The Federal Pole Attachments Act: Can an Old Dog Learn New Tricks?

 

In October, the Federal Communications Commission (“FCC”) adopted a series of rules designed to give competitors of incumbent local exchange carriers (“ILEC’s”) access to the telephone wiring and conduits inside multi-tenant buildings.[1] The rules:

 

·      Require telephone companies to give other telecommunications and cable companies access to conduits and rights-of-way located in multi-tenant buildings at regulated rates;

 

·      Prohibit (prospectively only) exclusive agreements between commercial building owners and telecommunications carriers;

·      Allow the building owner to move the Demarcation Point for telephone inside wire to the minimum point of entry (MPOE) at any building;

 

·      Require local exchange carriers (“LEC’s”) to timely disclose the location of existing demarcation points if they are not located at the MPOE; and

 

·      Permit tenants to place wireless antennas at any location the tenant controls under a lease.

 

The rules are coming under attack in the courts and it remains to be seen if they will stand up. One of the legal cornerstones of the rules, the federal Pole Attachments Act[2], poses a fundamental -- and undecided -- legal question of the ability of government to require the owner of a “right of way” to share it with another.

The simplest and most direct way to promote competition in the multi-tenant environment (“MTE”) is to require property owners to let any and all competitors onto their property. But that is also the most legally complex kind of regulation to administer because it is forced access and a “taking of property.” Under the Constitution, the property owner is entitled to “just compensation” and procedural due process for the “taking of property.” The FCC is clearly requiring the owner of a “right of way” to let others use it. But it is unclear whether and to what extent the forced sharing of utility “rights of way” is a “taking of property” and whether the FCC has fashioned an appropriate “compensation” procedure.

 

The federal Pole Attachments Act has been the focal point of this issue for many years. In the late 1970’s, cable companies wired America using utility poles. The good news was utility poles gave cheap and easy access to subscribers. The bad news was utility poles belonged to electric and telephone companies who wanted to be paid (handsomely) for the access their poles provided. A lot of fights ensued so in 1978, Congress enacted the federal Pole Attachments Act to regulate the placement of coaxial cable on utility poles.

 

Some utilities objected to the Pole Attachments Act because, they argued, it caused a “taking” of their property. That argument had some merit. The case law defining “property” under the Constitution says that if a law forces the physical occupation of the land by a third party, then there has been a “taking of property.” Mandatory cable access statutes, for example, cause a “taking of property.”

 

A federal court of appeals agreed with the utilities and said that the Pole Attachments Act caused an unconstitutional taking of their property.[3] But the Supreme Court reversed that decision in 1987.[4]

 

The Supreme Court said that there was no forced occupation of the utility poles under the Pole Attachments Act. The Supreme Court noted that the utilities routinely allowed third parties to use their poles. The Supreme Court said that once the utilities opened the door to third party occupancy of their poles, the government could regulate who might use the poles and the fees they had to pay.

 

The Supreme Court said the Pole Attachments Act merely regulated the existing relationships between utility companies and the third parties who used the poles. Some legal critics say that it was the Supreme Court -- not the utilities – who opened the door to third party use of their poles.

 

In 1996, Congress opened that door further. It amended the Pole Attachments Act so that all public utilities – electric, gas, water, steam, or any “other public utility" – have to share their poles, conduits and rights of way. (Note that private cable operators who get certified as a CLEC are also a “utility” under the statute.) The companies who can get access to the poles, conduits and rights of way now include cable companies and any provider of telecommunications service except for the incumbent local exchange carrier (“ILEC”).

 

With the expansion of the Pole Attachments Act, the FCC issued a rule in 1998 that required utilities to give wireless phone companies and internet service providers access to the poles, conduits and rights of way. The utilities went back to court and challenged the FCC again. In a series of decisions, the lower courts ruled that the Pole Attachments Act does cause a taking of property but the FCC can, subject to judicial oversight, set the “just compensation” to be paid for that taking.[5] The courts also said the FCC does not have the authority to designate wireless phone companies and internet service providers as beneficiaries of the Pole Attachments Act. Those cases are now working their way up to the Supreme Court.

 

Undeterred by these muddy waters, the FCC adopted the new rules and asked for comments on proposals that increase the ability of competitive local exchange carriers (“CLEC’s”) to use the conduits and other spaces controlled by phone companies in the MTE. It is fair to say that the FCC has pushed the outer edge of the legal envelope by opening up utility conduits inside privately owned buildings to third party use.

 

Up until now, the rules litigated under the Pole Attachments Act involved utility poles located in public streets. Now the FCC is extending the Pole Attachments Act to utility conduits and rights of way located on private property. The question of whether a regulation causes a “taking of property” becomes devilishly complex when there are three parties claiming control over the empty space inside conduits on private property – the ILEC, the CLEC and the building owner.

 

Why then would the FCC walk out onto the thin ice? The constitutional issues are unsettled and will eventually have to be sorted out by the Supreme Court. The Supreme Court will either approve the FCC’s rules or else send the FCC back to the drawing board in which event there will possibly be further action by Congress.

 

The FCC is crazy like a fox. It is looking to the day (probable but not certain) when it has to battle with the electric, cable, telephone and real estate industries in the halls of Congress. The fight will be over who decides what telecommunications and cable services are delivered to the occupants of multi-tenant buildings.

 

The FCC has always regarded itself as the advocate for the tenant. It has consistently taken the position that with very few and specific exceptions, the tenant alone should make the choice of which cable or telephone service to take and no one should have “exclusive” access to or control over that decision. The FCC is crafting the new rules so that they either stand up on appeal or else shape the debate that will occur if the FCC has to go back to Congress for more regulatory authority.

           

The first step of setting that stage is to identify the players. The FCC recognized the importance of “building local exchange carriers” or B-LEC’s. Just by giving B-LEC’s their own acronym, the FCC has signaled that the companies who focus solely on providing telecommunications services in the MTE are worthy of notice by the FCC (and Congress) as players in the telecommunications industry.

 

The next step is to define the positions of the players. The FCC did this by getting commitments from the real estate industry on how it would deal with competitive telephone service inside buildings. One of the driving forces in the FCC’s new rules was the Real Access Alliance, a coalition of the largest real estate trade groups representing over one million owners and managers of real estate.[6] Twelve members of the Real Access Alliance, who own over 250 million square feet of office space, pledged that they would:

 

·      Not to enter into any exclusive contracts for building access in the future;

·      Develop and implement clear procedures that allow any tenant to get service from any telecommunications provider who signs a model contract to be developed by the industry;

 

·      Inform tenants about existing alternatives, if any, for telecommunications services in their buildings

 

·      Establishing an independent “clearinghouse” to which aggrieved tenants and providers could complain; and

 

·      Support ongoing market studies conducted by the FCC.

 

In exchange for this pledge, the FCC has limited B-LEC access to utility conduits and rights of way inside buildings “to the extent such conduits and rights-of-way are owned or controlled by the utility.” The FCC narrowly defined the accessible right of way as “a defined pathway that a utility either is actually using or has specifically identified and obtained the right to use in connection with its transmission and distribution network.”

 

The FCC rejected the suggestion that competitors could go wherever they wanted in a building by operation of “blanket” utility easements, i.e. easements that grant a general right of access to the entire property. If there are any questions or disputes over the scope of ownership or control, they have to be decided under state law before the aggrieved B-LEC can bring its complaint to the FCC.

 

The practical effect of this narrow definition and exhaustion of state remedies is that the B-LEC still needs the permission of the building owner to do business in the building unless the B-LEC can figure out some way of installing all of its facilities inside the ILEC’s conduits and rights of way. That is rarely feasible, if at all. B-LEC’s are a long way from getting the kind of mandatory access to office buildings that cable companies have in some states to residential multi-tenant properties.

 

The legal effect of this narrow definition is that it takes the building owner out of the equation in determining whether there has been a “taking of property.” This simplifies the legal questions the courts have to consider and eliminates the real estate industry as an adversary in a constitutional challenge to the Pole Attachments Act. It also puts building owners to the task of carefully drafting their agreements with telecommunications carriers so that they can keep control over competitor access to the rights of way.

 

The political effect of this narrow definition is that the FCC now has major real estate interests on record as supporting the ban on exclusive telecommunications services contracts. This could come in handy if and when Congress has to write new legislation in this area. The FCC has cautioned the real estate industry that it is going to monitor the voluntary practices closely to see if the industry fulfills its commitment.

 

The FCC also asked for comments in October on whether it could prohibit LEC’s from providing service to buildings that discriminate between telecommunications carriers in granting access rights. The FCC is interested in banning existing exclusive telephone contracts. It also wants to discourage de facto exclusive contracts in the future by property owners who simply refuse to enter into contracts with multiple providers.

 

This proposal gives the FCC an alternative way to force open access to property without actually “taking” property. The government can regulate the manner in which an owner uses his property and not cause a “taking” so long as there is some economic use – however small – to which the property can still be put. An office building without telephone service may not be usable for office space but so long as it has some alternative use, e.g. storage, there has been no “taking” of the property.

 

It is worth noting that this kind of Hobson’s Choice could be forced on the owners of both residential and commercial properties and for both cable and telephone services. If adopted, it could give the FCC the tools it needs to ban all exclusive cable agreements and open up all properties to de facto forced access.

 

There are several other proposals the FCC wants further comments on. They include:

 

·      Whether the prohibition on exclusive access contracts in commercial MTEs should be extended to residential settings;

·      Whether there should be a ban on access agreements that grant exclusive marketing rights or incentive “bonuses;”

 

·      Whether telecommunications carriers can take advantage of the cable inside wiring rules.

 

These proposals affect private cable operators. They signal that the FCC is considering formulating the rules for telephone and cable exclusivity and access in residential MDU’s in the same proceeding and under the same set of rules as apply to commercial buildings. Comments are due December 22, 2000.