**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

Cavalier Telephone, LLC ) File No. PA 99-005

)

v\. )

)

Virginia Electric and Power Company )

**ORDER**

**Adopted: September 13, 2000 Released: September 18, 2000**

By the Deputy Chief, Cable Services Bureau:

1\. In this Order we consider a pole attachment complaint
(\"Complaint\"), filed with the Federal Communications Commission
(\"Commission\") on November 30, 1999, by Cavalier Telephone, LLC
(\"Complainant\") against Virginia Electric and Power Company
(\"Respondent\"), pursuant to Section 224 of the Communications Act
(\"Pole Attachment Act\")[^1] and Part 1, Subpart J, of the Commission's
rules.[^2] On June 7, 2000, we released an Order, DA 00-1250 (\"Prior
Order\")[^3] which resolved most of the issues raised in the Complaint.
In our Prior Order, we reserved our review of Respondent's annual pole
attachment rate and requested additional information to support the rate
charged. In this Order, we review the annual pole attachment rate
charged by Respondent to determine if it is a just and reasonable rate
pursuant to the Pole Attachment Act.

2\. Respondent is charging Complainant an annual pole attachment fee of
\$36.00 per pole for 1999, \$37.00 in 2000 and a projected \$38.00 in
2001. Respondent is charging cable companies approximately \$5.00 per
pole and other Virginia utilities are charging Complainant approximately
\$4.00 per pole.[^4] The Telecommunications Act of 1996 (\"1996
Act\")[^5] amended the Pole Attachment Act to include pole attachments
made by telecommunications carriers in addition to cable systems.[^6]
Our current formula applies to attachments made by both cable systems
and telecommunications carriers providing telecommunications services
until February 8, 2001,[^7] when a separate methodology[^8] becomes
effective for telecommunications carriers.[^9] In order to calculate a
reasonable pole attachment rate when the parties to a pole attachment
agreement cannot negotiate a reasonable rate, we apply our formula using
public data when available.

3\. Section 1.1409(c) of the Commission's rules provides that a rate is
just and reasonable if it does not exceed an amount determined by
multiplying the percentage of the total usable space occupied by the
pole attachment by the sum of the operating expenses and actual capital
costs of the utility attributable to the entire pole.[^10] The
methodology used to arrive at a pole attachment rate should be simple
and, preferably, based on publicly identifiable and verifiable
data.[^11] The Federal Energy Regulatory Commission (\"FERC\")
established its Part 101, prescribing a system of accounts for public
utilities and licensees subject to FERC\'s accounting requirements under
the Federal Power Act.[^12] Using information provided by
Respondent,[^13] and applying the formula established in Section
1.1409(e)(1) of the Commission\'s rules,[^14] we calculate a maximum
just and reasonable rate of \$5.12 per pole attachment per year.[^15]

4\. Thus, based on the facts presented, and in accordance with the Pole
Attachment Act and the Commission's rules, \$5.12 is the maximum just
and reasonable rate per pole attachment, per year, that Respondent may
charge. As noted however, Respondent was charging \$36.00 per pole
attachment for 1999 and \$37.00 per pole attachment for 2000.
Consequently, we find that Respondent's pole attachment rates, effective
November 30, 1999, are unjust and unreasonable. The refund period begins
from the date the Complaint was filed, November 30, 1999 to the present.
Therefore, we will order Respondent to reimburse the Complainant for any
charges over the amount of the maximum permitted annual pole attachment
rate of \$5.12 per pole, beginning November 30, 1999 through the
present, plus interest.[^16]

5\. Accordingly, IT IS ORDERED, pursuant to Sections 0.321 and
1.1401-1.1418 of the Commission\'s rules, 47 C.F.R. §§0.321 and §§
1.1401-1.1418, that the relief requested in the Complaint IS GRANTED TO
THE EXTENT INDICATED HEREIN.

6\. IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.1410 of the
Commission\'s rules, 47 C.F.R. §§ 0.321 and 1.1410, that the annual pole
attachment rate of \$36.00, effective November 30, 1999 through December
31, 1999, IS UNREASONABLE and that the annual pole attachment rate of
\$37.00, effective January 1, 2000 to the present, IS UNREASONABLE and
IS TERMINATED, effective upon the release of this Order.

7\. IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.1410 of the
Commission\'s rules, 47 C.F.R. §§ 0.321 and 1.1410, that the annual rate
of \$5.12 for each pole attachment IS SUBSTITUTED for the existing rate
of \$37.00, effective upon the release of this Order.

8\. IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.1410 of the
Commission\'s rules, 47 C.F.R. §§ 0.321 and 1.1410, that Respondent
SHALL REFUND to Complainant, within thirty (30) days of the release of
this Order, that portion of the amount paid in excess of \$5.12, for the
period from November 30, 1999 to the present, plus interest to the date
of refund.

9\. IT IS FURTHER ORDERED, pursuant to Sections 0.321 and 1.1401-1.1418
of the Commission\'s Rules, 47 C.F.R. §§ 0.321 and 1.1401-1.1418, that
Respondent and Complainant SHALL NEGOTIATE IN GOOD FAITH, a maximum just
and reasonable rate for the rates beginning in 2001, in accordance with
the Commission's rules.

FEDERAL COMMUNICATIONS COMMISSION

William H. Johnson

Deputy Chief, Cable Services Bureau

**Attachment A**

**Pole Attachment Formulas and Calculations**

**Maximum Rate = [Space Occupied by Attachment]{.underline} ~X~ Net Cost
of ~X~ Carrying**

**Total Usable Space Bare Pole Charge Rate**

  ----------------------- ----------------------- -----------------------
  **[Maximum                                      
  Rate]{.underline}**                             

  Space Occupied by       \(A\)                   1
  Attachment                                      

  Total Usable Space      \(B\)                   13.5

  Net Cost of a Bare Pole \(C\)                   \$188.28

  Carrying Charge Rate    \(D\)                   0.3669

  **Maximum Rate per      (A\\B) x C x D          \$5.12
  Pole**                                          
  ----------------------- ----------------------- -----------------------

**[Net Cost of a Bare Pole]{.underline}**

+-----------------------------------------------------+-----------------+
| \(1\) Gross Pole Investment                         | \$454,378,545   |
+-----------------------------------------------------+-----------------+
| \(2\) Depreciation Reserve                          | \$203,801,109   |
+-----------------------------------------------------+-----------------+
| \(3\) Net Deferred Operating Income Taxes           | \$1,401,887,026 |
+-----------------------------------------------------+-----------------+
| \(4\) Net Noncurrent Deferred Operating Income      | \$0             |
| Taxes                                               |                 |
+-----------------------------------------------------+-----------------+
| \(5\) Net Deferred Operating Income Taxes           | \$1,401,887,026 |
| (L(3)+L(4))                                         |                 |
+-----------------------------------------------------+-----------------+
| \(6\) Gross Plant Investment                        | 14,888,656,171  |
+-----------------------------------------------------+-----------------+
| \(7\) Net Deferred Operating Income Taxes (Poles)   | \$42,783,404    |
|                                                     |                 |
| ((L(1)/L(6) x L(5))                                 |                 |
+-----------------------------------------------------+-----------------+
| \(8\) Net Investment (Poles) (L(1)-L(2)-L(7))       | \$207,794,032   |
+-----------------------------------------------------+-----------------+
| \(9\) Net Investment (Bare Pole) (L(8) x .85 )      | \$176,624,927   |
+-----------------------------------------------------+-----------------+
| \(10\) Number of Poles                              | 938,087         |
+-----------------------------------------------------+-----------------+
| \(11\) Net Cost of a Bare Pole (L(9)/L(10))         | \$188.28        |
+-----------------------------------------------------+-----------------+

Carrying Charge Rate

  ----------------------------------------------- -----------------------
  \(1\) Administrative Charge                     0.0392

  \(2\) Maintenance Charge                        0.0591

  \(3\) Depreciation Charge                       0.0809

  \(4\) Taxes                                     0.0737

  \(5\) Return on Investment                      0.1140

  \(6\) Total Carrying Charge                     0.3669
  (L(1)+L(2)+L(3)+L(4)+L(5))                      

  **Administrative Charge**                       

  \(1\) Total G&A Expenses                        \$266,986,759

  \(2\) Gross Plant Investment                    \$14,888,656,171

  \(3\) Depreciation Reserve (Plant)              \$6,677,966,358

  \(4\) Accumulated Deferred Taxes (Plant)        \$1,401,887,026

  \(5\) Net Investment (Plant)                    \$6,808,802,787

  \(6\) Administrative Charge (L(1)/L(5))         0.0392

  **Maintenance Charge**                          

  \(1\) Maintenance Expense                       \$45,960,218

  \(2\) Gross Investment (364, 365, 369)          \$1,700,141,343

  \(3\) Depreciation Reserve (364, 365, 369)      \$762,559,533

  \(4\) Accumulated Deferred Taxes (364, 365,     \$160,082,016
  369)                                            

  \(5\) Net Investment (364, 365, 369)            \$777,499,795

  \(6\) Maintenance Charge (L(1)/L(5))            0.0591

  **Depreciation Charge**                         

  \(1\) Depreciation Rate                         0.037

  \(2\) Gross Pole Investment                     \$454,378,545

  \(3\) Depreciation Reserve (Pole)               \$203,801,109

  \(4\) Accumulated Deferred Taxes (Pole)         \$42,783,404

  \(5\) Net Investment (Poles)                    \$207,794,032

  \(6\) Depreciation Charge (L(1) x (L(2)/L(5))   0.0809

  **Taxes**                                       

  \(1\) Total Current and Deferred Taxes          \$501,602,790

  \(2\) Net Plant Investment                      \$6,808,802,787

  \(3\) Taxes (L(1)/L(2))                         0.0737

  **Return on Investment**                        

  Authorized by State Regulatory Commission       0.1140
  ----------------------------------------------- -----------------------

[^1]: Communications Act of 1934, *as amended*, 47 U.S.C. § 224.

[^2]: 47 C.F.R. §§ 1.1401-1.1418.

[^3]: *See* In the Matter of Cavalier Telephone, LLC v. Virginia
    Electric and Power Company, PA 99-005, DA 00-1250, 15 FCC Rcd 9563
    (2000). Respondent filed an application for review of DA 00-1250.

[^4]: Complaint at ¶ 8.

[^5]: Pub. L. No. 104-104, 110 Stat. 56 (1996).

[^6]: *See* 47 U.S.C. § 224(d)(3).

[^7]: *See* Amendment of Rules and Policies Governing Pole Attachments,
    FCC 00-116, 15 FCC Rcd 6453 at ¶ 5 (2000).

[^8]: *See* Implementation of Section 703(e) of the Telecommunications
    Act of 1996, 13 FCC Rcd 6777 at ¶¶ 116-130 (1998).

[^9]: *See* 47 U.S.C. § 224(d)(3) and 47 U.S.C. § 224(e)(4).

[^10]: 47 C.F.R. § 1.1409(c). *See also* In the Matter of Adoption of
    Rules for the Regulation of Cable Television Pole Attachments, First
    Report and Order, CC Docket 78‑144, 68 FCC 2d 1585 (1978) (\"First
    Report and Order\").

[^11]: First Report and Order, 68 FCC 2d 1585 (1978); Amendment of Rules
    and Policies Governing the Attachment of Cable Television Hardware
    to Utility Poles, 2 FCC Rcd 4387 (1987).

[^12]: 18 C.F.R. Part 101.

[^13]: Respondent provided information from its FERC Form 1 filings.

[^14]: 47 C.F.R. § 1.1409(e) (1).

[^15]: Our calculations are set forth in Attachment A to this Order.

[^16]: The Commission has determined previously that the appropriate
    rate of interest on the overcharges is the current interest rate for
    Federal tax refunds and additional tax payments. *See* Teleprompter
    of Fairmont, Inc. v. Chesapeake and Potomac Telephone Co. of West
    Virginia, 79 F.C.C. 2d 232 at ¶ 24 (1980), *order on recon.* 85
    F.C.C. 2d 243 (1981). Current interest rates can be found at Rev.
    Rul. 2000-30, 2000-25 I.R.B. 1262.