The Pricing of Pole Attachments: Implications and Recommendations

Phoenix Center Policy Paper No. 34

25 Pages Posted: 18 Mar 2009  

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Thomas Koutsky

Connected Nation Inc.

Lawrence J. Spiwak

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Date Written: December 2008

Abstract

Today, a patchwork of regulation applies to the rates, terms, and conditions cable and telephone companies pay for access to poles, ducts, and conduits. Concerned about the differences in pole attachment rates paid by communications carriers, the Federal Communications Commission ('FCC') is currently considering whether it should adopt a new, uniform rate for pole attachment services for 'broadband Internet access services.' In this Paper, we explore the optimal method of establishing rates for utility poles - Ramsey pricing - where the fixed costs of poles are allocated to firms based on the relative demand elasticities for attachments. We find that while historical differences in rates might have been compatible with Ramsey pricing when the service offerings of firms differed substantially, technological convergence dictates that these firms should pay a unified rate. Moreover, we present evidence indicating that optimal pricing principles would prescribe a significantly lower attachment rate for all broadband networks than the rates currently applied to these firms. Such a result would promote overall economic efficiency and increase consumer welfare.

Keywords: Pole Attachments, Ramsey Pricing, broadband

JEL Classification: K23, L51, L94, L96, L98, O38

Suggested Citation

Ford, George S. and Koutsky, Thomas and Spiwak, Lawrence J., The Pricing of Pole Attachments: Implications and Recommendations (December 2008). Phoenix Center Policy Paper No. 34. Available at SSRN: https://ssrn.com/abstract=1360940 or http://dx.doi.org/10.2139/ssrn.1360940

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Thomas M. Koutsky

Connected Nation Inc. ( email )

1020 College St
Bowling Green, KY 42101
United States

Lawrence J. Spiwak (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States
202-274-0235 (Phone)
202-318-4909 (Fax)

HOME PAGE: http://www.phoenix-center.org

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