U.S. GOVERNMENT PRINTING OFFICE

57–450CC WASHINGTON : 1999

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

(
COMMITTEE ON COMMERCE

TOM BLILEY, Virginia, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

MICHAEL G. OXLEY, Ohio

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

Vice Chairman

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

BRIAN P. BILBRAY, California

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

TOM A. COBURN, Oklahoma

RICK LAZIO, New York

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

RON KLINK, Pennsylvania

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

THOMAS C. SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

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,

Vice Chairman

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ROBERT L. EHRLICH, Jr., Maryland

TOM BLILEY, Virginia,

(Ex Officio)

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

BILL LUTHER, Minnesota

RON KLINK, Pennsylvania

THOMAS C. SAWYER, Ohio

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)
2

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)
(1)

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 play-
2

ing 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
3

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
4

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.
5

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.
6

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 foot-
7

hold 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.
8

1The 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.

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

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, facilitiesbased 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
9

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 facilitiesbased 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
10

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.
11

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 socalled 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 incum-
12

bent 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
13

1 47 U.S.C. sec. 573.

2 Indeed, Congress and the Commission intended OVS to be the primary source of facilitiesbased 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). 3See, 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.

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.

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 an-
14

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-

30.6See 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. 7 47 U.S.C. sec. 544(i).

nounced 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.

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.

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 applica-
15

8See 47 C.F.R. secs. 76.801-2 and 76.5(mm).

9See 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.). 10See 47 C.F.R. §§ 76.5 (mm) (2) and 76.804(a)(4) and (b)(5). 11 Id. 12 Id. at ¶ 38 (footnotes omitted). 13There 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.

tion 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

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:

[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

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
16

15 Inside Wiring Order, supra at ¶ 150.

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.

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.

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.
17

16See Telecommunications Regulation (New York, 1998), sec. 21.11[2].

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.

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
18

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.
19

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
20

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 facilitiesbased 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 in-
21

formed 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.
22

0See Connecticut General Statutes, Section 16-2471. See also Texas Public Utility Regulatory

Act §§ 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).

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.

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 multitenant 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,
23

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.
24

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.
25

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 com-
26

promise 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
27

1 United States Census Bureau, Census of Housing, ‘‘Units in Structure’’ (1990 figures)(available at <www.census.gov/hhes/ housing/census/units>). Indeed, MTEs are likely to be

the first place that residential facilities-based local exchange competition occurs. 2These 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. 3See ‘‘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)

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 onethird of U.S. residential units are located in MTEs.1

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.

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.

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
28

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). 5Federal Communications Comm’n v. Florida Power Corp., 480 U.S. 245 (1987). 6 503 U.S. 519 (1992).

7 Cf. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982). 8 Id. at 441. (‘‘Our holding today is very narrow...[O]ur conclusion that § 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 § 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.

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.

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.

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.’’

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.

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
29

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 caseby-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.
30

9The 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).

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).

• 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.
31

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.
32

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.
33

1Founded 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. 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 costeffective 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.

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.

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

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.
34

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.
35

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. 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’.’’

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.

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

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).
36

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.

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

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), be-
37

cause 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
38

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.

§ 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,
39

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.
40

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, re-
41

gardless 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.
42

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.
43

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 in-
44

vestment 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 devel-
45

opment 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 Mel-
46

ville, 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
47

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
48

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
49

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.
50

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 highdensity 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
51

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.
52

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 ‘‘cherrypicking’’ 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
53

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 proceed-
54

ing 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
55

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.
56

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 tele-
57

1Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996).

2FNPR at ¶ 5. 3FNPR at ¶ 63.

vision 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-theair 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:

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.

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
58

4 Communications Act of 1934, as amended, § 1, 47 U.S.C. § 151. 5Sixth 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.

7TV & Cable Factbook (Warren 1996 ed.), p. A-99. 8Second Annual Report (Video Competition), FCC 95-491 (Released: December 11, 1995), at

p. 2, ¶ 3.

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

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.

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 tele-
59

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. § 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. § 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.’’ 11See 47 U.S.C. §§ 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. § 303a, 303b, 394; 47 C.F.R.

§ 73.1930, 73.1940, 73.1941, 73.1942, 73.1943, 73.1944 (political rules); 47 C.F.R. § 83.670,

73.671 (children’s TV rules).

vision 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.

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.

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-
60

12See 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),

¶ 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. 13Fifth Report and Order, ¶ 5. 14 Communications Act of 1934, as amended, § 1 (47 U.S.C. § 151). 15Fifth Report and Order, ¶ 19 (citing Fourth Further Notice/Third Inquiry, at 10543).

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 overthe-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 ¶ 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-theair television service is a paramount goal of public importance.12 In this context, the

Commission stated:

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

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, Nationwide, 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

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
61

16See, 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)). 17Depending 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.

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 overthe-air antenna restrictions with respect to ‘‘common and restricted’’ areas of rental

property. See, e.g., Second R&O, at ¶ 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.

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 ¶ 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
62

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.

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 ¶¶ 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 ¶ 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 im-
63

pose 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 § § 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 § 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 § 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, ¶ 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, § 303, 47 U.S.C. § 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 overthe-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.
64

18See FNPR at ¶ 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). 20FNRP, at ¶ 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)). 21See Smith & Boyer, Survey of the Law of Property, 2d ed. 1971, West, p. 16. 22 Id. 23Penn 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). 24PruneYard Shopping Ctr. v. Robins, 447 U.S. 74, 83 (1980). 25 458 U.S. 419 (1982). 26 24 F.3d 1441 (D.C. Cir 1994) (‘‘Bell Atlantic’’).

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-theair 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.

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.

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.

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.

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
65

27See 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. 30 Id. At 440 n. 19. 31Smith & Boyer, supra 32 Id. At 440 (emphasis added). 33 47 U.S.C. § 151. 34 Id. at 1444 n.1 (‘‘The only question we consider is whether the order under review ere indeed duly authorized by law.’’). 35The 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.’’)

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:

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

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:

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

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

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
66

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. 39 Id. 40 475 U.S. 211 (1986). 41 Id. at 223-24 (quotations and citations omitted). 42 Cf. Loretto (‘‘an owner suffers a special kind of injury when a stranger directly invades and

occupies the owner’s property.’’)

their central offices. Thus, a different takings analysis applies to the facts of this

regulation.

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:

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

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:

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

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.

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
67

43 441 U.S. 51, 66, 100 S.Ct. 318, 62 L.Ed.2d 210, 233 (1979)

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

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.
68

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
69

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
70

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
71

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.
72

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.
73

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
74

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?
75

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.
76

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 ex-
77

tent 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.
78

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 localto-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-thecountry, 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?
79

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 freemarket 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.
80

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.
81

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 assur-
82

ances 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
83

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 ad-
84

dress 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
85

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 compensa-
86

tion 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
87

(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) §§ 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 multitenant 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 §§ 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 §§ 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 build-
88

ings in order to install facilities to serve tenants of the building. In adopting PURA

§ 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 § 54.260, which allows the property owner to charge reasonable compensation for the access privilege.

The provisions of PURA § 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 § 54.260. Specifically,

PURA § 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

§ 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 § 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 §§ 54.259 and 54.260 against property owners.

Pursuant to PURA §§ 15.021, 15.023, and 54.260, the Commission is clearly vested

with jurisdiction to enforce the building access provisions of PURA. Specifically,

PURA § 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 § 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 § 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

§§ 54.259 and 54.260 and guide compliance efforts in this area.
89

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 §§ 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
90

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 § 54.259 TO EXISTING

SERVICE ARRANGEMENTS WITH INCUMBENT LOCAL EXCHANGE CARRIERS

PURA § 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 § 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 § 54.259 nondiscrimination provision to be applicable to pre-September 1, 1995 business arrangements between incumbent local

exchange carriers and property owners.
91

1See PURA § 54.259(a)(3).

Although the nondiscrimination provisions of PURA § 54.259 are applicable to preSeptember 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.

Because the legislative intent behind PURA §§ 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 § 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 §§ 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
92

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, nondiscrim-
93

inatory 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, multifamily. Your first comment and from what I understand of the section you read was dealing with off-air signals and, as I had spoken
94

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
95

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
96

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.
97

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
98

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
99

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
100

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
101

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 commonsense 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 multitenant buildings. As you move forward with your consideration of this issue, I hope
102

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-bystate 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
103

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?
104

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
105

1Founded 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.

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.

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.
106

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.

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.

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 relation-
107

ship 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 longterm 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
108

3 458 U.S. 419,102 S. Ct. 3164, 73 L. Ed. 868 (1982).

4Loretto at 427. 5Loretto 458 U.S. at 432, n.9.

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

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.
109

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.