FCC Tried to Sweep Old Pole Attachment Standard ‘Under the Rug’: Duke Brief

The FCC improperly used its authority to award AT&T “significant rate reductions and massive (though incalculable) refunds,” said Duke Energy’s opening brief Monday (docket 22-2220) at the 4th U.S. Circuit Court of Appeals in its petition for review of an FCC November order denying it reconsideration in a pole attachment rate dispute with AT&T (see 2211290053). The petition stems from a September 2021 Enforcement Bureau order partly granting AT&T's claims it was charged "unjust and unreasonable" pole attachment rates by Duke.

The FCC’s jurisdiction doesn’t extend to the rates paid by Duke “for access to AT&T’s poles,” said the brief. “This case presents the first opportunity for a court of appeals to pass judgment on this issue in an as-applied context.” Duke alleges the FCC “created an entirely new standard and retroactively applied it” to the joint use agreement in place between Duke and AT&T to award AT&T a refund for the period governed by its 2011 pole attachment order.

The FCC “erred in finding that AT&T is entitled to a refund for the portion of its claim” governed by the 2011 order, said Duke’s brief. In reaching that finding, the FCC didn’t apply “the legal standard that governed” during the entire period that the 2011 order was in effect, it said. The FCC instead “retroactively applied a new standard that directly contradicted the prior standard,” it said.

Under the prior standard, the old telecom rate charged for pole attachments was neither a hard cap nor a reference point for rate disputes under existing joint use agreements, said Duke’s brief. But the FCC used the old telecom rate not only as a reference point but also as a hard cap to the rate charged to AT&T under the existing agreement, it said.

ILECs like AT&T were required under the prior standard to demonstrate the monetary value of the benefits they receive under an existing joint use agreement doesn’t justify the rates charged, said Duke’s brief. There’s “no dispute” that AT&T failed to quantify the monetary value of the benefits it receives under the existing agreement, it said. But the FCC nonetheless “found that AT&T met its burden” by comparing the rate under the parties’ existing agreement to, inter alia, the rate it would have paid under the new telecom rate and old telecom rate, it said.

The FCC’s retroactive application of the new standard was “impermissible,” said Duke’s brief. The FCC “abruptly departed” from the prior standard and replaced it with a new standard “that directly contradicts the prior standard,” it said. Duke relied on the prior standard because the new standard was not even announced until after the period governed by the 2011 order “had already expired,” it said. The FCC’s retroactive application of the new standard “significantly burdens Duke by saddling it with millions of dollars in refund liability for which it would not be responsible under the prior standard,” it said.

The FCC “acted arbitrarily and capriciously” by departing from the prior standard sub silentio (under silence), said Duke’s brief. When Duke directly challenged the unexplained departure from the prior standard, the FCC “pretended the prior standard never existed, refused to acknowledge any departure from the prior standard, and failed to provide a reasonable explanation for the change,” it said. “This is not a reasoned departure from previous precedent,” it said: It’s instead “an example of the FCC attempting to sweep a previous standard under the rug.”