                                                     [PUBLISH]

          IN THE UNITED STATES COURT OF APPEALS
                                                           FILED
                 FOR THE ELEVENTH CIRCUIT        U.S. COURT OF APPEALS
                                                   ELEVENTH CIRCUIT
                ____________________________          November 14, 2002
                                                    THOMAS K. KAHN
                                                          CLERK
                         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.,

                               2
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 Pole

Attachment Act of 1978 to give cable television companies the right to acquire

space 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 the

parties are unable to agree on the price, the cable company can seek relief in the

       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) × Net
       Cost of Bare Pole × Carrying Charge Rate

                                             3
FCC’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 television

company’s mandatory right of access to its utility poles, and it ordered the parties to

negotiate a price within the parameters of the Cable Rate. See In the Matter of Ala.

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 us to

declare that the rate imposed by the FCC does not provide just compensation and

therefore violates the Takings Clause of the Fifth Amendment. In essence, the

petitioners are using this case as a vehicle to mount a challenge to the rate

methodology set forth in 47 U.S.C. § 224(d)2 and the FCC’s implementation of the

rate methodology in 47 C.F.R. §§ 1.1401 et seq. We hold that based on the

particular facts of this case, the petitioners have failed to meet their burden of proof.

We therefore deny the petitions for review.

      The factual context of this case is difficult to comprehend without an

understanding of the economic and legislative climate existing prior to the 1996

Act, as well as the history of Fifth Amendment litigation in the pole attachment

       2
          The rate for cable television attachments is prescribed in 47 U.S.C. § 224(d), which
states: “[A] rate is just and reasonable if it assures a utility of recovery of not less than the
additional costs of providing pole attachments, nor more than an amount determined by
multiplying the percentage of usable space which is occupied by the pole attachment by the sum
of the operating expenses and actual capital costs of the utility attributable to the entire pole,
duct, conduit, or right-of-way.”

                                                4
context. Part I of this opinion provides this necessary background. Part II takes a

detour from the primary focus of this case by addressing the standing and

exhaustion issues presented. The heart of the case is found in part III, where we

find that there has been no violation of the Takings Clause. Finally, part IV

addresses arguments concerning the administrative process, such as whether the

FCC acted in a way that is arbitrary and capricious, or whether it failed to provide

the litigants with due process.

                                               I.

      Certain firms have historically been considered to be natural

monopolies–bottleneck facilities that arise due to network effects3 and economies of

scale.4 Such firms have historically included electric utilities, local telephone

       3
         Network effects often enhance the monopoly position of firms that operate in industries
where a large number of common customers is especially advantageous. See Stuart M.
Benjamin, Douglas G. Lichtman, and Howard A. Shelanski, Telecommunications Law and
Policy 616 (2002) (“All else equal, wouldn’t you have a strong incentive to select the phone
company 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, your
friends and family – which in turn would put pressure on their friends and family – to join the
same 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 be
insurmountable. As the Supreme Court recently explained: “A newcomer could not compete
with the incumbent carrier to provide local service without coming close to replicating the
incumbent’s entire existing network, the most costly and difficult part of which would be laying
down the ‘last mile’ of feeder wire, the local loop, to thousands (or millions) of terminal points
in individual 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 output
increases. See Benjamin et al., Telecommunications Law and Policy 376 (2001). This attribute

                                               5
companies,5 and oil pipelines. See generally Richard D. Cudahy, Whither

Deregulation: A Look at the Portents, Ann. Surv. Am. L. 155 (2001). Firms in

other markets frequently need access to these bottlenecks in order to compete. The

“essential facilities” doctrine in antitrust law has often provided the legal remedy

for 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 & Herbert

Hovenkamp, 3A Antitrust Law ¶ 772 (1996). Over the last several years, however,

Congress has sought to codify forced-access regulations rather than resorting to

judge-made principles of antitrust law. The most noteworthy effort in this vein was

the Telecommunications Act of 1996, 47 U.S.C. §§ 151 et. seq. In that monumental

legislation, Congress sought to break the hold of incumbent telephone monopolies

and pave the way for local competition. As an intermediate step toward the end-

game of facilities-based competition, Congress allowed competitive local exchange

carriers (CLECs) to gain forced access to the unbundled network elements (UNEs)


is common in industries where the initial fixed cost is very large and variable costs are
comparatively 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 in
order 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 be
natural monopolies after all. See Benjamin et al., Telecommunications Law and Policy 715
(2001) (“[P]olicymakers and entrepreneurs were ready to question the underlying assumption
that local service should – or at least as a practical matter would – be provided by state-
sanctioned monopolists.”).

                                              6
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 the

relationship between CLECs and ILECs and focused on the relationship between

cable television companies and electric power companies. Power companies have

something that cable companies need: pole networks. Concerned about the

monopoly prices power companies could extract from the cable companies,

Congress allowed cable companies to force their way onto utility poles at regulated

rates. This regime was not entirely born in 1996, however. The only novel part of

the 1996 Act was forced access. Pole attachments have in fact been regulated since

1978, and our story must therefore turn to an earlier date.

      Since the dawn of the cable television industry, cable companies have

attached their cables to utility poles owned by telephone companies and, more

frequently, power companies. In the view of Congress, the costs of erecting an

entirely new set of poles would have created an insurmountable burden on cable

companies. As the owner of these “essential” facilities, the power companies had

superior bargaining power, which spurred Congress to intervene in 1978. The Pole


       6
         The rate formula promulgated by the FCC (known as “TELRIC”) has been the source of
several 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
Attachment of Act of 1978 gave the FCC authority to “regulate rates, terms, and

conditions for pole attachments to provide that such rates, terms, and conditions are

just and reasonable” in any state that does not already have such regulations in

place. 47 U.S.C. § 224(b)(1). The Act further provided that the minimum

reasonable rate is equal to “the additional costs of providing pole attachments,”

while the maximum reasonable rate is to be calculated “by multiplying the

percentage of the total usable space, or the percentage of the total duct or conduit

capacity, which is occupied by the pole attachment by the sum of the operating

expenses 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, the

FCC promulgated regulations that focused on the upper end of this range.

Importantly, the 1978 Act did not force power companies to yield access; the

regulated rates applied only if (and when) voluntary agreements were entered into.

These regulations led to a constitutional challenge under the theory that, under

Loretto 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 providing just



        7
         This rate formula, unchanged since 1978, was restated more clearly by the Supreme
Court: “The minimum measure is thus equivalent to the marginal cost of attachments, while the
statutory maximum measure is determined by the fully allocated cost of the construction and
operation 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
compensation . This court partially agreed and held that the FCC’s Order effected a

taking of Florida Power’s property. Florida Power Corp. v. FCC, 772 F.2d 1537,

1544 (11th Cir. 1985). We went on to hold, however, that the FCC, as an

administrative agency rather than an Article III court, did not have the power to

determine what is just compensation for purposes of the Fifth Amendment Takings

Clause. Id. The Supreme Court reversed, holding that Loretto did not apply

because the Act did not require power companies to give access to cable

companies. 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 cases

from Loretto is the unambiguous distinction between a commercial lessee and an

interloper 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 rate

regulation under the “traditional” Fifth Amendment standard that applies to rate

regulations: “So long as the rates set are not confiscatory, the Fifth Amendment

does not bar their imposition.” Id. (citing St. Joseph Stock Yards Co. v. United

States, 298 U.S. 38, 53, 56 S. Ct. 720, 726, 80 L. Ed. 1033 (1936)). In sum, the

Supreme Court found that there was no Fifth Amendment violation, and therefore

did not address whether the initial determination of just compensation could be


                                          9
made by an administrative agency subject to judicial review. Florida Power, 480

U.S. at 254, 107 S. Ct. at 1113 n.8.

      Fast forward to 1996. As part of the sweeping changes Congress brought

about through the Telecommunications Act of 1996, Congress amended the 1978

Act by giving cable companies a right of forced attachment. That is, power

companies could not decline offers to attach at regulated rates, save for the statutory

exceptions of insufficient capacity or some safety, reliability, or other engineering

problem. See 47 U.S.C. § 224(f)(2).8 This change to a forced-access regime was

perhaps spurred by new laws, consistent with the 1996 Act’s vision of competition

in all sectors of the data distribution business, that gave large power companies

freedom to enter the telecommunications business rather than remain quarantined to

the electricity business. Pub. L. No. 104-104, § 103 (1996). Perhaps fearing that

electricity companies would now have a perverse incentive to deny potential rivals

the pole attachments they need, Congress made access mandatory. See Southern

Company v. FCC, 293 F.3d 1338, 1341-42 (11th Cir. 2002) (“Cable companies

were fearful that utilities’ prospective entry into the telecommunications market

       8
         A panel of this court recently used this statutory exception as the basis for vacating an
FCC rule which forced power companies to enlarge pole capacity at the request (and expense) of
attaching 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 the
statute with the forced build-out rules required under the FCC’s regulations, and thus held the
regulations to be ultra vires.

                                               10
would endanger their pole attachments, as utilities would be unwilling to rent space

on their poles to competing entities. Congress elected to address both of these

matters in the 1996 Telecommunications Act.”). In all other respects, however, the

regulatory regime remained the same. Because of this statutory change – ever

important in light of the Supreme Court’s distinction of Loretto from Florida Power

– power companies renewed their Takings Clause challenge.

      In one case, the power companies took aim at the statute itself, alleging that it

was facially unconstitutional because it took property without just compensation.

The district court held that the amendment effected a per se taking, but granted

summary judgment in favor of the FCC. See Gulf Power Co. v. United States, 998

F. Supp. 1386 (N.D. Fla. 1998). In conclusory fashion, the court found the

compensation to be “just,” id. at 1386, and also held that the availability of judicial

review by an Article III court rendered the initial determination of just

compensation by the agency constitutionally permissible, notwithstanding our

earlier holding in Florida Power, 772 F.2d at 1544. We affirmed for different

reasons, agreeing with the district court that the Act works a per se taking under

Loretto, but that the Act provides an adequate process for obtaining judicial




                                           11
review.9 Gulf Power Co. v. United States, 187 F.3d 1324 (11th Cir. 1999) (“Gulf

Power I”). However, we rejected the facial challenge, holding that the parties

failed to show that no set of circumstances exist under which the Act would be

valid.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 the

Telecommunications Act of 1996, 13 FCC Rcd. 6777 (1999), that devised a formula

for computing the attachment rent. See Gulf Power Co. v. FCC, 208 F.3d 1263

(11th Cir. 2000) (“Gulf Power II”). We held that (1) the FCC lacked jurisdiction to

regulate pole attachments to the extent that the attaching cable operators also

offered Internet service, (2) the 1996 Act authorized a taking as previously


           9
        Like the district court, we held that the availability of judicial review in the court of
appeals made the process for determining “just compensation” constitutionally permissible. We
went on to enumerate “at least five means at its disposal to gather the information needed to
determine 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
FCC proceeding; (2) remand the case and direct the FCC to supplement the record pursuant to 28
U.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) or
fashion any other “appropriate modes of procedure” to gather evidence it needs pursuant to the
All 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 formula
would inevitably be unconstitutional and (b) the takings claim was not ripe for review. This
need not concern us here, and in any event there is an obvious affinity between the ripeness
doctrine and the standard for facial challenges: both doctrines frequently require the challenger
to bring a concrete, as-applied challenge.

                                                12
determined by Gulf Power I, and (3) the just compensation claim failed because the

parties did not establish that there was no set of circumstances in which the FCC’s

rate regulation (like the general statutory rate scheme challenged in Gulf Power I)

would be valid. The first holding was subsequently reversed by the Supreme 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 its

opportunity in June 2000. APCo sent several letters to cable companies stating that

it would terminate attachment agreements unless the cable companies agreed to

higher rates.11 Specifically, APCo demanded an annual rate of $38.81 per pole

rather than the current $7.47. Various cable companies12 sought relief by filing a

complaint against APCo in the FCC’s Cable Bureau, which ultimately found for the

cable companies. The Bureau ordered APCo to reinstate the old $7.47 fee until a

new 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).


       11
         The pole attachment agreement between APCo and AT&T Cable Services was typical
of the agreements worked out by cable and power companies. Section 31 of the agreement
provided 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 of
cancellation.
       12
       The initial complaint was filed by the Alabama Cable Telecommunications Association
and Comcast Cablevision of Dothan, Inc.

                                              13
Meanwhile, a similar proceeding was initiated against Gulf Power by the Florida

Cable 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 against

APCo in this court, nos. 00-14763 and 00-15068, and they simultaneously sought

review by the full Commission.

      Since the initial filing of these petitions, two important decisions have been

rendered. First is the Supreme Court’s decision in National Cable. In that case, the

Court reversed our first holding in Gulf Power II (regarding the FCC’s jurisdiction)

and thereby answered the jurisdictional arguments raised in this case. Thus, any

contention that the FCC lacks jurisdiction to regulate the attachment rates of cable

companies that also offer Internet services must fail. The second decision is the full

Commission’s Order affirming the Cable Bureau in the APCo proceeding. See In

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 not

reach the merits of this case because the parties failed to exhaust their

administrative remedies.13 The Order also becomes the focus of any challenge


       13
         That is, the Order eliminated any exhaustion problem that would have precluded us
from reaching the merits at all. As we shall explain, however, the Order did not eliminate all
exhaustion concerns.

                                               14
under the Administrative Procedure Act, 15 U.S.C. § 706.14

      In short, the as-applied context of this litigation, combined with the recent

decisions of the FCC and Supreme Court, eliminate any threshold concerns that

would 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 1996

Act effects at taking, and our decision in Gulf Power I establishes that an initial

determination of just compensation by the FCC is constitutionally permissible so

long as there is judicial review in an Article III court.15 The primary issue in this

case, then, is a narrow one: whether the rate authorized by the FCC provides APCo

with 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 the full

       14
         “The reviewing court shall . . . hold unlawful and set aside agency action, findings, and
conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” 15 U.S.C. § 706(2)(A).
       15
         The petitioners renew their argument that regardless of the availability of judicial
review, an administrative agency cannot determine just compensation in the first instance. “The
law of this circuit,” however, “is ‘emphatic’ that only the Supreme Court or this court sitting en
banc can judicially overrule a prior panel decision.” See Cargill v. Turpin, 120 F.3d 1366, 1386
(11th Cir. 1997).

                                               15
Commission as a prerequisite to judicial review of decisions made under delegated

authority. See 47 U.S.C. § 155(c)(7).16 The mere act of filing an application alone

does not satisfy the jurisdictional prerequisite. The petitioners must give the

Commission an opportunity to issue a final decision; otherwise, the statutory

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 limit for filing

a petition for review in the court of appeals must be computed “from the date upon

which public notice is given of orders disposing of all applications for review filed

in any case.” Id. That is, the Commission must in some way act on the 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 this case, both Gulf

Power and APCo sought to bypass the full Commission by petitioning this court for

review of the Cable Bureau’s decision. Both petitions were therefore incurably

premature – at least until the Commission finally reviewed APCo’s petition.

Accordingly, both of the initial petitions, nos. 00-14763 and 00-15068, are

dismissed for failure to exhaust.

       16
         The statute states, “The filing of an application for review shall be a condition
precedent to judicial review of any order, decision, report, or an action made or taken pursuant to
a delegation under paragraph (1) of this subsection.” “Paragraph (1),” referred to in the statutory
text, empowers the Commission to delegate its functions to an “employee board or individual
employee” and other entities. See 47 U.S.C. § 155(c)(1). This provision is the statutory basis
for the Cable Bureau’s authority to issue the first order in this case.

                                               16
                                            B.

      The petition for review filed by Gulf Power is also defective because

petitions for review may be filed only by parties to an agency proceeding. The

Communications Act cross-references to the Hobbes Act, and so the latter governs

the procedure for judicial review of FCC orders. See 47 U.S.C. § 402 (“Any

proceeding to enjoin, set aside, annul, or suspend any order of the commission

under this chapter . . . shall be brought as provided by and in the manner prescribed

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 to review 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., 799 F.2d 317, 334

(7th Cir. 1986) (“The statute limits review to petitions filed by parties, and that is

that.”). Another statute confirms this conclusion. Under 28 U.S.C. § 2348, only

parties to the agency proceeding can intervene as of right, while intervention by a

nonparty is discretionary. This statutory condition would be defeated if the

nonparty could file its own petition for review as a matter of right. Accordingly,

Gulf Power’s initial petition for review in case, no. 00-15068, must also be


                                           17
dismissed for lack of standing. The Commission’s final order does not affect this

conclusion.17 This leaves us only with APCo’s petition for review of the Order by

the full Commission, no. 01-13058 – a petition joined by various intervenors but

not Gulf Power.

                                               III.

                                               A.

       The petitioners contend that the statute and regulations fail to provide just

compensation in this case. Their argument stems from three critical observations.

First, the Cable Rate fails to allocate to the attaching cable companies a pro rata

share of the unusable portion of the pole. The unusable portion – the part of the

pole that is below ground or is otherwise unavailable for attachment – is a capital

expenditure that benefits the cable companies no less than APCo.18 The unusable

portion constitutes a vast majority of the pole and provides ground clearance that

creates the requisite elevated corridor that is necessary for all attachments.

Therefore, the petitioners argue, such expenditures should be allocated to the

attaching entities equally. Second, the petitioners argue that the Cable Rate


       17
         Gulf Power is interested in the outcome of this case only because of its potential effect
as 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, includes
the unusable portion of the pole. See 47 U.S.C. § 224(3).

                                                18
inappropriately uses backwards-looking “historical” costs rather than fair market

value or replacement cost. Since pole-related expenditures are largely a function

of labor costs, the present “cost” of a network of poles is much greater than it was

when the network was first erected. Third, the Cable Rate does not allow the

recovery of various expenditures that are properly attributable to pole attachments.

Once these costs are taken into account, together with an appropriate adjustment

that allocates part of the unusable portion of the pole to cable companies and a

further adjustment that utilizes fair market value or replacement (rather than

historical) 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 $38.81

per pole, it is argued that the drastically less rate of $7.47 fails to provide just

compensation.

       We review constitutional challenges to agency orders de novo. Gulf Power

II, 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 Light Co.

v. Barach, 488 U.S. 299, 307, 109 S. Ct. 609, 102 L. Ed. 2d 646 (1989). Cases like


       19
        In the proceeding before the Cable Bureau, expert witnesses were used to generate
assessments of “value” based upon market value, income capitalization, and replacement cost
methodologies.

                                              19
Duquense Light stand for the proposition that rates can be regulated so long as they

are not so “unjust” as to be confiscatory, and within this range the regulatory

agency has broad discretion. Id. at 307, 109 S. Ct. at 616. When a physical taking

is at issue, however, a different analytical hat must worn. See 5 Nichols on

Eminent Domain § 18.06 [2], at 18-46 (“[T]raditional methods of valuation used in

rate-making cases are not necessarily valid when eminent domain value is at

issue.”); 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 than

voluntarily submitting to regulation as in the ratemaking cases, the court should

apply a more rigorous standard for just compensation than the relatively broad

‘zone of reasonableness’ standard developed under Hope.”). The Supreme Court

made 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 court for

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, in

fact, trigger the Loretto analysis because of the element of compulsion in the 1996

Act.

       In physical takings cases, the property owner generally must receive the


                                         20
“full monetary equivalent of the property taken.” United States v. Reynolds, 397

U.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) (just

compensation requires “the full and perfect equivalent in money of the property

taken.”). The Supreme Court has remained steadfast in its resistance to a rigid rule

for determining just compensation. See, e.g., United States v. Commodities

Trading 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 by

determining “what a willing buyer would pay in cash to a willing seller” at the time

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 replacement

cost and income capitalization approaches). The appropriate alternative, whatever

that may be, rarely countenances the use of historical cost, as several Supreme

Court 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., 338 U.S.

396, 403, 70 S. Ct. 217, 221-22, 94 L. Ed. 195 (1949). Therefore, APCo argues

that any of its substitute methods – the “sales comparison” approach, the


                                          21
“replacement cost” approach, or the “income capitalization” approach – should be

used. Any of these, it argues, yield a much higher rate than the FCC presently

allows. When a constitutionally acceptable cost methodology is combined with a

more appropriate inclusion of costs (such as unusable pole space and various

capital expenditures), the “full monetary equivalent of the property taken” exceeds

the $38.81 rate APCo seeks. While we might ordinarily be sympathetic to this

argument,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 company

to pay for any “make-ready” costs and all other marginal costs (such as

maintenance costs and the opportunity cost of capital devoted to make-ready and

maintenance costs), in addition to some portion of the fully embedded cost. See In

the Matter of Ala. Cable Telecomm. Ass’n et al. v. Ala. Power Co., 16 FCC Rcd.




       20
          Or maybe not. Arguably, this “as-applied” challenge flies in the face of our conclusion
in 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.”).

                                               22
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 by

the 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]he

question is, What has the owner lost? not, What has the taker gained?” United

States 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 specific application

of the general principle of the law of remedies: an aggrieved party should 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 Cable Rate, leads us to ask

the following question: does marginal cost provide just compensation in this case?

       This question exposes the unique nature of this case. Typically, the subject

of a government condemnation proceeding is ordinary property, such as land. In

such 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 Virginia

Electric (loss to the owner, not gain to the taker) and Reynolds (full monetary



       21
       APCo received more than a million dollars in make-ready payments from cable
company attachers.

                                            23
equivalent of the property taken). This is because most property is rivalrous – its

possession by one party results in a gain that precisely corresponds to the loss

endured 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 practical

purposes, nonrivalrous. This means that use by one entity does not necessarily

diminish the use and enjoyment of others. A common example of a nonrivalrous

good 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 million

feet into the sky. Further suppose that there is only one cable company in any one

market that desires to attach to the power company’s poles. Finally, suppose that

the government forces the power company to let the cable company attach to its

pole network. What level of compensation is just? So long as the marginal cost of

the attachment is paid, the power company incurs no lost opportunity or any other

burden. That is, the cable company’s use does not foreclose any other use. The

pole space is, for practical purposes, nonrivalrous.

      To this point APCo responds that the lost sale to the cable company – its

opportunity cost – has also been taken. We think, however, that it is irrelevant

whether the government keeps the condemned property for itself or appropriates it


                                          24
to 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 not

out any more money than we were before the taking, we are missing out on the

opportunity to sell to the government at what we deem the ‘full market price’ of

this 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 as distinguished

from others who may or may not possess the power to condemn has long been

excluded as an element of market value.”). It should not make a difference if the

government chooses to allocate the condemned property to private companies.

      In some cases, then, marginal cost will be sufficient to compensate the pole

owner. 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 its

way onto the tracks of other railroad companies. The ICC had authority to decide

the compensation Amtrak would pay, with the constraint that such compensation

was to be limited to “incremental costs.” The Second Circuit concluded:

      [A]ssuming arguendo that there has been a taking, compensation is

      adequate since MTA, in obtaining avoidable costs, will receive what it

      would have had but for the taking. In other words, the owner, there

      the lessee of the railroad facilities, will be put into the same position


                                          25
       monetarily as it would have occupied if the property had not been

       taken, and this is precisely the guiding principle of what is just

       compensation. . . . If the Fifth Amendment required such a sharing [of

       the overhead costs of ownership, then the petitioners] would be put in

       a better position by Amtrak’s appearance on the scene. True, Amtrak

       benefits. But if we know one immutable principle in the law of just

       compensation, it is that the value to the taker is not to be considered,

       only loss to the owner is to be valued.22

Id. at 297.

       Metropolitan Transportation involved something close to a nonrivalrous

good. Allowing traffic from one railroad rarely means that another railroad is

precluded from traveling on the same line unless, of course, the line is already

crowded. The possibility of crowding is perhaps more likely in the context of pole

space, however, and if crowded, the pole space becomes rivalrous. Indeed,

Congress contemplated a scenario in which poles would reach full capacity when it

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 government



       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.

                                               26
taking forecloses an opportunity to sell space to another bidding firm – a missed

opportunity that does not exist in the nonrivalrous scenario. By forcing the power

company to rent space that could be occupied by another firm (or put to use by the

power company itself), the analogy to land becomes more appropriate. In the “full

capacity” 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 APCo

allege that APCo’s network of poles is currently crowded. It therefore had no

claim. 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, as well as the

amount of any loss, is upon the party claiming to have experienced a taking).

      In short, before a power company can seek compensation above marginal

cost, 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 power

company 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 for

much more than marginal cost) necessarily provides just compensation. While this

analysis may create what appears to be an anomaly – a power company whose

poles are not “full” can charge only the regulated rate (so long as that rate is above

marginal cost), but a power company whose poles are, in fact, full can seek just


                                           27
compensation – this result is in accordance with the economic reality that there is

no “lost opportunity” foreclosed by the government unless the two factors are

present.23

                                                IV.

                                                A.

       APCo contends that regardless of how we ultimately rule on the merits, the

FCC’s decision is “arbitrary and capricious” and therefore must be set aside under

5 U.S.C. § 706. The policy decisions of agencies must be set aside if they are not

the product of reasoned decisionmaking. Courts are deferential to agency

decisions and will not upset them merely because they disagree with the policy

choice of the agency. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401

U.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 rather


       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.

                                                28
determine whether there was a rational connection between the facts found and the

choice 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 other

ratemaking cases, combined with its refusal to engage in detailed consideration of

APCo’s evidence on the just compensation issue, evinces unreasoned

decisionmaking. The FCC did, however, note that reimbursement of marginal cost

was tantamount to just compensation in this case. See In the Matter of Ala. Cable

Telecomm. 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 testimony

concerning the value proxies proffered by the petitioners’ experts, which were

irrelevant given the sufficiency of marginal cost. To be sure, the Cable Bureau and

the full Commission might have been advised to inquire about the level of capacity

presently on APCo’s poles. But we can hardly fault the Commission for ignoring

an issue that APCo never raised.

      Finally, we note that APCo does not contend that the FCC decision was

arbitrary and capricious in its policy determination; its concern is only with the

FCC’s constitutional analysis. Accordingly, we do not address the policy-based


                                          29
defenses raised by the FCC.24

                                              B.

       APCo asserts that the Commission’s pole attachment complaint proceeding

is defective because “if and when” they are ultimately successful in their claim that

they are entitled to more than the statutory rate, “there may not be any process that

will compensate APCo retroactively,” because the FCC “apparently lacks the

statutory authority to order a cable company to retroactively pay a charge higher

than the statutory maximum.” This argument posits a mere hypothetical. APCo

has not demonstrated that in this case the Commission’s procedures failed to

provide it with adequate compensation, and so resolution of its claim must await

another day. Moreover, this court explained in Gulf Power I that if a court were to

find 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 just

       compensation rate from the date it was first required to provide access

       under the mandatory access provision [and thereby] ensure a utility

       receives just compensation both prospectively and in the period prior

       to the court’s determination of the just compensation rate.


       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.

                                               30
Gulf Power I, 187 F.3d at 1335.

                                          C.

      APCo also contends that the FCC’s complaint process violated its Fifth

Amendment due process rights because “pole complaints normally are to be

adjudicated 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 general

observation rather than a real-life injury. The Commission’s rules state that “[t]he

Commission may decide each complaint upon the filings and information before it

. . . or may, in its discretion, order evidentiary procedures upon any issues it finds

to have been raised by the filings.” 47 C.F.R. § 1.1411. APCo must therefore

identify a material question of fact that warrants a hearing. But its dispute is only

over the methodology that should be used to calculate the level of just

compensation – an legal issue that hardly warrants an evidentiary hearing since no

material 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 there

has been a due process violation, there must be a private interest affected). For

example, if APCo and the cable companies were to later disagree about whether a

pole network is operating at full capacity, the FCC may commit a due process

violation if it were to adopt the cable companies’ position without an evidentiary


                                          31
hearing. That day, however, has not yet arrived.

                                         V.

      It is well settled that if the government commits a taking, it is under an

obligation to put the aggrieved party in the position it was in before the taking

occurred (and no better). In unique cases such as this one, marginal cost meets this

test – unless, of course, the aggrieved party proves lost opportunity by showing (1)

full capacity and (2) a higher valued use. APCo never alleged these facts.

Therefore, its challenges based on the Fifth Amendment and the Administrative

Procedure Act must fail, and its petition for review is denied.

      SO ORDERED.




                                          32
