Utilities Spurned by Top Court on Phone-Company Pole Fees

The U.S. Supreme Court turned away a challenge by five power companies to new federal rules that lower the fees telecommunications companies must pay to attach lines to electric utility poles.

The justices today left intact Federal Communications Commission rules that were upheld by an appeals court in February. Units of American Electric Power Co. (AEP), Duke Energy Corp. (DUK), NextEra Energy Inc. (NEE), Energy Future Holdings Corp. and Southern Co. (SO) had asked the Supreme Court to intervene.

Power companies estimated in 2011 that the FCC plan would cost them $1.2 billion in forgone fees annually. At the Supreme Court, those utilities said the rules may shift $350 million in costs from telecommunications companies to electric utility ratepayers.

“The FCC’s abrupt reversal of course will fundamentally restructure the relationship between the electric and telephone industries,” the companies argued in their appeal.

The rebuff is a victory for AT&T Inc. (T) and Verizon Communications Inc., the largest U.S. phone companies, which backed the FCC in the legal fight.

The large telephone companies hadn’t previously been covered by pole-attachment rate regulation and instead negotiated prices with power companies. That was a legacy of their roots in the Bell monopoly era during the last century.

President Barack Obama’s administration said in court papers that the FCC made the change to reflect “current market realities.”

‘Robust Competition’

Given that the large phone companies “are still relatively nascent in video and other markets in which they offer new services, the commission concluded that they too can benefit from the oversight of pole attachment rates in the interests of robust competition,” U.S. Solicitor General Donald Verrilli, the administration’s top courtroom lawyer, argued in court papers.

The legal dispute turned on the 1978 Pole Attachments Act, which authorizes the FCC to regulate the rates charged to cable-television companies and “providers of telecommunications services.” The utilities said other parts of the law indicate that phrase excludes established telephone service providers.

The U.S. has 134 million utility poles, according to a 2009 cable-company study. About 49 million of those are subject to FCC-regulated rates, with the remainder regulated by states or exempt from federal rules, the study found.

The case is American Electric Power Service v. Federal Communications Commission, 12-1396.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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