[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

                              ----------                              


                         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].
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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)
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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'.''
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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:
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
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