FCC Opposition
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 1 of 21
AMERICAN ELEC. POWER SERV. CORP., et al., )
)
Petitioners
)
)
v.
) No. 11-1146
)
FEDERAL COMMUNICATIONS COMMISSION )
and THE UNITED STATES OF AMERICA,
)
)
Respondents
)
Stay of the FCC's revised pole attachment rule, 47 C.F.R. 1.1409(e), which
became effective on June 8, 2011. As demonstrated below, petitioners have not
met the stringent standard for such extraordinary equitable relief.
electric utility companies, assess when cable television operators, telecommunica-
tions carriers, and others attach their lines to existing utility poles. In the Com-
munications Act, Congress directed the FCC to ensure that pole attachment rates
are "just and reasonable." 47 U.S.C. 224(b). Congress also has directed the FCC
to "encourage the deployment . . . of advanced telecommunications capability to all
Americans" by removing barriers to infrastructure development. 47 U.S.C.
1302(b). In balancing these directives, the FCC amended its Rule 1.1409(e) to
revise the pole attachment rate that pole owners within the agency's jurisdiction
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may charge telecommunications carriers. See Implementation of Section 224 of the
Act; A National Broadband Plan for Our Future, 26 FCC Rcd 5240, 5295-5338
126-220 (2011) ("Report & Order").1
Petitioners are electric power utilities that own poles subject to the Commis-
sion's revised rule. The crux of their request for a judicial stay is that telecom-
munications carriers generally will pay pole owners less for pole attachments under
the revised rule and this "threat" of "economic loss" (Mot. at 14), coupled with a
hypothesized loss of customer goodwill in the utilities' electric power businesses,
will cause them irreparable harm.
Although the Commission released its pole attachment order on April 7,
2011, with an effective date of June 8, 2011,2 petitioners waited until May 25, 2011
before seeking an administrative stay of the order before the Commission. The
Commission's Wireline Competition Bureau, acting under its delegated authority,
timely denied petitioners' request, concluding that petitioners had failed to estab-
lish the traditional prerequisites for obtaining such extraordinary relief. Imple-
mentation of Section 224 of the Act; A National Broadband Plan for Our Future,
DA 11-980 (WCB June 1, 2011) ("Stay Order") (See App. A).
Although the Bureau issued its stay denial on June 1, 2011 (the date by
1 The Federal Register version of the Report & Order attached to petitioners'
motion (Exh. B) is only a synopsis of the order. We have attached the complete
version of the order as Appendix B to this pleading.
2 The Commission's order was adopted and publicly released on April 7, 2011,
and provided that the relevant rule would become effective 30 days after Federal
Register publication. See Report & Order, 26 FCC Rcd at 5343 243. It was
published in the Federal Register on May 9, 2011. 76 FED. REG. 26620.
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which petitioners had requested a decision), petitioners inexplicably waited another
six days before seeking a judicial stay from this Court. At approximately 9:30 p.m.
on June 7, 2011, less than three hours before the challenged rule would go into
effect, petitioners filed their stay motion with this Court. The motion did not seek
emergency relief under D.C. Circuit Rule 18, and the revised pole attachment rule
accordingly became effective as of June 8.
If petitioners were seeking action from the Court preserving the status quo,
they would face a heavy burden of persuasion. A stay of an agency decision pend-
ing judicial review is always an "extraordinary" remedy. Virginia Petroleum Job-
bers Ass'n v. FPC, 259 F.2d 921, 925 (D.C. Cir. 1958). Here, however, petitioners
seek even more drastic relief. Rather than asking the Court to preserve the status
quo (the effect of a traditional stay), they effectively ask the Court to alter the sta-
tus quo by suspending a rule that is currently in force.
Because petitioners fail to meet the stringent requirements that apply to stay
requests, much less the even more exacting standard for obtaining the affirmative
injunctive relief that petitioners seek here, their motion should be denied.
Concerned that owners of utility poles in some instances were charging
cable television companies "monopoly rents" to attach cable television wires to
their poles, see Nat'l Cable & Telecomms. Ass'n v. Gulf Power Co., 534 U.S. 327,
330 (2002), Congress in 1978 added section 224 to the Communications Act, 47
U.S.C. 224. That provision directed the Commission to ensure that the rates,
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terms, and conditions for cable television systems to attach their cables to utility
poles are just and reasonable. Id., 224(b)(1), (d)(1).3
Under section 224, a "just and reasonable" rate is tied to the "cost[]" of
providing access to utility poles. See 47 U.S.C. 224(d)(1) (defining "just and
reasonable" rate based on "costs"). The statute itself recognizes that "cost" an
undefined term can be interpreted in a range of ways. Thus, section 224(d)(1)
defines a just and reasonable rate as ranging from a statutory minimum based on
the additional costs of providing pole attachments to a statutory maximum based
on the fully allocated costs that the pole owner incurs regardless of the presence of
attachments.4 In a series of orders, the Commission implemented a formula that
cable television system attachers and utilities could use to determine a maximum
allowable just and reasonable pole attachment rate referred to as the "cable rate
formula" and procedures for resolving rate complaints.5 In 1987, the Supreme
Court upheld the Commission's cable rate formula against a constitutional chal-
lenge, concluding that it adequately compensates pole owners.6
3 Section 224(c) provides that the Commission will regulate pole attachments
except where such matters are regulated by a state. Twenty-one states have cer-
tified that they regulate pole attachments. See Report & Order, 26 FCC Rcd at
5371.
4 47 U.S.C. 224(d)(1); see also 1977 Senate Report at 19-21, reprinted in 1978
U.S.C.C.A.N. at 127-28.
5 See, e.g., First Report and Order, 68 F.C.C. 2d 1585 (1978); Adoption of Rules
for the Regulation of Cable Television Pole Attachments, 77 F.C.C. 2d 187
(1980), rev. denied, Monongahela Pwr. Co. v. FCC, 655 F2d 1254 (D.C. Cir.
1981).
6 FCC v. Florida Power Corp., 480 U.S. 245 (1987); see also Alabama Power
Co. v. FCC, 311 F.3d 1357 (11th Cir. 2002) (upholding FCC order implement-
(footnote continued on following page)
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As part of its broader effort to promote infrastructure investment and compe-
tition, Congress expanded the reach of section 224 of the Communications Act in
the Telecommunications Act of 1996.7 Among other things, Congress added "pro-
vider[s] of telecommunications service[s]" as a category of attacher entitled to pole
attachments at just and reasonable rates under section 224. 47 U.S.C. 224
(a)(4), (b)(1). Congress also added a new section 224(e) to the Communications
Act, which provides a methodology "to govern the charges for pole attachments
used by telecommunications carriers to provide telecommunications services." 47
U.S.C. 224(e)(1)(4). Section 224(e) provides for the determination of pole
attachment rates based on "the cost of providing" space on a pole. 47 U.S.C.
224(e)(2), (3). The statute directs how the costs should be divided, or allocated,
between the pole owner and attacher, see 47 U.S.C. 224(e)(2)(3), but does not
specify how such costs should be computed before allocation among the parties.
Section 224(d), which the 1996 Act left unchanged, continues to govern a just and
reasonable rate, based on "costs," for "any pole attachment used by a cable system
solely to provide cable service." 47 U.S.C. 224(d)(3).
In 1998, the Commission adopted rules implementing the 1996 Act's new
pole attachment rate formula for telecommunications carriers. Implementation of
Section 703(e) of the Telecommunications Act, Amendment of the Commission's
Rules and Policies Governing Pole Attachments, 13 FCC Rcd 6777 (1998), aff'd in
________________________
ing cable rate provision of 1996 Act against constitutional and APA challenge),
cert. denied, 540 U.S. 937 (2003).
7 Telecommunications Act of 1996, Pub. L. No. 95-234, 92 Stat. 33 (1978).
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part, rev'd in part, Gulf Power v. FCC, 208 F.3d 1263 (11th Cir. 2000), rev'd,
Nat'l Cable & Telecomms. Ass'n v. Gulf Power, 534 U.S. 327 (2002). In uphold-
ing the Commission's action in that proceeding, the Supreme Court concluded that
section 224 gives the Commission broad authority to establish just and reasonable
rate levels. See Gulf Power, 534 U.S. at 336, 33889. The Court specifically
rejected an argument advanced by electric power utilities that "the straightforward
language of [section 224's] subsections (d) and (e) establishes two specific just and
reasonable rates [and] no other rates are authorized." Id. at 335 (citation omitted).
As a result of the statutory revisions in 1996, section 224 of the Communi-
cations Act now sets forth two separate methodologies to determine the maximum
rates for pole attachments: One applies to pole attachments used by a cable tele-
vision system solely to provide cable service (the cable rate formula) and the other
to pole attachments used by telecommunications carriers (the "telecom rate
formula"). 47 U.S.C. 224(d), (e). Under section 224, pole attachments for tele-
communications carriers initially were established under the cable rate formula,
and were transitioned to the telecom rate formula over a five-year period. 47
U.S.C. 224(e)(4). As the Commission initially implemented these statutory
formulas, the telecom rate formula generally resulted in higher pole rental rates
than the cable rate formula because the Commission elected to use a fully allocated
method to apportion costs when setting the telecom rate.
On April 7, 2011, following public notice and comment, the Commission
issued its Report & Order "comprehensively revis[ing]" the pole attachment rules.
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Among the new rules adopted in the Report & Order, the Commission revised 47
C.F.R. 1.1409(e), the telecom rate rule that petitioners now ask this Court to
suspend pending a decision on the merits of their petition for review.
Citing Congress's directive under 47 U.S.C. 1302(b), the Commission
explained that the Report & Order was "designed to promote competition and
increase the availability of robust, affordable telecommunications and advanced
services to consumers throughout the nation." Id. The Commission pointed out
that "different interpretations of the term `cost' in section 224(e) yield a range of
rates from the existing fully allocated cost approach at the high end to a rate closer
to incremental cost at the low end." Id. at 5244 8. Balancing the statutory goal
of accelerating broadband deployment against "the interest in continued pole
investment," the Commission adopted "a definition of cost that yields a new `just
and reasonable' telecommunications rate" that "generally will recover the same
portion of pole costs as the current cable rate." Id.
The Commission concluded that "the new formula will minimize the differ-
ence in rental rates paid for attachments that are used to provide voice, data, and
video services, and thus will help remove market distortions that affect attachers'
deployment decisions." Id. "Removing these barriers to telecommunications and
cable deployment," the Commission explained, "will enable consumers to benefit
through increased competition, affordability, and availability of advanced com-
munications services, including broadband," while still enabling pole owners to
earn a fair return when they provide access. Id.
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Commission's revised telecom rate formula. Mot. at 1.8 As petitioners acknow-
ledge, that rule became effective on June 8, 2011, within hours of petitioners' late-
night filing of their stay motion. Indeed, by filing their motion which did not
seek emergency relief less than three hours before the effective date of the rule
(see p. 3, supra), petitioners made it practically impossible for this Court to act on
their motion until after the rule had taken effect. Thus, petitioners did not proceed
in a manner directed at seeking to maintain the status quo pending the Court's
review of the merits of this case. Rather, from the outset they effectively sought
mandatory preliminary injunctive relief from the Court, directing the Commission
to turn back the clock and reinstate the pre-June 8, 2011 version of the telecom
rate rule.
That request for relief is subject to an even more exacting standard than the
standard applicable to stay requests that merely seek to preserve the status quo.
Such a drastic remedy "should be used sparingly and only in the most critical and
exigent circumstances" where "the applicants' right to relief [is] indisputably
clear." Graddick v. Newman, 453 U.S. 928, 936-37 (1981) (Powell, J., in cham-
8 Although the conclusion to petitioners' motion asks the Court to "stay the
Commission's Order pending judicial review" (Mot. at 19), petitioners clarify
that they seek a stay of "only one of the revised rules" adopted in the Report &
Order i.e., Rule 1.1409(e). Mot. at 2 n.1.
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bers); see also Adams v. Vance, 570 F.2d 950, 956 (D.C. Cir. 1977) (injunctive
relief that would otherwise be warranted upon a balancing of the equitable factors
is not appropriate where, among other things, the order "would not merely be pre-
servative of the status quo"). Petitioners have not come close to showing that they
have an "indisputably clear" right to extraordinary injunctive relief. Nor are they
even able to satisfy the stringent requirements applicable to stay requests that seek
to preserve the status quo pending judicial review.
Before a party can obtain such a stay preserving the status quo, it must show
that: (1) it will likely prevail on the merits; (2) it will suffer irreparable harm unless
a stay is granted; (3) other interested parties will not be harmed if a stay is granted;
and (4) a stay will serve the public interest. Washington Metro. Area Transit
Comm'n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977); D.C. Cir.
Rule 18(a)(1). The Supreme Court has underscored that a "stay is an `intrusion
into the ordinary processes of administration and judicial review,' ... and accord-
ingly `is not a matter of right, even if irreparable injury might otherwise result to
the appellant.'" Nken v. Holder, 129 S. Ct. 1749, 1757 (2009) (citation omitted);
see also Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 376 (2008)
(because injunctive relief is "an extraordinary remedy," it "may only be awarded
upon a clear showing that the plaintiff is entitled to such relief"). An applicant
"must establish that . . . he is likely to suffer irreparable harm in the absence of
preliminary relief." Winter, 129 S. Ct. at 375 (emphasis added). A mere possi-
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bility of harm is insufficient. Ibid.9 As we explain below, petitioners have failed
to satisfy this stringent standard, let alone the heightened standard that should be
applied in light of their late request for relief.
Petitioners mount two central challenges to the lawfulness of revised Rule
1.1409(e). First, they claim that the "Commission's actions are at odds with both
the plain language of 224(e) of the Act and Congressional intent." Mot. at 4.
Second, they contend that the Commission's action was arbitrary and capricious.
Id. Neither argument has merit.
Petitioners contend that this is a "Chevron I" case in which "Congress'
intent is clear from the face of the Act." Mot. at 4. Not so. As the Commission
explained in the course of a comprehensive analysis of the statutory language and
legislative history, "cost" is not specifically defined in section 224(e). Report &
9 Petitioners rely on cases suggesting that this Court applies a sliding-scale
approach to stay applications under which a strong showing on one of the tra-
ditional stay criteria can compensate for a weaker showing on another. See Mot.
at 3 (citations omitted). More recently, members of this Court have questioned
whether the sliding-scale approach to preliminary injunctive relief remains good
law in light of subsequent Supreme Court precedent. See, e.g., Davis v. Pension
Benefit Guaranty Corp., 571 F.3d 1288, 1295-96 (D.C. Cir. 2009) (Kavanaugh,
J., joined by Henderson, J., concurring) (opining that "the old sliding-scale
approach to preliminary injunctions . . . is no longer controlling, or even viable,"
and noting recent Supreme Court precedent "in the related context of stays")
(citations and internal quotation marks omitted); see also Sherley v. Sebelius,
2011 WL 1599685, *4 (D.C. Cir. Apr. 29, 2011) (discussing Davis). This Court
need not resolve that question in order to dispose of this motion, because peti-
tioners fail to establish any of the four traditional stay criteria.
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Order, 26 FCC Rcd at 5308 156-61. While Congress established a rate formula
in section 224(e) for charges for pole attachments used by telecommunications car-
riers, it did not specify a cost methodology. As the Commission observed, "section
224(e)(1) states that the Commission shall prescribe regulations `in accordance
with this subsection to govern the charges for pole attachments used by telecom-
munications carriers to provide telecommunications services,' and that `[s]uch
regulations shall ensure that a utility charges just, reasonable, and nondiscrimina-
tory rates.'" Report & Order, 26 FCC Rcd at 5308 156 (quoting 47 U.S.C.
224(e)(2)). Thus, section 224(e) describes how "[a] utility shall apportion the
cost of providing space" on a pole, but it does not define the term "cost." Id.
Accordingly, the Commission reasonably concluded that the term "the cost of pro-
viding space" is ambiguous and that, as the agency charged with administering the
Communications Act, it has the authority to interpret that ambiguous term. Id.
The Supreme Court similarly rejected a "plain meaning" argument akin to
petitioners' argument here when addressing Congress's use of the undefined term
"cost" in 47 U.S.C. 252. As the Court explained, "the unadorned term" "cost"
"is `a mere chameleon' and a `virtually meaningless' term." Verizon Commc'ns,
Inc. v. FCC, 535 U.S. 467, 500-01 (2002) (internal citations omitted). Likewise,
this Court has noted that the "generality" of terms such as "just and reasonable"
does not lend itself to an immutable meaning but rather "opens a rather large area
for the free play of agency discretion, limited of course by the familiar `arbitrary'
and `capricious' standard in the Administrative Procedure Act." Bell Atl. Tel. Cos.
v. FCC, 79 F.3d 1195, 1202 (D.C. Cir. 1996).
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Petitioners also argue that the "plain language of the Act clearly mandates a
different rate" for telecom service providers under section 224(e) as compared to
cable systems under section 224(d) and that "[t]he Act also expressly contemplates
that the Telecom Rate formula would yield rates higher than those yielded by the
Cable Rate formula." Mot. at 5. But petitioners cite no statutory language compel-
ling that conclusion. The relevant text refers to the "cost of providing space," 47
U.S.C. 224(e)(2), (3), and the Commission explained that it had focused "on
those costs arising from the actual provision of space for pole attachments, as
opposed to costs that arise regardless of the absence or presence of attachments."
Report & Order, 26 FCC Rcd at 5312 165. The Commission further explained
that its approach gave "meaning to the methodology for allocating costs under
sections 224(e)(2) and (e)(3)." Id. at 5310 161.
The legislative history cited by petitioners (Mot. at 5-6) does not foreclose
the Commission's reasonable reading of the statute, as the agency comprehensively
demonstrated. See id. at 5311-13 162-66. In particular, the Commission
rejected the utilities companies' argument that it should rely on the language of the
House version of the proposed legislation, which had not been enacted. Rather, it
explained that its approach was "consistent with the statutory language actually
adopted, regardless of the House's interpretation of `cost' for the purpose of its
unadopted amendments to section 224." Id. at 5312 165.10
10 Petitioners read too much into the Eleventh Circuit's statement in Alabama
Power that the telecom rate "`provided in 47 U.S.C. 224(e) yields a higher rate
for telecommunications attachments than the Cable Rate provides for cable
attachments.'" See Mot. at 6 (quoting Alabama Power Co., 311 F.3d at 1371
n.23). That statement merely reflected that under the Commission's regulations
(footnote continued on following page)
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Equally unavailing is petitioners' suggestion (Mot. at 9) that the Commis-
sion lacks the authority to establish different maximum rates for pole space for
urban and rural areas. The Commission explained that utilities should recover at
least the "cost of providing space" in all areas, but that such costs should no longer
include certain capital costs for the pole. Report & Order, 26 FCC Rcd at 5301-02
144. At the same time, the Commission sought to minimize any undue burden on
utility ratepayers that the exclusion of capital costs might entail. Id. at 5304 149
(quoting S. Rep. No. 95-580, at 21 (1977)). The Commission's revised formula
thus allows utilities to recover the greater of (1) the "cost of providing space"
(which excludes capital costs) in every area or (2) a percentage of fully allocated
costs (including capital costs) that varies based on the location of the pole (66% in
urban areas and 44% in rural areas). Id. at 5305 152. The Commission justified
the urban/rural rate difference by explaining that "there typically are fewer
attachers in non-urban areas," and that a one-size-fits-all formula that fails to
distinguish between urban and rural areas "would increase the burden pole attach-
ment rates pose for providers of broadband and other communications services in
non-urban areas, as compared to urban areas," id. at 5305 150. Petitioners ignore
this aspect of the Commission's decision in their stay motion.
Petitioners state that the Commission "reverse[d] course on fifteen years of
regulatory precedent" in adopting its revised rule. Mot. at 2. But it is well estab-
________________________
at the time, the telecom rate established in section 224(e) yielded a higher rate
for telecommunications attachments than the cable rate provided for cable
attachments. The Eleventh Circuit's empirical observation did not suggest that
the statute compels different rates.
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lished that an agency may change its policy, so long as it demonstrates an aware-
ness that it is changing position, as well as that "the new policy is permissible
under the statute, that there are good reasons for it, and that the agency believes it
to be better, which the conscious change of course adequately indicates." FCC v.
Fox Television Stations, Inc., 129 S. Ct. 1800, 1811 (2009). That axiom of admin-
istrative law reflects the commonsense proposition that an agency is "not required
to `establish rules of conduct to last forever.' " Motor Vehicle Mfrs. Ass'n v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983) (citation omitted).11
Here, as in Fox Television Stations, the Commission both acknowledged its
policy change and explained in detail why such a change was necessary and within
its statutory authority. The Commission recognized that it had relied on a fully-
allocated cost approach when it initially implemented section 224(e) in 1998.
Report & Order, 26 FCC Rcd at 5300 141. However, experience had shown
"that this approach . . . resulted in higher rates than necessary, as well as rate dis-
parities and disputes over whether the cable or telecom formula applies, negatively
impacting communications service providers' investment decisions to expand their
networks and services." Id. at 5308 157. That outcome also undermined "Con-
gress' policies underlying the 1996 Act to encourage the widest deployment pos-
11 For this reason, petitioners are wrong in claiming that the Commission's con-
struction of the Communications Act is not entitled to deference because it
reflects a change of policy (Mot. at 10). The Supreme Court "has rejected the
argument that an agency's interpretation `is not entitled to deference because it
represents a sharp break with prior interpretations' of the statute in question."
Rust v. Sullivan, 500 U.S. 173, 186 (1991) (quoting Chevron U.S.A. Inc. v.
Natural Res. Def. Council, Inc., 467 U.S. 837, 862(1984)).
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sible of advanced communications services, such as broadband Internet access, by
promoting competition and removing barriers to infrastructure investment." Id.
Moreover, the Commission emphasized that there is no "category or type of costs
that are caused by the attacher that are not recovered through the new telecom
rate." Id. at 5321 182. In light of these considerations, the Commission's deci-
sion to change course was not arbitrary and capricious.
Petitioners further assert that the Commission acted arbitrarily because,
while citing its goal of removing "`market distortions that affect attachers' deploy-
ment decisions,'" it allegedly presented no evidence "meaningfully linking" the
new telecom rate formula "with broadband deployment decisions." Mot. at 10. In
fact, the Commission cited extensive record evidence that "pole rental rates play a
significant role in the deployment and availability of voice, video, and data net-
works." Report & Order, 26 FCC Rcd at 5316 172; see generally id. at 5316-21
172-181. That evidence demonstrated that the new (generally lower) telecom
rate will promote the statute's goals of broadband deployment and availability.
"The basis for injunctive relief in the federal courts has always been irrepa-
rable harm and inadequacy of legal remedies." Wisconsin Gas Co. v. FERC, 758
F.2d 669, 674 (D.C. Cir. 1985) (quoting Sampson v. Murray, 415 U.S. 61, 88
(1974)). To obtain the extraordinary relief they seek, petitioners therefore must
demonstrate that the irreparable injury they allege is "both certain and great,"
"actual and not theoretical." Id. In other words, petitioners must provide "proof
indicating that the [alleged] harm is certain to occur in the near future," id.
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(emphasis added), if Rule 1.1409(e) remains in effect pending judicial review.
Petitioners' unsubstantiated and vague claims of harm do not clear this high hurdle.
Rather, they rest on allegations of a "threat" of "economic loss" (Mot. at 14),
coupled with dubious speculation that petitioners will lose customer goodwill
under the Commission's revised telecom rate (id. at 15-16).
"It is . . . well settled that economic loss does not, in and of itself, constitute
irreparable harm. . . . `The key word in this consideration is irreparable.'"
Wisconsin Gas, 758 F.2d at 674 (quoting Virginia Petroleum Jobbers, 259 F.2d at
925). Although economic loss may support a stay application if the movant
demonstrates that such loss will be "both certain and great," id., petitioners have
failed to make either showing here. For example, petitioners predict without any
supporting evidence that the "negotiation positions occupied by pole owners and
pole attachers will be disrupted" (Mot. at 12) by the revised telecom rate formula.
Even if such injury could qualify as irreparable harm, petitioners have failed to
adduce any evidence demonstrating the imminence or likelihood of that injury
here.12 Indeed, any such claim is undercut by petitioners' delay in seeking a judi-
12 For that reason, this case is unlike the Eighth Circuit decisions cited by petition-
ers (Mot. at 12) in which the stay applicant had made a substantial evidentiary
showing of the adverse effect on ongoing negotiations of a failure to grant a
stay. See Iowa Util. Bd. v. FCC, 109 F.3d 418, 425 (8th Cir. 1996); Brady v.
NFL, 2011 WL 1843832 *7 (8th Cir. May 16, 2011). Nor does Robertson v.
Cartinhour, 2011 WL 1752189, *1 (D.C. Cir. Apr. 19, 2011) (unpublished),
support petitioners' claim of irreparable injury. In that case, proof of economic
loss was sufficient only because the stay applicant had established that the
defendant was likely to fraudulently "dissipate the only assets available for
relief." Id. at *3. In other words, absent a grant of extraordinary interim relief,
the applicant would be deprived of any remedy even if he were to ultimately
prevail.
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cial stay.
Nor have petitioners attempted to demonstrate that any alleged losses would
be "great," Wisconsin Gas, 758 F.2d at 674. They have offered no evidence, for
example, quantifying the magnitude of the economic harm that they allegedly face
if Rule 1.1409(e) remains in effect during this litigation. Thus, the Court has no
basis for determining whether any such harm, even if it should occur, would be
significant or trivial. Indeed, the rule does not even apply in 21 states where peti-
tioners may have some, most or even all of their operations. See n. 3.
Similarly, petitioners' assertion (Mot. at 16) that they may be unable to
"recoup losses incurred by under-recovery of rents paid pending appeal" consti-
tutes precisely the sort of speculative claim of pure "economic loss" that this Court
has routinely rejected in denying stay applications. See, e.g., Wisconsin Gas, 758
F.2d at 674; Reynolds Metals Co. v. FERC, 777 F.2d 760, 763 (D.C. Cir. 1985)
("the mere possibility that after this litigation is concluded, and assuming petition-
ers prevail, the court might not decree refund, and the Commission might then also
refuse to provide it because of reliance on its overturned decision, is in no way
enough to satisfy our clear and oft-repeated standard."). Moreover, any such harm
"could be mitigated through negotiations with attachers." Stay Order 10. In
analogous situations, parties have provided for contingencies by including in their
agreements provisions that take into account a change of law that may result from
litigation. See, e.g., SBC Commc'ns, Inc. v. FCC, 407 F.3d 1223, 1230 (D.C. Cir.
2005); In the matter of Connect America Fund, 26 FCC Rcd 4554, 4778 (2011).
In an attempt to bolster their allegations of economic loss, petitioners claim
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that they will face irreparable injury from "the loss of goodwill on the part of
the[ir] . . . electric customers" because those customers will be required to "cross
subsidize the resulting shortfall in rental revenue during the period" of judicial
review. Mot. at 15-16. While loss of goodwill sometimes can establish irreparable
injury if it is proven to be "certain and great," Wisconsin Gas, 758 F.2d at 674,
petitioners again have failed to provide such proof. 13 The sole declaration that
petitioners submitted in support of their stay motion simply reports the unremark-
able fact that one state trade association anticipated that the FCC's revised rates
would "`apply once the FCC order becomes effective.'" Bynum Decl., Mot. Exh.
D. at 4. Nor is petitioners' speculation regarding a loss of customer goodwill
even plausible: The notion that customers of regulated, historical monopoly,
electric utilities will make purchasing decisions based on fluctuations in revenue
that the utilities obtain from pole attachers during the pendency of this litigation
which might or might not even be reflected in actual rates strains credulity. And
if a loss of revenue attributable to the Commission's revised rate formula ulti-
mately could be passed on to utilities' customers, petitioners themselves have
acknowledged that "`the impact of revised Rule 1.1409(e) is unlikely to motivate a
rate change by itself.'" Stay Order 9 (citing Stay Request at 5 n.13); see also
Report & Order, 26 FCC Rcd at 5305 151 ("because there are far more attach-
ments by cable operators [whose rate formula has not changed] than by telecom-
munications carriers paying the telecom rate," the actual change in utilities' current
13 None of the cases cited by petitioners (see Mot. at 15) establish that an unsub-
stantiated allegation of loss of goodwill is sufficient to demonstrate the requisite
irreparable injury.
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- 19 -
pole attachment cost recovery from existing attachments "is likely to be relatively
modest.").
Petitioners dismiss the potential harm to other parties if the Court were to
suspend the Commission's revised telecom rate rule and instead reinstate the prior
rule. Petitioners assert, without any citation or supporting evidence, that telecom
service providers had been paying the higher rate for many years and presumably
had budgeted to continue to pay that rate for the "foreseeable future." Mot at 16.
On that basis, petitioners conclude that if that higher rate were to remain in effect
"during the pendency of the appeal [it] will certainly not disrupt their business
operations or hinder broadband deployment." Id. But, as the Commission's staff
noted in denying petitioners' request for an administrative stay, petitioners them-
selves have acknowledged that some existing contractual arrangements "`simply
incorporate by reference the extant Commission telecom formula.'" Stay Order
13. Thus, "the new telecom rate formula would benefit attachers currently under
those types of agreements . . . [and] granting a stay would deny those attachers the
benefit of the lower rate." Id. Nothing in petitioners' motion refutes this
reasoning.
The Commission concluded that revising the telecom rate formula to reduce
the costs of attaching broadband lines to utility poles was a major step toward
reducing barriers to broadband deployment, consistent with the agency's statutory
mandate to "take immediate action to accelerate" broadband "deployment . . . by
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 20 of 21
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removing barriers to infrastructure investment." 47 U.S.C. 1302(b). As the
Report & Order noted, the Commission had previously "identified [its] pole
attachment rules as a means to advance the deployment of broadband." Report &
Order, 26 FCC Rcd at 5299 136 (citation omitted). That strong public interest
which transcends the personal interests of petitioners here would be thwarted by
a stay of the Commission's revised telecom rate rule.
Finally, there is no merit to petitioners' claim that, if the new rule remains in
effect during this litigation, it will "unleash[] turmoil and uncertainty on pole
attachment relationships." Mot. at 18. The Commission's staff rejected that claim,
explaining that it was the prior disparity between telecom and cable rates that had
adversely affected cable operators' "incentives to use their existing networks to
provide new, advanced services." Stay Order 12. By contrast, the new rate will
"`better enable providers to compete on a level playing field, will eliminate distor-
tions in end-user choices between technologies, and lead to provider behavior
being driven more by underlying economic costs than arbitrary price differen-
tials.'" Id. (quoting Report & Order, 26 FCC Rcd at 5303 147).
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 21 of 21
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Respectfully submitted,
Austin C. Schlick
General
Counsel
Peter Karanjia
Deputy
General
Counsel
Richard K. Welch
Acting
Associate
General
Counsel
/s/ C. Grey Pash, Jr.
C.
Grey
Pash,
Jr.
Counsel
Federal
Communications
Commission
Washington,
D.
C.
20554
(202)
418-1751
June 20, 2011
In the
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
AMERICAN ELEC. POWER SERV. CORP., et al., )
)
Petitioners
)
)
v.
) No. 11-1146
)
FEDERAL COMMUNICATIONS COMMISSION )
and THE UNITED STATES OF AMERICA,
)
)
Respondents
)
OPPOSITION OF FCC TO MOTION FOR STAY
The Federal Communications Commission opposes Petitioners' Motion forStay of the FCC's revised pole attachment rule, 47 C.F.R. 1.1409(e), which
became effective on June 8, 2011. As demonstrated below, petitioners have not
met the stringent standard for such extraordinary equitable relief.
INTRODUCTION
Pole attachment rates are the charges that owners of utility poles, includingelectric utility companies, assess when cable television operators, telecommunica-
tions carriers, and others attach their lines to existing utility poles. In the Com-
munications Act, Congress directed the FCC to ensure that pole attachment rates
are "just and reasonable." 47 U.S.C. 224(b). Congress also has directed the FCC
to "encourage the deployment . . . of advanced telecommunications capability to all
Americans" by removing barriers to infrastructure development. 47 U.S.C.
1302(b). In balancing these directives, the FCC amended its Rule 1.1409(e) to
revise the pole attachment rate that pole owners within the agency's jurisdiction
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 2 of 21
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may charge telecommunications carriers. See Implementation of Section 224 of the
Act; A National Broadband Plan for Our Future, 26 FCC Rcd 5240, 5295-5338
126-220 (2011) ("Report & Order").1
Petitioners are electric power utilities that own poles subject to the Commis-
sion's revised rule. The crux of their request for a judicial stay is that telecom-
munications carriers generally will pay pole owners less for pole attachments under
the revised rule and this "threat" of "economic loss" (Mot. at 14), coupled with a
hypothesized loss of customer goodwill in the utilities' electric power businesses,
will cause them irreparable harm.
Although the Commission released its pole attachment order on April 7,
2011, with an effective date of June 8, 2011,2 petitioners waited until May 25, 2011
before seeking an administrative stay of the order before the Commission. The
Commission's Wireline Competition Bureau, acting under its delegated authority,
timely denied petitioners' request, concluding that petitioners had failed to estab-
lish the traditional prerequisites for obtaining such extraordinary relief. Imple-
mentation of Section 224 of the Act; A National Broadband Plan for Our Future,
DA 11-980 (WCB June 1, 2011) ("Stay Order") (See App. A).
Although the Bureau issued its stay denial on June 1, 2011 (the date by
1 The Federal Register version of the Report & Order attached to petitioners'
motion (Exh. B) is only a synopsis of the order. We have attached the complete
version of the order as Appendix B to this pleading.
2 The Commission's order was adopted and publicly released on April 7, 2011,
and provided that the relevant rule would become effective 30 days after Federal
Register publication. See Report & Order, 26 FCC Rcd at 5343 243. It was
published in the Federal Register on May 9, 2011. 76 FED. REG. 26620.
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 3 of 21
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which petitioners had requested a decision), petitioners inexplicably waited another
six days before seeking a judicial stay from this Court. At approximately 9:30 p.m.
on June 7, 2011, less than three hours before the challenged rule would go into
effect, petitioners filed their stay motion with this Court. The motion did not seek
emergency relief under D.C. Circuit Rule 18, and the revised pole attachment rule
accordingly became effective as of June 8.
If petitioners were seeking action from the Court preserving the status quo,
they would face a heavy burden of persuasion. A stay of an agency decision pend-
ing judicial review is always an "extraordinary" remedy. Virginia Petroleum Job-
bers Ass'n v. FPC, 259 F.2d 921, 925 (D.C. Cir. 1958). Here, however, petitioners
seek even more drastic relief. Rather than asking the Court to preserve the status
quo (the effect of a traditional stay), they effectively ask the Court to alter the sta-
tus quo by suspending a rule that is currently in force.
Because petitioners fail to meet the stringent requirements that apply to stay
requests, much less the even more exacting standard for obtaining the affirmative
injunctive relief that petitioners seek here, their motion should be denied.
BACKGROUND
Pole Attachment Regulation
Concerned that owners of utility poles in some instances were charging
cable television companies "monopoly rents" to attach cable television wires to
their poles, see Nat'l Cable & Telecomms. Ass'n v. Gulf Power Co., 534 U.S. 327,
330 (2002), Congress in 1978 added section 224 to the Communications Act, 47
U.S.C. 224. That provision directed the Commission to ensure that the rates,
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 4 of 21
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terms, and conditions for cable television systems to attach their cables to utility
poles are just and reasonable. Id., 224(b)(1), (d)(1).3
Under section 224, a "just and reasonable" rate is tied to the "cost[]" of
providing access to utility poles. See 47 U.S.C. 224(d)(1) (defining "just and
reasonable" rate based on "costs"). The statute itself recognizes that "cost" an
undefined term can be interpreted in a range of ways. Thus, section 224(d)(1)
defines a just and reasonable rate as ranging from a statutory minimum based on
the additional costs of providing pole attachments to a statutory maximum based
on the fully allocated costs that the pole owner incurs regardless of the presence of
attachments.4 In a series of orders, the Commission implemented a formula that
cable television system attachers and utilities could use to determine a maximum
allowable just and reasonable pole attachment rate referred to as the "cable rate
formula" and procedures for resolving rate complaints.5 In 1987, the Supreme
Court upheld the Commission's cable rate formula against a constitutional chal-
lenge, concluding that it adequately compensates pole owners.6
3 Section 224(c) provides that the Commission will regulate pole attachments
except where such matters are regulated by a state. Twenty-one states have cer-
tified that they regulate pole attachments. See Report & Order, 26 FCC Rcd at
5371.
4 47 U.S.C. 224(d)(1); see also 1977 Senate Report at 19-21, reprinted in 1978
U.S.C.C.A.N. at 127-28.
5 See, e.g., First Report and Order, 68 F.C.C. 2d 1585 (1978); Adoption of Rules
for the Regulation of Cable Television Pole Attachments, 77 F.C.C. 2d 187
(1980), rev. denied, Monongahela Pwr. Co. v. FCC, 655 F2d 1254 (D.C. Cir.
1981).
6 FCC v. Florida Power Corp., 480 U.S. 245 (1987); see also Alabama Power
Co. v. FCC, 311 F.3d 1357 (11th Cir. 2002) (upholding FCC order implement-
(footnote continued on following page)
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 5 of 21
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As part of its broader effort to promote infrastructure investment and compe-
tition, Congress expanded the reach of section 224 of the Communications Act in
the Telecommunications Act of 1996.7 Among other things, Congress added "pro-
vider[s] of telecommunications service[s]" as a category of attacher entitled to pole
attachments at just and reasonable rates under section 224. 47 U.S.C. 224
(a)(4), (b)(1). Congress also added a new section 224(e) to the Communications
Act, which provides a methodology "to govern the charges for pole attachments
used by telecommunications carriers to provide telecommunications services." 47
U.S.C. 224(e)(1)(4). Section 224(e) provides for the determination of pole
attachment rates based on "the cost of providing" space on a pole. 47 U.S.C.
224(e)(2), (3). The statute directs how the costs should be divided, or allocated,
between the pole owner and attacher, see 47 U.S.C. 224(e)(2)(3), but does not
specify how such costs should be computed before allocation among the parties.
Section 224(d), which the 1996 Act left unchanged, continues to govern a just and
reasonable rate, based on "costs," for "any pole attachment used by a cable system
solely to provide cable service." 47 U.S.C. 224(d)(3).
In 1998, the Commission adopted rules implementing the 1996 Act's new
pole attachment rate formula for telecommunications carriers. Implementation of
Section 703(e) of the Telecommunications Act, Amendment of the Commission's
Rules and Policies Governing Pole Attachments, 13 FCC Rcd 6777 (1998), aff'd in
________________________
ing cable rate provision of 1996 Act against constitutional and APA challenge),
cert. denied, 540 U.S. 937 (2003).
7 Telecommunications Act of 1996, Pub. L. No. 95-234, 92 Stat. 33 (1978).
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 6 of 21
- 6 -
part, rev'd in part, Gulf Power v. FCC, 208 F.3d 1263 (11th Cir. 2000), rev'd,
Nat'l Cable & Telecomms. Ass'n v. Gulf Power, 534 U.S. 327 (2002). In uphold-
ing the Commission's action in that proceeding, the Supreme Court concluded that
section 224 gives the Commission broad authority to establish just and reasonable
rate levels. See Gulf Power, 534 U.S. at 336, 33889. The Court specifically
rejected an argument advanced by electric power utilities that "the straightforward
language of [section 224's] subsections (d) and (e) establishes two specific just and
reasonable rates [and] no other rates are authorized." Id. at 335 (citation omitted).
As a result of the statutory revisions in 1996, section 224 of the Communi-
cations Act now sets forth two separate methodologies to determine the maximum
rates for pole attachments: One applies to pole attachments used by a cable tele-
vision system solely to provide cable service (the cable rate formula) and the other
to pole attachments used by telecommunications carriers (the "telecom rate
formula"). 47 U.S.C. 224(d), (e). Under section 224, pole attachments for tele-
communications carriers initially were established under the cable rate formula,
and were transitioned to the telecom rate formula over a five-year period. 47
U.S.C. 224(e)(4). As the Commission initially implemented these statutory
formulas, the telecom rate formula generally resulted in higher pole rental rates
than the cable rate formula because the Commission elected to use a fully allocated
method to apportion costs when setting the telecom rate.
The Report and Order Before the Court
On April 7, 2011, following public notice and comment, the Commission
issued its Report & Order "comprehensively revis[ing]" the pole attachment rules.
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Among the new rules adopted in the Report & Order, the Commission revised 47
C.F.R. 1.1409(e), the telecom rate rule that petitioners now ask this Court to
suspend pending a decision on the merits of their petition for review.
Citing Congress's directive under 47 U.S.C. 1302(b), the Commission
explained that the Report & Order was "designed to promote competition and
increase the availability of robust, affordable telecommunications and advanced
services to consumers throughout the nation." Id. The Commission pointed out
that "different interpretations of the term `cost' in section 224(e) yield a range of
rates from the existing fully allocated cost approach at the high end to a rate closer
to incremental cost at the low end." Id. at 5244 8. Balancing the statutory goal
of accelerating broadband deployment against "the interest in continued pole
investment," the Commission adopted "a definition of cost that yields a new `just
and reasonable' telecommunications rate" that "generally will recover the same
portion of pole costs as the current cable rate." Id.
The Commission concluded that "the new formula will minimize the differ-
ence in rental rates paid for attachments that are used to provide voice, data, and
video services, and thus will help remove market distortions that affect attachers'
deployment decisions." Id. "Removing these barriers to telecommunications and
cable deployment," the Commission explained, "will enable consumers to benefit
through increased competition, affordability, and availability of advanced com-
munications services, including broadband," while still enabling pole owners to
earn a fair return when they provide access. Id.
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ARGUMENT
PETITIONERS' TARDY STAY REQUEST SHOULD BE DENIED
Petitioners ask the Court to suspend Rule 1.1409(e), which establishes theCommission's revised telecom rate formula. Mot. at 1.8 As petitioners acknow-
ledge, that rule became effective on June 8, 2011, within hours of petitioners' late-
night filing of their stay motion. Indeed, by filing their motion which did not
seek emergency relief less than three hours before the effective date of the rule
(see p. 3, supra), petitioners made it practically impossible for this Court to act on
their motion until after the rule had taken effect. Thus, petitioners did not proceed
in a manner directed at seeking to maintain the status quo pending the Court's
review of the merits of this case. Rather, from the outset they effectively sought
mandatory preliminary injunctive relief from the Court, directing the Commission
to turn back the clock and reinstate the pre-June 8, 2011 version of the telecom
rate rule.
That request for relief is subject to an even more exacting standard than the
standard applicable to stay requests that merely seek to preserve the status quo.
Such a drastic remedy "should be used sparingly and only in the most critical and
exigent circumstances" where "the applicants' right to relief [is] indisputably
clear." Graddick v. Newman, 453 U.S. 928, 936-37 (1981) (Powell, J., in cham-
8 Although the conclusion to petitioners' motion asks the Court to "stay the
Commission's Order pending judicial review" (Mot. at 19), petitioners clarify
that they seek a stay of "only one of the revised rules" adopted in the Report &
Order i.e., Rule 1.1409(e). Mot. at 2 n.1.
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 9 of 21
- 9 -
bers); see also Adams v. Vance, 570 F.2d 950, 956 (D.C. Cir. 1977) (injunctive
relief that would otherwise be warranted upon a balancing of the equitable factors
is not appropriate where, among other things, the order "would not merely be pre-
servative of the status quo"). Petitioners have not come close to showing that they
have an "indisputably clear" right to extraordinary injunctive relief. Nor are they
even able to satisfy the stringent requirements applicable to stay requests that seek
to preserve the status quo pending judicial review.
Before a party can obtain such a stay preserving the status quo, it must show
that: (1) it will likely prevail on the merits; (2) it will suffer irreparable harm unless
a stay is granted; (3) other interested parties will not be harmed if a stay is granted;
and (4) a stay will serve the public interest. Washington Metro. Area Transit
Comm'n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977); D.C. Cir.
Rule 18(a)(1). The Supreme Court has underscored that a "stay is an `intrusion
into the ordinary processes of administration and judicial review,' ... and accord-
ingly `is not a matter of right, even if irreparable injury might otherwise result to
the appellant.'" Nken v. Holder, 129 S. Ct. 1749, 1757 (2009) (citation omitted);
see also Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 376 (2008)
(because injunctive relief is "an extraordinary remedy," it "may only be awarded
upon a clear showing that the plaintiff is entitled to such relief"). An applicant
"must establish that . . . he is likely to suffer irreparable harm in the absence of
preliminary relief." Winter, 129 S. Ct. at 375 (emphasis added). A mere possi-
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 10 of 21
- 10 -
bility of harm is insufficient. Ibid.9 As we explain below, petitioners have failed
to satisfy this stringent standard, let alone the heightened standard that should be
applied in light of their late request for relief.
A. Petitioners Have Failed To Show That They Are Likely
To Prevail On The Merits.
Petitioners mount two central challenges to the lawfulness of revised Rule
1.1409(e). First, they claim that the "Commission's actions are at odds with both
the plain language of 224(e) of the Act and Congressional intent." Mot. at 4.
Second, they contend that the Commission's action was arbitrary and capricious.
Id. Neither argument has merit.
Petitioners contend that this is a "Chevron I" case in which "Congress'
intent is clear from the face of the Act." Mot. at 4. Not so. As the Commission
explained in the course of a comprehensive analysis of the statutory language and
legislative history, "cost" is not specifically defined in section 224(e). Report &
9 Petitioners rely on cases suggesting that this Court applies a sliding-scale
approach to stay applications under which a strong showing on one of the tra-
ditional stay criteria can compensate for a weaker showing on another. See Mot.
at 3 (citations omitted). More recently, members of this Court have questioned
whether the sliding-scale approach to preliminary injunctive relief remains good
law in light of subsequent Supreme Court precedent. See, e.g., Davis v. Pension
Benefit Guaranty Corp., 571 F.3d 1288, 1295-96 (D.C. Cir. 2009) (Kavanaugh,
J., joined by Henderson, J., concurring) (opining that "the old sliding-scale
approach to preliminary injunctions . . . is no longer controlling, or even viable,"
and noting recent Supreme Court precedent "in the related context of stays")
(citations and internal quotation marks omitted); see also Sherley v. Sebelius,
2011 WL 1599685, *4 (D.C. Cir. Apr. 29, 2011) (discussing Davis). This Court
need not resolve that question in order to dispose of this motion, because peti-
tioners fail to establish any of the four traditional stay criteria.
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 11 of 21
- 11 -
Order, 26 FCC Rcd at 5308 156-61. While Congress established a rate formula
in section 224(e) for charges for pole attachments used by telecommunications car-
riers, it did not specify a cost methodology. As the Commission observed, "section
224(e)(1) states that the Commission shall prescribe regulations `in accordance
with this subsection to govern the charges for pole attachments used by telecom-
munications carriers to provide telecommunications services,' and that `[s]uch
regulations shall ensure that a utility charges just, reasonable, and nondiscrimina-
tory rates.'" Report & Order, 26 FCC Rcd at 5308 156 (quoting 47 U.S.C.
224(e)(2)). Thus, section 224(e) describes how "[a] utility shall apportion the
cost of providing space" on a pole, but it does not define the term "cost." Id.
Accordingly, the Commission reasonably concluded that the term "the cost of pro-
viding space" is ambiguous and that, as the agency charged with administering the
Communications Act, it has the authority to interpret that ambiguous term. Id.
The Supreme Court similarly rejected a "plain meaning" argument akin to
petitioners' argument here when addressing Congress's use of the undefined term
"cost" in 47 U.S.C. 252. As the Court explained, "the unadorned term" "cost"
"is `a mere chameleon' and a `virtually meaningless' term." Verizon Commc'ns,
Inc. v. FCC, 535 U.S. 467, 500-01 (2002) (internal citations omitted). Likewise,
this Court has noted that the "generality" of terms such as "just and reasonable"
does not lend itself to an immutable meaning but rather "opens a rather large area
for the free play of agency discretion, limited of course by the familiar `arbitrary'
and `capricious' standard in the Administrative Procedure Act." Bell Atl. Tel. Cos.
v. FCC, 79 F.3d 1195, 1202 (D.C. Cir. 1996).
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 12 of 21
- 12 -
Petitioners also argue that the "plain language of the Act clearly mandates a
different rate" for telecom service providers under section 224(e) as compared to
cable systems under section 224(d) and that "[t]he Act also expressly contemplates
that the Telecom Rate formula would yield rates higher than those yielded by the
Cable Rate formula." Mot. at 5. But petitioners cite no statutory language compel-
ling that conclusion. The relevant text refers to the "cost of providing space," 47
U.S.C. 224(e)(2), (3), and the Commission explained that it had focused "on
those costs arising from the actual provision of space for pole attachments, as
opposed to costs that arise regardless of the absence or presence of attachments."
Report & Order, 26 FCC Rcd at 5312 165. The Commission further explained
that its approach gave "meaning to the methodology for allocating costs under
sections 224(e)(2) and (e)(3)." Id. at 5310 161.
The legislative history cited by petitioners (Mot. at 5-6) does not foreclose
the Commission's reasonable reading of the statute, as the agency comprehensively
demonstrated. See id. at 5311-13 162-66. In particular, the Commission
rejected the utilities companies' argument that it should rely on the language of the
House version of the proposed legislation, which had not been enacted. Rather, it
explained that its approach was "consistent with the statutory language actually
adopted, regardless of the House's interpretation of `cost' for the purpose of its
unadopted amendments to section 224." Id. at 5312 165.10
10 Petitioners read too much into the Eleventh Circuit's statement in Alabama
Power that the telecom rate "`provided in 47 U.S.C. 224(e) yields a higher rate
for telecommunications attachments than the Cable Rate provides for cable
attachments.'" See Mot. at 6 (quoting Alabama Power Co., 311 F.3d at 1371
n.23). That statement merely reflected that under the Commission's regulations
(footnote continued on following page)
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 13 of 21
- 13 -
Equally unavailing is petitioners' suggestion (Mot. at 9) that the Commis-
sion lacks the authority to establish different maximum rates for pole space for
urban and rural areas. The Commission explained that utilities should recover at
least the "cost of providing space" in all areas, but that such costs should no longer
include certain capital costs for the pole. Report & Order, 26 FCC Rcd at 5301-02
144. At the same time, the Commission sought to minimize any undue burden on
utility ratepayers that the exclusion of capital costs might entail. Id. at 5304 149
(quoting S. Rep. No. 95-580, at 21 (1977)). The Commission's revised formula
thus allows utilities to recover the greater of (1) the "cost of providing space"
(which excludes capital costs) in every area or (2) a percentage of fully allocated
costs (including capital costs) that varies based on the location of the pole (66% in
urban areas and 44% in rural areas). Id. at 5305 152. The Commission justified
the urban/rural rate difference by explaining that "there typically are fewer
attachers in non-urban areas," and that a one-size-fits-all formula that fails to
distinguish between urban and rural areas "would increase the burden pole attach-
ment rates pose for providers of broadband and other communications services in
non-urban areas, as compared to urban areas," id. at 5305 150. Petitioners ignore
this aspect of the Commission's decision in their stay motion.
Petitioners state that the Commission "reverse[d] course on fifteen years of
regulatory precedent" in adopting its revised rule. Mot. at 2. But it is well estab-
________________________
at the time, the telecom rate established in section 224(e) yielded a higher rate
for telecommunications attachments than the cable rate provided for cable
attachments. The Eleventh Circuit's empirical observation did not suggest that
the statute compels different rates.
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 14 of 21
- 14 -
lished that an agency may change its policy, so long as it demonstrates an aware-
ness that it is changing position, as well as that "the new policy is permissible
under the statute, that there are good reasons for it, and that the agency believes it
to be better, which the conscious change of course adequately indicates." FCC v.
Fox Television Stations, Inc., 129 S. Ct. 1800, 1811 (2009). That axiom of admin-
istrative law reflects the commonsense proposition that an agency is "not required
to `establish rules of conduct to last forever.' " Motor Vehicle Mfrs. Ass'n v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983) (citation omitted).11
Here, as in Fox Television Stations, the Commission both acknowledged its
policy change and explained in detail why such a change was necessary and within
its statutory authority. The Commission recognized that it had relied on a fully-
allocated cost approach when it initially implemented section 224(e) in 1998.
Report & Order, 26 FCC Rcd at 5300 141. However, experience had shown
"that this approach . . . resulted in higher rates than necessary, as well as rate dis-
parities and disputes over whether the cable or telecom formula applies, negatively
impacting communications service providers' investment decisions to expand their
networks and services." Id. at 5308 157. That outcome also undermined "Con-
gress' policies underlying the 1996 Act to encourage the widest deployment pos-
11 For this reason, petitioners are wrong in claiming that the Commission's con-
struction of the Communications Act is not entitled to deference because it
reflects a change of policy (Mot. at 10). The Supreme Court "has rejected the
argument that an agency's interpretation `is not entitled to deference because it
represents a sharp break with prior interpretations' of the statute in question."
Rust v. Sullivan, 500 U.S. 173, 186 (1991) (quoting Chevron U.S.A. Inc. v.
Natural Res. Def. Council, Inc., 467 U.S. 837, 862(1984)).
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 15 of 21
- 15 -
sible of advanced communications services, such as broadband Internet access, by
promoting competition and removing barriers to infrastructure investment." Id.
Moreover, the Commission emphasized that there is no "category or type of costs
that are caused by the attacher that are not recovered through the new telecom
rate." Id. at 5321 182. In light of these considerations, the Commission's deci-
sion to change course was not arbitrary and capricious.
Petitioners further assert that the Commission acted arbitrarily because,
while citing its goal of removing "`market distortions that affect attachers' deploy-
ment decisions,'" it allegedly presented no evidence "meaningfully linking" the
new telecom rate formula "with broadband deployment decisions." Mot. at 10. In
fact, the Commission cited extensive record evidence that "pole rental rates play a
significant role in the deployment and availability of voice, video, and data net-
works." Report & Order, 26 FCC Rcd at 5316 172; see generally id. at 5316-21
172-181. That evidence demonstrated that the new (generally lower) telecom
rate will promote the statute's goals of broadband deployment and availability.
B. Petitioners Have Failed To Demonstrate That They Will Suffer
Irreparable Injury Absent A Stay.
"The basis for injunctive relief in the federal courts has always been irrepa-
rable harm and inadequacy of legal remedies." Wisconsin Gas Co. v. FERC, 758
F.2d 669, 674 (D.C. Cir. 1985) (quoting Sampson v. Murray, 415 U.S. 61, 88
(1974)). To obtain the extraordinary relief they seek, petitioners therefore must
demonstrate that the irreparable injury they allege is "both certain and great,"
"actual and not theoretical." Id. In other words, petitioners must provide "proof
indicating that the [alleged] harm is certain to occur in the near future," id.
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 16 of 21
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(emphasis added), if Rule 1.1409(e) remains in effect pending judicial review.
Petitioners' unsubstantiated and vague claims of harm do not clear this high hurdle.
Rather, they rest on allegations of a "threat" of "economic loss" (Mot. at 14),
coupled with dubious speculation that petitioners will lose customer goodwill
under the Commission's revised telecom rate (id. at 15-16).
"It is . . . well settled that economic loss does not, in and of itself, constitute
irreparable harm. . . . `The key word in this consideration is irreparable.'"
Wisconsin Gas, 758 F.2d at 674 (quoting Virginia Petroleum Jobbers, 259 F.2d at
925). Although economic loss may support a stay application if the movant
demonstrates that such loss will be "both certain and great," id., petitioners have
failed to make either showing here. For example, petitioners predict without any
supporting evidence that the "negotiation positions occupied by pole owners and
pole attachers will be disrupted" (Mot. at 12) by the revised telecom rate formula.
Even if such injury could qualify as irreparable harm, petitioners have failed to
adduce any evidence demonstrating the imminence or likelihood of that injury
here.12 Indeed, any such claim is undercut by petitioners' delay in seeking a judi-
12 For that reason, this case is unlike the Eighth Circuit decisions cited by petition-
ers (Mot. at 12) in which the stay applicant had made a substantial evidentiary
showing of the adverse effect on ongoing negotiations of a failure to grant a
stay. See Iowa Util. Bd. v. FCC, 109 F.3d 418, 425 (8th Cir. 1996); Brady v.
NFL, 2011 WL 1843832 *7 (8th Cir. May 16, 2011). Nor does Robertson v.
Cartinhour, 2011 WL 1752189, *1 (D.C. Cir. Apr. 19, 2011) (unpublished),
support petitioners' claim of irreparable injury. In that case, proof of economic
loss was sufficient only because the stay applicant had established that the
defendant was likely to fraudulently "dissipate the only assets available for
relief." Id. at *3. In other words, absent a grant of extraordinary interim relief,
the applicant would be deprived of any remedy even if he were to ultimately
prevail.
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 17 of 21
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cial stay.
Nor have petitioners attempted to demonstrate that any alleged losses would
be "great," Wisconsin Gas, 758 F.2d at 674. They have offered no evidence, for
example, quantifying the magnitude of the economic harm that they allegedly face
if Rule 1.1409(e) remains in effect during this litigation. Thus, the Court has no
basis for determining whether any such harm, even if it should occur, would be
significant or trivial. Indeed, the rule does not even apply in 21 states where peti-
tioners may have some, most or even all of their operations. See n. 3.
Similarly, petitioners' assertion (Mot. at 16) that they may be unable to
"recoup losses incurred by under-recovery of rents paid pending appeal" consti-
tutes precisely the sort of speculative claim of pure "economic loss" that this Court
has routinely rejected in denying stay applications. See, e.g., Wisconsin Gas, 758
F.2d at 674; Reynolds Metals Co. v. FERC, 777 F.2d 760, 763 (D.C. Cir. 1985)
("the mere possibility that after this litigation is concluded, and assuming petition-
ers prevail, the court might not decree refund, and the Commission might then also
refuse to provide it because of reliance on its overturned decision, is in no way
enough to satisfy our clear and oft-repeated standard."). Moreover, any such harm
"could be mitigated through negotiations with attachers." Stay Order 10. In
analogous situations, parties have provided for contingencies by including in their
agreements provisions that take into account a change of law that may result from
litigation. See, e.g., SBC Commc'ns, Inc. v. FCC, 407 F.3d 1223, 1230 (D.C. Cir.
2005); In the matter of Connect America Fund, 26 FCC Rcd 4554, 4778 (2011).
In an attempt to bolster their allegations of economic loss, petitioners claim
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 18 of 21
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that they will face irreparable injury from "the loss of goodwill on the part of
the[ir] . . . electric customers" because those customers will be required to "cross
subsidize the resulting shortfall in rental revenue during the period" of judicial
review. Mot. at 15-16. While loss of goodwill sometimes can establish irreparable
injury if it is proven to be "certain and great," Wisconsin Gas, 758 F.2d at 674,
petitioners again have failed to provide such proof. 13 The sole declaration that
petitioners submitted in support of their stay motion simply reports the unremark-
able fact that one state trade association anticipated that the FCC's revised rates
would "`apply once the FCC order becomes effective.'" Bynum Decl., Mot. Exh.
D. at 4. Nor is petitioners' speculation regarding a loss of customer goodwill
even plausible: The notion that customers of regulated, historical monopoly,
electric utilities will make purchasing decisions based on fluctuations in revenue
that the utilities obtain from pole attachers during the pendency of this litigation
which might or might not even be reflected in actual rates strains credulity. And
if a loss of revenue attributable to the Commission's revised rate formula ulti-
mately could be passed on to utilities' customers, petitioners themselves have
acknowledged that "`the impact of revised Rule 1.1409(e) is unlikely to motivate a
rate change by itself.'" Stay Order 9 (citing Stay Request at 5 n.13); see also
Report & Order, 26 FCC Rcd at 5305 151 ("because there are far more attach-
ments by cable operators [whose rate formula has not changed] than by telecom-
munications carriers paying the telecom rate," the actual change in utilities' current
13 None of the cases cited by petitioners (see Mot. at 15) establish that an unsub-
stantiated allegation of loss of goodwill is sufficient to demonstrate the requisite
irreparable injury.
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 19 of 21
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pole attachment cost recovery from existing attachments "is likely to be relatively
modest.").
C. A Stay Would Harm Other Parties.
Petitioners dismiss the potential harm to other parties if the Court were to
suspend the Commission's revised telecom rate rule and instead reinstate the prior
rule. Petitioners assert, without any citation or supporting evidence, that telecom
service providers had been paying the higher rate for many years and presumably
had budgeted to continue to pay that rate for the "foreseeable future." Mot at 16.
On that basis, petitioners conclude that if that higher rate were to remain in effect
"during the pendency of the appeal [it] will certainly not disrupt their business
operations or hinder broadband deployment." Id. But, as the Commission's staff
noted in denying petitioners' request for an administrative stay, petitioners them-
selves have acknowledged that some existing contractual arrangements "`simply
incorporate by reference the extant Commission telecom formula.'" Stay Order
13. Thus, "the new telecom rate formula would benefit attachers currently under
those types of agreements . . . [and] granting a stay would deny those attachers the
benefit of the lower rate." Id. Nothing in petitioners' motion refutes this
reasoning.
D. A Stay Would Harm The Public Interest.
The Commission concluded that revising the telecom rate formula to reduce
the costs of attaching broadband lines to utility poles was a major step toward
reducing barriers to broadband deployment, consistent with the agency's statutory
mandate to "take immediate action to accelerate" broadband "deployment . . . by
USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 20 of 21
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removing barriers to infrastructure investment." 47 U.S.C. 1302(b). As the
Report & Order noted, the Commission had previously "identified [its] pole
attachment rules as a means to advance the deployment of broadband." Report &
Order, 26 FCC Rcd at 5299 136 (citation omitted). That strong public interest
which transcends the personal interests of petitioners here would be thwarted by
a stay of the Commission's revised telecom rate rule.
Finally, there is no merit to petitioners' claim that, if the new rule remains in
effect during this litigation, it will "unleash[] turmoil and uncertainty on pole
attachment relationships." Mot. at 18. The Commission's staff rejected that claim,
explaining that it was the prior disparity between telecom and cable rates that had
adversely affected cable operators' "incentives to use their existing networks to
provide new, advanced services." Stay Order 12. By contrast, the new rate will
"`better enable providers to compete on a level playing field, will eliminate distor-
tions in end-user choices between technologies, and lead to provider behavior
being driven more by underlying economic costs than arbitrary price differen-
tials.'" Id. (quoting Report & Order, 26 FCC Rcd at 5303 147).
CONCLUSION
For the foregoing reasons, petitioners' stay motion should be denied.USCA Case #11-1146 Document #1314075 Filed: 06/20/2011 Page 21 of 21
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Respectfully submitted,
Austin C. Schlick
General
Counsel
Peter Karanjia
Deputy
General
Counsel
Richard K. Welch
Acting
Associate
General
Counsel
/s/ C. Grey Pash, Jr.
C.
Grey
Pash,
Jr.
Counsel
Federal
Communications
Commission
Washington,
D.
C.
20554
(202)
418-1751
June 20, 2011
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