The Lockbox Problem

By installing neutral lockboxes for terminating home-run wiring, property owners can sidestep disputes among providers that threaten their ability to provide competitive services. November/December 2011

Every MDU owner who desires to give tenants a choice among video providers at a property with a single set of home-run wires faces a lockbox problem. A lockbox is a secured location at which a cable operator’s distribution system is joined to the wiring inside a multitenant building. Service providers naturally want to control home-run wiring, and a lockbox provides a means to block other providers’ access to that wiring.

Lockboxes, sometimes called junction boxes, may be attached to building exteriors, located in basements or placed in closets on multiple floors of a building. Typically, when a building is constructed, the incumbent cable operator installs inside wiring and attaches a securely locked box containing cable taps where strands of home-run cable are plugged into the distribution plant. The cable company owns the box and limits access to it to prevent signal theft.

When a property owner wishes to contract with a second, competing provider but the incumbent refuses to open the lockbox, the second provider cannot connect its distribution system to the inside wiring. Even if the incumbent cable provider does not refuse outright to open its lockbox, it may erect barriers – for example, by requiring that each conversion be processed separately, necessitating a separate dispatch of technicians to the property. The incumbent provider’s unilateral control over competitive access to wiring creates both the incentive and the means to suppress competition, undermining consumer choice and ultimately preventing the property owner from realizing the full value of the asset.

Because no Federal law or regulation explicitly addresses this problem, incumbent cable operators can intimidate property owners and deter potential competitors – for example, by announcing that anyone tampering with the lockbox will be sued or even criminally prosecuted. Lack of legal clarity may produce a small-scale war of attrition as a competitive provider’s technicians forcibly pry open the lockbox or drill through the wall beside the box and pull wires to the new lockbox, whereupon the incumbent’s technicians rip the wiring out of the second lockbox and reattach them to the incumbent’s box.

In this situation, the second provider is likely to appeal to the property owner or manager – who is understandably reluctant to become involved, fearing potential liability for breach of contract or criminal prosecution. Ultimately, the victims are tenants, who are left without recourse or provider choice.

Does the FCC have anything to say about this?

In 2003, cable over-builder RCN filed a request for letter ruling with the FCC describing its difficulties accessing cable home wiring at the demarcation point 12 inches outside a subscriber’s unit. Because property owners were reluctant to allow RCN to drill through drywall in hallways, RCN’s only options were to install a second set of home-run wires or access the wiring at the incumbent’s lockbox in the utility closet.

The first option was impractical because the building owner objected to the disruption. As for the second possibility, “the [incumbent cable] operator refused to cooperate in allowing such a connection.” RCN urged the Commission to find that the demarcation point should be located “at the operator’s junction box” – and its request was granted.

When a federal court overturned the ruling, the Commission issued its “Sheet Rock Order” in 2007, restating its conclusion as a general proposition: Where the wiring is concealed behind wallboard at the 12-inch mark, the demarcation point is located where the wiring first becomes physically accessible – in most cases, at the incumbent provider’s lockbox. Incumbent cable providers have an affirmative obligation to facilitate alternative providers’ access to wiring at the demarcation point.

When the demarcation point is at the lockbox, any attempt to block an alternative provider’s access to the wiring there (for example, by refusing to open the box) constitutes a violation of federal law. Because most right-of-entry agreements explicitly require the provider to comply with all applicable laws, obstruction of access amounts to a breach of contract by the provider, putting the property owner in a good position to deliver a notice of breach to the incumbent.

Legal analysis does not provide a practical solution to the lockbox problem. What is the solution?

A Neutral Lockbox

A simpler, more logical and practical solution is for property owners to install and manage their own neutral lockboxes. After all, owners are responsible for determining which providers deliver services to their residents, and they have an interest in enhancing fair competition among service providers.

A neutral lockbox is a centralized location where inside wiring can be connected to providers’ proprietary distribution systems. A box is neutral if it is available for use by each provider without interference from other providers.

All home-run wires terminate at the neutral box, which is equipped with a cable tap for each home-run wire. A jumper extends from each cable tap through conduit to a nearby proprietary lockbox belonging to a provider and from there to the riser cable.

Each provider’s proprietary lockbox is secure and accessible only by that provider. The neutral box is also secure, and the property owner, can permit access by any provider as needed. The incumbent provider cannot block access to wiring and does not need to coordinate with other providers for conversion of customers. If a customer of Provider A decides to switch to Provider B’s service, Provider B’s technician opens the neutral box, disconnects the customer’s home-run wire from Provider A’s jumper and reconnects it to a jumper leading to Provider B’s box.

Of course, a neutral lockbox does not eliminate all potential for abuse. An unethical provider could still maliciously disconnect subscribers from its competitor’s system. No system involving the sharing of wiring can be foolproof. However, maliciously disconnecting a subscriber would presumably constitute a material breach of contract with the property owner and expose the provider to civil or criminal liability to its competitor.

Still, a neutral lockbox minimizes conflict over interior wiring at the demarcation point and thereby enhances fair and open competition. Some competitive providers – notably including DIRECTV – have, to their credit, offered to install a neutral lockbox at any building served by multiple providers. Though these neutral boxes are installed at the competitive provider’s expense, they are owned and managed by the property owner. The neutral lockbox concept thus presents a valuable opportunity for competitive video programming providers to offer property owners a tangible and lasting benefit while at the same time demonstrating the provider’s commitment to fair competition.

About the Author

Carl Kandutsch, a former FCC attorney, is in private practice representing property owners and broadband service providers on cable television and broadband communications issues. Dr. Kandutsch may be contacted through his website (www.kandutsch.com), via email ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ) or by telephone (207-659-6247).

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