Industry Urges FCC To Enhance Competition In MDUs

June 2003

The Independent Multifamily Communications Counsel (IMCC) is lobbying the Federal Communications Commission (FCC) to interpret the MDU Inside Wiring Rules so that some of the arguments used by franchised cable to frustrate competition in MDUs (multi-dwelling units) are tossed out the window. These issues are important to private cable operators, multiple dwelling unit owners and residents, and the DBS companies. They have been brought before the FCC in the form of Requests for Declaratory Ruling and can be read on the IMCC web site, www.imcc-online.org.

After considering comments filed by interested parties, the Commission will issue Declaratory Rulings on each of the questions. In this article, we provide brief summaries of the issues raised and their significance.

• MSOs use of cable inside wiring for the provision of non-video services.
• IMCC has asked the FCC for clarification of two issues under this heading.

First, cable Multiple System Operators (MSOs) providing telephone services qualify as Competitive Local Exchange Carriers ("CLECs") with a legal right to interconnect with wiring infrastructure installed and owned by the Incumbent Local Exchange Carrier ("ILEC") from the "Minimum Point of Entry" ("MPOE") into the individual unit of any MDU resident who chooses the CLEC.1 Cable MSOs functioning as CLECs argue that they are entitled to use a Network Interface Device ("NID") to connect to existing inside cable wiring from the lockbox/pedestal to the telephone company's MPOE to individual residential units for the provision of telephone and/or high-speed Internet services. MSOs assert that their interconnection rights as CLECs override any objections from the MDU owner and block application of the cable inside wiring rules, preventing a PCO from accessing that existing cable wiring.

This is a complicated issue from the technical and legal perspectives, but we hope that the FCC will agree that nothing in the telephony or video wiring rules allows an MSO/CLEC to utilize a NID to maintain exclusive control over home run wiring in order to block competition from PCOs.

Second, the FCC's inside wiring rules (47 C.F.R. §§ 76.800 et. seq) allow, in certain circumstances, competitive video providers (PCOs) to utilize existing in-building wiring owned by the incumbent franchised cable operator to provide video services to MDU residents. The MDU owner may invoke the inside wiring rules when the MSO has "no legally enforceable right to remain on the premises," for example, when the MSOs right of entry agreement with the MDU owner has expired.

Increasingly, MSOs seek to block application of the inside wiring rules by claiming – on a creative variety of grounds – that they have a "legally enforceable right to remain on the premises." One such tactic is the MSOs stated "intention" to utilize the existing wiring to provide non-video services (telephony and/or high-speed Internet) in the future.

Clearly, there are many factors – such as an agreement between the MSO and the MDU owner for the provision of alternative services, or the existence of a state or local rule – that could affect the answer to this question. However, in the absence of such factors and in light of the FCC's presumption that the wiring rules apply in all cases (47 C.F.R. § 76.804(c)), we believe that a mere "intention" to utilize wiring in the future does not amount to a "legally enforceable right to remain on the premises," and consequently, the MSO's claim is without merit. That means the incumbent would be required to leave the MDU and the owner could bring in an alternative provider. If this view is adopted by the FCC it will help MDUs bring in PCOs or alternative providers when the ROE has expired.

Applicability of inside wiring rules for unit-by-unit competition Again, there are two sub-issues here, the first concerning whether a state mandatory access law blocks application of the "unit-by-unit" inside wiring rules, and the second concerning the circumstances in which those rules apply regardless of state law.

A federal court decision in Kansas recently considered the first sub-issue. The State of Kansas' mandatory access law provides, "[t]he landlord shall not interfere with or refuse to allow access or service to a tenant by a communications or cable television service duly franchised by the municipality." Kan. Stat. Ann. § 58-2553(a)(5). The Kansas law is typical of the nineteen mandatory access statutes currently in effect throughout the country.

In Time Warner Entertainment et. al. v. Atriums Partners, L.P., (D. Kan. 2003), 2003 U.S. Dist. LEXIS 430, the MSO (Time Warner) argued that the Kansas mandatory access law prohibited the MDU owner from invoking the FCC's inside wiring rules so as to allow a competitor to use home run wires leading to units not served by the MSO. To our knowledge, this is the first time that a federal court has been asked to rule on a mandatory access law's effect on the inside wiring rules. The court held that while the Kansas statute allowed Time Warner to provide service to residents who desired that service, it did not give the MSO the right to maintain exclusive control over home run wires not currently being used by Time Warner. "...the court holds that § 58- 2553(a)(5) does not create a legally enforceable right to maintain home run wiring to those tenants where service is no longer provided nor requested."

The industry request sent to the FCC seeks their views on this issue and could be important for any MDU owner who seeks to bring a PCO into his building to compete with the franchised cable operator for subscribers on a unit-by-unit basis in any state with a mandatory access law.

Second, the Kansas decision cited above conflicts with another ruling from a federal court in New York regarding the circumstances in which an MDU owner may utilize the unit-by-unit rules to allow a PCO to compete for subscribers with the incumbent MSO within a single building. Under the FCC's inside wiring rules for unit-by-unit competition, an MDU owner may require the incumbent MSO to remove, sell or abandon home run wiring if the MSO has no "legally enforceable right to maintain any particular home run wire dedicated to a particular unit on the premises." 47 C.F.R. § 76.802(b). Recently, two federal courts have interpreted this language in ways that are inconsistent with each other.

In CSC Holdings, Inc. v. Westchester Terrace, et al, 235 F. Supp. 2d 243 (S. D. N.Y. 2002), a federal court in New York ruled that an MDU owner could not invoke the unit-by-unit rules as long as the incumbent MSO provided video service to at least one resident in the building. In effect, the court said that if the MSO had at least one subscriber in the building, the rules could not be used to allow a competitive PCO to access the existing wiring to provide service to any resident, even if every resident other than the one MSO subscriber wanted service from the PCO.

On the other hand, in the Atriums Partners case cited above, the Kansas court reached the opposite conclusion. The court noted that the FCC has created distinct inside wiring rules for "building-by-building" and for "unit-by- unit" competition. Under the "building-by-building" rules, an MDU owner may allow a competitive PCO to access existing inside wiring if the incumbent MSO has no right to serve any subscriber in the building – for example, when the MSOs right-of-entry agreement has expired. Under the "unit-by-unit" rules, the MDU owner may allow a competitive PCO to access home run wiring leading to units not served by the MSO, although the MSO may well have other subscribers in the building.

The Atriums court correctly noted that if the MDU owner could not utilize the unit-by-unit rules to take control over home run wires not serving MSO subscribers, those rules would serve no purpose at all. Or rather, they would serve the exact same purpose as the building-by-building rules because these distinct rules would apply only in the same circumstance.

Ideally, this issue should be resolved by the federal courts. However, a declaratory ruling from the FCC preserving the integrity of its regulatory framework for accessing inside wiring would be appropriate and helpful in producing real competition in the MDU market.

IMCC filed a forth letter with the FCC addressing home run wiring as it exits the resident's living unit. We urged that the FCC adopt language that says that if the wiring is behind sheetrock/wallboard that it be considered "physically inaccessible". If so, the demarcation point is not 12 inches outside the unit but is moved back to the lock box/junction box/pedestal. That makes it easier for the PCO to make the connection to provide service and that enhances competition. This issue was addressed by the FCC in a recent rulemaking and the IMCC position was adopted.

The National MultiHousing Council (NMHC) has filed comments with the FCC supporting each of the IMCC letters. Franchised cable companies have filed comments opposing the IMCC views as expressed in the letters seeking Declaratory Rulings.

If the IMCC views are adopted by the FCC video competition will be enhanced. Each issue is of considerable significance for MDU owners, PCOs and the two DBS companies.

If readers know of other examples of how franchised cable companies endeavor to frustrate the application of the FCC inside wiring rules, or try to prevent video competition, please contact the author or the IMCC.