[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
____________________________
No. 00-14763
_____________________________
FCC Docket No. PA 00-00003
ALABAMA POWER COMPANY,
Petitioner,
versus
FEDERAL COMMUNICATIONS COMMISSION,
UNITED STATES OF AMERICA,
Respondents,
ALABAMA CABLE TELECOMUNICATIONS
ASSOCIATION,
COMCAST CABLEVISION OF DOTHAN, INC,
AMERICAN ELECTRIC POWER SERVICE
CORPORATION,
Intervenors,
____________________________
No. 00-15068
_____________________________
FCC Docket No. PA-00-003
GULF POWER COMPANY,
Petitioner,
versus
FEDERAL COMMUNICATIONS COMMISSION,
UNITED STATES OF AMERICA,
Respondents,
AMERICAN ELECTRIC POWER SERVICE CORPORATION,
COMMONWEALTH EDISON COMPANY,
DUKE ENERGY CORPORATION,
Intervenors.
___________________________
No. 01-13058
____________________________
FCC Docket No. 01-00181-FCC
ALABAMA POWER COMPANY and
GULF POWER COMPANY,
Petitioners,
versus
FEDERAL COMMUNICATIONS
COMMISSION and the UNITED STATES,
Respondents,
ALABAMA CABLE TELECOMMUNICATIONS ASSOCIATION,
COMCAST CABLEVISION OF DOTHAN, INC., et al.,
and
AMERICAN ELECTRIC POWER SERVICE CORPORATION,
COMMONWEALTH EDISON COMPANY, ET AL.,
Intervenors.
____________________________
Petitions for Review of Orders
of the Federal Communications Commission
____________________________
(November 14, 2002)
Before TJOFLAT, BARKETT and WILSON, Circuit Judges.
TJOFLAT, Circuit Judge:
As part of the Telecommunications Act of 1996, Congress amended the PoleAttachment Act of 1978 to give cable television companies the right to acquirespace on the utility poles of power companies at rates established by a formula (the"Cable Rate" (1)) promulgated by the Federal Communications Commission ("FCC"or "Commission"). See 47 U.S.C. § 224. Under the regulatory scheme, if theparties are unable to agree on the price, the cable company can seek relief in theFCC's Cable Bureau. In this case, the Cable Bureau, and on review, the FCC,rejected the price demanded by Alabama Power ("APCo") for a cable televisioncompany's mandatory right of access to its utility poles, and it ordered the partiesto negotiate a price within the parameters of the Cable Rate. See In the Matter ofAla. Cable Telecomm. Ass'n et al. v. Ala. Power Co., 16 FCC Rcd. 12,209 (2001).APCo, Gulf Power Company ("Gulf Power"), and several intervenors now ask usto declare that the rate imposed by the FCC does not provide just compensationand therefore violates the Takings Clause of the Fifth Amendment. In essence, thepetitioners are using this case as a vehicle to mount a challenge to the ratemethodology set forth in 47 U.S.C. § 224(d) (2) and the FCC's implementation of therate methodology in 47 C.F.R. §§ 1.1401 et seq. We hold that based on theparticular facts of this case, the petitioners have failed to meet their burden ofproof. We therefore deny the petitions for review.
The factual context of this case is difficult to comprehend without anunderstanding of the economic and legislative climate existing prior to the 1996 Act, as well as the history of Fifth Amendment litigation in the pole attachmentcontext. Part I of this opinion provides this necessary background. Part II takes adetour from the primary focus of this case by addressing the standing andexhaustion issues presented. The heart of the case is found in part III, where wefind that there has been no violation of the Takings Clause. Finally, part IVaddresses arguments concerning the administrative process, such as whether theFCC acted in a way that is arbitrary and capricious, or whether it failed to providethe litigants with due process.
I.
Certain firms have historically been considered to be naturalmonopolies-bottleneck facilities that arise due to network effects (3) and economiesof scale. (4) Such firms have historically included electric utilities, local telephonecompanies, (5) and oil pipelines. See generally Richard D. Cudahy, WhitherDeregulation: A Look at the Portents, Ann. Surv. Am. L. 155 (2001). Firms inother markets frequently need access to these bottlenecks in order to compete. The"essential facilities" doctrine in antitrust law has often provided the legal remedyfor such problems. See, e.g., Otter Tail Power Co. v. United States, 410 U.S. 366,93 S. Ct. 1022, 35 L. Ed. 2d 359 (1973); see generally Phillip E. Areeda & HerbertHovenkamp, 3A Antitrust Law ¶ 772 (1996). Over the last several years, however,Congress has sought to codify forced-access regulations rather than resorting tojudge-made principles of antitrust law. The most noteworthy effort in this vein wasthe Telecommunications Act of 1996, 47 U.S.C. §§ 151 et. seq. In thatmonumental legislation, Congress sought to break the hold of incumbent telephonemonopolies and pave the way for local competition. As an intermediate steptoward the end-game of facilities-based competition, Congress allowed competitivelocal exchange carriers (CLECs) to gain forced access to the unbundled networkelements (UNEs) of incumbent local exchange carriers (ILEC) at regulated rates. (6) See 46 U.S.C. § 251(c)(3).
In another provision of the Act, Congress turned its attention away from therelationship between CLECs and ILECs and focused on the relationship betweencable television companies and electric power companies. Power companies havesomething that cable companies need: pole networks. Concerned about themonopoly prices power companies could extract from the cable companies,Congress allowed cable companies to force their way onto utility poles at regulatedrates. This regime was not entirely born in 1996, however. The only novel part ofthe 1996 Act was forced access. Pole attachments have in fact been regulated since1978, and our story must therefore turn to an earlier date.
Since the dawn of the cable television industry, cable companies haveattached their cables to utility poles owned by telephone companies and, morefrequently, power companies. In the view of Congress, the costs of erecting anentirely new set of poles would have created an insurmountable burden on cablecompanies. As the owner of these "essential" facilities, the power companies hadsuperior bargaining power, which spurred Congress to intervene in 1978. The PoleAttachment of Act of 1978 gave the FCC authority to "regulate rates, terms, andconditions for pole attachments to provide that such rates, terms, and conditions arejust and reasonable" in any state that does not already have such regulations inplace. 47 U.S.C. § 224(b)(1). The Act further provided that the minimumreasonable rate is equal to "the additional costs of providing pole attachments,"while the maximum reasonable rate is to be calculated "by multiplying thepercentage of the total usable space, or the percentage of the total duct or conduitcapacity, which is occupied by the pole attachment by the sum of the operatingexpenses and actual capital costs of the utility attributable to the entire pole, duct,conduit, or right-of-way." 47 U.S.C. § 224(d)(1). (7) Based on these guidelines, theFCC promulgated regulations that focused on the upper end of this range. Importantly, the 1978 Act did not force power companies to yield access; theregulated rates applied only if (and when) voluntary agreements were entered into. These regulations led to a constitutional challenge under the theory that, underLoretto v. Teleprompter-Manhattan CATV Corp., 458 U.S. 419, 102 S. Ct. 3164,73 L. Ed. 2d 868 (1982), they worked a per se physical taking without providingjust compensation . This court partially agreed and held that the FCC's Ordereffected a taking of Florida Power's property. Florida Power Corp. v. FCC, 772F.2d 1537, 1544 (11th Cir. 1985). We went on to hold, however, that the FCC, asan administrative agency rather than an Article III court, did not have the power todetermine what is just compensation for purposes of the Fifth Amendment TakingsClause. Id. The Supreme Court reversed, holding that Loretto did not applybecause the Act did not require power companies to give access to cablecompanies. See FCC v. Florida Power Corp., 480 U.S. 245, 251-53, 107 S. Ct.1107, 1111-12, 94 L. Ed. 2d 282 (1987). The Court asserted, "[I]t is the invitation,not the rent, that makes [Loretto] different. The line which separates these casesfrom Loretto is the unambiguous distinction between a commercial lessee and aninterloper with a government license." Id. at 243, 107 S. Ct. at 1112. Therefore,the per se rule of physical takings did not apply, and the Court upheld the rateregulation under the "traditional" Fifth Amendment standard that applies to rateregulations: "So long as the rates set are not confiscatory, the Fifth Amendmentdoes not bar their imposition." Id. (citing St. Joseph Stock Yards Co. v. UnitedStates, 298 U.S. 38, 53, 56 S. Ct. 720, 726, 80 L. Ed. 1033 (1936)). In sum, theSupreme Court found that there was no Fifth Amendment violation, and thereforedid not address whether the initial determination of just compensation could bemade by an administrative agency subject to judicial review. Florida Power, 480U.S. at 254, 107 S. Ct. at 1113 n.8.
Fast forward to 1996. As part of the sweeping changes Congress broughtabout through the Telecommunications Act of 1996, Congress amended the 1978Act by giving cable companies a right of forced attachment. That is, powercompanies could not decline offers to attach at regulated rates, save for thestatutory exceptions of insufficient capacity or some safety, reliability, or otherengineering problem. See 47 U.S.C. § 224(f)(2). (8) This change to a forced-accessregime was perhaps spurred by new laws, consistent with the 1996 Act's vision ofcompetition in all sectors of the data distribution business, that gave large powercompanies freedom to enter the telecommunications business rather than remainquarantined to the electricity business. Pub. L. No. 104-104, § 103 (1996). Perhaps fearing that electricity companies would now have a perverse incentive todeny potential rivals the pole attachments they need, Congress made accessmandatory. See Southern Company v. FCC, 293 F.3d 1338, 1341-42 (11th Cir.2002) ("Cable companies were fearful that utilities' prospective entry into thetelecommunications market would endanger their pole attachments, as utilitieswould be unwilling to rent space on their poles to competing entities. Congresselected to address both of these matters in the 1996 Telecommunications Act."). Inall other respects, however, the regulatory regime remained the same. Because ofthis statutory change - ever important in light of the Supreme Court's distinction ofLoretto from Florida Power - power companies renewed their Takings Clausechallenge.
In one case, the power companies took aim at the statute itself, alleging thatit was facially unconstitutional because it took property without just compensation. The district court held that the amendment effected a per se taking, but grantedsummary judgment in favor of the FCC. See Gulf Power Co. v. United States, 998F. Supp. 1386 (N.D. Fla. 1998). In conclusory fashion, the court found thecompensation to be "just," id. at 1386, and also held that the availability of judicialreview by an Article III court rendered the initial determination of justcompensation by the agency constitutionally permissible, notwithstanding ourearlier holding in Florida Power, 772 F.2d at 1544. We affirmed for differentreasons, agreeing with the district court that the Act works a per se taking underLoretto, but that the Act provides an adequate process for obtaining judicialreview. (9) Gulf Power Co. v. United States, 187 F.3d 1324 (11th Cir. 1999) ("GulfPower I"). However, we rejected the facial challenge, holding that the partiesfailed to show that no set of circumstances exist under which the Act would bevalid. (10)
In another case, the power companies filed a petition for review in this court,seeking reversal of an FCC Order, In re Implementation of Section 703(e) of theTelecommunications Act of 1996, 13 FCC Rcd. 6777 (1999), that devised aformula for computing the attachment rent. See Gulf Power Co. v. FCC, 208 F.3d1263 (11th Cir. 2000) ("Gulf Power II"). We held that (1) the FCC lackedjurisdiction to regulate pole attachments to the extent that the attaching cableoperators also offered Internet service, (2) the 1996 Act authorized a taking aspreviously determined by Gulf Power I, and (3) the just compensation claim failedbecause the parties did not establish that there was no set of circumstances in whichthe FCC's rate regulation (like the general statutory rate scheme challenged in GulfPower I) would be valid. The first holding was subsequently reversed by theSupreme Court in Nat'l Cable & Telecomm. Ass'n v. Gulf Power Co., 534 U.S.327, 122 S. Ct. 782, 151 L. Ed. 2d 794 (2002).
Forced to bring a challenge in an as-applied context, APCo seized itsopportunity in June 2000. APCo sent several letters to cable companies stating thatit would terminate attachment agreements unless the cable companies agreed tohigher rates. (11) Specifically, APCo demanded an annual rate of $38.81 per polerather than the current $7.47. Various cable companies (12) sought relief by filing acomplaint against APCo in the FCC's Cable Bureau, which ultimately found for thecable companies. The Bureau ordered APCo to reinstate the old $7.47 fee until anew agreement within the parameters of the Cable Rate could be reached. Ala.Cable Telecom. Ass'n v. Ala. Power Co., 15 FCC Rcd. 173,461 (2000). Meanwhile, a similar proceeding was initiated against Gulf Power by the FloridaCable Telecommunications Association and three cable Internet service providers,although that case languished in the Bureau and has yet to come to a resolution. Both APCo and Gulf Power filed petitions for review of the adjudication againstAPCo in this court, nos. 00-14763 and 00-15068, and they simultaneously soughtreview by the full Commission.
Since the initial filing of these petitions, two important decisions have beenrendered. First is the Supreme Court's decision in National Cable. In that case, theCourt reversed our first holding in Gulf Power II (regarding the FCC's jurisdiction)and thereby answered the jurisdictional arguments raised in this case. Thus, anycontention that the FCC lacks jurisdiction to regulate the attachment rates of cablecompanies that also offer Internet services must fail. The second decision is thefull Commission's Order affirming the Cable Bureau in the APCo proceeding. SeeIn the Matter of Ala. Cable Telecomm. Ass'n et al. v. Ala. Power Co., 16 FCC Rcd.12,209 (2001). That decision rendered moot the FCC's argument that we ought notreach the merits of this case because the parties failed to exhaust theiradministrative remedies. (13) The Order also becomes the focus of any challengeunder the Administrative Procedure Act, 15 U.S.C. § 706. (14)
In short, the as-applied context of this litigation, combined with the recentdecisions of the FCC and Supreme Court, eliminate any threshold concerns thatwould otherwise preclude us from reaching the merits, such as ripeness, exhaustion(and hence the jurisdiction of this court), and the jurisdiction of the FCC. Moreover, our decisions in Gulf Power I and Gulf Power II establish that the 1996Act effects at taking, and our decision in Gulf Power I establishes that an initialdetermination of just compensation by the FCC is constitutionally permissible solong as there is judicial review in an Article III court. (15) The primary issue in thiscase, then, is a narrow one: whether the rate authorized by the FCC provides APCowith just compensation.
II.
A.
Before we address the merits, two threshold issues warrant our attention. First, the Communications Act of 1934 requires an application for review to thefull Commission as a prerequisite to judicial review of decisions made underdelegated authority. See 47 U.S.C. § 155(c)(7). (16) The mere act of filing anapplication alone does not satisfy the jurisdictional prerequisite. The petitionersmust give the Commission an opportunity to issue a final decision; otherwise, thestatutory prerequisite would be rendered useless. The rest of section 47 U.S.C. §155(c)(7) confirms this common sense observation by mandating that the time limitfor filing a petition for review in the court of appeals must be computed "from thedate upon which public notice is given of orders disposing of all applications forreview filed in any case." Id. That is, the Commission must in some way act onthe application for review before a party may petition a court of appeals for review. See Richman Bros. Records Inc. v. FCC, 124 F.3d 1302 (D.C. Cir. 1997). In thiscase, both Gulf Power and APCo sought to bypass the full Commission bypetitioning this court for review of the Cable Bureau's decision. Both petitionswere therefore incurably premature - at least until the Commission finally reviewedAPCo's petition. Accordingly, both of the initial petitions, nos. 00-14763 and 00-15068, are dismissed for failure to exhaust.
B.
The petition for review filed by Gulf Power is also defective becausepetitions for review may be filed only by parties to an agency proceeding. TheCommunications Act cross-references to the Hobbes Act, and so the latter governsthe procedure for judicial review of FCC orders. See 47 U.S.C. § 402 ("Anyproceeding to enjoin, set aside, annul, or suspend any order of the commissionunder this chapter . . . shall be brought as provided by and in the mannerprescribed in [the Hobbs Act,] chapter 158 of Title 28."). That statute, in turn,provides that "[a]ny party aggrieved by the final order may . . . file a petition toreview the order in the court of appeals where venue lies." 28 U.S.C. § 2344. A"party aggrieved" is one who participated in the agency proceeding. See, e.g.,Erie-Niagara Rail Steering Committee v. Surface Trans. Bd., 167 F.3d 111, 111-12(2d cir. 1999); See also In re Chicago, Milwaukee, St. Paul & Pac. R.R. Co., 799F.2d 317, 334 (7th Cir. 1986) ("The statute limits review to petitions filed byparties, and that is that."). Another statute confirms this conclusion. Under 28U.S.C. § 2348, only parties to the agency proceeding can intervene as of right,while intervention by a nonparty is discretionary. This statutory condition wouldbe defeated if the nonparty could file its own petition for review as a matter ofright. Accordingly, Gulf Power's initial petition for review in case, no. 00-15068,must also be dismissed for lack of standing. The Commission's final order doesnot affect this conclusion. (17) This leaves us only with APCo's petition for reviewof the Order by the full Commission, no. 01-13058 - a petition joined by variousintervenors but not Gulf Power.
III.
A.
The petitioners contend that the statute and regulations fail to provide justcompensation in this case. Their argument stems from three critical observations. First, the Cable Rate fails to allocate to the attaching cable companies a pro ratashare of the unusable portion of the pole. The unusable portion - the part of thepole that is below ground or is otherwise unavailable for attachment - is a capitalexpenditure that benefits the cable companies no less than APCo. (18) The unusableportion constitutes a vast majority of the pole and provides ground clearance thatcreates the requisite elevated corridor that is necessary for all attachments. Therefore, the petitioners argue, such expenditures should be allocated to theattaching entities equally. Second, the petitioners argue that the Cable Rateinappropriately uses backwards-looking "historical" costs rather than fair marketvalue or replacement cost. Since pole-related expenditures are largely a functionof labor costs, the present "cost" of a network of poles is much greater than it waswhen the network was first erected. Third, the Cable Rate does not allow therecovery of various expenditures that are properly attributable to pole attachments. Once these costs are taken into account, together with an appropriate adjustmentthat allocates part of the unusable portion of the pole to cable companies and afurther adjustment that utilizes fair market value or replacement (rather thanhistorical) cost, (19) the "just" rate would be an annual rent of over $47 per pole. Because $47 is a "conservative" estimate, and since petitioners seek only $38.81per pole, it is argued that the drastically less rate of $7.47 fails to provide justcompensation.
We review constitutional challenges to agency orders de novo. Gulf PowerII, 208 F.3d 1263, 1271; Rural Tel. Coalition v. FCC, 838 F.2d 1307, 1313 (D.C.Cir. 1988). At first blush, the power companies appear to have a solid argument. The FCC inappropriately focused on ratemaking cases such as Duquense LightCo. v. Barach, 488 U.S. 299, 307, 109 S. Ct. 609, 102 L. Ed. 2d 646 (1989). Caseslike Duquense Light stand for the proposition that rates can be regulated so long asthey are not so "unjust" as to be confiscatory, and within this range the regulatoryagency has broad discretion. Id. at 307, 109 S. Ct. at 616. When a physical takingis at issue, however, a different analytical hat must worn. See 5 Nichols onEminent Domain § 18.06 [2], at 18-46 ("[T]raditional methods of valuation used inrate-making cases are not necessarily valid when eminent domain value is atissue."); Consolidated Gas Co. of Fla. v. City Gas Co. of Fla., 912 F.2d 1262,1314 n.52 & 1319 (11th Cir. 1990), vacated, 499 U.S. 915 (1991) (Tjoflat, C.J.,dissenting) ("Because the company acts under compulsion . . . rather thanvoluntarily submitting to regulation as in the ratemaking cases, the court shouldapply a more rigorous standard for just compensation than the relatively broad'zone of reasonableness' standard developed under Hope."). The Supreme Courtmade this analytical distinction clear in FCC v. Florida Power Corp., 480 U.S.245, 107 S. Ct. 1107, 94 L. Ed. 2d 282 (1987), when the Court reversed this courtfor applying the traditional Loretto analysis rather than the "not confiscatory"standard. Id. at 253, 107 S. Ct. at 1113-14. As we have stated, this case does, infact, trigger the Loretto analysis because of the element of compulsion in the 1996Act.
In physical takings cases, the property owner generally must receive the"full monetary equivalent of the property taken." United States v. Reynolds, 397U.S. 14, 16, 90 S. Ct. 803, 805, 25 L. Ed. 2d 12 (1970). See also United States v.Miller, 317 U.S. 369, 373, 63 S. Ct. 276, 279, 87 L. Ed. 336 (1943) (justcompensation requires "the full and perfect equivalent in money of the propertytaken."). The Supreme Court has remained steadfast in its resistance to a rigid rulefor determining just compensation. See, e.g., United States v. CommoditiesTrading Corp., 339 U.S. 121, 123, 70 S. Ct. 547, 549, 94 L. Ed. 707 (1950). Typically, fair market value is used. Id. Fair market value is established bydetermining "what a willing buyer would pay in cash to a willing seller" at thetime of the taking. Miller, 317 U.S. at 374, 63 S. Ct. at 280. There is not an active,unregulated market for the use of "elevated communications corridors," however,and so an alternative to fair market value must be used. Cf. General Motors v.United States, 140 F.2d 873, 875 (7th Cir. 1994) (discussing use of replacementcost and income capitalization approaches). The appropriate alternative, whateverthat may be, rarely countenances the use of historical cost, as several SupremeCourt cases make clear. See Commodities Trading Corp., 339 U.S. at 130, 70 S.Ct. at 553; United States v. Toronto, Hamilton & Buffalo Navigation Co., 338U.S. 396, 403, 70 S. Ct. 217, 221-22, 94 L. Ed. 195 (1949). Therefore, APCoargues that any of its substitute methods - the "sales comparison" approach, the"replacement cost" approach, or the "income capitalization" approach - should beused. Any of these, it argues, yield a much higher rate than the FCC presentlyallows. When a constitutionally acceptable cost methodology is combined with amore appropriate inclusion of costs (such as unusable pole space and variouscapital expenditures), the "full monetary equivalent of the property taken" exceedsthe $38.81 rate APCo seeks. While we might ordinarily be sympathetic to thisargument, (20) APCo's case is complicated by one known fact, one unknown fact,and one legal principle.
The known fact is that the Cable Rate requires the attaching cable companyto pay for any "make-ready" costs and all other marginal costs (such asmaintenance costs and the opportunity cost of capital devoted to make-ready andmaintenance costs), in addition to some portion of the fully embedded cost. See Inthe Matter of Ala. Cable Telecomm. Ass'n et al. v. Ala. Power Co., 16 FCC Rcd.12,209, ¶ 69 n.154 (2001). Indeed, such costs were paid in the present case. (21)
The legal principle is that in takings law, just compensation is determined bythe loss to the person whose property is taken. United States v. Causby, 328 U.S.256, 261, 66 S. Ct. 1062, 1065-66, 90 L. Ed. 1206 (1946). Put differently, "[t]hequestion is, What has the owner lost? not, What has the taker gained?" UnitedStates v. Virginia Elec. & Power Co., 365 U.S. 624, 635, 81 S. Ct. 784, 792, 5 L.Ed. 2d 838 (1961) (citation omitted). This takings principle is a specificapplication of the general principle of the law of remedies: an aggrieved partyshould be put in as good a position as he was in before the wrong, but not better. See generally Dan B. Dobbs, 1 Law of Remedies 281 (1993). This legal principle,together with the fact that much more than marginal cost is paid under the CableRate, leads us to ask the following question: does marginal cost provide justcompensation in this case?
This question exposes the unique nature of this case. Typically, the subjectof a government condemnation proceeding is ordinary property, such as land. Insuch a case, the "value" of the thing taken is congruent with the loss to the owner,and there is therefore little tension between the legal propositions in VirginiaElectric (loss to the owner, not gain to the taker) and Reynolds (full monetaryequivalent of the property taken). This is because most property is rivalrous - itspossession by one party results in a gain that precisely corresponds to the lossendured by the other party. In this case, however, the property that has been taken- space on a pole - may well lack this congruence. It may be, for practicalpurposes, nonrivalrous. This means that use by one entity does not necessarilydiminish the use and enjoyment of others. A common example of a nonrivalrousgood is national defense.
Suppose, for example, that a power company must, for its own "core"electric distribution activities, establish a network of poles that reaches one millionfeet into the sky. Further suppose that there is only one cable company in any onemarket that desires to attach to the power company's poles. Finally, suppose thatthe government forces the power company to let the cable company attach to itspole network. What level of compensation is just? So long as the marginal cost ofthe attachment is paid, the power company incurs no lost opportunity or any otherburden. That is, the cable company's use does not foreclose any other use. Thepole space is, for practical purposes, nonrivalrous.
To this point APCo responds that the lost sale to the cable company - itsopportunity cost - has also been taken. We think, however, that it is irrelevantwhether the government keeps the condemned property for itself or appropriates itto another entity. That is, if the government ran its own monopoly cable company,it would not make sense for the power companies to say, "Even though we are notout any more money than we were before the taking, we are missing out on theopportunity to sell to the government at what we deem the 'full market price' ofthis pole space." Cf. United States v. Cors, 337 U.S. 325, 333, 69 S. Ct. 1086,1091, 93 L. Ed. 1392 (1949) ("The special value to the condemner asdistinguished from others who may or may not possess the power to condemn haslong been excluded as an element of market value."). It should not make adifference if the government chooses to allocate the condemned property toprivate companies.
In some cases, then, marginal cost will be sufficient to compensate the poleowner. A similar conclusion was reached in Metropolitan Transp. Auth. v. ICC ,792 F.2d 287 (2d Cir. 1986). In that case, Amtrak was given the power to force itsway onto the tracks of other railroad companies. The ICC had authority to decidethe compensation Amtrak would pay, with the constraint that such compensationwas to be limited to "incremental costs." The Second Circuit concluded:
[A]ssuming arguendo that there has been a taking, compensation isadequate since MTA, in obtaining avoidable costs, will receive whatit would have had but for the taking. In other words, the owner, therethe lessee of the railroad facilities, will be put into the same positionmonetarily as it would have occupied if the property had not beentaken, and this is precisely the guiding principle of what is justcompensation. . . . If the Fifth Amendment required such a sharing[of the overhead costs of ownership, then the petitioners] would beput in a better position by Amtrak's appearance on the scene. True,Amtrak benefits. But if we know one immutable principle in the lawof just compensation, it is that the value to the taker is not to beconsidered, only loss to the owner is to be valued. (22)
Id. at 297.
Metropolitan Transportation involved something close to a nonrivalrousgood. Allowing traffic from one railroad rarely means that another railroad isprecluded from traveling on the same line unless, of course, the line is alreadycrowded. The possibility of crowding is perhaps more likely in the context of polespace, however, and if crowded, the pole space becomes rivalrous. Indeed,Congress contemplated a scenario in which poles would reach full capacity whenit created a statutory exception to the forced-attachment regime. 47 U.S.C. § 224(f)(2). When a pole is full and another entity wants to attach, the governmenttaking forecloses an opportunity to sell space to another bidding firm - a missedopportunity that does not exist in the nonrivalrous scenario. By forcing the powercompany to rent space that could be occupied by another firm (or put to use by thepower company itself), the analogy to land becomes more appropriate. In the "fullcapacity" situation, it is the zero-sum nature of pole space, like land, that is key. This leads us to the important unknown fact: nowhere in the record did APCoallege that APCo's network of poles is currently crowded. It therefore had noclaim. See United States v. John J. Felin & Co., 334 U.S. 624, 641, 68 S. Ct.1238, 1246, 92 L. Ed. 1614 (1948) (holding that the burden of proving loss, aswell as the amount of any loss, is upon the party claiming to have experienced ataking).
In short, before a power company can seek compensation above marginalcost, it must show with regard to each pole that (1) the pole is at full capacity and(2) either (a) another buyer of the space is waiting in the wings or (b) the powercompany is able to put the space to a higher-valued use with its own operations. Without such proof, any implementation of the Cable Rate (which provides formuch more than marginal cost) necessarily provides just compensation. While thisanalysis may create what appears to be an anomaly - a power company whosepoles are not "full" can charge only the regulated rate (so long as that rate is abovemarginal cost), but a power company whose poles are, in fact, full can seek justcompensation - this result is in accordance with the economic reality that there isno "lost opportunity" foreclosed by the government unless the two factors arepresent. (23)
IV.
A.
APCo contends that regardless of how we ultimately rule on the merits, theFCC's decision is "arbitrary and capricious" and therefore must be set aside under5 U.S.C. § 706. The policy decisions of agencies must be set aside if they are notthe product of reasoned decisionmaking. Courts are deferential to agencydecisions and will not upset them merely because they disagree with the policychoice of the agency. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401U.S. 402, 416, 91 S. Ct. 814, 823-24, 28 L. Ed. 2d 136 (1971). In short, the court"must not . . . substitute [its] judgment for that of the agency . . . but ratherdetermine whether there was a rational connection between the facts found and thechoice made." Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168,83 S. Ct. 239, 245-46, 9 L. Ed. 2d 207 (1962).
We are unconvinced that the FCC's decision was arbitrary and capricious.APCo argues that the FCC's misguided references to Duquense Light and otherratemaking cases, combined with its refusal to engage in detailed consideration ofAPCo's evidence on the just compensation issue, evinces unreasoneddecisionmaking. The FCC did, however, note that reimbursement of marginal costwas tantamount to just compensation in this case. See In the Matter of Ala. CableTelecomm. Ass'n et al. v. Ala. Power Co., 16 FCC Rcd. 12,209 ¶ 52 (2001). Therefore, it was not obliged to engage in detailed analysis of expert testimonyconcerning the value proxies proffered by the petitioners' experts, which wereirrelevant given the sufficiency of marginal cost. To be sure, the Cable Bureauand the full Commission might have been advised to inquire about the level ofcapacity presently on APCo's poles. But we can hardly fault the Commission forignoring an issue that APCo never raised.
Finally, we note that APCo does not contend that the FCC decision wasarbitrary and capricious in its policy determination; its concern is only with theFCC's constitutional analysis. Accordingly, we do not address the policy-baseddefenses raised by the FCC. (24)
B.
APCo asserts that the Commission's pole attachment complaint proceedingis defective because "if and when" they are ultimately successful in their claimthat they are entitled to more than the statutory rate, "there may not be any processthat will compensate APCo retroactively," because the FCC "apparently lacks thestatutory authority to order a cable company to retroactively pay a charge higherthan the statutory maximum." This argument posits a mere hypothetical. APCohas not demonstrated that in this case the Commission's procedures failed toprovide it with adequate compensation, and so resolution of its claim must awaitanother day. Moreover, this court explained in Gulf Power I that if a court were tofind an FCC order to be insufficient, Section 224 permits the court to direct
the FCC to issue a rate order providing that a utility receive the justcompensation rate from the date it was first required to provide accessunder the mandatory access provision [and thereby] ensure a utilityreceives just compensation both prospectively and in the period priorto the court's determination of the just compensation rate.
Gulf Power I, 187 F.3d at 1335.
C.
APCo also contends that the FCC's complaint process violated its FifthAmendment due process rights because "pole complaints normally are to beadjudicated on the basis of the pleadings, without the opportunity for a hearing." Like the first procedural claim, this claim fails because it is based on a generalobservation rather than a real-life injury. The Commission's rules state that "[t]heCommission may decide each complaint upon the filings and information before it. . . or may, in its discretion, order evidentiary procedures upon any issues it findsto have been raised by the filings." 47 C.F.R. § 1.1411. APCo must thereforeidentify a material question of fact that warrants a hearing. But its dispute is onlyover the methodology that should be used to calculate the level of justcompensation - an legal issue that hardly warrants an evidentiary hearing since nomaterial facts are disputed. See Mathews v. Eldridge, 424 U.S. 319, 321, 96 S. Ct.893, 896, 47 L. Ed. 2d 18 (1976) (requiring that before a court concludes that therehas been a due process violation, there must be a private interest affected). Forexample, if APCo and the cable companies were to later disagree about whether apole network is operating at full capacity, the FCC may commit a due processviolation if it were to adopt the cable companies' position without an evidentiaryhearing. That day, however, has not yet arrived.
V.
It is well settled that if the government commits a taking, it is under anobligation to put the aggrieved party in the position it was in before the takingoccurred (and no better). In unique cases such as this one, marginal cost meetsthis test - unless, of course, the aggrieved party proves lost opportunity byshowing (1) full capacity and (2) a higher valued use. APCo never alleged thesefacts. Therefore, its challenges based on the Fifth Amendment and theAdministrative Procedure Act must fail, and its petition for review is denied.
SO ORDERED.
FOOTNOTES
1. The mathematical expression of the Commission's rules, found in 47 C.F.R. §1.1409(e)(1), is as follows:
Maximum Rate = (Space Occupied by Attachment ÷ Total Usable Space) × NetCost of Bare Pole × Carrying Charge Rate
2. The rate for cable television attachments is prescribed in 47 U.S.C. § 224(d), whichstates: "[A] rate is just and reasonable if it assures a utility of recovery of not less than theadditional costs of providing pole attachments, nor more than an amount determined bymultiplying the percentage of usable space which is occupied by the pole attachment by the sumof the operating expenses and actual capital costs of the utility attributable to the entire pole,duct, conduit, or right-of-way."
3. Network effects often enhance the monopoly position of firms that operate in industrieswhere a large number of common customers is especially advantageous. See Stuart M.Benjamin, Douglas G. Lichtman, and Howard A. Shelanski, Telecommunications Law andPolicy 616 (2002) ("All else equal, wouldn't you have a strong incentive to select the phonecompany that had the largest number of customers with whom you might want to converse? Once you join, can you see how this same phenomenon would increase the pressure on, say, yourfriends and family - which in turn would put pressure on their friends and family - to join thesame phone network, thus increasing any monopoly tendency already at play in the market?"). The cost of competing with an incumbent firm in a network industry may well beinsurmountable. As the Supreme Court recently explained: "A newcomer could not competewith the incumbent carrier to provide local service without coming close to replicating theincumbent's entire existing network, the most costly and difficult part of which would be layingdown the 'last mile' of feeder wire, the local loop, to thousands (or millions) of terminal points inindividual houses and businesses." Verizon Communications Inc. v. FCC, __ U.S. __, 122 S. Ct.1446, 1662, 152 L. Ed. 2d 701 (2001).
4. Economies of scale typically arise when long-run average total cost declines as outputincreases. See Benjamin et al., Telecommunications Law and Policy 376 (2001). This attributeis common in industries where the initial fixed cost is very large and variable costs arecomparatively slight. Id. The result is that "eventually there will be only a single company,because until a company serves the whole market it will have an incentive to keep expanding inorder to lower its average costs." Omega Satellite Products Co. v. Indianapolis, 694 F.2d 119,126 (7th Cir. 1982) (Posner, J.).
5. A central premise of the 1996 Act is that local exchange carriers (LECs) may not benatural monopolies after all. See Benjamin et al., Telecommunications Law and Policy 715(2001) ("[P]olicymakers and entrepreneurs were ready to question the underlying assumption thatlocal service should - or at least as a practical matter would - be provided by state-sanctionedmonopolists.").
6. The rate formula promulgated by the FCC (known as "TELRIC") has been the source ofseveral statutory and constitutional challenges. See, e.g., Verizon Communications Inc. v. FCC,__ U.S. __, 122 S. Ct. 1446, 1662, 152 L. Ed. 2d 701 (2001).
7. This rate formula, unchanged since 1978, was restated more clearly by the SupremeCourt: "The minimum measure is thus equivalent to the marginal cost of attachments, while thestatutory maximum measure is determined by the fully allocated cost of the construction andoperation of the pole to which cable is attached." See FCC v. Florida Power Corp., 480 U.S. 245,253, 107 S. Ct. 1107, 1113, 94 L. Ed. 2d 282 (1987).
8. A panel of this court recently used this statutory exception as the basis for vacating anFCC rule which forced power companies to enlarge pole capacity at the request (and expense) ofattaching cable and telecommunications companies. See Southern Company v. FCC, 293 F.3d 1338,1346-47 (11th Cir. 2002). The panel could not reconcile the no-capacity excuse allowed under thestatute with the forced build-out rules required under the FCC's regulations, and thus held theregulations to be ultra vires.
9. Like the district court, we held that the availability of judicial review in the court ofappeals made the process for determining "just compensation" constitutionally permissible. Wewent on to enumerate "at least five means at its disposal to gather the information needed todetermine just compensation." Gulf Power v. United States, 187 F.3d 1324, 1334-35 (11th Cir.1999). A court of appeals could: (1) rely on the evidentiary submissions in the record of the FCCproceeding; (2) remand the case and direct the FCC to supplement the record pursuant to 28U.S.C. § 2347(c); (3) transfer the case to a district court for full hearing pursuant to 28 U.S.C. §2347(b)(3); (4) appoint a special master to hold hearings pursuant to Fed. R. App. P. 48; (5) orfashion any other "appropriate modes of procedure" to gather evidence it needs pursuant to theAll Writs Act, 28 U.S.C. § 1651.
10. Our holding on this point is somewhat confusing in that it seemingly held both that (a)the challengers failed to meet their burden of proof to show that in all situations the rate formulawould inevitably be unconstitutional and (b) the takings claim was not ripe for review. This neednot concern us here, and in any event there is an obvious affinity between the ripeness doctrineand the standard for facial challenges: both doctrines frequently require the challenger to bring aconcrete, as-applied challenge.
11. The pole attachment agreement between APCo and AT&T Cable Services was typicalof the agreements worked out by cable and power companies. Section 31 of the agreementprovided for an initial three year term (which had expired by the time APCo sought termination),followed by "continuation" unless either party provided the other with 90 days notice ofcancellation.
12. The initial complaint was filed by the Alabama Cable Telecommunications Associationand Comcast Cablevision of Dothan, Inc.
13. That is, the Order eliminated any exhaustion problem that would have precluded usfrom reaching the merits at all. As we shall explain, however, the Order did not eliminate allexhaustion concerns.
14. "The reviewing court shall . . . hold unlawful and set aside agency action, findings, andconclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not inaccordance with law." 15 U.S.C. § 706(2)(A).
15. The petitioners renew their argument that regardless of the availability of judicialreview, an administrative agency cannot determine just compensation in the first instance. "Thelaw of this circuit," however, "is 'emphatic' that only the Supreme Court or this court sitting enbanc can judicially overrule a prior panel decision." See Cargill v. Turpin, 120 F.3d 1366, 1386(11th Cir. 1997).
16. The statute states, "The filing of an application for review shall be a condition precedentto judicial review of any order, decision, report, or an action made or taken pursuant to adelegation under paragraph (1) of this subsection." "Paragraph (1)," referred to in the statutorytext, empowers the Commission to delegate its functions to an "employee board or individualemployee" and other entities. See 47 U.S.C. § 155(c)(1). This provision is the statutory basis forthe Cable Bureau's authority to issue the first order in this case.
17. Gulf Power is interested in the outcome of this case only because of its potential effectas a precedent for its own pending case. We note that Gulf Power has not moved to intervene. We will therefore treat it as amicus curiae in the APCo petition, no. 00-13058.
18. The regulated rate that telecommunications companies must pay, by contrast, includesthe unusable portion of the pole. See 47 U.S.C. § 224(3).
19. In the proceeding before the Cable Bureau, expert witnesses were used to generateassessments of "value" based upon market value, income capitalization, and replacement costmethodologies.
20. Or maybe not. Arguably, this "as-applied" challenge flies in the face of our conclusionin Gulf Power I and Gulf Power II that the power companies failed to prove that there is no circumstance in which the rate would be constitutionally acceptable. That conclusion would seem to foreclose any argument based on the methodology of the formula - the crux of petitioners' argument in this case. The panel, however, may well have had in mind the general judicial aversion to facial challenges to rate orders, and it perhaps did not mean to preclude future challenges to the rate methodology in an as-applied context. See Verizon Communications v. FCC, __ U.S. __, 122 S. Ct. 1646, 1679-80, 152 L. Ed. 2d 701 (2001) ("[T]he general rule is that any question about the constitutionality of ratesetting is raised by rates, not methods.").
21. APCo received more than a million dollars in make-ready payments from cable company attachers.
22. Notably, the court did not take the flawed analytical step of focusing on the track owner's lost opportunity to charge Amtrak "market" rates.
23. Since marginal cost provides just compensation so long as these factors are absent, it is irrelevant that the Telecom Rate provided in 47 U.S.C. § 224(e) yields a higher rate for telecommunications attachments than the Cable Rate provides for cable attachments. The FCC reached a perfectly logical conclusion when it observed:
Congress' decision to choose a slightly different rate methodology, more suited in its opinion to telecommunications service providers, does not call into question the constitutionality of the cable rate formula . . . because both formulas provide just compensation under the Fifth Amendment . . . . Congress used its legislative discretion in determining that cable and telecommunications attachers should pay different rates.
In the Matter of Ala. Cable Telecomm. Ass'n, 16 FCC Rcd. 12,209, ¶ 49.
24. We do not reach, for example, the question as to whether a hypothetical determination by the FCC to set the rate at marginal cost would be an "arbitrary and capricious" one, even if marginal cost would provide just compensation for Fifth Amendment purposes.