[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
ACCESS TO BUILDINGS AND FACILITIES BY TELECOMMUNICATIONS PROVIDERS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS,
TRADE, AND CONSUMER PROTECTION
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
MAY 13, 1999
__________
Serial No. 106-22
__________
Printed for the use of the Committee on Commerce
------------------------------
U.S. GOVERNMENT PRINTING OFFICE
57-450 CC WASHINGTON : 1999
COMMITTEE ON COMMERCE
TOM BLILEY, Virginia, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas RALPH M. HALL, Texas
FRED UPTON, Michigan RICK BOUCHER, Virginia
CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey
Vice Chairman SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee
CHRISTOPHER COX, California PETER DEUTSCH, Florida
NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma ANNA G. ESHOO, California
RICHARD BURR, North Carolina RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California BART STUPAK, Michigan
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
GREG GANSKE, Iowa THOMAS C. SAWYER, Ohio
CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma GENE GREEN, Texas
RICK LAZIO, New York KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio
JAMES E. ROGAN, California DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
James E. Derderian, Chief of Staff
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications, Trade, and Consumer Protection
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL G. OXLEY, Ohio, EDWARD J. MARKEY, Massachusetts
Vice Chairman RICK BOUCHER, Virginia
CLIFF STEARNS, Florida BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California ANNA G. ESHOO, California
NATHAN DEAL, Georgia ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming BILL LUTHER, Minnesota
JAMES E. ROGAN, California RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois THOMAS C. SAWYER, Ohio
HEATHER WILSON, New Mexico GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Bitz, Brent W., Executive Vice President, Charles E. Smith
Commercial Realty L.P...................................... 30
Burnside, Scott, Senior Vice President, Regulatory and
Government Affairs, RCN Corporation........................ 11
Case, Jodi, Manager of Ancillary Services, Avalon Bay
Communications Incorporated................................ 44
Heatwole, Andrew, Partner, Ripley-Heatwole Realtors.......... 40
Pestana, Larry, Vice President, Engineering, Time Warner
Cable...................................................... 49
Prak, Mark J., Partner, Brooks, Pierce, McLendon, Humphrey,
and Leonard................................................ 54
Rouhana, William J., Jr., Chairman and CEO, Winstar
Communications............................................. 23
Sugrue, Thomas J., Chief, Wireless Telecommunications Bureau,
Federal Communications Commission.......................... 6
Windhausen, John D., Jr., President, Association for Local
Telecommunications Services................................ 18
Material submitted for the record by:
Community Associations Institute, prepared statement of...... 105
(iii)
ACCESS TO BUILDINGS AND FACILITIES BY TELECOMMUNICATIONS PROVIDERS
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THURSDAY, MAY 13, 1999
House of Representatives,
Committee on Commerce,
Subcommittee on Telecommunications,
Trade, and Consumer Protection,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:08 a.m., in
room 2322, Rayburn House Office Building, Hon. W.J. ``Billy''
Tauzin (chairman) presiding.
Members present: Representatives Tauzin, Oxley, Stearns,
Deal, Cubin, Shimkus, Pickering, Fossella, Blunt, Markey,
Eshoo, Luther, Klink, Green, and McCarthy.
Also present: Representative Lazio.
Staff present: Mike O'Rielly, professional staff member;
Cliff Riccio, legislative clerk; and Andy Levin, minority
counsel.
Mr. Tauzin. The committee will please come to order.
We have a very distinguished and very large panel this
morning and so I will ask all of our guests to get seated and
comfortable and we expect to hear a very good hearing today and
to be a great deal more educated when it is finished. Let me
first welcome all of you and thank the witnesses for coming
today to discuss this very important issue of access to
buildings and facilities by telecommunications providers.
First of all, let me tell you that I realize the issue can
generate some rather heated debate. And I hope, instead of heat
today, we, of course, shed a little light on some of the real
confusion and expose the real issues that, perhaps we in
Washington, can help resolve for you. The differences that lie
between building owners and telecom providers can be seen in
how the different entities refer to the subject matter.
Building owners call it ``forced access,'' saying that these
companies are trying to force their way onto private property.
Telecom companies call it ``competitive access,'' feeling they
need to get access to buildings in order to compete with other
telecom providers who already are provided access.
The problem that members of our subcommittee are wrestling
with is the fact that all of these entities feel very
passionately about their positions and are both right to some
degree. Clearly, it is my wish and the wish of others on the
subcommittee that telecommunications providers be given the
chance to compete and that means giving them access to
customers in order that they can afford to offer them the
choice for whom they want to do business with. In fact, that is
what competition means: making a level playing field, giving
all the customers a chance to reach the companies they want to
reach and the companies a chance to make their case and then,
eventually, letting consumers decide who should be the winners
and losers in the telecommunications marketplace.
On the other hand, as a champion of property rights, it
troubles me when the government wants to tell a private
property owner what to do with their private property. And,
therefore, it is my hope that the hearings we have today will
serve as an attempt toward some sort of compromise, some
arrangement, some agreements that will get us the best of these
two very important worlds. We must take a look to see where
access to buildings is working. I think the representatives
from RCN, Winstar, and ALTS can give us some success stories
where access was allowed and competition has flourished. They
can, unfortunately, also point out a significant number of
instances where entry has been delayed or prevented.
On the other hand, building owners, realtors, and apartment
association representatives will tell us situations where they
feel access was acceptable and, indeed, prosperous. They are
also in the unenviable position of having to defend building
owners or managers that have used the access control to create
a new bottleneck, preventing customers from getting the service
that they want.
Consumers want choice in our marketplace and want to be
able to get the latest and the greatest technology. That
includes the speed at which they can surf the Internet, the
number of services they can get on one bill, and the lower
prices that competition usually helps provide. FCC has also
been invited to discuss with us today what they are doing, what
they are working on, and provide us with a sense of timing as
to when the FCC itself will complete items that they have or
will be having before them on both sides of the inside wiring
and the building access issues.
Clearly, there is a lot to consider today. As I said
earlier, there is a chance to start dialog and perhaps shed
more light than heat. I believe that there is room, indeed, for
some sort of balanced compromise. I want to thank, again, the
witnesses in advance and I am pleased to welcome now the
ranking minority member from the great State of Massachusetts,
my friend Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman, very much and I want
to commend for calling this hearing. And I think you are
correct that we are going to work together with all of the
parties if we are going to be able to resolve this very complex
issue. This issue is very important if we are going to advance
the subcommittee's telecommunications competition policy across
all services, be it video, data, and voice communications.
The Telecommunications Act of 1996 contained numerous
provisions that repealed or removed barriers to competition.
Some of the witnesses at our hearing today represent companies
that, in many cases, either would not exist or would not be
competing today in certain markets but for passage of the
Telecommunications Act. I am not fully satisfied however and I
don't think most other members of this subcommittee are either
with the progress we have made thus far in providing greater
competition to incumbent cable and incumbent telephone
companies.
One complaint from competitors that returns to us over and
over again is the issue of access to office buildings and
multiple dwelling units. The Telecommunication Act did not
contain a specific provision relating to building access for
telecommunications services, yet Congress did include section
207 which required the FCC to preempt restrictions on the
placement of over-the-air devices to receive video programming.
Moreover, the Commission has some underlying authority, such as
pole attachment provisions and inside wiring regulations, that
can affect building access for competitors. I am eager to hear
from our witnesses this morning on their views as to the
applicability of these provisions and the effectiveness of
these rules.
The issue of access to buildings and MDUs is one that not
only is vital to the growth of video data and voice
competition, but also forces policymakers to wrestle with
questions of building security and tenant safety, compensation
for building owners, and constitutional arguments raised with
respect to government-mandated access to private property. I am
hopeful that we can pragmatically address many of the
legitimate concerns of building owners to achieve a result that
serves to bring more choices and lower prices to tenants and
continues to fuel American economic growth in this important
marketplace.
Mr. Chairman, I thank you for holding this hearing and I
look forward to hearing from the witnesses.
Mr. Tauzin. Thank you, Mr. Markey. I am pleased to also
welcome my friend from Georgia, Mr. Deal for an opening
statement.
Mr. Deal. Thank you, Mr. Chairman. I don't have an opening
statement and look forward to the testimony.
Mr. Tauzin. Thank you, Nathan. Indeed we have an incredible
array of witnesses today and we want to get them going as
quickly as we can. Let me first admonish you that we have your
written statements and they are good and we thank you for that.
And we are going to read them over and over again and more than
once before we resolve this issue so please don't read your
statements to us. You can see, we try to conduct this very
informally in the sense that we would like you to have
conversation with us and give us the highlights of what you
came here to tell us today and make your best points. We will
have a little timer and you all get 5 minutes to do it. We
appreciate it. We have to do it that way. And the members will
have 5 minutes to dialog with you and I hope out of it, as I
indeed pointed out, comes a lot of understanding and perhaps
some resolution.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Michael G. Oxley, a Representative in
Congress from the State of Ohio
Thank you, Mr. Chairman, and welcome to our witnesses.
As we all know, the purpose of the '96 Act was to remove barriers
to competition. The question before us today is whether restricted
access to office complexes and apartment buildings for
telecommunications competitors poses a barrier to competition.
In the case of local telephone competition, where some new entrants
plan to employ wireless technologies to provide facilities-based
competition, the inability to access rooftops to place antennae to
serve occupants does appear to serve as a barrier to market entry.
The proposed solution--that building managers should be required to
offer reasonable, non-discriminatory access to telecommunications
competitors in exchange for full economic compensation--is offered as a
way to promote growth and competition by removing a market distortion
favoring incumbent carriers. I believe it is an idea worth exploring,
so I commend the Chairman for holding this morning's hearing.
Thank you, Mr. Chairman. I yield back.
______
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress
from the State of Florida
Mr. Chairman: Thank you for calling these hearings. The issues
before us are quite weighty and they magnify the state, or lack
thereof, of competition in the telecommunications industries.
I had hoped this hearing would focus on the issues of building
access, as I think they will, but our Subcommittee should devote
another hearing entirely to the subject of facilities access.
Issues surrounding facilities access for competitive telephone and
cable providers are different from the issues affecting building
access. I encourage my Chairman to hold such a hearing in the near
future.
As my colleagues know, I do believe our own individual states and
localities should play the paramount role in the regulation of
telecommunication providers, with the federal government and federal
regulators playing a complementary role.
However, Congress and the FCC must lead when barriers to
competition are evident and where national telecommunications policy
needs to be addressed.
This is what drove us to action to create the Telecommunications
Act of 1996. Our nation was in need of federal policy to deliver
competition at the local level. Unfortunately, some have delayed
competition by choosing to challenge provisions in the Act or challenge
how the Act was being implemented.
If Congress and the FCC is forced to act on building access and we
are challenged in court, I am confident the courts will continue to
recognize our authority in opening uncompetitive markets and
industries.
Some will argue about the constitutional provisions protecting
private property and I would agree with them.
But in many multi-tenant residential buildings, the tenants own
their condominiums or apartments and they are denied access to
competitive telephone or video services by their property management.
Do these owners not deserve the constitutional protection of
private property and, therefore, do they not have the right to receive
competitive telecommunication services?
There is no question that access to multi-tenant residential and
office buildings is fundamentally important in achieving competitive
structures in telecommunications. Without the ability to serve these
type of customers, competition in telephony, video, and data services
will be stifled.
I believe that sensible solutions to allow sensible access to
buildings for competitors is in every one's interest.
I think it is in the building owners interest, and I think they
will agree, to provide the best services to retain tenants and to
attract tenants. That is why reaching an agreement on building access
is achievable.
I had hoped and still hope that the issue can be settled at the
state level to allow our states and localities develop policies to
achieve competitive access. My home state of Florida had before the
state legislature maybe the preeminent bill in the nation concerning
access.
The Florida building access bill provided mandatory access for
telecommunications carriers to tenants in multitenant buildings on
reasonable, technologically neutral, and comparable terms and
conditions.
As I understand, all the players concerned from competitive
telecommunication providers, incumbents, and building owners were on
board with a compromise agreement as the bill was moving through the
Florida House.
They reached a settlement that all sides were not entirely
satisfied with, but all realized the agreement was the most reasonable
approach to achieving building access.
Then for typical political reasons, the bill was held up for
personal considerations. The problem remains that if our states
capitulate to political obstruction and allow barriers to competition
to continue to exist, Congress and the FCC will be forced to step in
and create solutions to allow reasonable building access.
I look forward to today's testimony and I hope the witnesses can
address the Florida bill and suggest if the Florida bill was an
adequate compromise or is there a better solution? Additionally, do you
think the Florida legislation can be used as a model for the federal
government?
Thank you Mr. Chairman.
______
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress
from the State of Wyoming
Thank you, Mr. Chairman, for holding this important hearing on
access to buildings and facilities by telecommunications companies.
The importance of facilities based competition in local
telecommunications markets cannot be understated. The competitive
industry has a legitimate complaint about not being allowed into
residential buildings. However, not all legitimate complaints warrant
government involvement.
Two months ago I facilitated a forum in Wyoming on the placement of
communication towers. The problem we were trying to resolve had to do
with telecommunications providers not being allowed to place much
needed cell towers in areas where they can deliver the best coverage
and the most advanced services.
Instead of legislating a solution, the meeting educated the public
and the public ended up driving the debate on why cell towers are
important for public safety, and essential for increasing modem
communication services.
I see the issue with accessing buildings in the same way. If there
are enough tenants of multi-dwelling units who are unhappy with their
current telephone, cable, Internet or any other utility service, they
have the option to demand that their building manager or owner change
it.
The bottom line is that the building managers and owners are
responsible for taking care of their tenants' needs. If the tenants are
unhappy with their current telecommunication services, something will
need to change.
Congress isn't going to promote competition in this regard: it's
going to be the consumer who demands competition by purchasing the
latest, greatest and least expensive technology and telecommunications
services.
These services are currently available and should be available for
people to choose from, but it should not come at the expense of
trampling the rights of private property owners.
Mr. Chairman, I look forward to hearing from the witnesses today
and yield back the balance of my time.
______
Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
Thank you Mr. Chairman, I also want to thank you for holding this
hearing.
This is an important hearing because it's about competition.
Competition brings consumers long-term benefits. Competition is the
best mechanism to ensure low rates. Competition also brings better
service and more choice.
Competition also poses a problem for incumbent providers. Incumbent
providers have two ways to respond to competition: meet consumer
demand, or perish.
The Telecommunications Act of 1996 says that, as a matter of law,
all telecommunications markets are open to competition. The local
telephone market, once closed to competition, is no longer a legal
sanctuary for monopolists.
Since the Act's passage, critics of the law have complained that
competition has not developed quickly enough. These critics, however,
choose to ignore the wealth of evidence that shows competitors are
making progress.
True: we'd all like to see more competition. But the solution there
is not to turn our backs on the progress we've made. Instead, we should
focus on ways to remove the remaining obstacles to competition.
Which brings us to the subject of building access, the so-called
``last hundred feet.''
This is an important component to promoting competition in local
telephone markets. Consumers who live in apartment or commercial
buildings are no less entitled to the benefits of competition.
I am therefore concerned when I hear charges that building owners
and managers go a long way to deny competitors access to their
properties. I know how difficult it must be to accommodate new folks
seeking access to office buildings and apartments. However, some
building owners and managers are mistakenly restricting access.
I recognize this is not true of all building owners. Some owners
and managers support competition in retail sales of electricity, which
pleases me. Many owners have done the right thing for their tenants and
opened their door to competition.
So we need to find an answer to the following question: how do we
take care of the ``bad actors?''
The FCC has done some good work in this area. But much work
remains, and the FCC ought to be using its power to help us find some
solutions.
Let me also say that I strongly support collaborative solutions to
this problem. I applaud those building owners and telecommunications
companies that have tried to fashion a compromise, and urge you to
continue your good work.
But those who choose to dig in their heels should know that we will
continue to monitor this situation. I am committed to opening the local
loop, and building access is a key component to that effort.
Again, I thank the Chairman for holding this hearing, and I look
forward to the testimony of the witnesses.
Mr. Tauzin. So we will start today by welcoming the chief
of the Wireless Telecommunications Bureau, Mr. Thomas Sugrue,
who will give us some idea of what the FCC is doing in this
area and give us an update on timing and what may be happening,
what is going on. So you may all learn something about what is
about to happen, all of you, from the FCC.
Mr. Sugrue.
STATEMENTS OF THOMAS J. SUGRUE, CHIEF, WIRELESS
TELECOMMUNICATIONS BUREAU, FEDERAL COMMUNICATIONS COMMISSION;
SCOTT BURNSIDE, SENIOR VICE PRESIDENT, REGULATORY AND
GOVERNMENT AFFAIRS, RCN CORPORATION; JOHN D. WINDHAUSEN, JR.,
PRESIDENT, ASSOCIATION FOR LOCAL TELECOMMUNICATIONS SERVICES;
WILLIAM J. ROUHANA, JR., CHAIRMAN AND CEO, WINSTAR
COMMUNICATIONS; BRENT W. BITZ, EXECUTIVE VICE PRESIDENT,
CHARLES E. SMITH COMMERCIAL REALTY L.P.; ANDREW HEATWOLE,
PARTNER, RIPLEY-HEATWOLE REALTORS; JODI CASE, MANAGER OF
ANCILLARY SERVICES, AVALON BAY COMMUNICATIONS INCORPORATED;
LARRY PESTANA, VICE PRESIDENT, ENGINEERING, TIME WARNER CABLE;
AND MARK J. PRAK, PARTNER, BROOKS, PIERCE, MCLENDON, HUMPHREY,
AND LEONARD
Mr. Sugrue. Thank you, Mr. Chairman and Congressman Markey,
members of the subcommittee. I am pleased to accept the
invitation to testify today on these important issues.
Apart from my role as chief of the Wireless Bureau at the
FCC, I have some personal experience with the benefits of
enabling telecommunications providers to have competitive
access to apartment buildings. Recently I sold my house and
moved into an apartment while awaiting the construction of a
new home. I was happy to discover that, when we signed our
lease, we were asked which of two providers did we want to
select for our local telephone service: Bell Atlantic or Jones
Communication. Jones, the cable company in Alexandria,
Virginia, is providing telephone service in that city. I felt
empowered by the availability of choice and the service
packages offered by Jones were attractively priced and included
an array of options. I was able to compare the two offerings
and pick between them. All Americans should have such a choice.
I should hasten to add that I selected Jones, not out of
any unhappiness with my friends at Bell Atlantic, but simply
out of professional curiosity.
How does this competition really work and so far the phone
seems to work.
Tenants in multiple dwelling units or MDUs potentially play
a critical role in the development of local competition. They
have the opportunity to be among the very first customers to
realize those benefits because of the economies of scale posed
by the concentration of customers in these locations. As a
result, MDUs could either be the beachhead in which facilities-
based competition gets a foothold or they could be the last
place competition arises because competitive carriers lack the
access to customers.
Competitive access to MDUs is also an important first step
toward advancing local competition in non-MDU areas. The
foothold Jones has in my apartment building and other MDUs and
the customer base and operational experience that it is gaining
could enable this carrier to take the next step, serving
customers more broadly throughout all of Alexandria.
Now on the video side, I do admit some frustration with my
situation. Since my apartment faces northeast, a DBS dish on my
balcony won't work. There ain't so satellites up in that
direction. So even though I can look out my window toward
Boston, I can't receive the New England regional sports
channels that cover my beloved Boston Red Sox and Boston
College athletic teams a result that, while frustrating to me
as a fan, is probably beneficial to my mental health. But,
Congressman Markey, I am sure you feel my pain.
But, personal experience aside, the importance of promoting
facilities-based local competition cannot be understated as a
critical step in reaching the pro-competitive goals Congress
established in the Telecom Act of 1996. In a competitive local
telecommunications market, competitors will have the incentive
to provide advanced features such as broad-band access and
innovative service packages in order to attract customers to
their offering. This pro-consumer result will be achieved in a
timely and efficient manner only in the context of full
facilities-based competition by service providers using all
delivery technologies.
As my formal testimony more fully explains, the Commission
has considered these issues in a number of proceedings aimed at
promoting facilities-based competition in video and
telecommunications. These proceedings have made inroads in this
area, but issues do remain. Particularly in light of the
emergence of new competitors in the form of wireless
telecommunications providers, like Winstar, Telegent, and
NextLink.
The Wireless Bureau has recently deployed Spectrum and will
continue to do in the future, which makes the emergence of
these new competitors a reality. The Bureau also intends to
propose to the Commission soon that it initiate a proceeding
that will attempt to address in a more comprehensive manner a
number of the interrelated questions about building access
issues involving these local telecommunications service
providers.
I respectfully suggest that the subcommittee consider
whether legislation appropriate to advance competitive access
to MDUs. Legislation could clarify the Commission's authority
to take action in the public interest to promote reasonable and
nondiscriminatory access. Legislation could also provide
guidance to the Commission and to reviewing courts on the
proper scope of agency action, including the principles that
should govern and the limitations that should apply. And it
could help ensure that whatever decisions the Commission makes
in this area do not get bogged down in protracted litigation
initiated by one side or the other in this debate. The
Commission staff would be pleased to offer their technical
assistance to the subcommittee in this effort.
Again, I thank the subcommittee for this opportunity and I
look forward to working with you on this matter.
[The prepared statement of Thomas J. Sugrue follows:]
Prepared Statement of Thomas J. Sugrue, Chief, Wireless
Telecommunications Bureau, Federal Communications Commission
Mr. Chairman, Ranking Member, and Members of the Subcommittee: Good
morning. I am Thomas Sugrue, Chief of the Wireless Telecommunications
Bureau at the Federal Communications Commission. I welcome this
opportunity to address the Subcommittee as it considers how best to
ensure that residential and business customers located in multiple
dwelling units (``MDUs''), such as apartment and office buildings, will
have reasonable opportunities to obtain advanced and innovative local
telecommunications services and video programming services from
competitive service providers.1
---------------------------------------------------------------------------
\1\ The comments and views expressed in this Statement are offered
in my capacity as Chief of the Commission's Wireless Telecommunications
Bureau and may not necessarily represent the views of individual FCC
Commissioners.
---------------------------------------------------------------------------
importance of facilities-based competition
The Commission has worked hard to implement a principal goal of the
Telecommunications Act of 1996 (``1996 Act'')--the promotion of
competition in local telecommunications markets. As you well know, the
1996 Act contemplated three entry strategies for local competitors: use
of their own physical facilities, use of unbundled elements of the
incumbents' networks, and resale of the incumbents' services. All three
of these entry strategies remain important as means of introducing
competition, and the Commission continues to take actions to facilitate
all three. In the long term, however, the most substantial benefits to
consumers will be achieved through facilities-based competition. Only
facilities-based competitors can avoid reliance on bottleneck local
network facilities. Only facilities-based competition can fully unleash
competing providers' abilities and incentives to pursue publicly
beneficial innovation.
Facilities-based competition is important not only for the
efficient and ubiquitous provision of basic telecommunications
services, but also for the availability of advanced and innovative
services. In a competitive local telecommunications market, competitors
will have the incentive to provide advanced features, such as broadband
access, and innovative service packages in order to attract customers
to their offerings. This pro-consumer result will be achieved in a
timely and efficient manner, however, only in the context of full
facilities-based competition by service providers using all delivery
technologies.
Moreover, the benefits of competition cannot be fully realized
unless competitive local telecommunications services can be made
available to all consumers, including both businesses and residential
customers, regardless of where they live or whether they own or rent
their premises. To the extent that certain classes of customers are
unnecessarily disabled from choosing among competing telecommunications
service providers, the Congressional goal of deploying services ``to
all Americans'' is placed in jeopardy. Furthermore, the fullest
benefits of competition cannot be achieved unless, to the extent
feasible, competitive services become available in all sectors of the
markets of incumbent local exchange carriers (``LECs''). Specifically,
facilities-based competition has been especially important in the video
area where competing multichannel video program distribution (``MVPD'')
providers have sought both access to inside wiring installed by cable
companies and the ability to install their own antennas on MDU
premises.
nature and impact of the mdu problem
I share the Subcommittee's concern in calling this hearing, which
is focused on two groups of users and their ability to realize the
benefits of facilities-based local telecommunications and video
services competition: the millions of Americans who live in apartment
buildings and other MDUs; and the many businesses, including small
businesses, that are located in office buildings that they do not
control. The special difficulty with offering competitive facilities-
based services to these customers arises from the need to transport
signals across the building owner's premises to the individual
customer's unit. For a telecommunications reseller or a user of the
incumbent LEC's unbundled local loops, this transport is typically
accomplished by piggybacking on the incumbent LEC's existing facilities
as part of the resale or unbundled access agreement. A carrier that
uses its own wireline or wireless facilities to reach the building
owner's premises, however, must then either install its own equipment
or obtain access to existing in-building facilities in order to reach
individual customers.
Depending on State law and local practices, some or all of the
locations and facilities to which competing carriers may require access
may be controlled by the incumbent service provider, the building
owner, or both. The rules governing ownership and control of existing
facilities also differ depending on whether the facilities are used for
telecommunications or video programming services. In order for
facilities-based competition to be fully available to all customers,
however, reasonable and nondiscriminatory access to competing providers
must be provided by whomever controls these facilities.
This hearing is especially timely in light of the Commission's
ongoing efforts to make spectrum available to provide fixed wireless
telecommunications services. For example, service providers are now
offering fixed voice telephony and high-speed Internet access services
over spectrum in the 24 GHz and 39 GHz bands. The Commission also
recently auctioned Local Multipoint Distribution Service spectrum in
the bands around 28 GHz, which should result in a significant number of
new licensees offering fixed wireless services over the next few years.
It appears that all of these spectrum bands will likely be used
primarily for broadband telecommunications applications, although
licensees can provide video programming services over this spectrum as
well. Because their technology enables them to avoid the installation
of new wireline networks, wireless service providers may be among those
with the greatest potential quickly and efficiently to offer widespread
competitive facilities-based services to end users. It is important
that this potential not be threatened by obstacles to these providers'
ability to deliver signals over the last 100 feet to their customers'
locations.
commission actions and plans
Significant Commission action over the past three years has been
devoted to facilitating the rapid and efficient arrival of ubiquitous
competition, including facilities-based competition, in local
telecommunications markets. Beginning with the trilogy of local
competition, access charge reform, and universal service rulemakings,
and continuing through actions the Commission is taking in such areas
as increasing the availability of spectrum, streamlining procedures,
and forbearing from enforcing unnecessary statutory provisions and
regulations, the Commission is moving to promote the ability of
competitive local telecommunications carriers to compete. The
Commission has similarly acted to promote competition in video
programming distribution markets. With respect to MDU access in
particular, the Commission has taken several actions and is considering
several others. Specific proceedings that are relevant to access to
MDUs include the following:
In its August 1996 Local Competition First Report and Order,
the Commission promulgated rules implementing amended Section
224 of the Communications Act. Section 224 requires public
utilities, including LECs, to provide cable television systems
and telecommunications carriers with nondiscriminatory access
under just and reasonable rates, terms, and conditions to
poles, ducts, conduits, and rights-of-way that they own or
control. Petitions for reconsideration of this portion of the
Local Competition First Report and Order are pending.
Implementation of the Local Competition Provisions of the
Telecommunications Act of 1996, First Report and Order, 11 FCC
Rcd 15499, 16058-16107 (1996).
Section 251(c)(3) of the Communications Act requires incumbent
LECs to provide other telecommunications carriers with
nondiscriminatory access to network elements on an unbundled
basis under just, reasonable, and nondiscriminatory rates,
terms, and conditions. The United States Supreme Court recently
vacated, and remanded for further consideration under the
prescribed statutory standards, the Commission's rules
identifying which network elements must be made available under
this provision. In a Notice of Proposed Rulemaking (NPRM)
implementing the Supreme Court's remand, the Commission
specifically requested comments regarding whether incumbent
LECs should be required to unbundle facilities located at end
users' premises. Comments are due on May 26, and reply comments
are due on June 10. Implementation of the Local Competition
Provisions of the Telecommunications Act of 1996, Second
Further Notice of Proposed Rulemaking, 64 Fed. Reg. 20238
(April 26, 1999).
In October 1997, the Commission adopted a Report and Order
amending its cable inside wiring rules to enhance competition
in the video distribution marketplace. At the same time, the
Commission adopted an NPRM requesting comment on other issues
affecting competitive video service providers' access to MDUs,
including whether restrictions should be placed on exclusive
contracts between building owners and multichannel video
programming distributors. Telecommunications Services Inside
Wiring, Report and Order and Second Further Notice of Proposed
Rulemaking, 13 FCC Rcd 3659 (1997).
In November 1998, the Commission adopted rules under Section
207 of the 1996 Act restricting building owners' authority to
impose restrictions on the placement of devices for the
reception of over-the-air video programming in areas that are
within a tenant's exclusive use. However, the Commission held
that it could not adopt similar rules governing the placement
of antennas in common or restricted access areas under Section
207 because Section 207 did not give it the express authority
to do so. Implementation of Section 207 of the
Telecommunications Act of 1996, Second Report and Order, 13 FCC
Rcd 23874 (1998).
In March 1996, the Commission amended its rule governing
preemption of state and local regulation of satellite earth
stations so as to make it consistent, to the extent
appropriate, with the rules applicable to smaller receiver
antennas. Preemption of Local Zoning Regulation of Satellite
Earth Stations, Report and Order, Memorandum Opinion and Order,
and Further Notice of Proposed Rulemaking, 11 FCC Rcd 19276
(1996).
Looking forward, one of the pending petitions for reconsideration
or clarification of the Local Competition First Report and Order asks
the Commission to clarify the right of access under section 224 to
rooftop rights-of-way and riser conduit (spaces inside the walls of a
building through which cabling is run) that a LEC or other utility owns
or controls. I anticipate that the Commission will act on this petition
in the near future. In addition, once comments have been received on
the recent NPRM regarding the identification of unbundled network
elements following the Supreme Court's remand, the Commission will have
a record on which to provide more guidance regarding incumbent LECs'
obligations to provide reasonable and nondiscriminatory access to
facilities they may own or control within customers' buildings.
Let me assure you that there is a strong recognition within the
Commission that a comprehensive and coordinated assessment of
competitive providers' access to MDUs is essential. Staff from Bureaus
and Offices across the Commission are working together to evaluate and
present the various issues that affect building access. As one
outgrowth of this process, the Wireless Telecommunications Bureau
intends soon to propose to the Commission an item initiating a
proceeding that will attempt to address in a more comprehensive manner
a number of interrelated questions comprised within the building access
problem for local telecommunications service providers.
potential obstacles to effective action
The upcoming Commission actions that I have just described will
constitute important steps toward ensuring that customers in MDUs will
have a full opportunity to obtain competitive facilities-based local
telecommunications services. Some interested parties have argued,
however, that the Takings Clause of the Fifth Amendment, as well as
limits on the Commission's statutory authority, may limit the
Commission's ability to act in this area. These arguments reflect
legitimate concerns about ensuring reasonable compensation to building
owners and ensuring against unreasonable burdens on their property, and
they will be fully considered by the Commission in the course of any
rulemaking proceeding. Even assuming, however, that the Commission
ultimately determines it has authority to take action under existing
law, the arguments in opposition may well form the basis for protracted
litigation in the event the Commission decides to adopt any rules.
For this reason, I respectfully suggest that the Subcommittee
consider whether legislation is appropriate to facilitate competitive
telecommunications carriers' access to MDUs. Legislation could clarify
the Commission's authority to take action in the public interest to
promote reasonable and nondiscriminatory access to MDUs and to prevent
the imposition of restrictions that discriminate or otherwise inhibit
the ability of competitive providers to install the facilities
necessary to offer their services in MDUs, including wireless equipment
such as antennas on the roofs of apartments and office buildings.
Legislation could also provide guidance to the Commission, and to
reviewing courts, on the proper scope of agency action in this area and
the principles that should apply, while still leaving implementation
details to be determined in Commission rulemakings and other
proceedings. Commission staff will be pleased to offer their technical
assistance to the Subcommittee in this effort.
conclusion
Once again, I would like to thank the Subcommittee for inviting me
to testify at this important hearing to examine issues of competitive
carrier access to customers located in MDUs.
Mr. Sugrue. With me today is Bill Johnson, who is deputy
chief of the Cable Services Bureau. I would like to ask the
subcommittee's permission that he join me at the table to
answer questions.
Mr. Tauzin. Without objection, that will be the order of
the day.
Mr. Sugrue. Thank you, sir.
Mr. Tauzin. We will get to questions in just a while, but
we want to know what proceedings are ongoing, where they
reside, and, at some point, what is the time line? And we will
get to that in a second. I think we will all be very
enlightened to learn those things.
Let me now introduce the guests we have here today who will
get to the substance of this debate and, perhaps, help us
resolve it. First, Mr. Scott Burnside, the senior VP of
Regulatory and Government Affairs of RCN, Dallas, Pennsylvania.
Dallas, Texas, is not the only Dallas, we find out, in America.
Mr. Burnside. You bet it is not.
Mr. Tauzin. This is America's hometown, Dallas,
Pennsylvania. Mr. Scott Burnside.
STATEMENT OF SCOTT BURNSIDE
Mr. Burnside. Thank you, Mr. Chairman, members of the
subcommittee. I am the senior vice president for regulatory and
government affairs at RCN corporation and I am appearing before
you today to discuss the obstacles RCN faces accessing inside
wiring in MDUs. The lack of such access is a serious impediment
to the full roll out of competitive cable services and the
implementation of both the spirit and intent of the
Telecommunications Act. We believe that only congressional
action can adequately cure the problems we are encountering. We
believe that a legislative solution can be found which will
advance competition in the delivery of cable services while, at
the same time, preserving the property rights of MDU owners and
incumbent cable operators.
My company, RCN, provides long distance and local telephony
service, Internet, and cable television service to the
residential marketplace. We currently offer service from Boston
to Washington, DC, and will initiate service shortly in
California. We have committed hundreds of millions of dollars
to build our network and are making good progress doing so,
despite a barrage of anti-competitive activities from existing
cable operators.
Among the most serious problems we have is access to the
so-called inside wire within multiple dwelling units. Problems
arise in the connection of our network to the individual
apartment units. Our preference is to install our own wire
always. Do so, however, is frequently not possible because the
building owners or managers are unwilling to permit the new
construction which would be required to install a second set of
wires. When incumbent cable operators refused to allow us to
use the existing wire, the result is, in these buildings we
have potential customers but no way to bring our signal to
them.
FCC rules that govern inside wire are inadequate for two
reasons. First, the rules are limited to instances in which the
incumbent cable provider does not have a legal claim to retain
its wiring in the MDU. In most cases, incumbent cable providers
assert an ownership interest or claim to have an exclusive
contractual arrangement with the MDU. Many States have enacted
mandatory access laws granting cable operators the right to
install their cable over any building ownership objections.
Using these laws, cable operators claim ownership of all
distribution wire. The FCC has declined to draft rules
preempting these anti-competitive claims, expressing hesitation
about its authority to do so.
In many cases, RCN has been denied access because of
exclusive contracts between MDU owners and the incumbent. The
FCC has declined to override these anti-competitive contracts,
even though they are clearly not in the best interests of
building residents.
The second reason the FCC rules are deficient focuses on
the definition of the word ``accessibility'' in the current
rules. New competitors are allowed to connect their wires at a
demarcation point 12 inches outside of the apartment unit,
unless that wire is physically inaccessible at that point. If
it is, the rules go on to say that the demarcation point is
moved to a point where the wires first become accessible
outside of the apartment unit. Quite often, we find that
building owners will not permit us to drill or cut holes in the
wall to pull in our wire and connect to the 12-inch point. In
such situations, the first point of access occurs at a junction
box in a riser closet or a stairwell. Surprise. The incumbents
do not agree and insist that the wire at the 12-point is
accessible by FCC definition, even though RCN is not permitted
to get at it.
We have attempted to address the interpretation of
accessibility with the FCC by seeking a very narrow staff
interpretation of the rule when building management will not
allow access. That was 8 months ago and to date we have had no
response. The interpretation sought by RCN would encourage
competition by establishing that a second cable provider can,
in such circumstances, access existing wire. Our request does
not impair the incumbent's property rights. RCN does not seek
to force a sale of the existing wire, but only to negotiate an
arrangement so that each company can use it.
With respect to this matter, we ask that Congress persuade
the FCC to address this narrow issue of interpretation as
quickly as possible. A favorable ruling by the FCC, while a
positive result and a good first step, is not the long-term
solution. Ultimately, Congress must address the issue of State
mandatory access laws and exclusive contracts which the
incumbents use to thwart the FCC's inside wire rules. The FCC
says it does not have sufficient jurisdiction to address these
existing problems.
We have not asked for a rewrite of the Telecom Act. We only
wish to have you finish what you started in 1996 by finetuning
the Act, adjusting for unanticipated anti-competitive actions
by the incumbents. The legislation should allow for the
promulgation of FCC rules necessary to permit any cable
provider to use, on a nondiscriminatory basis, the existing
home run wire. And, two, authorize the FCC or a Federal or
State court to preempt, when necessary, conflicting State laws
for prior and consistent contracts. We need a law which
establishes that the competitors must have fair and reasonable
access to existing wire which authorizes the FCC or the courts
to preempt conflicting State laws for inconsistent contract.
Thank you, Mr. Chairman.
[The prepared statement of Scott Burnside follows:]
Prepared Statement of Scott Burnside, Senior Vice President, Regulatory
and Government Affairs, RCN Corporation
Mr. Chairman and Members of the Subcommittee: My name is Scott
Burnside. I am the Senior Vice President of Regulatory and Government
Affairs of RCN Corporation (``RCN'') and I am appearing before you
today to discuss the obstacles RCN faces accessing ``inside wiring'' in
multiple dwelling units (``MDUs''). The lack of such access is a
serious impediment to the full rollout of competitive cable services
and the implementation of both the spirit and intent of the
Telecommunications Act of 1996 (the ``Telecommunications Act''). We
believe that only Congressional action can adequately cure the problems
we are encountering and we urge this Subcommittee to consider the
adoption of legislation addressing this competitive obstacle at the
earliest practical moment. We believe that a legislative solution can
be found which will advance competition in the delivery of cable
services while at the same time preserving the property rights of MDU
owners and incumbent cable operators.
First, let me briefly describe where RCN fits into the big picture.
As a result of the pro-competitive policies of the Telecommunications
Act, RCN was formed to provide residential telecommunications users
with a competitive alternative for their telephony, Internet, and cable
needs. As a telephony provider we initially supplied services by
reselling incumbent services, but increasingly we are building out, and
relying on, our own facilities-based, state-of-the-art, fiber optic
cable. Through this facilities based network, we are also able to offer
high speed Internet and cable services to our customers.
We operate in the Northeast corridor, from Boston to Washington,
D.C., and are actively expanding our service in the San Francisco to
San Diego corridor. We seek to provide value to our customers by
providing superior service while underpricing the competition in each
segment of our business and by offering discounts to customers who
subscribe to each of our telephony, Internet and cable services. The
focus of my testimony today will be on the cable aspect of our business
and the competitive hurdles we face accessing inside wiring in MDUs.
RCN operates both as an open video service (``OVS'') operator and
as a traditional Title VI franchised cable company. As you well know,
the OVS concept was developed by Congress and embodied in the
Telecommunications Act.1 You intended OVS to provide a new,
and much needed, competitive alternative to the monopolistic incumbent
cable companies.2 We have tried to implement Congress'
vision, and in fact, we like to refer to ourselves--perhaps somewhat
boastfully--as the ``poster child'' of the Telecommunications Act in
this regard. We operate OVS systems in Boston and its surrounding
communities, in New York City, and here in the District of Columbia
metropolitan area through our joint venture with PEPCO know as Star
Power Communications. We are also developing traditional franchised
cable operations in the Boston, New York and Washington metropolitan
areas, and are beginning to plan for and build out OVS and franchised
systems in the Philadelphia and San Francisco metropolitan regions. RCN
is by far the largest investor in and operator of, OVS. Indeed, there
are no other significant OVS operations up and running.
---------------------------------------------------------------------------
\1\ 47 U.S.C. sec. 573.
\2\ Indeed, Congress and the Commission intended OVS to be the
primary source of facilities-based competition to cable operators. See,
e.g., Implementation of Section 302 of the Telecommunications Act of
1996, Open Video Systems, Second Report and Order, 11 FCC Rcd 18223,
18259 (1996). (Subsequent history omitted).
---------------------------------------------------------------------------
In each market we have entered we have made significant in-roads
despite daunting barriers to entry. We believe that we have begun to
fulfill the fundamental pro-competitive premise of the
Telecommunications Act. We are aggressively pursuing our network build-
out and have signed up a significant number of cable customers,
especially in Boston and New York. Even so, we face competitive
obstacles every step of the way. This Subcommittee, of course, does not
need to be persuaded that competition in the cable marketplace is both
desirable and necessary. The continuous increase in customers' cable
rates, typically well in excess of inflation, is a constant topic of
concern.3 Yet it is interesting to see the theory at work.
For instance, RCN's entrance into certain markets has caused cable
operators to exercise dramatic restraint in some instances. For
example, in late 1997, Time Warner announced that new rate increases in
the range of 10% to 15% would take effect throughout the Boston area,
4 except in Somerville, where RCN provides competitive cable
service.5 Similarly, in the City of Boston, Cablevision
raised its rates only 2.5%. In New York City, Time Warner has
implemented an aggressive bulk discount program in many of the MDUs
where RCN offers competitive cable programming.
---------------------------------------------------------------------------
\3\ See, e.g., Communications Daily, July 15, 1998, p. 2, reporting
CPI data showing cable rate increases of 7.3% over the previous 12
months as compared with a 1.7% inflation rate.
\4\ Boston Globe, December 21, 1997 (WL 6286769).
\5\ Boston Globe, November 26, 1997 (WL 6282146). In fact, a cable
company executive stated that the company is ``looking at a whole new
competitive pricing system'' and ``facing how we deal in a competitive
environment for the first time.'' See also FCC En Banc Presentation on
the Status of Competition in the Multichannel Video Industry, December
18, 1997, at pp. 24-30.
---------------------------------------------------------------------------
Yet we have found the going very tough indeed. Economic theory
recognizes that the cable incumbents, who have enjoyed a quiet but very
prosperous life for decades, do not welcome new
competition.6 Over the last two years we have been subjected
to a barrage of anticompetitive activities by incumbent cable
companies: we have been harassed by pleadings seeking the withdrawal of
our OVS authority on various specious grounds--pleadings filed both by
individual cable companies and by cable trade associations. We have
been subjected to multiple administrative proceedings instigated by the
cable incumbent in Boston--our first OVS market--as well as litigation
in federal court brought by the incumbent cable operator which the
presiding judge urged be withdrawn because it was so lacking in merit.
We have been denied access to critical programming by our cable
competitors both in Boston and New York. Of course, we anticipated
resistance but to be candid the extent and intensity of that
resistance--the prevalence of anticompetitive practices, has really
surprised us. I hasten to add the important point that it has not
deterred us but merely required allocating more time and resources to
getting into various markets than we had initially anticipated.
---------------------------------------------------------------------------
\6\ See Predation In Local Cable TV Markets, Antitrust Bulletin, 9/
1/95 by T.W. Hazlett: ``Cable television operators pursue a predictable
set of reactions . . . to a potential CATV entrant . . . beginning with
a vigorous lobbying campaign to deny entry rights . . . selective price
cutting, preemptively remarketing the first submarkets to be
competitively wired . . . tying up cable network programming . . .
delaying access to . . . poles and/or underground conduits . . . and
creating customer confusion . . .'' Id. at 11.
---------------------------------------------------------------------------
One of the principal areas where we face substantial resistance
concerns access to inside wiring in MDUs. MDUs account for about 27
percent of all U.S. households and in many cities such as Boston, the
percentage is higher. Typically, MDUs have been wired by the local
incumbent cable company which has no interest in sharing such wiring
with a competitor. In MDUs, the cable signals are delivered to a
junction box, usually in an electrical closet in a basement or ground
floor of the building. From there the signals are carried by ``risers''
to junction boxes on each floor. From the junction boxes, the signals
are carried to each unit; this segment of the wiring is known as the
``home run wiring.'' This wiring is, in turn, connected to wiring
inside each unit, which is known as ``cable home wiring,'' and the
subscriber's set is attached to a cable box which is fed by the cable
home wiring. The home run wiring and the cable home wiring is usually
buried behind walls or ceilings and occasionally embedded in structural
elements. Riser cable is also generally inaccessible without opening
walls, floors, ceilings, or structural elements. Occasionally, however,
the wiring between junction boxes and cable boxes in individual units
is carried inside molding which is attached to the outside of existing
walls and similar structures.
For RCN, or for any non-incumbent cable provider, problems arise
when we attempt to connect our outside distribution network to the
individual customer units in MDUs. That is, after our signals have been
brought to an MDU by underground or aerial cable, we must distribute it
to individual subscribers. Our preference is to install our own wiring.
Doing so, however, is frequently not an available option because, if
construction or building alterations are required, the MDU owner or
manager is unwilling, understandably, to permit the new construction
which would be required to install a second set of wires. The incumbent
cable company, of course, refuses to allow the overbuilder to use its
existing wiring. We have encountered construction blockages in about
\1/3\ of the MDUs to which we have brought our signal in Boston, and in
no case was the incumbent willing to allow us to use the existing
wiring. As a result, we have subscribers who have requested our cable
service but we have no way to bring our signal to them.
The inside wiring issue has been a problem for cable competitors
for some time. Section 624(i) of the Cable Television Consumer
Protection and Competition Act of 1992 7 directed the FCC to
adopt rules governing the disposition of wiring within the cable
subscriber's home when such subscriber voluntarily terminates service.
The FCC subsequently adopted rules, but they were too restrictive in
their application as they applied only to wiring inside individual
units and up to 12 inches beyond such units.8 In 1997,
realizing the need to expand the scope of the rules, the FCC adopted
further rules seeking to grant competitors access to the incumbent's
inside wiring so that customers requesting a competitor's service could
receive such service 9 and requiring incumbents to cooperate
with new entrants to facilitate implementation of the pro-competitive
policies embedded in the rules.10
---------------------------------------------------------------------------
\7\ 47 U.S.C. sec. 544(i).
\8\ See 47 C.F.R. secs. 76.801-2 and 76.5(mm).
\9\ See Telecommunications Services, Implementation of the Cable
Television Consumer Protection and Competition Act of 1992, Cable Home
Wiring, Report and Order and Second Further Notice of Proposed
Rulemaking, CS Docket No. 95-184 and MM Docket No. 92-260, 13 FCC Rcd
3659 (1997) (``Inside Wiring Order''), recon. pending and appeal
pending, Charter Communications, Inc. v. FCC, Case No. 97-4120 (8th
Cir.).
\10\ See 47 C.F.R. Sec. Sec. 76.5 (mm) (2) and 76.804(a)(4) and
(b)(5).
---------------------------------------------------------------------------
In formulating its inside wiring rules, the FCC anticipated that
incumbent cable companies, especially in the case of service to MDUs,
might not cooperate with new cable competitors and adopted rules
specifically designed to address such situations. The Commission has
gone to great lengths to resolve the many complex bottleneck issues
related to inside wiring within MDUs, and has adopted regulations that
attempt to successfully moderate the anticompetitive inclinations of
incumbents.11 In explaining these procedures, the Commission
noted some of the exact problems currently faced by RCN:
---------------------------------------------------------------------------
\11\ Id.
---------------------------------------------------------------------------
[W]e believe that disagreement over ownership and control of
the home run wire substantially tempers competition. The record
indicates that, where the property owner or subscriber seeks
another video service provider, instead of responding to
competition through varied and improved service offerings, the
incumbent provider often invokes its alleged ownership interest
in the home run wiring. Incumbents invoke written agreements
providing for continued service, perpetual contracts entered
into by the incumbent and previous owner, easements emanating
from the incumbent's installation of the wiring, assertions
that the wiring has not become a fixture and remains the
personal property of the incumbent, or that the incumbent's
investment in the wiring has not been recouped, and oral
understandings regarding the ownership and continued provision
of services. Written agreements are frequently unclear, often
having been entered into in an era of an accepted monopoly, and
state and local law as to their meaning is vague. Invoking any
of these reasons, incumbents often refuse to sell the home run
wiring to the new provider or to cooperate in any transition.
The property owner or subscriber is frequently left with an
unclear understanding of why another provider cannot commence
service . . . The result, regardless of the cable operators''
motives, is to chill the competitive environment.12
---------------------------------------------------------------------------
\12\ Id. at para. 38 (footnotes omitted).
---------------------------------------------------------------------------
Unfortunately, the FCC's inside wiring rules are grossly
deficient. The rules are deficient for two principal reasons. First,
the rules are limited to instances in which the incumbent cable
provider does not have a legal claim to retain its wiring in the MDU.
So, even though the FCC rules attempt to grant open access to inside
wiring, the rules are inadequate because incumbent cable providers
assert an ownership interest to the wires or claim to have an exclusive
contractual arrangement to be the sole cable provider within the MDU.
In many states, the incumbent cable companies have persuaded the
legislature to adopt what are known as ``mandatory access laws.'' These
laws, with variations from state to state, grant cable companies a
legal right to install their service in MDUs even over the objection of
the building's owners or managers.13 Because the mandatory
access laws were crafted in an era when cable service was invariably
monopolistic, they may be used by incumbents to imped the introduction
of competition. Relying on such laws, the incumbents claim that they
own inside wiring, even when they cannot provide any proof of
ownership. For its part, the Commission has declined to draft its rules
so as to preempt these anticompetitive statutes, instead expressing
hesitation about the scope of its authority to do so.14 In
addition, incumbents often claim competitors cannot enter the MDU
because they have an exclusive contractual arrangement with the MDU
owner providing that the incumbent be the only cable provider. The FCC
has declined to override these existing anticompetitive exclusive
contractual arrangements between cable incumbents and MDU owners, but
it is apparent that such contracts are an impediment to competition.
Incumbents should not be permitted to rely on the sanctity of
anticompetitive contracts, especially in light of new and changed
regulatory circumstances, and the intent of the Telecommunications Act.
---------------------------------------------------------------------------
\13\ There are about 18 such statutes. The Massachusetts Mandatory
Access law is codified at M.G.L. Chapter 166A sec. 22. Cablevision, the
incumbent cable operator in Boston, has contended that this statute
grants it a ``legally enforceable right to remain on the premises of
the buildings . . . notwithstanding the owners' wishes.'' (Oppos. to --
--, p.7 filed in CSR ----).
\14\ Report and Order and Second Further Notice of Proposed
Rulemaking, in Docket No. 95-784, MM Docket No. 92-260, at page 81-101.
---------------------------------------------------------------------------
The second deficiency concerns the interpretation of the rules. The
rules allow a new entrant to interconnect in an MDU with cable home
wiring at the demarcation point. The demarcation point for cable home
wiring is at or about 12'' outside the unit unless it is physically
inaccessible at that point. The Commission found that, where the cable
demarcation point is ``physically inaccessible to an alternative [cable
provider], the demarcation point should be moved to the point at which
it first becomes physically accessible that does not require access to
the subscriber's unit.'' 15 RCN believes that wiring behind
the ceilings and walls and which MDU owners will not allow RCN to reach
by boring holes, is inaccessible, and as a result, the demarcation
point should be moved from 12'' outside each unit to the point where it
is first accessible or, in such cases, to the junction box. The
incumbents, however, do not agree and argue that the demarcation point
for the subscriber lines is located at or about 12'' outside the
subscriber's premises, notwithstanding the fact that the subscriber
line is located behind a ceiling or wall and that the MDU owners will
not allow RCN to bore through these structures nor install any new
wiring.
---------------------------------------------------------------------------
\15\ Inside Wiring Order, supra at para. 150.
---------------------------------------------------------------------------
Let me illustrate the deficiencies in the inside wiring rules for
you by reference to one particular matter which is typical of the kinds
of difficulties we are experiencing. Our Boston affiliate, RCN-BeCoCom,
a joint venture with the Boston Edison Company, initiated OVS service
in Boston last year and has been actively expanding its OVS system by
providing service to MDUs in the city of Boston. The incumbent cable
franchisee has enjoyed a monopoly for some seventeen (17) years and
currently serves approximately 320,000 subscribers. RCN has entered
into agreements to serve numerous MDUs that the incumbent currently
serves.
From its own junction boxes RCN can reach individual subscriber's
units either by connecting with the existing wiring at the incumbent's
junction boxes or by overbuilding its own subscriber line wiring and
connecting to the individual units. In some of these buildings we were
able to install our own wiring and have done so. In others, MDU owners
and managers will not allow RCN to cut, open, plug, spackle, tape, sand
and paint the ceilings and walls in order to install new lines because
it is disruptive and eventually could require the replacement of entire
ceilings and walls. In these instances RCN has installed all of the
facilities necessary to provide service in each of the buildings except
the subscriber lines necessary to access the end users. Specifically,
RCN's facilities consist of riser cables running vertically between
floors and junction boxes in the same utility closets as the incumbent
uses. In all but a very few cases, the existing wiring was installed
behind structural elements including sheet rock walls, ceilings, or
other immovable structures and is therefore inaccessible.
Notwithstanding the Commission's inside wiring rules, the incumbent
cable operator recognizes that in those MDUs where RCN is not allowed
to install its own wiring it can significantly delay RCN's penetration
of its heretofore captive market by refusing to cooperate with RCN. The
incumbent claims to own and to have contractual or statutory rights to
maintain the wiring, although no evidence has been produced to support
such a claim. Going to court to litigate each claim for each MDU is not
a viable option.
RCN repeatedly has tried to develop a reasonable modus operandi
with Cablevision, the incumbent, under which either company could
quickly and efficiently transfer a subscriber's service to the other,
without interruption or disruption to the subscriber. RCN has suggested
using joint junction boxes, shared possession of keys and access to
each other's junction box, coordinated appointments among the
respective field staffs, and other similar reasonable measures.
However, the incumbent, insisting that the wiring behind sheet rock is
accessible under the FCC's inside wiring rules, has refused all such
suggestions, and instead simply insists that RCN must bore through the
sheet rock to install its own wiring, regardless of the MDU owners' or
managers' objections.
We have attempted to address the interpretation of
``accessibility'' with the FCC but, to date, we have not received a
response. RCN sought a narrow staff interpretation of the rules to the
effect that, when wiring is behind sheet rock and the building
management will not allow access to it, the wiring should be considered
inaccessible under the rules with the result that the competitor should
have the right to interconnect at the junction box. To support this
interpretation, RCN relied upon comparable language in the National
Electrical Code. The incumbent and a host of other cable interests
opposed RCN's request.
The interpretation sought by RCN would encourage competition by
establishing that a second cable provider can, in such circumstances,
access existing wiring. Nor would RCN's request have impaired in any
way the incumbent's property rights. RCN did not, nor does it now seek
the opportunity to force a sale of the existing wiring to RCN, but only
to negotiate an arm's length arrangement for either company to use the
wiring. RCN sought to meet the incumbent at the bargaining table with
both parties under a Cable Services Bureau mandate to bargain in good
faith to resolve this matter. RCN noted that it has previously offered
to consider leasing the wiring from the incumbent, and that it would be
willing to discuss any reasonable payment arrangements for use of the
wiring. Almost eight-months later we have had no indication from the
Commission staff how it views the matter. With respect to this matter,
we ask that Congress persuade the FCC to address this narrow issue of
interpretation immediately.
However, a favorable ruling by the FCC, while a positive result and
a good first step, is not the long term solution to ensure competitive
access to inside wiring. Ultimately, Congress must address the issue of
the incumbents' interpretation of state mandatory access laws and long
term exclusive contracts which the incumbents continue to use
successfully to thwart the FCC's inside wiring rules. For that reason,
we have concluded that, although the Commission is to be commended for
committing a great deal of time and energy to its inside wiring rules,
the FCC simply does not have sufficient jurisdiction to address the
problems which exist. State law with respect to the property rights of
cable operators in inside wiring or related facilities is not at all
uniform.16 Service contracts entered into years ago between
monopoly cable providers and MDU owners frequently prohibit competitive
entry. We have concluded that we must ask for federal legislation.
---------------------------------------------------------------------------
\16\ See Telecommunications Regulation (New York, 1998), sec.
21.11[2].
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The purpose of the legislation would be to increase competition and
diversity in the cable video market through the elimination of barriers
to the distribution of cable programming within MDUs. The legislation
should (i) allow for the promulgation of FCC rules necessary to permit
any cable provider granted access to an MDU the right to use, on a
nondiscriminatory and competitively neutral basis, the existing home
run wiring in the MDU in order to provide competitive services to
customers requesting such service; (ii) provide for any cable provider
with a property interest in home run wiring to be fairly compensated
for such use; (iii) provide that any contract, arrangement or agreement
between an incumbent cable provider and an owner of an MDU, which is
inconsistent with the FCC's rules is unlawful with respect to such
inconsistency; and (iv) if the FCC determines that a State or local
government has adopted a law, regulation or ruling which discriminates
against any cable provider or that is inconsistent with the FCC's rules
or open competition, the FCC shall preempt the enforcement of such law,
regulation or ruling to the extent necessary to correct such violation
or inconsistency.
RCN does not suggest that access to MDU inside wiring requires a
massive legislative or regulatory effort; it does suggest, however,
that Congress should act to overcome the refusal of the incumbents to
make existing facilities available to new competitors on reasonable and
equitable grounds. Simply put, to bring competitive cable services to
subscribers in MDUs, we need a federal statute which establishes as an
overriding principle that competitors must have fair and reasonable
access to existing wiring and which authorizes the FCC, or a federal or
state court to preempt, where necessary, conflicting state law or prior
inconsistent contracts. Such access should be accompanied by a
financial obligation which is fair both to the incumbent and to the
entrant.
Let me emphasize what we neither need nor want:
We do not seek authority to force incumbents to sell us their
wiring. We do not wish to impair property rights or to force incumbents
to divest the inside wiring they have been using. All we need is an
enforceable right to use that wiring.
We do not seek authority to run roughshod over the preferences of
MDU owners or managers. We do ask for an opportunity to sell our
services to MDU residents if the residents or the owners do not want
such services, we can accept that. Provided that the process of
soliciting customers is fair, we are content to have the market decide
such questions.
We do not seek a federal right to force an incumbent out of an
existing building--only the right to use existing wiring on fair and
reasonable terms including cost allocations based on an economically
rational approach to costing. We do seek a process, compelled by the
legislation, in which the parties are required to negotiate terms and
conditions in good faith which are mutually satisfactory. In the event
such private negotiations are not adequate, we think it is critical
that the legislation provide the entrant with a variety of remedies,
including the filing of a formal administrative complaint, or taking
the matter to a U.S. district or state court, as the entrant deems most
advantageous.
We will persevere with our efforts to bring competitive services to
residents of MDUs because that is our vision and our business.
Undoubtedly we will continue to make progress. However, it would
significantly accelerate the roll-out of competitive cable services if
federal legislation were passed which established a broad policy
encouraging competitive entry into the MDU market.
Thank you very much.
Mr. Tauzin. Thank you very much, Mr. Burnside. We are now
pleased to welcome the president of the Association of Local
Telecommunication Services, or ALTS, Mr. John Windhausen, Jr.
By the way, does that qualify as a weapon? How did you get
in here?
Mr. Rouhana. It is mine.
Mr. Tauzin. Oh, it is yours. Okay.
Mr. Rouhana. It is my weapon.
Mr. Tauzin. Sure. Mr. Windhausen.
Mr. Windhausen. It is very small.
STATEMENT OF JOHN D. WINDHAUSEN, JR.
Mr. Windhausen. Thank you, Mr. Chairman. As you noted, my
name is John Windhausen. I am president of the Association for
Location Telecommunications Services or ALTS. By the way of
background, I had the pleasure of working on the staff of the
Senate Commerce Committee for 9 years, leading up to passage of
the Telecom Act and I had the distinct honor of standing next
to you, Mr. Chairman, during an historic signing ceremony in
the Library of Congress. But I also will have to admit, I share
the misfortune of Mr. Sugrue in also being a Red Sox fan.
As I mentioned, ALTS is the leading association
representing facilities-based competitors to the local
telephone companies. We currently have 72 members, CLEC
members, competitive local exchange companies, and that is up
substantially from the time the Act passed. When the act
passed, ALTS had 13 members. We are now up to 72. So we are
growing quite rapidly.
Our companies are meeting the provision of data services in
this country. We have installed over 660 switches around the
country and we are very quickly deploying DSL and other high-
speed Internet access services. Our members include wireless
companies, such as Winstar, Telegent, and Nextlink, that are
seeking to install antennas on rooftops. We are represent wire-
line companies who are seeking to run fiber optic cables into
the basements of buildings and other DSL companies that I
mentioned that are simply looking to attach electronics to the
wires provided by the phone companies.
Now, in crafting the Telecom Act, Congress identified three
barriers to the development of local competition:
interconnection with the local telephone company network, State
and local laws that prohibited competition, and building
owners. All three of these sectors must be handled, must be
dealt with for telecommunications competition to become a
reality. Congress, in my view, dealt very clearly and dealt
well with the first two of those issues. Unfortunately,
Congress did not do as good a job in crafting the language to
deal with the building owner problem.
Landlords right now are the final hurdle, the last
bottleneck, the last checkpoint. All of the benefits that
competition was supposed to provide lower prices, greater
technologies, new services all the wonderful things that CLECs
can provide in the market may never reach the consumer unless
the owner of the building allows the CLECs into that building.
The building owner literally is the gatekeeper. Not just
figuratively, but literally has the keys to the vaults and the
basement or to the rooftop to decide whether a CLEC gets into
that building and can deliver the services to the tenants or
not.
Fortunately, some landlords, and quite many landlords and I
believe we are about to hear from Mr. Bitz, who is one of those
progressive landlords who has worked out arrangements with
CLECs. And, in a lot of cases, these landlords realize the
benefits that our telecom companies can provide to consumers.
And so we are very happy to be able to make that progress.
Unfortunately, there are many other landlords that are not
so farsighted. Many other landlords simply refuse to open their
doors to CLECs whatsoever. They just refuse to. They say, we
have got provision from the telephone company. Why do we need
anybody else in our building?
Mr. Tauzin. By the way, we invited the company. They
refused to come. They just wouldn't be here.
Mr. Windhausen. Many landlords insist upon a percentage of
the revenues as a condition of opening their doors or they
assess very large rental fees that are a significant cost to
our business, just to get in the door. And that is before we
have the cost of actually providing the service, so it is a
significant impediment.
Or, in some cases, landlords grant exclusive access to one
company and put a contract out for bid and award an exclusive
arrangement. No other CLEC can then get in that building. It is
a very specific and identifiable harm to competition that
results.
In fact, my written testimony identifies many examples of
landlords that have charged tens of thousands of dollars just
for the right to get into the door and put an antenna on the
roof or put a fiber optic cable in the basement. So this
situation is particularly harmful because in most cases the
ILEC, the incumbent local exchange company, is in for free.
They have no had to pay these fees that the CLEC has to pay.
So, in this case, the CLEC is the one that is handicapped. It
simply can't afford to serve all of the consumers, all of the
tenants in those buildings.
So, for this reason, ALTS earlier this year initiated a new
campaign called the smart building policy project. The purpose
of this initiative is to educate building owners and
policymakers and consumers about the benefits of opening
buildings up to competition. Our objective is to demonstrate
that allowing competitive telephone companies to provide
advanced services to buildings will enable tenants to become
smart and sophisticated users of telecom services in a way that
will increase their productivity and speed up their access to
the Internet.
While we believe this project will help to convince
building owners to open their doors voluntarily, again, it is
also clear that many are simply not interested in doing so. So,
unfortunately, we need a legislative solution. And this is why
we are here today. As we heard earlier from Tom Sugrue, the FCC
right now has a lot of items on its plate. It is just not
certain of what the legal authority is that it has. If Congress
could step in and clarify the existing law, that would be of
great benefit to tenants and consumers and CLECs alike.
We are willing to work, as an association and as an
industry, we are willing to work with the building owners to
make sure that they are compensated, as long as that
compensation is reasonable. And so we hope to work with them
and with the members of this committee in crafting a solution
that we all can find and achieve success with the Telecom Act.
Thank you.
[The prepared statement of John D. Windhausen, Jr.
follows:]
Prepared Statement of John D. Windhausen, Jr., President, Association
for Local Telecommunications Services
Good morning Mr. Chairman and members of Congress. My name is John
Windhausen, Jr. I am the President of the Association for Local
Telecommunications Services (``ALTS''). ALTS is the leading national
industry association devoted to the promotion of facilities-based local
telecommunications competition and it represents companies that build,
own, and operate competitive local networks. Thank you for the
opportunity to discuss an issue that is critical to the development of
facilities-based local exchange competition as envisioned by the
Telecommunications Act of 1996.
Telecommunications carrier access to tenants in multi-tenant
buildings is essential to the development of local competition. In
order to provide facilities-based service to a tenant in a multi-tenant
building, a local telecommunications carrier must install its
facilities on or within the building, sometimes to the individual
tenant's premises (such as their office or apartment). In some cases,
the carrier's facilities extend only from the building owner's property
line to the basement telephone equipment room. For example, the
carrier's line extends from the curb, across the parking lot to the
building. Although this distance may be very short, it is impenetrable
without the building owner's consent--the operation of state property
laws generally requires that a telecommunications carrier obtain the
permission of the building owner prior to installing facilities within
and on top of that owner's building.
However, building owners can and do exclude telecommunications
carriers from buildings in many different ways. For example, absent a
landlord-tenant lease to the contrary--which is very uncommon--the
landlord can eliminate a tenant's choice in telecommunications carriers
simply by refusing carrier access to the building. Other landlords
impose such unreasonable conditions and demand such high rates for
access that competitive telecommunications service in those buildings
becomes an uneconomic enterprise. Consequently, landlords can
perpetuate the monopoly local telephone environment--the bottleneck--
that the 1996 Telecommunications Act sought to dismantle.
To give you an idea of the problems that ALTS members confront, I
offer you a sampling of examples. This is by no means an exhaustive
list of the problems that competitive carriers face, but it does
provide some concrete understanding of the unreasonable barriers to
competition that some landlords are erecting.
The manager of one large Florida property has demanded from a
CLEC a rooftop access fee of $1,000 per month and a $100 per
month fee for each hook up in the building. The company
estimates that this fee structure would cost it about $300,000
per year--just to service one building.
The management company for another Florida building demands
that a telecommunications carrier pay the management company
$700 per customer for access to the building, in addition to a
sizable deposit, a separate monthly rooftop fee, and a
substantial monthly fee for access to the building's risers
which are the dedicated, horizontal and vertical spaces within
a building that contain utility facilities. Taken together,
these fees preclude the company from providing tenants in that
building a choice of telecommunications carriers.
In one Arizona building, a CLEC had pulled its fiber cable
into the building, had access to the telephone closet and
building risers, and had begun providing service to customers
in the building with the landlord's permission. However, one of
the CLEC's customers in that building recently requested
expanded service from the CLEC, requiring an expansion of
facilities. The building owner informed the CLEC that it could
no longer have access to the telephone closet--that it was the
property of the incumbent LEC. Moreover, the building owner
informed the CLEC that the building was now under exclusive
contract to another carrier and that the CLEC would have to
obtain permission from that carrier to service the equipment
that the CLEC had already installed in the building. As a
result, the customer in the building is experiencing delays in
receiving expanded service while the CLEC negotiates with the
building owner and the ``exclusive'' telecommunications carrier
for access. Moreover, the CLEC's relationship with the customer
is at risk and the CLEC's facilities that were installed in the
building several years ago are in jeopardy of becoming stranded
assets.
One CLEC sought a building access agreement with a large
property holding and management company with properties
nationwide. This company required an agreement fee of $2,500
per building in addition to space rental of approximately $800
to $1,500 per month per building. Moreover, the company refused
to negotiate an agreement for fewer than 50 buildings. Finally,
as a condition of entering into the agreement, the company
insisted that the CLEC agree to refrain from making any
regulatory filings concerning the building access issue.
Another large property owner and management company demanded
$10,000 per month per building just for access rights to
building risers.
In an Arizona property, the incumbent and one competitive
provider had installed facilities. Four additional CLECs
requested access. The property owner demanded that the four new
CLECs provide conduit, fiber connectivity between buildings,
and dark fiber to the property owner free of charge--
approximately $200,000 of in-kind contributed facilities. The
property owner also seeks to charge a $750 per month access fee
for access to the property even though the access will not
deprive the property owner of leasable space to tenants. This
situation places the four new CLECs at a competitive
disadvantage to the two providers already inside the building.
A large number of building owners and managers do not want a
second telecommunications carrier in the building because of
revenue sharing arrangements with the first carrier and many
have entered into exclusive access contracts with a single
carrier; indeed, one building management company told a CLEC
not to solicit its tenants.
In Washington state, the owner of a new building put the
provision of telecommunications services to the tenants out to
bid. The winning bidder would gain exclusive access to provide
telecommunications service to the tenants in the building. The
incumbent provider was able to outbid all other providers,
offering to pay $10,000 every year to the building owner. The
incumbent was thereby able to shut its competitors out of the
building entirely.
Management companies for many other buildings demand revenue
sharing arrangements in exchange for access.
Some owners of newly constructed buildings are installing
``central distribution systems'' (``CDS'') in their buildings--
an intra-building telecommunications network. Rather than
allowing carriers to install their own facilities all the way
to the customer, the building owner requires the carriers to
utilize the CDS. However, some of these facilities are not
advanced enough to carry adequately the traffic of more
advanced carriers. Moreover, the building owners will not
guarantee the reliability of these CDS intra-building networks.
In addition, building owners often seek to charge excessive
rates for use of a CDS that many carriers would rather not use.
Finally, some building owners are requiring telecommunications
carriers to sign agreements that once a CDS system is
installed, it must be used--forcing CLECs to promise to strand
their installed investments within buildings. This creates a
tremendous disincentive to serving customers in these
buildings.
The tenants in these buildings often are without recourse and
cannot obtain access to telecommunications options. Building owner
interests sometimes say that the market will take care of the problem--
that landlords have the incentive to keep their tenants happy and to
allow them access to the telecommunications carriers of their choice.
They say that tenants will move out of the building if they are unhappy
with their telecommunications options. These arguments are simply
wrong.
The building access problem exists, suggesting that these ``market
incentives'' are not working. Of course, in some instances, the market
may provide competitive choices, but not until tenants are legally and
financially able and willing to move their residence or business for
the sake of competitive telecommunications choices. Tenants would be
required to incur the substantial expense and inconvenience of breaking
their leases and moving locations. Moreover, they may often confront
higher leases, given the strength of the real estate markets and the
economy generally. This is an unreasonable pre-condition to the
enjoyment of the competition envisioned by the 1996 Telecommunications
Act. In fact, may of these tenants--particularly individuals and small
and medium-sized businesses (those who have the least power when
dealing with landlords)--have never had the opportunity to experience
the benefits of telecommunications competition. This is largely a
theoretical phenomenon to them. The notion that these tenants would
break a lease and incur all of the other identified expenses for this
unknown benefit is unrealistic.
The 1996 Telecommunications Act represents a laudable effort to
open local telephone markets to competition. A good deal of work went
into the construction of the statute to eliminate barriers to
competitive entry. However, to a large degree, the 1996
Telecommunications Act assumes that once the incumbent LEC-imposed
barriers are removed, competition will be able to flourish. It does not
contemplate that even after incumbent LEC barriers are dismantled,
telecommunications carriers may still be prevented from reaching and
serving consumers. In short, the 1996 Telecommunications Act assumes
that building access is available. Unfortunately, that assumption has
proven incorrect. Building access remains a formidable barrier to the
accomplishment of local competition.
The building access problem is particularly acute given the nascent
stage of local competition. The geographic concentration of a large
number of consumers within a building allows economies of scale that
enhance the economic attractiveness of providing competitive service.
For this reason, multi-tenant buildings are likely to be the first
place that residential and commercial facilities-based local exchange
competition occurs on a significant scale. Building access restrictions
stifle competition precisely in those locations where it is most likely
to arise.
This is a problem that warrants a federal solution. The vast
majority of States have taken no action to ensure that tenants in
multi-tenant buildings are not excluded from a competitive
telecommunications environment. Connecticut and Texas both have
statutes requiring landlords to permit telecommunications carriers to
install their facilities to provide service to tenants
therein.0 The Ohio Public Utilities Commission held, in an
order, that landlords could not forbid or unreasonably restrict any
tenant from receiving telecommunications services from any provider of
the tenant's choice.0 Nebraska, too, has mandated building
access in residential buildings.0 But that leaves 46 States
without building access remedies.
---------------------------------------------------------------------------
\0\ See Connecticut General Statutes, Section 16-2471. See also
Texas Public Utility Regulatory Act Sec. Sec. 54.259 and 54.260,
implemented by Texas Public Utility Commission Project No. 18000.
\0\ Commission's Investigation into the Detariffing of the
Installation and Maintenance of Simple and Complex Inside Wire, Case
No. 86-927-TP-COI, Supplemental Finding and Order, 1994 Ohio PUC LEXIS
778 at *20-21 (Ohio PUC Sept. 29, 1994).
\0\ In the Matter of the Commission, on its own motion, to
determine appropriate policy regarding access to residents of multiple
dwelling units (MDUs) in Nebraska by competitive local exchange
telecommunications providers, Application No. C-1878/PI-23, Order
Establishing Statewide Policy for MDU Access, slip op. at 4 (Neb. PSC,
March 2, 1999).
---------------------------------------------------------------------------
A State-by-State approach to this problem is slow and it fails to
guarantee that tenants nationwide will have access to competitive
telecommunications choices. Moreover, a State-by-State approach may
also be ineffective because of the strategic behavior of property
management companies. ALTS members inform me that if they demand
compliance with the building access laws in those few States that have
them, nationwide property management companies will retaliate. These
management companies will penalize the carrier in those other States
without building access laws. Therefore, carriers with nationwide
operations are sometimes required to waive operation of building access
laws thereby undermining the effect of these laws in those few States
that have them.
I strongly urge Congress to enact legislation that ensures that
tenants in multi-tenant buildings across America can enjoy the benefits
of competition arising out of the 1996 Telecommunications Act that
other U.S. telecommunications consumers are beginning to enjoy. Access
should be nondiscriminatory, reasonable, and technologically-neutral.
It should permit landlords to receive compensation in exchange for
access--but that compensation must remain at reasonable levels and must
be assessed on a nondiscriminatory basis. The Texas and Connecticut
statutes offer compromise models for federal legislation that
incorporate these principles and I refer you to them. I encourage
Congress to act quickly on this issue and emphasize that once building
access is assured, Americans will enjoy a marked and rapid increase in
competitive options for local telecommunications services. Thank you.
Mr. Tauzin. Thank you very much, John. The subcommittee is
pleased to welcome a colleague from our full committee from New
York, Vito Fossella, who will introduce the next witness. Vito.
Oh, Mr. Lazio is going to do it. Mr. Lazio, from New York, is
going to introduce the next witness. Mr. Lazio.
Mr. Lazio. Thank you very much, Mr. Chairman. I appreciate
your extending this courtesy to me. I want to take this
opportunity to thank you personally for your interest in this
issue--you are really the point person in the House on
telecommunications--and for convening this hearing.
We have somebody from my neck of the woods who I think is
one of the true visionaries of the field--Bill Rouhana. I am
very pleased to see. He has been a director since the inception
of Winstar Communications, its chairman of the board since
February 1991, and CEO since May 1994. I am not going to read
his entire bio except to say that I have had the pleasure of
working with Bill Rouhana for the last several months in
particular and not just discussing telecommunications issues,
but talking about the future: its impact on children, the need
for multiple platforms of providing a level playing field to
give maximum consumer choice, and to provide for an open and
competitive field. In short, to spur the kind of creativity and
innovation that is necessary to continue the explosion of
technology and to provide the maximum amount of information to
our homes and to our businesses.
He is a creator, an innovator, a leader, and I think he has
expressed some very legitimate concerns which I hope we can
address in a balanced way--together with the rights of building
owners--to achieve the end purpose of enhancing the quality of
life for Americans. So it is a great pleasure that I see him
here today and it is with great pleasure that I thank you for
extending the invitation to somebody of his calibre.
Mr. Tauzin. Thank you, Mr. Lazio. With that kind of
buildup, Mr. Rouhana, you better have something very important
to say today.
STATEMENT OF WILLIAM J. ROUHANA, JR.
Mr. Rouhana. Well, I do have something important to say:
Good morning, Mr. Chairman, and to the members of the committee
and thank you, Congressman Lazio. I am Bill Rouhana. I am the
chairman and chief executive officer of Winstar. In the
interest of full disclosure, I would like to say I am not a Red
Sox fan, so and I am sorry Congressman Markey.
Mr. Markey. How about your wife?
Mr. Rouhana. Well, we can work on that. And I am also the
man who is packing the weapon that you discussed a minute ago.
In fact, that weapon is right here. And this is an antennae.
This is the antennae that we seek to put on building rooftops.
Mr. Tauzin. Hold it up there. Let us see what it looks
like. This is the Winstar antennae.
Mr. Rouhana. And this is the antennae that would be used by
companies like Telegent or Nextlink also. Any wireless fiber
type provider would use an antennae like this and, by
installing this very small antennae on a rooftop, would be able
to provide competitive local, long distance services as well as
high-speed Internet access, broad-band data services of all
kinds, and really bring the future of communications to tenants
in many, many buildings.
Now, we call this wireless fiber service and it really does
bring customers onto the information superhighway in a way that
allows them to really experience the benefits of this new world
we are seeing with the Internet and other things. And this can
be installed at a fraction of the cost of a fiber optic cable.
It is just as efficient. In fact, it is just as effective and
some people might say more effective and more reliable.
We install these radios on rooftops and then we connect
them to risers and conduits inside buildings and telephone
closets and these are the crucial steps to building and
expanding our network. In fact, there are some charts that I
brought here today. Since I knew I wasn't going to be as funny
as Tom Sugrue was, I wanted to have some show and tell items to
help break the monotony. And I have brought a couple of charts
for you to see, just so you could understand what we are
talking about here.
There are a bunch of people who want to get on the rooftop
and they all have a legitimate interest in that, but they are,
when you add them all together, a relatively limited number of
people who have a lot to offer the tenants in the buildings.
Once we are on the rooftop, we need access to the inside
wiring, which is already there. And then, using that wiring, we
get to the customers in the building. So there is a minimal
amount of space required for what we are doing, both outside
and inside the building. And it is relatively easy for us to
get tenants connected to what is really the first mile. It is
their connection to the Internet; it is their connection to the
outside world. And so a relatively simple, elegant, and easy
solution to extending the broad-band network to people who live
and work inside of multiple tenant environments.
You know, since 1994, we have successfully negotiated over
4,800 building access rights across the Nation. That is quite a
large number. And we are the country's largest holder of these
rights. So this, obviously, is something we know how to do and
we know the process. In fact, my colleague next to me is one of
our landlords, one of the landlords with whom we have
successful negotiated such rights, Charles Smith. And we find
that it is possible to reach agreement over and over with
landlords in how we do what we do.
But the chief impediment to extending this network even
more rapidly to many more buildings is really the difficulty of
obtaining access rights to the vast number of buildings that
are out there. There are 750,000 commercial office buildings
alone in the United States of America. There are literally
scores more multiple dwelling units. In order to get to each
and every one of those buildings, one negotiation at a time,
taking 9 to 24 months to do it, means we will wait decades for
the extension of the broad-band network to people who happen to
be unfortunate enough to be in multiple tenant environments.
And I don't think that is what any of use want to see happen.
So I would say that the key problem that we have today is
an enormous job which, if we must do it one negotiation at a
time, will be impossible to do in a reasonable timeframe for
our country. And so, as a result, this is the single most
important impediment to actually realizing the promise of the
Telecom Act. This is the unfulfilled promise of the Act.
Now the building owners and managers really, I think, see
it very much our way when you try to get to the bottom line of
this. In fact, they have Ten Commandments brochure, which we
have attached to our testimony, which talks about how to deal
with Telecom providers.
And the No. 2 commandment, which certainly I wouldn't
disagree with, is ``Don't discriminate among telecom
providers.'' This is not a bad idea. Obviously, it is a good
idea. The problem is in the marketplace, discrimination does
exist. Landlords do not understand this issue. When they are
forced, they take an awful long time to make up their minds
about this. As John has correctly said, there are even examples
where they can be attempting to use their rather special
position as the intermediary between us and the tenants in a
way that is really not right. It just doesn't work to the
tenants' benefit. They try to extract excess compensation or
special benefits.
Now I will say that that is really the exception rather
than the rule. The bigger problem is the time. The bigger
problem is the time. It takes a long time and there are so many
buildings that must be connected, that it will take us decades
to do what should be done and could be done in years if we have
a framework to operate under that is understood in advance and
which is agreed to between us and the building owners in
advance. And we would ask you to help us create that framework
because we have been unsuccessful in doing it ourselves.
In fact, it is kind of ironic that the U.S. Government has
asked another country to do what we are asking the U.S.
Government to do. I don't know if you are aware of this, but in
the World Trade Organization negotiations, the U.S. Government,
through the U.S. trade representative urged the Japanese
government to: ``Establish rules that facilitate access to
privately owned buildings, particularly multiple dwelling
units, to ensure that cable TV and new telecommunications
competitors can reach the same customers as the incumbent
carrier.'' So we are just asking the U.S. Government to do, for
its citizens, what it is asking the government of another
country to do for their citizens. Not an outrageous request, it
seems to me, especially given the importance of what we are
talking about to the future of our country. Now over the course
of a century, clearly gas, electric, telephone, water, cable,
virtually all kinds of utilities have been allowed into
multiple tenant buildings. This is not some paradigm shift,
some outrageous concept that is being invented here today for
the first time.
Without competitors, there is no competition. So, unless we
are given access to these buildings, we are clearly not going
to be able to compete with the incumbents. At this point,
without clear national guidelines, what we are going to find
is, even as the States move forward on this and, as you know,
two States, Connecticut and Texas, have very good access in
this regard what we find is that national building owners treat
you one way in one State and then, sometimes, if they are not
happy that you have used the legislation of one State, they
take it out on you in another State.
And this is not necessary because it is quite clear to me
that we can reach agreement. In fact, we do. We reach agreement
every day. And we did reach agreement in Florida recently on a
compromise bill with BOMA which I think is clearly an
indication that an agreement can be reached again.
Mr. Tauzin. But that bill did not pass last year.
Mr. Rouhana. It didn't. Time ran out. But I think, with a
little more time, it would have. And hopefully it will next
session if we don't have action here. You know, to ensure the
competition that we all want, we absolutely have to get to
multiple dwelling units. Too many individuals live in multiple
dwelling units, too many businesses are in multiple tenant
environments. We are going to have two classes in our society
in terms of access to the communications infrastructure unless
there is a way to remove this impediment. And I don't think we
want that. I don't think we need that. And I certainly don't
think that that is useful or the things that were envisioned in
the Telecom Act just passed.
So, with all that having been said, we need a framework. We
think it needs to come from you. And we will work as hard as we
can to reach yet another agreement with building owners that we
can all live with. Because I think that is quite doable and I
thank you for the opportunity to speak.
[The prepared statement of Wiliam J. Rouhana, Jr. follows:]
Prepared Statement of William J. Rouhana, Jr., Chairman and Chief
Executive Officer, Winstar Communications, Inc.
Good morning Mr. Chairman and members of Congress. My name is Bill
Rouhana. I am Chairman and Chief Executive Officer of WinStar
Communications, Inc. (``WinStar''). Thank you for the opportunity to
discuss with you today building access issues that are critical to
providing facilities-based competition to the incumbent local exchange
carriers (``ILECs'') and fulfilling the goals of the Telecommunications
Act of 1996.
I. Description of WinStar Communications, Inc.
WinStar is a nationwide competitive carrier with broadband FCC
licenses in the electromagnetic spectrum at the 28 and 38 GHz bands.
WinStar uses this spectrum to provide facilities-based fixed wireless
broadband communications services, including local and long distance,
data, voice and video services, as well as high speed Internet and
information services. WinStar currently operates in 31 markets,
including Baltimore, Boston, Cleveland, Columbus, Detroit, Houston, Los
Angeles, Minneapolis, New York City, San Francisco, and Washington,
D.C. WinStar plans to expand into 29 additional domestic markets by the
end of 2000 and 50 international markets by the end of 2004.
A key part of WinStar's local broadband networks is our Wireless
Fiber SM service, which is transmitted over microwave radio
spectrum, using small antennas approximately 12-24 inches. Our Wireless
Fiber SM service establishes connections between our
customer buildings and other buildings on our network. The quality and
capacity of our Wireless Fiber SM service meets or exceeds
that of typical fiber optic cable, and can be installed at a fraction
of the cost. Securing building access rights to install our antennas on
the roof, plus access to risers and conduits, telephone closets and
pre-existing inside wire, are crucial steps in the construction and
expansion of our local broadband networks. Charts outlining these
elements are attached.
II. Nondiscriminatory Access To Tenants In Multi-Tenant Environments Is
A Critical Component Of A Competitive Telecommunications
Market.
WinStar and the other competitive carriers owe their existence to
the 1996 Act. We actively use provisions in the 1996 Act, such as
Section 251, for interconnection with ILECs to successfully provide
competitive local exchange services to consumers. But interconnection
with ILECs, important as it is, is only one aspect of providing
service. Our ability to serve customers situated in multi-tenant
environments (``MTEs'') also depends upon our ability to reach them.
Since 1994, WinStar has successfully negotiated access rights to
4,800 buildings nationwide, making us the industry leader. However, the
chief impediment to extending our networks rapidly and bringing a
second communications pathway to millions of end users is the
difficulty of obtaining access rights to every building where we have a
potential customer. In the majority of cases, on average, it takes nine
months, but it can take as long as two years to negotiate access rights
with building owners. At this rate, it will take decades to obtain
access rights to all the buildings and customers that our networks are
designed to reach.
WinStar has experienced and is continuing to experience
difficulties in obtaining access rights to every building where it has
a potential customer. In reality, many building owners do not view
access by competitive carriers as a priority for their tenants; some
completely prohibit access to their tenants; many others impose
unreasonable conditions or rates that effectively preclude entry by
competitive carriers. As an example, one building owner on the East
Coast requested $50,000 upon signing of an access contract with WinStar
in addition to $1,200 per month. By contrast, the incumbent provider
rarely pays anything to the building owner for access to customers in
the building. For tenants, the 1996 Act thus far has failed to provide
the choices envisioned by Congress. This problem is not incidental;
approximately one-third of U.S. residential units are located in
MTEs.1
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\1\ United States Census Bureau, Census of Housing, ``Units in
Structure'' (1990 figures)(available at ). Indeed, MTEs are likely to be the first place that
residential facilities-based local exchange competition occurs.
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The Building Owners Management Association in its publication Wired
for Profit, provides Ten Commandments for its members to follow when
dealing with telecommunications service providers. The commandments are
attached to my testimony. You will note that BOMA's Second Commandment
states that building owners shall not discriminate among
telecommunications service providers. Nevertheless, in the marketplace,
a great many building owners do not and have never followed this
``commandment.'' Rather, they discriminate against competitive carriers
every day by not allowing us access to their tenants, or by allowing
such access on economically unreasonable terms - terms that are not
applied to any other utility that traditionally has enjoyed building
access privileges.
In Florida last month, as part of a larger telecommunications bill,
the competitive carrier community, along with BOMA and others in the
real estate community, agreed to legislative language ensuring non-
discriminatory building access. Although the overall bill ultimately
was not passed, building owners and competitive carriers did reach
agreement, as a group, on legislative language.2 Thus, no
one should tell you today that a legislative solution cannot be reached
and agreed to throughout the industry. In fact, the Florida experience
is evidence that the interests of competitive carriers and real estate
holders are complementary and that a win-win solution to the building
access issue can be reached.
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\2\ These parties included BOMA of Florida, the International
Council of Shopping Centers, the Florida Apartment Association, AT&T,
the Florida Coalition for Competition, the Association for Local
Telecommunications Services, e.spire Communications, Inc., NEXTLINK
Communications, Inc., Teligent, Inc., Time Warner Telecom, and WinStar.
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Indeed, the United States Government recently encouraged adoption
of such a solution in another country. In October 1998, the U.S.
Government stated that the Government of Japan should ``establish rules
that facilitate access to privately owned buildings, particularly
multi-dwelling units, to ensure that cable TV and new
telecommunications competitors can reach the same customers as the
incumbent carrier.'' 3 We simply ask the U.S. Government to
give the same instruction and care to the citizens of this country as
it has advocated for Japanese citizens.
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\3\ See ``Submission by the Government of the United States to the
Government of Japan Regarding Deregulation, Competition Policy, and
Transparency and Other Government Practices in Japan,'' at 10 (dated
Oct. 7, 1998)
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III. A Federal Solution For MTE Access Is Necessary And Appropriate.
A federal solution to building access issues is necessary to
promote facilities-based competition in the United States. This is
especially true because only two States--Connecticut and Texas--have
statutes that require landlords to grant nondiscriminatory access to
competitive carriers. Because some MTE owners and management companies
hold properties across various jurisdictions, no single State has the
capacity to address their unreasonable behavior in a comprehensive
fashion. Indeed, in some cases, if a carrier exercises its rights under
the building access laws of a particular State (e.g., in Texas),
nationwide property management companies will penalize the carrier in
other States without building access laws, thereby undermining the
effect of State-by-State resolution of the building access problem.
Moreover, the market often cannot be relied upon to secure timely
competitive telecommunications options for tenants in MTEs. Tenants
often lack the unilateral power to secure access to telecommunications
options. The argument that all a tenant need do is move to another
location misapprehends the economic realities of commercial tenancy.
The effect of long-term leases--typically found in commercial
environments--renders tenants without recourse to market
influences.4 Tenants should not be required to incur the
substantial costs of breaking a lease and moving to have competitive
choice. This is an unreasonable pre-condition to the enjoyment of the
competition envisioned by the 1996 Act.
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\4\ Cf. United States v. General Dynamics Corp., 415 U.S. 486, 501
(1974)(explaining that the ability of market participants to wield
competitive influence in the marketplace is reduced or eliminated by
their participation in long-term requirements contracts).
---------------------------------------------------------------------------
For these reasons, federal government intervention is necessary and
appropriate to ensure competitive carriers nondiscriminatory access to
MTEs. Such intervention will promote competition and the public
interest.
Intervention will not implicate the Takings Clause of the Fifth
Amendment. A nondiscriminatory access requirement is similar to the
Pole Attachment Act of 1978. The Supreme Court concluded that the Pole
Attachment Act of 1978 did not effect a taking because there was no
``required acquiescence.'' 5 That Act gave the FCC authority
to regulate rates; it did not force pole owners to enter into contracts
where there were none. Similarly, a nondiscriminatory access
requirement would not permit access to telecommunications providers in
the first instance, but would merely provide access to all
telecommunications providers once an MTE owner permits one
telecommunications provider to enter.
---------------------------------------------------------------------------
\5\ Federal Communications Comm'n v. Florida Power Corp., 480 U.S.
245 (1987).
---------------------------------------------------------------------------
This is comparable to the regulation at issue in Yee v. City of
Escondido, California.6 There, the Court found that a statue
may regulate the use of land by regulating the relationship between
landlord and tenant. A nondiscriminatory access requirement merely
regulates an already existing contractual relationship and does not
permit an initial invasion; 7 thus, a nondiscriminatory
requirement is not a ``takings.''
---------------------------------------------------------------------------
\6\ 503 U.S. 519 (1992).
\7\ Cf. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419
(1982).
---------------------------------------------------------------------------
Even if a federal nondiscriminatory requirement qualifies as a
Fifth Amendment takings, the government can avoid constitutional
challenge by providing for reasonable compensation. Loretto stands for
the proposition that even if a government regulation is a taking, it
can still survive constitutional scrutiny. There, the Supreme Court did
not invalidate the statute that it found to be a taking since a finding
of unconstitutionality required the absence of just compensation.
Indeed, the Court did not expressly rule upon the compensation provided
for in that particular case.8 A State court, on remand,
stated that $1.00 would most likely be adequate compensation in most
cases. For building access, the government can overcome any claims of
unconstitutionality through a requirement for reasonable compensation.
Certainly, as discussed below, the provision of reasonable compensation
for access is a condition competitive carriers are willing to
stipulate.
---------------------------------------------------------------------------
\8\ Id. at 441. (``Our holding today is very narrow . . . [O]ur
conclusion that Sec. 828 works a taking of a portion of appellant's
property does not presuppose that the fee which many landlords had
obtained from Teleprompter prior to the law's enactment is a proper
measure of the value of the property taken. The issue of the amount of
compensation that is due, on which we express no opinion, is a matter
for the state courts to consider on remand.''). Although there was no
subsequent judicial finding on the adequacy of the compensation (partly
because landlords did not apply to the Cable Commission for reasonable
compensation following the Supreme Court decision), a State court did
characterize it as ``altogether improbable [that it would be]
eventually judicially determined that the very minimal compensation
landlords stand to receive under the Executive Law Sec. 828
compensatory scheme (in most cases $1.00) does not amount to just
compensation . . .'' Loretto v. Group W Cable, 135 A.D.2d 444, 448, 522
N.Y.S.2d 543, 546 (1987). As Justice Blackmun noted in his dissent, the
practical effect of Loretto's case amounted to ``a large expenditure of
judicial resources on a constitutional claim of little moment.''
Loretto, 458 U.S. at 456, n.12.
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IV. The Government Must Mandate Nondiscriminatory Access to MTEs.
Clear guidelines governing building access will promote competitive
carriers' abilities to reach more consumers with less expensive,
superior, faster broadband services. This will, in turn, accomplish the
goals of the 1996 Act by promoting local competition. In Connecticut
and Texas, building access legislation has existed since 1994 and 1995
without significant legal challenge or a hue and cry that this approach
is unworkable. For the majority of this century, gas, electric,
telephone, and water lines have co-existed in virtually all of the
nation's multi-tenant buildings. Cable is now present. Buildings are
not being harmed in any way because of this access by utilities, and
they will not be harmed by competitive carriers' entry.
In order to secure competitive telecommunications service options
for tenants within MTEs, nondiscriminatory MTE access must encompass:
(1) rooftop access (for fixed wireless antennas); (2) inside wiring;
(3) riser cables (both horizontal and vertical); and, (4) telephone
closets and Network Interface Devices (``NIDs''). Access to these
facilities will ensure a technology-neutral capability for carriers to
provide telecommunications services to tenants in MTEs.
In furtherance of a competitive market--and in the related
interests of maximizing tenant choice--MTE access rules must adhere to
the principle of nondiscrimination. Telecommunications carriers should
compete on the basis of service quality and rates and should not
succeed or fail in the market because of discrimination. The terms,
conditions, and compensation for the installation of telecommunications
facilities in MTEs must not disadvantage one new entrant vis-a-vis
another new entrant. As a function of nondiscrimination, any tenant
access rules, recommendations, or conditions should be technologically
neutral. Services are and will continue to be offered using a variety
of technologies. Discriminatory rules or recommendations that would
disadvantage a particular carrier or type of carrier will, by
necessity, reduce the choices available to MTE tenants. Therefore, for
purposes of telecommunications competition and maximum tenant choice,
Congress should work with the FCC to ensure nondiscriminatory access to
MTEs among telecommunications carriers.
Additional conditions governing telecommunications carrier access
to MTEs should include the following:
Carrier assumption of installation and damage costs:
Installing carriers must assume the costs of installation as
well as the responsibility for repairs and payments for damages
to MTEs. Although indemnity provisions are also warranted, they
can entail the expense and delay of seeking judicial
resolution. MTE owners and the tenants occupying their MTEs
would be better served by a presumption that the cost of any
repairs for damages caused by facility installation should be
assumed by the installing carrier.
No customer prerequisite for access: MTE owners should not be
permitted to require the presence of customers within the MTE
as a condition of telecommunications carrier access. Carriers
must be permitted to wire a structure prior to seeking
customers within it. Otherwise, the delays involved in
providing service caused by the need to wire an MTE will
operate as a strong disincentive to choosing a competitive
provider of telecommunications service and will cause needless
delay in the time that a customer can expect to receive
service.
No exclusivity: MTE owners should be prohibited from granting
exclusive telecommunications carrier access to a building.
Exclusivity contravenes the choice that tenants should have
under the 1996 Act and restricts what could otherwise be a
competitive market for telecommunications service. The
reformation of long-term contracts to eliminate exclusivity
provisions when requested by the MTE owner, a
telecommunications carrier, or a tenant within the MTE, must be
permitted.
No charges to tenants for exercising choice: Under no
circumstances should an MTE owner or manager be permitted to
penalize or charge a tenant for requesting or receiving access
to the service of that tenant's telecommunications carrier of
choice.
Both commercial and residential MTEs should be included within
a nondiscriminatory MTE access requirement. As a policy matter,
both commercial and residential telecommunications consumers
should be permitted to experience the benefits of competition
envisioned by the 1996 Act. As a practical matter, in many
urban areas, it is not uncommon for one structure to
accommodate both commercial and residential tenants, making
enforcement of access distinctions between the two types of
structures difficult.
Reasonable accommodation of space limitations: As an economic
matter, space limitations most likely will not be an issue in
practice. The costs attending the installation of
telecommunications facilities within an MTE dictate that the
endeavor will not be undertaken if consumer demand within the
MTE is insufficient to recoup those costs. Logically, the
number of carriers seeking to install facilities within an MTE
will be limited by the number of services to which potential
tenant customers will subscribe. Nevertheless, in the unlikely
event that space limitations become a problem, it is
appropriate to address them on a case-by-case basis in a
nondiscriminatory manner. Available remedies include limits on
the time that carriers may reserve unused space within a
building and requirements that carriers share certain
facilities.
Congress need not establish rates or rate formulae for access.
However, it can describe rate structures that are presumed reasonable
or unreasonable by adopting a set of presumptions. In this manner, it
will eliminate a market failure--the inequality of bargaining
positions--derived from the MTE owner's/manager's monopoly status. This
method allows parties to negotiate specific rates within parameters
already deemed reasonable. Of course, parties should be free to
negotiate mutually acceptable terms that vary from the model.
Examples of reasonable parameters include the following:
Rates should not be based on revenues. MTE owners' imposition
of revenue sharing on a telecommunications carrier is per se
unreasonable because it does not approximate cost-based pricing
and suggests the extraction of monopoly rents.9 The
surplus benefits of telecommunications competition are more
appropriately directed to consumers. Revenue sharing should be
permitted as a voluntary arrangement to which carriers and
landlords can mutually agree (i.e., in exchange for the
landlord marketing the carrier's services within the building
as a ``preferred provider,'' but not in such a manner so as to
preclude other carriers from entering into or serving the
building).
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\9\ The Texas Public Utility Commission's building access
Enforcement Policy Paper notes that ``[c]ompensation mechanisms that
are based on the number of tenants or revenues are not reasonable
because these arrangements have the potential to hamper market entry
and discriminate against more efficient telecommunications utilities.
By equating the cost of access to the number of tenants served or the
revenues generated by the utility in serving the building's tenants,
the property owner effectively discriminates against the
telecommunications utility with more customers or greater revenue by
causing the utility to pay more than a less efficient provider for the
same amount of space.'' Informal Dispute Resolution: Rights of
Telecommunications Utilities and Property Owners Under PURA Building
Access Provisions, Project No. 18000, Enforcement Policy Memorandum
from Ann M. Coffin and Bill Magness, Office of Customer Protection, to
Chairman Wood and Commissioners Walsh and Curran at 6 (Oct. 29, 1997).
---------------------------------------------------------------------------
Rates must be nondiscriminatory. Rates for access to MTEs
should be assessed on a nondiscriminatory basis. For example,
if the incumbent LEC does not pay for access to an MTE, neither
should other telecommunications carriers.
Rates must be related to costs. MTE access rates must be
related to the cost of access and must not be inflated by the
MTE owner so as to render competitive telecommunications
service within an MTE an uneconomic enterprise for more than
one carrier.
WinStar is not seeking access to MTEs that is not already provided
to ILECs. Nor is it seeking access without providing just and
reasonable compensation to building owners for access where
compensation is appropriate. WinStar is willing to assume
responsibility for any repairs due to damages caused to a building
during installation or operation. The use of fixed wireless technology
can be, and is being, safely managed. Therefore, it is not a
disadvantage for building owners to provide nondiscriminatory access to
competitors, such as WinStar.
Mr. Tauzin. And now Mr. Brent Bitz, Executive VP, Charles
E. Smith Commercial Realty L.P. from Washington, DC, New York
Avenue here in the city. Mr. Bitz, you have been complimented
as a building owner who cooperates. Let us hear your story.
STATEMENT OF BRENT W. BITZ
Good morning, Chairman Tauzin, Mr. Markey. My name is Brent
Bitz. I am executive vice president with Charles E. Smith
Commercial Realty. Charles E. Smith Commercial Realty owns and
manages over 24 million square feet of commercial office space,
primarily located in the Mid-Atlantic region and we have some
over 2,000 tenants in our portfolio. Today I have the privilege
of speaking on behalf of the Building Owners and Managers
Association, which represents some 17,000 owners and property
management professionals throughout this country and other
nations.
Mr. Chairman, BOMA International and its members need and I
believe the record will properly document that we have
supported a competitive telecommunications marketplace. Such a
marketplace is important not only to ourselves but, more
importantly, important to our tenant which, of course, is the
lifeblood of our industry. Mr. Chairman, I hope to impart two
simple but important messages here today. Firstly, that
telecommunications competition is alive and thriving in office
buildings and, second, that the marketplace is currently
working extremely well; that government action will only hurt
competition, but not advance it.
And if any of you were reading the Wall Street Journal over
the last day or two, you may have noticed that some of the
companies represented in this room had announced extremely
ambulant revenue growth, extremely attractive numbers, numbers
that anyone in my industry would die to have. And I think that
should be taken into account, how rapidly this industry has
grown, in cooperation with our industry.
Studies have documented that, for an office building to
remain competitive in today's marketplace, it must offer
tenants not only a wide variety of telecommunication services,
but also a wide variety of service providers. Such a
marketplace does not need government-mandated access.
Telecommunications competition is very alive and very thriving.
As my colleagues have already pointed out, hundreds of license
agreements, indeed, thousands of license agreements are being
signed every year between our industry and the
telecommunications industry. These are negotiated in a free,
competitive environment at arm's length. We don't need the
government to assist us in that process.
While our tenants, we believe, can adequately rely on the
marketplace to ensure that their interests are well protected,
building owners, if it need be, will look to the U.S.
Constitution for our defence. But that is not what I wish to
speak about today, because that is adequately documented in our
written submission which you have in front of you.
We at the Charles E. Smith Commercial Realty Company are a
testament to the competitive marketplace. We ensure that office
consumers have not only the widest array of services, but also
a wide array of service providers. And my colleagues here have
already complimented our company on our ability to do that. We
did that of our own competitive interest, as you would expect a
company to do. We have eight local exchange carriers in our 102
buildings and this is only our company in the Mid-Atlantic
region. We have over 2,000 tenants and I am not aware of 1
single instance where any tenant has had a problem in its
telecommunications services as a result of its occupancy in our
buildings.
We have every conceivable type of tenant from small
entrepreneurs through major professional services firms and
very large government agencies. And I am very satisfied that
our company has been able to meet their existing
telecommunications needs by cooperative effort between
ourselves, them, and the telecommunications industry. In any
case where we were not able to meet a telecommunications need
from a tenant, we certainly were very happy to allow them and,
indeed, encouraged them to deal directly with the
telecommunications industry. Because the amount of revenues
that our industry sees out of this issue is very small relative
to the rental issue which is the lifeblood of our business.
I was hearing thousands of dollars mentioned just a moment
ago. I must be a very poor negotiator because I am only getting
hundreds. I will have to take some tips.
Any government action or mandate in this area, in our
opinion, would interrupt the free negotiation and flow between
companies. Moreover, the FCC, we believe, in its most recent
broad-band deployment docket, found there was no lack of broad-
band distribution, no lack of competitive choice being offered
in office buildings. We are at a loss to understand how the
proponents of forced building entry could ask this committee or
indeed this Congress to inject a static regulatory regime at
the intersection of the business and telecommunications
revolution.
If there is an issue that has arisen with the tenants in
the Charles E. Smith buildings between ourselves and the
telecommunications issue, it is where the telecommunications
industry has indeed turned us down because not all of our
buildings nor all of our tenants are viewed by the industry as
being a desirable business investment from their perspective.
Now as a businessman, I can understand it and, indeed, I can
accept it even if I am not happy. But what I can't accept, Mr.
Chairman, is their desire to have a one-sided request for
access. Such a benefit for them with no balancing obligation
for service, in our opinion, would be unacceptable.
Since neither tenants nor building owners have the right to
demand service from a provider, we do not think that the
provider should be given the right of forced access. The
telecommunications industry cannot have it both ways. They
cannot cherry pick the best business opportunities in major
buildings and desirable tenants throughout this country and
then have no obligation to serve the other thousands upon
thousands of smaller buildings that are located throughout this
country of ours. Even with the difficulties that I have told
you about, it is our opinion that commercial tenants can well
rely upon the existing competitive environment to ensure that
their telecommunications service needs are being taken care of.
And, in closing, Mr. Chairman, we can understand the CLEC's
industry desire for a guaranteed marketplace. In fact, some of
my colleagues were hoping that I would be able to arrange with
you today a bill for a 100 percent occupancy requirement. But
that is not a reasonable request.
Mr. Tauzin. What the heck.
Mr. Bitz. But as this committee and the Congress has stated
before, guaranteeing business success is not the role of
government. BOMA would like to suggest that the CLEC industry,
very much like Mr. Windhausen has mentioned, that instead of
spending our time fending off forced building entry
legislation, both at the Federal and the State level, that we
join together in a mutual education effort to bring those
perhaps less progressive members of our industry forward to
understand the benefits to both their companies and their
tenants of the competitive environment that we also agree is so
important to our national interests.
Thank you very much, Mr. Chairman. I would be happy to
answer any questions.
[The prepared statement of Brent W. Bitz follows:]
Prepared Statement of Brent W. Bitz, Executive Vice President, Charles
E. Smith Commercial Realty L.P.
introduction
Chairman Tauzin, Mr. Markey and members of the Subcommittee, good
morning, I am Brent Bitz. Executive Vice President of Charles E. Smith
Commercial Realty L.P. The Charles E. Smith Company owns and manages
over 25 million square feet of property. We serve in excess of 2,000
tenants and we employ more than 1150 individuals, either directly or
through contracts at our properties.
background
Today I have the privilege of testifying on behalf of the over
17,000 property management professionals that comprise the Building
Owners and Managers Association International.\1\ At BOMA, I currently
serve as a senior member of the association's National Advisory Council
and was appointed to serve as lead representative in meetings earlier
this spring that we had with the C-LEC industry represented by
Teligent.
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\1\ Founded in 1907, the Building Owners and Managers Association
(BOMA) International is a dynamic federation of 94 local associations
whose members own or manage over 8.5 billion square feet of downtown
and suburban commercial properties and facilities in North America. The
membership--composed of building owners, managers, developers, leasing
professionals, facility managers, asset managers and the providers of
goods and services--collectively represents all facets of the
commercial real estate industry.
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The record will document BOMA International and its members need--
and have supported--a competitive telecommunications marketplace. Such
a marketplace is important to our tenants and is, therefore, vital to
us.
The BOMA membership, however, has consistently identified
opposition to any governmental effort to mandate access to our
properties as a leading advocacy issue. BOMA feels forced building
access is unnecessary, unmanageable and unconstitutional.
office buildings need robust telecommunications offerings
Just as the telecommunications industry has been revolutionized,
and ultimately improved, by competition, our industry has recognized
the challenges posed by an increase in customer sophistication and
customer demands for new telecommunications services. Indeed, these
demands will be (and already are) providing opportunities for our
businesses to compete, one against the other, for market share. Our
members aggressively market the characteristics of their properties,
including telecommunications services.\2\
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\2\ Building owners and managers of America's real estate
increasingly are focused on improving wire management within buildings
and targeting investments in what is sometimes called ``smart
building'' technology. The highly competitive office market demands no
less of owners, who by nature are inclined to satisfy their tenants by
providing ample access to the expansive array of telecommunications
products and services needed to facilitate information flows.
In acknowledgment of this investment prerequisite, a number of real
estate owners have even devised systems on a building-specific basis
that provide cabling (copper or fiber optic) that is accessible to any
and all telecommunications providers; this approach is one of the most
cost-effective means of ensuring that tenants have the widest possible
access to the ever-proliferating number of service providers.
For example, the 31-story, 400,000-square-foot office building
located 55 Broad Street in lower Manhattan used to be a ``hollow
headstone for the Eighties.'' It was vacant for more than five years
following the bankruptcy of its anchor tenant in the late 1980s. New
York City's moribund downtown real estate market left little hope that
the building could ever return to life again. That was before it was
retrofitted by its owner (at a cost of more than 15 million dollars)
with fiber optic and high-speed copper wire as well as ISDN, T-1, and
fractional T-1 lines to enable Internet, LAN and WAN connectivity;
voice, video and data transmissions; and satellite accessibility. The
building owner suggests that prospective tenants need only ``plug in,''
and this message has been getting the attention of potential tenants as
far away as the West Coast.
Of course, many other building owners prefer not to get into the
business of owning or operating telecommunications facilities. But this
does not mean they ignore the occupants' needs. The simple facts are
that commercial tenants have considerable leverage when negotiating
lease terms and that no commercial building owner will refuse a
technically and financially feasible request from a tenant that
conforms to the owner's business plan for the property. Even during the
lease term, it is important for building owners and managers to keep
their customers satisfied. Happy tenants are more likely to renew their
leases and less likely to break them--and building operators have a
strong incentive to reduce the administrative costs and disruption that
accompany high turnover rates.
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BOMA, in cooperation with the Urban Land Institute, just released a
study entitled, ``What Office Tenant's Want.'' One portion of the study
asked tenants to rank their top three intelligent building features and
to indicate whether they would be willing to pay additional rent to
have such a missing amenity.
From the array of 13 intelligent building features, survey
respondents designated ``Built in Wiring for Internet Access'' as the
number one required feature and placed in an almost statistical tie for
positions two through five:
Wiring for high speed networks,
Conduits for cabling,
Fiber optics capability,
HVAC systems.
Seven out of ten survey respondents answered ``yes'' when asked if
they would be willing to pay additional rent to have one of these
intelligent building features added to their building.
number of providers almost as important as numbers of services
In addition to the BOMA/ULI study, numerous other studies have
documented that for an office building to remain competitive in today's
marketplace, it must offer tenants not only a wide array of
telecommunications services, but also an array of choices in
telecommunications service providers. Because the commercial real
estate business is fiercely competitive, we must provide our tenants
with access to the latest telecommunications services or they will go
elsewhere, and our buildings' operations will cease.
marketplace is working.
In short, the marketplace does not need government-mandated access;
telecommunications competition is alive and thriving in office
buildings. Hundreds of license agreements are being signed by office
building owners and telecommunications service providers every day.
These transactions are negotiated at arm's length and in a free market
environment.
charles e. smith experience
We at the Charles E. Smith Commercial Realty L.P. are a testament
to the competitive marketplace. We ensure that office consumers have
access not only to the widest array of telecommunications services, but
also have access to numerous service providers. At the Charles E. Smith
Company today, we have eight alternative local exchange carriers
providing service to our portfolio of 102 buildings. As I mentioned
earlier, we have approximately 2,000 tenants in the buildings, which we
either own or manage. I am not aware of a single incident where a
tenant was unable to meet its telecommunications needs because of
issues relating to its occupancy in one of our buildings. We have every
conceivable type of tenant in our portfolio. Our tenants range from
small entrepreneurs through sophisticated professional service firms
and major government agencies. I am completely satisfied that the
existing telecommunications service environment adequately meets my
tenants' needs. In every case, if we were not able to meet a tenant's
requirements through existing telecommunications service arrangements,
they were able to deal with these service providers on a direct basis.
At no time would we ever interfere with a tenant's desire to obtain
improved service in this vital business area.
Mr. Chairman, every one of those license agreements were executed
because they made business sense to all parties involved. Any
government action or mandate would disrupt that environment. Moreover,
the FCC, in its most recent broadband deployment docket, found no lack
of broadband distribution nor competitive choice being offered in
office buildings. As an industry, we are; therefore, at a loss to
understand how the proponents of forced building entry could ask this
Committee and this Congress to interject a static regulatory regime at
the intersection of the business and the telecommunications revolution.
reciprocal requirements
As a provider of commercial office space, one of the greatest
challenges we have faced are instances where telecommunications service
providers have elected not to do business with us or with the tenants
in our buildings. In each case, the reason the C-LEC elected to pass on
our business was that we did not represent an attractive-enough
investment opportunity. As a businessman, while I am not happy with
their decision I can accept it.
What I can not accept is the telecommunications industry's one-
sided request for forced access, which benefits them with no balancing
obligations for service. Since neither tenants nor building owners have
the right to demand service from a provider, we do not think that the
providers ought to be given the right to forced access. The
telecommunications industry cannot have it both ways. They can not
cherry pick the best opportunities for business and then unilaterally
ignore the rest of our industry's tenants across this nation.
unregulated environment works best
We believe that an unregulated environment works best. Commercial
tenants may rely upon market forces to ensure their access to not only
a wide array of telecommunications services, but also a wide array of
telecommunication service providers.
constitutional rights
And while tenants may rely upon the marketplace to ensure their
rights are protected, building owners will look to the U.S.
Constitution for our defense. But rather than going on at length about
the constitutional protections we enjoy \3\ and a discussion of how a
one-size-fits-all regulatory scheme for access is unmanageable, I have
reduced those comments to paper as Appendix One and Two, respectively.
I would like to conclude my testimony with a call for a cooperative
relationship with the competitive local exchange industry.
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\3\ Attached to my testimony as Appendix One, is a restatement of
the constitutional history on telecommunications wire and the leading
case, Loretto v. TelePrompTer Manhattan, 458 U.S. 420 (1982) and a
restatement of BOMA's filing with the FCC on why a regulatory response
with compensation is unmanageable.
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cooperation & education
Mr. Chairman, we can understand the C-LEC industry's desire of a
guaranteed marketplace. Some of my colleagues were hoping that perhaps
we could have a 100 percent occupancy law passed. But as this Committee
and this Congress have stated before: guaranteeing business success is
not the role of government.
The C-LEC industry claims that it is being treated unfairly or
differently from the incumbent local exchange carriers. If that is
true, it is a transition issue. One that will work itself out as more
and more building owners learn they may demand the same of incumbent
providers that which they are demanding of competitive providers.
BOMA would suggest the C-LEC industry, rather than force us to
spend our time fending off forced building entry legislation, join us
in an educational effort--an education effort to inform building owners
of their right to require incumbent providers to:
Obtain their permission for access, and
Comply with the same rules and regulations for gaining access
to any given property that we are today asking of C-LECs.
BOMA is currently engaged in this education program. We have
produced ``Wired for Profit'' which, in layman's language explains the
world of competitive telecommunications services and then offers model
license agreements to govern access to buildings. These license
agreements do not discriminate between incumbent and competitive
providers. We look forward to the day when all access to our buildings
by any telecommunications service provider is governed by such a
license.
Thank you for the opportunity to testify, and I welcome your
questions.
Appendix One
``forced building entry is unconstitutional''
Any attempt by Congress to directly, or indirectly by means of
Federal Communications Commission actions, mandate access to multiple-
unit buildings by telecommunications providers--whether under the guise
of defining demarcation points or otherwise--would lead to a taking of
private property under the Fifth Amendment.
The U.S. Supreme Court has held in Loretto v. TelePrompTer
Manhattan, 458 U.S. 420 (1982), that any regulation allowing a
telecommunications provider to emplace its cables in, on, or over a
private multi-tenant building is a governmental taking and would
violate the owners' rights under the Fifth Amendment. Involuntary
emplacement of wires would be ``taking'' within the meaning of the
Fifth Amendment subject to the requirement for compensation.\4\
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\4\ As the Court said in Ramirez de Arellano v. Weinberger, 240
U.S. App. D.C. 363, 387 n.95, 745 F.2d 1500, 1524 n.95 (1984) (en banc)
vacated on other grounds, 471 U.S. 1113 (1985), ``the fundamental first
question of constitutional right to take cannot be evaded by offering
`just compensation'.''
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For the Congress or the Federal Communications Commission to
mandate access for telecommunications providers' cables in and on
private buildings would be just as unconstitutional as the New York
statute that the Supreme Court held to be unconstitutional because it
permitted TelePrompTer to run its coaxial cables in and on Mrs.
Loretto's apartment building in New York City. See Loretto v.
TelePrompTer Manhattan CATV Corp., 458 U.S. 419 (1982).
A. Congressional or Commission-mandated Wiring of Private Buildings
Would be an Impermissible ``Permanent Physical Occupation.''
The physical requirement that a landlord permit a third party to
occupy space on the landlord's premises and to attach wires to the
building plainly crosses that clear, bright line between permissible
regulation and impermissible takings.
Where the ``character of the governmental action,'' the Supreme
Court has said, ``is a permanent physical occupation of property, our
cases uniformly have found a taking to the extent of the occupation,
without regard to whether the action achieves an important public
benefit or has only minimal economic impact on the owner.'' Loretto,
supra, at 434-35 (emphasis supplied), citing Penn Central
Transportation Co. v. New York City, 438 U.S. 104, 124 (1978).\5\
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\5\ In Penn Central the Supreme Court had observed that there was
no ``set formula'' for determining whether an economic taking had
occurred and that the Court must engage in ``essentially ad hoc,
factual inquiries'' looking to factors including the economic impact
and the character of the government action. No such detailed inquiry is
required where there is a permanent physical occupation. Id. at 426.
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B. Forced Carrier Access Satisfies the Legal Test for an
Unconstitutional Taking.
No de minimis test validates physical takings. The size of the
affected area is constitutionally irrelevant. In Loretto, supra, at
436-37, the Court reaffirmed that the ``the rights of private property
cannot be made to depend on the size of the area permanently
occupied.'' Id. at 436-37.
The access contemplated by Congress is legally indistinguishable
from the method or use of intrusion in Loretto, where the Court found a
``permanent physical occupation'' of the property where the
installation involved a direct physical attachment of plates, boxes,
wires, bolts and screws to the building, completely occupying space
immediately above and upon the roof and along the buildings' exterior
wall. Id. at 438.
Loretto settles the issue that government-mandated access to a
private property by third parties for the installation of
telecommunication wires and hardware constitutes a taking, regardless
of the asserted public interest, the size of the affected area, or the
uses of the hardware. In takings there is no constitutional distinction
between state regulation (Loretto) and federal regulation (FCC proposed
rulemaking).
C. ``Just Compensation'' for the Taking Requires Resort to Market
Pricing.
The takings objection to mandated access to private property cannot
be avoided by requiring the telecommunications service provider
benefited thereby to make a nominal payment to the owner for access. In
Loretto the New York statute at issue provided for a one-dollar fee
payable to the landlord for damage to the property. The Court concluded
that the legislature's assignment of damages equal to one dollar did
not constitute the ``just compensation'' required by the constitution.
While Loretto does not address the question of whether the
invalidity of a taking is avoided by payment from a third party, other
courts have held that takings to benefit a private telecommunications
provider are subject to heightened scrutiny. See Lansing v. Edward Rose
Associates, 442 Mich. 626, 639, 502 N.W. 2d 638, 645 (1993). AMTRAK's
condemnation and conveyance of the Boston & Maine's Connecticut River
railroad tracks to the Central of Vermont Railroad after payment of
compensation was narrowly upheld on the technicality that the
condemnation was under the adjudicatory oversight of the Interstate
Commerce Commission. Nat'l R.R. Passenger Corp. v. Boston & Maine, 503
U.S. 407, 112 S.Ct. at 1403-04 (l992). That degree of governmental
involvement is not contemplated here.
The practical point is this, viz., that government cannot prescribe
a nominal amount as compensation for access--the affected property
owner is constitutionally entitled to compensation measured against
fair market value. See U.S. v. Commodities Trading Corp., 339 U.S. 121,
126 (1950) (current market value); Bell Atlantic, supra, at 337 n.3, 24
F.3d at 1445 n.3. Is ascertainment of the disputed market values of
differing impingements on large numbers of highly diverse commercial
and residential properties something that either the Commission or the
courts are ready to handle?
Congress specifically has previously considered a mandatory access
provision and the provision was deliberately omitted in the final
version of the Cable Act to avoid a taking. There was not then, nor is
there now we believe any Congressional intent to support takings of
private property. Id. at 156-57, citing 130 Cong. Rec. H10444 (daily
ed. Oct. 1, 1984) (floor statement of Cong. Fields).
In Century SW Cable TV v. CIIF Associates, 33 F.3d 1068 (1994), the
Ninth Circuit, following Woolley, reversed the trial court's
application of Section 621(a)(2), because there was no evidence of an
express dedication. The court found that installation of cable to
individual units constituted a physical invasion under Loretto that was
not authorized by the statute. Accord, TCI of North Dakota, v. Shriock
Holding Co., 11 F.3d 812 (8th Cir. 1993).
The kind of forced building access contemplated here would largely
replicate the provisions for forced building access in S. 1822 in the
103d Congress for forced building access, which died on the floor of
the Senate in the fall of 1994. Such provisions would not have been
needed if the Commission already had that authority.
Appendix Two
``forced access is unnecessary and unmanageable''
There are sound and persuasive reasons why the Congress should not
attempt to regulate access to private property. Governmental regulation
would be unmanageable and it would interfere with effective on-the-spot
management.B.Commission Regulation is Undesirable Because it Would
Interfere with Effective On-the-Spot Management.
Not only is government intervention unnecessary, since property
owners are already taking steps to ensure that telecommunications
service providers can serve their tenants and residents, but it is
undesirable. Such intervention could have the unintended effect of
interfering with effective, on-the-spot property management. Building
owners and managers have a great many responsibilities that can only be
met if their rights are preserved, including compliance with safety
codes; ensuring the security of tenants, residents and visitors;
coordination among tenants and service providers; and managing limited
physical space. Needless regulation will not only harm our members'
interests, but those of tenants, residents, and the public at large as
well.
1. Safety considerations; code compliance.
Building owners are the frontline in the enforcement of fire and
safety codes, but they cannot ensure compliance with code requirements
if they cannot control who does what work in their buildings, or when
and where they do it. For government to limit their control would
unfairly increase the industry's exposure to liability and would
adversely affect public safety.
For example, building and fire codes require that certain elements
of a building, including walls, floors and shafts, provide specified
levels of fire resistance based on a variety of factors, including type
of construction, occupancy classification, and building height and
area. In addition, areas of greater hazard (such as storage rooms) and
critical portions of the egress system (such as exit access corridors
and exit stairways) must meet higher fire resistance standards than
other portions of a building. The required level of fire-resistance
typically ranges between twenty minutes and four hours, depending on
the specific application. These ``fire resistance assemblies'' must be
tested and shown to be capable of resisting the passage of floor and
smoke for the specified time.
Over the past 10 years, penetrations of fire-resistance assemblies
have been a matter of great concern, as such breaches have been shown
to be a frequent contributor to the spreading of smoke and fire during
incidents. The problem arises because fire-resistance assemblies are
routinely penetrated by a wide variety of materials, such as pipes,
conduits, cables, wires and ducts. An entire industry has been built
around the wide variety of approaches that must be used to maintain the
required rating at a penetration. It is not a simple issue of just
filling up the hole--the level of fire resistance required, the type of
materials of which the assembly is constructed, the specific size and
type of material penetrating the assembly, and the size of the space
between the penetrating item and the assembly are all factors in
determining the appropriate fire-stopping method.
Mandating access to buildings, without adequate supervision and
control by a building's owner or manager, would allow people unfamiliar
with a building the opportunity to significantly compromise the
integrity of fire-resistance-rated assemblies. Telecommunications
service personnel are not trained to recognize the importance of such
elements in a building's construction, much less to accurately assess
the types of assemblies they are penetrating or assuming any
responsibility as to code compliance. Thus, while perfectly competent
to drill holes and run wire, they would be unable to determine the
appropriate hourly rating of a particular wall, floor or shaft, and
would not know how to properly fill any resulting holes or recognize
those areas that they should not penetrate at all.
In fact, it is unlikely that a person punching holes and pulling
cables would even consider patching the holes after they pulled their
cables through. Many of these penetrations are made above suspended
ceilings or in equipment rooms where there is little or no aesthetic
concern.
Maintaining the integrity of fire-resistance-rated assemblies is
already a challenge for building managers because of the large number
of people and different types of service providers that may be working
in a building. Nevertheless, currently a building operator can restrict
access to qualified companies and can seek recourse, by withholding
payment or denying future access, if the work is not done correctly. If
building operators were forced to allow unlimited access to alternative
service providers, or were prohibited from restricting such access, the
level of building fire safety could be significantly jeopardized. It is
essential that building owners and managers be able to continue to
ensure in the future that those personnel performing work in a building
do so in a manner that does not compromise other essential systems,
including fire protection features; this has not been a generic problem
in the past, where building owners and managers have retained control.
We emphasize that these are not merely theoretical dangers--we have
received reports of actual breaches of firewalls from our members. The
only way fire safety can be assured in the future is by allowing
building owners and managers to determine who is permitted to perform
work on their property.
The same applies to all other codes with which a building owner
must comply. See, e.g., Article 800 (Communications Circuits) of the
National Fire Protection Association's National Electrical Code (1993
ed.), specifying insulating characteristics, firestopping installation,
grounding clearances, proximity to other cables, and conduit and duct
fill ratios. Technicians of any single telecommunications service do
not have all the responsibilities of a building owner and cannot be
expected to meet those responsibilities. Yet the building owner is
ultimately responsible for any code violations. Congressional or
Commission interference in this area could thus have severe unintended
consequences for the public safety.
While the Commission presently requires telephone companies to
comply with local building and electrical codes, see Section
68.215(d)(4) of the rules, 47 C.F.R. Sec. 68.215(d)(4), it could not
practically enforce the codes, particularly where competing providers
would have unrestricted access to common space.
2. Occupant security.
Building operators are also concerned about the security of their
buildings and their tenants and residents, and in certain circumstances
may be found legally liable for failing to protect people in their
buildings. Telecommunications service providers, however, have no such
obligations. Service technicians may violate security policies by
leaving doors open or admitting unauthorized visitors; they may even
commit illegal or dangerous acts themselves. Of course, these
possibilities exist today, but at least building operators have the
right to take whatever steps they consider warranted. The commenting
associations' concern is that in requiring building operators to allow
any service provider physical access to a building, the Commission may
specifically grant--or be interpreted as granting--an uncontrolled
right of access by service personnel.
It is simply impracticable for the Commission to develop any set of
rules that will adequately address all the different situations that
arise every day in hundreds of thousands of building across the
country. Consequently, any maintenance and installation activities must
be conducted within the rules established by a building's manager, and
the manager must have the ability to supervise those activities. Given
the public's justifiable concerns about personal safety, building
operators simply cannot allow service personnel to go anywhere they
please without the operator's knowledge, and the Commission should
respect that authority.
3. Effective coordination of occupants' needs.
A building owner must have control over the space occupied by
telephone lines and facilities, especially in a multi-occupant
building, because only the landlord can coordinate the conflicting
needs of multiple tenants or residents and multiple service providers.
Although this has traditionally been more of an issue for commercial
properties, such coordination may become increasingly important in the
residential area as well. Large-scale changes in society--everything
from increased telecommuting to implementation of the new
telecommunications law--are leading to a proliferation of services,
service providers, and residential telecommunications needs. With such
changes, the role of the landlord or manager and the importance of
preserving control over riser and conduit space is likely to grow.
Building owners must retain maximum flexibility over the control of
inside wiring of all kinds. If a building operator chooses to retain
complete ownership and control over its property--including inside
wiring--it should have that right. Presumably, if this proves to be a
good business practice, the market will reward building owners who
decide to retain control over coordinating such issues.
On the other hand, other building operators may find that their
tenants' needs require less hands-on management and control by the
operator. There may be a market for buildings in which tenants and
service providers work these issues out themselves. If there is,
property owners will respond by letting the market grow on its own,
simply because it is in their interests to serve their tenants as
efficiently as possible.
Indeed, it is likely that there is demand for both approaches to
managing a building. If so, any governmental action is likely to
distort the market and interfere with the efficient operation of the
real estate industry. Thus, to serve tenants' needs most effectively,
building owners should be allowed to make their own decisions regarding
the most efficient way to coordinate the activities of multiple service
providers and tenants.
4. Effective management of property.
A building has a finite amount of physical space in which
telecommunications facilities can be installed. Even if that space can
be expanded, it cannot be expanded beyond certain limits, and it can
certainly not be expanded without significant expense. Installation and
maintenance of such facilities involves disruptions in the activities
of tenants and residents and damage to the physical fabric of a
building. Telecommunications service providers have little incentive to
consider such factors because they will not be responsible for any ill
effects.
As with the discussion of fire and building codes above,
telecommunications service technicians are also unlikely to take
adequate steps to correct all the damage they may cause in the course
of their work. They are paid to provide telecommunications service, and
as long as the tenant has that service they are likely to see their job
as done. Since they do not work for the building operator, he has
little control over their activities. If building management cannot
take reasonable steps in that regard, building operators and tenants
will suffer financial losses and increased disruption of their
activities.
In one instance reported by a member, a cable operator installed an
outlet at the request of a tenant but without notifying building
management. To do so, the operator drilled a hole in newly-installed
vinyl siding and strung the cable across the front of the building. Not
only was this unsightly (affecting the marketability of the property),
but the hole in the siding created a structural defect that allowed
water to collect behind the siding. The building owner was able to
resolve the matter under the terms of its carefully-negotiated
agreement with the operator. If the Congress grants operators the right
of access, however, building owners may find that they cannot rely on
such agreements any longer.
5. Physical and electrical interference between competing providers.
Allowing a large number of competing providers access to a building
raises the concern that service providers may damage the facilities of
tenants and of other providers in the course of installation and
maintenance. It also poses a significant threat to the quality of
signals carried by wiring within the building. Competitive pressures
may induce service providers to ignore shielding and signal leakage
requirements, to the detriment of other service providers and tenants
in the building, or they may accidentally cut or abrade wiring
installed by other service providers or occupants.
The building operator is the only person with the incentive to
protect the interests of all occupants in a building. Individual
occupants are only concerned with the quality of their own service, and
service providers are only concerned with the quality of service
delivered to their own customers. Neither the Congress nor the
Commission can possibly police all of these issues effectively.
Consequently, building operators must retain a free hand to deal with
service providers as they see fit. If one company consistently performs
sloppy work that adversely affects others in the building, the building
owner should have the right to prohibit that company from serving the
building. Otherwise, the building owner will be unable to respond to
occupant complaints and will face the threat of lost revenue because of
matters over which it has little control.
Mr. Tauzin. Thank you, Mr. Bitz.
And, now, Mr. Andy Heatwole from Virginia Beach, Virginia.
Andy.
STATEMENT OF ANDREW HEATWOLE
Mr. Heatwole. Thank you, Mr. Chairman. Mr. Chairman, Mr.
Markey, members of the subcommittee. My name is Andy Heatwole.
I am speaking on behalf of the National Association of
Realtors, who represent nearly 730,000 realtors nationwide who
are involved in all aspects of the real estate business and
their affiliate, the Institute of Real Estate Management, whose
members manage 24 percent of the Nation's conventionally
financed apartments and 44 percent of the Nation's office
buildings. I am a realtor from Virginia Beach, Virginia. My
partners and I manage approximately 18,000 multi-family units
throughout Virginia and have built approximately 3,000 multi-
family. I am honored to speak before this committee today about
telecommunications access.
We recognize the changing and evolving telecommunications
industry and the need to promote competition in the
marketplace. Our customers, residents, and tenants demand new
and sophisticated telecommunications capabilities and such
services increase the marketability of our property.
Consequently, we have an incentive to establish policies that
promote the well-being of all residents. Mr. Bitz just alluded
to that. If we don't provide the product, our residents go
somewhere else, whether or not it is a commercial tenant or a
residential tenant.
However, we strongly oppose efforts, such as those being
discussed today, which would permit unrestricted access to
private property for the installation of telecommunications
services. We oppose mandatory access for a variety of reasons.
First, legitimate reasons exist for building owners and
managers to maintain control over access to building space.
Unrestricted access could prohibit owners and managers from
properly operating their properties. It would undermine their
ability to responsibly manage complex building systems in order
to ensure tenant safety.
I want to take a moment and read the grant of easement and
access rights from a telecommunications agreement that was
presented to us and if you would allow free and open access on
the same terms and conditions which is what Winstar asked for
in Virginia. Somebody signed this.
This is the easement you would be giving: ``The easement
extends throughout the premises both land and improvements
close in including raceways, common areas, equipment rooms,
equipment buildings, utility areas, and other spaces on, in,
and over the premises as reasonably necessary or useful for the
location, relocation, installation, maintenance repair,
upgrading, monitoring, operation, and removal of the
distribution system, subject to the limitations of this
agreement, on the location of the distribution system.
Permitter further agrees to grant blank free right of access,
ingress, and egress to and from the premises for marketing of
services at the premises, including door-to-door sales
activities and the placement of literature in the management
office located on the premises, subject to the limitations
contained in this agreement,'' which was approval of any of
their advertising.
``The terms of this agreement shall be deemed to be
covenants running with the land, constituting the premises. The
provisions of this section two shall survive the expiration or
earlier termination of this agreement.'' That would mean that
any service provider, regardless of their ability to perform
many of the people here today are extremely sophisticated. And
you can reach a negotiated agreement with them and be pretty
sure that you are going to get what you pay for and that your
residents are going to receive it.
But with language like this and what people generally want
is, No. 1, we don't know if our tenants will receive the
service they are promised. We have people trenching over our
property. We have people running lines over our property. We
have people drilling holes in our property. We have people
running wires along the baseboard inside the units of our
property. And we would have no control over it, plus people
going door-to-door and advertisements all over our club house.
The second point is that evidence shows that mandatory
access laws actually may lessen competition. Large incumbent
service providers are able to block small innovative often less
expensive providers from entering the marketplace due to the
time and expense it take to recoup their investment in the
wiring of the property. It will also place building owners who
offer these services to their tenants at a competitive
disadvantage. Owners often plan their properties with their own
wiring and, in many instances, the entire system. They should
not be penalized for providing state-of-the art facilities to
our tenants and residents.
We have in three properties provided cable TV service to
our residents. The way we recently got involved in it is
because the cable TV company refused to run the wiring inside.
We said, okay, we are going to run the wiring inside, we will
own the system. We provide, for $28 a month, the same service
that the cable TV virtually the same service that the cable TV
company charges about $44 in our area for. We have to be able
to recoup the cost of our investment in these instances.
Third, mandatory access will invalidate contractual
agreements already in place, further eroding competition in the
marketplace. Many owners and telecommunications providers have
exclusive agreements to provide services to their residents.
Without exclusive contracts, many small innovative providers
would not be able to enter into the marketplace. Mandatory
access would violate these contracts.
And, last, we believe that mandatory access laws violate
the private property rights of building owners and constitute a
taking under the Fifth Amendment. Under Loretto v. Teleprompter
Manhattan CATV, 58 U.S. Corp 1987, the Supreme Court stated
that, ``to the extent that the government permanently occupies
physical property, it effectively destroys the owners right to
possess, use, and dispose of the property.''
I would also mention that, in that same ruling, it says,
``A taking does not depend on whether the volume of space it
occupies is bigger than a bread box.'' It is slightly bigger
than a bread box, but a taking is a taking, period.
And just a couple of brief personal observations. I am a
pretty simple guy and I don't know a whole lot but I know a
couple of things. And one is that we appear that we may
actually have some property left at this point, private
property right. If this type of legislation is passed, we are
going to lose that right, plainly and simply.
We are the individuals that take the risk to build the
property in the first place. We are getting ready to start 120-
unit apartment project in Virginia Beach. We have put $6.5
million in land and another $2 million in equity into that
property. We are the ones taking the risk. If we don't provide,
whether or not negotiated, multiple access for things to
residents we won't rent the property out. The marketplace is
working, as Mr. Bitz said. But to require this mandatory access
I think is preposterous. We are the ones taking the risk.
The only other thing I have that I know is that any time I
am in a discussion such as this and there is a group of experts
and lawyers on the other side who are telling me that I don't
have a problem and it is in my best interests to do this, that
is when I really know I have a problem.
I was concerned when I came up here to testify today and
that is why. But having heard some of the testimony, I am
scared to death at this point. I believe the marketplace is
beginning to work. I believe, as owners and managers of
properties, we realize the necessity of having the best
available services available to our residents. But please do
not make this a mandatory access. Thank you.
[The prepared statement of Andrew Heatwole follows:]
Prepared Statement of Andrew Heatwole on Behalf of the National
Association of Realtors' and the Institute of Real Estate
Management
Hello. My name is Andrew Heatwole. I am speaking on behalf of the
NATIONAL ASSOCIATION OF REALTORS' who represents nearly
730,000 REALTORS' nationwide who are involved in all aspects
of the real estate business, and their affiliate, the Institute of Real
Estate Management, whose members manage 24 percent of the nation's
conventionally financed apartment units and 44 percent of the nation's
office buildings. I am a REALTOR' from Virginia Beach,
Virginia. My partners and I manage 1800 multifamily units throughout
Virginia, and have built approximately 3000 multifamily units. I am
honored to speak here before the committee on the very important issue
of telecommunications access.
The NATIONAL ASSOCIATION OF REALTORS' and the Institute
of Real Estate Management recognize the changing and evolving
telecommunications industry and the need to promote competition in the
marketplace. Our customers, residents and tenants, demand new and
sophisticated telecommunications capabilities and such services
increase the marketability of our properties. Consequently, we have an
incentive to establish policies that promote the well being of all
residents.
Overview
We strongly oppose efforts such as those being discussed today,
which would permit unrestricted access to private property for the
installation of telecommunications services. We oppose mandatory access
for a variety of reasons. First, legitimate reasons exist for building
owners and managers to maintain control over access to building space.
Unrestricted access could prohibit owners and managers from properly
operating their properties. It would undermine their ability to
responsibly manage complex building systems in order to ensure tenant
safety. Second, evidence shows that mandatory access laws actually
lessen competition. Large incumbent service providers are able to block
small, innovative, often less expensive providers from entering the
marketplace, due to the time and expense it takes to recoup their
investment in the wiring of a property. It will also place building
owners who offer these same services to their tenants at a competitive
disadvantage. Owners often plan their properties with their own wiring,
and in many instances, the entire system installed. We should not be
penalized for providing state-of-the-art facilities to our tenants and
residents. Third, mandatory access will invalidate contractual
agreements already in place, further eroding competition in the
marketplace. Many owners and telecommunications providers have
exclusive and perpetual agreements to provide services to their
tenants. Mandatory access would violate these contracts. Last, we
believe that mandatory access laws violate the private property rights
of building owners, and constitute a taking under the Fifth Amendment.
Managers and Owners Must Maintain Control Over Access To Building Space
Mandatory access to private property by large numbers of
communications companies may adversely affect the conduct of business.
It will undermine the property owners' and managers' ability to
responsibly manage complex building systems; ensure service reliability
and tenant safety' compliance with safety codes; as well as needlessly
raise legal issues. To require that property owners and managers
guarantee building access to a potentially unlimited number of service
providers will most certainly result in associated costs and
liabilities. Existing buildings have limited space available for
installation and maintenance of telecommunications systems. Unlimited
access could force owners to incur exorbitant costs for expansion and
renovation of riser cable space. Property damage is another issue of
concern. What protections will be granted to building owners against
property damage from unlimited installations and removals? It is
important that property owners and managers maintain control over the
space occupied by telecommunications lines, especially in a multi-
occupant building. Only the property owner or manager can coordinate
the conflicting needs of multiple tenants and multiple service
providers.
Private property owners of residential and commercial buildings
should have the right to choose and control the telecommunications
systems serving their tenants and residents. For all forms of
telecommunications system installation, maintenance and service, entry
into private property should be provided pursuant to a negotiated
agreement between the property owner/manager and the service provider--
not by legislative fiat. Negotiation on a competitive basis will allow
for consideration of the level of expertise, professionalism, and
reputation of the service provider. Owners should have the right to
negotiate mutually accepted terms and conditions for granting access to
building space and the valuable tenant markets contained within.
Building owners negotiate agreements with vendors for all of the
services they provide to their tenants such as coin operated washer/
dryers, vending machines and pay telephones. Telecommunications
services should be afforded the same negotiating privileges and
controls. The effect of mandatory access will be a decrease in service
reliability, tenant safety, and building code compliance.
Mandatory Access Actually Lessens Competition
If allowed unrestricted access, large incumbent service providers
could block small, innovative, and less expensive providers from
entering the marketplace. The initial investment of time and money
required to wire a building for telecommunication services is great and
therefore is factored into the negotiated agreement between building
owner and provider. Exclusive contracts assist the small provider in
recouping costs associated with initial wiring.
Some telecommunications providers argue that with mandatory access,
consumers will have the opportunity to purchase local phone service at
lower prices and improved service. This is simply not true. The
overhead costs of putting a dish on the roof and running phone lines
throughout a home are cost prohibitive for single family homes, small
businesses and all but the largest of multifamily housing complexes.
The costs are too high for these technologies to serve individual
consumers and small businesses. In fact, it appears that these
providers want mandatory access simply to ``cherry pick'' those
properties that demand the highest volume of services, while ignoring
those clients who require less service. Owners of buildings who house
these lucrative markets should not be forced to provide access to these
tenants upon demand.
Another unfair competitive scenario created by mandated access can
arise as more and more property owners include high-tech wiring in the
design of their buildings. They own and invest in this wiring, and
install it themselves. If property owners have to let competitors run
their own lines, it will be very difficult to recover the costs
involved in the original wiring. Or how about the scenario where a
telecommunications provider refuses to install the wiring but instead
waits until the building owner installs it himself or through a
competitor and then expects to get access to use the wiring to connect
to their cable signal when a tenant subscribes to their service? Some
landlords own the cable wiring in their buildings, and rent them to
cable providers under a revenue sharing agreement based upon tenant
participation. With mandatory access, the owners would have to allow
competitors in to compete against their own revenue sharing agreement.
Property owners who have invested in technology should not be penalized
by legislative action allowing mandatory access. These scenarios are
just a snapshot of the potential abuses and unfair practices that can
result in a mandatory environment.
Mandatory Access Will Invalidate Contractual Agreements
Property owners often enter into exclusive fixed term or perpetual
contracts with telecommunications providers in order to allow them the
ability to recoup their investment over time. To permit access to these
properties will create a conflict in which these existing agreements
would be undermined and even violated. This would place an unreasonable
infringement upon the free-market and could spawn numerous lawsuits.
Without the ability to recoup costs through exclusive contracts, many
of these businesses would not have the financial ability to enter the
marketplace, thus limiting competition for these services. Mandatory
access laws prohibit these arrangements, and allow big providers to
push the small businesses out of the way. Exclusive contracts allow
property owners to negotiate the best possible contracts for both price
and level of service, and enable new providers to enter the marketplace
and economically compete with established big companies.
Mandatory Access Jeopardizes Private Property Rights
Private property rights are integral to this discussion. There are
several court decisions that have shown that mandatory access violates
the Fifth Amendment to the Constitution. In Loretto v. Teleprompter
Manhattan CATV Corp (58 U.S. 419 (1987)), a New York statute provided
that a landlord must permit a cable television company to install its
wiring on its property, and can only demand payment up to an amount
determined by a state commission to be reasonable. In New York, this
amount was determined to be $1.00. The property owner brought a class
action suit against the city stating the wiring was a taking without
just compensation. The case came before the Supreme Court, who ruled
that the State of New York could not require such use of private
property without just compensation. They ruled that, ``when the
character of a governmental action is a permanent physical occupation
of real property, there is a taking to the extent of the occupation
without regard to whether the action achieves an important public
benefit or has only minimal economic impact on the owner.'' They
further stated, that ``to the extent that the government permanently
occupies physical property, it effectively destroys the owner's rights
to possess, use, and dispose of the property.'' Lastly, they ruled that
``the cable installation on the appellant's building constituted a
taking under the traditional, physical occupation test, since it
involved a direct physical attachment of plates, boxes, wires, bolts
and screws to the building.'' In Lucas v. South Carolina Coastal
Council (505 U.S. 1003 (1992)), the court similarly ruled that
``physical occupations by third parties are more likely to effect
takings than other physical occupations.''
Furthermore, requiring property owners to provide ``non-
discriminatory access'' is problematic because owners may already be
using their valuable property for other purposes. Many building owners
already lease space on their roofs to cellular and digital phone
companies. In these cases, the lease often involves a monthly payment,
and may even include a revenue sharing agreement. Legislation to allow
for mandatory access would violate a private owner's right to generate
revenue in this manner.
Conclusion
I thank you for this opportunity to present the views of NAR and
IREM on this very important issue. As you can see, we have very grave
concerns over the prospect of federal legislation permitting the
unlimited and unrestricted access to private property for the
installation of telecommunication services. Furthermore, the Congress
delegated the authority for telecommunications reform to the Federal
Communications Commission. The Commission reviewed the issue of
mandatory access through a public comment process, and chose not to
create a federal policy in this regard. I strongly urge you to
reconsider the need for such legislation at this time.
Mr. Tauzin. Thank you, Mr. Heatwole. You can be scared of
them, but don't be scared of us.
We are pleased to welcome the manager of ancillary services
Ms. Jodi Case, Avalon Bay Communities Incorporated, here in
Alexandria, Virginia. Ms. Case.
STATEMENT OF JODI CASE
Ms. Case. You should be frightened of me, however.
Actually, I am Jodi Case. I am a manager of ancillary
Services for Avalon Bay communities. Avalon Bay is the leading
provider of quality affordable apartment living. Our firm owns
and manages and actually has in the development pipeline more
than 50,000 apartment units that would be combined; not 50,000
in the development pipeline in 17 different States. We clearly
take pride in providing what we consider legendary service to
the people who live in our communities.
I, too, am frightened. I am here today to actually augment
what has been discussed previously. Virginia is not a mandatory
access area where you currently operate. Avalon Bay does have
communities that are currently operating in forced access
States. I come to you with examples, the real problems, the
real issues.
You had mentioned earlier that you thought that this might
be some type of mud wrestling, which is very appropriate since
I have, typically, mud all over my face because I am in mud. I
am in middle. I am in the trenches every single day. The
residents, the community managers. I am not a CEO. I am a
manager of the telecommunications services for our communities.
One person. I am not compensated by any amount of revenue that
is generated, because, clearly, with contracts that have just
been described, we spend a lot more on attorney fees to try to
get that language out.
I am here today on behalf of three principal trade
associations representing the private apartment industry: the
National Multi Housing Council; its affiliate, the American
Seniors Housing Association; and the National Apartment
Association. A written statement has been submitted to the
subcommittee, so I will limit my comments fortunately for you
to some of the specific examples and observations on the key
issues of forced access.
I don't have any props and I wish that that well, I don't
have any props, but I do have I don't want I wish that wasn't a
prop.
While there are extremely important constitutional and
private property rights issues associated with implementing
forced access for telecommunication providers, my comments will
only focus on the practical market and physical effect of such
policies. Remember, I am in the mud. I am knee deep in the
trench of this. When choosing an apartment, most residents
demand the best available telecommunications at the level they
can afford, along with other issues. They will not consider
communities that don't have telephone, video, Internet service.
As a result, apartment owners face a very dynamic and
competitive environment and telecommunications services are
part of that market.
At Avalon Bay, we confront this challenge every day. The
120 units that are being built in Virginia Beach, they can go
across the street and choose another community. With a great
deal of choice in the marketplace, we hope that they choose our
communities for the key stones of Avalon Bay, being high
quality of living experience and outstanding customer service.
We, too, like competition, reality contracts. We know,
unfortunately, from direct, first-hand experience, that forced
access statutes mean less competition and less choice for
residents. Why? The threat of a large established provider
being able to come onto the property drives away the smaller
competitors who do not believe it is worth the economic risk.
The economics just aren't there and our residents suffer
because of the lack of competition.
I want you to consider the language that was just read. In
a forced access State, where there is no competition, we have
no option. We must abide by that language or we don't have
cable or telephone or Internet, which actually occurred in one
of our Melville, New York, communities. It was a brand-new
construction. We sent several RFPs out, had a lot of interested
parties, some of which are here. Unfortunately, being a forced
access State, it just wasn't economically feasible. The number
of units, et cetera. The cable company was certainly had the
upper hand and used tactics such as: Here is our agreement. If
you would like us to provide service to your community, you
must sign this agreement. And it contained language that was
amazingly onerous. We had the PUC involved. 90 days went by and
new residents moved in without cable television. Cable
television; 90 days.
In New Jersey it is the same type of scenario. Because of
forced access there, the private cable operator has not been
able to sign up enough residents and have turned their
attention to States that do not have forced access.
By the way, this particular private operator has approached
the multiple system operator, the franchise operator, about
selling their systems. They are completely removing themselves
from mandatory access.
I could go into more details on these and other examples,
but I do know my time is limited, even though I could speak as
much as you would like me to.
Some telecommunications providers have begun seeking forced
access to apartment properties in the name of opening the
market. Fortunately, the legislatures in Florida, Georgia,
Indiana, Iowa, and Virginia have recently resisted the lobbying
pressures of the telecommunications providers and rejected
forced access proposals. Faced with defeat on a State level,
some of these providers are turning their efforts aggressively,
pursuing either the State public service commission route or
asking the Federal Government for help.
Why do the telecommunication providers say that they need
forced access? Landlords are not opening their doors? On the
one hand, they complain to the State and Federal legislative
and regulatory bodies that commercial property owners are
blocking the use of new technologies. On the other hand,
however, we hear in press releases the signing of one new
customer after another.
You had invited landlords to come today, those that are the
gatekeepers and none were available. I believe because there
are zero landlords out there that are gatekeepers, there are
none to be found. We would ask why they simultaneously tell
policymakers that they don't have market entry and then tell
the shareholders and potential new investors that the
marketplace is gobbling up their products. It would believe
that they believe that forced access would make the market for
their products even better or very possibly some may want to
sign up just enough of a market so they can sell to the larger
companies before the harsh economic realities of forced access
are realized.
The providers who are pushing forced access have also
changed the materials to call for this is a nice one resident
and consumer rights, instead of forced access, assuming that no
one would be against resident rights. We say, please don't be
fooled.
Avalon Bay will never lose sight of the larger field of
opportunity. We will stick to our core competencies: sales and
customer service. We will continue to create communities where
the Telecom Act initiatives are enhancements that make choosing
in Avalon Bay an even more attractive and compelling choice.
Remember, if we lose one resident and that rent, any deal that
could have been struck was not worth it.
Thank you and I will be pleased to answer any questions.
[The prepared statement of Jodi Case follows:]
Prepared Statement of Jodi Case, Manager of Ancillary Services,
AvalonBay Communities, Inc. on Behalf of American Seniors Housing
Association, National Apartment Association, and the National Multi
Housing Council
Chairman Tauzin and Members of the Subcommittee: I am Jodi Case,
Manager of Ancillary Services for AvalonBay Communities, Inc. of
Alexandria, Virginia. AvalonBay is a leading provider of quality,
affordable apartment living. Our firm owns and manages more than 50,000
apartment units in 17 different states. We take great pride in
providing ``legendary service'' to the people who live in AvalonBay
communities.
I am here today on behalf of three principal trade associations
representing the private apartment industry: the National Multi Housing
Council (NMHC), its affiliate the American Seniors Housing Association
(ASHA), and the National Apartment Association. The National Multi
Housing Council represents the apartment industry's largest and most
prominent firms with the principal officers of these organizations
serving as members. ASHA firms, similarly, are the leading providers of
assisted living in the United States. The National Apartment
Association is the largest national federation of state and local
associations of apartment industry professionals, comprised of 150
affiliates which represent more than 25,000 professionals who own and/
or manage more than 3.3 million apartments. NMHC, ASHA and NAA jointly
operate a federal legislative program and provide a unified voice for
the private apartment industry. Our combined memberships are engaged in
all aspects of the development and operation of apartments, including
ownership, construction, finance, and management.
The U.S. apartment industry provides homes for approximately 15
million families and individuals nationwide, representing the full
spectrum of America's population. Apartments account for about 15
percent of the entire housing stock, and they generate more than $75
billion annually in rental revenues and $16 billion in new construction
value. Approximately 400,000 jobs are provided through apartment
management and operation, while new apartment construction has created
jobs for an additional 200,000 workers.
We are here today to talk about telecommunications and forced
building access. While there are extremely important Constitutional and
private property rights issues associated with implementing forced
access for telecommunications providers, my comments will focus on the
practical market and physical affects of such policies.
To understand the impact of forced access legislation on the
apartments, one must first understand how the apartment industry
operates. To begin with, apartment owners are very concerned about the
viability of the telecommunications marketplace. Our residents have a
wide selection of apartment communities from which to choose, and it is
not unusual for 50 percent of our apartment residents to turnover in a
given year. When choosing an apartment, most residents will demand the
best available telecommunications at the level they can afford. They
will not consider communities that do not have the telephone, video or
Internet services they are seeking. As a result, apartment owners face
a very dynamic and competitive environment, and telecommunications
services are an important part of that market.
Telecommunications and Apartments
Until just recently, each new apartment community was routinely
wired for phone, and if they were lucky, cable service by the local
providers. Where cable wasn't available, a satellite master antenna
system was used. In the past few years, however, we have witnessed the
advent of competing systems and rapid changes in the technologies that
are available. Some telecommunications providers began seeking ``forced
access'' to apartment properties in the name of ``opening the market.''
There are now approximately 15 states that have enacted forced access
statutes in one form or another, although the pace of enactment by
other states has slowed to a crawl. Just recently, legislatures in
Florida, Georgia, Indiana, Iowa, and Virginia resisted the lobbying
pressure of the telecommunications providers and rejected forced access
proposals. Faced with defeat on a state level, some of these providers
are turning their effort to aggressively pursuing either the state
Public Service Commission route or asking the Federal government for
help.
Why do the telecommunications providers say they need ``forced
access?'' On the one hand, they complain to state and federal
legislative and regulatory bodies that commercial property owners are
blocking the use of new technologies. On the other hand, however, their
own press releases trumpet the signing of one new customer after
another.
We would ask why they simultaneously tell policymakers that they
don't have market entry and then tell their shareholders and potential
new investors that the marketplace is gobbling up their product? It
would appear that they believe that ``forced access'' would make the
market for their products even better. The providers who are pushing
forced access have also changed their materials to call for ``resident
and consumer rights'' instead of ``mandatory access,'' assuming that no
one would be against ``resident rights.'' We say, don't be fooled.
Whatever you call it, mandatory or forced access will actually harm
competition and the residents of our buildings by driving a number of
new competitors out of the market.
Forced Access Legislation will Actually Stifle Competition
Basic economics says that monopolies are bad. And when it comes to
granting a telecommunications provider a monopoly to serve a geographic
region, traditional economics is right. Those types of monopolies are
bad for competition. But, when you consider granting telecommunications
providers exclusive rights for a limited time period to service a
specific property, you actually help foster competition. These
property-exclusive contracts enable new providers the time required to
recoup the investment required to wire a property and expand their
operations. When multiple telecommunications companies compete toe-to-
toe on a single property, new competitors often lack the financial
muscle to win. Apartment owners can also leverage exclusive contracts
with telecommunications providers to ensure that residents receive good
and reliable service.
The truth is that mandatory access states have, in many cases,
unwittingly given the big incumbent service providers a competitive
edge because the big incumbent provider can always threaten to come
into a building that a small, new provider is trying to serve. This
actual or implied threat has driven competition out of many markets.
If Forced Access `` Why Not a Two-Way Street?
The dollar value of the telecommunications market is huge and
growing everyday. At the same time, the costs associated with providing
service are also large and vary depending upon the service being
provided, the affluence of the market being served, and the geographic
area to be served. As a result, many telecommunications providers
gravitate to the more lucrative areas and properties. This tendency to
``cream'' the best of the market can severely limit the choices of more
moderate income households.
If legislators are truly concerned with the rights of residents,
why not make forced access a two-way street. That is, if you allow any
telecommunications provider to service a given property without the
owners consent, then telecommunications providers should also be
required to offer service to any resident who requests it. Otherwise,
telecommunications providers are receiving a special privilege without
having the responsibility to provide service to those who request it.
Some have argued that the incumbent provider, usually the Bell System,
must be a provider of last resort, but that is not the same as
requiring a two-way street for all providers.
Forced Access Can Compromise Building Safety
Apartment and seniors housing communities are designed and
maintained to comply with very strict fire and safety codes to protect
their residents. The constant wiring and rewiring of a property that
occurs when forced access is granted to providers compromises the
ability of the property manager to adequately address building safety
and fire hazards.
Where do you start and where do you end with ``forced access''?
Apartment property owners and managers have to be concerned with many
different and competing priorities. It is simply not practical to allow
numerous telecommunications providers to come and go from a property.
Allowing several or more telecommunications competitors onto a given
property will result in damage to the property and chaos as wiring is
constantly installed and removed as residents move in and move out.
A recent rulemaking by the Federal Communications Commission has
given rights to tenants to install a satellite dish receiver on their
balcony without the prior approval of the apartment owner/manager.
Under the mistaken doctrine that a resident has rights that go beyond a
mutually agreed lease and heat, light, and power, the Commission has
shrugged aside the practical implications of residents mounting a dish
on a balcony railing. No credit is given to the fact that the dish
might be mounted in an unsafe manner. No credit is given to the fact
that it might be a high-rise building in a dangerously high-wind and
storm location in the country. A satellite dish is ``similar to a deck
chair or a bicycle on a balcony,'' is what we have heard. We assure
you, bicycles and deck chairs are not mounted on the top of balcony
railings. When a high wind blows one of these dishes off onto a young
child, we doubt that the FCC will be there to pay all of the legal and
medical damages.
Will ``New'' Service Actually be Provided?
The ability of a telecommunications provider to assign a contract
to another provider should be of great concern as you analyze the multi
dwelling unit market. Many providers do not actually provide
programming or service the properties with which they contract.
Instead, they turn around and assign their recently acquired contracts
to other providers. This transaction, which is encouraged by forced
access laws, does not actually further the competitive process or
create a more vibrant marketplace.
Conclusion
Apartment community owner/managers must be able to choose the best
service for a given community from a broad array of reliable providers.
Forced access actually creates less competition in the marketplace.
The telecommunications marketplace is highly competitive and
innovative products are coming along every day. Apartment communities
are taking advantage of these new products whenever and wherever
appropriate. But just as auto makers do not put new and untried
products in cars, apartment owner/managers need to make sure that a
given product will work and that the service will be there when the
product breaks down. Just because someone claims to be a
telecommunications provider does not mean that the products of that
company should have an automatic license to come into a given apartment
community in the name of ``tenant rights.''
We repeat our previous statement which is based upon actual
experience in the marketplace: exclusivity in a geographic area results
in less competition. However, exclusive contracts for a given community
actually work to the benefit of the resident because it allows an
apartment community owner/manager to negotiate the best possible
contract for both price and level of service and it enables new
providers to economically enter a geographic market and compete with
established providers.
Mr. Tauzin. Thank you, Ms. Case.
The last two witnesses represent cable and then
broadcasters. So we are pleased now to welcome Mr. Larry
Pestana, vice president of engineering for Time Warner Cable
for your discussion. Mr. Pestana.
STATEMENT OF LARRY PESTANA
Mr. Pestana. Thank you, Mr. Chairman, members of the
subcommittee. My name is Larry Pestana. I am the vice president
of engineering for Time Warner Cable in New York City and I
appear today solely on behalf of Time Warner Cable and not on
the behalf of the cable industry in general.
Time Warner Cable's New York City's system serves perhaps
the greatest concentration of multiple dwelling units or MDU
buildings anywhere in this country. In Manhattan alone, Time
Warner's cable system serves over 30,000 MDU buildings,
accounting for 850,000 residential units. Time Warner is
currently engaged in a massive upgrade of its New York City
system. Upon completion, Time Warner will be able to provide
additional tiers of digital service, including high definition
television as well as high-speed cable service.
Time Warner Cable has invested millions of dollars to
install its broad-band distribution facilities in MDU buildings
in Manhattan alone. Continued ownership of these facilities is
crucial for us to offer a wide array of services to our
customers.
I would first like to speak to you about the access to
premises issue. As you may know, in many States, including New
York, certain video providers enjoy statutory access to
premises rights. Most States, in enacting access to premises
laws, have limited their benefits to locally franchised cable
operators. This is because unique public interest
responsibilities on franchise cable operators such as public
access channels and universal service. By contrast,
unfranchised operators do not have similar obligations. In
fact, they make no secret of their policy to serve only upscale
and high-density areas, a strategy often referred to as cherry
picking or cream skimming.
It has been suggested that a national access to premises
law is necessary for video service competition to flourish
within the Nation's MDU buildings. Such legislation raises
thorny issues relating to taking of private property without
just compensation and promotion of competition. Congress has
declined to adopt such legislation in the past. We believe that
the best approach is to continue to allow each State to adopt
any appropriate legislation tailored to address the unique
situation faced in that particular State.
Let me turn now to the related but distinct issue of access
to wiring. An incumbent provider has invested many thousands of
dollars to install and maintain the internal distribution
system within any building it serves. Allowing a competitor,
carte blanche, to highjack Time Warner's property for its own
use and benefit does not constitute legitimate competition.
Furthermore, if Time Warner is forced to turn over its wiring
to a competitor for a particular unit or building, then it is
precluded from using the wiring itself, not just for video, but
also for high-speed modem service, telephony, and other
alternative services. Any competitor that wishes to compete
within a particular building should be required to construct
and pay for its own facilities.
In the 1992 Cable Act, Congress directed the FCC to adopt
rules the positioning of wiring inside a subscriber premises
upon termination of cable service. As the legislative history
makes clear, in an MDU context, this provision was intended to
apply exclusively to wiring within the four corners of an
individual resident's unit, not to the internal wiring
installed in the common areas of the building. In constructing
the rules, the FCC was wise not to move the cable demarcation
point to the location of the current telephone demarcation
point. Otherwise, cable operators' abilities and incentives to
offer non-video services to MDU residents would have been
destroyed.
Unlike in a narrow-band telephony context, a broad-band
provider such as a cable operator must retain exclusive control
over its entire internal broad-band distribution infrastructure
if it is to offer any combination of voice, video, data
transmission services to MDU residents. In the spirit of the
new FCC rules, Time Warner is actively working to resolve the
often contentious issues in this arena, such as shared use of
building molding, coordinating installations in newly
constructed buildings, developing policies to properly handle
customer changes in buildings where we compete unit by unit.
Finally, allow me to briefly address the issue of exclusive
contracts. Exclusive contracts inhibit the ability of MDU
residents to obtain services from competing providers. There is
no consensus on this issue of exclusive contracts to serve
MDUs. Various cable operators, incumbent telephone companies,
and competing providers have taken positions, both for and
against exclusive contracts. Groups representing MDU owners
understandably oppose any restrictions on exclusivity. Time
Warner is prohibited from entering into exclusive contracts in
New York City, which has led to significant competition. We
would favor a ban on exclusive contracts, so long as such a
restriction applies to all providers equally and recognizes the
sanctity of contracts.
There is just no legitimate, pro-consumer reason to
discriminate between providers when it comes to exclusivity.
Similarly, any ban on exclusivity should apply to all
communications services equally. For example, if the exclusive
agreements between landlords and video service providers are
banned, then exclusive agreements between landlords and
telephone service providers also should be banned. Moreover,
any ban on exclusivity must not interfere with existing
contracts. Accordingly, any such restriction should operate on
a prospective basis only.
Time Warner fully agrees that landlords are often the
greatest impediment to competitive alternatives for MDU
residents. If landlords were banned from accepting
consideration from telecommunication providers beyond the
nominal for the space occupied by the providers' facilities,
then the landlord would have a great incentive to accept
providers based on the quality of services offered to MDU
residents, rather than the provider offering the largest piece
of the action to the landlord.
I thank you very much for your attention and I look forward
to your questions.
[The prepared statement of Larry Pestana follows:]
Prepared Statement of Larry Pestana, Vice President of Engineering,
Time Warner Cable of New York City
Mr. Chairman, members of the subcommittee, my name is Larry
Pestana, Vice President of Engineering of Time Warner Cable of New York
City. In this capacity, I am responsible for issues relating to the
design and construction of Time Warner Cable's distribution
infrastructure. In New York City, much of this plant is installed
inside multiple dwelling unit, or MDU, buildings, ranging in size from
brownstones with just a few units to high-rises with hundreds of units.
Time Warner Cable must constantly attempt to coordinate with other
video providers in New York City who offer competitive alternatives to
MDU residents. I am here to communicate to you Time Warner's, as well
as my own individual perspective, on issues relating to access to
buildings and inside wiring. I appear today solely on behalf of Time
Warner Cable, and not on behalf of the cable industry generally.
Time Warner Cable's New York City system serves perhaps the
greatest concentration of MDU buildings anywhere in the country. In
Manhattan alone, Time Warner's cable system serves over 30,000 MDU
buildings accounting for over 850,000 residential units. Time Warner is
currently engaged in a massive upgrade of its New York City system,
which, upon completion, will allow us to provide additional tiers of
digital cable service, including HDTV, as well as high speed cable
modem service.
Cable system architecture in an MDU generally involves three basic
elements. First, there are the riser cables which typically run
vertically throughout the height of the building. At each floor, there
is usually a junction box or lockbox. From the lockbox, separate home
run cables are installed running to each unit on that floor, although a
home run is sometimes shared by more than one unit. At the demarcation
point, the home run enters the individual unit, where the inside wiring
then runs to each TV set or other device in the subscriber's premises.
In most buildings in New York City, the home runs are installed in
hallway moldings which can be snapped open for easy access. In some
buildings, riser cables and home runs are installed in metal tubes or
conduits.
Time Warner Cable has invested millions of dollars to install its
broadband distribution facilities in MDU buildings in Manhattan alone.
Landlords are required to pay to have telephone wiring installed in
their buildings, and accordingly they immediately own that wiring. On
the other hand, landlords are typically unwilling to pay the cost of
cable installation, and indeed often expect payments from the cable
operator for the right to wire the building. In New York, cable
operators are prohibited from making such payments to landlords,
although such restrictions do not apply to our competitors. With such a
significant up-front investment, and the crucial nature of the
ownership of these facilities to offer a wide array of services to our
customers, it should be apparent why Time Warner and other cable
operators must take appropriate steps to protect their right to
continued use of their distribution plant in MDU buildings. Otherwise,
their investment would be for naught.
access to premises
I would first like to speak to you about the access to premises
issue. As you may know, in many states, including New York, certain
video service providers enjoy statutory access to premises rights.
These laws have generally been upheld by the courts, following the
analysis of the U.S. Supreme Court in the Loretto decision. In that
case, the Supreme Court found that the installation of wiring on a
landlord's property constitutes a ``taking'' for which the property
owner is entitled to just compensation. The New York State access to
premises law was amended to include such a compensation mechanism.
These laws ensure that MDU residents have a real choice between the
franchised cable operator and the competing video service provider,
whose interests are often aligned with the financial interest of the
landlord.
Most state legislatures enacting access to premises statutes have
limited their benefits to locally franchised cable operators because
they recognize the unique public interest responsibilities franchised
cable operators shoulder. Indeed, franchised cable operators must meet
public interest obligations far beyond those imposed on any competing
providers. For example, locally franchised cable operators are
typically required to support local public, educational and
governmental access channels within the community. In addition, locally
franchised cable operators must construct their facilities throughout
their franchise territories, offering services to high income and low
income neighborhoods alike. By contrast, unfranchised operators, such
as RCN, do not have similar obligations and, in fact, make no secret of
their policy to serve only upscale and high-density areas, a strategy
often referred to as ``cherry-picking'' or ``cream-skimming.''
There is an easy solution for those complaining about the right of
access laws. In the 1992 Cable Act, Congress expressly directed that
all cable franchises must be non-exclusive and cannot be unreasonably
denied. Thus, any competitor can enjoy the benefits of any state access
to premises statute merely by obtaining a cable franchise. Indeed, many
competing video providers, including RCN, now routinely obtain cable
franchises. It is entirely appropriate for an entity seeking the
benefits of a local cable franchise be required to assume the attendant
responsibilities.
It has been suggested that a national access to premises law is
necessary for video service competition to flourish within the nation's
MDU buildings. Conversely, representatives of landlords will likely
argue that such laws interfere with their property rights and are
confiscatory. Without question, such legislation raises thorny issues
relating to taking of private property without just compensation and
promotion of competition, and Congress has declined to adopt such
legislation in the past. We believe that the best approach is to
continue to allow each state to adopt any appropriate legislation,
tailored to address the unique situation faced in a particular state.
cable home wiring
Let me turn now to the related but distinct issue of access to
wiring. This topic has to do not with service providers' rights to
access a building, but their efforts to use pre-existing wiring and
other equipment already installed in the building by the incumbent
provider. Obviously, any video service provider, as they initiate
service to a new building, would love to have the ability to access or
take over pre-existing wiring located within the building and avoid the
significant cost of building such a system . Where the landlord has
paid the full cost of the installation of the wiring, there is
typically little dispute over the landlord's right to select the
service provider authorized to use such facilities. But where the
incumbent provider has borne the costs of installing its distribution
infrastructure in an MDU, it should not be forced to give up ownership
or control of its property solely for the benefit of a competitor.
An incumbent provider has invested many thousands of dollars to
install and maintain the internal distribution system within any
building it serves. Indeed, Time Warner has spent many millions of
dollars to wire the buildings of Manhattan alone, and it is clear that
Time Warner must retain ownership of the wiring and related equipment
in order to protect its investment. Allowing a competitor carte blanche
to hijack Time Warner's property for its own use and benefit does not
constitute legitimate competition. Furthermore, if Time Warner is
forced to turn over its wiring to a competitor for a particular unit or
building, then it is precluded from using the wiring itself, not just
for video, but also for high speed cable modem service, telephony, and
other alternative services. Any competitor that wishes to compete
within a particular building should be required to construct, and pay
for, its own facilities.
In the 1992 Cable Act, Congress directed the FCC to adopt rules
governing the disposition of wiring inside a subscriber's premises upon
termination of cable service. As the legislative history makes clear,
in the MDU context, this provision was intended to apply exclusively to
wiring installed within the four corners of an individual residents'
unit, not to the internal wiring installed in the common areas of the
building. In its initial implementation of this provision, the FCC was
true to legislative intent. It established rules that prevent a cable
operator from removing the wiring inside a tenant's unit, when that
resident terminates cable service, without first offering to sell the
wiring to the MDU resident at a reasonable price.
More recently, the FCC has expanded the scope of this provision
well beyond its initial intent. The FCC improperly adopted procedural
requirements relating to ``home run'' wiring--the wiring in the MDU
extending from the riser or junction box, through the common areas of
the building, to the residents' actual dwelling unit. These ``home
run'' rules provide that the after receiving notice from the property
owner that it desires unit-by-unit or building-by-building competition,
the cable operator must choose one of three options: one, remove the
wiring; two, abandon the wiring; or three, sell the wiring to the
landlord or the new provider.
On their face, these rules do not apply where the cable operator
has a legal right to retain its facilities in a building after a
particular customer discontinues service, as is the case in New York
State. In practice, however, the FCC has improperly shifted the burden
such that cable operators could be forced to obtain injunction from a
court every time the ownership of the cable operator's property is
questioned. These new rules also operate such that if an incumbent
provider's home run wiring is installed within certain categories of
building material, it is automatically deemed inaccessible and the
individual unit resident has the right to acquire ownership of the
cable operators' facilities, which sometimes extend hundreds of feet
outside that resident's unit. Time Warner is confident that the courts
will ultimately determine that these rules were not authorized by
Congress in the 1992 Cable Act.
The FCC was wise not to move the cable demarcation point to the
location of the current telephone demarcation point, the minimum point
of entry (typically somewhere in the basement of the MDU). Had the FCC
moved the broadband point of demarcation to the minimum point of entry,
cable operators' ability and incentives to offer non-video services to
MDU residents would have been destroyed. Unlike in the narrowband
telephony context, a broadband provider such as a cable operator must
retain exclusive control over its entire internal broadband
distribution infrastructure if it is to offer any combination of voice,
video and data transmission services to MDU residents. Once it is
forced to turn over its entire distribution network, there is no way
for it to provide any of these services to the MDU's residents.
In the spirit of the new FCC rules, Time Warner is actively
working to resolve the often contentious issues in this arena such as
shared use of building molding, coordinating installations in newly
constructed or refurbished buildings, and developing policies to
properly handle customer changes in buildings where we compete unit by
unit.
exclusivity
Finally, allow me to briefly address the issue of exclusive
contracts. The FCC is currently considering whether and to what extent
it should allow MDU owners to enter into exclusive agreements with
cable operators and other video providers to offer service in their
buildings. Landlords have argued that a ban on exclusive contracts
would interfere with their ability to manage and maximize the value of
their property. On the other hand, exclusive contracts inhibit the
ability of MDU residents to obtain services from competing providers.
But even such an exclusive contract cannot preclude the inevitable
onslaught of competition. In its recent proceeding dealing with the
installation of off-air reception devices, the FCC made clear that MDU
residents have the right to install DBS reception equipment in their
units, for example, even in the face of an exclusive contract between
the landlord and a cable operator.
There is no consensus on the issue of exclusive contracts to serve
MDUs. Some cable operators have argued that exclusive agreements are
necessary or useful for the efficient marketing of service and should
be permitted. Other cable operators favor competition on a subscriber-
by-subscriber basis and have argued that MDU owners should not be
permitted to limit access to buildings by selling exclusive rights.
Similarly, alternative providers have taken divergent positions on
this issue. Many argue that long-term exclusive agreements are
necessary to enable them to successfully challenge incumbent cable
operators, so they should be allowed to enter into exclusive contracts,
but cable operators should not. Others oppose all exclusive contracts,
arguing that exclusivity is not necessary to promote competitive entry.
Still others favor allowing all providers to enter in to short-term
exclusive contracts of no more than five years, but would ban longer
term exclusive contracts. Groups representing MDU owners understandably
oppose any restrictions on exclusivity.
Time Warner is prohibited form entering into exclusive contracts in
New York City. We would favor a ban on exclusive contracts, so long as
such a restriction applies to all providers equally and recognizes the
sanctity of contracts. There is just no legitimate, pro-consumer reason
to discriminate between providers when it comes to exclusivity.
Similarly, any ban on exclusivity should apply to all communications
services equally. For example, if exclusive agreements between
landlords and video service providers are banned, then exclusive
agreements between landlords and telephone service providers also
should be banned. Moreover, any ban on exclusivity must not modify or
abrogate existing contracts, so as not to violate the Constitution.
Accordingly, any such restrictions should operate on a prospective
basis only.
Time Warner fully agrees that landlords are often the greatest
impediment to competitive alternatives for MDU residents. If landlords
were banned form accepting consideration form telecommunications
providers, beyond the nominal rent for the space occupied by the
providers facilities, then the landlord would have a greater incentive
to select providers based on the quality of services offered to MDU
residents, rather than the provider offering the largest ``piece of the
action'' to the landlord.
Thank you very much for your attention, and I look forward to your
questions.
Mr. Tauzin. Thank you, Mr. Pestana.
And, finally, Mr. Mark Prak, special counsel to the
National Association of Broadcasters, a partner of Brooks,
Pierce, McLendon, Humphrey, and Leonard in Raleigh, North
Carolina. Mr. Prak.
STATEMENT OF MARK J. PRAK
Mr. Prak. Thank you, Mr. Chairman, ranking member, members
of the committee. It is a pleasure to be here with you this
morning.
I am going to focus a little more narrowly in my comments
this morning. As perhaps the chairman was indicating, this
issue gets described broadly as forced access or competitive
access. And it is certainly true that you can listen to
adjectives and figure out where people are coming from. I guess
if I were asked to engage in that process, I would say that I
am the only panelist here talking to you this morning who can
be fairly characterized as talking to you about universal
lifeline access, because I represent the NAB, which represents
the Nation's television industry, among other things.
And we are here to talk to you about a provision of the law
that we thought already fixed this problems. It is a much
narrower fix, from our point of view, because there is no
question that section 207 of the Telecommunications Act of 1996
was designed to allow every American citizen, regardless of
their income or place of residence, to be able to receive the
signals of our free, over-the-air, local television stations.
And, as you know, section 207 required the FCC to promulgate
rules to prohibit restrictions on the use of good old fashioned
television antennas for that purpose.
The FCC, after a couple of years, adopted some rules and,
in fairness to the Commission, they go pretty far, but they
don't go far enough. Where you really get down to focusing in
on the rules, is that they do leave some persons in our
country, who reside in multiple unit dwellings, apartment or
condominiums, I guess we have come to call them multiple unit
dwellings, for those folks, there are situations occurring now
where they are being denied access to free, over-the-air local
television.
Why should you care about that? Well, I think every member
of the committee should be concerned about that for a couple of
reasons. The first is that when you understand how people
receive video in our country we know that 67 percent of the
country is connected to cable; 33 percent of the country does
not choose to subscribe to cable; and when you think about that
universe of people, I think it likely that, for many of those
people, they either can't afford cable or they choose not to
purchase cable. But for those people in that universe of folks
who reside in MDUs, we are now looking at a situation where
such people can be denied access to what has become the
universal lifeline service. And I say that not as an
exaggeration.
I was looking this morning, before coming over here to
Capitol Hill, at electronic media and I see pictures of the
tornadoes in Oklahoma. And I see headlines that say: Twister
takes toll but TV warnings helped. Well, when you get right
down to it, we have a Federal interest and a national
telecommunications policy that calls for the existence of an
emergency alert system. It calls for a means by which, if the
President needs to, he can communicate with everyone in our
country. It allows local television stations and also local
cable systems to participate in letting people know when there
is a tornado coming, an earthquake, or other natural disaster
or unusual weather that requires people to take cover and look
out for things. And that is where free, over-the-air television
comes in.
As many of you know in your districts, there are television
stations who operate street-level accurate Doppler weather
radar. I mean, it is amazing when you watch the weather at
night, and that is one of the things almost all of us do, is
you can see the ability of local weather personnel to predict
where things are going and, even as things are happening, they
can show you down in my market where I live in North Carolina,
they can show you what streets the storm is coming toward. So
it is very helpful in letting people know to get out of the
way.
It seems to me imprudent to have a national system of this
type and to have people who can be excluded from it by virtue
of choices made by landlords. I don't think this was a problem,
frankly, if you go back and think to way telecommunications has
grown so explosively. Prior to the early 1980's, when cable was
really growing and hitting its stride, most landlords had a
master antennae for all of their residents. They wanted to be
able to provide this. It was only after they had been going to
seminars on there's money for you in video provision to your
tenants that we start having these problems with seeing even
local television signals delivered to residents of MDUs.
So how shall we solve this problem? Well, we have got
another component of the problem I don't think it is as
complicated as the landlords make out but we are also engaged
right now in this country in building out a new digital
television system throughout the United States. That system and
all of the congressional and FCC policy judgments that have
been made are based on the assumption that every American
citizen, if they need to, can use and access a rooftop antennae
for the purpose of receiving local television signals. So we
have got a significant Federal interest, an interest that I
know is of concern to this committee, in seeing that this not
become a problem.
What do we ask you to do? Well, we say the FCC got a little
timid on us, with all due respect to Mr. Sugrue and Bill
Johnson, folks at the agency. We think that the landlords cowed
the agency. If you read section 207, it is pretty
straightforward. It doesn't say: prohibit restrictions that
would inhibit the use or impair a viewer's access to television
if you think it is a good idea and if there aren't any
complexities involved. It says do it. And what we got was a
solution to virtually everything that I think is a good
workable rule for which they are to be congratulated, but they
didn't get over the last hump, which is the MDUs, which, as
both the chairman and the ranking member have noted in their
opening statements, are critical to the system working the way
it is intended.
So I guess I would say is that one of the things we would
ask you to do, we think the rule we proposed to the commission
was simple, reasonable, and straightforward. They did not adopt
our rule. There are petitions for rulemaking pending or for
reconsideration of the final order, pending. I guess, Mr.
Chairman, if I could tell you what we at the NAB would like to
have you do, is we would like to have you put your arms around
the representatives of the FCC and tell them to go back and it
is all right to go ahead and adopt the approach that we have
advocated.
And I might just say at the ending here, before we get to
questions, that the fact is the rule we have taken and proposed
was designed to leave the status quo, in terms of individual
buildings, as much as possible, in the hands of the individual
building owner. If they use a master antennae, they have to.
First the tenant has the right to use an antennae. If the
building owner doesn't like that, they can provide a master
antennae, which we all know for many years was no big
controversy. If they already have an arrangement with cable
television to provide we know that local broadcast signals are
carried on cable television then that would be good enough as
well.
The key point, at the end of the day, should be that every
American citizen, regardless of whether they live in an MDU or
stately Wayne Manor have the ability to access free, over-the-
air local television. So I will say that. I will leave it at
that. I don't think it is near as complicated as my friends who
are real estate interests make out and I will be happy to
respond to questions.
[The prepared statement of Mark J. Prak follows:]
Prepared Statement of Mark J. Prak, Special Counsel to the National
Association of Broadcasters
Good morning. My name is Mark Prak, and I appear on behalf of the
National Association of Broadcasters. NAB is a non-profit, incorporated
association of television stations and radio stations located
throughout the country. NAB serves and represents the American
broadcast industry.
My testimony will be focused on the implementation of Section 207
of the Telecommunications Act of 1996 by the Federal Communications
Commission (FCC). Presently, the FCC has pending before it petitions
for reconsideration of its Second Report and Order issued last November
which adopted final rules designed to implement the mandate of Section
207. Suffice it to say that, with all due respect, the agency's rule
has segregated Americans into two classes: those who live in single
family homes and are able to receive the signals of free over-the-air
television stations and those who cannot receive free over-the-air
television signals merely because they reside in apartments,
condominiums, or other multiple-un it dwellings.
This result is unacceptable from a public policy standpoint. It
must not be accepted by this Subcommittee, the parent Commerce
Committee or the Congress.
The Commission has extended the benefits of Section 207 preemption
to some consumers who rent their homes or apartments and have access to
suitable balconies, patios or other areas ``under their control'' for
installing an antenna. But, it has failed to extend its Section 207
rules to ``common or restricted areas'' of rental property. In so
doing, the Commission fell well short of fulfilling the statutory
mandate or Section 207 to ``prohibit restrictions'' that impair a
viewer's reception of over-the-air video programming signals. As a
result, the Commission has created an artificial and false distinction
between rental property ``under the control'' of a tenant and ``common
or restricted'' property and has created a ``have-and-have not''
distinction between homeowners and renters. In the end, a tenant is a
tenant and a restriction is a restriction. The Commission erred in
extending its Section 207 rules to some tenants, but not others, and by
prohibiting some restrictions which impair the reception of over-the-
air signals, but not others.
i. background
The FCC instituted a rule making proceeding in response to the
passage of the Telecommunications Act of 1996 (the ``1996
Act'').1 Section 207 of the 1996 Act requires the FCC to
adopt regulations prohibiting state and local restrictions on the use
of over-the-air television antenna to receive television transmissions.
Specifically, this provision, titled ``Restrictions on Over-the-Air
Reception Devices,'' (OTARD) provides as follows:
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\1\ Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat.
56 (1996).
---------------------------------------------------------------------------
Within 180 days after the date of enactment of this Act, the
Commission shall, pursuant to Section 303 of the Communications Act,
promulgate regulations to prohibit restrictions that impair a viewer's
ability to receive video programming services through devised designed
for over-the-air reception of television broadcast signals,
multichannel multipoint distribution service, or direct broadcast
satellite services.
In its initial Report and Order and Memorandum Opinion and Order
shortly after the Act's passage, the Commission adopted a single rule
to implement Section 207. The rule prohibits any state law or
regulation, local law or regulation, or any private covenant,
homeowner's association rule or similar restriction that impairs the
``installation, maintenance, or use'' of antennae designed to receive
over-the-air television, DBS, or MDS signals. Out of what it described
as ``concern with the state of the record before it,'' however, the
Commission limited the application of the rule to property ``within the
exclusive use or control of the antenna user where the user has a
direct or indirect ownership interest in the property.'' 2
In issuing a Further Notice of Proposed Rule Making (FNPR) and
requesting further comment, the Commission concluded that the record
before it was ``incomplete and insufficient to extend our rule to
situations in which antennae may be installed on common property for
the benefit of one with an ownership interest or on a landlord's
property for the benefit of a renter.'' 3 The Commission
offered no rationale for drawing this distinction.
---------------------------------------------------------------------------
\2\ FNPR at para. 5.
\3\ FNPR at para. 63.
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In its FNPR, the Commission asked for comment, among other things,
on: (1) the application of the preemption rule to rental property and
to common property which a citizen does not own but instead has rights
in common with others; (2) the FCC's legal authority to prohibit
nongovernmental restrictions that impair reception by citizens that do
not have exclusive use or control and a direct or indirect ownership
interest in the property and, specifically, whether this implicates the
Takings Clause of the United States Constitution; and (3) the proposal
of a satellite DBS provider that community associations should be
allowed to make video programming available to any resident wishing to
subscribe to such programming at no greater cost and with equivalent
quality as would be available from an individual antenna installation.
NAB provided comments and reply comments to the FCC on these
points. On September 25, 1998, the FCC issued an Order denying
reconsideration of its original rule regarding the use of antennas and
other OTARD equipment by persons other than those in MDU's and that the
MDU issue would be addressed in a subsequent order.
On November 20, 1998, the FCC issued its Order creating ``video
haves'' and ``have-nots'' based on a citizen's residence in an MDU. NAB
and others petitioned the FCC in January of this year to reconsider its
decision. Those petitions for reconsideration remain pending.
The following argument explains why the Commission's final rule
fails to fulfill the intent of Congress in adopting Section 207.
ii. the commission was duty bound to adopt an antenna preemption rule
which applies to multiple dwelling units and other similarly situated
properties
The right of all citizens, no matter where they reside, to have
access to video programing services of their choosing is fundamental to
Congressional communications policy. Indeed, a primary objective of the
Communications Act of 1934, as amended, (the ``Communications Act''),
is to ``make available, so far as possible, to all the people of the
United States . . . a rapid, efficient, Nation-wide, and world-wide
wire and radio communication service with adequate facilities at
reasonable charges.'' 4 Section 1 of the Communications Act
does not exempt persons living in apartments, condominiums or other
such residences. For decades, the Commission has sought to implement
the Congressional policy reflected in Section 1 of the Communications
Act by allocating television frequencies to communities throughout the
nation. In so doing, the Commission's first priority has been to assure
the availability of at least one television service to all of the
people of the United States.5 A second priority has been to
make competing television signals available to all people.6
The nation's television broadcast service is now mature, ubiquitous and
competitive; virtually all citizens receive at least four competing
over-the-air television services and most receive many more. Los
Angeles, for example, receives service from 17 television
stations.7
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\4\ Communications Act of 1934, as amended, Sec. 1, 47 U.S.C.
Sec. 151.
\5\ Sixth Report and Order, 41 FCC 148, 167 (1952); see also, WITN-
TV, Inc. v. FCC, 849 F.2d 1521, 1523 (D.C. Cir. 1988).
\6\ Id.
\7\ TV & Cable Factbook (Warren 1996 ed.), p. A-99.
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The right of citizens to enjoy uninhibited access to video
programming takes on special importance with respect to over-the-air
television broadcasting. Over-the-air television remains the
cornerstone of the nation's video delivery system, a system that has
been expanded in recent years by cable television, VCRs, DBS, MMDS and
other video delivery technologies.8 Nevertheless,
terrestrial over-the-air television is the nation's free, universal
television service, and it remains the means by which all Americans,
regardless of financial means, can receive television news,
information, entertainment and sports programming. Accordingly,
Congress determined, in adopting Section 207, that all citizens,
whether they own or rent a home, condominium, townhouse or apartment,
should be able to employ a simple roof-top television antenna to
receive the terrestrial television stations in the local market where
they live.
---------------------------------------------------------------------------
\8\ Second Annual Report (Video Competition), FCC 95-491 (Released:
December 11, 1995), at p. 2, para. 3.
---------------------------------------------------------------------------
Our national communications policy is premised on the notion that
citizens may, by use of a conventional roof-top antenna, have access to
local broadcasting television stations.9 Thus, the residents
of multiple dwelling units 10 cannot be relegated to a video
programing service of their landlord's or homeowner association's
choosing. Instead, they must be free to select the television
programming service of their own choice. The failure of the FCC to
extend its rules implementing Section 207 to all residents of MDUs
means that residents of many such dwellings do not have access to the
nation's free, universal, over-the-air television service.
---------------------------------------------------------------------------
\9\ Congress' concern that citizens have access to their local
broadcast stations is also reflected in the must-carry provisions of
the Cable Television Consumer Protection and Competition Act of 1992.
Public Law No. 102-385, 106 stat. 1460, codified at 47 U.S.C. Sec. 534.
In addition, out of concern for those who live in areas that, because
of terrain obstructions or other interference, cannot receive broadcast
television network programming from a local station, Congress in 1988
enacted the Satellite Home Viewer Act (``SHVA''), P.L. 103-369, 17
U.S.C. Sec. 119. The SHVA created a special exemption from conventional
copyright law to provide satellite carriers a statutory copyright to
enable them to retransmit the signal of a distant network station and
deliver that signal by satellite to home dish owners who are unable to
receive a signal of at least Grade B intensity from a local affiliate
of that network. The SHVA gives a blanket compulsory copyright for
satellite delivery of independent television stations. The SHVA is a
truly extraordinary intrusion into the traditional free market in
copyrights and reflects a longstanding Congressional concern for
assuring access by the American people to television broadcast
programming. That concern was reflected again in The Cable Television
Consumer Protection and Competition Act of 1992, supra, which exempts
from that Act's retransmission consent provisions the retransmission by
satellite of distant network stations to home dish owners who are
beyond the reach of a local network affiliate.
\10\ Apartments, condominiums, townhouses and other forms of
multiple dwelling units which, under state laws and/or private
contracts, provide common areas for the benefit of residents are
referred to as ``MDUs.''
---------------------------------------------------------------------------
Moreover, Congress and the FCC, by statute and regulation, require
television broadcasters to provide certain programming deemed to be in
the public interest. Political programing and children's educational
programming are examples.11 It would be illogical in the
extreme for Congress to require the broadcast of such programming
without prohibiting restrictions--wherever imposed--on antennae and
devices necessary to receive that programming.
---------------------------------------------------------------------------
\11\ See 47 U.S.C. Sec. Sec. 312(a)(7), 315 (political
programming); Children's Television Act of 1990, Pub. L. No. 101-437,
104 Stat. 996-1000, codified at 47 U.S.C. Sec. 303a, 303b, 394; 47
C.F.R. Sec. 73.1930, 73.1940, 73.1941, 73.1942, 73.1943, 73.1944
(political rules); 47 C.F.R. Sec. 83.670, 73.671 (children's TV rules).
---------------------------------------------------------------------------
Accordingly, the NAB proposed that the Commission adopt the
following rule to implement Section 207:
Any private restriction on the placement of television
receiving antennae imposed by deed, covenant, easement,
homeowner's association agreement, lease or any similar
instrument shall be deemed unenforceable, provided, that a
reasonable restriction on the placement of television receiving
antenna in or on a multiple dwelling unit shall be enforceable
if the signals of all television stations placing a predicted
Grade B contour (as that term is defined in sections 73.683 and
73.684 of this chapter) or an actual Grade B signal as measured
under the provisions of this chapter over the premises are
transmitted without material degradation to all dwelling units
subject to the restriction via a common antenna or other means
without separate charge to the owners or tenants of those
dwelling units.
iii. the commission's rule and order explaining the rule is internally
inconsistent and fails to fulfill the congressional mandate to
``prohibit restrictions'' which impair the reception of over-the-air
signals
In addressing the application of Section 207 to rental property in
the Second R&O, the Commission concludes:
``[W]e agree with those commenters that argue that Section
207 applies on its face to all viewers, and that the Commission
should not create different classes of ``viewers'' depending
upon their status as property owners. For instance, if a local
government imposed a zoning restriction that prohibited a
landlord from installing a master antenna system for his
tenants to receive over-the-air broadcast signals, such a
restriction would be preempted, notwithstanding the fact that
the viewers in that situation are renters.'' Second R&O at 13
(footnote omitted).
The FCC's conclusion is a recognition that, in passing Section 207,
Congress did not intend for the Commission to create or foster a
``second class'' viewer that is relegated to receiving video
programming service of their landlord's or homeowner association's
choosing. Chairman Kennard, in his Separate Statement, echoed this
conclusion, going so far as to claim, ``The Commission has thus
eliminated the have-and-have not distinction that gave homeowners
access to the competitive video market but denied it to all apartment
dwellers.''
But that is not the case. Despite its recognition of the intent of
Congress to create a single class of viewers, the Commission stopped
well short of eliminating the classification of viewers based upon
their status as property owners. By failing to extend the benefits of
preemption to renters who do not have suitable property ``under their
control'' to install an antenna, the Commission has relegated tenants
who do not exercise ``control'' over an area suitable for placement of
an over-the-air antenna to ``second class'' status in today's video
programming marketplace.
Effectively, the Commission's order now sanctions different classes
of viewers, even within a single building. For example, because of the
Commission's unjustifiable distinction between property ``under the
control of a tenant'' and ``common or restricted'' property, a tenant
on one side of an apartment building with a balcony may exercise his or
her right to receive free, over-the-air broadcast (or other video)
programming while a tenant on the opposite side of the building--who
perhaps does not have a balcony or whose balcony faces in a direction
such that he or she cannot receive over-the-air signals--is not allowed
to receive such signals. This is exactly the sort of distinction that
Congress sought to eliminate in Section 207.
National communications policy is premised on the notion that
citizens may, by use of a conventional roof-top television antenna,
have access to local broadcast television stations--both NTSC and
digital. Thus, residents of multiple dwelling units should not be
relegated to a video programming service of their landlord's choosing.
Instead, Section 207, and national communications policy, compels that
they must be free to select the television programming service of their
choice.
iv. the commission's order is inconsistent with fundamental national
policy favoring preservation of the free, over-the-air broadcast system
In its Second R&O, the Commission pays lip service to the
preservation of over-the-air broadcasting and the diversification of
video programming services. The Commission states: ``[W]e believe that
Section 207 promotes the substantial governmental interests of choice
and competition in the video programming marketplace . . . [E]xpansion
of our rules will promote the important governmental interest in
enhancing viewers'' access to ``social, political, esthetic, moral and
other ideas.'' . . . The Supreme Court has ``identified a . . .
`governmental purpose of the highest order' in ensuring public access
to `a multiplicity of information sources.' '' Id. at para. 24
(footnotes omitted).
Similarly, in its orders requiring television broadcasters to
convert to digital television, the Commission has found that the
preservation of access to free, over-the-air television service is a
paramount goal of public importance.12 In this context, the
Commission stated:
---------------------------------------------------------------------------
\12\ See Advanced Television Systems and Their Impact upon the
Existing Television Broadcast Service, Fifth Report and Order, MM
Docket No. 87-268, FCC 97-116 (Released: April 21, 1997), para. 1
(``Fifth Report and Order''). See also Fourth Further Notice of
Proposed Rule Making/Third Notice of Inquiry, MM Docket No. 87-268, 10
FCC Rcd 10541 (Released: April 21, 1995) (``Fourth Further Notice/Third
Inquiry''), at 10541.
---------------------------------------------------------------------------
First, we wish to promote and preserve free, universally
available, local broadcast television in a digital world. Only
if DTV achieves broad acceptance can we be assured of the
preservation of broadcast television's unique benefit: free,
widely accessible programming that serves the public interest.
DTV will also help ensure robust competition in the video
market that will bring more choices at less cost to American
consumers. Particularly given the intense competition in video
programming, and the move by other video programming providers
to adopt digital technology, it is desirable to encourage
broadcasters to offer digital television as soon as
possible.13
---------------------------------------------------------------------------
\13\ Fifth Report and Order, para. 5.
---------------------------------------------------------------------------
This policy is part and parcel of the Commission's overriding statutory
mandate to ``make available . . . to all the people of the United
States . a rapid, efficient, Nation-wide, and world-wide wire and radio
communication service.'' 14 It is also a reflection of the
undeniable fact that ``broadcast television has become an important
part of American life.'' 15
---------------------------------------------------------------------------
\14\ Communications Act of 1934, as amended, Sec. 1 (47 U.S.C.
Sec. 151).
\15\ Fifth Report and Order, para. 19 (citing Fourth Further
Notice/Third Inquiry, at 10543).
---------------------------------------------------------------------------
Section 207 preemption serves to promote the preservation of free,
over-the-air broadcasting. Without complete prohibition of restrictions
on antenna placement, landlords will be free to dictate to their
tenants what video programming services they may receive and may
completely deny access to free, over-the-air broadcast service if they
so choose. By not completing the task assigned to it by Congress, the
Commission has left a gaping hole in the implementation of Section 207
to the degradation of over-the-air broadcasting which, of course,
depends on viewers being able to install and use antennas.
v. the commission has fashioned a three-part test out of whole cloth
which finds no support in the legislative history
The Commission applies a three-part test in evaluating whether to
prohibit over-the-air antenna restrictions with respect to ``common and
restricted'' areas of rental property. See, e.g., Second R&O, at para.
7 (``We find that Section 207 obliges us to prohibit restrictions on
viewers who wish to install, maintain or use a Section 207 reception
device within their leasehold because this does not impose an
affirmative duty on property owners, is not a taking of private
property, and does not present serious practical problems.'').
The Commission's creation of a three-part test in complying with
the directive of Section 207 is symptomatic of its fundamental
misunderstanding of the nature of the task before it. Congress directed
the Commission in Section 207 to adopt rules prohibiting all
restrictions that impair a viewer's ability to receive the specified
video programming services through over-the-air reception devices;
Congress did not direct the Commission to pick and choose among the
restrictions to be prohibited, yet this is exactly the result which the
Commission's application of the three-part test yields.
With respect to each element of the Commission's three-part test,
the Commission bends over backwards to avoid the straightforward
interpretation that the plain language of Section 207
compels.16 As shown below, when properly analyzed, even the
factors considered by the Commission support extension of the Section
207 rules to all viewers, including tenants in multiple dwelling units
with no access to a patio or balcony.
---------------------------------------------------------------------------
\16\ See, e.g., Chevron, U.S.A. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694, 717 (1984)
(where the meaning of a statute is clear on its face, there is no need
to divine the legislative intent from secondary sources and the agency
is bound to follow the interpretation); United States v. Locke, 471
U.S. 84, 96, 105 S.Ct. 1785, 1793, 85 L.Ed.2d 64 (1985) (``[w]e cannot
press statutory construction ``to the point of disingenuous evasion''
even to avoid a constitutional question'') (quoting Moore Ice Cream Co.
v. Rose, 289 U.S. 373, 379, 53 S.Ct. 620, 622, 77 L.Ed. 1265 (1933)).
---------------------------------------------------------------------------
A. The Commission's Construction of Section 207 to Prohibit Requiring
Affirmative Action by Landlords Misconstrues the Meaning of the
Statute.
In discussing its authority under Section 207, the Commission
concluded that it did not have authority to require affirmative actions
by landlords:
``Section 207 authorizes the Commission to remove
restrictions; Section 207 does not authorize the Commission to
impose independent affirmative obligations on a property owner
or a third party to enable the viewer to use a Section 207
device. Interpreting Section 207 to grant viewers a right of
access to possess common or restricted access property for the
installation of the viewer's Section 207 device would impose on
the landlord or community association a duty to relinquish
possession of property.'' Second R&O, at para. 35.
Because the extension of Section 207 to common and restricted areas
would entail allowing the placement of antennas in areas outside the
``control'' of tenants, the Commission reasons that this is
inconsistent with the mandate of Section 207 to (only) prohibit
restrictions. In other words, the Commission concludes it has authority
to ``prohibit'' but not to require affirmative action by third parties,
including landlords.
This reading is a hyper-technical parsing of Section 207 which
cannot be sustained. While the Commission is, of course, correct that
Section 207 does not explicitly authorize the Commission to require
action by third parties, Section 207 does require the Commission to
``prohibit restrictions'' wherever they may be found. In the face of
this clear legislative direction, there is no basis for the Commission
to refuse to carry out the directive under the guise of an
``affirmative obligations'' test of its own making.
Moreover, as a matter of regulatory drafting, it is clear that the
Commission could adopt a rule which prohibits all restrictions without
mandating any specific action on the part of multiple dwelling unit
owners, other than to obey the law.17 In the end, however,
it is clear that the Commission's concern with mandating ``affirmative
obligations'' by third parties conflates into its ``takings'' analysis.
The Commission concludes that the extension of Section 207 to all
tenants would cause landlords to ``relinquish possession'' of common
and restricted property, which, under the Commission's analysis, would
present a takings issue. As discussed below, the Commission
misconstrues controlling precedent in its consideration of the takings
issue. In any event, the Commission plainly errs by introducing a
quasi-takings analysis in its discussion of its authority to impose
``affirmative obligations'' on third parties.
---------------------------------------------------------------------------
\17\ Depending on how one characterizes the effect of a particular
regulation, all regulation could be construed as requiring affirmative
action by a third party by, for example, complying with the regulation.
This dissolves into a matter of semantics and characterization which
must give way to the clear intent of the statute.
---------------------------------------------------------------------------
No matter how one slices the issue of ``affirmative obligations,''
the Commission simply erred in misconstruing the mandate of Section
207. Section 207, properly construed, directs the Commission to adopt
rules that prohibit all restrictions, without distinguishing between
classes of viewers or the authors of such restrictions. The Commission
clearly erred in applying an ``affirmative obligations'' test and in
concluding that this test precluded extension of Section 207 to all
restrictions impairing access to over-the-air video programming.
B. The Commission Erred in Concluding that Extension of Section 207 to
Common and Restricted Areas Implicates the Takings Clause
The Commission committed plain and obvious error by concluding that
the per se takings analysis of Loretto v. Teleprompter Manhattan CATV
Corp, 458 U.S. 419 (1982), would be implicated by extending the Section
207 rules to all tenants. The Commission found:
``If we were to extend our Section 207 rules to permit a tenant
to have exclusive possession of a portion of the common or
restricted access property where a lease has not invited a
tenant to do so, the tenant would possess that property as an
``interloper with a government license'' thereby presenting
facts analogous to those presented in Loretto . . .
Under these circumstances, we agree with those commenters
that argue that the permanent physical occupation found to
constitute a per se taking in Loretto appears comparable to the
physical occupation of the common and restricted access areas
at issue here.'' Second R&O, at para.para. 39-40 (footnotes
omitted).
This conclusion is untenable in the face of the very narrow grounds
upon which Loretto was decided. Indeed, the facts of the present
proceeding--involving the prohibition of restrictions on the
installation of over-the-air antennas on common and restricted property
by or on behalf of tenants--were expressly reserved by the Loretto
court.
In Loretto, a state law provided that a landlord could not
interfere with the installation on his property of cable television
facilities by a cable operator. Significantly, the state statute at
issue did not give the tenant any enforceable property rights with
respect to the cable television installation; instead, the cable
company, not the tenant, owned the installation. This fact was deemed
dispositive by the Loretto court. The court expressly declined to opine
concerning the respective property rights of landlords versus tenants,
which is the precise issue presented here. In determining whether the
statute at issue constituted a permanent physical occupation of the
landlord's building by a third party, the court noted:
``If [the statute] required landlords to provide cable
installation if a tenant so desires, the statute might present
a different question from the question before us, since the
landlord would own the installation. Ownership would give the
landlord rights to the placement, manner, use, and possibly the
disposition of the installation . . . The landlord would decide
how to comply with applicable government regulations concerning
CATV and therefore could minimize the physical, esthetic, and
other effects of the installation.'' Loretto, at 440 n. 19.
In considering and purporting to distinguish this language, the
Commission engages in a classic example of circular reasoning.
Observing that the assumption of the hypothetical contained in note 19
was that the ``landlord would own the installation,'' the Commission
concluded that so long as the tenant owned the reception device placed
in a common or restricted area ``the landlord's or association's
property would be subjected to an uninvited permanent physical
occupation.'' Second R&O, at para. 43. This reasoning completely begs
the real question. The determinative fact in the Loretto hypothetical
was not that the landowner would own the installation but that the
cable operator would not own the installation. In other words, the
determinative fact in Loretto was that a third party to the landlord/
tenant relationship--the cable operator--would own and control the
installation.
The Loretto court expressly affirmed the ``State's power to require
landlords to comply with building codes and provide utility
connections, mailboxes, smoke detectors, fire extinguishers, and the
like in the common area of the building.'' Id. at 440 (emphasis added).
In this regard, the extension of Section 207 preemption to common and
restricted areas of apartment buildings involves the regulatory
modification of the relative rights between landlords and tenants. See
Loretto, 458 U.S. at 441 (``We do not . . . question . . . the
authority upholding a State's broad power to impose appropriate
restrictions upon an owner's use of his property.''). It is completely
inaccurate to assume that tenants stand in the same shoes as third
parties with respect to their rights in common and restricted areas.
For example, absent an express provision to the contrary, tenants have
the implicit right to access and use certain building common areas, as
a way of necessity between their ``landlocked'' unit and the street
outside. See 49 Am. Jur. 29 Landlord and Tenant Sec. Sec. 628 (1995)
(``Where property is leased to different tenants and the landlord
retains control of passageways, hallways, stairs, etc., for the common
use of the different tenants, each tenant has the right to make
reasonable use of the portion of the premises retained for the common
use of the tenants.''); see id. at Sec. 651 (``The landlord's
interference with the tenant's right of access and exist . . . may
constitute a constructive eviction, especially in case of the lease of
rooms or apartments in a building.''). Tenants are also entitled to an
implied right of necessity for the use of conduits and pipes through a
building for utility services, even if it includes some enlargement.
Id., at Sec. 632.
Similarly, in Yee v. City of Escondido, 503 U.S. 519 (1992), the
Supreme Court considered a rent control ordinance that prohibited
mobile home parks from terminating tenancies under certain
circumstances. Despite the fact that the effect of the challenged
ordinance was that tenants were allowed to occupy their landlord's
property over the landlord's objections, the Court found that the
ordinance did not constitute a compelled physical occupation of land.
The Court noted that the statute ``merely regulate[d] petitioners'' use
of their land by regulating the relationship between landlord and
tenant.'' Id. at 528 (emphasis in original). The Court went on to
explain: ``When a landowner decides to rent his land to tenants, the
government may . . . require the landowner to accept tenants he does
not like without automatically having to pay compensation. Id. at 529
(citing Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241,
261 (1964)).
Here, the extension of the Section 207 rules to all tenants would
only constitute a regulatory modification of the rights as between
landlords and tenants, which clearly does not fall within the per se
takings analysis. The extension of the Section 207 rules in this
context no more constitutes a taking than does the requirement that
landlords install fire detectors, fire sprinklers or mailboxes. Such
regulatory intrusions on the property of a landlords are consistent
with the regulated nature of the relationship and are permissible
exercised of Governmental authority.
C. The Commission Erred In Placing Reliance On What It Termed
``Practical Problems'' Of Implementing Section 207 Preemption
In rejecting the extension of the Section 207 rules to common and
restricted property in MDUs, the Commission placed great weight on so-
called ``practical'' implementation problems with such a rule. With
respect to its authority to consider implementation issues, the
Commission concluded: ``Congress gave the Commission the discretion to
devise rules that would not create serious practical problems in their
implementation.'' Second R&O, para. 7. The Commission based this
conclusion on Section 207's directive to promulgate regulations
``pursuant to Section 303 of the Communications Act of 1934.'' Section
303, in turn, authorizes the Commission to promulgate regulations ``as
public convenience, interest or necessity requires.'' Communications
Act, Sec. 303, 47 U.S.C. Sec. 303.
In so holding, the Commission erred in concluding that it
discretionary authority extended to overriding explicit Congressional
directive. Section 207 directs the Commission to adopt rules
``prohibiting restrictions'' that impair the reception of over-the-air
video programming signals. The Commission, however, erroneously
interpreted this command as if it read, ``if you think it's a good idea
and will not create practical implementation problems, adopt rules
prohibiting restrictions.''
In truth, the Commission has identified practical problems with
extending preemption to common and restricted areas. However, these
problems can be solved by MDU owners themselves quite easily if the
Commission authorizes the installation of a common antenna, as proposed
by NAB in its original comments and as approved by Commission in its
Order on Reconsideration in this proceeding with respect to landlords
that voluntarily undertake to install a common antenna. In any event,
the fact that multiple dwelling unit owners may be inconvenienced by
the extension of the Section 207 rules, or that such owners may have to
make new arrangements with their tenants concerning the use of common
and restricted areas, in no way diminishes the explicit Congressional
directive to establish rules to ``prohibit restrictions'' which impair
a viewer's ability to receive over-the-air signals.
vi. the commission is without authority to review the constitutionality
of section 207 of the 1996 act
As acknowledged by the Commission in its order accompanying the
FNPR, 18 Section 207 of the 1996 Act is mandatory. Section
207 provides that the Commission ``shall'' promulgate regulations to
prohibit restrictions which the ability of citizens to use antennae to
receive over-the-air signals. The language of the statute and the
legislative intent indicate that Congress did not envision exceptions
for specific classes of residents. Nothing in the legislative history
suggests that Congress' concern extended only to those citizens who own
their own single-family, detached dwelling. To the contrary, the
Conference Report makes clear that the Commission is required to apply
Section 207 to restrictions which ``inhibit'' reception of over-the-air
television signals.19 Private contracts, leases and
homeowner's association rules which restrict the ability of a lessee or
unit owner are impressible under Section 207. Any attempt to draw a
distinction between whether a citizen possesses a direct or indirect
ownership in a residence as a basis for determining whether the citizen
may use an antenna to receive over-the-air television service is
without support in the statute or legislative history.
---------------------------------------------------------------------------
\18\ See FNPR at para. 43 (``the statute requires that we prohibit
restrictions that impair viewers'' ability to receive the signals in
question . . . '').
\19\ H.R. Rep. No. 485, 104th Cong. 2d Sess., p. 166 (1996).
---------------------------------------------------------------------------
The Commission is without authority to declare the Congressional
mandate to be unconstitutional.20 To the extent that policy
judgments must be made concerning the scope of the regulation, Congress
has already made those judgments. Thus, the Commission must implement
the will of Congress in such a way as to ensure that all citizens who
choose to do so may avail themselves of access to the nation's free,
over-the-air television system. It is hornbook law that one who leases
real property from another possesses a non-freehold estate in the land
itself.21 This is true whether the lease runs for a term of
years, from year to year, from month to month, or from day to
day.22 Thus, the Commission's focus on whether a citizen has
a direct or indirect ownership in his residence as a basis for drawing
a legal distinction in his right to use an antenna to receive over-the-
air television signals is conceptually flawed. Section 207 requires the
Commission to ensure that all citizens--whether they own or rent--are
free to use an antenna to secure access to the over-the-air television
service.
---------------------------------------------------------------------------
\20\ FNRP, at para. 43 (citing GTE California, Inc. v. FCC, 39 F.3d
940, 946 (9th Cir. 1944) and Johnson v. Robison, 415 U.S. 361, 368
(1974)).
\21\ See Smith & Boyer, Survey of the Law of Property, 2d ed. 1971,
West, p. 16.
\22\ Id.
---------------------------------------------------------------------------
vii. there is no ``taking'' created by the extension of the antenna
preemption rules to multiple dwelling units
The ``Takings Clause'' of the Fifth Amendment to the United States
Constitution requires the government to compensate a property owner if
it ``takes'' the owner's property. A taking may involve either the
direct appropriation of property or a government regulation which is so
burdensome that it amounts to a taking of property without actual
condemnation or appropriation. A regulation results in a per se
regulatory taking if it requires the landowner to suffer a permanent
physical invasion of his or her property by a third party or ``denies
all economically beneficial or productive use of land.'' 23
It is well settled that if a regulation does not result in a per se
taking, courts will engage in an ``ad hoc'' inquiry to examine ``the
character of governmental action, its economic impact, and its
interference with reasonable investment-backed expectations.''
24 When properly analyzed, the regulation proposed here does
not constitute a ``taking'' by the Commission.
---------------------------------------------------------------------------
\23\ Penn Central Transp. Comp. v. City of New York, 438 U.S. 104,
98 S.Ct. 2646, 57 L.Ed.2d 631, reh. den., 99 S.Ct. 226, 58 L.Ed.2d 198
(1978); Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1014-15
(1992).
\24\ PruneYard Shopping Ctr. v. Robins, 447 U.S. 74, 83 (1980).
---------------------------------------------------------------------------
A. Loretto And Bell Atlantic Are Not Dispositive
The Commission requested comment on the application of Loretto v.
Teleprompter Manhattan CATV Corp.25 and Bell Atlantic
Telephone Companies v. FCC 26 to Section 207.
---------------------------------------------------------------------------
\25\ 458 U.S. 419 (1982).
\26\ 24 F.3d 1441 (D.C. Cir 1994) (``Bell Atlantic'').
---------------------------------------------------------------------------
As noted by the Court in Loretto as well as in subsequent Supreme
Court decisions, that case was decided on narrow grounds and is limited
to the specific facts of the case.27 In Loretto, a state law
provided that a landlord could not ``interfere'' with the installation
on his property of cable television facilities by a cable operator.
Significantly, the state statute at issue in Loretto did not give the
tenant any enforceable property rights with respect to the cable
television installation; instead, the cable company, not the tenant,
owned the installation.28 This fact was deemed dispositive
in Loretto; the Court expressly declined to opine concerning the
respective property rights of landlords versus tenants, which, of
course, is the precise issue here.29 The Court in Loretto
went on to note:
---------------------------------------------------------------------------
\27\ See 458 U.S. at 441, 73 L.Ed.2d at 886 (``Our holding today is
very narrow.''); FCC v. Florida Power Corp., 480 U.S. 245, 251, 107
S.Ct. 1107, 94 L.Ed.2d 282, 289 (1987) (Acknowledging, ``We
characterized our holding in Loretto as ``very narrow.'').
\28\ Id. At 339.
\29\ Id.
---------------------------------------------------------------------------
If [the statute] required landlords to provide cable
installation if a tenant so desires, the statute might present
a different question from the question before us, since the
landlord would own the installation. Ownership would give the
landlord rights to the placement, manner, use, and possibly the
disposition of the installation . . . The landlord would decide
how to comply with applicable government regulations concerning
CATV and therefore could minimize the physical, esthetic, and
other effects of the installation.30
---------------------------------------------------------------------------
\30\ Id. At 440 n. 19.
---------------------------------------------------------------------------
Moreover, the holding in Loretto was premised on the Court's
finding that the state law at issue constituted a permanent physical
occupation and deprivation of the owner's property by a third party
with no legal interest in the property. In contrast, the regulation at
issue here involves only a temporary physical occupation by one who has
a property right in the real estate. As noted above, a lease is an
estate in land.31 The Court in Loretto affirmed the broad
public power of states to regulate housing conditions in general and
the landlord-tenant relationship in particular without necessarily
being required to pay compensation for all economic effects that such
regulation may entail. The Court concluded:
---------------------------------------------------------------------------
\31\ Smith & Boyer, supra
---------------------------------------------------------------------------
Consequently, our holding today in no way alters the analysis
governing the State's power to require landlords to comply with
building codes and provide utility connections, mailboxes,
smoke detectors, fire extinguishers, and the like in the common
area of the building. So long as these regulations do not
require the landlord to suffer the physical occupation of a
portion of his building by a third party, they will be analyzed
under the multifactor inquiry generally applicable to non-
possessory governmental activity.32
---------------------------------------------------------------------------
\32\ Id. At 440 (emphasis added).
---------------------------------------------------------------------------
The regulation proposed by NAB is, indeed, a permissible regulation
of the landlord-tenant relationship. Moreover, if states have latitude
to regulate property rented by landlords, then there can be no question
but that Congress may, as it has done in enacting Section 207, impose
such restrictions on the use of property as it deems appropriate to
ensure the availability to all citizens of the nation's system of
television broadcasting.33
---------------------------------------------------------------------------
\33\ 47 U.S.C. Sec. 151.
---------------------------------------------------------------------------
The decision of the D.C. Circuit Court of Appeals in Bell Atlantic
is also irrelevant to the takings issue. In Bell Atlantic, the court
struck down two Commission orders requiring Local Exchange Companies
(``LECs'') to set aside a certain portion of their central offices for
occupation and use (``co-location'') by competitive access providers
(``CAPs''). The sole question before the court was whether the
Commission's order compelling LECs to provide co-location orders for
CAPs was authorized by statute.34 Of course, no such
question arises here because Congress, in Section 207 of the 1996 Act,
has explicitly directed the Commission to promulgate the regulation in
question. Because the FCC had no such authorization in Bell Atlantic,
the court construed the FCC's power narrowly.35 Such
construction was necessary, the court concluded, because the co-
location orders raised ``substantial'' constitutional questions under
the Takings Clause in light of the Supreme Court's holding in Loretto.
Again, the regulation under consideration in this proceeding is
distinguishable from the Bell Atlantic and Loretto facts because (1) no
``stranger'' to the owner is granted rights with respect to an owner's
property, and (2) the regulation does not authorize a permanent
interference with the owner's property interests. In Bell Atlantic, the
CAPs had no ownership or contractual interest in the land used by the
LECs for their central offices. Thus, a different takings analysis
applies to the facts of this regulation.
---------------------------------------------------------------------------
\34\ Id. at 1444 n.1 (``The only question we consider is whether
the order under review ere indeed duly authorized by law.'').
\35\ The Bell Atlantic court did not rest its decision on a Takings
Clause analysis. Id. at 1444, n.1 (``The only question we consider is
whether the orders under review were indeed duly authorized by law.'')
---------------------------------------------------------------------------
B. When The Proper Standard Is Applied, It Is Evident That No
``Taking'' Is Created By The Application Of The Proposed Rule
To Third-Party Property Owners
The Takings Clause issue is properly analyzed under the standard
set forth in the Supreme Court's decision in Penn Central Transp. Comp.
v. City of New York.36 In that case, the Court conceded that
it has ``been unable to develop any set formula for determining when
justice and fairness require that economic injuries caused by public
action be compensated by the government . . . '' 37 Whether
a taking has occurred depends largely ``upon the particular
circumstances [in a] case,'' and the process of analysis is essentially
an ``ad hoc, factual'' inquiry.38 Nonetheless, the Court has
identified the following factors which inform and guide the analysis:
---------------------------------------------------------------------------
\36\ 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631, reh. den. 99 S.
Ct. 226, 58 L.Ed.2d 198 (1978).
\37\ Id. at 124, 57 L.Ed.2d at 648 (quotations omitted).
\38\ Id.
---------------------------------------------------------------------------
The economic impact of the regulation on the claimant and,
particularly, the extent to which the regulation has interfered
with distinct investment-backed expectations are, of course,
relevant considerations. So, too, is the character of the
government action. A ``taking'' may more readily be found when
the interference with property can be characterized as a
physical invasion by government, than when interference arises
from some public program adjusting the benefits and burdens of
economic life to promote the common good.39
---------------------------------------------------------------------------
\39\ Id.
---------------------------------------------------------------------------
As recognized by the Commission in its Order accompanying the FNPR,
Congress has the power to change contractual relationships between
private parties through the exercise of its constitutional powers. In
Connolly v. Pension Benefit Guaranty Corp.40, the Court
stated:
---------------------------------------------------------------------------
\40\ 475 U.S. 211 (1986).
---------------------------------------------------------------------------
Contracts, however, express, cannot fetter the constitutional
authority of Congress. Contracts may create rights in property,
but when contracts deal with a subject matter which lies within
the control of Congress, they have a congenital infirmity.
Parties cannot remove their transactions when the reach of
dominant constitutional power by making contracts about them .
. . [T]he fact that legislation disregards or destroys existing
contractual rights, does not always transform the regulation
into an illegal taking.41
---------------------------------------------------------------------------
\41\ Id. at 223-24 (quotations and citations omitted).
---------------------------------------------------------------------------
Regulation of landlord-tenant relationships is an everyday fact of
life. Federal, state and local governments place numerous requirements
and regulations on landlords concerning the terms under which property
may be rented. Many of these requirements (i.e., provision of heat,
smoke detectors, utility hookups) require a landlord to do things or to
permit tenants to do things which affect, in some way, the property
owned by the landlord. These regulatory requirements are not
``takings'' in the constitutional sense because of the incidental
nature of the intrusion on the owner's property interests in relation
to the public interest goal sought to be achieved by the government.
The nature of the regulation required by Section 207 is analogous
to conventional regulations governing the landlord-tenant relationship.
Any intrusion into the owner's property is minimal. The right created
by Section 207 is a right given to individuals and not, as did the
state law struck down in Loretto, a right given to the video program
provider. Instead, the regulation required by Section 207 will only
give tenants and unit owners the right to install antennae to receive
video services. For an owner of a unit in a condominium or townhouse,
the ability to use such an antenna is likewise incident to the
ownership interest possessed by the resident. It is important to note
that the person for whose benefit the regulation is adopted would not
be a ``stranger'' 42 to the owner. Instead, the regulation
is for tenants who are in direct contractual relationship (i.e.,
privity) with the landlord/owner and with respect to property in which
the citizen has a leasehold right or, in the case of condominiums and
other common ownership forms, by one with an ownership stake in the
property. Although persons residing in MDUs do not generally own common
areas such as rooftops, they clearly do have interests in these areas
to the extent provided in the rental agreement, other contractual
declaration, or applicable state law.
---------------------------------------------------------------------------
\42\ Cf. Loretto (``an owner suffers a special kind of injury when
a stranger directly invades and occupies the owner's property.'')
---------------------------------------------------------------------------
The regulation is simply a minimal and temporary intrusion of the
kind which has been allowed by the Supreme Court. See Northern
Transportation Co. v. Chicago, 99 U.S. 635 (1879) (no taking where city
constructed a temporary dam in river to permit construction of a
tunnel, even though plaintiffs were thereby denied access to their
premises, because the obstruction only impaired the use of plaintiffs'
property). In PruneYard Shopping Center v. Robins, 447 U.S. (1980), the
Court considered a state constitutional requirement that shopping
center owners permit individuals to exercise free speech and petition
rights on their property to which they had already invited the general
public. In concluding that this requirement did not involve and
unconstitutional taking, the Court found determinative that the
invasion was ``temporary and limited in nature'' and that the owner
``had not exhibited an interest in excluding all persons from his
property.'' The Court noted: ``The fact that [the solicitors] may have
physically invaded [the owners'] property cannot be viewed as
determinative.'' Id. at 84. As was the case in PruneYard, the use
allowed by the regulation required by Congress here is not inconsistent
with uses allowed by the owner. MDU owners are under affirmative duties
to allow the installation of and interconnection with utility services
such as electricity and telephone. The addition of facilities to
receive over-the-air television programming is no different in nature
from these types of utility services.
What is really at issue with respect to the proposed regulation is
the purported ``right'' of landlords to exercise control over the means
by which tenants gain access to video programming. MDU owners would
like to have the ability to control their tenants' access to video
programming so that tenants will be channeled to ``approved'' video
programming sources. Not surprisingly, landlords are using their
leverage to extract additional revenues from their tenants while at the
same time excluding competing video service providers from access to
tenants in MDUs. In so doing, the owners of MDUs may frustrate the
ability of citizens to access the video programming of their choice. If
the Commission's commitment to competition and consumer choice is to
have real substance, then tenants in MDUs must have the ability to
choose the video services they desire. Landlords do not have a property
right to inhibit competition in video program delivery. Simply put,
neither Congress' elimination of this leverage from landlords, nor the
Commission's rule to implement Section 207, implicate the Takings
Clause. As the Court noted in Andrus v. Allard, regulations affecting
an owner's future profits do not constitute a taking:
[L]oss of future profits--unaccompanied by any physical
property restriction--provides a slender reed upon which to
rest a takings claim.43
---------------------------------------------------------------------------
\43\ 441 U.S. 51, 66, 100 S.Ct. 318, 62 L.Ed.2d 210, 233 (1979)
---------------------------------------------------------------------------
In sum, the rule required by Congress is a government regulation of
the sort recognized by the Court as permissible in Loretto. Viewed in
the context of the important governmental interests at stake and the
very limited impact on the property rights of affected owners, the
regulation simply does not implicate the Takings Clause of the United
States Constitution.
Thank you for providing us with the opportunity to appear today.
Mr. Tauzin. Let me disagree with you. The Chair recognizes
himself and then I will recognize other members. I think it is
more complicated than that. Let me kind of, maybe, set the
stage. I want to ask Mr. Sugrue, first of all, how many
inquiries of rulemakings are going on at the FCC right now, in
this area?
Mr. Sugrue. Well, we have a rulemaking addressing the
utility rights of way under section 224. We have got unbundled
network elements.
Mr. Tauzin. Yes. That is two.
Mr. Sugrue. That is two. Cable inside wiring.
Mr. Tauzin. That is three.
Mr. Sugrue. Section 207, over-the-air receptive devices.
Mr. Tauzin. Four.
Mr. Sugrue. I think that is it.
Mr. Tauzin. I think you are making my case for FCC reform,
to begin with but let me make the point.
We have got four proceedings going on, all in different
areas of communications services to multi-dwelling or multi-
commercial tenant buildings. Is that correct?
Mr. Sugrue. We have four proceedings----
Mr. Tauzin. Four proceedings.
Mr. Sugrue. [continuing] implementing four different parts
of the Communications Act. That is right. Yes.
Mr. Tauzin. Right. Yes. And what is so complex is that
communications are merging and converging into a single stream
of ones and ohs. Someone told me at a meeting the other day,
relax, it is just ones and ohs.
But all this stuff is going to be coming down to us from
satellites, from over-the-air, wireless, from wires into the
building. Master antennas might work for, you know, in some
cases, cable service is fine but what if the tenant wants to
get DBS service and receive a local broadcast over an antennae
and the DBS cable programming from a direct broadcast
satellite? What about that case? Where the tenant really wants
that, but there is no provision for that in the bill.
It gets really complicated. Let me take where we have been
to where we have to get and I think everybody will see the
complexity. In a monopoly provision of communication services
system, in the old telephone system where there was one
telephone company, it was kind of easy to understand. The
telephone company had an obligation to serve, therefore there
was no real deal to be cut, no sharing of revenues with the
building owner, the wires, technically, I guess, belonged to
the telephone company who had a right to put them in and, in
fact, an obligation to put them in when he was called upon to
do so.
Cable companies, emerging in this country to help avoid the
necessary of antennas or bad reception in some areas, now
delivering the broadcast channels under compulsory license,
very often under exclusive cable agreements with the
franchising authority, sort of a monopoly de facto, if nothing
else, was delivering video services through the wire end of the
home. And so the cable company owned the wire, I guess, in many
of these cases, at least to the building and perhaps even in
the building.
And all of a sudden we have the explosion of new wireless
services. As the computer merges with the wireless industry and
cellular is born and wireless video is born, satellites go up.
Now we get new satellite services. It is getting complex all of
a sudden. And then we pass an Act that says, you know, we kind
of like that. We kind of like the idea of a lot of different
people serving the customers of America and consumers having a
lot of different choices. So we passed an Act and we said we
are going to get away from these monopoly driven services. We
are going try to give cable some competition so that they are
no longer exclusively providing the video services to people.
We are going to give the telephone companies competition so
they are no longer the telephone company, exclusively
delivering the services.
And now we have got to think of a new system that works for
the building owners, for the tenants, and for the providers.
And it is complex. It is extremely complex right now. For
example, Mr. Bitz makes the point, in this new world, is it
fair to say that communications providers have a right to
deliver their services into a building, but they don't have the
obligation to do so when tenants want these services? Is it
right for the building owners to decide which of those services
are going to come in by which companies? And then is it up to
the consumers to choose which building they want to be in?
Suppose you have got to be in that building for a lot of other
good reasons but you don't have any choice except what your
building owner wants to give you?
Is it right to pass forced entry? And where do you stop
there? Do you say everybody has a right? Does everybody have a
right to that wire? Or does everybody have to run their own
wire, put up their own antennae? And how many are you going to
have? It gets real complicated. And it gets real tough for
government to end up making all of these decisions as we go
from a monopoly driven system to a competitive system where
literally everything is merging very quickly into a single
stream of high-bandwidth that is going to deliver video,
telephony, and data services all in the same package. And that
is the picture. That is the picture.
And out of it I will let you I am going to have just a
limited time, but I want you all to comment. As many of you as
want to out of it comes a bunch of questions. Should the
Federal Government make the rules? Should the States,
individual States? You made a case, some of you, a compelling
argument for a national rule. Some of you made the argument
that these are things States ought to work out. We see States
trying to work it out. Connecticut and Texas have passed laws.
Florida has just tried and ran out of time on an agreement
reached by the building owners, the property owners interest
and the communications company.
Is it okay from where we sit, having been responsible for
the 1996 Act, for us to leave it to people to agree or not
agree on whether consumers in America are going to have
competitive choices or do we have a responsibility to help make
sure that happens? You know, I kind of think we can't just sit
back and just hope it happens. You have got to maybe help make
it happen. And, if we do, if we get engaged, do we write
instructions to the FCC, as Mr. Sugrue has suggested? Guidance
instructions, clear authority, perhaps in the reform of the
FCC, putting all of this under a single place instead of in
four different bureaus?
Or do we write a national law right now that defines the
rights of the consumers in America and the rights of building
owners and the rights of telecom companies who want to get to
those consumers? It gets real complicated, Mr. Prak. I have got
a limited time, but I want you all, you sat through anything
that I have had to say, any of you want to react? And then I
will turn it over to Mr. Markey.
Mr. Prak. Mr. Chairman, I would like to just react. I guess
I was attempting to say, my piece of it doesn't have to be
complicated.
I wouldn't begin to want to get into what you were
describing because the truth is my focus is much more narrow
than that. And I don't believe my piece has to be complicated,
unless you make it so.
Mr. Tauzin. I understand. And let me also clarify
something. What I was telling Ms. Case was that I was just did
a PSA with Kermit the Frog yesterday and I pointed out to
Kermit that it must be pretty cool to have a girlfriend who
likes to mud wrestle. And he said, I have got to use that. That
is cool.
But this shouldn't be a mud wrestle. I mean, it really
shouldn't be. We ought to be able to conceive of some framework
in which this works. Is the framework just prohibiting
exclusive agreements in a competitive marketplace? Without
necessarily defining who can come and saying you can't say
nobody can come except the person I want. Is that the right
remedy? Come back to me. Mr. Bitz wanted to go first. I guess
you are next, Mr. Heatwole.
Mr. Bitz. Mr. Chairman, it seems to me that we are looking
at a situation where I didn't bring any props, so if you will
allow me to be a little impromptu the question is whether the
cup is half empty or half full. In 1996, from a competition
point of view, there was none. The cup was empty. But it seems
to me that what has occurred over the last few years is that
the cup has been filling up and maybe we are about here.
Mr. Tauzin. But what if you are real thirsty and live at
the top of the cup?
Ms. Case. It has got some rocks in it though.
Mr. Bitz. That is right. But by no means has it made the
progress that you, representing our country might like, but
that the direction is clear, is that the companies that are
sitting here with me are doing deals. It is getting into more
and more buildings across the country every day. That the
progress in your direction is quite correct and we don't need
to have more regulation to tie us up when we are already
heading where the Congress wanted us to go in 1996.
Mr. Tauzin. Mr. Rouhana wants to respond to that, but I
promised Mr. Heatwole first.
Mr. Heatwole. Here's my point, regarding----
Mr. Tauzin. Grab the mike, Mr. Heatwole.
Mr. Heatwole. Excuse me. A couple of quick points.
Mr. Tauzin. You have to have access to us. Shared access.
Mr. Heatwole. Regarding Mr. Prak, in 2 of the systems that
we own where we own the entire cable TV distribution system and
1, which is a seniors property, a 205-unit property, we provide
free, off-air access, costs them nothing. In a family property
for off-air access, we charge I think $12 a month for that
cable system.
Mr. Tauzin. Let me quickly ask you, in the contract you
were presented, you read to us, what was your quid pro quo?
What would you get? Nothing?
Mr. Heatwole. Nothing. Zero.
Mr. Tauzin. So there was no offer: We will pay you
something----
Mr. Heatwole. Nothing.
Mr. Tauzin. [continuing] to take over all this rights of
entry and----
Mr. Heatwole. It was zero.
Mr. Tauzin. Zero. How about was there an agreement to pay
any damages?
Mr. Heatwole. Well, it theoretically. Yes.
Mr. Tauzin. But there was no quid pro quo, no offer to
share anything?
Mr. Heatwole. No. We have looked at those agreements.
Mr. Tauzin. Yes.
Mr. Heatwole. But in that particular agreement, there was
nothing that----
Mr. Tauzin. Quickly, what is the difference between that
agreement, a telecom provider, and the pizza delivery man? He
drives across your driveway. He parks in your parking lots and
delivers pizzas to your customers. Can you say to the pizza
delivery community in your town, only one of you can come? Do
they all have a right to come? They are using shared facilities
to provide services and sell products to your customers. What
is the difference?
Mr. Heatwole. Well, No. 1, they leave.
Mr. Tauzin. They leave. Very good.
They leave something good behind, too.
Mr. Heatwole. Hopefully. No. 2, theoretically, I assume
that we could ban, you know, all pizza delivery drivers, you
know, to the property. You have some areas where the pizza
delivery people won't deliver, you know, because of----
Mr. Tauzin. So there are some analogies there. We need to
think about that. Mr. Rouhana. And then I will recognize my
well, Mr. Sugrue and then Mr. Markey.
Mr. Rouhana. I was going to try and address, actually, the
first question you asked. As you were making your statement,
Mr. Chairman, I was thinking, be careful what you wish for,
because you may get it.
Mr. Tauzin. That is right.
Mr. Rouhana. In the Telecom Act, I believe what you wished
for was competition.
Mr. Tauzin. Yes.
Mr. Rouhana. And people are trying to deliver it. And we
have run into a road block and so we are back saying, there is
a road block. You have asked whether this is a local or a
national issue and I think I have tried to make the point that
it really needs to be addressed on a national level because
this is a national problem. This is not something that is
happening just in one State; it is happening across the country
and the fact is that the telecommunication infrastructure of
this country is a national infrastructure and it just needs to
be there and it needs to be upgraded.
I listened very carefully during all of the presentations
by the folks representing the real estate community because I
do believe a solution to all of these problems can be crafted
and that it is possible for people to sit down, talk about
these issues, and find the right balance for legislation that
would protect both the real estate interests and ensure that an
impediment to competition is removed.
I don't think there is any doubt that that can be done. It
has been done in two States. It has certainly been done over
and over again in other utility situations. We are not
inventing something here, we are repeating a process that has
happened again and again with regard to buildings. All we are
trying to do is make sure that we deal with it rather than let
it drift. We are sitting in a very difficult position where our
infrastructure outstrips the ability of people to deliver it
today because of this building access impediment issue, so----
Mr. Tauzin. Mr. Sugrue, when are going to have it decided?
Mr. Sugrue. Well, first I just want to endorse your vision
of how complex this world is and that, for your job and mine,
we were a lot easy in monopoly days. So competition is great
except living through it until we get there.
I just wanted to note two things. One, the Bureau is
recommending to the Commission that it shortly initiate a
proceeding that pulls together threads of these different
proceedings as they affect telecommunications service providers
and addresses them in a more comprehensive manner. And the
Wireless Bureau assuming the Commission adopts it, because I
don't want to get ahead of them; we propose, they dispose but
assuming it is adopted, we will be addressing issues as they
affect telecom providers like Winstar and others in terms----
Mr. Tauzin. So you have got to pull all of these
proceedings together, if they agree to do that. Then you try to
settle them. And how long does all that take?
Mr. Sugrue. The notice initiating that proceeding should
hopefully be out next month and then, by the end of year I
would hope or early next year, have an order out resolving it.
And I just wanted to note that, while there are four
proceedings, you are really talking about two bureaus and you
have them both here before you, so we will try to----
Mr. Tauzin. There are four proceedings, but two bureaus
involved.
Anyone else before I turn it over to Mr. Markey? Mr.
Windhausen.
Mr. Windhausen. Mr. Chairman, you asked what your
responsibility is now at this stage. And I think there is a
responsibility for Congress to clarify this situation. Perhaps
the best way I could the best language I have used or I have
heard used is by an editor for the Baton Rouge Advocate that I
met with just a couple of days ago.
Mr. Tauzin. Careful now.
Mr. Windhausen. And his suggestion was: So what you guys
are really looking for is to nudge the market along. And I
think that is exactly right. With regard to this building
access problem, the statutory language just doesn't clarify,
doesn't go far enough to really deal with it for certain. And
if we could just have legislative language that would establish
the tenant's right to choose the provider that they want, then
the CLECs will go and we will negotiate a deal with the
landlord. We are not looking for free entry, forced access that
was referred to earlier. We just want to be able to have the
right to provide service and then we will work something out.
There has been discussion as well about the number about
residential competition in Congress and why don't we have more
residential competition. I think it is important to point out
that 30 percent of residential consumers live in apartment
buildings. If we don't take some action to deal with this
problem that you could well be writing off those 30 percent of
the public and saying, sorry, you don't get the choices that
everybody else gets. That is why it is very critical for
residential competition as well.
Mr. Tauzin. I want to recognize Mr. Markey. You just put on
the table the question: If we should provide legislative
instructions that consumers have a right to multiple choices,
does that abrogate existing contracts, exclusivity contracts?
Do we have a right to do that? Is there a problem under
whatever that Act Mr. Dingell always talks about where the
government gets sued--Tucker. The Tucker Act. Are we going to
get sued? Mr. Markey.
Mr. Markey. Okay. Thank you. Mr. Bitz, does your
association believe that exclusive access deals are okay?
Mr. Bitz. No. We do not support exclusive access. Our
industry association has repeatedly stated we believe in a
competitive marketplace. That implies multiple providers in any
circumstances, Mr. Markey.
Mr. Markey. Okay. Do you agree with that Mr. Heatwole?
Mr. Heatwole. I'll speak individually.
Mr. Markey. Yes. You are speaking for the whole
association, is that correct, Mr. Bitz?
Mr. Bitz. Yes.
Mr. Heatwole. They don't know what I am going to say, so I
will speak individually. If it is okay, then they will well
done. In a perfect world, you would certainly want free and
open access by anyone. From a very practical standpoint, as we
pointed out, if you have a small local provider who may have
the best of the Internet connection, the phone connection, and
the cable TV connection, they may not be able to borrow the
money to put in the system or the distribution system onsite
required if the bank knows that they don't have 1-year, 2-year,
3-year, whatever the period is, contract. In that instance,
what you have done is you have, de facto, opted to the large
incumbent provider. Second----
Mr. Markey. Well, Andy, no. We have said to the smaller
guy, find a way of being able to compete.
Mr. Heatwole. But he may be able to.
Mr. Markey. See we look at it, Mr. Heatwole, from the
perspective of the tenant, okay. Our goal is to make sure that
your tenants have the lowest possible Internet, cable,
telephone long distance price. That is our objective. So if
there is only one person in, then, obviously, that person is
not going to be under the pressure to lower the price on all of
those other services.
Mr. Heatwole. My point is that the one person with the
lowest price may be the small provider who, without an
exclusive contract, does not have the capital that many of
these other larger companies have and, consequently, he is
excluded from providing the lower price and you have, de
facto----
Mr. Markey. I understand that, Mr. Heatwole.
Mr. Heatwole. And, second----
Mr. Markey. I have just got to move on. I apologize, Mr.
Heatwole. The big point that we are trying to make here is that
we want the marketplace to determine what the lowest price is,
not a predetermined exclusive contract to determine that.
Because we are not sure that that deal, over a period of time,
winds up with the lowest price because of the innovation and
the change. And that is why we like your association's
perspective on this, okay. And so we will just stick with this
because it seems to be something that we can work with. And it
is only that I have limited time that I have to move on and I
apologize to you, sir.
In Massachusetts, Mr. Burnside, what has happened where you
are able to compete, to cable rights, to other rights?
Mr. Burnside. Well, a couple of interesting things, Mr.
Markey, have happened. One example in Massachusetts, in 1998,
when Time Warner announced a 12 to 15 percent price increase
across the board, they exempted one community, the first
community that RCN had actually established service in, and
said that that community would not have a price increase
because Time Warner faced a competitive situation. So it is
pretty clear. And we could look to other examples in New York
where we have seen bulk discounts, perfectly acceptable from
the market standpoint, bulk discounts offered in MDUs where RCN
has been able to build its service. So, clearly, prices do come
down.
And I might add that it has been our experience that, in
addition to prices coming down, the pie tends to get larger. We
heard that 67 percent of the homes passed take cable service.
We have experience in markets where in fact, there is one in
particular in eastern Pennsylvania where we own a cable system
that is completely overbuilt by a competitor. And there the
penetration rates exceed 90 percent. So the pie gets bigger,
keeping the local licensing authorities whole.
Mr. Markey. Okay. So when we in Congress preempted all of
the exclusive contracts that municipalities had granted to the
incumbents, it made it possible for RCN to come in, then, and
begin to match or lower the price that was being offered by the
incumbent cable company for the benefit of consumers across the
company.
Mr. Burnside. That is it exactly. Exactly.
Mr. Markey. So, Mr. Sugrue, do we have to legislate it all?
Are there any changes you think we have to make in order to
give you the authority you need in order to, you know, get to
the point where you can have the power that these companies can
offer the integrated telecommunications services that are
scattered now throughout the Telecommunications Act?
Mr. Sugrue. I think on the question of building access, the
issue we have been principally debating today, legislation
would be helpful. The Commission hasn't ruled really one way or
the other with respect to telecom services whether it has the
jurisdiction under the present law. But it is at least, as you
can tell from the debate--and I have gotten white papers and
constitutional scholars coming in on each side of this--that it
is open for debate right now.
Mr. Markey. And, finally, has a tenant ever been denied,
Mr. Bitz, service from the telecom or cable provider of their
choice, to your experience?
Mr. Bitz. Well, I can only speak for the company that I
work for, sir. We have never had a situation that I am aware of
where, as a result of the landlord's business decisions, the
tenant has been denied their choice of telecommunications
provider. In many cases, the tenants actually go direct to
telecommunication service provider, independent of us. And I
can't speak as to whether or not they have been turned down,
although I would suspect that is the case because we have many
small tenants who would not be necessarily attractive business
targets for the telecommunications industry and smaller
buildings that I know where we have tried to encourage the
telecommunications industry to actually provide service and we
have been turned down by various companies.
Mr. Markey. Finally, Mr. Rouhana, have you ever been denied
access to customers in MDUs that would want access to your
service?
Mr. Rouhana. Rarely, but it happens. It does happen.
Mr. Markey. And what is the reason why you are denied?
Mr. Rouhana. I have never really been able to tell. I mean,
the fact is that when you are dealing with a landlord, you are
dealing with an absolute authority. So they don't have to tell
you. They have no responsibility to respond even. So, in the
cases where we have not gotten into the buildings, it has been
because we have gotten little or no response from the people in
charge.
The problem is there are so many landlords. If they were
all like the people at this table, we wouldn't have a problem.
They would all already have us in there. So that is really the
issue. There are so many of them.
Mr. Markey. Let me ask Mr. Windhausen to finish up on the
question.
Mr. Windhausen. Thank you, Mr. Markey. Yes we do have
several examples where customers sought to receive service from
a particular CLEC and were told by the building owner, no, I am
sorry. The building owner said I have an exclusive deal with
one provider. That is your only choice. And we have those
examples from wireless companies and wire-line companies who
tried to provide service and the building owner has said no.
Mr. Markey. Okay. Thank you, Mr. Windhausen.
Mr. Tauzin. Thank you, Mr. Markey. I wanted to welcome the
vice chairman of the committee, Mr. Oxley, to the hearings and
recognize for a round of questions the gentlelady Ms. Cubin.
Mrs. Cubin. Thank you, Mr. Chairman. I am from Wyoming and
recently held a community hearing on placing towers for
cellular telephones and the biggest thing, the biggest issue
was private property rights. And I want to tell you that
private property rights in Wyoming means something different
than they do in Washington, DC. And when you are talking about
placing a tower somewhere, it is a lot more personal when you
are talking about requiring someone on the place where they
live, the landlord, it seems like it is much more of a
violation to the private property rights of someone in Wyoming.
And I would like to ask you, Mr. Rouhana, on the issue of
private property rights, you suggest that the issue of access
should be addressed at the national level. Now is that
exclusively to provide some companies with--well, companies
like yours--with a seamless business plan?
Mr. Rouhana. Well, I think I will just have to go back to
the very beginning. It seems to me that what we are trying to
do is to create competition and the issue that is preventing us
from getting to the buildings, which is where the customers
are, is this access issue. Now this is in a multiple dwelling
environment, not in a single family home, so certainly we are
not advocating that.
Mrs. Cubin. We have those.
Mr. Rouhana. I know you do. And we are certainly not
advocating that. And private property rights--I mean, what is
there that is more important, frankly, than that? But this is,
as I said, I think over and over again, not the first time this
has happened. What we are talking about is a situation where
people have congregated. They are in buildings that are owned
by others. And those others are standing between the people in
the buildings and those who they want service from and they are
preventing that from happening. So, clearly, there has got to
be a balance of these interests.
Our proposal, I think, tries to take that account and, in
particular, has all kinds of safeguards built even in that case
to make sure that this is not an abusive process. We don't want
to take anything. We want to give something. We want to give
the services that these tenants have been asking for, that they
need. I don't want their buildings. I just want to give the
tenants the service. And we are even willing to pay for it, so
it is not even a question of asking for access for free. We are
more than willing to pay a commercially reasonable rate.
Mrs. Cubin. Well, what this reminds me of, if you will
forgive me, is the Endangered Species Act, you know, where you
lose the ability to use your land because there is potentially
an endangered species on there. They are not taking your land
away, but you can't use it. So, you know, there are certain
rights that go along with owning property.
I wanted to ask you, too, you are talking about the person
that stands in between, the landlord, getting the residents
what they want and the providers providing it. Are any of you
aware of any circumstance where a building owner or a building
manager actually has been paid to prevent someone else from
coming in? Because I can see that that would be a problem.
Anyone who wants to answer that.
Mr. Windhausen. There are many examples of landlords and
building owners granting exclusive contracts to one single
provider.
Mrs. Cubin. Right.
Mr. Windhausen. And, as a part of that agreement, the
landlord agrees to be paid by that exclusive provider and the
agreement is that the landlord will then prevent any other
competitor from serving that building. I mean that is part of
an exclusive contract.
Mrs. Cubin. Right. But what I mean is that if someone else
wanted to negotiate the same kind of contract with that
landowner or that landlord, are there instances that anyone of
you know of that that wasn't allowed or they just weren't
interested or--any?
Mr. Windhausen. That is exactly what happens with an
exclusive contract. Another CLEC will come in and say I just
want the same deal that the other guy is getting and the
landlord has said no.
Mrs. Cubin. Mr. Rouhana--or anyone who wants to answer this
I really think, as a general rule, that situations that have
problems are better addressed at the State level. And I am sure
you have reasons to think that they should be addressed at the
national level rather than the State level. Could you tell me
what they are?
When I came in here, I was--you know, I just thought we
have to protect private property rights. Well, now I am
confused. Now I honestly know that there is something in
between here. I am just trying to find what it is and I am not
going to find it out here today. It will take a lot of time and
work.
Mr. Rouhana. Well, I would say there are really two big
reasons that I think it is appropriate to try to do this
nationally. First of all is just the Telecom Act itself, you
know, is a national Act and the entire imperative behind it is
to try and create for the country an infrastructure that will
be equally distributed across the country and will be available
across the country. So I think solving the problem nationally
will at least ensure that, to the maximum extent possible for
money and dollars will flow evenly across the country to the
extent it can.
Second, our experience has been that where State Acts exist
and we attempt to use and we are dealing with a national
landlord, they can sometime take it out on us in another State
without similar kinds of rights. So we can find that is a way
to sort of freeze the effectiveness of the State law by, you
know, making it clear that if you try to use the State law in
this State, we will make it hard for you in another place where
they don't have this law. And so it is a little more
complicated than just a State-by-State analysis.
Obviously, we will continue to work with the States have we
have. And, frankly, we will continue to do this one building at
a time because we have to. But I think it would be better in
terms of the attempt to get a complete infrastructure out there
that is competitive, if we had a national solution. I think it
would happen more quickly for everyone that way.
Mrs. Cubin. Thank you, Mr. Rouhana.
Mr. Tauzin. Thank you. Go ahead, Ms. Case.
Ms. Case. I see absolutely no----
Mr. Tauzin. Pull the microphone to you.
Ms. Case. I have never needed a microphone. Exclusivity--as
a property owner, there is nothing wrong with exclusivity. I am
providing--you already know so I can--I am providing you with
your home. If I engage into a contract that provides that
provider an exclusive right, then I am taking the risk, if I
get paid or if I don't get paid. I can tell you that we don't
have, currently, any contracts that are exclusive for service.
But I will allow our managers to exclusively market a provider.
Now if a resident is dissatisfied with that provider, I lose.
My contract needs to have customer service obligations in
there.
I am the one who loses the resident. If I get paid money up
front, if I get paid on an ongoing basis, I will lose. There is
no amount of money that could bring our company to higher
levels than rent. And that is what we are in the business to
do.
Mrs. Cubin. Well, while I generally agree with that, in
Wyoming it is not just so simple as okay I am going to move out
of your building into somebody else's.
Mr. Tauzin. Unless you get a tent.
Mrs. Cubin. Yes.
So, you know, in theory I agree, but----
Mr. Tauzin. Thank you, Ms. Cubin. I think Mr. Prak--you
have got a few who want to comment before I move on.
Mr. Prak. I was just going to respond from the perspective
of over-the-air, free, over-the-air television, that there is a
national interest and that I would think that you could
harmonize your views with respect to privately owned property,
as I have, and in the same way that the Supreme Court has, by
looking at some of these regulations as akin to local laws and
Federal laws that require access to utility connections, mail
boxes, smoke detectors, fire extinguishers, all of these things
that are required. A mail box is required by Federal law.
At one level, one could look at them as some kind of
infringement upon private property rights. Our Supreme Court
has interpreted the Constitution otherwise.
Mrs. Cubin. I just want to make one more statement now. You
know, I am really torn here because we were talking about
local-to-local TV with some industry broadcasters and they
said, well, they will only be serving in the next few years the
top 70 markets. Well, the largest market in Wyoming is 196 and
the next one is 199. So I am thinking, well, okay, if we are
going to across-the-country, nationally provide or make
provisions that everyone can have access, then maybe every
single citizen in the country deserves the right to have
everything that everybody else has, so maybe we shouldn't be
looking at Wyoming at 196 and 199. Maybe we should just say,
okay, industry, build it.
Everybody is entitled to mail a letter for the same price.
Everybody is entitled to telephone service. Everybody is
entitled to electricity. Get them the telecommunications
services, too.
Mr. Prak. I guess what I would say in response,
Congresswoman, is that the folks I represent are in the process
of trying to do that right now. We are in Wyoming and, by
golly, we are going to cover it all with a digital signal.
Mr. Tauzin. Don't mess with Wyoming, any of you. I am
telling you.
Mr. Prak. That is right.
Mr. Tauzin. Thank you. If you have other responses I will
have to move on--maybe you can get your points in with other
members. Let me recognize the gentlelady from California, Ms.
Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman, for holding this
hearing. It is fascinating. As I have listened to not only
everyone at the table offering their testimony, but members
asking questions I leaned over to my distinguished colleague
from Pennsylvania and said, I think that we are national
referees sometimes. So we have got to come up with a solution
on this. But first I want to start with Mr. Burnside. I just
can't resist this. Do people tell you that you look like Robin
Williams?
Especially when you smile. Look at that. And he does wear
glasses sometimes.
Mr. Burnside. You are not the first.
Ms. Eshoo. Okay. Okay. Great. Well, I had to get that in. A
little levity. For those that haven't seen his face, if you can
turn around now.
Mr. Tauzin. You ought to hear the number of people who ask
Robin Williams if he looks like Mr. Burnside. It is amazing.
Ms. Eshoo. Right. Yes. Let me start out with Mr. Bitz. In
your testimony, you pointed out that your residencies are
providing competitive options for tenants and it has been
mentioned before that BOMA supported a bill that nearly passed
in the Florida legislature. Do you consider that a model? And,
if so, would you support a federally modeled bill from that
piece of legislation that is pending in the Florida
legislature?
Mr. Bitz. Well, perhaps, like many families, we don't
always agree within our family and, at a national level, BOMA
disagreed with what the local chapter entered into.
Ms. Eshoo. And what was your disagreement?
Mr. Bitz. Our position is that we are not in favor of any
mandated access, even on a negotiated basis.
Ms. Eshoo. But once you get beyond that. I mean, that is
like the developer going in and saying 1,000 homes and then
when they have to sit down and negotiate with the planning
department, then the powers to be they will say, okay, we will
do 720 units. So, you know, what is your next position?
Mr. Bitz. You heard my next position, which was this goes
to the heart of, in our opinion, of owning real estate because
private property rights are very important to us and we believe
we are meeting the Nation's telecommunications objective as an
industry. I, in a somewhat humorous fashion, used my glass of
water to point out that progress has been made, dramatic
progress has been made, about the number of service providers.
We believe that that will continue. It is a very positive
trend. We support that.
But we don't want the government forcing us to have to deal
with people that we may or may not otherwise deal with in a
free-market environment. We support the free-market environment
and we support the competitive environment that we are in. We
believe that works for our tenants.
Ms. Eshoo. Do you charge people to have access to the
services?
Mr. Bitz. Yes.
Ms. Eshoo. And, if so, do you have----
Mr. Bitz. The agreements we have, including with my
colleague next to me----
Ms. Eshoo. Do you have fixed rates? Or does the association
help set them?
Mr. Bitz. No, these are individually negotiated between
individual companies and telecommunications service providers.
Ms. Eshoo. What is the range? What is the range that you
charge?
Mr. Bitz. Well, I would say it would vary from like $100 to
$500 a month for a site. It depends on the size of the
building. I mean, a small building, obviously, is worth less
than a much larger one. We do not, in my company, have really
huge buildings. We are here in Washington. They are of medium
size. So I can't speak for, you know, major buildings in New
York. But that is our company's experience.
Ms. Eshoo. So it is anywhere from $500 a month on up.
Mr. Bitz. On down.
Ms. Eshoo. Oh.
Mr. Bitz. It is not a lot of money from our perspective,
Ma'am.
Ms. Eshoo. So a provider would pay anywhere from $500 on up
or down for----
Mr. Bitz. Down.
Ms. Eshoo. Down. The high is $500 a month?
Mr. Bitz. That is correct. That is right.
Ms. Eshoo. And what is your cost for charging that $500 a
month?
Mr. Bitz. It is impossible to identify a separate cost. It
is like, when we build a building----
Ms. Eshoo. It is just the cost of----
Mr. Bitz. It is just we are you know, these things are
multi-billion-dollar properties.
Ms. Eshoo. [continuing] providing a space.
Mr. Bitz. That is correct, Ma'am.
Ms. Eshoo. In your association, how many players are there?
I am just trying to get a handle on how much is involved here.
I have a sense that it is a lot.
Mr. Bitz. Well, the commercial office building industry, we
have 17,000 members who are in our association. I don't know--
--
Ms. Eshoo. So of the 17,000 how many people would be----
Mr. Bitz. There would be hundreds of companies.
Ms. Eshoo. There would be hundreds.
Mr. Bitz. Hundreds of companies.
Ms. Eshoo. And are the 17,000 buildings? 17,000 members.
Mr. Bitz. 17,000 members.
Ms. Eshoo. How many buildings do you think there are?
Mr. Bitz. If there is not pushing 1 million office
buildings in the United States of every description, I would be
surprised.
Ms. Eshoo. So 1 million and how many do you think are in
the $500 range a month?
Mr. Bitz. I couldn't answer that question, Ma'am. I have
never seen any statistics.
Ms. Eshoo. Anyone have any idea? Yes, Mr. Windhausen.
Mr. Windhausen. Well, I am sorry, I don't have the answer
to that specific question, but I would like to say that, in my
testimony, that we have a number of examples of building owners
charging thousands of dollars per month, up to and exceeding
$10,000 per month. So not all the companies are as farsighted
as Mr. Bitz in only charging $500. It is really a much bigger
problem.
Ms. Eshoo. Mr. Chairman, I think there is something in my
background legislatively where we developed--you know, we
worked together on this and you were key in the passage of it
of uniform standards across the country in another area. There
is no question in my mind that there are private property
rights that come in and around this, that we bump up against
our magnificent Constitution.
But it seems to me that it is an area that does cry out for
some kind of fair--of course, that is in the eyes of the
beholder--something reasonable that--because this is all over
the map. I mean, it is catch-as-catch-can. I think that people
that live in the buildings, use the buildings, I know people in
my district are still acting where is the competition of the
Telecom Act that you touted in working on that. So I do think
that this is an area that we are going to have to look at some
kind of legislative solution. Obviously, we are not going to
come up with it today, but in listening to people, this is--I
think that we are going to be faced with it.
It is complex, obviously. But unless the parties come
together and say we have a solution--and I would encourage
that. It doesn't sound like there is. But if there isn't. If
you don't get together, I think that the Congress may very well
step in and I have said to people before do you really want the
Congress in this? Well, we will see. But if you can't come up
with--I think that you can even though you didn't want to state
what a solution might be, I think that is good for openers.
I would urge you to try and come together to draw up
something voluntarily. But, if not, then I guess we will jump
into it.
Mr. Markey. Will the gentlelady yield?
Ms. Eshoo. Sure. I would be glad to.
Mr. Markey. I thank the gentlelady for yielding. You know,
most of the telecommunications legislation that has moved
through Congress is driven by the personal experiences of
members as well. And, you know, the gentleman from North
Carolina here, Mr. Prak, he is right. Which apartment owner was
saying in the 1950's and 1960's and 1970's and 1980's, I am not
going to have an antennae on the top of my apartment building
and I am not charging my tenants anything, so it wasn't any big
deal to have an antennae on top of the roof, obviously.
And then a new phenomenon occurred, as we know, and there
is nothing that frosts me more than to be in a hotel room of a
hotel that never--that you used to make phone calls from that
used to cost, if you made a local call, .30, .50. And all of a
sudden to find out that the ten local calls you make now cost
you $1 just to access the phone and then still only .30 to the
phone company, right?
Ms. Eshoo. The tax is cheaper than that, than the local
call.
Mr. Markey. No, it is not just the tax----
Ms. Eshoo. No, the bed tax.
Mr. Markey. It is the hotel break up, okay. It is the
sharing of this profit that, you know, they now get .75 or .50
for every phone call, Ookay? Now that is fine, okay? You are a
captive, you know. But now you have got one-third of all
Americans in apartment buildings. So the higher this fee is
that an apartment owner can charge is the higher the rates have
to be that the competitor has to charge in order to provide
these services. So there is a balance that has to be struck
here because, obviously, everyone is in an apartment building
as a captive.
So, yes, we have moved from this old Mr. Prak area where
people said, yes, we are going to provide it or the old Bell
system, the old era to this new era where now it is a profit
center, you know? And we are also trying at the same time to
drive telecommunications revolution into every room that people
in our country live in as well. So it is a balance and we just
have to strike it but it is our own personal experience that
helps to animate the debate.
Ms. Eshoo. Can I reclaim my time now?
Mr. Tauzin. The gentlelady--now let me explain how this
works. The gentlelady controls the time. I have been generous
with time because I was pretty generous with myself. And the
gentlelady controls it. If you want to address these comments,
the gentlelady recognizes you and you can address them. The
gentlelady has the time.
Ms. Eshoo. Thank you very much, Mr. Chairman. And I thank
our ranking member for making the points that he made too. I
love to tease him, but he is a brilliant and witty mind here
and we can't do without him.
Mr. Tauzin. Well, don't go too far.
Ms. Eshoo. And you too, Mr. Chairman. You, too, absolutely.
There has been testimony, and legitimately so, relating to
businesses and what they receive, what they should receive, how
they receive it, the competition, all of that. What about the
residential buildings? I mean, if Congress were to provide
access, what assurances are you prepared to give us that the
residential customers will be served as well?
Mr. Heatwole. In Virginia, you are barred by the Virginia
Residential Landlord Tenant Act from charging an access fee
simply to get on the property. You cannot charge $500 or $1,000
or $10,000. You can, if there is a quid pro quo. I have paid to
put the lines inside the building. What will you pay me to rent
the lines? I am providing space and a building for a
distribution system. My staff is providing advertising and
actually signing up your customers. For providing those
services, we can negotiate a reasonable fee for those services.
But as far as simple access, give me $1,000 or you can't come
on my property, in Virginia, on residential properties, we
cannot do that and we don't do that.
Ms. Eshoo. Thank you very much. Mr. Rouhana and Mr.
Burnside, maybe.
Mr. Burnside. Well, obviously, our business, our
marketplace is the residential communities and I would just
make the point that throughout the 1996 Act, you consistently
use the word ``competitively neutral,'' ``nondiscriminatory.''
And I cannot see anything in exclusive contracts or mandatory
access laws when used to claim exclusive ownership of wire
otherwise inaccessible in that last mile that could be possibly
described as competitively neutral in any way, shape, or form.
So I think you certainly have----
Ms. Eshoo. You are saying the words of the Act support the
question or the answer to the question I just posed?
Mr. Burnside. Words of the Act in sections of the Act where
those words are used reflect the spirit of the Act.
Ms. Eshoo. So is the spirit catching, though? I mean, do
you think this would----
Mr. Burnside. I would agree that it is catching on.
Ms. Eshoo. Okay.
Mr. Burnside. But we still have some ``I''s to dot and some
``T''s to cross in some corrective legislation, I believe.
Ms. Eshoo. You really do look like him.
When you smile, it really gets----
Mr. Rouhana.
Mr. Rouhana. How do you follow Robin Williams? That is my
question.
Ms. Eshoo. I know. We are going to find someone that you
look like.
Mr. Rouhana. All right, well, let us not go there.
I may not like what you do. The answer to your question is
we are primarily focused on the business community, but as we
build out our network, we are going to end up with line-of-
sight from our hub sites to literally thousands of multiple
dwelling units. The easier it is for us to get into the
commercial marketplace, the faster we are getting to the local
marketplace. It is that simple. It is a simple equation. If it
is harder for us to go and it takes us decades to get to the
commercial marketplace, we can't go to the residential
marketplace until we get there because the economics don't
allow us to do it. RCN is primarily focused on residential.
But what I am saying about Winstar is true about all
competitive carriers. The faster we get established and have
the critical mass to be able to service customers, the faster
we are bringing this service to people. We didn't go into
business to be small. We went into business to be big, to serve
as many people as we possibly can.
The impediment to getting there fast is this building
access issue. I have said it over and over again. And you were
quite right when you said there is something big going on here.
We have a million negotiations to do to get into the commercial
buildings. How can we do this in less than a decade or two
without some kind of framework? It won't happen any other way.
Ms. Eshoo. I think you have made excellent points. Thank
you to you all. I just wonder when several industries are going
to have more women at the top. This is really interesting.
Well, I guess it is great that there are women on this side of
the table.
Mr. Tauzin. Absolutely. It is a good balance, I think over
here you have got going. Let me thank the gentlelady.
Ms. Eshoo. Thank you.
Mr. Tauzin. One of the things that--as I go to Mr.
Pickering--I will probably want to submit in the form of
written questions: How much disclosure occurs where there are--
you know, to tenants? How much disclosure occurs to the tenant
that you only have these services, you don't have a right to
choose other services? And what is being charged for access?
And whether disclosure--you don't have to answer that now. I
just want to put it on the table because it is a question that
other members have whispered to me.
The gentleman from Mississippi, Mr. Pickering.
Mr. Pickering. Thank you, Mr. Chairman. And I want to
commend you for having this hearing. This is a very important
hearing. As someone who worked on the other side on Senate
staff then, as I have said before, lost my influence when I
became a member, but did work for too many days and too many
years and too many hours on the Telecom Act, knowing the
various debates.
Mr. Tauzin. Mr. Pickering, you might tell them who you
worked for on the Senate side.
Mr. Pickering. I worked for Senator Lott on the Senate
side.
Mr. Tauzin. Imagine what a come-down that was.
Mr. Pickering. But I have worked with Mr. Windhausen very
closely as he worked with Senator Hollings at that time. And it
is clear that our intent and the spirit of the Act was to have
a competitive policy and competitive access. This is a classic
case where we have to balance the property rights, the
constitutional property rights, with individual rights of
access to information and technology.
We are going from a one-wire world and model to a multiple
network, multiple technology, from wireless to other wire
lines, whether it is electric utilities or cable companies or
traditional telephone company.
The access question, especially when you put it in the
context of one-third of the U.S. population is in a multi-
tenant building, this is something that we have to address and
hopefully we can resolve. I was hoping that maybe Florida came
up with an appropriate balance. I understand your position
today, but I think, Mr. Chairman, that is something that we may
want to look at.
Let me go quickly, though, to FCC authority, Mr. Sugrue.
Because some would argue that you have existing authority to
address this question and I just want to we gave you broad
authority under the Act to eliminate all barriers to
competition. If you look in section 224, access to utilities
right of way for the provision of telecommunications services;
section 706, to promote the deployment of advanced services;
section 207, prohibits restrictions on devices designed for
over-the-air reception of video programming, which--any
restrictions that could appear under that section.
Do you believe that you have additional authority or the
general authority to address this issue? If so, what are your
plans for addressing it? And does the Wireless Bureau have a
proposal or are they in the process of putting a proposal
forward on this issue?
Mr. Sugrue. To start with the last question first, and I am
just going to work back, the Bureau is, as I indicated earlier,
proposing that the Commission initiate a proceeding to address
these issues: building access, both building access with
respect to conduit and wire control by the utility and those
issues that are the focus of today's discussion, which is
principally access to those parts that building and wiring
controlled by the building owner.
Again, assuming that the Commission adopts the Bureau's
proposal, we would launch that probably in June. We are
targeting the June meeting on that.
Mr. Pickering. Since you are doing a proposal, is the
correct interpretation in your view that the FCC has the
authority to address building access?
Mr. Sugrue. Not necessarily. One of the principal issues to
be discussed is just the scope and extent of the Commission's
authority. The Communications Act does not, even with the
amendments in the 1996 Act, does not explicitly address this.
There is longstanding Supreme Court law of supporting the
Commission's exercise of what the court has called ancillary
jurisdiction, jurisdiction that derives from the purposes of
the Act and----
Mr. Pickering. The intent.
Mr. Sugrue. We sort of put it together from different
parts. The parts that you cited, undoubtedly, would be the
parts we would cite were we to proceed on that. As to whether
we need legislation, it would save a lot of time, effort, and
sleepless nights for us if the Congress were so inclined to
tell us: FCC, go this far. Don't go any further than this. And
just what the standards would be. Because, from the debate here
today, what you heard today is really almost a microcosm of
what we have heard and are going to hear, I am sure, in the
next few months.
Mr. Pickering. Mr. Sugrue, I would appreciate it if, as you
move forward within the FCC, that you would also provide
recommendations to Congress of what we need to do that would be
helpful in bringing about the objectives of the Act.
Mr. Sugrue. Thank you.
Mr. Prak. Yes, Mr. Pickering, if I may, I just wanted to
respond by saying, at some point, Congress may need to provide
encouragement to the Commission to exercise the authority it
already has. I don't know if you were here for my testimony on
the 207 issue regarding over-the-air broadcasters, but it
strikes me that when Congress passed the Telecommunications Act
which contained section 207, it made a judgment about that
Act's provisions' constitutionality and its harmony with the
Fifth Amendment. And now when we go before the agency in a
rulemaking proceeding and we are revisiting Fifth Amendment
issues that had been addressed by the Congress or we would
contend had been addressed by the Congress, that, at some
point, before it is litigated, somebody has got to go ahead,
belly up to the bar, and move on.
Mr. Pickering. Let me just add, Mr. Sugrue. In the
structure of the bill, the Telecommunications Act, we tried to
provide you with the flexibility to achieve the objectives of
the Act. And we gave you pretty broad authority. Sometimes we
wish we could take that back.
Mr. Tauzin. Oh, yes.
Mr. Pickering. But I do think that we gave you the broad
authority and the flexibility to address these issues.
Mr. Sugrue. Thank you. I appreciate that.
Mr. Tauzin. Thank you, Mr. Pickering. At this point in the
record, I want to note that we have received testimony from the
Public Utility Commission of the State of Texas, which is State
that has passed legislation. And, without objection, they have
asked that we make it part of our record. It is so ordered.
[The prepared statement of the Public Utility Commission of
Texas follows:]
Public Utility Commission of Texas
Austin, Texas 78711-3326
May 11, 1999
The Honorable W.J. ``Billy'' Tauzin
Chairman, Subcommittee on Telecommunications, Trade and Consumer
Protection
Committee on Commerce
U.S. House of Representatives
Room 2125, Rayburn House Office Building
Washington DC 20515-6115
Dear Representative Tauzin: I am sorry that I am unable to join you
for the May 13 hearing on building access issues for facilities-based
local telecommunications service providers. I hope you will allow me to
share a few brief thoughts on how these issues have been handled here
in Texas.
While incumbent local exchange companies have had access to multi-
tenant buildings for years, facilities-based competitive local exchange
companies (CLECs) trying to compete for those customers do not always
had the same level of access. Without building access on the same terms
and conditions as the incumbent local telephone company, new
competitors face a significant competitive disadvantage to serve
building tenants and the goal of a competitive market is stalled.
To further competition in the local telecommunications market, the
Texas Legislature amended the Public Utility Regulatory Act of Texas
(``PURA'') in 1995 to add two sections on building access:
Section 54.259 prohibits a property owner from preventing or
interfering with a telecommunications utility's installation of
a service requested by a building tenant, discriminating
against a telecommunications utility with respect to
installation, terms or compensation issues, and requiring
unreasonable payments in exchange for access to the property.
These provisions assure that building access and rental charges
are assessed equally on all telecommunications service
providers.
Section 54.260 allows a property owner to charge reasonable
compensation, limits and impose necessary conditions on a
utility seeking access, to protect the property and its owner.
These statutory provisions are attached (Attachment A).
After addressing several examples of discriminatory building
access, the Texas Commission staff developed an enforcement policy to
implement PURA's building access provisions and facilitate negotiated
building access arrangements between building owners and
telecommunications utilities. This policy (see Attachment B, Public
Utility Commission of Texas memo of October 29, 1997) attempts to
balance the rights of service providers and building owners and reduce
the need for formal enforcement actions by the PUC. The policy
specifies that the basis for a compensation mechanism should be to
compensate the property owner for the space used (i.e., through a
square foot rental rate as with market-based building lease rates),
regardless of the number of customers served or the revenues generated
by the telecommunications provider. To assure non-discriminatory
treatment of multiple telecommunications providers, the PUC's policy
requires that when a competitive carrier enters a multi-tenant
building, the owner must modify the terms of its arrangement with the
incumbent carrier to give it the same fees, terms, limits and
conditions as the CLEC.
Congress and federal and state regulators have worked hard to
assure that effective local service competition is not hindered by
access to the local loop. But if the loop is the ``last mile'',
building access is the ``last yard'' for many customers and CLECs. The
National Association of Regulatory Utility Commissioners approved a
resolution on this topic at its summer, 1998 meetings (Attachment C).
I hope this information is useful to the Subcommittee as it
deliberates this important market opening issue. If I can provide any
additional information, please let me know.
Best wishes,
Pat Wood, III
cc: Representative Thomas Bliley
ATTACHMENT A
Texas Utilities Code
public utility regulatory act of texas
Sec. 54.259. DISCRIMINATION BY PROPERTY OWNER PROHIBITED.
(a) If a telecommunications utility holds a consent, franchise, or
permit as determined to be the appropriate grants of authority by the
municipality and holds a certificate if required by this title, a
public or private property owner may not:
(1) prevent the utility from installing on the owner's property a
telecommunications service facility a tenant requests;
(2) interfere with the utility's installation on the owner's
property of a telecommunications service facility a tenant requests;
(3) discriminate against such a utility regarding installation,
terms, or compensation of a telecommunications service facility to a
tenant on the owner's property;
(4) demand or accept an unreasonable payment of any kind from a
tenant or the utility for allowing the utility on or in the owner's
property; or
(5) discriminate in favor of or against a tenant in any manner,
including rental charge discrimination, because of the utility from
which the tenant receives a telecommunications service.
(b) Subsection (a) does not apply to an institution of higher
education. In this subsection, ``institution of higher education''
means:
(1) an institution of higher education as defined by Section
61.003, Education Code; or
(2) a private or independent institution of higher education as
defined by Section 61.003, Education Code.
(c) Notwithstanding any other law, the commission has the jurisdiction
to enforce this section.
(V.A.C.S. Art. 1446c-O, Secs. 3.2555(c), (e), (g).)
Sec. 54.260. PROPERTY OWNERS CONDITIONS.
(a) Notwithstanding Section 54.259, if a telecommunications utility
holds a municipal consent, franchise, or permit as determined to be the
appropriate grant of authority by the municipality and holds a
certificate if required by this title, a public or private property
owner may:
(1) impose a condition on the utility that is reasonably necessary
to protect:
(A) the safety, security, appearance, and condition of the
property; and
(B) the safety and convenience of other persons;
(2) impose a reasonable limitation on the time at which the utility
may have access to the property to install a telecommunications service
facility;
(3) impose a reasonable limitation on the number of such utilities
that have access to the owner's property, if the owner can demonstrate
a space constraint that requires the limitation;
(4) require the utility to agree to indemnify the owner for damage
caused installing, operating, or removing a facility;
(5) require the tenant or the utility to bear the entire cost of
installing, operating, or removing a facility; and
(6) require the utility to pay compensation that is reasonable and
nondiscriminatory among such telecommunications utilities.
(b) Notwithstanding any other law, the commission has the
jurisdiction to enforce this section.
(V.A.C.S. Art. 1446c-O, Secs. 3.2555(d), (e).)
ATTACHMENT B
public utility commission of texas
______
memorandum
TO: Chairman Pat Wood, III
Commissioner Judy Walsh
Commissioner Patricia Curran
FROM: Ann M. Coffin
Assistant Director
Office of Customer Protection
Bill Magness
Director
Office of Customer Protection
DATE: October 29, 1997
RE: On Agenda for November 4, 1997 Open Meeting
Project No. 18000: Informal Dispute Resolution
Office of Customer Protection Enforcement Policy regarding Rights
of Telecommunications Utilities and Property Owners under PURA Building
Access Provisions.
The Public Utility Commission of Texas (Commission) has recently
been asked to address implementation and compliance issues concerning
the ``building access'' provisions of the Public Utility Regulatory Act
(PURA) Sec. Sec. 54.259 and 54.260. The building access provisions of
PURA were adopted during the 1995 legislative session in an effort to
guarantee telecommunications utilities access to public and privately
owned property for the provision of competitive telecommunications
services. To date, the Commission has not addressed compliance issues
associated with the building access provisions of PURA. As competition
becomes a reality, telecommunications utilities have begun to raise
concerns regarding their ability to access multi-tenant buildings in
order to provide telecommunications services to the building's tenants.
Specifically, the telecommunications utilities are concerned that
property owners may be placing unreasonable terms and conditions on
building access to the detriment of the developing competitive
telecommunications market.
In order to quickly respond to these concerns and provide both
telecommunications utilities and property owners the benefit of our
interpretation of the provisions set forth in PURA Sec. Sec. 54.259 and
54.260, the Office of Customer Protection (0CP) has developed the
following enforcement policy. In no way is this policy intended to
affect shared tenant service (STS) providers' right of entry contracts
with property owners. Rather, 0CP seeks to facilitate negotiated
building access arrangements between incumbent local exchange carriers,
new entrants, and building owners by providing parties with OCP's
position on these complex issues. Although the policy paper is intended
to reduce the need for formal enforcement actions, in the event that
parties allege violations of PURA Sec. Sec. 54.259 and 54.260, 0CP
intends to use this policy to guide its determination of whether
enforcement actions against parties should be initiated.
Overview of PURA, Sections 54.259 and 54.260
In 1995, the Texas Legislature passed legislation that introduced
sweeping changes in the way in which telecommunications utilities may
operate and the way they are regulated in Texas. Specifically, the
legislation encouraged competitive entry into the Texas local exchange
telecommunications market. Since that time, the Commission has actively
undertaken its responsibility to introduce competition into the local
telecommunications marketplace. Inevitably, the statutory mandate to
``open up'' the telecommunications marketplace has caused an increase
in the number of telecommunications utilities seeking access to multi-
tenant buildings in order to provide, install, maintain, and operate
facilities necessary for the provision of service to the buildings'
tenants. This demand for access has raised a fundamental question
regarding a telecommunications utility's ``right'' to access commercial
buildings in order to install facilities to serve tenants of the
building. In adopting PURA Sec. 54.259, the state legislature answered
this question by creating a right of access by the telecommunications
utility to public and private property. In exchange for allowing the
telecommunications utility access to the building, the state
legislature adopted PURA Sec. 54.260, which allows the property owner
to charge reasonable compensation for the access privilege.
The provisions of PURA Sec. 54.259 govern the right of a
telecommunications utility to access public and private property by
mandating access, on a nondiscriminatory basis, to any
telecommunications utility whose services are requested by a tenant.
Sections 54.259(a)(4) and (5) prohibit discrimination against a tenant
or in favor of another tenant based on their selection of a
telecommunications utility and prohibit a demand for payment from a
tenant for allowing their chosen provider access to the building. These
provisions protect tenants who exercise their ``right'' to choose among
service providers from being subjected to actions such as increased
rental charges or surcharge assessments that may occur as a result of
requiring the building to give access to multiple providers. Similarly,
Sections 54.259(a)(1-4) protect the telecommunications utility, whose
services are requested by a tenant, against discriminatory actions by
the property owner. These provisions prohibit the property owner from
preventing or interfering with a telecommunications utility's
installation of a service requested by a building tenant;
discriminating against the telecommunications utility in regard to
installation, terms, or compensation issues; and requiring
``unreasonable payments'' in exchange for access to the property. The
principle underlying these provisions is that a property owner may not
treat similarly situated tenants or utilities on a different basis and
that access and rental charges must be assessed on an equal basis among
telecommunications service providers.
In recognition that property owners have the right to impose
reasonable conditions and/or limitations on a telecommunications
utility's ability to access the property owners property, the state
legislature enacted PURA Sec. 54.260. Specifically, PURA Sec. 54.260(a)
(1)-(2) authorizes the imposition of conditions or limitations that are
``reasonably necessary'' to protect the security, appearance, and
condition of the property and the safety of the property and persons on
it, as well as the imposition of ``reasonable'' limitations on times
available for installation. In addition, PURA Sec. 54.260(a)(3)-(S)
permits the property owner to limit the number of telecommunications
utilities that may access the owners property if space constraints
dictate such a limitation; require indemnification for certain costs,
and; require the tenant or utility to bear the entire cost of
installing, operating, or removing any facilities. Most significant,
however, is PURA Sec. 54.260(a)(6), which allows the property owner to
require the utility to pay compensation that is ``reasonable and
nondiscriminatory'' among telecommunications companies.
PUC Jurisdiction
A number of parties that filed comments in this project raised the
issue of whether the Commission has jurisdiction over matters involving
building access. Specifically, parties challenge the constitutionality
of the provisions, as well as the Commission's authority to enforce
PURA Sec. Sec. 54.259 and 54.260 against property owners.
Pursuant to PURA Sec. Sec. 15.021, 15.023, and 54.260, the
Commission is clearly vested with jurisdiction to enforce the building
access provisions of PURA. Specifically, PURA Sec. 54.260(b) states
that ``[n]otwithstanding any other law, the commission has jurisdiction
to enforce this section.'' (emphasis added). Without question, the
Commission has jurisdiction over the operations and services of
telecommunications utilities operating in Texas. In light of the
statutory language in PURA Sec. 54.260(b) and the telecommunications
expertise that the Commission brings to resolving building access
issues, the Commission can reasonably conclude that it has primary
jurisdiction over building access issues involving disputes between
telecommunications utilities and property owners. Thus, any remedial
relief or administrative penalty action ordered by the Commission would
extend to property owners on issues which involve the rights of
telecommunications utilities in building access situations.
Enforcement Policy
In enacting PURA Sec. 54.259, the Legislature sought to encourage
competition in the local telecommunications market by facilitating
competitive provider access to customers in privately owned multi-
tenant buildings. It is with this in mind that OCP has crafted an
enforcement policy on the building access issue that attempts to
balance the rights of both service providers and property owners. OCP
emphasizes that this enforcement policy does not constitute a rule or
order of the Commission. Rather, the policy seeks to establish the
parameters for interpreting PURA Sec. Sec. 54.259 and 54.260 and guide
compliance efforts in this area.
The positions of the parties affected by this issue are diverse.
The primary areas of conflict center around the parties' positions
regarding the limits of the ``discrimination'' and ``unreasonable
payment'' terms in PURA Sec. Sec. 54.259 and 54.260, respectively.
Specifically, the telecommunications utilities argue that absent some
regulatory limits on the compensation issue, property owners have an
incentive to extract monopoly rents for access. The utilities argue
that competitive telecommunications options enhance the market value of
the building and that any compensation to property owners must be
minimal and take into consideration the building enhancement that
results from the provision of competitive telecommunications services.
Representatives of property owners, on the other hand, argue that the
free market must be allowed to dictate terms, conditions, and
compensation for access to a building's risers and conduits. These
parties also argue that simply looking at the quantity of space to be
used by the telecommunications utility does not take into account the
value of the property, the nature of the improvements, its location, or
the quality or size of the ``market'' created by the property owner for
the telecommunications utility.
i. basis for determining reasonable compensation
Given the complexity of the issue, it is unlikely that a single
compensation method can be found for each type of space requirement.
The basic underlying principle, however, for any cost methodology
related to building compensation issues is that property managers must
impose the same costs, methodology, and rates on any telecommunications
utility which gains access to the building. This approach ensures that
competitive telecommunications services are available to tenants
without the imposition of reasonable building restrictions by property
owners. Granting building tenants access to competitive carriers is
central to achieving PURA's goal of making competitive
telecommunications service alternatives available for all Texans and
their businesses, regardless of whether they live and work in a single
family home or a multi-tenant building. Although the real estate
industry, in general, is controlled by the free market, building access
is a market segment that is not subject to free market forces. Rather,
the property owner, by virtue of his ability to control access to the
tenant acts as a gatekeeper through whom telecommunications utilities
must gain passage. The exercise of this control enables the property
owner to dictate terms and conditions of the building access
arrangement that may grant access to one telecommunications utility,
but deny access to another. In addition, the telecommunications utility
cannot freely ``walk away'' from the terms and conditions placed by the
building owner on the access arrangement, because the utility must have
access to that particular building in order to provide service to its
customer who is a tenant in that building. In order to address the
absence of free market control over building access issues, the
Legislature established compensation requirements for property owners.
Specifically, the Legislature required that compensation for access be
reasonable and nondiscriminatory.
The ability of the property owner to charge compensation which is
reasonable and nondiscriminatory does not, however, imply that every
telecommunications utility must be treated identically. Rather, it
requires that a telecommunications utility be offered the same terms,
conditions, and compensation arrangement as its similarly situated
counterpart. This interpretation preserves not only the right of the
parties to freely engage in commercial transactions wherein a service
provider seeks access to private property, but also ensures that the
property owner does not exert control over the building access
arrangement in a manner that is unreasonable or discriminatory to the
telecommunications utility.
In establishing the parameters applicable to the term
``reasonable'' compensation, it is important to distinguish between
buildings in which the property owner has moved to a single minimum
point of entry (MPOE), and thus owns all wiring inside the point of
demarcation where the main line enters the building. In such instances,
the telecommunications utilities must compensate the property owner for
the use of cable distribution facilities. In multi-tenant buildings
where telecommunications utilities maintain ownership of their wiring
and other facilities to the point of contact with the individual
tenants (multiple demarcation points), telecommunications utilities
must compensate the property owner for use of building space.
A. Basis for determining reasonable compensation in a single
demarcation point system.
In instances in which the property owner has assumed responsibility
and ownership of wiring beyond the MPOE, the telecommunications utility
may decide to utilize the building's existing cable distribution
facilities. A property owner may charge for use of distribution
facilities on the owners side of the demarcation point in a number of
different ways. For instance, the property owner may base compensation
on a per pair, per circuit or per conduit or sheath basis. Without
question, the charge for use of distribution facilities on the owner's
side of the demarcation point may take into consideration the type of
facilities used by the property owner in providing telecommunication
services. In negotiating compensation terms for the use of the property
owner's distribution facilities, parties may consider factors such as
the amount of facilities investment, the useful life of the facilities,
tax and a reasonable rate of return.
A property owner may also seek compensation for the physical space
used by the utility in the building's equipment room and any actual
costs associated with the utility's use of the building. The property
owner, by controlling building access, manages an essential element in
the delivery of telecommunications to the tenants in that building. As
such, the price of equipment room space leased to utilities to provide
service to tenants in that building should be based on the actual
economic cost of the space and not on the number of tenants served or
the revenues generated by the carrier for the provision of
telecommunications services to the building's tenants. Compensation in
this manner is reasonable because it ensures similar terms and
conditions for all providers.
B. Basis for determining reasonable compensation in a multiple
demarcation point system.
In multi-tenant buildings, where the telecommunications utility
maintains ownership of the wiring and other facilities to the point of
contact with the individual tenants (multiple demarcation points), the
property owner may receive compensation for the telecommunications
utility's use of the rental space in the equipment room, use of the
building's conduit facilities, and any actual costs associated with the
utility's use of the building. Compensation for rental floor space, as
well as the use of the building conduit facilities should be based on
the rental value in the marketplace of the property used by the
provider, not on the type of facilities used, the revenues generated,
or the number of customers served.
Compensation mechanisms that are based on the number of tenants or
revenues are not reasonable because these arrangements have the
potential to hamper market entry and discriminate against more
efficient telecommunications utilities. By equating the cost of access
to the number of tenants served or the revenues generated by the
utility in serving the building's tenants, the property owner
effectively discriminates against the telecommunications utility with
more customers or greater revenue by causing the utility to pay more
than a less efficient provider for the same amount of space.
The basis of any compensation mechanism should be to compensate the
property owner for the space used, regardless of the number of end use
customers served or the revenues generated by the telecommunications
carrier. For this reason, use of the square foot rental rate for use of
the basement and riser space is a reasonable basis of compensation in
buildings with multiple demarcation systems. Lease rates for commercial
property are an appropriate guide for determining compensation for
access to the building because commercial leases not only reflect the
variation in rental rates depending on the location and desirability of
a particular building, but indicate what tenants are willing to pay for
the amount of square footage being used by the tenant in the same
marketplace and for the same type of space. This method of compensation
ensures that the property owner is paid the fair market value for the
use of the space and also recognizes that space in the basement of an
office is not as valuable as retail space in a section of the building
open to the public, or a corner office on the top floor of an office
building.
II. Applicability of the Discrimination Provision in PURA Sec. 54.259
to Existing Service Arrangements with Incumbent Local Exchange Carriers
PURA Sec. 54.259 specifically prohibits a property owner from
discriminating in favor of or against a tenant or telecommunications
utility in any manner. This prohibition against discriminatory
treatment is consistent with the overall terms of PURA which sought to
advance the public welfare by promoting competition in the provision of
telecommunications services in Texas. See PURA Sec. 51.001 (a)-(c).
While recognizing that many existing access arrangements were made
prior to competitive entry, it is OCP's position that prior contractual
agreements which provide for exclusivity or preferential terms for the
incumbent telecommunications utility disserve the goals of PURA
specifically and telecommunications competition generally. Accordingly,
OCP interprets the PURA Sec. 54.259 nondiscrimination provision to be
applicable to pre-September 1, 1995 business arrangements between
incumbent local exchange carriers and property owners.
Although the nondiscrimination provisions of PURA Sec. 54.259 are
applicable to pre-September 1, 1995 service arrangements, the non-
discrimination provisions are triggered only at the time a competitive
carrier seeks access to the building served by the incumbent
telecommunications carrier. Therefore, service arrangements made prior
to September 1, 1995, should be allowed to stay in place until a second
carrier invokes the nondiscrimination requirement. Once a competitive
carrier seeks access to the building, the nondiscrimination provisions
are triggered, and the property owner must either treat all carriers
the same as the incumbent ``in relation to the installation, terms,
conditions, and compensation of telecommunications services facilities
to a tenant on the owners property'' \1\, or re-negotiate with the
incumbent to treat it the same as all other carriers seeking access.
---------------------------------------------------------------------------
\1\ See PURA Sec. 54.259(a)(3).
---------------------------------------------------------------------------
Because the legislative intent behind PURA Sec. Sec. 54.259 and
54.260 is to foster competition, not provide protected status to the
incumbent, compensation arrangements for building access that apply
only to new entrant telecommunications utilities or new customers of an
incumbent telecommunications utility are not reasonable. Every provider
of telecommunications service must charge rates that recover its costs.
At the same time, every provider's prices are nonstrained by the prices
of its competitors. If the incumbent is paying no fee for building
access, it certainly will have a cost advantage over its new entrant
competitors that are paying such a fee. Exempting incumbents from
paying for building access inevitably impacts competitors adversely
because of the comparative cost advantage the incumbent gains as a
result. Accordingly, when a new provider enters a commercial property,
the treatment of the incumbent must be revised to match that accorded
to the new provider. Thus, if private property owners require new
providers to pay a fee, the incumbent should begin to pay a fee
calculated in the same manner and on the same basis.
III. Prospective Customers as a Condition of Access
As more and more telecommunications utilities seek access to a
building to provide service to the building's tenants, space
limitations associated with access will inevitably arise. PURA
Sec. 54.260 authorizes a property owner to reasonably limit the number
of utilities that have access to the property if the owner can
demonstrate that space constraints justify such a situation. OCP is
concerned however, that some carriers may attempt to preemptively
``reserve'' space in the building to the exclusion of subsequent
carriers who may have the intention of serving the building on a more
immediate basis. OCP will interpret such behavior on the part of the
telecommunications utility to be anticompetitive. In addition, any
restrictions on building access that impose unreasonable delays on a
competitive carriers provision of telecommunications service to a
customer will be considered discriminatory on the part of the property
owner. OCP believes that the appropriate remedial course for either
activity is enforcement action by the Commission.
IV. Carrier of Last Resort Obligation and Building Access
Several parties commented regarding a telecommunications utility's
carrier of last resort (COLR) obligation in the context of the building
access issue. Specifically, parties sought clarification on whether a
telecommunications utility with COLR obligations may refuse to serve a
building if a property owner seeks compensation for access. Because the
implications associated with the COLR obligations extend beyond the
building access, OCP declines to address the issue in this enforcement
policy.
V. Conclusion
In enacting PURA Sec. Sec. 54.259 and 54.260, the legislature
sought to facilitate the development of local competition by ensuring
that new entrants receive access to tenants on the property based on
reasonable compensation and equal, non-discriminatory terms. Under
these conditions, will residential and business customers in multi-
tenant buildings experience the benefits of competition in the form of
lower rates and expanded choices for products and services. OCP
encourages telecommunications utilities and property owners to
negotiate late building access arrangements that will enable utilities
to compete for business on the basis of price and the provision of
expeditious service. These types of access arrangements will benefit
not only telecommunications utilities and property owners, but
customers as well.
Although OCP's enforcement policy regarding building access issues
is intended to facilitate building access arrangements between parties
and reduce the necessity for formal enforcement actions, parties should
be aware that the policy statements and proposals for resolving
disputes developed in Project No. 18000 do not constitute commission
rules and resolving disputes developed in Project No. 18000 do not
constitute commission rules and orders, and do not deprive parties of
rights under PURA or the Administrative Procedure Act. Project No.
18000 represents the Commission's effort to expedite settlement of
business disputes in the increasingly competitive markets for
telecommunications and electric services.
Please contact Ann Coffin (6-7144) or Bill Magness (6-7145) if you
would like additional information on this matter.
Attachment
cc: Adib, Pwviz; Laakso, John; Bellon, Paul; Mueller, Paula; Bertin,
Suzanne; Prior, Dianne; Davis, Stephen; Sapperstein, Scott; Dempsey,
Roni; Silverstein, Alison; Featherston, David; Slocum, Bret; Hamilton,
Kathy; Srinivasa, Nara; Jenkins, Brenda; Whittington, Pam; Kjellstrand,
Leslie; Wilson, Martin; Kyle, Sandra; Vogel, Carole.
ATTACHMENT C
NARUC--Summer 1998
Resolution Regarding Nondiscriminatory Access to Buildings for
Telecommunications Carriers
WHEREAS, Historically, local telephone service was provided by only
one carrier in any given region; and
WHEREAS, In the historic one-carrier environment, owners of multi-
unit buildings typically needed the local telephone company to provide
telephone service throughout their buildings; and
WHEREAS, Historically, owners of multi-unit buildings granted the
one local telephone company access to their buildings for the purpose
of installing and maintaining facilities for the provision of local
telephone service; and
WHEREAS, Competitive facilities-based providers of
telecommunications services offer substantial benefits for consumers;
and
WHEREAS, In order to serve tenants in multi-unit buildings,
competitive facilities-based providers of telecommunications services
require access to internal building facilities such as inside wiring,
riser cables, telephone closets, and rooftops; and
WHEREAS, Facilities-based competitive local exchange carriers,
including wireline and fixed wireless providers, have reported concerns
regarding their ability to obtain access to multi-unit buildings at
nondiscriminatory terms, conditions, and rates that would enable
consumers within those buildings to enjoy many of the benefits of
telecommunications competition that would otherwise be available; and
WHEREAS, All States and Territories, as well as the Federal
Government, have embraced competition in the provision of local
exchange and other telecommunications services as the preferred
communications policy; and
WHEREAS, Connecticut, Ohio, and Texas already utilize statutes and
rules that prohibit building owners from denying tenants in multi-unit
buildings access to their telecommunications carrier of choice; and
WHEREAS, The President of NARUC testified before the Senate
Judiciary Committee's Subcommittee on Antitrust, Business Rights, and
Competition that ``[f]or competition to develop, competitors have to
have equal access. They have to be able to reach their customers and
building access is one of the things that state commissions are looking
at all across the country.''; and
WHEREAS, The attributes of incumbent carriers such as free and easy
building access should not determine the relative competitive positions
of telecommunications carriers; and
WHEREAS, The property rights of building owners must be honored
without fostering discrimination and unequal access; now, therefore, be
it
RESOLVED, That the Executive Committee of the National Association
of Regulatory Utility Commissioners (NARUC), convened at its 1998
Summer Meetings in Seattle, Washington, urges State and Territory
regulators to closely evaluate the building access issues in their
states and territories, because successful resolution of these issues
is important to the development of local telecommunications
competition; and be it further
RESOLVED, That the NARUC supports legislative and regulatory
policies that allow customers to have a choice of access to properly
certificated telecommunications service providers in multi-tenant
buildings; and be it further
RESOLVED, That the NARUC supports legislative and regulatory
policies that will allow all telecommunications service providers to
access, at fair, nondiscriminatory and reasonable terms and conditions,
public and private property in order to serve a customer that has
requested service of the provider.
Sponsored by the Committee on Communications
Adopted July 29, 1998
Mr. Tauzin. The Chair is now pleased to recognize the
gentleman from Pennsylvania, himself an experienced hand in the
communications world. Mr. Klink.
Mr. Klink. That is true. A recovering broadcaster.
Let me just, first of all, I was kind of stricken as we sit
here at the hearing, at the position that many of us are in,
including Chairman Tauzin. I think the chairman, if you will
recall back, and one of the first issues that you and I talked
about in depth was private property rights and we worked, all
of us, so hard on coming up with competitiveness in the Telecom
Act. So we find two things that we feel very passionately about
clashing before us here today. And the answers are not easy.
I just wanted to go back. I have got the older version of
the Telecom Act, but I think this is the section 207, although
it was different. And I want to just read from it, ``Directs
the Commission to promulgate rules prohibiting restrictions
which inhibit a viewers' ability to receive video programming
from over-the-air broadcast station or direct broadcast
satellite service. The committee intends this section to
preempt enforcement of State or local statutes or regulations
or State or local legal requirements, restrictive covenants, or
encumbrances that prevent the use of antennae designed for off-
the-air reception of television broadcast signals or satellite
receivers designed for reception of DBS service. Existing
regulations including but not limited to zoning laws,
ordinances, restrictive covenants, or homeowners associations'
rules shall be unenforceable to the extent contrary to this
section.''
So what we have said to the building owners and to the
realtors and to the people who manage property, we are going to
give you an exemption so all those here comes the big Federal
Government that is usually thought of as being a pain in
everybody's posterior, we are going to give you an exemption to
all these local problems that you could have and now you are
sitting here before us today telling us you don't want to work
with us to get that service the last couple of hundred of feet
to the consumers out there that may desire this. And it gives
me a little bit of a problem.
As I said, chairman, myself, others, we don't want to get
into takings. We don't get into--private property means a lot
to us. I own--I owned. I have sold it since I have been here to
support my bad habits of being a Congressman. It costs you a
lot to be down here--I mean, I was a property owner, a
commercial property, rental properties. I know what you go
through.
On the other hand, you know, we have got some exciting
possibilities here and that bottleneck exists just maybe 100 or
200 feet away from the people that we wanted to serve, the
people designed to benefit by this Act, that is the American
people, being able to engage in purchasing as another option
these competitive services. So I would ask for a reaction to
that.
Mr. Heatwole. Well, I am going to speak to residential,
multi-family. Your first comment and from what I understand of
the section you read was dealing with off-air signals and, as I
had spoken earlier, in the properties where we actually own the
cable TV system, we either give it away--the off-air signal or
we sell it for $12 a month. The chairman asked, you know, what
do you tell residents what is available? Well, in our area, if
we don't do it, build a system as a landlord, you have the
incumbent provider. Those are the two things that are available
as far as television is concerned.
You know, I don't know the answer to all these questions,
but generally, as we have stated, competition in the
marketplace of residential units and commercial units requires
that you provide certain services. Theoretically, we wouldn't
have to have telephone service in any of our units, but I doubt
that we would have very many residents because most people want
telephone service. Most people want television service, either
off-air or cable TV. To be competitive in a marketplace, we
simply cannot deny that service.
And, in Virginia, as far as residents are concerned and I
will read from the Landlord Tenant Act ``Access of tenant to
cable, satellite, or other television facilities'' and it goes
on to any provider, it says ``No landlord shall demand or
accept payment of any fee, charge, or other thing of value from
any provider of all these things in exchange for giving the
tenants of such landlord access to such services and no
landlord shall demand or accept any such payment from any
tenants in exchange thereof unless landlord is itself the
provider of the service.''
Mr. Klink. Mr. Heatwole, first of all, I am not here to
defend what they have done in Virginia. We have got 49 other
States and Commonwealths that we have to deal with.
Mr. Heatwole. Maybe it is the solution.
Mr. Klink. Well, it may or may not be. But the point here
is--and I think, as my distinguished colleague, Ms. Eshoo, said
a few moments ago in her questioning--if we have thousands of
people out there and perhaps tens of thousands of people who
own buildings. And perhaps now if you are getting into
residential, it is millions. I don't even know the number and I
don't think anybody here knows the number.
If this industry, which is booming and which really could
bring, I think, great competition--I think broad-band
technology has great possibilities that probably none of us in
this room has ever thought of--if we are going to bring that to
the American people, which is one of the things that we--we
didn't have broad-band in mind when we did the Telecom Law, but
we want to see new technologies. We want to see things happen.
We want to see industries develop. We are in a communications
era, an informational era. I think we all agree with that.
If they have to go building-by-building and sometimes in
these negotiations, I think we all know, can take a year or
more to just kind of, you know, it is an attorneys relief act
which there are probably some people in this room that would
like that idea. There are probably a lot that wouldn't.
The point is that if we in this committee and in this
Congress said to the building owners and the people, as we did
as I read that section: We are willing to wave as much of a
wand as we have here in the Federal Government to relieve you
from all of the problems that you could have with zoning laws
and other limiting laws by the local governments in an effort
to get the communications into your building, whether it is
direct, off-the-air, I mean the intention is clear. We want to
get the service, whatever it is, to the people.
And you remember, when we wrote this law in 1996, we were
replacing a law that was written in 1934 before television was
even invented. And so we realized as we were doing this that we
are writing a law that deals with technologies that we haven't
even dreamed of, haven't been invented yet, but we have to be
able--and we had long, long discussions--how do we get these
technologies that we don't even know about as we write this
law--to the people?
Now we come here today and we take all of your objections
very seriously, but how do we get that last few hundred feet?
And we asking you to go with us and there doesn't seem to be a
willingness because, again, Ms. Eshoo asked about could we use
the Florida law, which we understand has not been enacted, that
we understand, though, at least in Florida, there was agreement
between the realtors and their building owners--I think Mr.
Bitz said it was a disagreement within the family. How can we
get to where we need to be? How can we give Mr. Sugrue the
direction that the FCC needs to get somewhere that is not going
to be onerous to you but, at the same time, allows us to see
that this technology is out there as a viable option for the
consumers across this Nation and the next technology that we
have a year from now or 10 years from now.
Mr. Bitz.
Mr. Bitz. Earlier in my presentation, I stated that I was
not aware in our company at least--and I can only speak for my
own business experience--of any tenant in our commercial office
buildings who is not satisfied with their telecommunications
service. The voice that is missing at this table is you have
competing industries at the moment, but you don't have anyone
speaking for the consumer directly and I can only reflect the
anecdotal experience that I have with over 2,000 tenants. I--in
my experience. And I speak quite directly--is that I am not
aware of any of our commercial tenants who are not well-served
by the existing amount of telecommunications competition they
already have. I can't speak for residential or the commercial
industry. In my experience, that is certainly the case and
while not every company can get into every building, that is
not the issue. The question is are the tenants adequately
served. And, in my perspective, they certainly do appear to be
served.
On our end, think of the problems there would be if we were
forced to have to deal with every single competitive provider.
This gentleman indicated there are now 72 of them. Trying to
deal with 72 companies to deal with the same service again and
again and again in small-and medium-sized buildings would not
serve the public interest, which, at that point, would already
have been well taken care of by having 4 or 5 or 3 or 6
providers already in a building. So what we are saying is that
we believe the competition is already there in the commercial
business.
Mr. Klink. Mr. Rouhana.
Mr. Rouhana. What Brent says is true. He is one of the
enlightened landlords that does allow people to have access.
The problem is there are a million of them. But what he also
illustrates is how good negotiators landlords are. Because when
asked the question: Do you have any compromise at all? He says,
no. And the truth is that is the process we have. And we will
offer any number of compromises: Connecticut, Texas, Florida, a
brand-new one. We are trying to reach a compromise. That is the
whole point of this from our point of view. And there are ways
to protect every single issue that has been raised here and we
are more than willing to work through those. We do need a
solution though. And it needs to be a national one.
And now just one last thing about the FCC. Two years ago at
the FCC, these issues that we have been talking about today
were raised in rulemaking proceedings and they haven't been
answered. And the primary reason is the Commission, rightfully
I believe, is unclear about its ability to act. They
legitimately feel they don't have a clear mandate. We think
they do have a clear mandate, but they believe they don't. So
somebody needs to clarify it and I don't know who you go to
when a regulatory authority doesn't believe they do, except to
the legislative. So we are here and we are going to need either
some kind of a clear direction or a law.
Mr. Klink. Mr. Windhausen.
Mr. Windhausen. If I could just add in response to a couple
of things that Mr. Bitz also said, we do have examples of
consumers who sought the right to receive service from an
individual CLEC and they were denied that right so we do know
of many unhappy consumers, tenants. It is also that Mr. Bitz
mentioned that we are looking for the right for 72 different
companies to get into each building. That is not what we are
looking for. For the most part, what happens is the economics
work out that once you have two or three or perhaps four CLECs
into a building, no other CLEC is going to seek access because
it is just not economic for them.
We are only seeking access where there is space available.
If the landlord can demonstrate that there is no space anymore
to accommodate anyone else, that is fine. That is a legitimate
reason for him to say, no, I am sorry. I can't take in any more
CLECs. And that is a reason that we will understand and we are
very happy if that would be written into the legislation.
Mr. Klink. I thank you very much. Mr. Chairman, you have
been very kind with the time. I just want to--and the hour is
getting late. If nothing else comes out of my line of
questioning, I just think it is important that we recognize
that we have not come to the business community or those who
are investing and putting up buildings and own and manage
buildings and saying we want you to give and you haven't got
any. We have actually--and I think you know this and the other
members of the committee know it because they were here--we
took their interests into consideration, very high
consideration, when this legislation was written, when it was
passed and we are just asking for them to come to the table.
And the intransigence that I hear. I hope that that is just
for a day. Maybe you weren't prepared for the question. I hope
that there is an ability, really, to be able to work together
so we can get through this. We are not looking for a
steamroller to come over the top of you, but, on the other
hand, we want to get this technology out to the public. Thank
you, Mr. Chairman, for your time.
Mr. Tauzin. Thank you, Mr. Klink. I may point out to you,
Mr. Rouhana, that generally when the FCC has trouble finding,
you know, authority to do something, it is generally because
they are reluctant to do something because when they want to do
something they generally find authority to do something.
Mr. Rouhana. Well said.
Mr. Tauzin. But I understand the argument. The gentlelady
from Missouri, the Show Me State. By the way, Karen, it is the
common practice in Federal court when you go there to argue a
case, the court will often ask you how are you here? I mean,
what authority, what jurisdiction do we have over your case? A
cajun lawyer once said, now, I came by the bus.
But the Commission is asking how are we are? What authority
do they have? And it is a good question. Ms. McCarthy.
Ms. McCarthy. And I can appreciate, Mr. Chairman, that they
would like us to address the answer and make it easier for
them. But I come out of a background of State government feel
pretty strongly if States like Connecticut and Ohio and
Nebraska and Texas and even Florida are in the process or have
addressed this issue, that probably the question for this
committee today is, you know, if there were to be Federal
legislation, what should be in it? How is it working out there
in the States? Is there some model for us?
And in any of these States, have we got reciprocity going
so that if a building owner is required to provide access on
demand, are they also required to request service on demand? Is
that in any of the State models? Mr. Rouhana, you made begin,
but anyone who would like to weigh in. I would like to know
your thoughts on what is out there and working. What would be
ideal, if anything, for us to do.
Mr. Rouhana. Well, I think that both Connecticut and Texas
have a rather balanced approach to this and I think either one
of them is particularly good. Personally, I think the
Connecticut Act is the better of the two because it deals with
the time problem that I have been talking about today more
directly. Happily, in neither of those States has anything bad
happened to the real estate market because of the passage of
the Act. We haven't had, you know, assaults of thousands of
telecom companies on people and there hasn't been a--I don't
think there has been any diminution of the value of the real
estate. And certainly wouldn't want to see that happen.
Mr. Tauzin. Would the gentlelady yield? I think she has
raised a good question. Do any of those statutes provide an
obligation to serve?
Mr. Rouhana. I don't know of any that does.
Mr. Tauzin. Balanced with the right to be served?
I thank the gentlelady.
Ms. Case. Communities that are entrenched within these
forced access communities and there is no competition in these
communities because of the forced access, because they have a
legal and enforceable right to be there, being the local
incumbent. So you are less likely to have choice and
competition. We have zero choice and competition right now for
two new development deals in Connecticut and in New Jersey. And
the one community that I referenced that was in New York was
serviced, there were no customer service issues. They didn't
even have an obligation to provide service within 90 days of a
resident moving in.
Ms. McCarthy. Mr. Chairman, I apologize to the panel. Why I
was late was I sit on the Energy Power Subcommittee and we are
grappling with a similar principle there that we are talking
about here in telecom--and the full committee and all these
members will deal with eventually--of this reciprocity, as we
deregulate how energy is delivered into the home and the wiring
that is in place now to address these telecom issues will be
critical to many of the issues that we are grappling with in
another subcommittee.
So, Mr. Chairman, I would really like to hear more thought
on this reciprocity idea and the rights that go both ways if
you wouldn't mind a moment more of discussion by----
Mr. Tauzin. Absolutely. The gentlelady controls the time.
If any of you wants to discuss this with her. How does it work
in a competitive--we understand a monopoly market. You have got
a service. You have the right to put the wires in in service.
But you also have the service if you want your service. How
does that work in a competitive market? Ms. McCarthy has, I
think, raised an excellent question.
Mr. Pestana. In New York State, the cable operators, such
as Time Warner, have to provide service to everybody. All
residents that want cable get service, regardless of how much
it costs us. The competition, RCN in New York, obviously they
just pick the right buildings or the ones that have the right
financial solutions for them. So they compete unit-by-unit in
some locations and they compete on a bulk basis sometimes where
we basically get excluded because we have the equipment there,
but the landlord signs an agreement where everybody has to hook
up to RCN. So we have those kinds of situations. But we are
required to serve everybody.
Ms. McCarthy. Mr. Rouhana, do you want to speak to this
please?
Mr. Tauzin. Yes, address the gentlelady. She controls the
time.
Mr. Rouhana. Yes, I think that there is a physical issue
involved here which is literally the number of places that
network infrastructure has to be created physically in order to
deliver service to everyone. So what we have been talking about
today is one of the impediments to actually going to as many
places as possible which is building access. And I said a
little bit earlier that we have got to get as many commercial
places as we can so we can build the infrastructure, then start
to go to the residential markets. And that you can't physically
get there any faster than you can get there, but slowing us
down is not going to get us there faster. So, by making it
harder for us to get into buildings, we won't speed up the
process of getting to everyone.
So I don't know quite how to answer the question except to
say physically we have to create the network. That is a one
building at a time thing. There are a million buildings to
build it to. We have got to get access first to build to them.
That is just commercial. Then there is is it 30 million homes
some much bigger number of multiple dwelling units and then
homes that have to be eventually reached. And it is going to
take a combined effort of multiple carriers doing that to get
an alternative infrastructure built across the country. And it
is going to be cable providers and competitive carriers, using
a variety of technologies, that ultimately get us an
alternative infrastructure in all of the facilities we want.
But, clearly, that access, we don't have a shot at that.
Ms. McCarthy. Have you ever refused service when requested
by a building owner?
Mr. Rouhana. By a building owner?
Ms. McCarthy. Yes.
Mr. Rouhana. Building owners don't ask us for service,
tenants do. If we get an order from a tenant we try to serve
them, if our network can get to them. It is a physical
question. If we can get our network to a tenant, we want to
serve them. We would like to serve everybody.
Ms. McCarthy. Mr. Bitz.
Mr. Bitz. With due respect to my colleague next to me, we
have been turned down. We have contracts with the firm that Mr.
Rouhana represents. We also have buildings where because I
assume they are not attractive, they have elected not to sign
up on those buildings. We have 102 in the Mid-Atlantic area.
So the issue of reciprocity is very important because right
now we have many buildings where we would like to have service
where we can't because maybe they are too small or the tenant
mix is not desirable from a telecommunications service
providers' perspective. So that is an issue of concern to our
industry, because, I have mentioned before, the real point that
we are looking to is to have happy tenants. The amount of
revenue that we get out of this is really very small. I think
it is .8 cents per square foot compared to $19 per square foot
for rent. So it is infinitesimal relative to our overall
business model.
Ms. McCarthy. Mr. Rouhana.
Mr. Rouhana. I just need to respond to that because if
there is a place we haven't gone it is because we physically
can't get there. I am back to my same issue. The process of
constructing a network across the entire Nation takes a period
of time. Time is the No. 1 impediment to having competition as
quickly as possible. I mean, you want to have it as fast as you
can have it. Building access is a key impediment to getting
there. So we could get into a circular discussion about which
came first, but the fact is, if we can't build the network to
places, we can't get to the next place.
Ms. McCarthy. Well, my original question that I posed and
directed to you was about the fact that if Federal legislation
is needed or created what should be in it? And this question of
reciprocity is one that I believe the subcommittee would
entertain as a component of that, if we go down that path. And
so that is why I was seeking thoughts on whether the question
of reciprocity should be in it. Let me hear from--what is your
name? I am sorry--Mr. Windhausen.
Mr. Windhausen. That's right. Thank you. Earlier there was
reference made to Connecticut and Texas State statutes on these
issues. They do not contain a reciprocity requirement, I
imagine because they found it wasn't necessary. These companies
are common carriers. They already have an obligation under the
law to serve and to serve in a nondiscriminatory basis. I think
the way the economics work out is once you are in a building
and once you are wired, your incentive then, as the CLEC, as
the competitor, is to put as much traffic onto those facilities
as possible. So it only makes sense for you to serve as many
consumers in that building as want service. So there is no need
for that kind of legislative requirement for reciprocity
because it will happen anyway, once the access to the building
is granted.
Mr. Prak. If I might, Ms. McCarthy, on the question of
obligation to serve, I represent the over-the-air television
industry, KNBC, Kansas City, for example. We have been told by
the Congress and by the FCC to build out digital television
facilities to serve everyone. Our concern in this is that we
don't want landlords standing in the way of folks who reside in
their buildings being able to receive free, over-the-air
television service, however they may receive it, whether they
receive it with an over-the-air antennae or through cable or
shortly, I guess, there will be the opportunity to receive it
through DBS.
Ms. McCarthy. Mr. Chairman, I am not sure there is any
other individual who wishes to speak. Mr. Sugrue?
Mr. Tauzin. Any other want to respond?
Mr. Burnside. Yes, Mr. Chairman, Ms. McCarthy, I would just
like to return, for a moment, to direct your focus to the cable
competition side, with respect to your core question. When you
passed the 1996 Telecommunications Act, part of it was to
create a concept called ``OVS'' or open video systems. And one
of the things that the cable industry has hard time with since
you passed that Act is the fact that, as an OVS operator, it is
not required to adhere to the franchising licensing build out
under the same terms and conditions that the existing cable
operator is required to build out.
However, I think you recognized when you did that part of
the Act, that it was absolutely impossible to expect a new
competitor, a new entrant, coming into a marketplace, to
overbuild an existing market which basically is a monopoly,
even though 67 percent of the customers homes take it. You
could not simply ask a new entrant to build out all of New York
City at the same time and under the same conditions in which
the new entrant 17 or 15 or 25 years ago did.
So I think it is a bit disingenuous for that industry to
expect new entrants on the cable side to be held to the same
standards as opposed to what I think you tried to achieve, and
that was to give a new entrant competition and opportunity to
get started and then extend its market, extend its network, as
it was financially and physically possible.
Ms. McCarthy. Mr. Sugrue.
Mr. Sugrue. If I could just respond. Because I don't want
to leave the subcommittee confused about the Commission's
attitude toward its own jurisdiction in this area. The
Commission has never said aye or nay with respect to
telecommunications services and Winstar, for example. Part of
that is the focus has been on video because, in part, the law
was sort of shaped a little bit with video in mind. Part
because Winstar really wasn't doing much when the law passed
and was being debated 4 years ago in 1995 and 1996.
Mr. Tauzin. It is already an old law.
Mr. Sugrue. In a way it is. We also have a Commission with
four new commissioners since the law passed and a new Wireless
Bureau chief and we tend to take a fresh look, shall we say, at
these issues.
Mr. Tauzin. Don't use that term.
Mr. Sugrue. I know. I was deliberately provocative. But so
I don't want to mislead people. We want to look at this issue
hard and my endorsement of some clarification is just to make
our job easier, frankly, if we had some.
Ms. McCarthy. Mr. Chairman, thank you both for this hearing
and for the time you have given me to explore this question. I
really would be curious to have staff look into the States nd
how it is working out there and appreciate the opportunity to
be a part of this.
Mr. Tauzin. Thank you very much and thank we have a lot of
information that we will share with you on those State laws and
at least as much background as we have gathered and, perhaps,
the witnesses who are experiencing real world, as you said, in
the mud operations can give us some insight as to their
specific observations on how well those State laws are working.
The Chair will recognize the ranking minority member, Mr.
Markey for as much time as you shall require.
Mr. Markey. Thank you, Mr. Chairman, very much. I just want
to thank you for holding this hearing and for the excellent
testimony that we received from the witnesses today. I think we
pretty much had the issue framed for us today. We have voice
and video and data industry that wants to provide competition,
lower prices, better service to the one-third of Americans that
live in apartment buildings and to businesses that operate in
large structures across the country. And, on the other hand, we
have legitimate concerns on the part of the real estate
industry: the tenant safety, constitutional property right
issues, compensation issues that all legitimately are being
raised by the other side.
I think that our task is now very well framed for us. I
think it is important for us to get it and get it resolved. And
I would hope that this would be the kick-off of our effort to
find some common-sense solution that legitimately deals with
the issues raised by all parties, but toward the goal of
ensuring that there is low-priced competition available for
every tenant in America. And I thank you for holding the
hearing.
Mr. Tauzin. I thank my friend. The Chair recognizes
himself. Let me, at this point, mention that PCIA has also
submitted testimony for the record. Without objection, that
testimony will be made as part of the record.
[The prepared statement of PCIA follows:]
May 12,1999
The Honorable W.J. (Billy) Tauzin
United States House of Representatives
Chairman, Subcommittee on Telecommunications, Trade & Consumer
Protection
2183 Rayburn HOB
Washington, DC 20515
Dear Chairman Tauzin: I want to commend you and the
Telecommunications Subcommittee for conducting this week's hearing on
the issue of access to multi-tenant buildings by competitive
telecommunications providers. PCIA, on behalf of its Wireless Broadband
Alliance members, looks forward to working with the Subcommittee as it
explores means of promoting wireless broadband alternatives for the
millions of small businesses and residential customers that live and
work in multi-tenant buildings. As you move forward with your
consideration of this issue, I hope you will take into consideration
the basic principles that I have outlined below. I respectfully request
that you include this letter in the record of your hearing.
Consumers must have a choice of ``last mile'' broadband access
providers if Congress' vision of a competitive telecommunications
market is to be realized. Wireless broadband providers offer a real
alternative to phone companies' DSL services and to cable modems.
However, if these new wireless services are to achieve their potential,
it is crucial for these wireless companies to have non-discriminatory
access to buildings where incumbents now provide service.
Wireless broadband licensees are more than capable of offering the
full array of broadband telecommunications services. The most
established of these companies, WinStar and Teligent, are deploying
service across the country today. Yet there are hundreds of companies
recently licensed by the FCC who are prepared to offer highspeed voice,
data, video-on-demand and Internet access to small businesses and
residential consumers. These potential customers, who by and large have
not had the opportunity to experience true broadband technologies, are
often located in multi-tenant buildings under the control of a landlord
or condominium association. For wireless broadband operators to offer
these extraordinary services to these consumers, they must first have
access to the buildings. This requires the consent of third parties
(e.g., landlords or management agents) who often have made exclusive
arrangements with the incumbent telephone company or cable company to
serve the tenants in a building.
Some states have recognized the importance of mandating access for
alternative telecommunications services in a multi-tenant environment.
For example, Connecticut and Texas require, by statute, non-
discriminatory access to buildings while the Ohio and Nebraska public
utility commissions have mandated access. Last year, the National
Association of State Regulatory Commissioners (NARUC) adopted a
resolution supporting the rights of consumers in multi-tenant buildings
to have a choice of telecommunications providers. Finally, this spring
the State of Florida almost adopted legislation that would mandate
access to buildings with reasonable compensation to building owners.
Notably, this legislation garnered the support of the Building Owners
and Managers Association (BOMA). Unfortunately, however, most states
have yet to address this issue.
PCIA believes that the resolution of building access concerns
demands a federal solution. Otherwise, wireless operators will face
piece-meal and conflicting obstacles to their deployments across the
country. Congress previously rejected the state-by-state approach to
opening local markets to telecommunications competition through its
adoption of the Telecommunications Act of 1996. It should do the same
here through either express legislation or by directing the Federal
Communications Commission to fashion access rules.
As you consider means of offering consumers a real choice in their
broadband telecommunications providers, I urge you to keep several
principles in mind. These principles will ensure that new
telecommunications services are made available to all Americans while
protecting the legitimate private property rights of building owners.
Non-discriminatory access to buildings: The terms, conditions,
and compensation for the installation of telecommunications
facilities in multi-tenant buildings must not disadvantage one
new entrant vis-a-vis another new entrant or new entrants vis-
a-vis incumbent providers. Telecommunications carriers should
compete to serve consumers on the basis of service quality and
rates and should not succeed or fail in the market because of
discrimination that tilts the playing field or prevents choice
altogether.
Carrier assumption of installation and damage costs:
Installing carriers must assume the costs of installation as
well as the responsibility for repairs and payments for damages
to buildings. Building owners and the tenants occupying their
buildings should be assured that the cost of any repairs for
damages caused by facility installation should be assumed by
the installing carrier.
No exclusivity: Building owners should be prohibited from
granting exclusive access to telecommunications carriers.
Exclusivity contravenes the choice that tenants should have
under the 1996 Act and restricts what could otherwise be a
competitive market for telecommunications service.
No charges to tenants for exercising choice: Under no
circumstances should a building owner or manager be permitted
to penalize or charge a tenant for requesting or receiving
access to the service of that tenant's telecommunications
carrier of choice.
Both commercial and residential multi-tenant environments
should be included within a nondiscriminatory building access
requirement. As a policy matter, both commercial and
residential telecommunications consumers should be permitted to
experience the benefits of competition envisioned by the 1996
Act. As a practical matter, in many urban areas it is not
uncommon for one structure to accommodate both commercial and
residential tenants, making enforcement of access distinctions
between the two types of customers difficult. Small and medium-
sized business tenants are often denied a choice of
communications providers and do not have the clout in a
building to compel the landlord to honor their choice of
provider.
Reasonable accommodation of space limitations: Space
limitations in buildings most likely will not be an issue in
practice. In the unlikely event that space limitations become a
problem, it is appropriate to address them on a case-by-case
basis in a nondiscriminatory manner. Available remedies include
limits on the time that carriers may reserve unused space
within a building without serving commercial customers and
requirements that carriers share certain facilities.
Building owners should receive reasonable compensation for
building access: Congress need not establish specific rates or
rate formulae for access. Instead, Congress can establish a set
of presumptions for the FCC or other government bodies to use
to evaluate the reasonableness of a charge. This method allows
parties to negotiate specific rates within the parameters
defined by Congress. These parameters might include the
following:
Rates should not be based on revenues. Congress should
presume that a building owner's imposition of revenue sharing
on a telecommunications carrier is per se unreasonable because
it does not approximate cost-based pricing and suggests the
extraction of monopoly rents.
Rates must be nondiscriminatory. Congress should require
that rates for access to buildings be assessed on a
nondiscriminatory basis. For example, if the ILEC does not pay
for access to a multi-tenant building, neither should other
telecommunications carriers. This would not bar the landlord
from recovering reasonable out-of-pocket costs.
Rates must be related to costs. Building access rates must
be related to the cost of access and must not be inflated by
the building owner so as to render competitive
telecommunications service within the building an uneconomic
enterprise for more than one carrier.
The Telecommunications Act of 1996 clearly voices Congress's desire
to promote facilities-based local exchange competition. Today, a new
breed of facilities-based providers using wireless broadband
technologies are ready to meet that goal. These companies will offer
small businesses and residential customers the highspeed Internet
access and other advanced services that are unavailable to them today.
Customers deserve the right to choose the wireless alternative for
receiving broadband access. Yet millions of potential customers will
not have the opportunity to choose unless Congress adopts a building
access regime that insures non-discriminatory access for all
telecommunications providers.
Again, I thank you and the Committee for opening a dialogue on this
important matter.
Best regards,
Jay Kitchen
President,
Personal Communications Industry Association
cc: Chairman Bliley
Ranking Member Dingell
Members of Telecommunications Subcommittee
Mr. Tauzin. Let me make a couple of comments. First of all,
on section 207, I think it is interesting to note that one of
the reasons why section 207 is there was to protect the right
of the viewer to put up an antennae and receive the signal. The
concern there was principally focused in on direct broadcast
television--you are right--it was a video kind of concept.
But it was designed to make sure that, in fact, there
wouldn't be a denial in State law, local laws, or property
owners agreements that would restrict one of the property
owners from, in fact, installing a DBS dish and, therefore,
offering a competitive choice for the local incumbent cable.
That was sort of the genesis, perhaps, of the section but it
speaks of viewers, not owners, which is rather interesting. And
I know the Commission is wrestling with that. What is the
meaning of that term?
The Congress could well have said owners are not, you know,
no restrictions shall be allowed to prevent owners, State laws,
local laws, agreements among common owners, would prevent a
single owner from putting up an antennae and receiving some of
these services. But the law said viewers, not owners. Does that
mean, then, that the owner of the property can't stand between
the viewer, a tenant, and his right to have an antennae,
whatever it takes to receive these signals.
While we were thinking video and while the Internet is
mentioned twice in the 1996 Act, that is all the browser wasn't
even invented until 1995. It was being invented at the same
time we were trying to write a law about switch networks and we
weren't even thinking about, you know, packet networks like the
Internet. While all that is true, how does that law then, which
was written with a video concept in mind, apply now to all
sorts of wireless services and wired services, that will
contain a lot more than video? That, indeed, could be
integrated services and by all accounts will be integrated
services. And those are interesting thoughts that I think we
are going to take with us from this hearing.
In this testimony by PCIA, PCIA calls for a whole list of
things they think would help. I would touch on them real
quickly and just to give you an idea of how complex we view
this task. They ask for nondiscriminatory access to buildings.
Well, how many? How many people should have nondiscriminatory
access to a single building? You mentioned how many members now
in your association and that is growing. CLECs are growing.
Companies are I mean, we have churned out all kinds of
spectrums for all kinds of new users and providers out there.
And they all want to get to our homes or our businesses.
How many would have nondiscriminatory access to the same
building? Would they have it over a common wire? Common
antennae? Or does everyone get to put their own system in? At
what cost to the landowner, the property rights concerns? That
is not easy to deal with.
PCIA mentions the carrier should assume the cost of
insulation and damage cost. Well, did the monopoly incumbent
telephone company have to pay for those costs? Did the owner
have to pay for them? Is the new entrant going to be treated
differently than the incumbent when it comes to cost and
installation of those systems? How do you get parity there? Is
everybody free or is everybody charged? And if you go everybody
charged, who is going to set the charges? Is government going
to be setting prices here? Determining whether it should be
$500 maximum and whether or not when I am in a hotel I should
be charged that extra buck for a .10 call? You know, Mr. Markey
raises that issue. Do we get into that? Do we dare go there?
No exclusivity. I notice the Florida statute, for example,
touches that, but it says no exclusivity forward. So that there
is no abrogating existing contracts. But what is a contract has
a 25-year term? Take it or leave it. You want cable services,
you can only have ours for the next 25 years. When cable was a
monopoly and de facto legally then. And now all of a sudden we
have got new competitors who want to come in. Well, we have got
an exclusive contract for 25 years and nobody should abrogate
it. Not an easy little problem.
No charges to tenants for existing choice. Well, if the
landowner has a lot of charges or the provider has additional
charges to reach that tenant, you mean you can't pass that on
the tenant? And who can? Under what circumstances? And how
much? How much of an add-on can you make? Do we get into that?
In a competitive marketplace where we are trying to deregulate,
downsize the FCC's role, how much do you really want the FCC
involved in all that, guys and gals?
And it goes on. I mean, they have got a whole list. For
example, the reasonable compensation for the building owners'
access, rates to be based on revenue. Well, again, are we going
to get into all the criteria upon which rates are going to be
based to compensate for the use of buildings or access to
buildings to reach those viewers who now become not just
viewers, but information service customers of the future?
The plate is full. I say it again. Thank you very much. You
have enlightened us but you have also made our lives much more
complex and for that we thank you because that means our jobs
will continue.
The hearing stands adjourned.
[Whereupon, at 1 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:
Statement of the Community Associations Institute
The Community Associations Institute (CAI) \1\ appreciates the
opportunity to address the Subcommittee on Telecommunications, Trade
and Consumer Protection on behalf of the nation's condominium
associations, cooperatives and planned communities to provide the
following comments on the issue of access to buildings and facilities
by telecommunications providers.
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\1\ Founded in 1973, CAI is the national voice for 42 million
people who live in more than 205,000 community associations of all
sizes arid architectural types throughout the United States. Community
associations include condominium associations, homeowner associations,
cooperatives and planned communities.
CAI is dedicated to fostering vibrant, responsive, competent
community associations that promote harmony, community and responsible
leadership. CAI advances excellence though a variety of education
programs, professional designations, research, networking and referral
opportunities, publications, and advocacy before legislative bodies,
regulatory bodies and the courts.
In addition to individual homeowners, CAI's multidisciplinary
membership encompasses community association managers and management
firms, attorneys, accountants, engineers, builders/developers, and
other providers of professional products and services for community
homeowners and their associations. CAI represents this extensive
constituency on a range of issues including taxation, bankruptcy,
insurance, private property rights, telecommunications, fair housing,
electric utility deregulation, and community association manager
credentialing. CAI's over 17,000 members participate actively in the
public policy process through 57 local Chapters and 26 state
Legislative Action Committees.
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Community associations fully support a competitive
telecommunications marketplace and are working diligently and
effectively to secure the telecommunications services requested by
residents while ensuring that the delivery of such services does not
damage the substantial investment that homeowners have made in
association property. Increasingly, community association residents are
seeking newer, faster, and more sophisticated telecommunications
capabilities. In response to such demands, resident boards of directors
are looking to viable competition among telecommunications companies--
and the advancements that such competition will produce--as means to
provide more enhanced and affordable services to their communities. If
certain telecommunications providers have not gained access to
community associations, it is due to a lack of demand for their
services, concern over potential damage to property, the scarcity or
absence of available space, or other such legitimate concerns. It is
not due to association intransigence.
Understanding Community Associations
In order to understand the concerns of community association
residents and their collective opposition to any proposal that would
grant telecommunications providers a privilege to access and use common
or private property without permission, it is important to grasp the
legal basis and governance structure of community associations.
All community associations are comprised of property that is owned
separately by an individual homeowner and property owned in common
either by all owners jointly or the association.\2\ There are three
legal forms of community associations: condominiums, cooperatives, and
planned communities, which differ as to the amount of property that i.s
individually owned. In condominium associations, an individual owns a
particular unit; the rest of the property is owned jointly by all unit
owners. In cooperatives, the individual owns stock in a corporation
that owns all property; the stock ownership gives the individual the
right to a proprietary lease of a unit. In planned communities, an
individual owns a lot; the association owns the rest of the property.
Generally, an individual owns less property in a condominium than a
planned community, while there is no individual property ownership in a
cooperative. Therefore, while individuals do own or use property in
community associations, they do not exclusively own all property in the
association. Community associations either own or control association
common property, using and maintaining this property for the benefit of
all association residents.
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\2\ In each type of community association, different terms apply to
residents who have an ownership interest in the association: unit owner
in a condominium, resident or apartment owner in a cooperative, and
homeowner in a planned community. For convenience, all diree types will
be referred to as ``owners.'' The term ``resident'' applies to owners
and tenants collectively.
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By virtue of their property interest, association owners are
members of the association's voting body. As such, they are responsible
for electing a board of directors to govern the association. In this
respect, residents govern themselves since community associations are
operated by residents on behalf of residents. Owners in a community
association who are not on the board may participate in governing
sessions by attending board meetings and joining various committees.
Directly or indirectly, owners have control over the activities that
occur in their association and board members must regularly seek the
votes of their neighbors to remain in office. As a result, community
associations are particularly accustomed to considering the needs and
desires of their residents when determining budgetary expenditures, the
use of common property and the selection of association services and
service providers.
Individuals choose to purchase homes in community associations
subject to the covenants, rules and regulations that enable all
residents to participate in the governance of the community and
establish high levels of services and standards for all. Congress
should recognize this self-determinate process and the role community
associations lay in maintaining, protecting and preserving the common
areas, the value of the community or building and all individually
owned property within the development. To fulfill these duties,
community associations must be able to control, manage and otherwise
protect their common property.
In the context of telecommunications, this may mean that the
association enables all residents to choose one or more of Services A,
B and C but that Service D is not available to Resident X because the
delivery of Service D would mean substantial cost to the association or
would damage association property. Service D may also be unavailable
because the provider sought to deliver the service in a manner that did
not adequately protect the association or its property. The bottom line
is that community associations have the appropriate right and
responsibility to manage common property, and those that seek to use
such property, for the maximum benefit and enjoyment of all residents.
An association's charge to preserve, protect and manage common property
will always dictate that any provider wishing to physically enter
association property or use wiring on association property must satisfy
association concerns about such things as security, liability and space
limitations. This is absolutely appropriate and vital if the
association is to fulfill its duty to the individuals who have
purchased homes in the community.
Forced Entry Is Unnecessary, Inappropriate & Unfair
While proponents of forced entry proposals attempt to justify their
arguments by irresponsibly portraying community associations and others
as barriers to competition, the substantial growth of competitive
telecommunications providers in recent years demonstrates nothing if
not the effectiveness of the marketplace in meeting the growing demand
for advanced and dependable services. The successful relationship
between competitive telecommunications providers and community
associations across the country merits celebration--not legislative
action.
It appears Congressional action is being solicited, however,
because providers either fear the competition of an open marketplace or
have simply concluded that they do not wish to address the legitimate
concerns that community associations and others have in relation to
effectively and professionally managing an environment where multiple
telecommunications providers may be operating within a property.
CAI believes that it would be absolutely inappropriate for Congress
or any other governmental entity to disregard the positive evolution of
the competitive marketplace by granting any special legislative
privilege for telecommunications providers to advance their business
strategies and profit margins at the expense of the rights of others.
Forced Entry Dismisses Importance of Provider Knowledge, Expertise &
Reputation
The telecommunications industry is growing rapidly and provider
quality varies tremendously. To ensure that community association
residents receive dependable services, association boards of directors
must be able to weigh factors such as a provider's reputation when
allocating limited space to telecommunications companies. This is
essential if residents are to have a variety of dependable
telecommunications options and confidence that the providers are
committed to the community's long-term interests.
Community associations choose telecommunications services from
alternative service providers that provide high quality, reasonably
priced, flexible services that are demanded by association residents.
Forced entry policies would deter the growth of the competitive
marketplace, and instead, would create artificial markets by granting
privileges to low quality telecommunications service providers that
would otherwise be unable to compete based on the quality of and demand
for their services. With any provider able to force installation of
telecommunications equipment on association property, providers would
not have to demonstrate service quality and competitive pricing or
address any other legitimate concerns for the valuable and limited
space they would require. Therefore, forced entry policies would impede
the growth of quality competition and possibly prevent association
residents from receiving better services from more professional
providers.
Forced Entry Undermines Community Security, Safety & Association's
Responsibility to Manage Common Property
Removing an association's prerogative to regulate the access of
providers to building or community systems, as proponents of mandatory
access/forced entry are requesting, would limit the association's
ability to protect residents and their telecommunications service, the
equipment of all providers, and the property itself. In such an
environment, resident safety and security would be compromised and
association risks and liabilities would escalate.
Forced entry proposals undermine every responsibility associations
have to properly serve their owners and the properties. Equipment and
wiring installation usually involves removing or drilling through
roofs, walls, floors, and ceilings. This activity often causes damage,
requiring additional expense to restore the property. With its
authority to permit or deny access to its common property and to
require that all providers negotiate a written agreement governing
their conduct, an association can choose telecommunications providers
that will not damage common and private property during equipment
installation and maintenance, and insure that any damage is properly
repaired and paid for by the provider causing the damage.
In a forced entry environment, all telecommunications providers
could access an association regardless of how they treat the property
and providers would have less of an incentive to prevent damage to
common property because their lack of care could not be a basis for
exclusion. The association and its owners, the telecommunications
consumers, would be required to bear the financial burden of repairs.
With multiple service providers having the unrestricted right to
enter an association, the potential for damage to common property and
telecommunications equipment, or injury to association residents and
personnel, would increase exponentially. Since multiple providers would
often be using the same portions of common property, it is conceivable
that such areas would be damaged, restored to some extent, then damaged
again by another provider. It is also conceivable that a new provider
would damage a previous provider's telecommunications equipment during
installation.
If telecommunications providers damage property or injure
association residents, it is likely that the association would be held
liable since it has the responsibility to decide what companies and
providers operate within the community. Yet, forced entry policies
would negate the rights of associations to limit the risk of damage or
injury while minimizing the disruption to common property,
telecommunications equipment, and association residents. Instead, it
would labor associations with the expensive and burdensome task of
trying to hold telecommunications providers liable for problems after
the fact.
Forced Entry Ignores Space Limitations & Is Anti-Competitive
Real estate is a finite resource and common area space is always
limited. It is simply not possible for community associations to
accommodate an unlimited number of providers. It is this reality that
seems to make forced entry so appealing to providers already in the
marketplace. Not only do they see a prospect of advancing their
immediate business plan, they also understand that a forced entry
environment would enable them to preclude future competitors by
installing equipment and wiring in as many buildings as possible so
there would be no remaining space when new providers come to call.
Not only would such a rush to occupy space likely result in poor
quality installations and increased damage to common property, the end
consumer would also suffer in such a forced entry environment because
competition would be limited. A new provider could be just what the
residents desire but the association would be precluded from adding the
services or substituting the new provider for an incumbent because
providers and not the association controlled the space allocations.
Community associations must maintain their rights and flexibility to
select a balance of providers in order to respond to resident
requirements and ensure a wide diversity of services within the
property.
Forced Entry Raises Serious Property Rights Issues
CAI urges Congress to recognize that any requirement forcing a
community association to permit access to property for the installation
of telecommunications equipment or wiring, in the absence of just
compensation, would violate the Fifth Amendment to the United States
Constitution and would be the same as that invalidated by the United
States Supreme Court in Loretto v. Manhattan Teleprompter.\3\ In
Loretto, the New York statute required building owners to make their
properties available for cable installation, providing only nominal
compensation for the space occupied. The Supreme Court ruled that that
installation amounted to a permanent physical occupation of the
landlord's property and that even the slightest physical occupation of
property, in the absence of compensation, is a taking.\4\ The Court
further reasoned that permanent occupancy of space is still a taking of
private property, regardless of whether it is done by the state or a
third party authorized by the state.\5\
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\3\ 458 U.S. 419,102 S. Ct. 3164, 73 L. Ed. 868 (1982).
\4\ Loretto at 427.
\5\ Loretto 458 U.S. at 432, n.9.
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Conclusion
CAI eagerly anticipates the growth of additional competition among
telecommunications providers and believes that such competition is best
fostered through a free and open marketplace that operates with minimal
governmental intrusion.
Increasingly, community associations, responding to the desires of
their residents, are entering into contracts with multiple
telecommunications providers to offer a variety of competitive services
to residents. As more providers enter the marketplace to offer high
quality, reasonably priced services, such competition will only
increase.
Any forced entry policy would unnecessarily limit the rights of
community associations and their residents simply to advance the
business plans of various telecommunications providers and would be
inappropriate for a free market grounded on competition and the respect
for private property. Such a policy would hamper the development of a
more competitive telecommunications environment and expose the nation's
community association residents to undue risks, costs and chaos.
Community associations must retain control over common property,
which they maintain and protect. Just as all dry cleaners or sandwich
shops may not force their way onto common property to sell their
services simply because an association has contracted with other such
entities, neither should a telecommunications provider be allowed to
take over property it does not own simply because other providers are
already there.
A telecommunications providers access to community. associations is
now and should continue to be based on the quality of services it
provides and the demand for those services.. A reputable provider with
a quality service.will be competitive in this environment. Congress
should encourage such competition rather than create artificial markets
for providers seeking to avoid it.
Finally, Congress should be aware that this issue has been
previously considered and rejected by this body, by the Federal
Communications Commission and by numerous states legislatures and
regulatory bodies. It is time to put a stop to this endless trek of
providers who travel from one governmental entity to another in search
of someone to ignore the marketplace realities and public policy
shortcomings that should always merit the demise of forced entry
proposals. To do otherwise would be a disservice to the nation's 42
million community association homeowners.