cerning the regulation of CATV pole attachments. We appreciate having the opportunity to respond. The Edison Electric Institute is the principal national association of investorowned electric light and power companies in the United States. Its member companies serve 99 percent of all customers of the investor-owned segment of the industry and 77.5 percent of all users of electricity in the country. Thus the Institute's members would be directly affected by any Congressional decision to extend Federal jurisdiction to the use of electric utility poles by the cable television industry. As previously discussed by the Institute in its written testimony, dated September 1, 1976, filed with the Subcommittee on Communications at hearings on HR 15268, there is no need for Federal regulation of pole attachments. However. in order to assist the Subcommittee staff in evaluating the Draft Bill we have the following comments. Sections 224 (a) (1) and (2) of the Draft Bill define “utility" to mean a person who provides telephone service or electric energy to the public and owns or controls poles, ducts, conduits or right-of-way used for wire communications, except for persons owned by the United States, its agencies or instrumentalities. Section 224 (a) (3) defines "pole attachment" to mean any attachment for wire communication on a utility pole or right-of-way. The language of the Draft Bill does not limit the scope of the attachment to CATV attachments. As written, a telephone line attachment would be a pole attachment covered by the Draft Bill. Presumably the Draft Bill is intended to apply only to attachments used to support wires used to transmit cable television. Assuming that the only attachments to be regulated are CATV atachments, the following should be substituted in lieu of the present Section 224 (a) (3) : “(3) The term 'pole attachment' means any attachment for wire communication by cable television on a utility pole, and includes any installation for such communication in a duct or conduit, or on any facility or right-of-way owned or controlled by a utility." The latter portion of the Draft Bill contains instructions for the FCC to regulate the "rates, terms and condtions" for pole attachments in any case where the states do not regulate them. While the Institute agrees that the regulation of CATV attachments, if it must be done by any governmental body, is best left to the states, the language of the Draft Bill with respect to the Federal or state regulation is excessively vague. Presumably, immediately upon enactment of the Draft Bill the FCC would have jurisdiction over all CATV attachments, except those in states which prior to Congressional action have vested jurisdiction over CATV attachments, if it must be done by any governmental body, is best left to lowed for the adoption of legislation by those states that would prefer to assert jurisdiction over CATV attachments rather than allow the FCC to obtain that jurisdiction. As written, the FCC might well have jurisdiction of cases of relatively short periods between the enactment of a Federal law and the subsequent enactment of a state statute conferring jurisdiction over CATV attachments to some state authority. Since many state legislatures meet in general session only every two years, a minimum of two years should be allowed to the states to assert jurisdiction, with FCC jurisdiction attaching only after the minimum period has elapsed. Additionally, the Draft Bill provides that the FCC shall regulate the "rates, terms, and conditions" for pole attachments. Although giving no directions concerning terms and conditions, the Draft Bill, in our view, establishes an improper standard for use in regulating rates. Presumably, the usual terms and conditions would provide that the CATV attachments must comply with the applicable safety standards, and be constructed and maintained to prevent disruption of utility service. Also, such terms would seem to require the CATV operator to give a hold harmless agreement to the pole owner or operator and might require insurance protection for the pole owner. At a minimum, the suitability of the pole for utility service should not be significantly impaired by the CATV attachment. In any legislation, rates, terms and conditions for CATV attachments should be made subject to a requirment that they be just and reasonable, not unduly discriminatory against one person compared with another person similarly situated, and that the pole attachment be properly connected and maintained. With the inclusion of such a provision, there would be no reason to attempt to define a maximum and minimum reasonable rate, and any such attempt is, we believe, ill-advised. The expenses and revenues that a utility incurs through CATV attachments on the utility's facilities are included in the levels of reportable expenses and revenues that must be reported by a utility to the regulatory authority having jurisdiction over utility rates. That authority has in most cases dealt with utility rates and examined utility expenditures for many years, developing in the course of that period considerable expertise in the evaluation of the proper charge for a particular utility service. State statutes vary on the method of valuation to be used in establishing rates base (i.e., the value of fixed assets devoted to utility service) upon which rate of return is computed; some states use "fair value," some reproduction cost new, some original cost, and some a variation of one of these. Likewise, methods of computing operating expenses vary. The Draft Bill takes no account of this, but rather requires that "actual expenses" be used. Does this mean capital cost and operating expense computed in accordance with the method used in the particular state, or is it intended to set a different standard? Such ambiguity will lead to controversy. The Draft Bill attempts to define both a maximum and a minimum rate in terms we think would result in charges to CATV companies of less than the appropriate amounts. Rather than reviewing here in detail the numerous elements that go into the setting of utility rates and the valuation of utility property, we will point out the paramount flaw in the maximum rate: by limiting the rate to "expenses of the utility attributable to that portion of the pole, duct or conduit used by the pole attachment,” and defining “that_portion" as a percentage of the space above minimum required clearance, the Draft Bill ignores completely a significant element of the value to the CATV company provided by the opportunity to attach to a utility pole. A primary purpose of the pole is to elevate the wires on it, whether electric, telephone or CATV, to the clearances above ground required in all states by law. CATV wires are subject to such requirements. Clearly, then, in the absence of pre-existing utility poles, a CATV system would be required to erect its own, or bury its cable underground. Equally clear, the CATV system receives value from that part of the pole from the minimum clearance height down to its base underground. Why then should this proposed legislation arbitrarily refuse to recognize this value? State regulatory authorities should be allowed to consider the facts in each particular case, and based on those facts and the applicable state law governing utility rates, determine the just and reasonable rate, without having Congress define a maximum level of charges. Such action by the Congress would, we believe, be inappropriate. Furthermore, as indicated above we believe the maximum prescribed by the Draft Bill is not adequate to cover the true costs associated with CATV attachments. Finally, by prescribing too tightly the level of rates and requiring, as does the Draft Bill, that the amount of the rate be computed on the proportion of the pole used by the CATV Company, Congress may inhibit innovative state rate policies that are designed to promote CATV. For example, the Public Service Commission of New York in promulgating standards for utility pole attachments stated that "we might consider an annual rental fee based on the number of cable subscribers or the cable operators' annual revenues, rather than on the number of poles used by the cable operator.' "1 Whether or not the charges that would result from application of that possible New York method would fit within the minimum and maximum contained in the Draft Bill is unclear. One can be certain, however, that a state commission would be reluctant to adopt any innovative rate structure faced with a Congressional mandate to determine the rate through the use of the proportion of pole devoted to CATV. Revised in accordance with the Institute's view Section 224 (b) would read: "(b) Effective 24 months following enactment of this Bill the Commission shall regulate the rates, terms and conditions for pole attachments in any case where no State authority has jurisdiction to regulate the same. Thereafter, the Commission shall continue to regulate such rates, terms and conditions until a State authority receives jurisdiction to regulate the same. The Commission may prescribe minimum, maximum or precise rates and any such rate and the terms and conditions prescribed by the Commission shall be just and reasonable; and, not unduly discriminatory against one person compared with another person similarly situated. The pole attachment shall be properly connected and maintained so that it will not reduce the reliability of the utility service rendered by means of the pole." 1 Opinion and Order Promulgating Standards for Utility Pole Attachment Agreements. Opinion No. 77-1, February 28, 1977, at p. 9. While the suggested changes would, if incorporated into the Draft Bill, make it less objectionable, the Institute is not convinced of the need for any Federal legislation on pole attachments, and accordingly would oppose such legislation. We respectfully suggest that the Subcommittee on Communications reflect on the real impetus behind the proposed legislation before taking further action on it. The real impetus, we believe, is a desire of the cable television industry to place an arbitrary and unnecessarily restrictive ceiling on the price paid to utilities for the utilization of their facilities. We suspect that if the maximum rate level feature were removed from the Draft Bill, it would have far less support in the already divided CATV industry. The Institute strongly disagrees with arguments that legislation such as this is necessary to prevent the utilities from setting unreasonably high charges. We believe that our member companies have set rates at eminently reasonable levels, and in most instances good and business like cooperation exists between electric utilities and CATV companies. To the best of our knowledge, in none of the proceedings before the FCC nor lawsuits in which CATV companies have accused utilities of oppressive conduct, has there been adduced any hard evidence of the economic viability of any CATV system being jeopardized by excessive pole attachment charges. We appreciate the opportunity to give you our views on this subject. Should a bill be introduced, we would appreciate being offered the opportunity to present a witness at a hearing. Sincerely, W. DONHAM CRAWFORD, President. Hon. WARREN G. MAGNUSON, ASSOCIATION OF AMERICAN RAILROADS, Chairman, Senate Committee on Commerce, Science, and Transportation, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: The Association of American Railroads has reviewed the captioned proposed legislation and has no position on that portion of it which relates to penalties and forfeitures. With regard to the pole attachment issue, in the opinion of the AAR, the definition of utilities in Section 5 of the bill as "* * * any person who provides telephone service or electric energy to the public and who owns or controls poles, ducts, conduits, or rights-of-way used, in whole or in part, for wire communication" does not include members of the railroad industry. Despite their extensive pole systems, railroads do not provide telephone service or electric energy to the public. With the understanding that it is not the intent of the Senate that the railroads be affected by this legislation, the Association of American Railroads will not oppose it. In the past, the AAR has opposed legislation, the enactment of which would have authorized the Federal Communications Commission to regulate and thus to require the use of railroad rights-of-way by those desiring to lease space for non-railroad wire communications. The railroad industry has said, among other things, that the requirement to open railroad rights-of-way to others involved elements of condemnation, or eminent domain; that the requirement could violate original company charters which require railroads to use land conveyed to them only for railroad purposes; that the requirement could substantially impair the ability of the railroads to exercise the necessary flexibility to change their own communications systems as their needs changed. All of those arguments, and more, remain valid. If the Committee undertakes to amend the definition of the term "utility," the Association of American Railroads respectfully requests that an opportunity be given to review such amendment and, if it is decided that such an amendment will operate to the detriment of AAR's member railroads, to present testimony before the Committee. Thank you for your attention and for this opportunity to comment. Very truly yours, HARRY J. BREITHAUPT, Jr. Hon. WARREN G. MAGNUSON, ASSOCIATION OF AMERICAN RAILROADS, Chairman, Senate Subcommittee on Commerce, Science, and Transportation, U.S. Senate Office Building, Washington, D.C. DEAR MR. CHAIRMAN: On June 17, 1977, I wrote you about the captioned, proposed legislation, outlining the position of the Association of American Railroads on the pole attachment issue. At that time, AAR took no position regarding the penalties and forfeitures portion of S. 1547; this letter will address that subject. Section 503(b) of The Communications Act of 1934 [47 U.S.C. 503(b)], as proposed to be amended, would alter the potential forfeiture penalty structure. Under present law the penalty for each day of violation can be up to $1,000, with a maximum of $10,000. The proposed amendment would increase the potential daily forfeiture penalty to $2,000 but, for industries like the railroads, would reduce the potential maximum to $5,000. (Communications common carriers, broadcast licensees and cable television operators would be subject to a potential maximum of $20,000.) The major concern of the railroad members of this Association is not over the potential increased amount of penalties as such--although they believe any increase should be fully justified by the FCC— but over the way in which the proposed legislation, if enacted, would be administered by the Commission. In determining the amount of penalty, the FCC is directed to "take into account the nature, circumstances, extent and gravity of the proposed acts committed and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and such other matters as justice may require." The major railroads typically operate several thousand mobile radios under one station license. With such a large number of transmitters in constant use over their rights-of-way and in yards, there is always the possibility that one will be operated inadvertently outside the precise terms of the FCC authorization. Human error, for instance, or operational circumstances, could be the cause of an unintentional off-frequency use of a transmitter, particularly where the users are not professional communicators but are railroad employees such as locomotive engineers, conductors and brakemen. Although each of these inadvertent infractions is minor in itself, if the cumulative effect of them were to be construed as a repeated failure to comply and became part of the "history of prior offenses," the effect on the railroad industry could become major. The railroad industry is aware that this problem is shared by other radio users with large numbers of transmitters operated under a single station license. Our members believe that Congressional recognition of this problem is important to the proper administration of the provisions of S. 1547, if enacted. They urge the Committee to amend the language in proposed § 503 (b) (2), at page 3, line 16, by striking the phrase, “. . . any history of prior offenses . . ." and substituting for it the language, the history of compliance relative to the number of transmitters licensed. The AAR does not disagree with the need for strong enforcement authority in the FCC. The railroad industry knows that efficient use of the crowded radio spectrum makes vital the need for substantial compliance with the terms of licenses granted by the Commission; it is in a railroad's own self-interest always to operate its radios properly. Nevertheless, the problems of the radio user, whose operation of many transmitters under one license is also an aid to the efficiency of the FCC, should be taken into account prior to the enactment of the proposed amendments. Thank you for this opportunity to submit these additional comments. HARRY J. BREITHAUPT, Jr. CONTINENTAL TELEPHONE CORP., Hon. ERNEST F. HOLLINGS, Chairman, Subcommittee on Communications, DEAR CHAIRMAN HOLLINGS: Mr. John Smith, of your staff, has invited Continental Telephone Corporation to provide comments on those portions of S 1547 which pertain to the pole attachment issue. The proposed legislation is that jointly proposed by the National Cable Television Association (NCTA) and the National Association of Regulatory Utility Commissioners (NARUC). Continental is appreciative of the opportunity which the Subcommittee is affording it to comment on the proposed legislation and of the Subcommittee's consideration of Continental's submission in that regard. At the outset, it should be noted that in the FCC proceedings concerning pole attachments, Continental maintained that the Commission did not have jurisdiction to regulate the rates, terms and conditions for pole attachments. If, however, Congress is to grant the Commission such jurisdiction under such conditions as are set forth in the first sentence of subsection (b) of the proposed legislation, Continental believes that the following comments should be taken into account in any such statutory enactment. The most serious deficiency of the proposed legislation is that it will not provide for adequate compensation to the utilities who provide pole attachments. Specifically, Continental does not believe that the provisions contained in subsection (b) will insure a fair recovery to the utility in two particulars. First, Continental would urge that the utility be allowed to charge the additional costs of providing pole attachments as a one-time accommodation charge, rather than utilizing such costs as the minimum in a determination of a “just and reasonable rate." These one-time charges have no reasonable relation to the determination of recurring costs in the form of rates, which are, in effect, "rental" charges designed to compensate the utility for continuing use of its facilities. Second, while Continental does not object to the imposition of an upper limit to the rate to be imposed as a recurring rental charge for the pole attachment, nor to the structuring of that upper limit on the basis of "actual capital and operating expenses of the utility," it does believe that the language of the present proposed legislation would fail to allow an upper limit that affords reasonable compensation to the utility. Under the present language, the rate can only represent the proportion of useable space actually occupied by the pole attachment. The utility then would continue to carry all capital and operating expenses on unused space on the pole as well as assigned useable space made unuseable by the pole attachment, i.e.. safety zone separation space between wires, in spite of the fact that the pole attachment creates, in effect, a shared use of the entire pole facility. Continental urges that any legislation enacted provide as the maximum rate allowed (in addition to any one-time accommodation charge) a charge which would require each user to share in the full cost of both useable and unused space on the pole on a proportional space utilization basis. Otherwise, the company using the pole attachment is being subsidized by the utility for what should be a portion of its operating expenses. Upon request of the Subcommittee, Continental would be willing to submit a draft of appropriate statutory language designed to effectuate the assurance of a maximum rate in conformance with the comments expressed herein. Our remarks herein are the same as those submitted to Chairman Van Deerlin, Subcommittee on Communications in response to his request for comments. Sincerely, WILLIAM FRIEDMAN, Vice President. CONTINENTAL TELEPHONE CORP., Hon. ERNEST F. HOLLINGS, DEAR MR. CHAIRMAN: Continental Telephone Corporation ("Continental") is pleased to be afforded the opportunity to comment on S. 1547, to amend the Communications Act of 1934, as amended (the "Act"). Continental will limit comments to Section 5 of S. 1547 which pertains to the regulation of pole attachments and which proposes to add a new Section 224 to Tile II of the Act. There is attached hereto a proposed revised Section 5 which reflects our comments. Section 5 of S. 1547 is confusing in that its relationship to the other provisions of Title II of the Act is unclear. We do not believe that the existing provisions of Title II-for example, those provisions pertaining to accounting procedures, etc., should apply to pole attachments, if for no other reason than that it would create administrative chaos for the Federal Communications Commission (the Commission has already expressed deep concern about the increased workload which might be created by enactment of the proposed legislation). Nor do we |