What Your Electric Company May Not Be Telling You
Posted by Jamie Holland on October 23, 2012
Healthy competition is good. It is what drives businesses to greater heights, provides better goods and services for the people, and ensures the best prices. Healthy competition allows similarly situated businesses, on a level playing field, to fight it out and may the best product (or products) win. This premise is part of what makes this country great.
So what does unhealthy competition look like? Let me provide a scenario: “Company A” invests billions of dollars in the development of a product. The only way for this product to reach consumers, however, is through a monopoly system of distribution owned by “Company B.” By virtue of its monopoly, Company B can charge Company A anything it wants for the cost of distribution. In some cases, Company B charges a fair rate – one that adequately compensates Company B for the use of its distribution system. In other cases Company B charges MUCH higher rates than are fair and truly reflective of the value they provide Company A. As a result, these higher costs are either passed along to Company A’s customers or simply absorbed by Company A, taking away from the ability to continue to develop even better products for its customers.
This scenario should sound familiar. It is the very sort of scenario that has led to numerous state and federal laws against unfair trade practice. It is what has led to countless lawsuits. It is what forced the breakup of Ma Bell back in the 1980’s. Why? Because as Americans we are entitled to have a fair system that makes sure we have access to the best products and services out there; we should not be deprived, as citizens and business owners, of the right to fair business practices.
Your first question is likely, “But if there are laws against such bad and unfair business practices, who is Company A and who is Company B in this scenario and how does this still go on?” What if I told you Company A is your local cable provider and Company B is your local electric company? The fact of the matter is that your local electric company owns most of the utility poles you see around town and your cable company has to attach its cable line to those poles to bring you TV, Internet and phone service. All of the control is in the hands of the electric company because there is no other realistic way to distribute cable products to you – and they know it. The rules against unfair trade practices that stop private businesses from this behavior simply do not apply to municipal electric companies and electric cooperatives. As a result, some electric companies take the opportunity to gouge your cable provider to subsidize their electric system.
Your next question, then, is “How much does my electric company charge my cable company to attach to their utility poles?” The simple answer is: whatever they feel like. When your electric company and your cable company enter into negotiations for pole attachment agreements, it isn’t really a negotiation at all. With control over the sole means of distribution and no oversight or regulation, the electric companies that don’t care about the investments made by your cable company and how much your cable bill might have to go up can charge up to SEVEN TIMES what other electric companies in Tennessee charge the exact same cable company for the exact same pole attachment.
Are ANY pole attachment agreements regulated? Yes – if a company owns a utility pole, the FCC has a formula to calculate how much they can charge your cable operator to attach. In most states, the majority of electric companies are private/publicly-traded companies so their pole attachment agreements are subject to the FCC formula or the state has chosen to regulate the rates. In Tennessee, however, the only poles to which this applies are the ones owned by companies like AT&T, which make up only a fraction of the total utility poles in the state.
So why should you care about all this? First of all, it is simply unfair to allow a practice that can be and is abused so frequently to the detriment of companies investing in our state. Second, every dollar above what a fair rate would be paid by your cable company to your electric company is one less dollar that company has to invest in new technologies to improve your products and services. Third, Tennessee is in competition with other states and allowing these practices put us behind. When companies are looking to invest in greater broadband deployment, they are naturally going to be drawn to states where pole attachment rates are fairer and more predictable. In this world in which access to robust broadband grows more important every day – everything from better educating our children to attracting new businesses to our state – we cannot afford to allow this to continue.
At this point I believe it only fair to makes something very clear: I am not painting all municipal electric companies or electric co-operatives with the same brush. Many electric systems in Tennessee have good faith, fair dealing business practices with the cable operator in their territory. The two have a strong and healthy business relationship that allows the electric system to be fairly and justly compensated for the space on their utility poles used by your cable company. And, in turn, your cable company maintains a greater ability to continue to invest in technology development and build-out to meet our ever-increasing demand for high definition television and fast Internet speeds. These fair-dealing electric companies should be the ones MOST upset by their fellow electric systems that do not behave similarly; we are all familiar with the notion “a few rotten apples ruin the whole bunch.”
We must demand fairness for the companies who have and wish to continue improving our lives by providing the best cable television, broadband and telephone service. Anything less and we are only falling farther and farther behind.
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