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Feature Article*
"Building Access 2003 "
By
Nelson Migdal & Eric Fishman, Holland & Knight
Telecommunications
issues are back in the news. Eight years ago, in the first major
overhaul of telecommunications law in 62 years, the U.S. Congress
adopted the Telecommunications Act of 1996, charging the Federal
Communications Commission with its enforcement. In its implementation
of the Act, however, the FCC has encountered numerous hurdles and legal
reverses. At the same time, it has had to grapple with historic
developments – the downturn of the economy and the aftermath of 9/11 –
which have had a profound impact on its statutory mission.
The ongoing debate on the issue of so-called "forced access" – the
prohibition against exclusive contracts between telecommunications
service providers (TSPs) and of commercial office buildings (multitenant
environments or MTEs) – offers valuable insight into (or "illustrates
the dynamics of") the conflicting social and legal demands, which the
FCC and other regulators must recognize and reconcile as they discharge
their statutory mandate. On the one hand, Congress charged the FCC with
the responsibility for ensuring the rapid deployment of new
telecommunication technologies by fostering competition and regulation:
[T]o provide for a
pro-competitive, de-regulatory national policy framework designed to
accelerate rapidly private sector deployment of advanced
telecommunications and information technologies and services to all
Americans by opening all telecommunication markets to competition.
(Conference Report on S.652, Telecommunications Act of 1996, 104th
Congress, 1st Session).
On the other hand, the FCC
cannot discharge its mandate in a vacuum, but must recognize the
competing, and equally valid, requirements of unregulated entities whose
interests could be adversely affected by the Commission's rules and
policies. Access to MTEs, be they commercial or residential, still
requires the consent of the owner of that MTE, and any regulation that
addresses the access issue must preserve the interests of building . At
the same time, regulators must recognize how the events of 9/11 and the
downturn of the economy – and the telecommunications sector in
particular – have altered the relationship between TSPs and MTE
(owners). For their part, both TSPs and MTE must acknowledge and
attempt to reconcile their conflicting, but legitimate, commercial
interests in the wake of 9/11 and marketplace realities.
This article will provide some of the background for the current
regulatory climate, describe some of the issues currently before the FCC
and how the FCC intends to address them, provide insight into the
importance of gaining a license for access to the MTE from the owner,
and identify certain important tools for entering into an agreement
(often referred to as the Access Level Agreement or ALA) with the MTE
owner.
Regulatory Background
Regulatory initiatives by the FCC have affected, or may affect, the
relationship between owners and TSPs in six principal areas: exclusive
contracts; satellite dishes; in-building ducts; inside wiring;
bankruptcy; and homeland security.
Exclusive Contracts. In October 2000, the FCC amended its rules to
prohibit any "common carrier" from "enter[ing] into any contract,
written or oral, that would in any way restrict the right of any
commercial multiunit premises owner, or any agent or representative
thereof, to permit any other common carrier to access and serve
commercial tenants on that premises." 47 C.F.R. § 64.2500. As
interpreted by the Commission, the term "exclusive contract" refers not
only to a contract that gives the contracting provider the sole right to
serve a building, but also to other arrangements that have the same
effect. For example, the FCC prohibits a contract with a competitive
carrier that could permit access to that carrier and an incumbent, but
deny access to anyone else. Similarly, the FCC forbids a contract that
would limit access to providers using a particular technology, or that
imposes such onerous prerequisite to the approval of access that they
effectively deny access. Promotion of Competitive Networks in Local
Telecommunications Markets, FCC 00-368, released October 25, 2000.
In many other respects,
however, the rule against exclusivity is limited:
First, the rule applies only to "common carriers," a term that the
Commission limits to providers of "telecommunications services." An
entity is not a common carrier for purposes of the rule if it does not
offer "telecommunications"–i.e., "the transmission, between or
among points specified by the user, of information of the user's
choosing, without change in the form or content of the information as
sent and received" for a fee directly to the public. 47 U.S.C. § 153.
Specifically, "telecommunications services" do not include services
frequently used in conjunction with, or as a substitute for, traditional
telephone services, such as cable service and Internet service. Thus,
neither cable service providers nor ISPs are subject to the FCC's
contract exclusivity rule.
Second, the FCC rule
only applies to commercial MTEs–not to residential MTEs (apartment
buildings) or to residential tenants who may occupy commercial MTEs.
Nothing in the FCC's rules forbids a common
carrier from entering into an exclusive contract to serve only
residential customers on any premises. The rule also does not apply
to hotels, since hotel guests are not "tenants" within the meaning of
the rules. To the extent that a hotel is a tenant in a commercial
building, however, the prohibition would apply.
Third, the FCC rule
applies only to building access. It does not apply to other commercial
arrangements between MTEs and TSPs, such as exclusive marketing
agreements.
Fourth and finally, the
FCC's rule is prospective only, and leaves intact agreements existing at
the time of the Commission's rule adoption.
In a Further Notice of
Proposed Rulemaking, released concurrently with the new rule in October
2000, the FCC sought comment on whether to extend its exclusive contract
prohibition retroactively, and to residential MTEs. The Commission has
taken no action in this matter for more than two years, and for the time
being seems unlikely to do so. In that regard, in a ruling released in
January 2003, the Commission decided not to prohibit exclusive and
perpetual contracts between multiple dwelling unit (MDU) and
multichannel video programming distributors (MVPDs), such as cable
operators. Individual states, however, are free to impose such
requirements, as the FCC has not preempted state action in this area.
Telecommunications Services Inside Wiring, FCC 03-9, released
January 29, 2003.
In its January 2003 ruling,
the FCC also addressed the phenomenon of "mandatory access" laws, which
several states have adopted, and which provide franchise cable operators
with a legal right to install and maintain cable wiring in MDU
buildings, even over the MDU ' objections. Typically, mandatory access
laws grant only the franchised operator the right of mandatory access.
The FCC has long recognized
that mandatory access laws may impede competition in the MDU marketplace
and that they tend to preclude alternative (non-cable) MVPDs from
executing MDU contracts. This is due to the fact that most mandatory
access laws give the franchised cable operator a legal right to wire and
remain in an MDU. The predictable result is that competitive providers
are less likely to take the financial risk of entering, or to secure the
necessary financial backing to enter, the MDU marketplace in a mandatory
access state.
At the same time, the
Commission has recognized the possibility that, but for the existence of
mandatory access statutes, some MDU would refuse to allow their
buildings to be wired for cable programming. For this reason, the
Commission has not preempted state mandatory access laws, nor
established a federal mandatory access requirement. Instead, the
Commission has urged states and municipalities that have mandatory
access laws to carefully consider the level of effective competition
among MVPDs in the MDU market place, and if competition is found to be
lacking, to determine whether a repeal or reform of such laws might
enhance such competition and thereby benefit consumers.
In its prior rulings, the FCC
has also made no finding or determination regarding which state statutes
foreclose application of our home run wiring rules. Instead, the
Commission has adopted a presumption that the home run wiring
disposition procedures will apply in each state “unless and until the
incumbent obtains a court ruling or an injunction enjoining its
displacement.” The presumption was designed to allow the home run
wiring rules to “apply in mandatory access states to the extent state
law does not permit the incumbent to maintain its home run wiring . . .
against the will of the MDU owner.”
In January 2003 ruling, the
FCC rejected requests to abolish this presumption. Accordingly, the
agency's home run wiring disposition procedures apply in the absence of
a state court ruling or injunction.
Antennas. In its
October 2000 ruling, the FCC also expanded the scope of its so-called "OTARD"
(over the air reception device rule), which allows MDU residents to
install individual satellite or wireless antennas within their own
leasehold. As amended by the Commission, the rule prohibits
"any restriction, including
but not limited to any state or local law or regulation, including
zoning, land use, or building regulations, or any private covenant,
contract provision, lease provision, home' association rule or similar
restriction, on property within the exclusive use or control of the
antenna user where the user has a direct or indirect hip or leasehold
interest in the property that impairs the installation, maintenance or
use of…"
certain small dish antennas (one meter or smaller) used to receive video
programming or to transmit and receive fixed wireless services.
For purposes of the rule, a
restriction impairs installation, maintenance or use of an antenna if it
unreasonably delays or prevents installation, maintenance or use;
unreasonably increases the cost of installation, maintenance or use; or
precludes reception or transmission of an acceptable quality signal.
Any fee or cost imposed on a user by a restriction must be reasonable in
light of the cost of the equipment or services and the rule, law,
regulation or restriction's treatment of comparable devices.
Although parties have sought
reconsideration of the FCC's expansion of the OTARD rule, it is worth
noting that in December 2001, the U.S. Court of Appeals for the District
of Columbia rejected challenges by BOMA and others to the old OTARD
rule, which did not cover fixed wireless services. Building and
Managers Association v. FCC, 254 F.3d 89 (D.C. Cir. 2001). Barring
unforeseen circumstances, a reversal of the newly expanded OTARD rule by
the court therefore seems unlikely.
The expansion of the old OTARD
rule has multiple ramifications for building. At present, the fixed
wireless services, which the FCC regulates, cover many frequency ranges,
some of which are licensed, and some of which are not. While all
frequency users must ensure that their operations do not cause
interference with one another, many of the mechanisms to ensure
coordination are self-regulatory, depending on the good will and
cooperation of the users themselves. This is particularly the case with
unlicensed spectrum, which use is rapidly expanding for multiple
commercial applications, including wireless Internet access.
For example, many licensed
spectrum users, both commercial and government, have
expressed concern that allowing certain
unlicensed uses – in which devices operating at low power and in fairly
limited range use the same frequencies as licensed providers – may
create interference that compromises the quality of services provided by
licensed users. Conversely, those wanting to introduce certain new
technologies view access to unlicensed spectrum as
beneficial to the public interest and maintain that the degree of
interference created by certain unlicensed uses
is not “harmful.” While the expanded OTARD rule does not allow an
owner to prohibit the installation of fixed wireless antennas on tenant
premises, owners should ensure that their contractual arrangements with
both TSPs and tenants ensure that wireless operations do not cause
interference with other tenants and the owner's own operations.
In-Building Ducts. Pursuant to Section 224(f)(1) of the
Communications Act, a utility must provide a cable television system or
any telecommunications carrier with nondiscriminatory access to any
pole, duct, conduit or right-of-way owned or controlled by it. In its
October 2000 ruling, the FCC interpreted Section 224 to require
utilities (including telephone companies) reasonable and
nondiscriminatory access to ducts, conduits and other rights-of-way that
the utility owns or controls inside buildings.
Consistent with this view, the
FCC has defined a "right-of-way" inside a building to mean "at a
minimum, where (a) a pathway is actually used or has been specifically
designated for use by a utility as part of its transmission and
distribution network, and (b) the boundaries of that pathway are clearly
defined, either by written specification or by an unambiguous physical
demarcation."
This interpretation has
important implications for TSPs, cable operators and owners. Pursuant
to the Commission's policy, TSPs and cable operators have no inherent
right to use space in any building. Rather, the right of any provider
to use space must be defined either by contract (a grant of an easement
or other property right by the owner) or by state law, which expressly
confirms the utility's ability to both voluntarily provide access to an
area and obtain compensation for doing so. Moreover, it is important to
note that a utility can provide access only to ducts, conduits or rights
of way. This does not necessarily mean that the utility can grant
access to the building itself.
Inside Wiring and Home Run Wiring. The demarcation point of a
building is the point where wiring under the control of the incumbent
local exchange carrier (ILEC, usually a Bell company) ends and wiring
under the control of a subscriber begins. The minimum point of entry (MPOE)
is either the closest practicable point to where the wiring crosses a
property line, or the closest practicable point to where the wiring
enters a multiunit building or buildings. In its October 2000 order,
the FCC established procedures to require the ILEC to move the
demarcation point to the MPOE to give competing telephone providers
greater access.
Moving the demarcation point to the MPOE would give the building owner
more control over the wiring inside the building, from the MPOE/demarcation
point inward. However, the responsibility for installation and
maintenance comes with control. Building may contract with other
parties, including the ILEC, to install and maintain wiring controlled
by the building owner. They should consult with their attorneys to see
if moving the demarcation point to the MPOE in their buildings is
appropriate for their specific situation.
In its regulations, the FCC treats inside wiring for telecommunications
services differently from home run wiring for cable operators and other
MVPDs. The latter regulations establish specific procedural mechanisms
requiring the sale, removal or abandonment of home run wiring in MDUs
where the incumbent provider no longer has an enforceable right to
remain in the building or service particular units and the MDU owner
wishes to (a) terminate service for the entire building and use the home
run wiring for an alternative video service provider; or (b) permit more
than one MVPD to compete for the right to use the home run wiring on a
unit-by-unit basis. In adopting these rules, the FCC has allowed the
MDU owner, rather than individual subscribers, the option to acquire the
home run wiring of a departing MVPD, on the theory that the property
owner should have the ability to control the wiring since it is
responsible for the common areas of a building.
Bankruptcy. With the economic downturn in the telecommunications
industry, many carriers have filed for bankruptcy court protection. In
their efforts to emerge from bankruptcy, companies have rejected many of
their contracts and, in some cases, discontinued service. While primary
jurisdiction over reorganization lies with the bankruptcy court, it
should be noted that certain issues may require intervention by the FCC,
as well as state regulators, who have jurisdiction over the operations
of carriers and market entry and exits. In this regard, the Chairman of
the FCC has indicated that it will scrutinize carefully requests by
carriers to discontinue service to make sure that the interests of end
users are adequately protected.
These issues are particularly relevant to building who have licensed
access to their properties to TSPs that have sought bankruptcy court
protection. Although the terms of many of their license agreements may
authorize the building owner to terminate the contract and seize the
TSP's equipment, both bankruptcy law and the Communications Act may
prohibit them from doing so, particularly if their actions may
jeopardize the services of tenants. Conversely, building faced with
bankrupt TSP licensees may wish to consider seeking intervention by the
FCC to ensure that service to tenants is not interrupted or terminated.
Homeland Security. To fully and effectively carry out its role in
promoting homeland security, network protection, interoperability,
redundancy and reliability, the FCC has set as its objectives (a) to
evaluate and strengthen measures for protecting the nation’s
communications infrastructure; (b) to facilitate rapid restoration of
the U.S. communications infrastructure and facilities after disruption
by a threat or attack; and (c) to develop policies that promote access
to effective communications services by public safety, public health,
and other emergency and defense personnel in emergency situations.
Consistent with these objectives, the FCC has established a Homeland
Security Policy Council and called for private sector assistance in
formulating plans and best practices to implement these goals. While
these initiatives are still in progress, it is important for both TSPs
and owners to recognize their need to cooperate with each other to
ensure network diversity, reliability and operability in the event of an
emergency.
What TSPs Need
The failure of TSPs to understand the competing interests for
building access, and to address properly the concerns of the owner, will
continue to make building access one of the greatest challenges for TSPs.
TSPs require a platform from which to serve existing customers and win
new customers. The better and more profitable customers, both from a
qualitative and quantitative point of view, are law firms, accounting
firms, high-tech firms, financial services firms, Fortune 100
companies, family businesses and small businesses that are tenants in
commercial office buildings. Whether the focus is on the primary urban
markets in major U.S. cities or on the secondary and tertiary markets
across the country, TSPs desire and require access to these potential
customers in order to execute the TSPs' business plans. These potential
customers are the tenants of the owner. The owner both owns the asset
in which the tenant has its office and may have paid to develop and
build the building. In smaller markets, there even may be one or more
people who have personally guaranteed the loan that is secured by that
building. TSPs must forge contractual ties with owners to gain the right
to install and operate in-building broadband networks and the right to
offer broadband services to building tenants, but they must do so in the
context of the fact that the owner has a very valuable asset to nurture
and protect. TSPs should remember that, with very limited exceptions,
there are no federal or state laws or rules that apply to private
building owners to compel building owners to provide access to TSPs.
Continuing Concerns
All of the serious concerns about a building’s telecommunications assets
(rooftop space, riser space, telephone closet space, floor space in the
basement or near the roof to house cables and/or switches) that existed
in 1996 still exist today. The Internet and the power of
cyber-connectivity may be infinite (at least we seem to think they are),
but a commercial office building made of steel, concrete, glass and
other materials is finite. Older buildings may present additional
challenges because they were constructed before developers thought about
designing for "smart" buildings that would permit diversity and
redundancy in the ability to deliver telecommunications services to
tenants.
In fact, in the post 9/11 environment, many larger buildings and
buildings located in major U.S. cities, have increased building
security, which has placed further limits on access to the roof and the
building's telephone closets and mechanical spaces. For example, while
unfettered 24/7 access to the roof is considered essential for a
provider with an antenna or dish on the roof, it is unlikely that owners
in major urban settings will permit access to the roof except during
normal business hours, with prior notice, and perhaps accompanied by a
building engineer. Any roof access outside of normal business hours, if
permitted at all, is also likely to require prior notice so that a
building engineer or other representative of the owner can be present,
and the party seeking the access will pay for all additional expenses of
the building owner, such as overtime charges of the building engineer.
With so many roofs now "locked down" there are different considerations
of what are "commercially reasonable" requirements for building and roof
entry.
Owners are focused on how to keep tenants feeling safe, secure and
happy. The relationship between the owner and its tenants is the core
business focus of the owner, as long as minimum network performance
standards are maintained. The proceedings of the FCC may be front page
news, and the skirmishes between providers may be interesting sport, but
the ALA with a TSP is a small part of the world of the owner.
Forgetting or ignoring that reality will find us back in the early days
of the Act, with providers demanding building access and complaining
when it is not readily available, even though the providers have done
nothing to demonstrate their business case to owners or address owners'
concerns.
It has not been that
long since broadband deployment failed to reach its expected demand,
especially with respect to commercial office buildings. Those TSPs
failed to gain substantial access to commercial office buildings. The
challenges of entering into an ALA with an owner have not changed. This
is not the time for TSPs to be dancing in the streets, but rather the
time to take a long, hard look back to avoid repeating the mistakes of
the last decade.
Negotiating Building Access
The relationship between owners and TSPs seeking access to MTEs remains
dynamic and sometimes charged. The struggles of the past have moved
many owners beyond the struggles of power, ego and control to an
examination of the essential operational matters that will ultimately
control how owners and TSPs work together to bring telecommunications
services to tenants. So once a decision is made to hammer out an ALA to
wire a building or deliver services to one or more tenants, how do you
get it done?
The transaction relating to access to commercial buildings requires a
solid, well-developed agreement. One example of a form agreement is the
Telecommunications License Agreement (Multi-Tenant Office Building), but
more commonly called The Model Agreement, as developed by the Real
Access Alliance in 2000-2001. Many Owners and TSPs seeking either to
serve tenants in the MTE or use the roof of the MTE, have already
discovered the value of using this document or significant portions of
it, or something similar to it. The idea is to use a form agreement,
such as The Model Agreement, to accelerate and enhance the ability of
providers to gain access to MTEs while permitting owners to preserve
their valuable asset. It gives property owners, managers and providers
a common starting point for their dealings with each other in matters
relating to access for telecommunications in MTEs. With myriad issues
and competing priorities that arise in the negotiation of building
access agreements, the theory was, and is, to narrow and more clearly
define those issues and competing priorities. Since the development of
The Model Agreement, our experience has been that some property owners
also have been using either The Model Agreement or various elements of
the Model Agreement in other situations such as when a provider seeks to
pre-provision a building unrelated to a tenant request for service, and
when a cellular or similar provider seeks access to the roof for an
antenna. The Model Agreement was never intended to, and does not
attempt to dictate where the parties in a transaction will ultimately
end up at the conclusion of their negotiations, but it does provide the
interested parties with a solid place to start.
Nelson Migdal and Eric Fishman are
Partners in the Washington, D.C., office of Holland & Knight LLP. They
are the primary drafters of The Model Agreement and write and speak
frequently on the subject of building access. The Model Agreement and
related materials are available from Holland & Knight LLP on CD ROM.
Mr. Migdal can be reached at (202) 457-5925 or at nmigdal@hklaw.com.
Mr. Fishman can be reached at (202) 828-1849 or at efishman@hklaw.com.
*CRE Partners is not responsible for the content, validity,
technical accuracy or other claims or information contained in this
article. Feature Articles are often authored by outside sources
and do not necessarily reflect the views or opinions of CRE Partners.
Further, publication of articles in the CRE Partners Newsletter and/or
web site is not meant to represent, promote, or endorse any company,
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