Building aerial fiber means putting the fiber on poles. Most poles are owned by electric utilities, although some belong to telephone companies or municipalities. Invariably, some poles have to be replaced in order to add a new fiber line. This mostly occurs when there is not enough room on an existing pole to provide for the required safe distance between wires that are required by national safety codes. The common fix for this problem is to install a taller pole and move existing wires from the old pole to the new one – the process can be agonizingly slow since the pole owner has to coordinate with existing attachers. Worse is the expense, since the new attacher has to pay the full cost of replacing the pole and moving the old wires.
But poles often must be replaced because they are obsolete or in bad condition. The FCC recently issued new pole rules which designate poles that are out of safety compliance or that are already scheduled to be replaced as ‘red-flagged poles’. Under the new rules, a new fiber attacher will not be responsible for the full cost of replacing a red-flagged pole. We’ll have to wait to see how the new rules play out in actual practice since pole owners are likely to argue vehemently about when to assign the red-flag designation.
Regardless of why poles have to be replaced, the BEAD grants are going to be used to replace huge numbers of poles. I don’t have any easy way to estimate the number of poles that will be replaced, but it wouldn’t be surprising if it is in the millions. It’s fairly normal for aerial construction to require the replacement of 5% to 10% of poles. In places where the poles are in bad shape, this can be a lot higher.
The cost of replacing poles is built into the construction costs of adding new aerial fiber. Since BEAD will pay up to 75% of the cost of fiber construction, that means BEAD will pay up to 75% of the cost of replacing poles.
That is a huge windfall for electric utilities. In far too many cases, the poles that will replaced by BEAD should have already been upgraded and replaced by the pole owners. Depending on the local conditions in different part of the country, poles typically are expected to last from 30 to 50 years. Unfortunately, it’s not unusual for utilities to keep poles far past the expected economic life.
Fiber providers have been yelling for years that the process is unfair. They are routinely being asked to replace poles that have held other wires for decades. During that time, the pole owner collected pole attachment fees – which should have more than covered the periodic replacement cost of the poles.
Regulators blew it a long time when they didn’t require pole owners to put pole attachment fees into a sinking fund that could only be used to repair poles after storm damage or eventually replace poles. But pole owners count pole attachment fees like any other revenue stream, and it’s quickly used for something else – and in many electric companies might even use the fees to pay dividends to shareholders.
Some states have recognized the pole issue as a big problem and used a solution that has me scratching my head. These states have taken some funding from CAREs or ARPA and created a pole replacement fund to replace the worst poles in the state. This makes some sense if bad poles are a major impediment to building fiber.
But you don’t have to think about this very hard to realize that a pole replacement fund is exactly the wrong economic incentive to give to pole owners. If I’m a pole owner and my State will fund pole replacement, I’m going to cut way back on the poles that I’ll voluntarily replace. I’d let the inventory of bad poles build up and then ask for more pole replacement money. To use common political vernacular – a pole replacement fund fosters welfare for electric companies.
The FCC had an opportunity in its recent pole order to take an important step, which was to require all pole owners to create a public inventory showing the age and condition of every pole. Such a database would make it easy to spot the pole owners who are not replacing poles as needed. Without this basic data, it’s incredibly hard for regulators to force pole owners to do the right thing.
The BEAD grants will bring a lot of broadband to places that need it. It’s just a shame that a lot of the funding will be used to replace the pole inventory of utilities that failed to invest in their own networks.