Ownership Of And Access To Inside Wiring

Coxcom v. Picerne   August 2004

The Rhode Island Superior Court's recent decision in Coxcom v. Picerne Real Estate Group, 2003 WL 22048781 (R.I. Super 2003) contains probably the most complete and detailed judicial analysis of the FCC's inside wiring rules on record. For that reason, this decision has potentially significant implications for MDU owners and private cable operators ("PCOs") alike.

This article summarizes the court's discussion of the FCC's rules regarding "home run wiring," that is, that segment of the cable wiring running between the "pedestal" or "junction box" and the subscriber's individual unit.1 The FCC rules allow an MDU owner to force the incumbent franchised MSO to make the existing home run wiring available for use by a competing PCO to serve MDU residents.

There are two fundamental conditions that must be met in order for the MDU owner to invoke the home run wiring rules: First, the incumbent MSO must own the wiring; and second, the incumbent MSO must not have a "legally enforceable right" to maintain the wiring in question over the objection of the building owner. These conditions are typically met when the incumbent MSO's right-of-entry ("ROE") agreement expires, although the FCC rules may apply in other circumstances as discussed in the Coxcom decision.

In Coxcom, the court's analysis of these conditions revolves around issues of ownership (who, the incumbent MSO or the MDU owner, owns the inside wiring) and access/control (who has the right to control the conduit or path occupied by the inside wiring).

Ownership Issues

If the MDU owner (rather than the incumbent MSO) owns the inside wiring, the owner need not invoke the FCC rules in order to make that wiring available to a competing PCO. In Coxcom, the court discussed two ways in which wiring installed by an incumbent MSO may, by operation of law, become the property of the MDU owner.

First, wiring installed by the incumbent MSO becomes the property of the MDU owner if it is considered a "fixture" and therefore part of the real estate (as opposed to removable personal property). Although the law of fixtures varies somewhat from state to state, in general, an item is a fixture if it (1) is physically "annexed" to the real estate; (2) adapted or applied to the same use or purpose to which that part of the real estate is dedicated; and (3) intended to become part of the real estate. In decisions dealing specifically with wiring inside MDU buildings, courts have classified the wiring as a fixture if the incumbent MSO fails to remove the wiring when it is not actively in use (such as when a subscriber terminates service), and when removal could not be accomplished without damage to the property. Depending on the facts, the law will classify cable wiring as a fixture (and therefore property of the MDU owner) even when the MSO's right-of-entry agreement purports to retain ownership for the MSO. (An article to be published in The October issue of this magazine will discuss the law of fixtures as well as so-called "perpetual" ROE agreements.)

Second, the wiring may become property of the MDU owner if it is considered abandoned by the MSO. Assuming that the existing wiring cannot be considered a fixture, if the MSO fails to comply with the FCC's procedures (by acting within prescribed deadlines), it will be deemed to have abandoned the wiring to the MDU owner. In Coxcom, the MDU owner notified the incumbent MSO (Cox) that it was invoking the FCC's procedures for competitive access to the home run wiring. Rather than responding to the owner's notice by electing to sell, abandon or remove the wiring within the compulsory time period, Cox wrote back to the owner insisting that various right-of-entry agreements blocked application of the FCC rules in the first instance. Because Cox did not make the required election (sell, abandon or remove) before the deadline, the court held that by failing to cooperate, Cox had abandoned the wiring to Picerne, thus losing its option of selling or removing the wiring. To the extent that inside wiring has been abandoned by the incumbent MSO, the MDU owner may assert control immediately by making the wiring available for use by a competitive PCO.

Access Issues

Even if the incumbent MSO owns the home run wiring in a building, the MDU owner may invoke the FCC rules to allow a competing PCO to utilize the wiring, if the incumbent lacks a "legally enforceable right" to maintain that wiring in the building. The FCC rules distinguish between the "building by building" and "unit by unit" disposition of inside wiring.

The FCC rules governing the "building by building" disposition of cable inside wiring in MDU buildings (in order to provide a competing video provider with access to the existing wiring infrastructure throughout the building) can only be invoked by the MDU owner when the incumbent MSO has no "legally enforceable right" to maintain the wiring anywhere in the building – for example, when the ROE has expired.

On the other hand, the rules governing the "unit by unit" disposition of inside wiring can only be invoked when the MSO has no "legally enforceable right" to maintain the wiring dedicated to a particular subscriber's residence ("home run wiring"). The "unit by unit" rules allow a competing video provider to utilize the existing home run wiring to provide service to subscribers who choose the competitor's service over that of the incumbent MSO.

In Coxcom, the court made two significant rulings on the question of when the incumbent MSO lacks a "legally enforceable right" to maintain its wiring, such that the MDU owner may invoke the FCC rules.

First, the fact that the incumbent MSO retains subscribers in the MDU building does not block application of the FCC rules. In other words, the fact that the MSO provides service to some residents does not prevent the MDU owner from allowing a PCO to utilize the existing wiring to serve other residents.

Two federal courts have given opposite answers to the question whether an MDU owner may invoke the FCC's unit-by-unit rules to make the incumbent MSO's existing home run wiring available to a competing PCO to provide service. In CSC Holdings, Inc. v. Westchester Terrace, 235 F.Supp. 2d 243 (S.D.N.Y. 2002), a District Court in New York ruled that so long as the incumbent MSO retains at least one subscriber in an MDU building, the MDU owner may not invoke the FCC's unit by unit rules to allow a competing PCO access to home run wiring. In Time Warner Entertainment Co. v. Atrium Partners, a Kansas District Court rejected the CSC Holdings decision and correctly held that the fact that the incumbent MSO has at least one subscriber in the building does not bar a competing PCO from utilizing home run wiring dedicated MDU residents who choose the PCO's service, according to the FCC's unit by unit rules. Provided the MSO does not have an exclusive ROE, the MDU owner can allow a PCO to compete for subscribers in the building, using the existing wiring infrastructure.

The Rhode Island court in Coxcom agreed with the federal court in Kansas, and went one step further, holding that the existence of Cox subscribers in Picerne's buildings did not bar the owner from invoking the FCC's building by building rules to force the sale, abandonment or removal of all the home run wiring in the buildings.

Second, the court held that because its right-of-entry agreements did not make Cox the exclusive provider of video services to residents, Cox's right to maintain wiring in the buildings was in the nature of a revocable license. Because Cox's ROEs were non—exclusive, the MDU owner was free to revoke the ROEs – which it effectively did by notifying Cox of its intent to invoke the FCC rules. Once the ROEs were revoked, Cox had no "legally enforceable right" to maintain its wiring on the premises over the owner's objection, and the owner could therefore utilize the rules to make the wiring available to a competing PCO.

Conclusion

Coxcom is a decision by a Rhode Island Superior Court and therefore represents the law of the State of Rhode Island only. Nonetheless, the decision is significant for the range of the issues it addresses. Overall, the message to MDU owners when dealing with a recalcitrant incumbent MSO is to know your rights and aggressively assert them if the MSO refuses to cooperate within the FCC's framework for competitive access to existing wiring in MDU buildings. In particular, the MDU owner should not be intimidated if the MSO's response to the initial FCC notification letter is a blanket assertion that prior right-of-entry agreements block the application of the FCC's rules. Coxcom shows how, despite the existence of such agreements, (1) the wiring may in fact be the property of the MDU owner (whether as a fixture or by abandonment) – in which case the owner will not need to use the FCC rules at all; or (2) the owner may still be in a position to force the sale or abandonment of the wiring, such that it may be used by a PCO.