's Cable Services Bureau which reduced Georgia Power's $53.35 annual pole rental rate to between $6.56 and $8.24. FCC has jurisdiction over utility pole attachments for cable and telecommunications providers under the Pole Attachment Act of 1978, as amended by the Telecommunications Act of 1996, specifically 47 U.S.C. § 224. Georgia Power contends in its petition that FCC acted arbitrarily and capriciously in numerous ways when it ruled on the pole attachment rate dispute between Georgia Power and intervenor Teleport Communications Atlanta, Inc. (Teleport). We conclude that FCC did not act arbitrarily or capriciously, and we therefore deny the petition for review.

I. BACKGROUND

The Eleventh Circuit appears to have become a locus for pole attachment disputes. A fuller statement of the legal background for this dispute may be found in our several previous opinions involving pole attachments. See Ala. Power Co. v. FCC, 311 F.3d 1357 (11th Cir.2002), petition for cert. filed 71 U.S.L.W. 3653 (U.S. Apr. 4, 2003) (No. 02-1474); Gulf Power Co. v. FCC, 208 F.3d 1263, 1266-70 (11th Cir.2000) (Gulf Power 2), rev'd in part sub nom. Nat'l Cable & Telecomms. Ass'n, Inc. v. Gulf Power Co., 534 U.S. 327, 122 S.Ct. 782, 151 L.Ed.2d 794 (2002) (Gulf Power 3); Gulf Power Co. v. United States, 187 F.3d 1324, 1326-28 (11th Cir.1999) (Gulf Power 1).

To summarize briefly, cable companies have always attached their cables to utility poles of power and telephone companies in order to take advantage of the pre-existing network of poles, conduits, and rights-of-way. The lack of alternatives to these existing poles allowed utilities to charge cable companies monopoly rents for their attachments. Congress intervened in 1978 with the Pole Attachment Act, which authorized FCC to specify a range of rents that utility companies could charge once they voluntarily decided to allow cable companies to attach to utility poles. With the Telecommunications Act of 1996, Congress mandated access to utility poles for both cable and telecommunications services providers. Access for telecommunications companies was an entirely new development in the 1996 Act. Prior to that, telecommunications attachments to utility poles were governed only by market forces. Under the regime established by the Telecommunications Act, FCC was charged with creating a new telecommunications formula to set attachment rates for telecommunications attachers. The telecommunications formula was a new formula, different from the cable formula that FCC had promulgated under the 1978 Pole Attachment Act for cable companies.

Because access to utility poles was mandatory and involved physical occupation of part of the poles, we concluded that pole attachments pursuant to the new Telecommunications Act effected a taking that required just compensation. See Gulf Power 1, 187 F.3d at 1328. We left it to FCC to determine in the first instance what just compensation would be. Id. at 1333. Utility companies subsequently challenged, inter alia, the FCC rate formula for pole attachments, but because no specific FCC determination was at issue, we declined to rule on whether the FCC formula provided just compensation. See Gulf Power 2, 208 F.3d at 1272-73. More recently, we have determined that some of the pole attachment rates promulgated by FCC provide just compensation to utility companies, at least in the absence of specific evidence to the contrary. See Ala. Power, 311 F.3d at 1370-71.

The specific dispute in this case takes place against the background of the ever-shifting regulatory regime governing pole attachments. In setting the pole rental rate, the number of pole attachers is a crucial factor. This is so because rent can be assessed for the unusable space on a utility pole (essentially the part of the pole near the ground where no attachments can be placed) but which is nonetheless necessary to support the remainder of the pole, where attachments can be placed. According to the Telecommunications Act, the costs associated with the unusable space must be partly shared on a proportional basis by all entities with attachments on the pole. See 47 U.S.C. § 224(e)(2). The higher the number of attachers, therefore, the lower the pole rent will be.

In 1998, FCC promulgated the Telecom Order, which required each utility to develop a presumptive average number of attaching entities for its poles, based on their locations. In the Matter of Implementation of Section 703(e) of the Telecommunications Act of 1996: Amendment of the Commission's Rules and Policies Governing Pole Attachments, 13 F.C.C.R. 6777 at ¶¶ 78-79 (1998) (Telecom Order). The Telecom Order allowed for challenges to the utility's presumptive average number of attachers; when an appropriate challenge is filed, the utility can then be required to justify its presumption. See id.

Because of complaints from utilities about the difficulty of substantiating their presumptive average number of attachers, FCC changed this rule (via notice and comment rulemaking) so that the FCC itself would set a presumptive average. In the Matter of Amendment of Commission's Rules and Policies Governing Pole Attachments: In the Matter of Implementation of Section 703(e) of the Telecommunications Act of 1996, 16 F.C.C.R. 12,103 (2001) (Recon Order). For non-urban areas, FCC set the presumptive average at three attachers; for urbanized areas, the presumption was five attachers. Id. at 12,139-40, ¶¶ 71-72. The presumptions were based in part on the near-universality of the kinds of attachments found on utility poles; FCC reasoned, for example, that there would be electric, telephone, and cable attachments in non-urbanized areas, yielding a presumption of three attachers. Id. at 12,139-40, ¶ 71. In urbanized areas, the presumption of five attachers included electric, telephone, cable, competitive telecommunications, and government agency attachments. Id. at 12,140, ¶ 72. FCC's presumptions were rebuttable by either party. Id. at 12,139, ¶ 70.

On October 10, 2000, before the Recon Order issued, Georgia Power notified Intervenor Teleport Communications that it was imposing an annual pole attachment rate of $53.35. After some limited negotiations with Georgia Power, Teleport filed a complaint with the FCC's Cable Services Bureau,¹ arguing that Georgia Power's new rate was in excess of the maximum rate permissible under the Pole Attachment Act. In its reply to the complaint, Georgia Power argued that the FCC formula failed to provide just compensation because it relied on historical costs rather than fair market value. Teleport filed a reply objecting to Georgia Power's market-based calculations. When Georgia Power attempted to file a supplemental response, the Cable Services Bureau ordered it stricken from the record. The Cable Services Bureau subsequently ruled on Teleport's complaint, striking Georgia Power's rates and substituting lower, incremental rates. In the Matter of Teleport Communications Atlanta, Inc. v. Ga. Power Co., 16 F.C.C.R. 20,238, 20,243-44, ¶ 13 (2001) (Teleport).

Importantly, the Cable Services Bureau applied the FCC's presumptions from the Recon Order when it ruled on Teleport's complaint, even though the Recon Order issued six months after Teleport filed its complaint. The Bureau ruled that Georgia Power had failed to justify its lower average number of attachers, and without adequate justification, the higher presumptive averages from the Recon Order would apply. See Teleport, 16 F.C.C.R. at 20,243, ¶ 11.

On December 14, 2001, one month after the Cable Services Bureau ruled on the Teleport complaint, Georgia Power filed an application for administrative review by the full Commission. While that application was pending, Georgia Power filed with the Eleventh Circuit the petition for review at docket number 02-10222 (the first petition). Oral argument was scheduled for October 30, 2002.

On October 8, 2002, however, the full FCC issued an order affirming the Cable Services Bureau's order. See In the Matter of Teleport Communications Atlanta, Inc. v. Ga. Power Co., 17 F.C.C.R. 19,859 (2002) (Final Order). In its order, FCC disavowed the Cable Services Bureau's reliance on the presumptions established in the Recon Order. Id. at 19,866-67, ¶ 20 Instead, the full FCC "independently adopt[ed]" the same presumptions, based in part on the rationale behind the Recon Order. Id. According to FCC, the Cable Services Bureau's reliance on the Recon Order was harmless error. Georgia Power then filed another petition for review (at docket number 02-15605) of the full FCC's order (the second petition). The panel continued the oral argument on the first petition and consolidated it with the second petition.²

On November 14, 2002, another panel of this Court decided Alabama Power, thereby ruling on several important issues extant in the consolidated petitions...