United States Court of Appeals
For the Eighth Circuit
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No. 16-1683
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Ameren Corporation; American Electric Power Service Corporation; Centerpoint
Energy Houston Electric, LLC; Virginia Electric and Power Company
lllllllllllllllllllllPetitioners
v.
Federal Communications Commission; United States of America
lllllllllllllllllllllRespondents
COMPTEL, doing business as INCOMPAS; Level 3 Communications; National
Cable & Telecommunications Association; United States Telecom Association
lllllllllllllllllllllIntervenors
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Texas Industrial Energy Consumers; Texas Office of Public Utility Counsel
lllllllllllllllllllllAmici on Behalf of Petitioner
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Petition for Review of an Order of the
Federal Communications Commission
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Submitted: January 11, 2017
Filed: July 31, 2017
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Before WOLLMAN, MURPHY, and COLLOTON, Circuit Judges.
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WOLLMAN, Circuit Judge.
Ameren Corporation; American Electric Power Service Corporation;
CenterPoint Energy Houston Electric, LLC; and Virginia Electric and Power
Company (collectively, Petitioners) petition for review of a November 2015 order of
the Federal Communications Commission (FCC) governing the rates that utility
companies may charge telecommunications providers for attaching their networks to
utility-owned poles. The FCC, the United States, and intervenors COMPTEL d/b/a
INCOMPAS; National Cable & Telecommunications Association; Level 3
Communications, LLC; and United States Telecom Association oppose the petition.
We deny the petition.
I. Background
Under the Pole Attachments Act, 47 U.S.C. § 224, the FCC has the authority
to ensure that rates for attachments to utility poles by providers of cable television
services (cable providers) and providers of telecommunications services
(telecommunications providers) are “just and reasonable.” Id. § 224(b)(1).
Section 224 initially applied only to cable providers. The statute sets forth a lower
bound and an upper bound for “just and reasonable” rates. The lower bound is a rate
that “assures a utility the recovery of not less than the additional costs of providing
pole attachments,” and the upper bound is a rate that is “determined by multiplying
the percentage of the total usable space . . . which is occupied by the pole attachment
by the sum of the operating expenses and actual capital costs of the utility attributable
to the entire pole.” Id. § 224(d)(1). The FCC set the rate for this upper bound (the
Cable Rate) by multiplying three values: the space factor (the space occupied by an
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attachment divided by the total usable space on the pole), the net cost of a bare pole,
and a carrying charge rate. 47 C.F.R. § 1.1409(e)(1).
Congress amended § 224 in 1996, expanding it to cover pole attachments by
telecommunications providers. Section § 224(e) sets forth methods for apportioning
the cost of a pole among telecommunications providers:
(2) A utility shall apportion the cost of providing space on a pole, duct,
conduit, or right-of-way other than the usable space among entities so
that such apportionment equals two-thirds of the costs of providing
space other than the usable space that would be allocated to such entity
under an equal apportionment of such costs among all attaching entities.
(3) A utility shall apportion the cost of providing usable space among all
entities according to the percentage of usable space required for each
entity.
Id. § 224(e). This revision thus established a separate formula for determining the
rate for pole attachments by telecommunications providers (the Telecom Rate).
Until 2011, the FCC determined “cost” for the Telecom Rate the same way as
for the Cable Rate (net cost of a bare pole multiplied by a carrying charge rate), and
implemented § 224(e)(2) by calculating the space factor differently, apportioning
two-thirds of the costs of the unusable space among attaching telecommunications
providers. Thus, the Telecom Rate was typically higher than the Cable Rate, because
the values for the net cost of a bare pole and the carrying charge rate were the same
for both the Cable Rate and the Telecom Rate, while the value for the space factor
was typically higher in the Telecom Rate because it included two-thirds of the
unusable space on the pole.
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In response to concerns that the risk of having to pay the Telecom Rate may
have deterred cable providers from expanding their services, the FCC adopted an
order in April 2011 designed to equalize the Cable and Telecom Rates. In the Matter
of Implementation of Section 224 of the Act, Report and Order and Order on
Reconsideration, 26 FCC Rcd. 5240 (2011) (the April 2011 Order). This Order
reinterpreted the term “cost” in § 224(e)(2) by defining the “cost” for an urban-area
pole as 66 percent of the pole’s fully allocated costs (the net cost of a bare pole
multiplied by the carrying charge rate), and for a non-urban-area pole as 44 percent
of the pole’s fully allocated costs. Id. at 5304, ¶ 149. Under the FCC’s rebuttable
presumptions of 5 attachers to an urban-area pole and 3 attachers to a non-urban-area
pole, In the Matter of Implementation of Section 224 of the Act, Order and Further
Notice of Proposed Rulemaking, 25 FCC Rcd. 11864, 11913, ¶ 119 n.324 (2010), the
new Telecom Rate under the April 2011 Order approximated the Cable Rate.
The United States Court of Appeals for the District of Columbia Circuit upheld
the April 2011 Order against claims that it was inconsistent with § 224. Am. Elec.
Power Serv. Corp. v. FCC, 708 F.3d 183 (D.C. Cir.), cert. denied, 134 S. Ct. 118
(2013). The electric utilities’ petition for review argued that “cost” in § 224(e) must
mean the fully allocated costs of a pole, not the April 2011 Order’s definition of
“cost” as either 66 or 44 percent of the pole’s fully allocated costs. Id. at 189. The
D.C. Circuit noted that § 224(e) “is in important respects less specific than § 224(d),”
because “while § 224(e) prescribes the apportionment criteria rather specifically, it
nowhere defines the term ‘cost.’” Id. at 188-89. Evaluating the April 2011 Order
under the standard set forth in Chevron, USA, Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984), the court held that the term “cost” as used in
§ 224(e) is ambiguous and that the FCC’s interpretation of the statute was reasonable
in light of its policy interest in eliminating market distortion caused by the difference
between the Cable Rate and the Telecom Rate. Am. Elec. Power, 708 F.3d at 186,
189-90.
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In November 2015, the FCC again altered the Telecom Rate, adopting the order
at issue in this case. In the Matter of Implementation of Section 224 of the Act, Order
on Reconsideration, 30 FCC Rcd. 13731 (2015) (the November 2015 Order). The
FCC found that the April 2011 Order had failed to equalize the Telecom Rate and the
Cable Rate, because utilities frequently rebutted the presumptions of 5 attachers in
an urban area and 3 attachers in a non-urban area, which resulted in a higher Telecom
Rate. Id. at 13738, ¶ 18. The FCC was also concerned that its recent order
classifying retail broadband internet service as a telecommunications service, In the
Matter of Protecting and Promoting the Open Internet, Report and Order on Remand,
Declaratory Ruling, and Order, 30 FCC Rcd. 5601, 5734, ¶ 308 (2015), in
conjunction with the continued disparity between the Cable Rate and the Telecom
Rate, would lead to rate increases for cable providers offering broadband service.
November 2015 Order at 13741, ¶ 21. Further, the FCC was concerned that, because
some states that had elected to regulate pole attachments under 47 U.S.C. § 224(c)
used the Cable Rate, a higher Telecom Rate would deter telecommunications
investment in states where the FCC’s Telecom Rate applied. Id. at 13741-42, ¶ 22.
The November 2015 Order addressed these concerns by eliminating the distinction
between poles in urban and non-urban areas, instead basing “cost” on the average
number of attachers to a pole within an area: “cost” in areas with an average of 5
attachers is defined as 66 percent of fully allocated costs, 56 percent for 4 attachers,
44 percent for 3 attachers, and 31 percent for 2 attachers. Id. at 13756. In service
areas where the average number of attachers is not a whole number, the percentage
is interpolated from the percentages assigned to the nearest whole numbers. Id.
II. Discussion
We review the FCC’s interpretation of § 224(e) under the two-step framework
set forth in Chevron. We first determine “whether Congress has directly spoken to
the precise question at issue,” and if it has, we “must give effect to the unambiguously
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expressed intent of Congress.” Chevron, 467 U.S. at 842-43. “[I]f the statute is silent
or ambiguous with respect to the specific issue, the question for the court is whether
the agency’s answer is based on a permissible construction of the statute.” Id. at 843.
The agency’s view “governs if it is a reasonable interpretation of the statute—not
necessarily the only possible interpretation, nor even the interpretation deemed most
reasonable by the courts.” Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218
(2009). Even when an agency policy represents a change from past policy, the
agency generally need not demonstrate that “the reasons for the new policy are better
than the reasons for the old one; it suffices that the new policy is permissible under
the statute, that there are good reasons for it, and that the agency believes it to be
better.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009).
We conclude that the term “cost” in § 224 is ambiguous. “The fact is that
without any better indication of meaning than the unadorned term, the word ‘cost’ in
[a different statute], as in accounting generally, is ‘a chameleon,’ a ‘virtually
meaningless term.’” See Verizon Commc’ns, Inc. v. FCC, 535 U.S. 467, 500 (2002)
(citations omitted). Indeed, § 224(d) uses the term “cost” in different ways. It sets
forth as a lower bound “the additional costs of providing pole attachments.” It sets
forth as an upper bound a rate equal to the percentage of the pole’s usable space
occupied by the attachment multiplied by the “operating expenses and actual capital
costs of the utility attributable to the entire pole.” In § 224(e), by contrast, Congress
did not specify what type of “cost” it meant, providing instead that, among
telecommunications providers, the “cost” of providing usable space on a pole shall
be apportioned according to the percentage of usable space required for each attacher,
and the “cost” of providing unusable space on a pole shall be apportioned to each
attacher such that its share equals two-thirds of the costs it would be allocated under
an equal apportionment of such costs. Thus, while the Cable Rate under § 224(d)
must fall within a range defined by two different, specified types of “cost,” § 224(e)
does not specify what type of “cost” must be used to determine the Telecom Rate.
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Petitioners argue that the November 2015 Order defies Congress’s intent to
establish two different rates in § 224(d)(1) and § 224(e). We disagree that the statute
evinces such an intent. Section 224(d) requires that pole attachment rates for cable
providers fall within a certain range. Section 224(e) requires that pole attachment
rates for telecommunications providers be calculated according to a certain formula.
Because the term “cost” in § 224(e) is ambiguous, the same “cost” definition need not
be used to determine the upper bound for cable rates under § 224(d) and the rate for
telecommunications providers under § 224(e). Accordingly, the statute permits, but
does not require, the Cable Rate and the Telecom Rate to diverge.
Likewise, we reject Petitioners’ argument that the FCC’s interpretation of the
statute renders § 224(e) superfluous. See Corley v. United States, 556 U.S. 303, 314
(2009) (“[A] statute should be construed so that effect is given to all its provisions,
so that no part will be inoperative or superfluous, void or insignificant . . . .” (quoting
Hibbs v. Winn, 542 U.S. 88, 101 (2004))). As set forth above, the statute allows the
Cable Rate and the Telecom Rate to diverge, but does not require them to do so.
Whether or not the rates diverge, the Cable Rate must fall within the range set forth
in § 224(d) and the Telecom Rate must be calculated according to the formula set
forth in § 224(e). Thus, the formula for calculating the Telecom Rate under § 224(e)
is not superfluous.1
1
In light of this conclusion, we need not address the FCC’s argument that the
alternative, cost-causation formula for determining the Telecom Rate under
47 C.F.R. § 1.1409(e)(2)(ii) prevents § 224(e) from becoming superfluous under the
November 2015 Order.
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We conclude that the November 2015 Order constitutes a reasonable
interpretation of the ambiguity in § 224(e).2 The FCC sought to eliminate the
disparity between the Cable and Telecom Rates in order to avoid subjecting cable
providers offering broadband service to the higher Telecom Rate, and to avoid rate
disparity between states whose pole attachment rates are regulated by the FCC and
those states that had elected to regulate pole attachment rates using the Cable Rate
even for telecommunications providers. Finding that the April 2011 Order’s
presumptions of five attachers in urban areas and three attachers in non-urban areas
were inadequate to achieve these goals, the FCC adopted the multiple cost allocators
set forth in the November 2015 Order. This approach represents a “reasonable
policy” choice, and thus we defer to the FCC’s interpretation. See Verizon, 535 U.S.
at 523.3
We find the D.C. Circuit’s decision in American Electric Power to be
persuasive. Petitioners attempt to distinguish this case from American Electric
Power, noting that, under the April 2011 Order upheld in that case, the Telecom Rate
did not vary based on the number of attachers (instead varying based on urban or non-
2
To the extent that Petitioners argue that the November 2015 Order resulted
from arbitrary and capricious decision making in violation of the Administrative
Procedure Act, 5 U.S.C. § 706, their argument fails for the same reasons that explain
why the November 2015 Order is reasonable. See Shays v. Fed. Election Comm’n,
414 F.3d 76, 96 (D.C. Cir. 2005) (“[O]ur inquiry at the second step of Chevron . . .
overlaps with the arbitrary and capricious standard . . . .” (quoting Chamber of
Commerce of the U.S. v. Fed. Election Comm’n, 76 F.3d 1234, 1235 (D.C. Cir.
1996))).
3
Petitioners contend that “[t]here is simply no evidence in the record sufficient
to support a determination” that equating the Telecom Rate and the Cable Rate will
encourage the expansion of broadband services. Pet’rs’ Br. 39. This claim is time-
barred under 28 U.S.C. § 2344 in light of Petitioners’ failure to challenge that
determination within sixty days of the entry of the April 2011 order.
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urban location); that the April 2011 Order adopted only two definitions of the term
“cost,” as opposed to the potentially infinite definitions in the November 2015 Order;
and, “perhaps most importantly,” that under the April 2011 Order it was at least
possible for the Cable and Telecom Rates to diverge. Petr’s’ Br. 21-22. We conclude
that those distinctions are of no significance. The D.C. Circuit concluded that the
term “cost” was ambiguous and that the FCC’s choice to define “cost” so as to
equalize the Cable and Telecom Rates was reasonable. Am. Elec. Power, 708 F.3d
at 188-90. That reasoning applies with equal force here.
The petition for review is denied.
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