CAN THEY REALLY DO THAT? MANDATORY COMMUNICATIONS
ACCESS AND THE RIGHTS OF LANDLORDS
Georgette C. Poindexter, Daniel Giannetto
Our homes are filled with the products of the communications revolution. We have cell
and cordless phones, more than two hundred cable or satellite television channels, and, of
course, the boundless potential of the Internet. There seems to be no limit to the means
and efficiency by which we communicate. The Telecommunications Act of 1996 was
intended to promote competition and reduce regulation in the telecommunications
industry. In pursuit of these goals, the Federal Communications Commission has
proposed a “mandatory access” regulation that would force owners of apartment
buildings to provide access to their buildings on a non-discriminatory basis to
telecommunications service providers. If enacted, this legislation will have a severe
economic impact on the real estate community.
The mandatory access proposal has sparked considerable debate, invoking
extensive comment from both the real estate and telecommunications communities. For
the telecommunications companies this debate is about the ability to reach the one-third
of the population who live in apartments. Young start-up companies, in particular, have
had difficulty accessing this new market They fear they will be shut out by the extensive
use of exclusive contracts between landlords and well-established service providers.
Landlords, on the other hand, face the prospect of losing millions of dollars that they
would otherwise receive through lucrative access agreements. They feel that they should
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be free to contract with other parties and should not be restricted in the use of their
property.
THE TELECOMMUNICATIONS ACT
In the mid-1990’s, Congress and President Clinton, recognizing the veritable explosion of
communications technologies, enacted legislation to speed up the already blistering pace
of innovation. This legislation took the form of the Telecommunications Act of 1996 (the
Act)--“an Act to promote competition and reduce regulation in order to secure lower
prices and higher quality services for American telecommunications consumers and
encourage the rapid deployment of new telecommunications technologies.” President
Clinton’s opening remarks emphasized the significance of the Act: “This landmark
legislation fulfills my Administration’s promise to reform our telecommunications laws
in a manner that leads to competition and private investment, promotes universal service
and open access to information networks, and provides for flexible government
regulation.”
Underlying the Act was the assumption that only through vibrant, open
competition could the full potential of the telecommunications market be realized. The
House Committee on Commerce provides some insight: “For decades, U.S.
telecommunications policy has relied on heavily regulated monopolies to provide
communications services to businesses and consumers. Advances in telecommunications
have greatly benefited consumers and American businesses. Technological advances
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would be more rapid and services would be more widely available and at lower prices if
telecommunications markets were competitive rather than regulated monopolies.”
The Act was intended to promote competition in the local telephone service
market and the multichannel video market, and to “preserve and promote the
competitiveness of over-the-air broadcast stations.” With varying degrees of leeway in
decision-making, it is the mandate of the Federal Communications Commission (FCC) to
ensure that the goals of the Act are met.
A brief survey of the Act highlights the FCC’s duty to continually monitor and
protect the competitive forces at work in the telecommunications marketplace. Section
257 serves as an example. Under §257(a) the FCC is required, within 15 months after the
date of enactment of the Act, to “complete a proceeding for the purpose of identifying
and eliminating… market entry barriers.” Subsection (b) of §257 states that, “the
Commission shall seek to promote the policies and purposes of this Act favoring
diversity of media voices, vigorous economic competition, technological advancement,
and promotion of the public interest, convenience, and necessity.” The FCC also has a
duty to report periodically to Congress on regulations relating to the elimination of
barriers to competition, and, “the statutory barriers identified under subsection (a) that the
Commission recommends be eliminated, consistent with the public interest, convenience,
and necessity.”
In some cases Congress has provided the FCC with significant guidance. In others
it has allowed for creativity and flexibility in decision-making. There are reporting
requirements, as well as stipulations which call for periodic internal regulatory review. It
goes without saying that the FCC has been charged with a daunting and important task.
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THE FCC STEPS IN
The mandatory access regulation is only one piece of a complicated set of regulations
promulgated pursuant to the Act. For the sake of perspective, it will be helpful to have
some background information on both enacted and proposed regulatory measures the
FCC has considered.
In a Report and Order issued on November 14, 1997, the FCC amended
regulations relating to the disposition of cable home wiring and established regulations
for the disposition of home run wiring. Home run wiring is the wiring from the point at
which it becomes dedicated to an individual unit in a multiple dwelling unit--MDU--to
the cable demarcation point, that is, the location where the cable enters the building. The
rule sets up procedural mechanisms to address some of the difficulties experienced by
some smaller, start-up service providers. For a variety of reasons, these providers were
having a hard time obtaining access to properties in order to run additional home run
wires to subscriber’s units.
According to the FCC, “This action was necessary because competition is
currently being deterred by disputes over control and use of the wires necessary to reach
each unit in an MDU. The intended effect of this action is to expand opportunities for
new entrants seeking to compete in distributing video programming and to broaden
consumers’ ability to install and maintain their own wiring.” The Commission goes on to
say, “We believe that our rules regarding the building-by-building and unit-by-unit
disposition of home run wiring adopted herein will lower many…barriers to entry and
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may alleviate some of the advantages incumbent providers may have with respect to
providing service to particular buildings." If we take it as a given that vigorous
competition leads to a better product for the consumer, then reducing barriers to entry
into the telecommunications marketplace is certainly a "good" thing. If new providers
cannot reach apartment dwellers they will have a difficult time maintaining a viable
business. This is particularly "bad" if the newcomers provide a better product than the
current providers' product.
Although the FCC had mandatory access requirements under consideration at this
early stage, it stated that, “While we believe that nondiscriminatory access for video and
telephony service providers enhances competition, we will not adopt a federal mandatory
access requirement at this time.” The FCC also acknowledged that some form of
mandatory access laws exist in approximately 18 jurisdictions, along with countless local
ordinances providing similar access rights, but declined to support the preemption of state
mandatory access laws. Perhaps in response to pressure by service providers, two years
later the FCC is considering taking a more aggressive stance on the issue.
The FCC subsequently issued a Report and Order on December 23, 1998
expanding the Over-the-Air Reception Devices Rule which effectively prohibited
landlords from placing restrictions on tenants rights to install satellite dishes and other
antenna devices on rental property where the tenant has exclusive use or control. It
explained that, “this amendment to the rules serves two federal objectives of promoting
competition among multichannel video providers and of providing viewers with access to
multiple choices for video programming.” The regulation was intended to “strike a
balance between the interests of tenants, who desire access to more video programming
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services, and the interests of landlords, who seek to control access to the use of their
property.
In accordance with that objective, the decision was made to refrain from applying
the restriction to common areas that are not completely under tenant control. The FCC
concluded that “antenna restrictions that apply to common or restricted access areas are
beyond the scope of the statutory authority for this rule, and that the rule, therefore,
cannot apply to antenna restrictions on common or restricted access.” The logic behind
the distinction is clear. Lease agreements give tenants a "possessory interest" (as opposed
to outright ownership) over a particular unit in a multiple-unit building. This possessory
interest affords the tenant the right to use and control the unit as he or she wishes, of
course limited by the terms negotiated into the lease agreement. The government is
afforded the power to put certain limitations on what parties can contract for--in this case
the limitation is that landlords cannot restrict the tenant from erecting certain devices.
Because the common areas of MDUs (lobbies, public rooms, corridors) are not a subject
of the lease agreement, the government does not have any contract to impose limits upon
them. Therefore the FCC felt that it had no footing upon which to require landlords to
allow these devices into their common areas.
On August 2, 1999, the FCC issued a Notice of Proposed Rulemaking seeking
comment on a number of proposals intended to increase competition in the
telecommunications marketplace. Among these was the mandatory access proposal. The
FCC sought comment on whether it should, “require building owners who allow access to
their premises to any telecommunications provider to make comparable access available
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to all such providers on a nondiscriminatory basis…” Comment was also sought on the
legal authority that the FCC may or may not have had to adopt such a requirement.
In addition to the mandatory access proposal, other provisions also have
implications for MDU owners, some more consequential than others. Comment was
requested on, “whether the Commission should forbid telecommunications service
providers, under some or all circumstances, from entering into exclusive contracts with
building owners, and abrogate any existing exclusive contracts between these parties.”
Further, the Notice requested comment on, “whether the FCC should modify its rules
governing determination of the demarcation point between facilities controlled by the
telephone company and by the landowner on multiple unit premises.” The FCC also
considered extending similar rules to those adopted under §207 (Over-the-Air Reception
Devices Rule) to providers of telecommunications and other fixed wireless services,
and/or extending its rules governing access to cable home wiring to include providers of
telecommunications services.
SERVICE PROVIDERS VS. LANDLORDS
Service providers argue that mandatory access regulations (along with any other procompetition regulation) are necessary next steps in furthering the goals of the Act. A
combination of excessive fees demanded by landlords and long-term contracts between
landlords and established service providers lead new entrants into the
telecommunications market to claim that without interior access to apartments they are at
a serious competitive disadvantage. According to The Wall Street Journal, “[Companies]
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need to be able to wind wires through walls, tap into existing wiring or switches, or
install antennae on roofs. They claim their requests to enter buildings are often turned
down, and even when they are allowed to come in, the negotiation process is prolonged
or landlords demand excessive fees.”
Service providers also point to tenant interests. They take the position that tenants,
as consumers, stand to lose without open access. “The idea of the 1996 Telecom Act was
to put consumers in the driver’s seat,” explains John Windhausen, president of
Association for Local Telecommunications Services. The Act specifically recognizes the
goal of improved service and pricing to the consumer. When a landlord limits access,
tenants are tied to their landlord’s provider.
Landlords have a considerably different view of the situation. Real-estate
executives contend that “the myriad proposals currently under review could cost the realestate industry billions of dollars annually in both lost revenue, as well as additional
safety, security and liability expenses,” reports The Wall Street Journal. They also point
to the impracticability of providing access to an indefinite number of providers. In fact,
property owners argue, competitive telecommunications access is at work in the
marketplace. Charlton Research concluded an independent survey in July 1999 revealing
that nearly 65 percent of all requests fielded by building owners and managers from
telecommunications companies within the last year regarding potential telecom services
either led to approval for building access or to contract negotiations, which suggests that
most owners do not grant exclusives. Owners argue that tenants' demand for the most
innovative and advanced service providers will require them to provide their tenants with
the best services available in order to stay competitive.
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LEGAL QUESTIONS
The question is whether the mandatory access regulations proposed by the FCC, if
enacted, would infringe upon the legal rights of property owners, that is, do these
regulations fall into the realm of a “taking” of private property which would require
compensation under the U.S. Constitution. In our opinion, legal precedent suggests that
the answer is "yes."
In most states (some states have already instituted mandatory access
requirements) service providers are forced to bargain with MDU owners to determine an
appropriate fee for access to the MDU and all of the potential customers residing therein.
The parties are free to negotiate towards mutually acceptable terms. A mandatory access
provision would dispense with the bargaining process. In order for such a provision to
work, the FCC would have to set a predetermined rate for right of entry. If the service
provider was willing to pay that rate, the MDU owner would have no option but to allow
the provider to run its facilities into the building. Mandatory access provisions deprive
property owners of one of the most important sticks in the bundle – the property owner’s
right of exclusion.
We are not faced with a novel situation. A number of states have had mandatory
access requirements in place for some time. In fact, the Supreme Court dealt with the
issue at hand in 1982 in the case of Loretto v. Teleprompter Manhattan CATV Corp. In
this case, a New York City landlord sued Teleprompter Manhattan CATV Corp. claiming
that the installation of cable wiring on the landlord’s rental property (pursuant to a New
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York state law requiring a landlord to permit installation of such facilities on rental
property) constituted a constitutionally compensable taking. The Court agreed with the
landlord, in the process developing what is now a universally accepted per se category in
takings doctrine.
The Loretto case stands for the proposition that where the government authorizes
the permanent physical occupation of property it constitutes a per se taking. The Court
held, “that a permanent physical occupation authorized by government is a taking without
regard to the public interests that it may serve… Our constitutional history confirms the
rule, recent cases do not question it, and the purposes of the Takings Clause compel its
retention.”
As long as the Loretto case is the standard against which we must judge (and
there is no indication that the Court’s opinion on the subject has wavered), the species of
mandatory access requirement that the FCC is proposing will constitute a per se taking of
private property. Neither the size of the wire being installed, the economic impact on the
MDU owner, nor the nature of the regulation will play a role in this determination.
However, there are several more steps required in this analysis. The government’s
ability to exercise its eminent domain power, and hence “take” the property, hinges on
whether the taking furthers a valid objective. The government must stay within the
bounds of the police power afforded by the Constitution. Congress and the FCC have
been clear about the objectives of the Act and the pursuant regulations: “to secure lower
prices and higher quality services for American telecommunications consumers and
encourage the rapid deployment of new telecommunications technologies.” The question
is whether the Court will deem these objectives valid.
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The Loretto Court did not specifically address whether mandatory access
regulations were a valid use of the state’s police power. The extent of the Court’s
consideration of the matter was as follows: “The Court of Appeals determined that § 828
serves the legitimate public purpose of ‘rapid development of and maximum penetration
by a means of communication which has important educational and community aspects,
and thus is within the State’s police power. We have no reason to question that
determination.”
The Supreme Court shed more light on the determination of a valid purpose in
Turner Broadcasting System, Inc. v. FCC. Here, the Court reaffirmed that “promoting the
widespread dissemination of information from a multiplicity of sources” is an important
governmental interest. The Court went on to explain that, “[t]here is a corresponding
governmental purpose of the highest order in ensuring public access to a multiplicity of
information sources, and the Government has an interest in eliminating restraints on fair
competition even when the regulated parties are engaged in protected expressive
activity.” While recognizing that the Turner Court was not contemplating the mandatory
access issue, their characterization expresses a clear intent to view this type of
governmental interest as a valid objective.
Coupling the Court’s treatment of the subject as a non-issue in Loretto and the
positive treatment given in Turner, it appears to us that the Court has already decided that
promoting access to information technology stands on firm ground as a legitimate
government objective. As such, it opens the door to permissible regulation, including
mandatory access.
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Although the legal basis for allowing a taking appears uncontroversial, the
compensation requirement inherent in takings doctrine presents a more difficult question.
The “takings” clause of the Fifth Amendment provides: “[N]or shall private property be
taken for public use without just compensation.” In 1998, in Gulf Power Company v.
United States of America, the U.S. District Court in the Northern District of Florida
recognized that, “[e]ssential to any Fifth Amendment argument is that a taking of
property, whether the result of the per se rule promulgated in Loretto or an ad hoc factual
inquiry…, does not violate the Constitution so long as it provides for just compensation.”
The FCC, in order to meet Constitutional requirements, will have to include some
form of fee structure in any mandatory access regulation it enacts. When it does, it opens
itself up to attack. The Supreme Court has not yet conclusively decided whether an
administrative body can determine compensation under takings doctrine at all, although
the stream of existing caselaw in the lower courts runs in favor of this power.
The Gulf Power case dealt directly with the issue and serves as a guide. In Gulf
Power a group of electric utilities brought an action challenging the constitutionality of a
nondiscriminatory access provision of the Pole Attachment Act. The mandatory access
provision in this case imposed an obligation on qualifying utilities to provide
nondiscriminatory access to their poles and conduits. The Act empowered the FCC to
determine just and reasonable rates to be paid to the utilities.
Addressing the issue at hand, the court said, “All that is required is that a
reasonable, certain and adequate provision for obtaining compensation exist at the time of
the taking. If the government has provided an adequate process for obtaining
compensation, and if resort to that process yields just compensation, then the property
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owner has no claim against the Government…” The Court held that, “an FCC
determination subject to judicial review is not only constitutionally sound, but is the more
practical approach to a just compensation decision made pursuant to the Pole Attachment
Act.” The court recognized the danger in allowing the same branch of government to
both affect the taking and determine compensation. The court reasoned that, “judicial
review of a legislative determination affords the same separation-of-powers protections
that would otherwise be guarded by an initial judicial assessment of compensation.”
Further, “Although the FCC remains in the decisive spotlight, the court is forever in its
shadow, and it is this lingering possibility of judicial review which ensures compliance
with the just compensation guarantees of the Fifth Amendment.”
The Gulf Power court was relying heavily on the decision of the U.S. Supreme
Court in Williamson County Regional Planning Commission v. Hamilton Bank. In that
case, the Court explained: “All that is required is that a reasonable, certain and adequate
provision for obtaining compensation exist at the time of the taking. If the government
has provided an adequate process for obtaining compensation, and if resort to that process
yields just compensation, then the property owner has not claim against the Government
for a taking…”
The Gulf Power court took the Supreme Court’s decision as an implicit
recognition “that an assessment of just compensation does not require judicial
determination.” The Gulf Power Court also cited Wisconsin Central Limited v. Public
Service Commission: “The Fifth Amendment does not require a judicial determination of
just compensation in the first instance on each occasion of a taking of private property.”
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Of course, any guess as to the Supreme Court’s determination of the issue is
purely speculative. The Williamson County decision, however, is a strong indicator that
the Court would agree with the position taken by the Gulf Power and Wisconsin Central
Courts. It is doubtful that a regulation would be nullified under an attack on the FCC’s
Constitutional authority to determine compensation.
An attack on the FCC’s interpretation of the Act seems to be the only viable
opportunity for having mandatory access regulations struck down. As we have seen, a
mandatory access regulation would constitute a taking. The Court has been reluctant to
allow an administrative taking without a clear mandate from Congress to do so. Hence,
the mandatory access may be stricken if the FCC lacks the legal authority to engage in a
taking.
Of particular importance here is a 1994 D.C. Circuit Court decision in Bell
Atlantic Telephone Co. v. FCC. Under Bell Atlantic, where an agency authorizes “an
identifiable class of cases in which the application of a statute will necessarily constitute
a taking,” its authority is construed narrowly to defeat such an interpretation unless the
statute grants express or implied authority to the agency to effect the taking. According to
the Bell Atlantic court, implied authority may be found only where “the grant [of
authority] itself would be defeated unless [takings] power were implied.”
When the government exercises its eminent domain power, it is imposing a
serious burden on its citizens. The decision to take away a citizen’s property rights –
especially when we consider that a mandatory access regulation would force MDU
owners to allow a permanent physical invasion of their property--is not to be left to the
determination of a regulatory body unless there is strict evidence that the legislature
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deemed such a taking appropriate (the theory being that only elected officials should be
allowed to impose such a cumbersome duty). The FCC must be careful not to impose
mandatory access requirements unless it can find “express or implied authority” to do so
within the Act. If it is not, its regulation will be ripe for an attack.
CONCLUSIONS
Eager to fulfill its mandate, the FCC is considering a bold course of action. If it were to
effect a taking upon MDU owners, a small group of citizens would be forced to concede
an essential property right for the good of the community. In its haste, the FCC may be
dismissing less drastic measures.
Certainly, if the FCC were to enact mandatory access regulations, it would be
effecting a taking. It also seems likely that such a course of action would be legally
sound. The only realistic challenge available to those who want to contest the regulation
seems to be over the issue of statutory interpretation. The FCC is mindful of its statutory
authority. It could be quite difficult to attack the FCC along those lines if it finds a
provision that gives it the authority to effect a taking.
The real estate community has two options. It could wait for a mandatory access
regulation to be passed, and then attack that regulation on interpretive grounds. Or, it
could take one of two preventative courses of action. It could refute the claims of the
service providers that there is in fact a need for mandatory access provisions. Or, it could
promote alternative measures that might fulfill the same objective, while being less
intrusive. The latter option is more practical and, more important, it gives the real estate
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community a chance to help develop the regulations that will have a meaningful impact
on the industry.
Whatever course of action is taken, preparations must be made. The start-up
service providers are knocking on the door, and the FCC is eager to let them in--and it
will act, whether the real estate community joins the fight or not.
[Author Bio: Georgette C. Poindexter is Associate Professor of Real Estate, Legal Studies
and Law at the University of Pennsylvania. Daniel Giannetto is a JD candidate at the
University of Pennsylvania Law School.]
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