Telephone Inside Wire is Up for Grabs
By James Mac Naughton

All of the Local Exchange Carriers ("LEC's"), and almost all of their telephony based competitors use digital subscriber lines ("DSL") to provide high speed broadband service in the multi-tenant environment. There are several companies that offer proprietary technologies which emulate DSL. Both DSL and the proprietary technologies use existing unshielded copper twisted pair wires to deliver a high speed digital signal to the end user's modem. This is the same modest twisted pair of copper wire used to deliver plain old telephone service ("POTS") to the telephone receiver. In an increasingly competitive world, more attention is being focused on this "last mile" because it is up for grabs.

The telephone wiring and associated equipment inside of a multi-tenant building is commonly called "inside wire." It was typically — though not always — installed by the LEC and is, in most cases, "owned" by the LEC.

But even if the LEC owns the inside wire, it does not necessarily control it. The Federal Communications Commission ("FCC") and various state regulatory bodies have adopted rules that permit almost anyone to use inside wire. Unfortunately many of those rules are complex and, in some cases, outdated. Between the regulatory uncertainty, the fast changing telecommunications landscape and the technical jargon that surrounds inside wire, there is confusion over exactly how one goes about exercising their right to use inside wire.

The use of inside wire by providers of high-speed broadband has been promoted in three different ways:

• The Demarcation Point is set at an accessible place. The Demarcation Point is an expressly defined legal term. It is the point on the inside wire where the LEC is no longer responsible for the maintenance of the inside wire and the property owner assumes the maintenance responsibility for the inside wire. Any competitor can use the wiring on the customer's side of the Demarcation Point. No affirmative legal steps need to be taken to exercise this right. But the competitor will need the property owner's consent to get access to the premises.
• LEC's are required to make inside wire available for use by competitors as part of the overall requirement to "unbundle" separate and discrete parts of the public switch telephone network ("PSTN"). This requires the user to go through the process of leasing the "unbundled" inside wire. The competitor effectively "piggy backs" on top of the LEC's established access in the building and may not need the property owner's consent to get access to the tenants.
• LEC's and other utilities are required to make rights of way and conduit space inside multi-tenant buildings available for use by other telecommunications carriers. The rules to implement this right are still being written. It is still unclear whether and to what extent the property owner's consent is needed for competitors to take advantage of this right.

The Demarcation Point

The FCC and various states require LEC's to set a Demarcation Point for inside wire. The basic rules for the Demarcation Point are simple. The LEC owns and is responsible for the maintenance of any equipment on the LEC's side of the Demarcation Point. The multi-unit building owner, or the end user, is responsible for the maintenance of any equipment on their side of the Demarcation Point. The equipment on the owner/user side of the Demarcation Point is commonly referred to as "customer premises wiring".

Competitors may use and connect to the customer premises wiring. No one except the LEC can connect to the equipment or wiring on the LEC's side of the Demarcation Point.

There are two kinds of "inside wiring" — simple wiring and complex wiring. Simple wiring is two pairs of unshielded twisted copper wires, also known as Category 3 wire. Complex wiring is anything else.

Anyone can make connections to the simple wiring part of customer premises wiring. But if the connection to the customer premises wiring involves complex wiring, then FCC imposes certain requirements about the experience level of the technicians who make the installation.

Under the FCC's rules, the Demarcation Point for all multi-unit buildings constructed after August 13, 1990 is the minimum point of entry (the "MPOE"). The MPOE is the "closest practicable point to where the wiring crosses the property line [or] enters a multi-unit building or building." The building owner can, if it wishes, establish multiple MPOE's on the

property closer to the end user. This has been a common practice for many developers because it relieves them of the maintenance obligation for customer premises wiring.

For multi-tenant properties constructed before August 13, 1990, the Demarcation Point "shall be determined in accordance with the local carrier's reasonable and non-discriminatory standard operating practices." If there are multiple Demarcation Points, then they "shall not be further inside the customer's premises than a point twelve inches from where the wiring enters the customer's premises, or as close thereto as practicable." As a practical matter, the Demarcation Point for pre-August 13, 1990 buildings is typically (though not always) at the wall plate inside the end user's unit. In this circumstance, a competitor who wants to use inside wire on the carrier's side of the wall plate will have to take some affirmative steps to move the Demarcation Point away from the wall plate and closer to the property line. Moving the Demarcation Point effectively changes the LEC's wiring to customer premises wiring which the competitor can then use.

The FCC's regulations allow the owner of a post-August 13, 1990 building to order that multiple Demarcation Points be moved to a single point at the MPOE. The FCC has indicated that an LEC also has to accommodate a request to establish the Demarcation Point at the MPOE for buildings built before August 13, 1990.

Since the Demarcation Point is a metaphysical dividing line of maintenance responsibilities, there does not appear to be any reason to actually relocate any equipment in a post-August 13, 1990 building when moving the MPOE. However, the FCC apparently (though it is not clear) requires that there be some physical relocation of inside wire in pre-August 13, 1990 buildings before an MPOE can be establish and the Demarcation Point moved to the MPOE.

Several states have set their own rules for the Demarcation Point. California, for example, requires building owners to install their own inside wire with the Demarcation Point at the MPOE for all buildings, regardless of when they were built. Other states, such as Florida set the Demarcation Point at the vaguely defined point within the "customer's premises" that is "easily accessed by the customer." There are facial inconsistencies between federal and state regulations on the Demarcation Point. The FCC is currently considering amending the rules regarding inside wire and the Demarcation Point which may eliminate those discrepancies and make the Demarcation Point at the MPOE in all instances.

Unbundled Network Elements

The 1996 federal legislation that deregulated the telecommunications industry requires incumbent LEC's ("ILEC's") to give competitors "unbundled" access to and the use of the ILEC's facilities . These facilities are commonly referred to as unbundled network elements.

The FCC recently adopted rules that require an ILEC to "unbundle" all of the components of inside wire for use by the competitors. The unbundled inside wire components now available for a competitor's use include all the drops, loops and subloops inside a multi-unit building and all of the facilities, poles and conduits that hold wire and equipment. Competitors get to use of these elements by negotiation with the LEC. The rules provide for arbitration in the event an agreement cannot be reached.

The FCC has also directed ILEC's to "unbundle" the ADSL capacity of their network. Thus the use of ADSL capacity on inside wire is available to competitors subject to some restrictions.

Under the new rules, ILEC's are also required to construct "a single point of interconnection at multi-unit premises that is suitable for use by multiple carriers." The cost of this construction is subject to negotiation.

The rules requiring ILEC's to unbundle inside wire and ADSL capacity do not address what control, if any, the property owner has over the use of unbundled equipment and services in the multi-tenant building. Clearly the owner's cooperation will be needed to implement the ILEC obligation to construct a single interconnection point in a building. But the rules apparently presume that the competitor will "piggy back" onto whatever access rights an ILEC already has to a building.

Access to Conduits and Rights of way

The 1996 federal legislation requires that "utilities" (including LEC's) grant other telecommunications carriers non-discriminatory access to the poles, ducts, conduits and rights of way that are owned or controlled by the utility. This statute broadens the scope of cable pole attachment rights to include all broadband carriers — not just cable companies — and extends those rights beyond the public streets and into multi-tenant buildings.

The FCC has a pending proceeding to establish rules that implement this statutory right. Some states, such as Colorado, have adopted their own rules which require LEC's to give most competitors nondiscriminatory access to their poles, ducts, conduits and rights-of-way in multi-unit properties. Several states, such as Texas, are considering such rules.

The Future

The cable industry has its own set of rules for the cable inside of multi-tenant buildings. The incumbent franchised cable operators fought long and hard — unsuccessfully in the end — to keep competitors from using cable inside wire. Hopefully the telephone inside wire rules — though imperfect and still being rewritten — will discourage ILEC's from waging the same kind of battle. Only time will tell.

About the Author

W. James Mac Naughton is an attorney with twenty-five years experience specializing in telecommunications, copyright, business law and litigation. He represents a wide range of clients in the telecommunications industry including major real estate developers, CLEC's, and video distributors. He has offices in Woodbridge, New Jersey and New York City. Mr. Mac Naughton is also a member of the editorial advisory board to this magazine.