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Regulation - What is it Good For?

The Cost of Using Poles

The Georgia Public Service Commission (GPSC) passed a rule recently that reduces the cost of pole attachments to $1 per year per pole for anybody that builds broadband in areas of the state that the state considers to be unserved. They titled this the One Buck Deal. The state has created its own broadband map that undoes many of the errors in the FCC’s broadband maps and shows that over 500,000 rural homes don’t have broadband.

I really don’t mean to detract from any effort to make it easier to build rural fiber – but pole attachment fees are not what is stopping companies from building rural fiber. It easy to understand how regulators got this idea because the big ISPs have been screaming about pole attachment fees for years. And at the national level, the biggest fiber builders have claimed that pole attachment fees are an impediment.

From an operating perspective, annual pole attachment fees are a relatively minor cost for most network owners. The biggest expenses for operating a new fiber project are labor and interest on debt. Other big expenses include the cost of the Internet backbone, billing, and marketing. Pole attachments fall far down the list, and for most projects I’ve worked with, the cost of pole attachments is rarely more than a percent or two of total operating expenses. While the GPSC gesture of reducing these fees would be welcome to a fiber overbuilder, avoiding 1% of operating costs isn’t going to move the needle on any business plan.

The biggest cost of deploying fiber is the construction cost of building the fiber network along each road in a service area. Poles play a major role in the cost equation, but it’s not the fees to rent the poles that are the problem. The biggest cost culprit in putting fiber on poles in something the industry calls make-ready. This is the cost of getting poles ready before fiber can be hung. There are national electrical standards that define the spacing between wires of different utilities – rules that are designed to provide safety to technicians that must work on poles, particularly when trying to fix storm damage.

Make-ready costs fall into three general categories. Some make-ready involves fixing existing problems with wires. The original utilities on the poles may not have followed the safety rules and there are often many cases where wires are already out of compliance with the safety rules. Cables may be installed too close to neighboring wires. Wires might have too much sag, making it hard for an additional attacher.  Unfortunately, the make-ready rules say that the new fiber attacher must pay the full cost fixing existing problems.

The second category of make-ready involves situations where there is not enough room for a new attacher. In these cases, the pole must be replaced with a taller pole and each existing attacher must move wires to the new pole. Unfortunately, the new attacher must also pay for all of these costs.  The final category of cost in areas with a lot of trees is tree trimming. Electric utilities are supposed to keep trees trimmed out of the way of the wires on a pole – but if they are lax in this effort, then the new fiber attacher must also pick up these fees.

It’s not untypical for make-ready costs to range from $10,000 to $20,000 per mile, with some cases we know of as high as $50,000 per mile. The areas with the highest costs are with pole owners (generally electric companies) that have neglected pole maintenance for many years. A new fiber builder is often saddled with replacing poles that are rotted or leaning – something that the utilities should have been routinely fixing over the years. I know of cases where practically every pole needs to be replaced – and this can generally be pinned on the absence of maintenance by the pole owner.

If the GPSC really want to make it easier to build rural fiber, they would have tackled the make-ready issue aggressively. It’s crazy that a new pole attacher must pay to fix existing safety violations of the current utilities using the pole. It’s massively unfair that a new fiber attacher should pay the full cost to replace poles that are old, rotted, and already unsafe.

But fixing the make-ready issue means taking on the powerful lobbies of existing utilities. The telcos, cable companies, and electric utilities collectively have a huge presence in most state legislatures. They are perfectly happy with the status quo where the new guy pays to fix all past sins.

I hope the Georgia idea doesn’t catch on. Regulators and state politicians look for easy ways to say that they are doing something to fix the rural broadband problem. They will point to things like the One Buck Deal to prove they are taking action – when in fact, actions like this one don’t make it any easier to build rural fiber. If regulators want to fix rural pole issues, then they should be fixing the 99% cost problem of pole make-ready instead of the 1% cost issue of pole attachment fees.

3 replies on “The Cost of Using Poles”

Here in Vermont a new attacher does not have to pay the costs for work that represents neglected maintenance. We do not have to pay for replacement of rotted poles but we do have to pay for replacing poles when the existing pole is too short to accommodate our attachment with the required spacing. Doug is right that make-ready costs can be a major inhibitor to rural development, but they are also a burden in somewhat more densely populated areas (i.e. village centers and/or major road arteries) where there are lots of cables on the poles that have to be moved or new larger poles put in.

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