"Today, telephone companies, wireless firms, and cable companies pay different rates to attach their utility poles and, according to some estimates, the difference in prices is stark," said Phoenix Center President and co-author Lawrence J. Spiwak. "This arcane system hinders and skews broadband investment decisions, a problem that would be solved with a lower and uniform rate available to all broadband firms."
Phoenix Center Policy Paper No. 34, The Pricing of Pole Attachments: Implications and Recommendations, shows that the current rates for access to poles, ducts, and rights of way (collectively referred to as pole attachments) charged to many broadband firms are generally too high and should be lowered and unified in order to promote consumer welfare and economic efficiency. The study recommends that policymakers use the economic principle of "Ramsey pricing" as a framework for determining the most efficient means of pricing these essential broadband network inputs. A core principle of Ramsey pricing is that firms with a similar elasticity of demand for a common input to production-in this case, utility poles-should pay similar rates for that input.
"The convergence of communications networks has many implications, with one being that the regulated prices for pole attachments should likewise converge," said Phoenix Center Chief Economist George S. Ford, a co-author of the study. "Having different rate structures for cable and telephone companies might have made sense when Congress and the FCC established this system 30 years ago when the networks offered very different services. Today, economically efficient pricing implies the pole rate should be common for all broadband providers, and also be much lower than the rates charged today."
"The rate broadband providers pay to attach equipment to a utility pole may seem like an arcane issue. But there are tens of millions of poles, each of which are absolutely critical pathways to homes and businesses that need to be connected, especially in rural areas," said Phoenix Center Resident Scholar and study co-author Thomas M. Koutsky. "If we're going to have a national broadband policy directed at promoting broadband infrastructure investment, then a good place to start is with the simple telephone pole."
The Phoenix Center is an international, non-profit 501(c)(3) organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of telecommunications and high-tech industries.
