development of that issue. The parties should, however, explore the possibility of establishing a pole attachment rate through negotiation, subject to Commission approval, or stipulations of fact, so that protracted evidentiary hearings might be avoided. We now turn to a discussion of various standards for utility pole attachment agreements that we believe can be promulgated now. Those standards are premised on the assumptions that annual pole rental rates will remain substantially below fully allocated costs, and that the connection of cable facilities to utility plant should not be allowed to increase the costs borne by utility ratepayers. Senator SCHMITT. Thank you very much. Unless you are in a rush, if you would like to listen to the rest of the testimony, then maybe we can have a panel discussion. [The statement follows:] STATEMENT OF ALEXANDER J. KALINSKI, PRESIDENT, THE NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, WASHINGTON, D.C. Mr. Chairman and members of the subcommittee: My name is Alexander J. Kalinski, and I am president of the National Association of Regulatory Utility Commissioners, commonly known as the "NARUC". I am also the chairman of the New Hampshire Public Utilities Commission and have served in such office since July 1, 1971. I am accompanied at the witness table by Paul Rodgers, NARUC general counsel, and Alvina M. McHale, NARUC director of congressional relations. The NARUC is a quasi-governmental, nonprofit organization founded in 1889. Within its membership are the governmental agencies of the 50 States and of the District of Columbia, Puerto Rico, and the Virgin Islands engaged in the regulation of utilities and carriers. The mission of the NARUC is to improve the quality and effectiveness of public regulation for the benefit of the American consumer. The members of the NARUC are pleased to have an opportunity to make their views known on S. 1547, a bill to amend the Communications Act of 1934, as amended, with respect to penalties and forfeitures, and to authorize the Federal Communications Commission to regulate pole attachments, and for other purposes. I will limit my remarks to a discussion of section 5 of S. 1547 which amends title II of the Communications Act of 1930 by adding a section entitled "Regulations of Pole Attachments." As you know, Mr. Chairman and members of the subcommittee, at the urging of the chairman of the House Subcommittee on Communications, Lionel Van Deerlin, the NARUC and the National Cable Television Association (NCTA) earlier this year attempted to draft an agreement on legislation for the regulation of cable television pole attachments. Our joint efforts were successful and during the month of February, both NARUC and NCTA formally approved draft language. In a March 10 letter to interested parties, Chairman Van Deerlin circulated the draft agreement and requested comments. The draft agreement approximates the language of section 5 of S. 1547. The NARUC last year opposed the pole attachment legislation, H.R. 15268, which authorized the FCC to steer clear of pole attachment agreements if the FCC concluded that proposed State regulation of same met its criteria. The FCC could reenter the dispute, however, if later dissatisfied with State performance. The NARUC argued that the enactment of such legislation would create a dangerous precedent for State regulation. State regulation would only be permitted to the extent that its intent and direction coincided with FCC intent and direction. The NARUC witness, Chairman Tenney I. Deane, Jr. of the North Carolina Public Utilities Commission, testified September 1, 1976, before the House Subcommittee on Communications that if Congress moved to enact some legislation, it should be in the form of a one-sentence amendment giving the FCC authority to regulate pole attachment rates only when the State does not. Chairman Deane mentioned that the precedent for such an arrangement exists in the case of local exchange telephone rates.1 State jurisdiction remains intact 1 Section 221(b) of the 1934 Communications Act precludes FCC jurisdiction over charges, classifications, practices, services, facilities, or regulations regarding wire. mobile, or point-to-point radio telephone exchange service when a State commission or local governmental authority is in control. [47 U.S.C., Sec. 221 (b).] even if a portion of the exchange service in question constitutes interstate or foreign communication. The concept of reserving jurisdiction to those States willing to exercise it is equally apparent in the so-called Hinshaw Amendment to the Natural Gas Act which exempts facilities from Federal jurisdiction when they are "subject to regulation by a State commission." [68 Stat. 36 (1954); 15 U.S.C., Sec. 717(c).] The NARUC believes that State and local authorities are better equipped than Federal agencies to determine thet justness and reasonableness of proposed rates and to discern the standards for safe and adequate service with respect to their own communities. In the event that a State declines to regulate cable television and a dispute arises regarding the fairness of pole attachment rates, terms, and conditions, the NARUC/NCTA compromise language provides that the FCC be designated as the abritrator. Whether the rate is determined by the FCC or the State authority, however, the language provides a statutory standard for allocating the cost of pole attachments. Further, as Amos B. Hostetter, Jr., Chairman of NCTA's Utility Relations Committee, noted in a March 16, 1977 appearance before the Federal Communications Commission, the proposed bill "directs the FCC to regulate pole attachments, but allows the States to assume that responsibility at any time." Hostetter further noted that the bill "does not set pole rates or interfere with an agency's traditional methods of establishing a rate of return." The bill does however "provide the forum to adjudicate the reasonableness of pole attachment rates and practices." In conclusion, Mr. Chairman, the NARUC recommends favorable and speedy action on section 5 of S. 1547. The NARUC concludes that the compromise language should result in an equitable arrangement and solution for all parties involved. Thank you for your attention. [The following information was subsequently received for the record:] NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, Hon. ERNEST F. HOLLINGS, DEAR SENATOR HOLLINGS: Thank you for the opportunity to further elaborate on the pole attachment legislation included in S. 1547. I will respond to your specific questions in order: Question 1. In what way does this bill as presently written act as an incentive or a disincentive to states to involve themselves in pole attachment regulation? Answer. The bill as written would provide an incentive for State pole attachment regulation in that most States would prefer to have such local matters regulated at the State rather than the Federal level. As is evident from the FCC survey, attached hereto in response to question 8, some States which do not presently regulate pole attachments are in the process of developing positive pole attachment regulatory programs. This is a novel issue to many and since the future course of cable development in individual States is not at all certain, this process will take time. However, we believe that in the long run, the vast majority of States will assert necessary jurisdiction. Question 2. Why did NARUC agree to a proposal that apparently dictates the manner in which the states can set pole attachments rates? Answer. I will elaborate more extensively on this question in my answer to questions 6 and 7 below. Basically, it is the NARUC position that the rate guidelines set forth in the bill only provide the upper and lower limits of what could be considered reasonable rates. There is a wide latitude given the States in ratemaking policy and in other policies which would derive from local circumstances. Question 3. Are you in favor of nationally uniform pole rates? Answer. No. Question 4. What kind of incentives could we build into this bill to insure that the bulk of pole attachment regulation will be performed by the states? Answer. It would be difficult to provide incentives per se without in some way limiting a State's right to regulate pole attachments in the future. Since the pole attachment issue has only recently come into the limelight, the NARUC considers it unadvisable to seek to force State action through this bill. The States are acting and should be permitted to act without and duress from speculative and potentially restrictive incentive measures. There is no evidence to warrant an assumption that further incentives are needed. Question 5. The bill as written establishes no mechanism whereby a state may recapture jurisdiction from the FCC once it has determined to move. How do you interpret the intention of the bill in this respect? Will a state have to demonstrate that its regulatory plan is consistent with statutory and/or FCC guidelines, or may it simply notify the Commission that it has occupied the field? Answer. The primary purpose of the bill is to insure that pole attachments are regulated as soon as possible with the emphasis being on regulation by the States. Since this is a new and developing area of law, there is a time factor involved in any State's assertion of jurisdiction. Many States would require special legislation supported by studies of local needs in order to even give their commissions pole attachment authority. And, of course, there is the possibility that some States may not wish to regulate this field. The NARUC interprets the bill as allowing any State to recapture jurisdiction at any time. This would simply involve the individual State asserting proper jurisdiction in accordance with State law and providing notice and documentation of its action to the FCC. We do not consider that a gradual replacement of FCC jurisdiction with State jurisdiction would be a serious problem-indeed, it should be encouraged. However, in view of the alleged need for some form of immediate reglation and the pressure which is being placed on the Federal government to intercede, it is advisable, through this bill, to provide for interim FCC regulation where States have not yet acted. Question 6. You state that this bill "does not interfere with a [state] agency's traditional methods of establishing a rate of return." Would you please elaborate? Question 7. Alfred Kahn, former Chairman of the New York State Public Service Commission, while generally endorsing the rate setting formula of this bill, believes that the standards prescribed are unnecessarily restrictive, and that there exists a number of plausible alternatives besides the one set forth in S. 1547. If there are several reasonable alternatives, why should we not give the states greater flexibility to adopt methods better suited to local needs? Answer. Questions 6 and 7 are best answered together. The bill, as agreed on by the NARUC and NCTA, sets only what may be construed as the upper and lower limits of pole attachment rates. At the lower end, "not less than the additional cost of providing pole attachments," assures that the utility company be reimbursed for at least the incremental costs of providing that attachment on an existing facility. This, of course, prevents any regulatory authority from employing a ratemaking method which would prove non-compensatory to the utility. On the other end of the spectrum, the phrase "nor more than the actual capital and operating expenses of the utility," prescribes any rate which allows a natural monopoly utility company to collect more than the fully allocated cost of providing the attachment. Thus, if a State traditionally uses a "value of service" concept in setting certain rates, it may continue to do so provided that any utility or cable television company would have the right to challenge a rate if it felt that the rate did not fall within the range permitted by the statute. In essence, the parameters of the statute require little more than that the rates be just and reasonable; i.e., compensatory but not confiscatory. I should also note that while the rate parameters are spelled out with some degree of specificity, the general power of the States is far broader, allowing the States to regulate other "terms and conditions" of pole attachment agreements in a manner reflective of local conditions. For example, the States would have authority to oversee such matters as mandatory attachment, termination clauses, service and maintenance requirements, billing practices, notification of surveys by utilities, attachment schedules, labor surcharges, and anti-competitive practices such as tie-in clauses. In short, the authority given the States under this bill is not greatly limited by the ratemaking provisions. Rather, these provisions serve only as general guidelines and as bases for possible subsequent review of administrative action. Question 8. Please provide the Subcommittee with a summary of existing laws and practices of those states which presently exercise pole attachment jurisdiction, as well as a summary of those state laws which you believe now empower state utility commissions to exercise pole attachment jurisdiction. Answer. I have attached a recent survey of State authority prepared by the Cable Television Bureau of the FCC. This survey includes the latest available data on the status of individual State pole attachment authority. Question 9. Under this bill could a state preclude FCC jurisdiction by assuming jurisdiction but not exercising it? Answer. No. The purpose of the bill is to provide for regulation of pole attachments by either the FCC or the State commissions. Question 10. Would you provide an estimate of manpower needs in a state if it were to excerise pole attachment jurisdiction? Answer. I would anticipate minimal additional manpower needs on the State level. While it is understandable that the FCC may need additional staff to regulate an entirely new field, most States are already deeply involved in regulation of local utilities and could integrate pole attachment matters with their existing workload. Question 11. If the rate setting formula of S. 1547 were amended to state "*** no less than incremental costs, etc. nor more than fully allocated costs of the utility attributable, etc. would there be any practical difference? Answer. As noted in my answer to questions 6 and 7, there would be little practical difference. Question 12. Have the states that have asserted jurisdiction over pole attachments been able to resolve disputes to the satisfaction of the cable and utility companies? Answer. I am unaware of any serious discontent with State regulation of pole attachments. All disputes which have given rise to court action are reported in the FCC survey. The NARUC sincerely appreciates your interest in our views on this pending legislation. If you have any further questions please contact me at any time. Very truly yours, ALEXANDER J. KALINSKI, President. |