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Before the
               Federal Communications Commission
     Washington, D.C. 20554


In the Matter of                   )
                         )         CS Docket No. 97-98
Amendment of Rules and Policies    )
Governing Pole Attachments         )


                             REPORT AND ORDER


Adopted:  March 29, 2000                     Released:  April 3, 2000

By the Commission:


                              TABLE OF CONTENTS
                                                              Paragraph No.
I.   INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

II.  BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2

III. PRICING METHODOLOGIES FOR USE IN POLE ATTACHMENT FORMULAS . . . . . .7
     A.   Background . . . . . . . . . . . . . . . . . . . . . . . . . . .7
     B.   Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . .8
          1.   Modification of Cable Formula   . . . . . . . . . . . . . .8
          2.   Gross Book versus Net Book Costs  . . . . . . . . . . . . 11

IV.  ARMIS UNIFORM SYSTEMS OF ACCOUNTS FOR LEC POLE OWNERS . . . . . . . 12

V.   FORMULA FOR DETERMINING ATTACHMENT RATES FOR POLES. . . . . . . . . 14
                                                                 A.   Percentage of Usable Space Occupied  . . . . .  16
          1.   Background  . . . . . . . . . . . . . . . . . . . . . . . 16
          2.   Discussion  . . . . . . . . . . . . . . . . . . . . . . . 19
               a.   Safety Space . . . . . . . . . . . . . . . . . . . . 20
               b.   Minimum Ground Clearance . . . . . . . . . . . . . . 23
               c.   30 Foot Poles  . . . . . . . . . . . . . . . . . . . 25
               d.   Weight and Wind Load Factors . . . . . . . . . . . . 27

     B.   Cost of a Bare Pole. . . . . . . . . . . . . . . . . . . . . . 31
          1.   LEC Pole Owner Formula Methodology  . . . . . . . . . . . 32
          2.   Electric Utility Pole Owner Formula Methodology . . . . . 36
          3.   Total Number of Poles . . . . . . . . . . . . . . . . . . 43

                                                                 C.   Carrying Charge Rate . . . . . . 44
          1.   Administrative Element  . . . . . . . . . . . . . . . . . 46
          2.   Maintenance Element . . . . . . . . . . . . . . . . . . . 53
               a.   Pole Rental Expenses Paid to Third Party . . . . . . 54
               b.   FERC Account 590 . . . . . . . . . . . . . . . . . . 57
          3.   Depreciation Element  . . . . . . . . . . . . . . . . . . 62
          4.   Taxes Element . . . . . . . . . . . . . . . . . . . . . . 71
          5.   Rate of Return Element  . . . . . . . . . . . . . . . . . 74

VI.  FORMULA FOR DETERMINING ATTACHMENT RATES FOR CONDUITS . . . . . . . 77
     A.   Background . . . . . . . . . . . . . . . . . . . . . . . . . . 77
     B.   Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . 82
          1.   Conduit Formula Methodology . . . . . . . . . . . . . . . 82
          2.   Conduit Physical Characteristics  . . . . . . . . . . . . 84
          3.   Factors of the Conduit Formula. . . . . . . . . . . . . . 86
               a.   Percentage of Total Capacity Occupied. . . . . . . . 89
                    i.   Total Duct or Conduit Capacity. . . . . . . . . 89
                    ii.  Occupied Capacity, the Half-Duct Presumption. . . . . . . 92
          4.   Net Linear Cost of Conduit  . . . . . . . . . . . . . . . 96
               a.   Net Conduit Investment . . . . . . . . . . . . . . . 97
                                                                           b.   System Duct Length . . . . . . .104
          5.   Carrying Charge Rate. . . . . . . . . . . . . . . . . . .105
               a.   Maintenance Element  . . . . . . . . . . . . . . . .108
                    i.   LEC Owned Conduit . . . . . . . . . . . . . . .109
                    ii.  Electric Utility Owned Conduit  . . . . . . . .111
               b.   Depreciation Element . . . . . . . . . . . . . . . .113

     VII.                                                        REGULATORY FLEXIBILITY . . . . . . . 115
     VIII.                                                       PAPERWORK REDUCTION ACT OF 1995 ANALYSIS . . . . .  156
     IX.                                                         ORDERING CLAUSES . . . . . . . . . . 158

APPENDIX A  -  Revised Rules 
APPENDIX B  -  List of Commenters 
               APPENDIX C -   Section 224 (d) Formulas for Attachments on Poles and in Conduit
               I.   INTRODUCTION 

     1.   This Report and Order ("Order") addresses issues raised in Amendment of Rules and Policies
Governing Pole Attachments, Notice of Proposed Rulemaking, CS Docket No. 97-98 ("Notice") relating to the
maximum just and reasonable rates utilities may charge for "pole attachments" made to a pole, duct, conduit
or right-of-way.  Generally, the commenters represent the interests of one of the following three categories: 
(1) electric utilities; (2) cable operators; and (3) telecommunications carriers.  In this Order, we adopt
amended rules set forth in Appendix A.

II.  BACKGROUND 

     2.   Section 224 of the Communications Act ("Pole Attachment Act") grants the Commission
authority to regulate the rates, terms, and conditions governing pole attachments and requires that such rates,
terms and conditions be just and reasonable.  The Commission is also authorized to adopt procedures
necessary to hear and to resolve complaints concerning such rates, terms, and conditions.  In 1978, when
Congress directed the Commission to regulate rates for pole attachments used for the provision of cable
service, Congress established a zone of reasonableness for such rates, bounded on the lower end by
incremental costs and on the upper end by fully allocated costs.  See S. Rep. No. 95-580 ("1977 Senate
Report").
     
     3.   Beginning in 1978, the Commission developed a methodology to determine the maximum
allowable pole attachment rate under Section 224(d)(1), (the "Cable Formula"), in Adoption of Rules for the
Regulation of Cable Television Pole Attachments, First Report and Order, CC Docket No. 78-144 ("First
Report and Order"); Second Report and Order ("Second Report and Order"); and Memorandum and Order
("Third Order"), implementing a cost methodology premised on historical or embedded costs.  In 1987, the
Commission amended and clarified the methodology for determining rates in Amendment of Rules and
Policies Governing the Attachment of Cable Television Hardware to Utility Poles, CC Docket No. 86-212
("Pole Attachment Order").

     4.   The Telecommunications Act of 1996 ("1996 Act") amended Section 224 in several
important respects.  Section 703(6) of the 1996 Act added a new Subsection 224(d)(3), that expanded the
scope of Section 224 by applying the Cable Formula to rates for pole attachments made by
telecommunications carriers in addition to cable systems, until a separate methodology becomes effective
for telecommunications carriers.  Section 703(7) of the 1996 Act added new Subsections 224(e)(1-4), which
set forth a separate methodology to govern charges for pole attachments used to provide telecommunications
services.

     5.   In Implementation of Section 703(e) of the Telecommunications Act of 1996, CS Docket No.
97-151 ("Telecommunications Report and Order"), the Commission adopted a separate methodology for pole
attachments on poles ("Telecommunications Pole Formula") and in conduits ("Telecommunications Conduit
Formula") for providers of telecommunications services, including cable systems providing
telecommunications services, after February 8, 2001.  Revisions to the Cable Formula and the formula for
pole attachment rates in conduit systems adopted in this Order will apply to attachments made by cable
systems and, until the Telecommunications Pole Formula and the Telecommunications Conduit Formula
become effective in 2001, will also apply to attachments by telecommunications carriers providing
telecommunications services.  After February 8, 2001, the Cable Formula for poles and the formula adopted
for pole attachments in conduit systems adopted in this Order, will continue to apply to pole attachments used
by a cable television system, as long as the pole attachment is not also used to provide telecommunications
services.  

     6.   In the Notice, we sought comment to evaluate the accuracy of the Cable Formula, to evaluate
and revise certain accounting rules, and to consider the continued applicability of certain presumptions.  We
sought comment regarding a methodology for use in determining just and reasonable pole attachment rates for
conduit systems.  We also sought comment on whether, due to the reported frequency with which
accumulated depreciation balances exceed gross pole investment, a modification of the Cable Formula was
necessary.  

III. PRICING METHODOLOGIES FOR USE IN POLE ATTACHMENT FORMULAS 

     A.   Background

     7.   When Congress enacted Section 224 in 1978, it directed the Commission to institute an
expeditious program for determining just and reasonable pole attachment rates.  Legislative history indicates
that Congress was concerned with regulatory complexity, opting for a simple plan requiring a minimum of
staff, paperwork and procedures and the avoidance of a large-scale ratemaking proceeding.  Congress did not
believe that special accounting measures or studies would be necessary because most cost and expense items
attributable to utility pole, duct and conduit plant were already established and reported to various regulatory
bodies, for example forms submitted to the Commission by local exchange carriers ("LECs") and to the
Federal Energy Regulatory Commission ("FERC") for electric utilities.  Congress also did not expect the
Commission to re-examine the reasonableness of the cost methodologies that various regulatory agencies had
sanctioned.  Section 224(d)(1) describes two possible cost methodologies, incremental and fully allocated,
each of which is based on the "actual" capital costs of construction and operation of the pole attachment
infrastructure (poles, ducts, conduit and rights-of-way).  Since 1978, the Commission, in interpreting this
statutory language, chose an embedded cost methodology, which has been upheld by the United States
Supreme Court.  Congress expected that pole attachment rates based on incremental costs would be low,
because utilities generally recover the make-ready or change-out charges directly from cable systems.  On the
other hand, fully allocated costs constitute the basis of the upper boundary of the range of just and reasonable
rates.  The Commission noted that in arriving at an appropriate rate, it is important to ensure that the
attaching entity is not charged twice for the same costs, once for make-ready costs and again for the same costs
if the business expense is reported in the corresponding pole or conduit capital account.

     B.   Discussion

          1.   Modification of the Cable Formula

     8.   In the Notice, we solicited comment on proposed modifications to the Cable Formula and the
Commission's rules relating to the maximum just and reasonable rates utilities may charge for pole
attachments.  We also sought comment on whether a modification is necessary to improve the accuracy of the
Cable Formula.  We did not specifically raise the issue of forward looking costs in the Notice in this
proceeding.  However, in response to the Notice, American Electric submitted comments supporting a
methodology for determining a just and reasonable rate for pole attachments which employs forward looking
economic cost pricing.  Electric utility pole owners assert that such a methodology is necessary to
appropriately compensate them for pole attachments made by telecommunications carriers.  This position is
vehemently opposed by most attaching entities.  The utilities' argument is articulated in a report prepared by
the Reed Consulting Group ("Reed Report"), submitted by American Electric, which argues that the
Commission should take a new perspective on the Cable Formula.  The Reed Report contends that the electric
utilities do not possess market power; their facilities are not essential; they do not compete directly with cable
or telecommunications companies; they do not enjoy unequal bargaining power; and they have no motivation
to restrict access.  Based on these arguments, the Reed Report concludes that pole attachment rates should be
set through market negotiation or in the alternative, using replacement rather than historical costs in the Cable
Formula.  In order to reach its conclusion, the Reed Report defines the relevant market to include wireless
technology and underground cable as alternatives to pole attachments.  NCTA responds that Congress did not
choose to repeal or modify the use of historical costs in the Cable Formula; that no certified state calculates
pole rates based on reproduction costs; that there are no viable alternatives for the placement of cable and
telecommunications facilities; and that the utilities do compete with cable and telecommunications providers.

     9.   The Commission has employed historical costs in Cable Formula calculations since the
passage of the Pole Attachment Act in 1978.  Further, the United States Supreme Court has upheld the
application of an historical cost methodology for determining pole attachment rates.  Thus, for two decades
the Cable Formula has provided a stable and certain regulatory framework, that may be applied "simply and
expeditiously" requiring "a minimum of staff, paperwork and procedures consistent with fair and efficient
regulation."  Switching to a methodology based on forward-looking economic costs would cause significant
disruption and impose significant costs on attachers and this Commission.  Such a change would require the
Commission to develop a new formula that would necessitate a long and protracted rulemaking proceeding,
and would likely involve complicated pricing investigations.  In addition, such a change is likely to generate
numerous complaints that the Commission would be required to resolve.  Moreover, the Reed Report itself
acknowledges that the use of a replacement cost methodology burdens regulators with a "long and tedious rate
case process."  While we acknowledge that setting prices on the basis of forward-looking economic costs has
significant advantages, including that it gives the appropriate signal for new entrants to invest in facilities, we
believe these advantages are likely to be less pronounced in this context.  We note that Congress has not
expressed any intent for the Commission to deviate from the use of historical costs in the Cable Formula.  We
further note that the Notice did not specifically raise the possibility of shifting to a methodology based on
forward-looking economic costs, and it therefore may not have been fully considered in the comments.  Thus,
we believe that in this particular context, after balancing all these factors, the disadvantages associated with
changing to a methodology based on forward-looking economic costs would far outweigh any resulting
benefits.  For these reasons, we decline the electric utility pole owners' request to shift from the historical cost
methodology at this time.

     10.  Based on all these factors, we will continue the use of historical costs in our pole attachment
rate methodology.  The continued use of a clear rate formula by the Commission is essential to encourage
parties to negotiate for pole attachment rates, terms and conditions.  We believe the continued use of historical
costs accomplishes key objectives of assuring, to both the utility and the attaching parties, just and reasonable
rates; establishes accountability for prior cost recoveries; and accords with generally accepted accounting
principles. 

          2.   Gross versus Net Book Costs

     11.  In the Notice, we sought comment on calculating pole attachment rates using gross book
instead of net book costs.  Currently, the Cable Formula incorporates net figures for the calculation of
maximum pole attachment rates.  Cable operators generally oppose a change to the use of gross book costs,
contending that a) there are no regulatory or administrative efficiencies to be gained by moving to all gross
book costs; b) net book costs would still be needed for return on investment computations; and c) the technical
reasons offered by utilities in support of the use of gross book costs are not valid.  American Electric and
other utility pole owners comment that the use of gross book costs are acceptable in the Cable Formula if the
use of forward looking costs is not adopted by the Commission for pole attachment rates.  As we stated in the
Pole Attachment Order, our preference is to use net figures.  The calculation of rate base items on a net basis
is employed in the Cable Formula because that methodology reflects prior utility recovery of investment
through depreciation, and prevents over-recovery of actual amounts invested.  We compute the carrying
charge elements for maintenance, depreciation and administrative expenses, as well as for return on investment
and taxes, using net book costs.  For example, the net cost of a bare pole component is derived from the gross
investment in poles less accumulated depreciation and accumulated deferred income taxes.  The use of gross
book costs in the Cable Formula would require that the carrying charge elements for maintenance,
depreciation and administrative expenses be calculated using gross book costs for both total plant investment
and pole investment.  Even if gross book costs were used in the Cable Formula, the rate of return and the
income tax carrying charges would continue to be computed using net book costs because utility prices are
generally set to allow an authorized rate of return on net book costs.  The use of gross book costs on a case by
case basis does not appear to be inconsistent with the legislative history of Section 224, which indicates that
the Commission has significant discretion in selecting a methodology for determining just and reasonable pole
attachment rates.  In the past, if parties submitted calculations using gross book figures, we have calculated
the maximum pole attachment rate using gross book costs.  The important goal is to ensure that like figures
are used, whether net or gross and the Commission has stated that if both parties to a pole attachment
complaint agree, the pole attachment rates may be computed using gross book costs.  We are not persuaded
that our current preference for the use of net figures should be abandoned.  Therefore, we will continue to use
net figures in the Cable Formula.  However, as in the past, when all parties to a complaint agree, we will allow
the use of gross book costs.


     IV.  ARMIS Uniform System of Accounts for LEC Pole Owners 

     12.  In the Notice, we proposed a formal revision of the Cable Formula for LECs so that it
accurately reflects our current use of data from the Commission's Automated Reporting Management
Information System ("ARMIS").  ARMIS Report 43-02 - Uniform System of Accounts ("USOA") contains
the financial operating results of a LEC's telecommunications operations for every Part 32 account.  The
Cable Formula codified by the Pole Attachment Order specifies particular Part 31 accounts to be used to
calculate the pole attachment rates LECs may charge cable systems.  Previously LECs reported data collected
in Part 31 accounts on an FCC Form M.  Effective January 1, 1988, Part 31 was replaced by Part 32, which
changed how LECs account for and report certain costs.  For example, it appeared that the Part 31 accounts
used in the Cable Formula included some non-administrative expenses in the administrative component of the
carrying charges.  The proposed Part 32 accounts used in the Cable Formula would not include such non-
administrative expense in the administrative component.  The potential for inclusion of unrelated expenses in
certain accounts must be balanced with the inability to recover other minor expenses that may have a
legitimate nexus to pole attachments that are included in unrelated accounts.  Our policy has been that not
every detail of pole attachment cost must be accounted for, nor every detail of non-pole attachment cost
eliminated from every account used.  The adoption of Part 32 would not alter our policy in that regard.
  
     13.   There was no opposition in the record, and substantial encouragement, to the codification
of the use in the Cable Formula of Part 32 accounts reported to the ARMIS.  Adoption of Part 32 accounts will
facilitate public access to data on which to determine just and reasonable pole attachment rates.  We affirm
the use of Part 32 Uniform System of Accounts for LECs, as reported to ARMIS, in determining various
components of the Cable Formula.  These specific accounts are discussed in this Order relating to various
aspects of the Cable Formula. 

V.   FORMULA FOR DETERMINING ATTACHMENT RATES FOR POLES

     14.  The Commission uses the following Cable Formula in disputed cases to set rates to be
charged by utilities for attachments on poles:  

                                

     15.  In the Notice, we sought comment on the continued applicability of various factors and
elements within this formula.  In Implementation of Section 703(e) of the Telecommunications Act of 1996,
Notice of Proposed Rulemaking ("Telecommunications Notice"), we also sought comment regarding whether
wind and weight load factors should be considered in the pole attachment rate and deferred discussion and
decision on that issue to this rulemaking.  

     A.   Percentage of Total Usable Space Occupied

          1.   Background     
     
     16.  In the Second Report and Order, consistent with Section 224(d)(2) and Congressional intent,
the Commission defined total usable space as the space on the utility pole above the minimum grade level that
is usable for the attachment of wires, cables, and related equipment.  Based upon survey results, consideration
of the National Electric Safety Code ("NESC"), and practical engineering standards used in constructing
utility poles, the Commission found that "the most commonly used poles are 35 and 40 feet high, with usable
spaces of 11 to 16 feet, respectively."  In the Third Order, the Commission relied on NESC guidelines and
data received in its rulemaking proceedings to affirm the presumption of an average 18 feet for minimum
ground clearance, referring to Congressional findings that "  . . . the typical utility pole [is] 35 feet in length
[and] has 11 feet of usable space leaving a total of 24 feet for both the portion buried underground [6 feet] and
the necessary ground clearance [18 feet].  To avoid a pole by pole rate calculation, the Commission adopted
rebuttable presumptions of (1) an average 37.5 foot pole height; (2) 13.5 feet of usable space; and (3) one foot
as the amount of space a cable television attachment occupies.  These presumptions serve as the premise for
calculating pole attachment rates under the current formula.  

     17.  In anticipation of the Notice, a group of electric utilities filed a white paper ("White Paper"),
intended to facilitate the exchange of ideas among parties interested in matters related to pole and conduit
attachments.  The White Paper asserts that over time and with increased demand for pole space the average
pole height has increased to 40 feet, and that the usable space presumption should be reduced from 13.5 feet
to 11 feet.  In 1984, the Commission, in an order denying a petition filed by some of the utilities now
sponsoring the White Paper, Petition to Adopt Rules Concerning Usable Space on Utility Poles, FCC 84-325
("Usable Space Order") rejected the same arguments for changing the usable space presumptions as they
again put forward.  

          18.  In the Notice, we sought comment on the 37.5 foot presumptive pole height,
          the 13.5 foot usable space presumption, the average 18 foot minimum ground clearance, the
          allocation of the 40-inch safety space to usable space, the exclusion of 30 foot poles from the
          calculation of costs of a bare pole and whether 30 foot poles lack a sufficient amount of
          usable space to accommodate multiple attachments.  

          2.   Discussion

     19.  The presumptions used in the Cable Formula have been repeatedly affirmed since the
enactment of the Pole Attachment Act.  We again decline to modify the well established presumptions
leading to 7.4% as the percentage of usable space occupied by a pole attachment.  Commenters are divided
on this issue, with pole owners asserting they should be entitled to higher rates that would result from their
desired presumption changes, and attaching entities quoting Congressional intent, Commission precedent and
widespread industry practice to counter the arguments.  We are not persuaded by specific current industry
data from electric utilities to change the usable space presumptions.  



               a.   Safety Space 

     20.  A 40-inch safety space was created to minimize the likelihood of physical contact between
employees working on cable television or telephone lines and the potentially lethal voltage carried by the
electric lines, as well as to prevent electrical contact between such cables.  In the Second Report and Order,
and the Third Order, the Commission rejected the arguments of electric companies that the entire 40 inches
of safety space should be attributable to cable television operators.  In the Notice, we sought comment on the
continued validity of the allocation of the 40-inch safety space to usable space.  After consideration of the
evidence in this proceeding, we decline to decrease the amount of usable space from 13.5 feet to 11 feet by
reallocating the 40-inch safety space as unusable space.  Removing  the 40-inch safety space from usable
space, under Section 224(d), would have the effect of spreading the costs of the safety space among the utility
pole owner and the attaching entity.  

     21.  Some electric utilities request that we remove the 40-inch safety space from the presumptive
13.5 feet of usable space because the safety space exists to protect attaching entities' workers when installing
and maintaining their pole attachments.  Attaching entities assert that any cable operator or
telecommunications carrier seeking to install a pole attachment is already required to incur "make-ready"
expenses to ensure the existence of the 40-inch safety space, and that electric utilities benefit from the safety
space by attaching their own facilities such as communications equipment, street lights, transformers, and
grounded, shielded power conductors in the safety space.  

     22.  It is the presence of the potentially hazardous electric lines that makes the safety space
necessary and but for the presence of those lines, the space could be used by cable and telecommunications
attachers.  The space is usable and is used by the electric utilities.  A bare pole, when erected has portions to
which attachments cannot be made at any time the ground clearance and the part of the pole below ground. 
The rest is available for attachments; it is usable space.  A communications attachment, even though it may be
a fiber optic cable with a diameter of only one inch, is presumed to occupy one foot of the attachable space
because of separation requirements.  In a like manner, the electric supply cable on the pole, because of its
unique spacing requirements must be 40 inches away from communications attachments.  No one questions
that the eleven inches of space not physically occupied by a fiber optic cable, but attributed to it, is usable
space.  Because the electric supply cable precludes other attachments from occupying the safety space, which
would otherwise be usable space, the safety space is effectively usable space occupied by the supply cable.  So
long as their crews make the installation, the electric utilities are not limited by the NESC in what equipment
or cables they may attach in the safety space.  Accordingly, we reject the electric utilities' arguments to reduce
the presumptive usable space of 13.5 feet by 40 inches.

               b.   Minimum Ground Clearance 

     23.  In the Second Report and Order, the Commission established that a presumptive average 18
feet of the pole space is reserved for ground clearance.  The 18 foot presumption is not dictated by the
National Electric Safety Code ("NESC"), but is an average to be used in the estimation of total usable space. 
In the Usable Space Order, we determined that the selection of the 18 foot figure reflected various elements
such as differing pole heights, as well as NESC standards that vary depending on the physical environment of
the pole.  Factors used to determine the NESC standard of minimum ground clearance, include whether the
wires or cables cross over railroad tracks, roads, or driveways and the amount of voltage transferred through
the cables.  In response to the Notice, some electric utilities suggest that the lowest attachment on a pole must
be at least 19'8" from the ground in order to accommodate communications cable sag.  The electric utilities
provide us with "average" sag for a "typical" communications cable, but do not indicate how either was
determined.  In the Usable Space Order we carefully considered numerous studies submitted to us before
concluding that the 18 foot figure was an appropriate tool to estimate usable space.  The data provided by the
utilities regarding sag does not demonstrate the same rigor as the studies on which our Usable Space Order
was based.

     24.  The rebuttable nature of the usable space presumption allows for the use of a different
minimum ground clearance when necessary to improve the accuracy of the calculations.  Presumptions were
adopted to encourage expeditious response to complaint information requests.  We have not been persuaded
that a departure from our well established presumption of an average minimum ground clearance of 18 feet is
warranted.  

               c.   30 Foot Poles

     25.   In the Notice, we sought comment on whether 30 foot poles lack a sufficient amount of
usable space to accommodate multiple attachments and whether including poles of 30 feet or less in the total
number of poles for calculating the Cable Formula results in a distorted rate.  The White Paper contends that
poles of 30 feet or less lack a sufficient amount of usable space to accommodate multiple attachments, and
suggests that the inclusion of these poles in the calculation results in an inexact determination of the actual net
costs of a bare pole.  

     26.  We have not been presented with evidence that a pole attachment rate based on pole
inventory, in which 30 foot poles are included, fails to adequately compensate a pole owner.  We have received
significant information to the contrary.  Telecommunications carriers disagree with the utilities' argument
to exclude 30 foot poles from the bare pole calculation.  The record confirms the prevalent use of 30 foot
poles and reflects that exclusion of such poles from the Cable Formula calculations could distort the resulting
rate by excluding a significant portion of LEC plant investment from the rate calculation.  With a presumed
ground clearance of 18 feet, a 30 foot pole has six feet of usable space.  A 30 foot electric utility pole can
accommodate two communications attachments or more with overlashing.  A 30 foot LEC pole can
accommodate more.  We conclude that a distorted inventory of poles would be reflected if utilities were
allowed to "opt out" or exclude their poles of 30 feet or less when calculating their pole attachment rates. 

               d.   Weight and Wind Load Factors
          
     27.  In the Telecommunications Notice we sought comment on an issue raised by Duquesne Light
in its Petition for Reconsideration ("Duquesne Petition") of the Commission's decision in Implementation of
the Local Competition Provisions of the Telecommunications Act of 1996, First Report and Order, CC Docket
No. 96-98 ("Local Competition Order").  The Duquesne Petition requests that the Commission recognize,
and incorporate into its rate formula, that various attachments place difference burdens on the poles. Duquesne
Light asserts that presumptions used in the Cable Formula should include factors addressing weight and wind
loads.  For instance, Duquesne Light claims that overlashing of an attachment will increase the loading on
the pole, especially during adverse icy and windy weather conditions.  Duquesne Light maintains that an
increase in loading could cause a pole to lean, lines to sag or the pole to break or collapse.  This increase in
loading, Duquesne Light argues, necessitates the charging of an additional fee for the overlashed cable, as well
as treatment of the overlash as a separate attachment.  In the Telecommunications Report and Order, we
reserved decision on the weight and wind load issues until the resolution of the rulemaking currently before
us.  We will therefore address at this time whether any presumptions should reflect these factors. 

     28.  Consideration of loading, including weight and wind load, relates to engineering of the pole
structure.  Sections 24 through 26 of the NESC address considerations of loading and structural requirements
in detail.  We do not believe that an attachment "burden on the pole" relates to anything other than an
assessment of need for make-ready changes to the pole structure, including pole change-out, to meet the
strength requirements of the NESC.  Make-ready costs are non-recurring costs for which the utility is directly
compensated and as such are excluded from expenses used in the rate calculation.  We agree with USTA that
the statutory language for allocating costs in Section 224 refers to space, not load capacity.  

     29.  We are not convinced that "burden on the pole" due to weight and wind load is an additional
factor for consideration in the determination of the amount of space occupied.  Wind and weight loading
factors, as calculated using NESC rules, increase as the cross-sectional area of the wire increases.  The
NESC calculations use the worst case scenario where the wind is blowing parallel to the ground and
perpendicular to the side of the cable, wire, conductor, etc., creating maximum wind resistance.  The surface
area presented to the wind is directly proportional to the diameter or vertical dimension of the wire, conductor,
cable, etc.  As the vertical dimension increases, and therefore, the surface area increases, the wind load factor
increases.  It is the vertical dimension of the wire that determines how much space is occupied on the pole. 
The current method for allotting space to a pole attachment, therefore, accounts directly for the wind load
factor.  The weight load factor is considered when deciding whether a stronger pole is necessary as part of
make-ready work.

     30.   Further, the inclusion of factors such as wind and weight load in the presumptions could lead
to unacceptable over-recovery.  Many of the factors have already been included in accounts in the maintenance
element of the carrying charge rate.  For electric utility owned poles, FERC Account 593 includes pole related
expenses for overhead lines and allows for the recovery of the cost of labor, materials used and expenses
incurred in the maintenance of overhead distribution facilities.  This account includes expenses for repair pole
related equipment and  adjusting the sag of attachments to the pole.  The Commission's ARMIS rules for
LEC accounting provide for the recovery of damages and pole related expenses caused by storms or other
casualties.  The complete costs of the physical attachments of an attaching entity are normally paid to the
pole line owner as a condition of attachment, addressing such factors as weight, wind load and safety space. 
These make-ready costs have been fully recovered.  It would be inappropriate to allow for their recovery again
through the pole rate.

      B.  Cost of a Bare Pole  

     31.  In the Pole Attachment Order, the Commission promulgated a methodology to arrive at the
net cost of a bare pole for use in the Cable Formula from a calculation of the total investment in poles less
accumulated depreciation for poles, and less accumulated deferred income taxes.  An adjustment to a utility's
net pole investment (of 15% for electric utilities and 5% for LECs) is necessary to eliminate the investment in
crossarms and other non-pole related items.

          1.   LEC Pole Owner Formula Methodology

     32.  The Pole Attachment Order prescribed a formula for determining the net cost of a LEC's bare
pole, using the old Form M, Part 31 Account 241 (Gross Pole Investment), as follows:  


0

33.
In
the
Notice, we proposed a revised formula to determine a value for the net cost of a bare pole using the ARMIS
Part 32 Account 2411 (Gross Pole Investment) for LEC pole owners, applying the 5% (or 0.95) adjustment
factor.  Based on the record, we affirm our proposed formula to determine the net cost of a bare pole for
LEC pole owners under the following formula:  

                                

          34.  In this formula Accumulated Depreciation (Poles) and Accumulated Deferred Income Taxes
(Poles) are derived from composite Part 32 accounts attributable to poles.  Specifically, Accumulated
Depreciation (Poles) represents the share of Part 32 Account 3100 (Accumulated Depreciation) that
corresponds to Account 2411, and Accumulated Deferred Income Taxes (Poles) represents the shares of Part
32 Accounts 4100 (Net Current Deferred Operating Income Taxes) and 4340 (Net Noncurrent Deferred
Operating Income Taxes) that correspond to Account 2411.  

          35.  The formula, as adopted, updates the Cable Formula to reflect current regulatory accounting
practices by LECs, and clarifies the method for accurately deriving the proper figure for accumulated deferred
income taxes when used in conjunction with the pole attachment formula.  This formula updates the Cable
Formula in a manner that is equitable to all parties by providing consistency in calculating a pole attachment
rate based on publicly available and verifiable data.  The adjustment to the Cable Formula also recognizes
more accurately the accumulated deferred taxes related to pole investment than would proration based upon a
ratio of pole investment to total plant in service.

               2.   Electric Utility Pole Owner Formula Methodology

          36.  The Pole Attachment Order prescribed a formula for determining the net cost of a bare pole
for electric utilities using FERC Accounts as follows:  

                                

          37.  In the Notice, we stated the formula includes factors appropriate for arriving at the net cost
of a bare pole for electric utility pole owners.  In response to the Notice, some electric utilities assert that FERC
Accounts 365 (Overhead Conductors and Devices) and 368 (Line Transformers) should be included in the
calculations to determine the net cost of a bare pole. 
 
          38.  We decline to add portions of Accounts 365 or 368 to the net cost of a bare pole factor.  This
factor already contains adjustment components, relating to appurtenances such as crossarms, that can be
challenged with appropriate verifiable data.  We affirm our conclusion that lightning protectors and
grounding installations recorded in accounts other than Account 364 should not be included in the calculation
of the net cost of a bare pole factor.  Attaching entities are required to provide separate grounding for their
own attachments.  Lightning protectors and grounding installed on poles by utilities are equipment specific
to the electric utility's core business services and not related to the general cost of the pole plant.  Portions of
Accounts 365 and 369 are already included in the maintenance element of the relevant Cable Formula.  

          39.  We do not believe that portions of Accounts 580 (Operation:  Supervision and Engineering)
and 583 (Operation Overhead Line Expenses, Major Utilities Only) should be included even if they contain
some capital expense incurred with respect to all electric power distribution plant.  Based on the record, we
believe that any increased accuracy that would be derived from including some minute percentage of
pole-related expenses that may be recorded in miscellaneous accounts, is outweighed by the complexity of
arriving at an appropriate and equitable percentage of the expenses.  The descriptions of what expenses are
to be reported in Accounts 365, 368, 580 and 583, contained in FERC Part 101, appear to relate more
directly to the electric utilities' core business operations rather than "actual capital costs attributable to the
entire pole, duct, conduit or right-of-way," as required for inclusion in the rate formula.  

          40.  In keeping with long-standing Commission precedent, expenses relating to grounding
systems should be excluded from the rate base because, like cross-arms and appurtenances, they are part of the
electric utilities' entire system of conductors, rather than of poles.  In addition, costs for such equipment are
often included in make-ready expenses that attaching entities pay on an up-front, non-recurring basis.  We
also agree with cable operators and telecommunications carriers that contend the adoption of the electric
utilities' proposals would have the significant disadvantage of requiring the allocation of portions of FERC
accounts into rate-base calculations, turning virtually every rate dispute into a full-blown, discovery-laden rate
case.  

          41.  We affirm the following formula to determine the net cost of a bare pole for electric utilities: 

                                

          42.  Under this formula, Accumulated Depreciation (Poles) represents the share of FERC Account
108 (Accumulated provision for depreciation of electric utility plant (Major only) a composite account that is
required to be maintained on a subsidiary basis, that corresponds to Account 364 (Poles, Towers, and
Fixtures).  Similarly, Accumulated Deferred Income Taxes represents the share of composite FERC Account
190 (Accumulated deferred income taxes) that corresponds to Account 364.  

               3.   Total Number of Poles

          43.  We have previously concluded that poles of 30 feet or less should be included in calculations
of the Cable Formula in our discussion about pole height and the usable space presumption.  Based on our
review of the record in this proceeding, we also conclude that poles of 30 feet or less should therefore be
included in the inventory of the total number of poles owned or used, jointly-owned or solely-owned, by a
utility.  The exclusion of these poles would result in a distorted and inaccurate pole inventory resulting in an
unjust and unreasonable pole attachment rate because they are being used by the utility for their business
services and by cable operators and telecommunications carriers to provide their respective services.

          C.   Carrying Charge Rate (Poles)

          44.  The carrying charge rate reflects those costs incurred by the utility in owning and
maintaining poles regardless of the presence of pole attachments.  The elements of the carrying charge rate
are: administrative, maintenance, depreciation, taxes and cost of capital (rate of return).  In the Pole
Attachment Order, the Commission identified the regulatory accounts to be used, where possible, in
applying the Cable Formula to determine the maximum allowable rate for pole attachments.  The carrying
charge rate factor of the Cable Formula is calculated as follows:  
                                

To calculate the carrying charge rate, the Commission developed a formula that relates each of these elements
to a pole owner's net pole investment.  The full Cable Formula, with all its components, elements and
accounts used, is attached to this Order as Appendix C.

          45.  In May 1986, the Commission adopted a new uniform system of accounts for all FCC
regulated telephone companies.  The Commission's Annual Report Form M was revised on April 27, 1989
to reflect the new accounting system in Part 32 that replaced the accounting system in Part 31, effective
January 1, 1988.  The Pole Attachment Order provided formulas for determining a maximum just and
reasonable pole attachment rate with regulatory accounts identified.  The formula for LECs used Part 31
accounts.  After the New USOA-Part 32 Adoption, the Common Carrier Bureau responded to a request for
clarification of what Part 32 accounts would be used in place of the Part 31 accounts specified in the Pole
Attachment Order.  That guidance was given with the understanding that an exact tracking of  expenses from
Part 31 accounts to Part 32 accounts was not possible.  In this Order, we formalize and further clarify the
Part 32 accounts to be used in the Cable Formula for LECs utilities.  LECs maintain their Part 32 accounts and
file their annual operating costs with the Commission's Automated Reporting and Management Information
System ("ARMIS").  

               1.   The Administrative Element 

          46.  In the Pole Attachment Order, the Commission adopted procedures to identify and calculate
administrative expenses, for use in the carrying charge rate as a ratio of total administrative and general
expenses to total plant investment.  A formula for the administrative expenses was given as follows:

                                

          47.  In the Notice, we proposed the following revised formula, using Part 32
          accounts, for the administrative element for LECs:  

                                

     48.  The substantive changes to the administrative element proposed in the Notice, based primarily
on the adoption of Part 32, included the addition of Accounts 6710 (Executive and Planning), 6720 (General
and Administrative), 6110 (Network Support Expense), 6120 (General Support Expense), 
6534 (Plant Operations Administration Expense), and 6535 (Engineering Expense).  Additionally, we
proposed to exclude Account 6231 (Radio Systems Expense) because we believe that the expenses reported in
this account are unrelated to the administrative element relating to pole attachments.  We also proposed to
exclude what previously were the non-administrative components of Part 31 Accounts 671 (Operating Rents),
672 (Relief and Pensions) and 677 (Expenses Charged During Construction).  

     49.  We affirm our tentative conclusion that the administrative element contain Part 32 Accounts
6710 and 6720 because those accounts contain a comprehensive set of administrative expenses which are
related to operating expenses and capital costs attributable to pole attachments.  Even though some expenses
contained in these accounts are not attributable to pole attachments, the bulk of the expenses are relevant to
plant investment.  It is not necessary to separate out all miscellaneous expenses from the accounts used. 
Notably, there are minimal pole related expenses reported in other accounts that are largely not pole related
and, therefore, not included in our formula calculations.  We do not require the removal of every non-pole
related cost from every account nor do we require every pole attachment cost be pulled from extraneous
accounts.  The LEC utility pole owner is compensated for the pole attachment's use of space on the pole by
the use of the Cable Formula as required by the statute.  Cable operators and telecommunications carriers
support the inclusion of Accounts 6710 and 6720.

     50.  We do not adopt our tentative proposal to include Accounts 6110, 6120, 6534 and 6535. 
Generally, LEC pole owners support the Commission's proposals for adoption of Part 32 and the inclusion of
Accounts 6710, 6720, 6110, 6120, 6534 and 6535.  In contrast, cable operators assert that if Accounts 6110,
6120, 6534, 6535 are used, the attaching entity will be paying for the same expenses twice, once through make
ready charges and again as part of the pole attachment rate.  The cable operator or telecommunications
carrier compensates the pole owner for pole attachments through project specific costs in make-ready
expenses and through rates based on the Cable Formula.  Account 6110, Network Support Expenses,
aggregates a number of different accounts that relate to general equipment cost and maintenance not applicable
to other plant specific operations expenses.  Account 6120, General Support Expenses, aggregates a number
of accounts that relate to expenses and costs not directly attributable to pole attachments, such as art work and
computers.  Account 6534, Plant Operations Administration Expense, includes costs incurred in the general
administration of plant operations that are not transferable to project specific construction and training
accounts.  Account 6535, Engineering Expense, includes costs incurred in the general engineering of the
LEC's  telecommunications plant which are not directly chargeable to a specific project.  If costs are
attributable to a pole attachment specific project, those expenses are recorded in accounts already included in
the Cable Formula.  

     51.  We affirm our conclusion not to include Part 32 Account 6231 in the calculations for the
administrative element because that account reports expenses associated with radio systems  and is unrelated
to poles.  There was no opposition to the exclusion of Account 6231 from the administrative element
calculations.  We also affirm our proposal to exclude the non-administrative expenses previously charged to
Part 31 Accounts 671, 672, and 677, except to the extent the expenses are include in Part 32 Accounts 6710
and 6720. 

     52.  The following formula is adopted to determine the administrative element of the carrying
 charge rate of the Cable Formula for LEC pole owners: 

                                

          2.   The Maintenance Element 

     53.  In the Pole Attachment Order, the Commission adopted procedures to identify and calculate
the maintenance expenses for use in the carrying charge rate as a ratio of expenses included in the utility's pole
maintenance account, to net pole investment.  For purposes of the calculation of the maintenance element,
the denominator is the net pole investment which equals the sum of gross pole investment, minus accumulated
depreciation related to poles, minus accumulated deferred income taxes related to poles.  

               a.   Pole Rental Expenses Paid to a Third Party by LEC Pole Owner

     54.  In the Notice we proposed the following revised formula for the maintenance element for
LEC pole owners, to exclude pole rental expenses paid to third parties by the LEC pole owner, from the
amount reported in Account 6411 (Poles Expense):  

                                
                                

     55.  We affirm our tentative conclusion to exclude rental expenses from accounts that make up
either the administrative or maintenance elements of the carrying charge rate of the Cable Formula.  Based
on the record and current practice, we believe the most economically precise and equitable approach is not to
include rents paid to third parties in either the administrative or maintenance element of the carrying charge
rate for LECs.  These expenses are itemized and reported on Account 6411, and can be verified and removed
from the formula calculations.  The burden should not rest on an attaching entity to discover or determine
whether rents are appropriate for inclusion in the carrying charge rate as some pole owners suggest.  We
disagree that the inclusion or exclusion of rental expenses should depend on what is contracted for in the rental
agreement between the third party pole owner and the LEC "renter."  

     56.  The exclusion of pole rental expenses paid to a third party is necessary to avoid the attaching
entity compensating the LEC pole owner for expenses related to the LEC pole owner's core business expenses
rather than capital costs of providing pole attachments as required by Section 224(d)(1).  Account 6411
includes the rents paid by the LEC to electric utilities for the LEC's use of the electric utility's poles for the
LEC's own core business.  Cable operators and telecommunications carriers pay to LECs pole attachment
rental fees to attach to LEC poles, and may also independently pay rental fees to the electric utility to attach to
their poles.  Inclusion of the LEC's rental fees paid to the electric utility in the Cable Formula would result in
the cable operator or telecommunications carriers subsidizing the LEC's own pole rental fees and paying the
electric utility twice.  We disagree that inclusion of pole rental expenses is appropriate because the costs are
incurred in relation to plant administrative expenses.  We are not persuaded that the inclusion of these rents
in pole attachment rate computations is appropriate just because it represents a business expense incurred by
the LEC to conduct its core business.  

               b.   FERC Account 590

     57.  In the Pole Attachment Order, the Commission adopted the following formula to determine
the maintenance element of the carrying charge rate for use by electric utility pole owners:

                                

     58.  In the Notice, we sought comment on whether a portion of the expenses recorded in FERC
Account 590 (Maintenance Supervision and Engineering) should also be included in the numerator of this
equation if the cost of labor and expenses reported in that account relates to poles.  If so, we inquired what
amount of those expenses should be allocated to the pole maintenance carrying charge.  Electric utilities record
the cost of labor and expenses incurred in the general supervision and direction of the distribution system
maintenance in Account 590.  A portion of the amount in Account 590 may support supervision of the
maintenance of the pole line investment.  The amount in this account, however, also applies to distribution
plant other than poles and conduit.  If used, the amount from the account would have to be adjusted.  In the
Notice, we tentatively concluded that some identifiable portion of the expenses recorded in Account 590
should be included in the maintenance element of the carrying charge rate of the Cable Formula. 

     59.  As a result of our review of the record in this proceeding, we reject our tentative conclusion. 
We believe that any increased accuracy that would be derived from including the minute percentage of pole
related expenses that may be included in Account 590, is outweighed by the complexity of arriving at an
appropriate and equitable percentage of the expenses.  The elements are not designed to be all inclusive nor are
they intended to exclude all non-pole related expenses in the interest of simplicity.  Utility pole owners are
adequately compensated for their costs of providing space in which an attaching entity can attach facilities
necessary to support its cable or telecommunications services through the Cable Formula components.  The
methodology used to arrive at a pole attachment rate should be simple and based preferably on publicly
identifiable and verifiable data.  In our view, the existing formula for the maintenance element of the
carrying charge rate achieves that objective.  

     60.  Electric utility pole owners assert that Account 590 expenses are appropriate for inclusion in
carrying charge rate factor of the Cable Formula.  Edison Electric/UTC suggests a factor of two percent of
Account 590 would be appropriate, while Ohio Edison contends that 22% of the expenses in Account 590
could be allocable to pole maintenance.  Sprint expressly supports the use of Account 590 data.  Cable
operators contend that Account 590 is designed to cover maintenance costs that have little or no nexus to the
pole network and attachment of communications facilities to such poles and that actual maintenance expenses
associated with poles, conductors and services (drops) are already accounted for in other accounts.  Further,
cable operators contend that the amount of return possible is not justified by the level of detail and calculation
required.  

     61.   We disagree with electric utilities that Account 590 should be included in the carrying charge
rate factor of the Cable Formula just because the expenses relate to the maintenance of a distribution system
which may include poles.  The description of Account 590 advises that "direct field supervision of specific
jobs shall be charged to the appropriate maintenance account."  To the extent that pole owners are able to
specifically identify and report maintenance costs related to poles on which there are pole attachments, those
expenses should be included in Account 593 on which the maintenance element is currently based. We are
not persuaded that any residual expense related to poles that may be included in this account is significant.
     
          3.   The Depreciation Element 

     62.  In the Pole Attachment Order, the Commission adopted the following formula to determine
the depreciation expense for use in the Cable Formula:  

                                

     63.  For the purpose of the formula calculations, net pole investment is identified as gross pole
investment minus the depreciation reserve (also known as accumulated depreciation) related to poles minus
accumulated deferred income taxes related to poles.  Under 47 C.F.R. Part 32, Section 32.22(a), LECs are
required to provide their current and non-current deferred tax data in Accounts 4100 and 4340, respectively. 
The formula for the net cost of a bare pole includes accumulated deferred taxes which are derived by adding
Accounts 4100 and 4340.  The sum of these two accounts is then multiplied by the ratio of gross pole
investment to total gross plant investment to calculate the net deferred operating income taxes for poles. 

     64.  Some LEC pole owners assert that, because pole removal costs typically exceed gross salvage
proceeds by a wide margin, negative net salvage values and, consequently, negative or unusually low pole
attachment rates may occur late in a pole's useful life.  For example, if each of the five carrying charge formula
components equals 10%, the total carrying charge rate would be 50%.  This rate would then be multiplied by
net pole investment, expressed on a per pole basis as net cost of a bare pole, and the percentage of usable pole
space occupied by a cable operator or telecommunications carrier, to determine the maximum just and
reasonable rate per pole.  Since the Cable Formula calculation involves the multiplication of these three
factors, two of which would be positive and one negative, a negative rate could result if the LECs assertions
proved true.

     65.  The Cable Formula methodology anticipates depreciation rates at levels sufficient to provide
each utility pole owner the opportunity to recover its plant investment on a straight-line depreciation basis over
the life of the associated plant.  In the Notice, we proposed to revise the depreciation element of the Cable
Formula.  We sought comment on the scope of the problem outlined in the SWB Petition and inquired as
to the number of jurisdictions where accumulated depreciation balances currently exceed gross pole
investment, or may in the near future.  In instances where commenters believe that a modification of the pole
attachment formula is necessary, we sought comment on appropriate adjustments and the circumstances in
which the adjustment should be made.  We sought comment to determine whether net salvage value is
appropriate to include in the depreciation rate or whether the application of the depreciation rate formula leads
to negative net pole investment results.  

     66.  In the Notice, we also sought comment on whether, due to the frequency with which
accumulated depreciation balances exceed gross pole investment, a modification of the Cable Formula is
necessary.  Four LEC pole owners report that they currently have negative pole values due to the results of
calculations using negative net pole salvage values.  Two other LEC pole owners predict they may
experience negative net pole values in the future.  Electric utilities report their costs of removal by different
accounting methods than LECs and do not experience negative results.  Cable operators and some
telecommunications carriers assert the reports of negative pole value are either anomalies of the accounting
practices used, or are mathematically impossible.

          67.  We find that there is some merit in all of the comments received.  The
          problem arises from the net pole investment formula itself, under which:
                                
For LECs, the Accumulated Depreciation balance includes both the depreciation attributable to Gross Pole
Investment and depreciation attributable to removal costs.  However, Account 2411 does not include removal
costs.  Instead, removal costs are subtracted from gross salvage proceeds to arrive at future net salvage value. 
Therefore, the Accumulated Depreciation balance will ultimately exceed Gross Pole Investment, leading to
negative net pole valuations.  As a general matter, these atypical results are also fueled by the materiality of
pole removal costs.  For most telecommunication asset classes, removal costs represent a small percentage of
gross investment and are usually less than gross salvage proceeds.  However, poles are an anomaly in this
regard.  Future Net Salvage values average -73%, meaning that removal costs dwarf gross salvage proceeds,
and represent a large percentage of Gross Pole Investment.  Applying the depreciation of removal costs to
Gross Pole Investment, therefore, accelerates the recovery period of Gross Pole Investment by over 40%.  

     68.  As a remedy, some commenters suggested setting a minimum value for net pole investment
at the last positive valuation to occur under our current formula.  Although we agree that this would preclude
negative results, it would not cure the fundamental mismatch between the components of the Gross Pole
Investment and Accumulated Depreciation calculations.  Moreover, investment returns based on the difference
between Gross Pole Investment and Accumulated Depreciation as defined presently are understated to the
extent that removal cost depreciation is reflected in the Accumulated Depreciation balance.  This inequity
would persist if last positive valuations were used.  Finally, last positive valuations would vary among
operators and lead to inconsistent results.  

     69.  Instead, we will eliminate the cause of the negative results.  Specifically, when the
Accumulated Depreciation attributable to removal costs is isolated as an offset to gross removal costs under
the future net salvage calculation, negative results are eliminated.  This allows a proper matching of
depreciation and corresponding sources, and provides an accurate basis for calculating investment returns. 
Account 3100, as used in the Cable Formula, is redefined to include only that portion of Account 3100 which
arises from the depreciation of Account 2411.  The remaining component of Account 3100, accumulated
depreciation for removal costs, is netted separately under the future net salvage calculation.  The total
depreciation recovery remains unchanged, but the risk of negative carrying charge components has been
eliminated.  The LECs recovery basis is now comparable to that of electric utility pole owners.

     70.  Consequently, for the purposes of all affected formulas, we redefine Net Pole Investment as:
                                
where Accumulated Depreciation (Poles) includes only that portion of Account 3100 which arises from the
depreciation of Account 2411.  The portion of Accumulated Depreciation (Poles) attributable to removal costs
shall be treated as an offset to gross removal costs when calculating future net salvage value.  

          4.   The Taxes Element 

     71.  In the Notice, we sought comment on whether the taxes element of the carrying charge rate
of the formula used for LEC pole owners should reflect certain tax-related accounts.  We also proposed that
changes from Part 31 to Part 32 accounting for LEC pole owners should be reflected under the following
formula:  

                                

     72.  We believe the proposed accounts and methodology for the taxes element of the carrying
charge rate provide utility pole owners with appropriate compensation when used under the Cable Formula. 
Although a one-to-one matching of tax elements from Part 31 to Part 32 may not be achievable in all instances,
we believe the proposed tax element formula will provide reasonable results in an expeditious manner. 
Basing the tax element of the carrying charge rate on pole investment, rather than plant investment as proposed
by utility pole owners, may produce results decidedly different from the actual tax experience of pole owners
and are subject to manipulation.  Similarly, the application of statutory tax rates instead of tax rates based on
actual individual experience are likely to produce overstated tax carrying charge rate that would result in
artificially higher pole attachment rates.  

     73.  We affirm the use of our proposed formula.  Our policy in applying the Cable Formula does
not eliminate all non-pole related expenses from all accounts used in the carrying charge rate.  We are not
required to disaggregate accounts to eliminate possible non-pole related investments or expenses, nor are we
required to scour all utility accounts for every dollar that may benefit a pole attachment.  We do not believe
the statutory Federal income tax rate, rather than actual taxes paid, should be used in calculating the taxes
element of the carrying charge rate factor of the Cable Formula because the actual taxes paid are readily
available from the utility pole owners' regulatory agency data.

          5.   The Rate of Return Element 

     74.  The rate of return element is currently taken from the rate of return authorized for the
utilities' intrastate services.  In the Notice, we noted that this policy implicitly assumes that the states will
continue to regulate utility rates on a rate of return basis, when in fact many states are moving away from that
method of regulation and have adopted incentive-based regulation.  We tentatively concluded that in such
cases the authorized intrastate rates of return will not reflect the utilities' costs of capital.  

     75.  The Commission has adopted an annual rate of return for the interstate access services of
LECs of 11.25%.  In the Notice, we sought comment on whether 11.25% should be used as the rate of return
when calculating the carrying charge rate factor of the Cable Formula, for utilities in states that no longer
regulate that utility on a rate of return basis.  In the Notice, we proposed the following as the return
element of the carrying charge rate for use in the Cable Formula:

                                
                                
     76.  We affirm our tentative conclusion to continue the use of the rate of return authorized by the
state for intrastate services of the utility, when available.  Commenters generally agree that the rate of return
set by the Commission for LECs, as modified from time to time, is a reasonable default rate of return for use
in the Cable Formula when an actual rate of return is not prescribed by the state.  NCTA points out,
however, that, if the utility's actual realized rate of return is lower than the default, it would be inequitable to
allow it a higher rate of return than its actual rate.  We believe that the use of the default rate of return is an
equitable solution, in those instances when a state has not prescribed a rate of return for a utility covering the
period of time in which rates were in dispute.  We adopt as the default rate of return, the rate of return set by
the Commission for LECs, covering the appropriate period, as it is modified from time to time.  We believe
this serves our policy of using default rates to expedite the Cable Formula calculations.  

VI.  FORMULA FOR DETERMINING ATTACHMENT RATES FOR CONDUITS

     A.   Background  

     77.  Conduits are structures that provide physical protection for cables and allow new cables to be
added inexpensively along a route, without having to dig up the landscape, streets and other structures in the
community each time a new cable is installed.  A collection of conduits, together with their supporting
infrastructure, constitutes a conduit system.  A conduit consists of one or more ducts, which are the
enclosures that carry the cables.  Often, when cable system or telecommunications carriers' cables are placed
in a duct, three or more inner ducts are inserted into the duct allowing "one duct to be treated more like
conduit."  Section 224 provides that for conduit, the capacity of the conduit is the equivalent of usable space
in the pole context. 

     78.  Congress authorized the Commission to regulate rates, terms, and conditions for pole
attachments in ducts and conduits under Section 224 which states:  

                     . . . a rate is just and reasonable if it assures a utility the recovery of not less than the
          additional costs of providing pole attachments, nor more than an amount determined by
          multiplying the percentage of the  . . . total duct or conduit capacity, 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 . . . duct [or] conduit. 

The 1977 Senate Report outlined Congressional intent regarding the methodology the Commission should
apply when determining whether a rate was just and reasonable for pole attachments on poles and in ducts,
conduit and rights-of-way.  It was not until 1996, however, that the Commission had before it a complaint
about rates charged by a utility for attachments in a conduit.  

     79.  In the Notice, we sought comment on application to conduits of the attachment formula
used to calculate the maximum rate for poles, and on several issues relating to how to determine the percentage
of capacity occupied by an attachment: how to identify the total capacity and costs attributable to the
conduit, and whether conduit owned by an electric utility is sufficiently different from conduit owned by a
LEC or other utility to warrant special treatment.  The conduit methodology proposed in the Notice to
determine the maximum just and reasonable rate per attachment is represented as follows:

                                

          80.  This formula follows the same methodology that we use for determining just
          and reasonable rates for pole attachments on poles, and uses a half-duct rebuttable
          presumption for capacity used by a pole attachment in a conduit.  The Commission first
          applied this adaptation, based on the unique characteristics of duct and conduit systems, in
          Multimedia Cablevision, Inc. v. Southwestern Bell Telephone, where the Commission
          concluded that it was a simple and efficient mechanism for establishing a conduit rate
          consistent with Section 224.  
                                
                                
     B.   Discussion

          1.   Conduit Formula Methodology

     82.   Just as we use the entire pole inventory for establishing a rate for pole attachments to poles, we
believe it is appropriate to use system-wide data for establishing the maximum rate for conduit.  Some electric
utilities argue that, due to disparities in cost between urban and suburban conduit, using system-wide costs will
not provide adequate compensation.  We note, however, that the electric utilities that raise the issue have
themselves proposed calculating the carrying charges on a system-wide basis.  Similarly, as has been pointed
out by Time-Warner and NCTA, calculating the cost of the conduit on a system-wide, or averaging, basis will
adequately compensate the utilities. 

     83.  We are not persuaded by the electric utilities' contentions that they lack the detailed information
necessary to apply the proposed formula.  They assert that use of specific FERC accounts is inconsistent
among utilities.  Necessary figures are available in underlying records filed to support claims in sworn FERC
submissions, and only in rare instances would a utility lack detailed information because it has no records. 
Where such records do not exist, other sources of information may be used.  Electric utilities have
demonstrated their ability to calculate a rate by applying the formula.  Although the conduits which comprise
a conduit system may vary widely from urban to suburban or rural locales, we will use the system-wide
historical cost of the conduit in the formula.

          2.   Conduit Physical Characteristics

     84.  In the Notice, we asked whether there are physical differences between conduit owned and used
by electrical or other utilities and conduit owned by cable systems or telecommunications carriers that would
affect the rates for attachment to conduits.  We hypothesized that there would be differences related to
conduit construction, maintenance and safety.  We asked whether these differences should affect the rate for
these facilities.  

     85.  Some electric utilities comment that such differences do exist and should have an impact on the
rate.  Specifically, they assert that electric conduits have safety and reliability considerations that warrant
special caution due to potential dangers to untrained personnel, electric equipment, and high voltage
requirements and that such concerns require special procedures and precautions.  They argue that these
necessary precautions translate into additional costs and, therefore, impact just and reasonable rates.  These
costs, however, are currently reflected in the rates.  Infrastructure investment required to assure safety and
reliability is captured in the accounts used to calculate the net book value of the respective types of conduit. 
Special precautions related to placement of communications cables in conduit are included in make-ready
costs. All special precautions taken in maintenance of the system are reflected in the maintenance element of
the carrying charge rate.  

          3.   Factors of the Conduit Formula

     86.  The first factor of the formula, Conduit Capacity, is determined using the following variables: 


"No. of Inner Ducts" is the number of inner ducts placed in the duct.  If there are no inner ducts the value
would be presumed to be two, reflecting the rebuttable presumption that not more than half of a duct is
occupied.

"No. of Ducts" is the total number of ducts in the conduit system.  This number does not include collapsed or
otherwise damaged ducts that are not repairable.  In general, this would be presumed to be the average number
of ducts per conduit for the system.

     87.  The second factor of the formula, Net Linear Cost of Conduit, is determined using the
following additional variables:

"Net Conduit Investment" is gross conduit investment less the accumulated depreciation and accumulated
deferred taxes.

"System Duct Length" is the sum of the length of all ducts in the system minus the length of collapsed ducts
and the length of ducts that for other reasons are physically unable to contain cable.  The System Duct Length
may be arrived at in one of three ways:  First, it may be obtained from available records.  Second, the length
of the conduit in the system may be multiplied by an estimated average number of ducts per conduit.  Third,
the length of all ducts in the system is the sum of the products of the length of each conduit times the number
of ducts in that conduit.

     88.  Calculation of the maximum rate may be simplified by using the presumptions and using the
Net Linear Cost of a Conduit for the second term in the formula.  The formula then is, essentially, our
proposed formula:
                                
                                
We discuss in greater detail below each of the factors within the formula.

               a.   Percentage of Total Capacity Occupied

                    i.   Total Duct or Conduit Capacity 

     89.  The total capacity of a duct or conduit is the entire volume of available capacity in the conduit
system.  All costs associated with the construction of the conduit system are considered in determining the
cost of this total capacity.  In the Notice, we sought comment on how to allocate capacity for various uses in
a conduit, and whether a utility may eliminate some of its conduit capacity from the total capacity as used
in the formula, by reserving some capacity for use for maintenance, future business needs, or for space set-
aside for use by a state or local government.  A utility may designate a maintenance duct so that if a cable in
another duct fails, a temporary cable may be placed in the maintenance duct and spliced into the damaged
cable. A duct so designated is usable in the event it is needed and, therefore, is part of the conduit capacity. 
Municipal ducts are those that may be allocated for the use of the local government as a condition in a
franchise, license, right-of-way or other agreement.  Where a duct is required by the municipality to be set
aside for potential future use, in the nature of consideration as a condition for a license, franchise, or permit,
the costs attributable to that unused capacity are part of the total cost of the conduit.  The utility is compensated
for those costs as part of its net conduit investment and/or in the carrying charge rate.  Ducts may be reserved,
or kept unused to be available to the utility for expansion of its core business services.

     90.  The question of reducing the amount of total capacity of a duct or conduit based on some
theoretical or potential need, unduly complicates the conduit formula methodology.  The clear language of
the statute dictates that the amount of "total duct or conduit capacity" is to be used when calculating a
percentage of capacity occupied by a pole attachment.  We will not allow capacity designated for maintenance,
future business plans, or municipal set-asides to be subtracted from the total duct or conduit capacity.  The
record supports our finding that capacity in a duct or conduit that is usable for any of these purposes is part of
the "total duct or conduit capacity."  A methodology which attempts to account for any possible variations
would require substantial oversight and regulation to prevent abuses or over recovery.  Such regulation and
complexity would be contrary to the clear language of the statute.  

     91.   Ducts which have collapsed or are otherwise damaged and are no longer available for pole
attachments should not be included in the capacity of a conduit or duct.  Some of these ducts can be
repaired.  Ducts that cannot be restored no longer provide capacity to the conduit and, by definition, do not
constitute ducts.  

                    ii.  Occupied Capacity, the Half-Duct Presumption

     92.   Presumptions are used in the Cable Formula to expedite the calculations of a just and
reasonable rate so that complicated surveys, accounting and calculations may be avoided.  We proposed and
sought comment on a methodology that presumes rebuttably that an attachment in a conduit occupies one half
of a duct, and invited additional proposals to make the methodology simple and administratively efficient. 


     93.  We retain the rebuttable presumption adopted in Multimedia Cablevision that an attacher
occupies one half of a duct, and no more.  There we accepted the findings of the Massachusetts Department of
Public Utilities that a cable system attachment occupies only one-half of a duct, does not preclude the use of
the other half of the duct, and that, therefore, the cable system should not be charged for the use of the entire
duct.  The record supports the retention of this presumption.  

     94.   Some electric utilities assert, however, that an electric supply cable cannot share a duct with
a communications cable, and, therefore, from the electric utility point of view, the communications cable
occupies the entire duct.  Some of these utilities also point out that for certain electric supply cables,
minimum spacing requirements do not permit a communications cable in an adjacent duct, and, therefore, from
their point of view, the communications cable occupies the adjacent ducts as well.  The situation is
somewhat analogous to the safety space on a pole although it does involve a NESC prescribed exclusion zone
around the electric supply cable.  Electric utilities do not dispute that the capacity is usable, but argue that the
full capacity of the duct is occupied by the communications cable because the electric utility is prevented from
using that capacity by the NESC.  Communications cables may, and often do, share a duct.  The NESC
requires that, where electric supply cables share a duct with communications cables, the cables be maintained
by the utility.  It cannot be said, therefore, that any given communications cable occupies a whole duct.  If
the electric supply cable excludes other cables from the duct it occupies, it is that electric supply cable that
occupies the entire duct, not the communications cables it excludes.  Similarly, if the electric supply cable
cannot tolerate communications cables in adjacent ducts, then the electric utility's supply cable effectively
occupies those adjacent ducts not the communications cable.  Conversely, if the electric supply cable cannot
be placed in a duct because the duct is partially occupied by a communications cable, the reason is that the duct
contains less available capacity than the electric supply cable requires.  The capacity is available to other
communications cables and is, therefore, not occupied.

     95.  Some cable operators assert that even the application of the half-duct methodology will result
in rates that are unreasonably high in light of current inner-duct technology.  The term "inner-duct" generally
refers to small diameter (1" or 1") pipe or tubing placed inside a conventional duct to allow the installation
of multiple wires or cables.  Use of inner-duct is a common practice.  Some electric utilities recommend that
we require the first attacher in a previously unoccupied duct to install inner-duct.  The cost of the inner-duct
would, presumably, be considered a make-ready cost.  Ameritech urges that a presumption of less than one
half of a duct would reflect what is possible, but not what is currently in place and what is practical under
existing conditions.  We will not require installation of inner-duct.  The half-duct presumption is rebuttable,
and the presence of inner-duct is adequate rebuttal.  We have made direct provision in the formula for that
contingency.  Where inner-duct is installed, either by the attacher or in a previous installation, the maximum
rate will be reduced in proportion to the fraction of the duct occupied.  That fraction will be one divided by the
number of inner-ducts in the duct, so that a default presumption of capacity occupied is one-half duct, or the
actual percentage of capacity occupied.  

          4.   Net Linear Cost of Conduit 

     96.  As indicated in the Notice, in the conduit context, we use the net linear cost of the conduit, as
compared to the net cost of a bare pole, as one factor within the formula for determining the rate.  The Notice
presumed, without discussion and without specifically seeking comment, that utilities would be capable of
determining this figure.  As the net cost of a bare pole reflects the total system investment for the above ground
pole attachment infrastructure, to arrive at a system investment for use in the conduit formula we identify the
net linear cost of the conduit system.  To accomplish this, the utility must first  establish the Net Conduit
Investment as discussed below.

               a.   Net Conduit Investment

     97.  The formula requires the determination of the utility's net linear cost of its conduit system.  The
Net Conduit Investment is calculated as follows: 

                                

     98.  Gross Conduit Investment for the LEC consists of Part 32 Account 2441.  For the electric
utility, Gross Conduit Investment is reflected in FERC Part 101 Account 366.  For LECs, Accumulated
Depreciation (Conduit) represents the share of ARMIS Account 3100 that corresponds to Account 2441.  For
electric utilities, Accumulated Depreciation (Conduit) represents the share of FERC Account 108 that
corresponds to Gross Conduit Investment valuations included in Account 366.

     99.  In the Notice we proposed a formula for the calculation of accumulated deferred income
taxes for conduit.  The formula is shown as:

                                

     100. Total Accumulated Deferred Income Taxes for electric utilities are based on FERC Account
190.  However, LEC conduit owners object to this formula on the basis that the actual amount of
Accumulated Deferred Income Taxes for conduit is available directly from the LEC's books.  BellSouth
maintains that because it is required to keep separate and accurate records of accumulated deferred income
taxes for poles and conduit, our formula will improperly introduce non-conduit related deferred taxes into rate
calculations.  NCTA argues that LECs should not use accumulated deferred income taxes figures taken from
the LEC's books because the information is not publicly available.

     101. The Pole Attachment Order did not specifically require the use of proration as a method to be
used in the calculation of the net costs of a bare pole, which we apply in this context for conduit, and only
noted that accumulated deferred income taxes were to be used in calculations.  Our goal has always been to
adopt a formula which set the maximum rate using publicly available data, in a fair and expeditious manner. 
We also have a policy against requiring additional accounting procedures so long as the information is
available from the utilities upon reasonable request.  As the LEC conduit owner is required to keep this data
precisely as required for the formula, we will allow them to use it in the rate calculation.  

     102. To determine the net conduit investment for conduit owned by an electric utility, we base the
gross conduit investment on Account 366.  Edison Electric/UTC suggests that portions of Accounts 367
(Underground conductors and devices) and 369 (Services) should be included.  We disagree.  Conductors
and related devices are part of the utility's core business services' infrastructure, and such capital expenses are
not included in the Cable Formula for poles.  Account 367 may include some costs of installed materials that
provide support for the conduit system, but such a portion of that account is reflected in the maintenance
element calculations.  The electric utility has an opportunity to recover appropriate expenses reported in those
accounts in the carrying charges.  

     103. We also reject electric utilities' suggestions that portions of Accounts 580 (Operation -
Supervision and Engineering) and 583 (Operation - Overhead Line Expenses, Major Utilities Only) should be
included, even if they may contain some expenses incurred with respect to the electric power distribution
plant.  The descriptions of the expenses included in FERC Part 101 Accounts 367, 369, 580 and 583, relate
directly to the electric utilities' core business operations rather than "actual capital costs attributable to the
entire pole, duct, conduit or right-of-way."  The same appears true of FERC Accounts 357 (Underground
Conduit), 358 (Underground Conductors and Devices), 371 (Installation on Customer Premises), and 373
(Street Lighting and Signal Systems) which are also not included in the formula.

               b.   System Duct Length

     104. The denominator for the Net Linear Cost of Conduit element within the formula is based on
duct length.  In the Notice we indicated that duct length could be stated as per linear meter or per linear foot. 
In response, some electric utilities argue that they are not capable of readily computing conduit investment on
per linear foot or meter basis because FERC accounts associated with underground system only track dollar
values and not linear measurement.  The record indicates that the utilities often have the data required for the
calculations and, when they do not have the data they can estimate it from the data they have.  The net cost
data is available from FERC reports and, although electric utilities are not required to report the linear footage
of conduit deployed, we are informed that they routinely produce linear footage data during state conduit rate
proceedings.  Electric utility corporate or engineering departments have records on installed plant. 
Moreover, as NCTA observes, when a utility is unable to obtain the requisite data, information from other
sources may be used.  A determination of the total length of duct and conduit in the system can be made with
a precision comparable to that reached in determining the number of poles owned by the utility.  The utility
must, however, specify the method used for computing the duct length and must disclose this information to
all attachers upon request.  

     5.   Carrying Charge Rate (Conduit)

     105. The elements of the carrying charge rate are: administrative, maintenance, depreciation, taxes
and rate of return.  In the Pole Attachment Order, the Commission identified the regulatory accounts to be
used, where possible, in applying the Cable Formula to determine the maximum allowable rate for pole
attachments on poles.  The Commission addressed the pole attachment formula and accounts to be used for
determining a pole attachment rate for LEC-owned conduit systems in Multimedia Cablevision.  The
accounts to be used for an attachment rate for a conduit system owned by an electric utility will be accounts
reported to FERC that are comparable to the LEC accounts identified in Multimedia Cablevision,  as
discussed in this Order. 

     106. To calculate the carrying charge rate, the Commission developed a formula that relates each of
these elements to a utility's net plant investment appropriate to the location of the pole attachment (e.g., poles,
conduit system, right-of-way).  That formula is:
                                

     107. The administrative, taxes, and rate of return elements will be the same for use in a formula for
pole attachments in conduits and rights-of-way as on poles.  We have already discussed those elements, and
the appropriate accounts and methodologies to develop the figures to be used in the full formula in previous
sections and will not repeat our discussion here.  The maintenance and depreciation elements, with the
accounts and methodologies specific to conduits, are discussed in this Order.  The Cable Formula for
application to attachments in conduits owned by LEC and electric utilities, with all components, elements and
accounts used, are attached to this Order as Appendix C-3 and C-4, respectively.  

               a.   Maintenance Element

     108.      In the Pole Attachment Order, the Commission adopted procedures to identify and calculate the
maintenance expenses for use in the carrying charge rate as a ratio of expenses included in the utility's
maintenance account, to net investment.  For purposes of the calculation of the maintenance element, the
denominator is the net investment which equals the sum of gross investment, minus accumulated depreciation
related to conduit systems, minus accumulated deferred income taxes related to conduit systems.  

                    i.   LEC owned Conduit

     109. In the Notice, we proposed the following methodology for the maintenance element of the
carrying charge rates of the Cable Formula for LEC conduit owners:

                                

     110. We affirm the use of our proposed formula to determine the maintenance carrying charge rate
element for LEC owned underground conduit systems.  Account 2441, which unlike Account 2411 (used as
the gross pole investment to determine the net cost of a bare pole) includes no non-cable related investment
that supports LEC operations exclusively and, consequently, does not require the application of an adjustment
factor.  Telecommunications carriers and LEC commenters support our conclusion that manhole costs
included in Account 2441 are suitable for recovery as underground conduit system costs.  

                    ii.  Electric Utility Owned Conduit 

     111. The formula and accounts to be used for the maintenance element of the carrying charge rate
of the Cable Formula for electric utility conduit owners is determined by applying FERC accounts analogous
to those LEC accounts used in Multimedia Cablevision, as follow:  

                                

     112. FERC Account 366 contains capital costs for installed underground conduit and tunnels used
for housing distribution cables or wires.  For electric utilities, Accounts 367 (Underground Conductors and
Devices) and 369 (Services), and corresponding maintenance expenses are included in Account 594
(Maintenance of underground lines).  Some electric utilities suggest inclusion of Accounts 580 (Operation
and Supervision), 584 (Operation of Underground Lines), 588 (Miscellaneous Distribution Operation
Expenses), 590 (Maintenance Supervision and Engineering-Major Only), and 598 (Maintenance of
Miscellaneous Distribution Plant).  Accounts 580, 584, 588 are operational accounts which report expenses
relating to the utility's core business services and not pole attachments.  We have addressed inclusion of
Account 590 above and do not include that account in the Cable Formula for poles.  Account 598 is a
miscellaneous account related generally to maintenance of equipment on customer premises and is not
associated with pole attachments in conduit.  We will not include any portion of Accounts 580, 584, 588,
590 or 598 in the denominator of the maintenance element because the costs or expenses reported to these
accounts do not reflect "operating expenses and actual capital costs of the utility attributable to
the . . . conduit."  

               b.   Depreciation Element

     113. In the Notice, we proposed a formula to determine the depreciation element for conduit as
follows:  
                                

     114. Consistent with our discussions and conclusions above, we are excluding FERC Accounts 367
and 369 from the numerator for this equation for electric utility conduit owners.  Therefore, only FERC
Account 366 will be used as a basis for Gross Conduit Investment under the formula for electric utilities.  For
LECs, ARMIS Account 2441 represents the corresponding Gross Conduit Investment account under the
formula.  We adopt our proposed formula, as modified, as follows: 

                                

VII. FINAL REGULATORY FLEXIBILITY ACT ANALYSIS

     115. As required by the Regulatory Flexibility Act ("RFA"), an Initial Regulatory Flexibility
Analysis ("IRFA") was incorporated in the Notice.  The Commission sought written public comment on the
proposals in the Notice including comment on the IRFA.  The comments received are discussed below.  This
present Final Regulatory Flexibility Analysis ("FRFA") conforms to the RFA.

                         1.   Need for, and Objectives of, the Order

     116. In 1987, the Commission adopted its current pole attachment formula for calculating the
maximum just and reasonable rates utilities may charge cable systems for pole attachments.  Since then the
Commission replaced its accounting system for telephone companies, creating Part 32.  This created a need to
advise telephone companies about how the new system should be used in the pole attachment formula.  The
Telecommunications Act of 1996 made pole attachment rules applicable to telecommunications providers. 
The existing pole attachment formula applies to them until February 8, 2001.  This gave rise to a need to
ensure that the pole attachments rules would appropriately accommodate these new attachers. The use of
conduit by cable systems and had not yet been addressed in detail by the Commission.  This needs to be done
in light of the anticipated number of new attachers whose entry into the marketplace the Commission wishes
to facilitate.  We recognize that a significant number of new attachers might be small businesses.

     117. The objectives of the rules adopted herein are consistent with Congressional intent to provide
a clear methodology to determine just and reasonable pole attachment rates in a manner that uses publicly
available and verifiable data whenever possible.  The objectives of the rules adopted herein change the formula
methodology used to determine a just and reasonable pole attachment rate to reflect the present Part 32
accounting system for telephone companies that replaced the former Part 31 rules in 1988.  Finally, the
objectives of the rules adopted herein are to identify a conduit methodology that will determine the maximum
just and reasonable rates utilities may charge cable operators and telecommunications carriers for pole
attachments to conduit systems.  Although our rules do not differentiate between large and small businesses,
our use of presumptions and publicly available data in our methodology ensures that small businesses will not
be discouraged from seeking recourse with the Commission against the imposition of unreasonable pole
attachment rates. 

                         2.   Summary of Significant Issues Raised by Public Comments In Response to the
               IRFA

     118. Small Cable Business Association ("SCBA") filed comments in response to the IRFA
contained in the Notice, and, to the extent they are relevant to the issues in this proceeding, we incorporate
them herein by reference.  SCBA claims in its IRFA comments that, because of the statutory exclusion of
cooperatives from the definition of utility, Section 224 does not minimize market entry barriers for small cable
operators.  According to SCBA, the IRFA in the Notice fails to consider this issue.  SCBA claims that
small cable systems will be particularly hurt by the statutory exemption of cooperatives from the definition of
utility because small cable systems often operate in rural areas and therefore necessarily attach their plant to
rural telephone and electric cooperatives.  In its Reply to the SCBA's comments, the National Telephone
Cooperative Association responded that " . . . the exemption [of cooperatives from Section] 224 does not
deprive SCBA members of available legal remedies in connection with pole attachment agreements negotiated
with exempt electric or telephone cooperatives."  We note that the SCBA does not appear to be claiming that
our rules will disproportionately burden small cable systems, but that where our rules do not apply, small cable
system operators will be disproportionately harmed.  Because the exemption for cooperatives was set forth by
Congress clearly in Section 224(a)(1), the Commission is left no discretion to address SCBA's concerns in this
regard.  In general comments, the National Cable Television Association ("NCTA") acknowledged that:  

     The benefits [of the Commission's current pole attachment regulatory regime] are most vivid
     in the case of small cable operators.  Small operators are peculiarly vulnerable to pole rent
     overcharges, because of the nature of their service areas.  The Commission has recognized
     that small systems serve areas that are far less densely populated areas than the areas served
     by large operators.   A small rural operator might serve half of the homes along a road with
     only 20 homes per mile, but might need 30 poles to reach those 10 subscribers.  A pole rent
     increase creates an enormous push on [cable] rates, and frequently makes rural line extensions
     uneconomical.  These same small operators are often the very parties without the budgets to
     litigate expensive document-intensive rate cases.

The NCTA's comments recognize that the Commission's chosen methodology does not excessively burden
small businesses.

                         3.   Description and Estimate of the Number of Small Entities To Which Rules Will
               Apply

     119. The RFA generally defines a "small entity" as having the same meaning as the terms "small
business," "small organization," and "small governmental jurisdiction."  In addition, the term "small
business" has the same meaning as the term small business concern under the Small Business Act.  A "small
business concern" is one that:  (1) is independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the Small Business Administration
("SBA").  For many of the entities described below, the SBA has defined small business categories through
Standard Industrial Classification ("SIC") codes.

               a.   Utilities

     120. Many of the decisions and rules adopted herein may have a significant effect on a substantial
number of utility companies.  Section 224 defines a "utility" as "any person who is a local exchange carrier or
an electric, gas, water, steam, or other public utility, and who owns or controls poles, ducts, conduits, or rights-
of-way used, in whole or in part, for any wire communications.  Such term does not include any railroad, any
person who is cooperatively organized, or any person owned by the Federal Government or any State."  The
SBA has provided the Commission with a list of utility firms which may be effected by this rulemaking. 
Based upon the SBA's list, the Commission concludes that all of the following types of utility firms may be
affected by the Commission's implementation of Section 224.  

                    (1)  Electric Utilities (SIC 4911, 4931 & 4939)

     121. Electric Services (SIC 4911).  The SBA has developed a definition for small electric utility
firms.  The Census Bureau reports that a total of 1379 electric utilities were in operation for at least one year
at the end of 1992.  According to SBA, a small electric utility is an entity whose gross revenues did not exceed
five million dollars in 1992.  The Census Bureau reports that 447 of the 1379 firms listed had total revenues
below five million dollars.

     122. Electric and Other Services Combined (SIC 4931).  The SBA has classified this entity as a
utility whose business is less than 95% electric in combination with some other type of service.  The Census
Bureau reports that a total of 135 such firms were in operation for at least one year at the end of 1992.  The
SBA's definition of a small electric and other services combined utility is a firm whose gross revenues did not
exceed five million dollars in 1992.  The Census Bureau reported that 45 of the 135 firms listed had total
revenues below five million dollars.

     123. Combination Utilities, Not Elsewhere Classified (SIC 4939).  The SBA defines this utility as
providing a combination of electric, gas, and other services which are not otherwise classified.  The Census
Bureau reports that a total of 79 such utilities were in operation for at least one year at the end of 1992. 
According to SBA's definition, a small combination utility is a firm whose gross revenues did not exceed five
million dollars in 1992.  The Census Bureau reported that 63 of the 79 firms listed had total revenues below
five million dollars.

                                             (2)  Gas Production and Distribution
                         (SIC 4922, 4923, 4924, 4925 & 4932)

     124. Natural Gas Transmission (SIC 4922).  The SBA's definition of a natural gas transmitter is an
entity that is engaged in the transmission and storage of natural gas.  The Census Bureau reports that a total
of 144 such firms were in operation for at least one year at the end of 1992.  According to SBA's definition, a
small natural gas transmitter is an entity whose gross revenues did not exceed five million dollars in 1992. 
The Census Bureau reported that 70 of the 144 firms listed had total revenues below five million dollars.

     125. Natural Gas Transmission and Distribution (SIC 4923).  The SBA has classified this entity as
a utility that transmits and distributes natural gas for sale.  The Census Bureau reports that a total of 126 such
entities were in operation for at least one year at the end of 1992.  The SBA's definition of a small natural gas
transmitter and distributor is a firm whose gross revenues did not exceed five million dollars.  The Census
Bureau reported that 43 of the 126 firms listed had total revenues below five million dollars.

     126. Natural Gas Distribution (SIC 4924).  The SBA defines a natural gas distributor as an entity
that distributes natural gas for sale.  The Census Bureau reports that a total of 478 such firms were in
operation for at least one year at the end of 1992.  According to the SBA, a small natural gas distributor is an
entity whose gross revenues did not exceed five million dollars in 1992.  The Census Bureau reported that
267 of the 478 firms listed had total revenues below five million dollars.

     127. Mixed, Manufactured, or Liquefied Petroleum Gas Production and/or Distribution (SIC
4925).  The SBA has classified this entity as a utility that engages in the manufacturing and/or distribution of
the sale of gas.  These mixtures may include natural gas.  The Census Bureau reports that a total of 43 such
firms were in operation for at least one year at the end of 1992.  The SBA's definition of a small mixed,
manufactured or liquefied petroleum gas producer or distributor is a firm whose gross revenues did not exceed
five million dollars in 1992.  The Census Bureau reported that 31 of the 43 firms listed had total revenues
below five million dollars.

     128. Gas and Other Services Combined (SIC 4932).  The SBA has classified this entity as a gas
company whose business is less than 95% gas, in combination with other services.  The Census Bureau
reports that a total of 43 such firms were in operation for at least one year at the end of 1992.  According to the
SBA, a small gas and other services combined utility is a firm whose gross revenues did not exceed five
million dollars in 1992.  The Census Bureau reported that 24 of the 43 firms listed had total revenues below
five million dollars.

                    (3)  Water Supply (SIC 4941)

     129. The SBA defines a water utility as a firm who distributes and sells water for domestic,
commercial and industrial use.  The Census Bureau reports that a total of 3,169 water utilities were in
operation for at least one year at the end of 1992.  According to SBA's definition, a small water utility is a firm
whose gross revenues did not exceed five million dollars in 1992.  The Census Bureau reported that 3065 of
the 3169 firms listed had total revenues below five million dollars.

                    (4)  Sanitary Systems (SIC 4952, 4953 & 4959)  
     
     130. Sewerage Systems (SIC 4952).  The SBA defines a sewage firm as a utility whose business is
the collection and disposal of waste using sewage systems.  The Census Bureau reports that a total of 410
such firms were in operation for at least one year at the end of 1992.  According to SBA's definition, a small
sewerage system is a firm whose gross revenues did not exceed five million dollars.  The Census Bureau
reported that 369 of the 410 firms listed had total revenues below five million dollars.

     131. Refuse Systems (SIC 4953).  The SBA defines a firm in the business of refuse as an
establishment whose business is the collection and disposal of refuse "by processing or destruction or in the
operation of incinerators, waste treatment plants, landfills, or other sites for disposal of such materials."  The
Census Bureau reports that a total of 2287 such firms were in operation for at least one year at the end of 1992. 
According to SBA's definition, a small refuse system is a firm whose gross revenues did not exceed six million
dollars.  The Census Bureau reported that 1908 of the 2287 firms listed had total revenues below six million
dollars.

     132. Sanitary Services, Not Elsewhere Classified (SIC 4959).  The SBA defines these firms as
engaged in sanitary services.  The Census Bureau reports that a total of 1214 such firms were in operation
for at least one year at the end of 1992.  According to SBA's definition, a small sanitary service firms gross
revenues did not exceed five million dollars.  The Census Bureau reported that 1173 of the 1214 firms listed
had total revenues below five million dollars.

                    (5)  Steam and Air Conditioning Supply (SIC 4961)

     133. The SBA defines a steam and air conditioning supply utility as a firm who produces and/or
sells steam and heated or cooled air.  The Census Bureau reports that a total of 55 such firms were in
operation for at least one year at the end of 1992.  According to SBA's definition, a steam and air conditioning
supply utility is a firm whose gross revenues did not exceed nine million dollars.  The Census Bureau
reported that 30 of the 55 firms listed had total revenues below nine million dollars.

                    (6)  Irrigation Systems (SIC 4971)

     134. The SBA defines irrigation systems as firms who operate water supply systems for the
purpose of irrigation.  The Census Bureau reports that a total of 297 firms were in operation for at least one
year at the end of 1992.  According to SBA's definition, a small irrigation service is a firm whose gross
revenues did not exceed five million dollars.  The Census Bureau reported that 286 of the 297 firms listed
had total revenues below five million dollars.

               b.   Telephone Companies (SIC 4813)

     135. Many of the decisions and rules adopted herein may have a significant effect on a substantial
number of small telephone companies.  The SBA has defined a small business for SIC code 4813 (Telephone
Communications, except Radiotelephone) to be a small entity when it has no more than 1500 employees. 
The Census Bureau reports that, at the end of 1992, there were 3497 firms engaged in providing telephone
services, as defined therein, for at least one year.  This number contains a variety of different categories of
carriers, including local exchange carriers ("LECs"), interexchange carriers ("IXCs"), competitive access
providers ("CAPs"), cellular carriers, mobile service carriers, operator service providers, pay telephone
operators, personal communications service ("PCS") providers, covered SMR providers and resellers.  Some
of those 3497 telephone service firms may not qualify as small entities or small incumbent LECs because they
are not "independently owned and operated."  We therefore conclude that fewer than 3497 telephone service
firms are small entity telephone service firms or small incumbent LECs that may be affected by this Order. 
Below, we estimate the potential number of small entity telephone service firms or small incumbent LEC's that
may be affected by the rules adopted herein in this service category.

                    (1)  Wireline Carriers and Service Providers

     136.   The SBA has developed a definition of small entities for telephone communications
companies other than radiotelephone (wireless) companies.  The Census Bureau reports that, there were 2321
such telephone companies in operation for at least one year at the end of 1992.  According to SBA's
definition, a small business telephone company other than a radiotelephone company is one employing no
more than 1500 persons.  Of the 2321 non-radiotelephone companies listed by the Census Bureau, 2295
were reported to have fewer than 1000 employees.  Thus, at least 2295 non-radiotelephone companies that
might qualify as small entities or small incumbent LECs, or small entities based on these employment
statistics.  Although some of these carriers are likely not independently owned and operated, we are unable at
this time to estimate with greater precision the number of wireline carriers and service providers that would
qualify as small business concerns under SBA's definition.  Consequently, we estimate that there are fewer
than 2295 small entity telephone communications companies other than radiotelephone companies that may
be affected by the decisions or rules adopted in this Order.

                    (2)  Local Exchange Carriers

     137. Neither the Commission nor SBA has developed a definition of small providers of local
exchange services.  The closest applicable definition under SBA rules is for telephone communications
companies other than radiotelephone (wireless) companies (SIC 4813).  The most reliable source of
information regarding the number of LECs nationwide appears to be the data that the Commission publishes
annually in its Telecommunications Industry Revenue report, regarding the Telecommunications Relay Service
("TRS").  According to "TRS Worksheet" data released in November 1997, there are 1371 companies reporting
that they categorize themselves as LECs.  Although some of these carriers are likely not independently
owned and operated, or have more than 1500 employees, we are unable at this time to estimate with greater
precision the number of LECs that would qualify as small business concerns under SBA's definition. 
Consequently, we estimate that there are fewer than 1371 small incumbent LECs that may be affected by the
rules adopted herein.

                    (3)  Interexchange Carriers

     138. Neither the Commission nor SBA has developed a definition of small entities specifically
applicable to providers of interexchange services.  The closest applicable definition under SBA rules is for
telephone communications companies other than radiotelephone (wireless) companies (SIC 4813).  The most
reliable source of information regarding the number of IXCs nationwide of which we are aware appears to be
the data that we collect annually in connection with TRS.  According to our most recent data, 143 companies
reported that they were engaged in the provision of interexchange services.  Although some of these carriers
are likely not independently owned and operated, or have more than 1500 employees, we are unable at this
time to estimate with greater precision the number of IXCs that would qualify as small business concerns
under SBA's definition.  Consequently, we estimate that there are fewer than 143 small entity IXCs that may
be affected by the decisions and rules adopted in this Order.

                    (4)  Competitive Access Providers

     139. Neither the Commission nor SBA has developed a definition of small entities specifically
applicable to providers of competitive access services.  The closest applicable definition under SBA rules is for
telephone communications companies other than radiotelephone (wireless) companies (SIC 4813).  The most
reliable source of information regarding the number of CAPs nationwide of which we are aware appears to be
the data that we collect annually in connection with the TRS Worksheet.  According to our most recent data,
109 companies reported that they were engaged in the provision of competitive access services.  Although
some of these carriers are likely not independently owned and operated, or have more than 1500 employees,
we are unable at this time to estimate with greater precision the number of CAPs that would qualify as small
business concerns under SBA's definition.  Consequently, we estimate that there are fewer than 109 small
entity CAPs that may be affected by the decisions and rules adopted herein.

                    (5)  Cellular Service Carriers

     140. Neither the Commission nor SBA has developed a definition of small entities specifically
applicable to providers of cellular services.  The closest applicable definition under SBA rules is for telephone
communications companies other than radiotelephone (wireless) companies (SIC 4812).  The most reliable
source of information regarding the number of cellular service carriers nationwide of which we are aware
appears to be the data that we collect annually in connection with the TRS Worksheet.  The TRS Worksheet
places cellular licensees and Personal Communications Service ("PCS") licensees in one group.  According to
the most recent data, there are 804 carriers reporting that they categorize themselves as either PCS or cellular
carriers.  Although it seems certain that some of these carriers are not independently owned and operated, or
have more than 1500 employees, we are unable at this time to estimate with greater precision the number of
cellular service carriers that would qualify as small business concerns under SBA's definition.  Consequently,
we estimate that there are fewer than 804 small entity cellular service carriers that may be affected by the
decisions and rules adopted in this Order.

                    (6)  Mobile Service Carriers

     141. Neither the Commission nor SBA has developed a definition of small entities specifically
applicable to mobile service carriers, such as paging companies.  The closest applicable definition under SBA
rules is for telephone communications companies other than radiotelephone (wireless) companies (SIC 4813). 
The most reliable source of information regarding the number of mobile service carriers nationwide of which
we are aware appears to be the data that we collect annually in connection with the TRS Worksheet.  According
to our most recent data, 172 companies reported that they were engaged in the provision of mobile services. 
Although it seems certain that some of these carriers are not independently owned and operated, or have more
than 1500 employees, we are unable at this time to estimate with greater precision the number of mobile
service carriers that would qualify under SBA's definition.  Consequently, we estimate that there are fewer than
172 small entity mobile service carriers that may be affected by the decisions and rules adopted in this Order.

                    (7)  Broadband Personal Communications
                         Services ("PCS") Licensees

     142. The broadband PCS spectrum is divided into six frequency blocks designated A through F,
and the Commission has held auctions for each block.  The Commission has defined "small entity" for Blocks
C and F as an entity that has average gross revenues of less than $40 million in the three previous calendar
years.  For Block F, an additional classification for "very small business" was added and is defined as an entity
that, together with their affiliates, has average gross revenues of not more than $15 million for the preceding
three calendar years.  These regulations defining "small entity" in the context of broadband PCS auctions has
been approved by the SBA.  No small businesses within the SBA-approved definition bid successfully for
licenses in Blocks A and B.  There were 90 winning bidders that qualified as small entities in the Block C
auction.  A total of 93 small and very small business bidders won approximately 40% of the 1479 licenses for
Blocks D, E, and F.  However, licenses for blocks C through F have not been awarded fully, therefore there
are few, if any, small businesses currently providing PCS services.  Based on this information, we conclude
that the number of broadband PCS licensees will include the 90 winning C Block bidders and the 93 qualifying
bidders in the D, E, and F blocks, for a total of 183 small PCS providers as defined by the SBA and the
Commission's auction rules.  We note that the TRS Worksheet data track PCS licensees in the reporting
category "Cellular or Personal Communications Service Carrier."  As noted supra  in the paragraph regarding
cellular carriers, according to the most recent data, there are 804 carriers reporting that they place themselves
in this category. 

                    (8)  Specialized Mobile Radio ("SMR") Licensees

     143. Pursuant to 47 C.F.R.  90.814(b)(1) and 90.912(b)(1), the Commission has defined small
entity in auctions for geographic area 800 MHz and 900 MHz SMR licenses as a firm that had average annual
gross revenues of less than $15 million in the three previous calendar years.  This definition of a small entity
in the context of 800 MHz and 900 MHz SMR has been approved by the SBA.  The rules adopted in this
Order may apply to SMR providers in the 800 MHz and 900 MHz bands that either hold geographic area
licenses or have obtained extended implementation authorizations.  We do not know how many firms provide
800 MHz or 900 MHz geographic area SMR service pursuant to extended implementation authorizations, nor
how many of these providers have annual revenues of less than $15 million.  We assume, for purposes of this
FRFA, that all of the extended implementation authorizations may be held by small entities which may be
affected by the decisions and rules adopted in this Order.  We note that the TRS Worksheet data track SMR
licensees in the reporting category "Paging and Other Mobile Carriers."  According to the most recent data,
there are 172 carriers, including SMR carriers, reporting that they place themselves in this category.

     144. In April 1997, the Commission held auctions for geographic area licenses in the 900 MHz
SMR band.  There were 60 winning bidders that qualified as small entities in the 900 MHz auction.  Based on
this information, we conclude that the number of 900 MHz geographic area SMR licensees affected by the
rules adopted in this Order includes these 60 small entities.  In December 1997, the Commission also held
auctions for the 525 licenses for the upper 200 channels in the 800 MHz SMR band.  There were 10 winning
bidders that qualified as small entities in that auction.  Based on this information, we conclude that the number
of geographic area SMR licensees that may be affected by the rules adopted in this Order also includes these
10 small entities.  However, the Commission has not yet determined how many licenses will be awarded for
the lower 230 channels in the 800 MHz geographic area SMR auction.  There is no basis, moreover, on which
to estimate how many small entities will win these licenses.  Given that nearly all radiotelephone companies
have fewer than 1000 employees and that no reliable estimate of the number of prospective 800 MHz licensees
for the lower 230 channels can be made, we conclude, for purposes of this FRFA, that some or all of the
licenses could conceivably be awarded to small entities that may be affected by the decisions and rules adopted
in this Order.

                    (9)  Resellers

     145. Neither the Commission nor SBA has developed a definition of small entities specifically
applicable to resellers.  The closest applicable definition under SBA rules is for all telephone communications
companies (SIC 4812 and 4813).  The most reliable source of information regarding the number of resellers
nationwide of which we are aware appears to be the data that we collect annually in connection with the TRS
Worksheet.  According to our most recent data, 339 companies reported that they were engaged in the resale
of telephone services.  Although it seems certain that some of these carriers are not independently owned and
operated, or have more than 1500 employees, we are unable at this time to estimate with greater precision the
number of resellers that would qualify as small business concerns under SBA's definition.  Consequently, we
estimate that there are fewer than 339 small entity resellers that may be affected by the decisions and rules
adopted in this Order.

               c.   Wireless (Radiotelephone) Carriers (SIC 4812)

     146. Pursuant to the terms of the 1996 Act, wireless carriers are entitled to affix their equipment to
utility poles with rates consistent with the Commission's rules discussed herein.  SBA has developed a
definition of small entities for radiotelephone (wireless) companies.  The Census Bureau reports that there
were 1176 such companies in operation for at least one year at the end of 1992.  According to SBA's
definition, a small business radiotelephone company is one employing no more than 1500 persons.  The
Census Bureau also reported that 1164 of those radiotelephone companies had fewer than 1000 employees. 
Thus, even if all of the remaining 12 companies had more than 1500 employees, there would still be 1164
radiotelephone companies that might qualify as small entities if they are independently owned and operated. 
Although some of these carriers are likely not independently owned and operated, we are unable at this time
to estimate with greater precision the number of radiotelephone carriers and service providers that would
qualify as small business concerns under SBA's definition.  Consequently, we estimate that there are fewer
than 1164 small entity radiotelephone companies that may be affected by the rules adopted herein.

               d.   Cable System Operators (SIC 4841)

     147. The SBA has developed a definition of small entities for cable and other pay television
services, which includes all such companies generating less than $11 million in revenue annually.  This
definition includes cable systems operators, closed circuit television services, direct broadcast satellite
services, multipoint distribution systems, satellite master antenna systems and subscription television services. 
According to the Census Bureau, there were 1423 such cable and other pay television services generating less
than $11 million in revenue.

     148. The Commission has developed its own definition of a small cable system operator for the
purposes of rate regulation.  Under the Commission's rules, a "small cable company," is one serving fewer than
400,000 subscribers nationwide.  Based on our most recent information, we estimate that there were 1439
cable systems that qualified as small cable system operators at the end of 1995.  Since then, some of those
companies may have grown to serve over 400,000 subscribers, and others may have been involved in
transactions that caused them to be combined with other cable systems.  Consequently, we estimate that there
are fewer than 1439 small entity cable system operators that may be affected by the decisions and rules
adopted in this Order.

     149. The Communications Act also contains a definition of a small cable system operator, which
is "a cable operator that, directly or through an affiliate, serves in the aggregate fewer than one percent of all
subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in
the aggregate exceed $250,000,000."  The Commission found that an operator serving fewer than 617,000
subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual
revenues of all of its affiliates, do not exceed $250 million in the aggregate.  Based on available data, we find
that the number of cable systems serving 617,000 subscribers or less totals 1450.  Although it seems certain
that some of these cable system operators are affiliated with entities whose gross annual revenues exceed
$250,000,000, we are unable at this time to estimate with greater precision the number of cable system
operators that would qualify as small cable systems under the definition in the Communications Act.

               e.   Municipalities

     150. The term "small governmental jurisdiction" is defined as "governments of . . . districts, with
a population of less than 50,000."  There are 85,006 governmental entities in the United States.  This
number includes such entities as states, counties, cities, utility districts and school districts.  We note that
Section 224 specifically excludes any utility which is cooperatively organized, or any person owned by the
Federal Government or any State.  For this reason, we believe that Section 224 will have minimal if any affect
upon small municipalities.  Further, there are 18 states and the District of Columbia that regulate pole
attachments pursuant to Section 224(c)(1).  Of the 85,006 governmental entities, 38,978 are counties, cities and
towns.  The remainder are primarily utility districts, school districts, and states.  Of the 38,978 counties, cities
and towns, 37,566 or 96%, have populations of fewer than 50,000.

               D.   Description of Projected Reporting, Recordkeeping, and Other Compliance
          Requirements

     151. The rules adopted in this Order may require a change in certain recordkeeping requirements
for conduit systems.  A utility will now have to maintain specific records relating to the number of linear
meters, or feet, of conduit for the purpose of determining the net cost of conduit and the amount of conduit
linear measurement in which a pole attachment exists.  Although this requirement affects both large and small
businesses equally, we believe that through the use of presumptions, specific accounts and publicly available
data in our methodology, we have avoided a more extensive regulatory scheme which might have burdened
small entities.  We conclude that our rules will not disproportionately burden small entities.  

               E.   Steps Taken to Minimize Significant Economic Impact on Small Entities, and
          Significant Alternatives Considered

     152. Section 703 of the 1996 Act amended Section 224 in several important ways to provide access
to and rate regulation for pole attachments by cable operators and telecommunications carriers in order that
they might compete in the market place to provide their respective services.  The 1996 Act established a pole
attachment rate methodology for telecommunications carriers that would not become effective until February
8, 2001.  Until that time, pole attachments by telecommunications carriers will be regulated in the same
manner as pole attachment rates for cable operators under Section 224(d).  Prior to the 1996 Act, access to pole
attachments was available only to cable operators and only under their franchise pursuant to Section 621.  With
the legislative expansion of access and rate regulation, small entities have greater opportunity to develop the
infrastructure necessary to compete in the cable and telecommunications marketplaces.  We have been mindful
to maintain simplicity whenever possible, and to provide methodologies consistent with availability to publicly
verifiable data.  In the Notice, we sought comment to re-evaluate the formula methodologies used or proposed,
to update our rules for accounting used in the formulas, and to provide a methodology for determining just and
reasonable rates for pole attachments in conduit.  

     153. In accordance with the RFA, the Commission has endeavored to minimize significant impact
on small entities.  To minimize the burden on utility pole owners, including those that qualify as small entities,
and to promote certainty and efficiency in determining the pole attachment rate for cable operators and
telecommunications carriers, we have maintained our formula presumptions, including our one-foot
presumption of space occupied by a pole attachment, and the presumptive amount of usable space on a pole. 
We have adopted a conduit methodology based on publicly available data and a half-duct presumption of
capacity occupied by a pole attachment in a conduit system, to simplify the process of determining a just and
reasonable pole attachment rate and to provide certainty for small entities preparing to enter the competitive
marketplace.  We have formalized the use of part 32 accounting for LECs.  We have consolidated all formula
elements, and accounts specified for use in the formulas, in this one document in order to provide ease of
application by all parties. 

     154. Report to Congress:  The Commission will send a copy of the Order, including this FRFA,
in a report to be sent to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of
1996, see 5 U.S.C.  801(a)(1)(A).  A copy of the Order and this FRFA (or summary thereof) will also be
published in the Federal Register, see 5 U.S.C.  604(b), and will be sent to the Chief Counsel for Advocacy
of the Small Business Administration. 

VIII.     PAPERWORK REDUCTION ACT OF 1995 ANALYSIS

     155. The requirements adopted in this Order have been analyzed with respect to the Paperwork
Reduction Act of 1995 (the "1995 Act") and found to impose modified information collection requirements on
the public.  The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general
public to take this opportunity to comment on the information collection requirements contained in this Order,
as required by the 1995 Act.  Public comments are due 60 days from date of publication of this Order in the
Federal Register.  Comments should address:  (1) whether the proposed collection of information is necessary
for the proper performance of the functions of the Commission, including whether the information shall have
practical utility; (2) the accuracy of the Commission's burden estimates; (3) ways to enhance the quality,
utility, and clarity of the information collected; and (4) ways to minimize the burden of the collection of
information on the respondents, including the use of automated collection techniques or other forms of
information technology.

     156. As stated above, written comments by the public on the modified information collection
requirements are due 60 days from date of publication of this Order in the Federal Register.  Comments on the
information collections contained herein should be submitted to Judy Boley, Federal Communications
Commission, Room 234, 1919 M Street, NW, Washington, DC  20554, or via the Internet to jboley@fcc.gov. 
For additional information on the information collection requirements, contact Judy Boley at 202-418-0214 or
via the Internet at the above address.

IX.       ORDERING CLAUSES

     157. IT IS ORDERED that, pursuant to Sections 1, 4(i), 224 and 303(r) of the Communications Act
of 1934, as amended, 47 U.S.C.  151, 154(i), 224 and 303(r), the Commission's rules are hereby amended
as set forth in Appendix A.

     158. IT IS FURTHER ORDERED that Section 1.1402 of the Commission's rules, as amended in
Appendix A hereto, will become effective 30 days after the date of publication of this Report and Order in the
Federal Register, and that Sections 1.1404 and 1.1409 of the Commission's rules, as amended in Appendix A
hereto, will become effective 140 days after the date of publication of this Report and Order in the Federal
Register, unless the Commission publishes a notice before that date stating that the Office of Management and
Budget ("OMB") has not approved the information collection requirements contained in the rules.  

     159. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs, Reference
Operations Division, SHALL SEND a copy of this Report and Order, including the Final Regulatory
Flexibility Analyses, to the Chief Counsel for Advocacy of the Small Business Administration.


                         FEDERAL COMMUNICATIONS COMMISSION



                         Magalie Roman Salas
                         Secretary
                                APPENDIX A

                                Revised Rules

Part 1 of Title 47 of the Code of Federal Regulations is amended as follows:

PART 1   PRACTICE AND PROCEDURE

1.   The authority citation for Part 1 continues to read as follows:

AUTHORITY:  47 U.S.C. 151, 154(i), 154(j), 155, 225, 303(r) and 309.

2.   Amend  1.1402 to revise paragraphs (c), (i), (j) and (l) and add paragraph (n) to read as follows:

 1.1402  Definitions.

* * * * *
     (c)  With respect to poles, the term usable space means the space on a utility pole above the minimum
grade level which can be used for the attachment of wires, cables, and associated equipment, and which
includes space occupied by the utility.  With respect to conduit, the term usable space means capacity within
a conduit system which is available, or which could, with reasonable effort and expense, be made available, for
the purpose of installing wires, cable and associated equipment for telecommunications or cable services, and
which includes capacity occupied by the utility.
     
* * * * *
     (i)  The term conduit means a structure containing one or more ducts, usually placed in the ground, in
which cables or wires may be installed.
     (j)  The term conduit system means a collection of one or more conduits together with their supporting
infrastructure.

* * * * *
     (l)   With respect to poles, the term unusable space means the space on a utility pole below the usable
space, including the amount required to set the depth of the pole. 

* * * * *
     (n)  The term inner-duct means a duct-like raceway smaller than a duct that is inserted into a duct so
that the duct may carry multiple wires or cables.

* * * * *

3.   Amend  1.1404 to remove paragraph (k), and redesignate old paragraphs (l) (m) and (n) as (k), (l),
and (m), respectively; revise the first sentence of paragraph (g), paragraphs (g)(10), (g)(13), the last
(unnumbered) paragraph of paragraph (g); revise paragraph (h); and revise paragraph (j), to read as follows:

 1.1404  Complaint.

* * * * *
     (g)  For attachments to poles, where it is claimed that either a rate is unjust or unreasonable, or a term
or condition is unjust or unreasonable and examination of such term or condition requires review of the
associated rate, the complaint shall provide data and information in support of said claim. * * *

* * * * *
     (10)  The rate of return authorized for the utility for intrastate service.  With its pleading, the utility
shall file a copy of the latest decision of the state regulatory body or state court which establishes this
authorized rate of return if the rate of return is at issue in the proceeding and shall note the section which
specifically establishes this authorized rate and whether the decision is subject to further proceedings before
the state regulatory body or a court.  In the absence of a state authorized rate of return, the rate of return set by
the Commission for local exchange carriers shall be used as a default rate of return.

* * * * *
     (13)  Reimbursements received from CATV operators and telecommunications carriers for
non-recurring costs;  and

Data and information should be based upon historical or original cost methodology, insofar as possible.  Data
should be derived from ARMIS, FERC 1, or other reports filed with state or federal regulatory agencies
(identify source).  Calculations made in connection with these figures should be provided to the complainant. 
The complainant shall also specify any other information and argument relied upon to attempt to establish that
a rate, term, or condition is not just and reasonable.

* * * * *
     (h)  With respect to attachments within a duct or conduit system, where it is claimed that either a rate
is unjust or unreasonable, or a term or condition is unjust or unreasonable and examination of such term or
condition requires review of the associated rate, the complaint shall provide data and information in support
of said claim.  The data and information shall include, where applicable:

     (1)   The gross investment by the utility for conduit;
     (2)   The accumulated depreciation from the gross conduit  investment;
     (3)   The system duct length or system conduit length and the method used to determine it;
     (4)   The length of the conduit subject to the complaint;
     (5)   The number of ducts in the conduit subject to the complaint;
     (6) The number of inner-ducts in the duct occupied, if any.  If there are no inner-ducts, the attachment
is presumed to occupy one-half duct.
     (7) The annual carrying charges attributable to the cost of owning conduit.  These charges may be
expressed as a percentage of the net linear cost of a conduit.  With its pleading, the utility shall file a copy of
the latest decision of the state regulatory body or state court which determines the treatment of accumulated
deferred taxes if it is at issue in the proceeding and shall note the section which specifically determines the
treatment and amount of accumulated deferred taxes.
     (8) The rate of return authorized for the utility for intrastate service.  With its pleading, the utility shall
file a copy of the latest decision of the state regulatory body or state court which establishes this authorized
rate of return if the rate of return is at issue in the proceeding and shall note the section which specifically
establishes this authorized rate and whether the decision is subject to further proceedings before the state
regulatory body or a court.  In the absence of a state authorized rate of return, the rate of return set by the
Commission for local exchange carriers shall be used as a default rate of return; and
     (9)  Reimbursements received by utilities from CATV operators and telecommunications carriers for
non-recurring costs; and

Data and information should be based upon historical or original cost methodology, insofar as possible.  Data
should be derived from ARMIS, FERC 1, or other reports filed with state or federal regulatory agencies
(identify source).  Calculations made in connection with these figures should be provided to the complainant. 
The complainant shall also specify any other information and argument relied upon to attempt to establish that
a rate, term, or condition is not just and reasonable.

* * * * *
     (j)  ***A utility must supply a cable television operator or telecommunications carrier the information
required in paragraph (g), (h) or (i) of this section, as applicable, along with the supporting pages from its
ARMIS, FERC Form 1, or other report to a regulatory body, within 30 days of the request by the cable
television operator or telecommunications carrier.***
     (k)  The complaint shall include a brief summary of all steps taken to resolve the problem prior to
filing.  If no such steps were taken, the complaint shall state the reason(s) why it believed such steps were
fruitless.
     (l)  Factual allegations shall be supported by affidavit of a person or persons with actual knowledge of
the facts, and exhibits shall be verified by the person who prepares them.
     (m)  In a case where a cable television system operator or telecommunications carrier claims that it has
been denied access to a pole, duct, conduit or right-of-way despite a request made pursuant to section 47
U.S.C.  224(f), the complaint shall be filed within 30 days of such denial.  In addition to meeting the other
requirements of this section, the complaint shall include the data and information necessary to support the
claim, including:
     (1) The reasons given for the denial of access to the utility's poles, ducts, conduits and rights-of-way;
     (2) The basis for the complainant's claim that the denial of access is improper;
     (3) The remedy sought by the complainant;
     (4) A copy of the written request to the utility for access to its poles, ducts, conduits or rights-of-way; 
and
     (5) A copy of the utility's response to the written request including all information given by the utility
to support its denial of access.  A complaint alleging improper denial of access will not be dismissed if the
complainant is unable to obtain a utility's written response, or if the utility denies the complainant any other
information needed to establish a prima facie case.
 
* * * * *

4.   Amend  1.1409 to revise paragraph (e)(1); add new paragraph (e)(3) and redesignate old paragraph
(e)(3) as paragraph (e)(4); and revise paragraph (f) to read as follows: 

 1.1409  Commission consideration of the complaint.

* * * * *
     (e) * * *

      (1) The following formula shall apply to attachments to poles by cable operators providing cable
services.  This formula shall also apply to attachments to poles by any telecommunications carrier (to the
extent such carrier is not a party to a pole attachment agreement) or cable operator providing
telecommunications services until February 8, 2001:
                                
                                
* * * * *
     (3)  The following formula shall apply to attachments to conduit by cable operators providing cable
services.  This formula shall also apply to attachments to conduit by any telecommunications carrier (to the
extent such carrier is not a party to a pole attachment agreement) or cable operator providing
telecommunications services until February 8, 2001:  
                                

If no inner-duct is installed the fraction, "1 Duct divided by the No. of Inner-Ducts" is presumed to be . 

     (4)  Subject to paragraph (f) the following formula shall apply to pole attachments within a conduit
system beginning on February 8, 2001:

Maximum Conduit Rate = Conduit Unusable Space Factor + Conduit Usable Space Factor

For purposes of this formula, the conduit unusable space factor, as defined under Section 1.1417(c), and the
conduit usable space factor, as defined under Section 1.1418(c), shall apply to each linear foot occupied.
     (f)  Paragraphs (e)(2) and (e)(4) of this section shall become effective February 8, 2001 (i.e., five years
after the effective date of the Telecommunications Act of 1996).  Any increase in the rates for pole attachments
that result from the adoption of such regulations shall be phased in over a period of five years beginning on the
effective date of such regulations in equal annual increments.  The five-year phase-in is to apply to rate
increases only.  Rate reductions are to be implemented immediately.  The determination of any rate increase
shall be based on data currently available at the time of the calculation of the rate increase.
                                APPENDIX B
                            List of Commenters
     Note:     If no abbreviation appears in parentheses following the full name of the party, the full name is used in
     this Order.

Comments in CS Docket No. 97-98
American Electric Power Service Corporation, Commonwealth Edison Company, Duke Energy     
Corporation and Florida Power and Light Company (American Electric)
Ameritech
Association for Local Telecommunications Services
AT&T Corp. (AT&T)
Bell Atlantic & NYNEX (Bell Atlantic/NYNEX)
BellSouth Corporation (BellSouth)
Carolina Power & Light Company, Delmarva Power & Light Company, Atlantic City Electric Company,
Entergy Services, Florida Power Corporation, Pacific Gas and Electric Company, Potomac Electric Power
Company, Public Service Company of Colorado, Southern Company, Georgia Power, Alabama Power, Gulf
Power, Mississippi Power, Savannah Electric, Tampa Electric Company and Virginia Power, including North
Carolina Power (Carolina Power)
Consolidated Edison Company of New York, Inc. (ConEd)
Duquesne Light Company (Duquesne Light)
Edison Electric Institute and UTC, the Telecommunications Association (Edison Electric/UTC)
GTE Service Corporation (GTE)
MCI Telecommunications Corporation (MCI)
National Cable Television Association, Cable Telecommunications Association, Texas Cable &
Telecommunications Association, Cable Television Association of Georgia, South Carolina Cable Television
Association, Cable Television Association of Maryland, Delaware and the District of Columbia, Mississippi
Cable Telecommunications Association, Mid-America Cable Telecommunications Association, Kansas Cable
Telecommunications Association, Jones Intercable, Inc., Charter Communications, Greater Media, Inc., Prime
Cable, Rifkin & Associates, TCA Cable TV, Inc., and The Helicon Corporation (NCTA)
Ohio Edison Company (Ohio Edison)
Public Service Company of New Mexico (Public Service of New Mexico)
SBC Communications Inc. (SBC)
Small Cable Business Association (SBCA)
Southeastern Indiana Rural Electric Membership Cooperative (Southeastern Indiana REMC)
Southern New England Telephone Company (SNET)
Sprint Local Telephone Companies (Sprint)
Tele-Communications, Inc. (TCI)
Time Warner Cable (Time Warner)
Union Electric Company (Union Electric)
United States Telephone Association (USTA)
U S West, Inc. (U S West)
WorldCom, Inc. (WorldCom)

Reply Comments in CS Docket No. 97-98

American Electric Power Service Corporation, Commonwealth Edison Company, Duke Energy     
Corporation and Florida Power and Light Company (American Electric)
Ameritech
AT&T Corp. (AT&T)
Bell Atlantic & NYNEX (Bell Atlantic/NYNEX)
Carolina Power & Light Company, Delmarva Power & Light Company, Atlantic City Electric Company,
Entergy Services, Florida Power Corporation, Pacific Gas and Electric Company, Potomac Electric Power
Company, Public Service Company of Colorado, Southern Company, Georgia Power, Alabama Power, Gulf
Power, Mississippi Power, Savannah Electric, Tampa Electric Company and Virginia Power, including North
Carolina Power (Carolina Power)
Chugach Electric Association (Chugach) 
Edison Electric Institute and UTC, the Telecommunications Association (Edison Electric/UTC)
GTE Service Corporation (GTE) 
KMC Telecom Inc. (KMC Telecom)
MCI Telecommunications Corporation (MCI) 
National Cable Television Association, Cable Telecommunications Association, Texas Cable &
Telecommunications Association, Cable Television Association of Georgia, South Carolina Cable Television
Association, Cable Television Association of Maryland, Delaware and the District of Columbia, Mississippi
Cable Telecommunications Association, Mid-America Cable Telecommunications Association, Kansas Cable
Telecommunications Association, Jones Intercable, Inc., Charter Communications, Greater Media, Inc., Prime
Cable, Rifkin & Associates, TCA Cable TV, Inc., and The Helicon Corporation (NCTA)
National Telephone Cooperative Association 
Qwest
SBC  Communications Inc. (SBC)
Tele-Communications, Inc. (TCI)
Time Warner Cable (Time Warner)
United States Telephone Association (USTA) 
U S West, Inc. (U S West) 
WorldCom, Inc. (WorldCom)

Ex Parte Communications by Parties Not Previously Filing Comments
New England Electric Systems (NEES)
                              APPENDIX C - 1
                   Pole Attachment Formulas (Poles) For
                 Local Exchange Carrier (LEC) Pole Owners
                     Using FCC ARMIS Part 32 Accounts



Where:


















                         Appendix C - 2
                    Pole Attachment Formulas (Poles) For 
          Electric Utility Pole Owners Using FERC Part 101 Accounts




Where:

















                         APPENDIX C -3
             Pole Attachment Formulas (Conduit) For
          Local Exchange Carrier (LEC) Conduit Owners
                Using FCC ARMIS Part 32 Accounts




Where:

















                         APPENDIX C - 4
             Pole Attachment Formulas (Conduit) For
                Electric Utility Conduit Owners
                  Using FERC Part 101 Accounts



Where: