TELECOMMUNICATIONS AND THE COMMERCIAL REAL ESTATE MARKET
INTRODUCTION
In 1996, Congress
passed the Telecommunications Act of 1996 (the ì1996 Actî) which substantially
amended the Communications Act of 1934 (the ì1934 Actî).Ý
One of the goals in the 1996 Act is to promote innovation and investment
by multiple market participants in order to stimulate competition for
telecommunications services, including broadband telecommunications services.The Federal Communications Commission (ìFCCî)
is charged with the responsibility to promulgate rules to implement the1996
Act and the 1934 Act.
Broadband telecommunications
consist of ìadvanced telecommunications.îÝ
Advanced telecommunications services are high speed switched broadband
telecommunications that enable users to originate and receive high quality
voice, data, graphics and video telecommunications using any technology. Broadband communications have the capability
of supporting communication both from the provider to consumer and from
the consumer to provider direction, at a transmission speed or bandwidth
in excess of 200 Kbs per second in the last mile in the distribution of
telecommunications services to consumer.Ý
The bandwidth speed of 200 Kbs per second is enough to provide
the most popular forms of broadband services - - changing web pages as
fast as one can flip the pages of a book and to transmit full motion video.In addition, standard telephone lines are considered
broadband lines if they have been upgraded or otherwise altered in ways
that make them capable of broadband speeds. For example, a standard telephone line, which can have a transmission
speed of up to 56 Kbs per second, but has been conditioned so it is capable
of more than 200 Kbs per second would constitute broadband lines.Ý
Almost all electronic forms of communications
are becoming digital.Ý Broadband
telecommunications make it possible to send and receive large amounts
of digital information at high rates of speed. The demand for broadband telecommunications
is rapidly growing and consumers access to broadband services is leading
to innovations in new telecommunications services as well as improvements
to existing services.
THE FCCíS NEW REGULATIONS
AND THE REAL ESTATE MARKET
Against this background,
the FCC has assessed the availability of advanced telecommunications services,
and has determined that the deployment of advanced telecommunications
services is progressing based on the large investments which have been
made in broadband technology since the passage of the 1996 Act.Ý
However, the FCC has recognized that existing barriers prevent
competitive assess to broadband services in the commercial real estate
market, and in particular, in the Multiple Tenant Environment (ìMTEî)
segment of the commercial real estate market.
An MTE is any ìcontiguous
premises under common ownership or control that contains two or more distinct
units occupied by different tenants.î MTEs include apartment buildings (rental, condominium
or cooperative), office buildings, office parks, shopping centers, and
manufactured housing communities.Ý There
are more than 750,000 office buildings and over 1,000,000 residential
multiple dwelling units in the United States.
Thus, the FCC very recently adopted measures to
promote competition in telecommunications services in the MTE segment
of the commercial real estate market.ÝÝ
These measures, in the form of new regulations, became effective
March 12, 2001. These new regulations:
1. prohibit communications common carriers from
entering into contracts that restrict owners and managers of commercial
MTEs from allowing access by competing carriers;
2. clarify and modify
the FCCís previous established rules governing control of wiring inside
MTEs (and commercial buildings);
3. conclude that access
to conduits and rights of way that are owned or controlled by ìutilityî
within an MTE fall within the provisions of the FCCís authority to regulate
the rates, terms and conditions for access to poles, ducts, conduits and
rights-of-way owned or controlled by utilities under the 1934 Act; and
4.
conclude that parties with direct or indirect ownership or a leasehold
interest in property, including tenants in MTEs, should have the ability
to place antennas used to receive or transmit any fixed wireless service
in areas within their exclusive control, and prohibit most restrictions
on their ability to do so.
The intent of these new regulations is to prevent incumbent local
exchange carriers from obstructing competitorsí access to MTEs or
to engage in anti-competitive conduct with third parties in denying competitors
access to MTEs.ÝNeither the FCC
nor its rules, however, regulate MTE owners or the commercial real estate
market.
The commercial real
estate industry has responded to the FCCís efforts to promote competition
in the telecommunications segment of the commercial real estate market
by committing to practices that propose policies against entering into
exclusive contracts for building access and responding to tenant requests
for service by a particular telecommunications carrier within 30 days
of such requests.ÝThese practices
may fall short of achieving the goal of competitive access to broadband
services in MTEs.ÝAccordingly,
the FCC promulgated these new regulations.Ý
We summarize these new FCC regulations in more detail below:
Exclusive Contracts
The FCC recognizes
that exclusive contracts exist between incumbent telecommunications carriers
and MTE owners and managers.Ý Thus,
the FCCís new rules prohibit communications
carriers, in commercial real
estate settings only, which include government and nonprofit offices
as well as commercial MTEs, from entering into future contracts that restrict property owners or their
agents from granting access to their buildings to other telecommunications
providers. This new rule applies to all communications
carriers subject to regulation by the FCC, both incumbent and competitive
local exchange carriers.Ý The FCC
has not extended this rule to residential
MTEs, but intends to examine whether it may lawfully do so in the future.
Access to Wiring
In each MTE, there is a designated demarcation point which marks
the division, or property line, between telecommunications network wiring
under control of a communications carrier and wiring under the control
of a building or end user. The wiring on the building side of a demarcation
point is under control of the building manager or owner. In 1990, the FCC ruled that carriers were allowed
to place demarcation points at the minimum point of entry (ìMPOEî) in
a building.Ý An MPOE is defined
as either the closest practical point to where the building crosses a
property line or the closest practical point to where the wiring enters
into a multiunit building or buildings.
The FCC rules do not require uniform demarcation points and MPOEs
because competitive carriers providing digital subscriber line (ìDSLî)
service would be disadvantaged if they rely on leasing of unbundled loops
or lines from incumbent carriers in buildings where the demarcation point
is inside the MTE. Thus, competitive carriers, like DSL providers,
that rely on access to unbundled loops from incumbent carriers would be
forced to negotiate with incumbent carriers and building owners if demarcation
points were moved to the MPOE.Ý This
consequence would increase the competitive carriersí costs and further
delay deployment of broadband telecommunications services to end users
and MTEs.Ý Furthermore, moving
the demarcation point in existing buildings would give rise to other legal
issues and expenses.
Consequently, the FCC decided to give MTE owners or managers the
power to decide whether to relocate demarcation points to MPOEs.Ý
Thus, MTE owners or managers can require communications carriers
to move demarcation points to the MPOE.Ý
Moreover, communications carriers must conclude negotiations with
MTE owners and managers over moving demarcation points in good faith within
45 days of a request to move the demarcation point to the MPOE.Ý
If the location of the demarcation point is unknown to the MTE
owner or manager, the affected carrier must declare that location upon
request. Finally, where MTE owners or managers decide
to move a demarcation point to the MPOE, the installation and maintenance
of the new demarcation point will be the responsibility of the carrier,
but control, including the terms of access, will reside with the MTE owner.
Access to Conduits
and Rights of Way
Section 224 of the
1934 Act provides that a ìutilityî shall provide a cable television system
or any telecommunication carrier with nondiscriminatory access to any
pole, duct, conduit, or right of way owned or controlled by it. Under Section 224, a utility means a local exchange carrier, or
a electric, gas, water, steam or other public utility and who owns or
controls, poles, ducts, conduits, or rights-of-way used, in whole or in
part, for any wire communications (the ìrights-of-wayî).Ý
Incumbent local exchange carriers are considered utilities. Under this new rule, ìutilitiesî must give
competitors access to their rights-of-way.Ý
The FCC, however, has not
ruled that MTEs are a utility within the meaning of Section 224.
The purpose of this new rule is to prevent anti-competitive behavior
by incumbent local exchange carriers toward competitors by withholding
of access to rights-of-way, thereby preventing competitive choice.
Under this FCC rule,
incumbent carriers must be compensated by competitors to whom they give
access to their rights of way.Ý The
compensation must be based on terms and conditions that are just and reasonable.Ý
Instead, the FCCís regulatory authority only applies to communication
carriers that are subject to the 1934 Act, and to ìutilitiesî which fall
within the definition of that term used as in Section 224 of the 1934
Act. This new FCC rule, however, does not intend to override whatever
authority MTE owners might have based on terms of its agreements with
carriers or state law regarding ownership of rights-of-way. The important
point to note is that MTE owners are not regulated by the FCC, and this
new rule about making right-of-way available to competitive carriers does
not apply to them.
Installation of
Antennas in Areas Under Tenant Control
The FCC recognizes the right of tenants of MTE (both residential
and commercial) to install over the air reception devices, receive television
direct broadcast satellite and multi-channel, and multi-point distribution
services. Thus, the FCCís regulations flatly prohibits,
with few exceptions, any state or local law, regulation, private covenant,
contract revision, lease provision, homeownersí association rule or similar
restriction that impairs the installation, maintenance or use of certain
antennas designed to receive video programming services on property or
fixed wireless services with the exclusive control or use of the antenna
user where the user has a direct or indirect ownership or leasehold interest
in the property.Ý Fixed Wireless
signals consent of any commercial non-broadcast signals transmitted by
means of wireless technology to and/or from a fixed customer locations. Fixed wireless signals do not include AM radio,
FM radio, amateur (or ham) radio, citizen band radio, or digital audio
radio signals.
The Telecommunications
group at Shughart Thomson & Kilroy, P.C., offers a comprehensive
telecommunications industry practice, with nationally and internationally
recognized experts in the field of telecommunications relating to broadcasting,
cable, wireline and wireless carriers as well as telecommunications mergers,
financings, and acquisitions.
For
more information call the Telecommunications Group Attorneys:
Michael L. Glaser
Philip W. Bledsoe
Howard B. Gelt
Michael D. Murphy
