*Pages 1--30 from C:\Pdf2Text\Ready4Text_in\pdf\51798.pdf* Federal Communications Commission FCC 00- 366 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of Promotion of Competitive N2tworks in Local Telecommunications Markets Wireless Communications Association International, Inc. Petition for Rulemalung to Amend Section 1.4000 of the Commission's Rules to Preempt Restrictions on Subscriber Premises Reception or Transmission Antennas Designed to Provide Fixed Wireless Services Implementation of the Local Competition Provisions in the Telecommunications Act of 1996 Review of Sections 68.104, and 68.2 13 of the Commission's Rules Concerning Connection of Simple Inside Wiring to the Telephone Network 1 1 1 WT Docket No. 99- 2 1 7 1 1 1 1 1 1 ) 1 1 1 CC Docket No. 96- 98 1 1 1 CC Docket No. 88- 57 1 1 1 1 1 FIRST REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING in WT Docket No. 99- 217, FIFTH REPORT AND ORDER AND MEMORANDUM OPINION AND ORDER in CC Docket No. 96- 98, AND FOURTH REPORT AND ORDER AND MEMORANDUM OPINION AND ORDER in CC Docket No. 88- 57 Adopted: October 12,2000 Released: October 25,2000 Comment Date: December 22,2000 Reply Comment Date: January 22,2001 Comments and reply comments to be filed only in WT Docket No. 99- 2 17 By the Commission: Commissioner Furchtgott- Roth dissenting and issuing a statement. 1 Federal Communications Commission FCC 00- 366 TABLE OF CONTENTS Paragraph Numbers I . INTRODUCTION .............................................................................................................................................. 1 I1 . SUMMARY ......................................................................................................................................................... 3 I11 . BACKGROUND ........................................................................................................................................... 10 IV . REPORT AND ORDER 1 MEMORANDUM OPINION AND ORDER ................................................. 14 .................................................................................................................................. A . STATE OF THE MARKET 14 B . ExcLusrvE CONTRACTS .................................................................................................................................. 25 ................................................................................................................................................ I . Background 25 2 . Discussion .................................................................................................................................................. 27 C . ACCESS TO WIRING ......................................................................................................................................... 41 I Background ............................................................................................................................................... 42 . 2 . Discussion .................................................................................................................................................. 49 3 . Single Definition of Inside Wiring ............................................................................................................. 60 4 . Safety Concerns Regarding the Placement of the Demarcation Point Awayfiom the Building ................ 62 5 . Prospective Eflect of 1997 Demarcation Point Order .......................................................................... 6 6 D . ACCESS TO CONDUITS AND RIGHTS- OF- WAY .................................................................................................. 70 1 Background ................................................................................................................................................ 70 2 . Discussion .................................................................................................................................................. 76 E . AREAS UNDER TENANT CONTROL .................................................................................................................. 94 I . Background ................................................................................................................................................ 94 2 . Discussion .................................................................................................................................................. 97 V . FURTHER NOTICE OF PROPOSED RULEMAKING ........................................................................... 125 A . NON- DISCRIMINATORY ACCESS REQUIREMENT ............................................................................................ 125 I . Update on the State of the Market ........................................................................................................... 128 2 . LegaIIssues .............................................................................................................................................. I 3 1 3 . Potential Scope of Application ................................................................................................................ I 5 1 4 . Potential Implementation Issues .............................................................................................................. 156 ............................................................................................................................... B . Exc~ usrv~ CONTRACTS 1 6 0 1 . Residential Exclusive Contracts ............................................................................................................ 1 6 1 2 . Exclusive Access Provisions in Existing Contracts .................................................................................. 163 ............................ C . PREFERENTIAL MARKETING AGREEMENTS AND OTHER PREFERENTIAL ARRANGEMENTS 165 D . DEFINITION OF RIGHT- OF- WAY Ml'ES ...................................................................................................... 169 E . EXTENSION OF C ~L E INSIDE WIRING RULES ............................................................................................... 171 VI . CONCLUSION ........................................................................................................................................... 176 W . PROCEDURAL MATTERS ................................................................................. - ........................ .. ........ 177 VIXI . ORDERING CLAUSES .................................................................................. .. .............. "" ..................... 1% APPENDIX A: List of Commenters APPENDIX B: Final Rules APPENDIX C: Final Regulatory Flexibility Analysis APPENDIX D: Initial Regulatory Flexibility Analysis 2 Federal Communications Commission FCC 00- 366 I. INTRODUCTION 1. In this item, we further our ongoing efforts under the Telecommunications Act of 1996' to foster competition in local communications markets by implementing measures to ensure that competing telecommunications providers are able to provide services to customers in multiple tenant environments (MTEs). In the Competitive Nenuorh NPIL'rl, we requested comment on the state of access to MTEs and on a variety of potential measures to improk~ such access.* Based on the extensive record compiled in response to that Notice, we adopt several measures to remove obstacles to competitive access in this important portion of the telecommunications market. Specifically, we: (1) prohibit camers from entering into contracts that restrict or effectively restrict owners and managers of commercial MTEs from permitting access by competing carriers; (2) clarify our rules governing control of in- building wiring and facilitate exercise of building owner options regarding that wiring; (3) conclude that the access mandated by Section 224 of the Communications Act (the "Pole Attachments ~c t ")~ includes access to conduits or rights- of- way that are owned or controlled by a utility within MTEs; and (4) conclude that parties with a direct or indirect ownership or leasehold interest in property, including tenants in MTEs, should have the ability to place antennas one meter or less in diameter used to receive or transmit any fixed wireless service in areas within their exclusive use or control, and prohibit most restrictions on their ability to do SO. 2. We also note that, while these measures will help significantly to advance competition and customer choice, they may well be insufficient in themselves to secure a full measure of choice for businesses and individuals located in MTEs. We recognize that the real estate industry has taken some positive steps to facilitate tenant choice of telecommunications providers by working towards the development of best practices and model agreements4 We will closely monitor these industry efforts and, if such efforts ultimately do not resolve our concerns regarding the ability of premises owners to unreasonably deny competing telecommunications service providers access to customers in MTEs, we are prepared to consider taking additional action, including adopting rules to assure that MTE owners offer competing telecommunications service providers access to their premises. In order to be prepared to take further action, if necessary, we request comment in a Further Notice of Proposed Rulemaking on the current state of the evolving market for the provision of telecommunications services in MTEs. We also note that a strong case can be made that we have authority to impose obligations on camers to ensure nondiscriminatory access to MTEs. We seek comment on this legal argument, whether it would be prudent to exercise such authority, the potential scope of such requirements, and how such requirements could be implemented, if adopted. In addition, we seek fiuther comment on several other Telecommunications Act of 1996, Pub. L. No. 104- 104, 110 Stat. 56, codified at 47 U. S. C. $9 151 et seq. (1996 Act). The 1996 Act amended the Communications Act of 1934 (the '% ommunications Act" or the "Act"). Promotion of Competitive Networks in Local Telecommunications Markets, Notice of Proposed Rulemaking and Notice of Inquiry in WT Docket No. 99- 21 7, and Third Further Notice of Proposed Rulemaking in CC Docket No. 96- 98, 14 FCC Rcd 12673, 12687- 12712, fi( n 28- 69 (1999) (Competitive Networks NPRM). In the Notice of Inquiry portion of the same item, we requested comment on issues relating to access to public rights- of- way and franchise fees, state and local taxes, and other means of promoting competitive networks. Id. at 12712- 19, w70- 85. These issues will be addressed separately at another time. 3 47 U. S. C. $ 224. See Letter fkom Real Access Alliance to William E. Kemard, Chairman, FCC, dated September 6,2000 (September 6 Real Access Alliance Letter). 3 Federal Communications Commission FCC 00- 366 potential Commission actions that may be necessary in the event that competition in the MTE market does not develop sufficiently. 11. SUMMARY 3. In the 1996 Act, Congress sought "to provide for a pro- competitive, de- regulatory national poli.-. y framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to c~ m~ etition."~ One of the most important goals of the 1996 Act was to bring competition to the traditionally monopolistic market for local telecommunications ser~ ices.~ In order to bring competition to this market, Congress contemplated competitive entry by three means - use of a competitor's own facilities, use of unbundled elements of the incumbent local exchange camer's (LEC's) network, and resale of the incumbent's service - and it included provisions to prevent incumbent LECs from blocking competitive entry by any of these means. ' Congress also extended the scope of the Pole Attachments Act to grant access to te~ ecommunications service providers in addition to cable service providers. 8 4. We remain committed to removing obstacles to competitive entry into local telecommunications markets by any of the avenues contemplated in the 1996 ~c t .~ Nonetheless, we have recognized that the greatest long- term benefits to consumers will arise out of competition by entities using their own facilities." Because facilities- based competitors are less dependent than other new entrants on the incumbents' networks, they have the greatest ability and incentive to offer innovative technologies and service options to consumers. Moreover, facilities- based competition offers the best promise of ultimately creating a comprehensive system of competitive networks, in which today's 5 S. Conf. Rep. No. 104- 230, 104" Cong., 2d Sess. at 1 (1996) (1996 Conference Report). 6 See mlernentation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket NO. 96- 98, First Report and Order, 1 1 FCC Rcd 15499,15505- 06, fi 3 (1996) (Local Competition First Report and Order), affd in part and vacated in part sub nom. Competitive Telecommunications Ass 'n v. FCC, 117 F. 3d 1068 (8" Cir. 1997), affd in part and vacated in part sub nom. Iowa Utils. Bd. v. FCC, 120 F. 3d 753 (8" Ck. 1997), a f d in part, rev'd in part, and remanded sub nom. AT& T Corp. v. Iowa UtiZs. Bd., 525 U. S. 366 (1999) (Iowa Utilities Board). 7 See 47 U. S. C. 251( c)( 2) (requiring incumbent LECs to provide interconnection with the facilities and equipment of any requesting telecommunications carrier on just, reasonable, and nondiscriminatory rates, terms, and conditions), 25 1 (c)( 3) (requiring incumbent LECs to provide nondiscriminatory access to network elements on an unbundled basis on just, reasonable, and nondiscriminatory rates, terms, and conditions), 25 l( c)( 4) (requiring incumbent LECs to offer services for resale at wholesale rates, and generally forbidding incumbent LECs from prohbiting or imposing unreasonable or discriminatory conditions or limitations on resale). 8 47 U. S. C. § 224. See, e. g., Implementation of the Local competition Provisions of the Telecormrmnications Act of 1996, CC Docket No. 96- 98, Third Report and Order and Fourth Further Notice of Proposed Rulemaking, 15 FCC Rcd 3696 (1999) (promulgating rules governing access to unbundled network elements following United States Supreme Court remand) (W E Remand Order); Deployment of Wireline Services Offering Advanced Telecommunications Capability, Third Report and Order in CC Docket No. 98- 147, Fourth Report and Order in CC Docket No. 96- 98, 14 FCC Rcd 20912 (1999) (adopting line sharing and other unbundling rules for Digital Subscriber Line service). 10 See Competitive Networks NPRM, 14 FCC R C ~ at 12676- 77, n 4. 4 Federal Communications Commission FCC 00- 366 incumbent LECs no longer will exert bottleneck control over essential inputs, but will compete on a more equal basis with their rivals." 5. One particular benefit that we hope will arise from the growth of facilities- based competition is increased availability of advanced services. In the 1996 Act, Congress directed the Commission to encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all ~rnericans." We have recently found that advanced telecommunications capability is being deployed in a reasonable and timely fashion, although certain groups of consumers may be particularly vulnerable to untimely access. I3 We believe that competitive providers will continue to play a vital role in the growth and ubiquitous availability of advanced services, both by innovating themselves and by placing competitive pressure on the incumbents to offer more advanced services at attractive prices. '4 At the same time, we expect that the ability to offer advanced capabilities that benefit consumers will be an important factor in many competitors' marketplace suc~ ess. '~ 6 . In this item, we take targeted actions to promote the continued deployment of competitive and advanced telecommunications services and reduce the substantial barriers that remain to deployment of these services in MTES, '~ and we request comment on potential additional actions. The actions we take here are as follows: First, we forbid telecommunications camers from entering into contracts to serve commercial properties that restrict or effectively restrict the property owner's ability to permit entry by other 17 camers. Second, in order to reduce competitive carriers' dependence on the incumbent LECs to gain access to on- premises wiring, while at the same time recognizing the varied needs of carriers and building owners, we establish procedures to facilitate moving the demarcation point to the minimum point of I I See id. at 12685- 86, W 20- 23. 12 1996 Act, $706, codified as a note to 47 U. S. C. $ 157. 13 Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the ~elecommunications Act of 1996, CC Docket No. 98- 146, Second Report, FCC 00- 290 (rel. Aug. 21,2000) (Section 706 Second Report). 14 For example, although competitive LECs currently serve under 7% of asymmetric digital subscriber line (DSL) subscribers, they reportedly have DSL- capable equipment in one- third more central offices than do incumbents, and they appear to be adding DSL customers at a faster rate. Id. at para. 102. See also id. at paras. 192- 193 (discussing competitive LEC investment in DSL infrastructure). Moreover, analysts have projected that terrestrial wireless providers will serve between 12 and 15 percent of the residential and between 14 and 50 percent of the business high- speed market w i t h the next few years, and that satellite providers could serve between 5 and 10 percent of the hgh- speed market. Id. at paras. 197,202. 15 See Competitive Networks NPRM, 14 FCC Rcd at 12675- 76, 12687, 3,26. 16 See paras. 17- 1 9, inj- a (describing barriers to deployment in MTEs). 17 See Section IV. B, infia. 5 Federal Communications Commission FCC 00- 366 entry (MPOE) at the building owner's request, and we require incumbent LECs to timely disclose the location of existing demarcation points where they are not located at the MPOE. '~ Third, we determine that under Section 224 of the Communications Act, utilities, including LECs, must afford telecommunications carriers and cable service providers reasonable and nondiscriminatory access to conduits and rights- of- way located in customer buildings and campuses, to tht: extent such conduits and rights- of- way are owned or controlled by the ~ti1it- y. '~ Fourth, we extend to antennas that receive and transmit telecommunications and other fixed wireless signals our existing prohibition of restrictions that impair the installation, maintenance or use of certain video antennas on property within the exclusive use or control of the antenna user, where the user has a direct or indirect ownership or leasehold interest in the property. 20 7. The specific actions that we take in today's Report and Order will reduce the likelihood that incumbent LECs can obstruct their competitors' access to MTEs, as well as address particular potentially anticompetitive actions by premises owners and other third parties. We remain concerned, though, that, based on the record, unreasonable discrimination among competing telecommunications service providers by some premises owners remains an obstacle to competition and consumer choice. 8. We recognize the recent efforts of the real estate industry to develop model contracts and best practices aimed at improving MTE owners' processing of tenant requests for service from alternative telecommunications carriers or carrier requests for access to MTEs to serve tenant^.^ ' In particular, a coalition of 11 trade associations representing over 1 million property owners and operators has committed to a best practices implementation plan including: (1) adopting a firm policy not to enter into any exclusive contracts for building access in the future; (2) responding within 30 days to written tenant requests for a particular telecommunications provider, and accommodating such requests in good faith, where appropriate space is available and the provider intends to execute an access agreement that is substantially in the form of a model contract to be developed by the industry; (3) informing tenants of existing alternatives in buildings that are already served by multiple competitive providers, and encouraging a dialogue with tenants regarding the advantages of additional providers; (4) incorporating these processing guidelines in new leases and notices to existing leaseholders; (5) committing to a clearer and more predictable process for responding to requests fiom carriers to access the MTE to serve customers, including provision of clear guidance regarding the MTE owner's policies within 30 days, where the carrier agrees that its access to the MTE is conditioned on deploying equipment andlor providing service to tenants by a date certain; (6) establishing an independent clearinghouse to which interested parties could submit allegations of behavior that is inconsistent with either the model contracts or "best practices" developed as part of this initiative; and (7) supporting a periodic, quantitative study of the market for building access, to be conducted under the auspices of the omm mission.^^ At least 12 18 See Section IV. C, infra. In addition, we take this opportunity to resolve certain pending petitions for reconsideration of our telecommunications inside wiring rules. Id. 19 See Section N. D, infia. 20 See Section IV. E, infia; 47 C. F. R. 9 1.4000. 2 1 See September 6 Real Access Alliance Letter. Id. 6 Federal Communications Commission FCC 00- 366 building owners who collectively own or operate over 250 million square feet of office space have committed to these best practices. 23 9. We are encouraged by those efforts and will closely monitor their progress. At the same time, we are aware of concerns that these voluntary commitments may fall short of protecting tenants' ability to choose among competing ~a m e r s .~~ Therefore, if su: h efforts ultimately do not resolve our concerns regarding the ability of premises owners to discriminate unreasonably among competing telecommunications service providers, we are prepared to sonsider talung additional action. Accordingly, in a Further Notice of Proposed Rulemalang, we seek comment in several areas: First, we seek to refresh the record on the status of the market for the provision of telecommunications services in MTEs in order to evaluate the necessity of a nondiscriminatory access requirement. Second, we seek additional comment on the legal argument that we have authority to impose requirements on carriers in order to ensure nondiscriminatory MTE access, and on whether we should exercise such authority. Third, we seek comment on the circumstances under which the benefits would exceed the costs of such requirements, and on how any nondiscriminatory access requirement could be implemented. 25 Fourth, we ask whether today's prohibition on exclusive access contracts in commercial MTEs should be extended to residential settings, either in addition to or in lieu of a nondiscriminatory access requirement applicable to these premises, and whether we should prohibit camers from enforcing exclusive access provisions in existing contracts in either commercial or residential MTE? Fifth, we seek comment on whether we should proscribe carriers fiom entering into contracts that grant them preferences other than exclusive access, such as exclusive marketing or landlord bonuses to tenants that use their services, in some or all situation^.^ ' Sixth, we seek additional comment on the definition of "rights- of- way" in MTEs to which a utility must allow access under Section 224.28 Finally, we seek additional comment on whether we should extend our cable inside wiring rules to facilitate the use of home run wiring by telecommunications service providers where an incumbent cable provider no longer has a legal right to maintain its home run wiring in the building. 29 23 Id. at 1. 24 See Letter from Thomas Cohen, Smart Buildings Policy Project, to FCC Commissioners, dated September 7, 2000. 25 See Section V. A, infia. 26 See Section V. B, infia. 27 See Section V. C, infia. 28 See Section V. D, infra. 7 Federal Communications Commission FCC 00- 366 10. The Commission has taken many actions both before and since the 1996 Act to remove obstacles to facilities- based competition in local telecommunications markets. For example, among other things, we have implemented Section 25 1 of the Communications Act, forborne from enforcing statutory provisions and regulabons that could inhibit the ability of new entrants to compete, made additional spectrum available to competitors using wireless technology, and increased the flexibility of use of previously allocated ~~e c h ~m .~~ These efforts have continued during the past year. 3' 11. In the Competitive Networks NPRM, we discussed our thoughts regarding the development of facilities- based competition generally, 32 and in a companion Notice of Inquiry we sought comment generally regarding factors that may be impeding the growth of competitive networks and what actions we should take to ameliorate such impediments. 33 The principal focus of the NPRM, however, was on promoting competitive access to MTEs, such as apartment buildings (rental, condominium, or co- op), office buildings, office parks, shopping centers, and manufactured housing communities. This important segment of the market poses special challenges to facilities- based entry. In order to offer service in an MTE, a facilities- based competitor must either gain access to existing on- premises wiring or obtain access to conduit and other suitable areas in order to install its own equipment. In addition, providers using wireless technology must obtain access to rooftops or other suitable locations to place their antennas. Access to these facilities and areas is typically controlled by the building owner, the incumbent LEC, or both. Thus, unlike in the case of a stand- alone residence or commercial enterprise, a competitive facilities- based carrier cannot supply service simply by dealing with the end user. 34 (Continued from previous page) 29 See Section V. E, infia. 30 See generally Competitive Networks NPRM, 14 FCC Rcd at 12678- 80, M[ 8- 10. 3 1 See, e. g., Public Notice, "The Wireless Telecommunications Bureau Announces That It Is Prepared to Grant 1848 Licenses to Operate in the 39 GI- Iz Band," DA 00- 2242 (rel. Oct. 2,2000) (announcing licenses ready to grant in 38.6- 40.0 MHz band); Amendments to Parts 1,2,87 and 101 of the Commission's Rules to License Fixed Services at 24 GHz, WT Docket No. 99- 327, Report and Order, FCC 00- 272 (rel. Aug. 1,2000) (adopting service rules for 24.25- 24.45 and 25.05- 25.25 GHz bands); Rulemaking to Amend Parts 1,2,21, and 25 of the Co& sion7s Rules to Redesignate the 27.5- 29.5 GHz Frequency Band, to Reallocate the 29.5- 30.0 GHz Frequency Band, to Establish Rules and Policies for Local Multipoint Distribution Service and for Fixed Satellite Services, CC Docket No. 92- 297, Zlzird Report and Order and Memorandum Opinion and Order, 15 FCC Rcd 1 1857 (2000) (declining to extend restriction on incumbent LECs and cable companies holding attributable interests in Local Multipoint Distribution Service Block A licenses, based in part on finding that open eligibility may speed the availability of broadband services in rural areas); Service Rules for the 746- 764 and 776- 794 MHz Bands, and Revisions to Part 27 of the Commission's Rules, WT Docket No. 99- 168, First Report and Order, 15 FCC Rcd 476 (2000) (establishing service rules for spectrum to be vacated by television broadcaste~ s), Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, FCC 00- 224 (rel. June 30,2000) (addressing issues raised on reconsideration and seeking comtnent on potential cost- sharing rules, relocation agreements, and secondary auctions to facilitate clearing of spectrum), Second Memorandum Opinion and Order, FCC 00- 330 (rel. Sept. 14,2000) (dismissing additional petition for reconsideration as moot). 32 Competitive Networks NPRM, 14 FCC Rcd at 12683- 87, 18- 27. 33 Id. at 12719, n 85. 34 See id. at 12688, 730; see also Section 706 Second Report at para. 60 (noting that landlord control over access may create banier to provision of advanced services in MTEs, especially by competitive providers). 8 Federal Communications Commission FCC 00- 366 12. Attention to the unique issues and challenges affecting access to MTEs is important because a substantial proportion of both residential and business customers nationwide are located in such env~ ronments.~ ' Thus, an absence of widespread competition in MTEs would insulate incumbent LECs from competitive pressures and deny facilities- based competitive carriers the ability to offer their services in a sizable portion of local markets, thereby jeopardizing full achievement of the benefits of competition. Moreover, such a situation would directly undermine the express Congressional goal of bringing competition and advanced services to "all ~mericans."~~ Finally, because MTEs frequently offer a relatively large revenue opportunity in a limited space, they can be the most efficient environments for many competitive LECs initially to serve. Thus, inability to compete in those environments in the short term may jeopardize the business plans and viability of some potentially powerful competitors that could in the long term offer ubiquitous competition throughout an incumbent LEC's senice area. Indeed, even if competitive access is available in some MTEs, competitive carriers may be unable to succeed economically, and thus offer competitive choices to any customers, without broad access to MTE markets. For these reasons, we requested comment in the Competitive Networks NPRM on the practical concerns involved in serving MTEs, on the state of the market, and on several potential actions that we could take to promote competitive access. 13. The Competitive Networks NPRM generated extensive interest among incumbent and competitive LECs, building owners and managers, electric and gas utilities, cable service providers, local governments, and others. We received 438 formal comments and 252 reply comments." In addition, the Commission's Local and State Government Advisory Committee (LSGAC) filed two reco~ nmendations.~~ We have also received numerous ex parte filings from parties representing a variety of interests, including several members of Congress. Although we do not list these ex parte filings individually, we have incorporated them in the record and we have fully considered them in reaching the conclusions set forth herein. 39 35 See Competitive Networks NPRM, 14 FCC Rcd at 12687- 88, f i 29. 36 See 1996 Act, 4 70qa); 1996 Conference Report at 1. 37 Commenters and the short forms by which they are cited herein are listed in Appendix A. Unless otherwise indicated, all citations to comments and reply comments herein refer to comments and reply comments on the Competitive Networks NPRM. In order to enable the Commission to develop a more comprehensive record in this proceeding, we grant the motions to file further reply comments by the Wireless Communications Association International, Inc. and by Concerned Communities and Organizations. 38 FCC Local and State Government Advisory Committee Advisory Recommendation Number 19: Notice of Proposed Rulemaking, Notice of Inquiry, and Thud Further Notice of Proposed Rulemaking, WT Docket No. 99- 2 17, CC Docket No. 96- 98, dated Nov. 1, 1999 (LSGAC Recommendation No. 19); FCC Local and State Government Advisory Cormnittee Recommendation Number 22: Notice of Proposed Rulemaking, Notice Of Inquiry, and Third Further Notice of Proposed Rulemaking, WT Docket No. 99- 217, CC Docket No. 96- 98, dated Aug. 29, 2000 (LSGAC Recommendation No. 22). 39 Ex parte filings are accessible on the Commission's Electronic Comment Filing System (ECFS), htt~: i! www. fcc.~ ov! e- file/ ecfs. html. Instructions for using ECFS are also available on that page. 9 Federal Communications Commission FCC 00- 366 IV. REPORT AND ORDER 1 MEMORANDUM OPINION AND ORDER A. State of The Market 14. Based on the record compiled in response to the Competitive Networks NPRM, we conclude that meaningful progress has been made in the competitive development of the market for facilities- based telecommunications services in MTEs, but some obstacles to full competitive choice remain. We are concerned that, at least in certain cases, both building owners and incumbent LECs retain the ability and incentive to discriminate among and impose unreasonable terms on new entrants. As a result, end users have likely been forced to pay unnecessarily high rates for local telecommunications services, and have been denied the benefits of advanced and innovative service options. At the same time, we are mindful that there has been progress in the market, and we are hopeful that this trend will continue to yield more competitive options for increasing numbers of consumers. Indeed, some recent developments indicate that this may be the case. 15. MTEs constitute a substantial portion of both residential and commercial units in the United States. An MTE is any contiguous premises under common ownership or control that contains two or more distinct units occupied by different tenants. Thus, MTEs include, for example, apartment buildings (rental, condominium, or co- op), office buildings, office parks, shopping centers, and manufactured housing communities. There are over 750,000 office buildings and over one million residential multiple dwelling units in this nation. 40 As of 1990, approximately 28 percent of all housing units nationwide were located in multiple dwelling units, and that percentage is likely growing. 4' 16. There is evidence in the record that both wireless and wireline competitive LECs have made progress in obtaining access to MTEs, especially in commercial markets. 42 For example, WinStar currently provides broadband communications services to over 15,000 small and medium- sized business customers in 31 domestic markets. 43 Virtually all of these customers are located in MTEs. Competitive LECs continue to contract for access to an increasingly large number of commercial buildings. Indeed, there is evidence that the availability of alternative providers for local telecommunications services is often a selling point in leasing negotiations between building owners and prospective tenants and, thus, buildin owners may have incentives to enter into agreements with competitive LECs for building 5 access. Moreover, in response to the issues raised and developed in this proceeding, some of the leading companies in the real estate industry have recently made a commitment to the Commission to undertake to develop and promote the use of sample contracts for building access, as well as "best practices" to facilitate negotiations for building access. 45 These best practices will include a fm policy not to enter into exclusive contracts for building access; procedures and expedited time frames for 40 Access to Buildings and Facilities by Telecommunications Providers: Hearing Before the Subcomm. on Telecommunications, Trade, and Consumer Protection of the House Committee on Commerce, 1 0 6 ~ Cong. 24 (1999) (Written Testimony of William J. Rouhana, Jr., Chairman and Chef Executive Officer, WinStar Communications, Inc.). 4 1 Competitive Networks NPRM at 12687- 88, 729. 42 See Cornerstone Properties, et al. Comments at 7- 8. See also Section 706 Second Report. 43 WinStar Comments at 2. 44 Real Access Alliance Comments at 7. 45 September 6 Real Access Alliance Letter. 10 Federal Communications Commission FCC 00- 366 processing tenant requests for service from a particular telecommunications provider, where appropriate space is available and the provider intends to substantially accept a model access agreement; a clearer and more predictable process for responding to requests for access generated by camers; establishment of an independent clearinghouse for complaints by tenants, real estate companies, and service providers; and support for periodic studies of the market under the auspices of the om mission.^^ This initiative represents a positive step in the development of the market for building access. 17. Notwithstanding this progress, however, there is also meaningful evidence that competitive LECs have in many instances encountered unreasonable demands and significant delay in their efforts to obtain access to buildings." Competitive LECs complain that they are being impeded by incumbent LECs and building owners. 48 In some instances, competitive LECs state that they have been denied access to buildings completely, or have been charged exorbitant rates for access or been subjected to unreasonable conditions. And, in others, contract negotiations have reportedly spanned upwards of eighteen months - a timeframe that is particularly problematic for a service provider in a competitive market .49 18. Although the record does not contain statistical evidence regarding the prevalence of such activities, competitive LECs cite to specific incidents of unreasonably restrictive behavior on the part of incumbent LECs and building owners that, they assert, are hurting competition and consumers. These include the MTE in New York City that has been through three different owners since 1998, all of whom have denied access to a competitive LEC, despite the fact that tenants in the MTE have sent letters to the owners requesting access for the competitive LEC." Another incident involves the manager of a large office building in Florida who has demanded a rooftop access fee of $1,000 per month and a fee of $100 per month for each in- building hook- up from a competitive LEC.~ ' The competitive LEC estimates that this fee structure would cost it about $300,000 per year to service this one building. 52, Yet another incident involves a competitive LEC that has been negotiating for over 18 months with several Boston, Massachusetts MTE owners who claim that they are still examining the telecomrnunications issues, while their tenants remain without choice of telecommunications service providers. 53 19. The record further indicates that incumbent LECs are using their control over on- premises wiring to frustrate competitive access to multitenant buildings. Competitive LECs report that they have encountered difficulties with incumbents when attempting to arrange for interconnection or lease unbundled network elements. For example, competitive LECs report that incumbents may fail to timely provide non- proprietary information in their possession, require the presence of their own technicians to 46 Id. 47 AT& T Comments at 4; Nextlink Comments at 4- 5; Teligent Comments at 9- 10; Winstar Comments at 16- 18. 48 Id. 49 See, e. g., AT& T Comments at 6- 7; Nextlink Comments at 2. 50 ALTS Comments at 12. 5 1 Id. at 15. 52 Id. 55 Id. at 9. 11 Federal Communications Commission FCC 00- 366 supervise competitive LEC wiring, and take unreasonable amounts of time in scheduling such visits. j4 In addition, competitive LECs contend that incumbent LECs often require network configurations which may be disadvantageous for competitors. 55 20. Building owners argue, however, that competitive LECs have yet to provide service in many of the buildings to which they have obtained rights of access. For example, according to one press account, WinStar has wired 4,000 of the approximately 8,000 buildings for which it has obtained access, while Teligent has wired 3,000 of the approximately 7,500 buildings for which it has obtained access. 56 Building owners argue that these numbers suggest that competitive LECs are not even able to serve the buildings they have rights to access now, and thus are not constrained by any alleged lack of nondiscriminatory access to all buildings. 21. Economic theory supports the idea that building owners may, at least under some circumstances, be able to exert market power over telecommunications access. There is no question that building owners control access to any individual building. Whether that control translates into the ability or incentive to unreasonably restrict access to competitive LECs depends on the circumstances in particular real estate markets, as well as the time frame one is considering. For example, over the long term, tenants may have the ability to neutralize building owners' control by choosing not to occupy buildings that do not offer attractive telecommunications service options. The extent to which tenants may have effective choice in the near term depends on several factors, including the availability of alternative spaces, the typical length of leases, the costs of relocation, and the relative importance of telecommunications among the factors a tenant considers when choosing a space. The extent of tenant power may vary from market to market, including between residential and commercial tenants as well as in different geographic areas and market cycles. 22. A noteworthy development is the emergence of a new type of telecommunications service provider. These senice providers, often referred to as "building LECs" or "B- LECs," exclusively serve MTEs. In many instances, these companies own telecommunications facilities only within the buildings they serve, and must interconnect with other camers to transmit signals outside these buildings. Many of these ventures have been created by, or with the active participation of, the real estate industry. Also, some of the companies partner with major real estate companies in order to serve their buildings. One such company, Broadband Office, Inc., has reportedly partnered with 50 major real estate owners across the ~ountry.~ ' 23. We are encouraged by the progress we have seen in the development of the competitive market for facilities- based telecommunications services. Competitive LECs have made gains in the overall number of buildings to which they have access. In addition, we believe that the recent effort by representatives of the real estate industry to begin to develop and promote the use of both model 54 See Letter from Frank Simone, Government Affairs Director, AT& T, to Magalie Roman Salas, Secretary, FCC, dated June 20,2000. 55 Id. 56 See Letter from Matthew C. Ames, Counsel for Real Access Alliance, to Magalie Roman Salas, Secretary, FCC, dated July 3,2000 (enclosing article from June 16,2000 edition of Commercial Property News entitled "Demetree, Homig Stress Tenant Needs"). 57 See Letter from Kathleen Q. Abernathy, Counsel for Broadband Office, to Magalie Roman Salas, Secretary, FCC, dated May 17,2000 (enclosing news article entitled "Birth of a BLEC: Service Providers Jump at Chance to Win Over MTU [multi- tenant unit] Audience"). 12 Federal Communications Commission FCC 00- 366 contracts and best practices is a positive step. At the same time, however, we are concerned that the overall pace of the development of the market is sluggsh. Based on information in the record, there are over 1.75 million MTEs and, more than four years after the passage of the 1996 Act, facilities- based competitive LECs have access to only a small percentage of these locations. As a result, all too often consumers are left without any choices with regard to the provision of local telecommunications service. Indeed, the record demonstrates that there are at least some circumstances in which building owners have both the ability and incentive to extract excessive profits from the provision of telecommunications services by unreasonably restricting competitive LECs' access to their buildings. While building owners have introduced evidence that tenant mobility constrains their exercise of market power, and that the maximum amount of revenue a building owner could obtain fiom telecommunications is small compared to the revenues that would be put at risk if tenants were denied the services they want, 58 competitive LECs have provided countervailing evidence suggesting that the costs of relocation and the length of leases often prevent tenants fiom exerting their AS a result, we find that the evidence supports the conclusion that, at least in some instances, building owners exercise market power over telecommunications access. 24. In addition to the market power exerted by building owners, we also find that incumbent LECs possess market power to the extent their facilities are important to the provision of local telecommunications services in MTEs. Although competitive LECs are rapidly building customer base and gaining market share, they still account for less than six percent of local market revenues6' Even within their relatively small share of the local market, the revenues of competitive LECs come primarily from special access and local private line services rather than from switched service to end users. 61 Thus, because incumbent LECs still serve the vast majority of customers, they continue to control most facilities useful to the provision of telecommunications service to MTEs that are not controlled by the MTE owners. In the absence of effective regulation, they therefore have the ability and incentive to deny reasonable access to these facilities to competing carriers. B. Exclusive Contracts 1. Background 25. In the Competitive Networks NPRM, we requested comment on whether we should forbid telecommunications service providers, under some or ail circumstances, from entering into exclusive contracts with building owners. 62 Further, we sought comment on whether we have the authority to forbid common camers from entering into exclusive contracts with building owners or managers under Section 201 of the Communications Act, which prohibits unjust and unreasonable practices. In addition, we sought comment on the appropriate scope of any rule against exclusive contracts, and how such a rule should be implemented. We asked commenters to address whether a ban on exclusive contracts would be 58 Real Access Alliance Comments at 8- 9. 59 Teligent Comments at 11; Winstar Comments at 18. 60 See Local Telephone Competition at the New ~llennium (Summaniing December 3 1, 1999 data fiom F o ~ 477 and 499- A), Common Carrier Bureau, Industry Analysis Division, August 2000, httD:// www. fcc.~ ov/ Bureaus/ Common Carrier/ Rmrts/ FCC- State LinWIADllcom. pdf at 3. 6 1 See Local Competition Report, Common Carrier Bureau, Industry Analysis Division, August 1999, h~:~/ ww~. fc~.~ ov/~ cb/ stats/ lcom[, 98.~ df at 1. 62 See Competitive Networks NPRM, 14 FCC Rcd at 12706- 12707, fl61 and 64. 13 Federal Communications Commission FCC 00- 366 an effective means of securing nondiscriminatory access, and whether such a rule should apply to all telecommunications camers and contracts or only in some situations, such as unreasonably long contracts or contracts involving carriers with market power. 63 Finally, we requested comment on the legal and policy issues and practical implications of either abrogating existing exclusive contracts or allowing them to remain in force, including any constitutional i s s ~e s .~ We noted that the Nebraska Public Service Commission has already prohibited exclusive contracts and marketing agreements between telecommunications companies and property owners, except for contracts and agreements involving condominiums, cooperatives, and homeowners' association^.^^ 26. By and large, most comrnenters on this issue, including both incumbent LECs and competitive LECs, support a ban on exclusive access contract^.^^ Comrnenters argue that exclusive access contracts remove choice from the consumer and eventually adversely affect service quality, rates, and innovation since an exclusive camer lacks the threat of competition within the MTE, thereby removing the incentive to provide quality service. 67 AT& T asserts that the Commission should prohibit incumbent LECs from entering into or enforcing exclusive service agreements with building owners because such agreements allow the incumbent LECs to "lock up" multiple tenant buildings before compet~ tion has had an opportunity to develop. 68 A few parties, however, argue that exclusive contracts are necessary under some circumstances in order for competitive carriers to achieve a sufficient return on their investment in serving a building. 69 If exclusive contracts are not permitted, those parties argue, competitive providers simply will not take the risk of entering many buildings, and tenants of those buildings will experience none of the benefits of competition at all. In a recent ex parte filing, Real Access Alliance distinguished between residential and commercial markets, arguing that exclusive contracts should be forbidden in commercial buildings but permitted in the residential context." 2. Discussion 27. Based on our review of the record, we will prohibit camers, in commercial settings, from entering into contracts that effectively restrict premises owners or their agents from permitting access to 63 Id. 64 Id. 65 Order Establishing Statewide Policy for MDU Access, Application No. C- 1878PI- 23, slip op. at 4 (Neb. P. S. C. March 2, 1999) (Nebraska MDU Order). 66 See, e. g., AT& T Comments at 25- 27; Qwest Comments at 11; SBC Comments at 7; Teligent Comments at 17- 19; Winstar Cormnents at 24- 25. 67 Teligent Comments at 17. 68 AT& T Comments at 26. 69 OpTel Comments at 18; Real Access Alliance Comments at 70. 70 See Letter fiom Matthew C. Ames, counsel for Real Access Alliance, to Magalie Roman Salas, Secretary, FCC, filed June 16,2000 (June 16 Real Access Alliance Letter). See also Section V. B, infra. We note that the Commission's rules currently permit exclusive contracts for video programming services. See 47 C. F. R. Part 76; see also Telecommunications Services Inside Wiring Customer Premises Equipment, Report and Order and Second Further NPRM, CS Docket No. 95- 1 84, 13 FCC Rcd 3659 at 3778- 80, fl258- 266. (Inside Wire Report and Order and Second Further NPRM). 14 Federal Communications Commission FCC 00- 366 other telecommunications service providers. 71 The use of exclusive contracts in commercial settings poses a risk of limiting the choices of tenants in MTEs in purchasing telecommunications services, and of increasing the prices paid by tenants for telecommunications ser~ ices. '~ In addition, the record provides no evidence that in commercial settings the ability to enter into exclusive contracts would have efficiency enhancing or pro- competitive effects. 73 Because the record is inconclusive about the likely competitive effects of exclusive contracts for the provision of telecommunications services in residential MTEs, however, we are seeking further information in the Further Notice of Proposed Rulemaking below. Moreover, we seek comment in the Further Notice of Proposed Rulemaking on whether we should prohibit carriers from enforcing exclusive access provisions in existing contracts in either commercial or residential MTEs. 28. An exclusive contract between a building owner and a telecommunications service provider can be viewed as a type of vertical restraint, or restraint affecting firms in two different markets. The economic analysis of such vertical controls- including, in the extreme, mergers of upstream and downstream firms- is complex. In general, such arrangements can be either beneficial or harmhl to the public interest, depending on the precise environment in which they occur. Whether a particular restraint in a specific situation increases or decreases consumer welfare is often a widely debated subject among economic scholar^. '^ One finding of the economic literature, however, is that vertically related firms may enter into long term or exclusive contracts that inefficiently deter or foreclose entry to a market and thus harm cons~ rners.~ ' We believe that exclusive contracts between building owners and telecommunications providers fit this model. Building owners and service providers may both find it advantageous to enter into such arrangements, yet those arrangements may nonetheless be h a d 1 to MTE tenants. 29. For incumbent LECs, an exclusive contract may essentially constitute a device to preserve existing market power. First, an exclusive contract erects a barrier preventing other telecommunications firms from offering service to tenants in the building( s) covered by the contract. Second, where new entrants face fixed costs or otherwise have costs characterized by increasing returns to scale, the 71 See para. 37 z'nfia for a discussion of the types of arrangements that would fall under this prohibition. 72 The text of the rule that we adopt is set forth in Appendix B. We do not address in this section arrangements that give a preference to a particular carrier but do not effectively restrict the premises owner from permitting other providers access, such as exclusive marketing agreements. Rather, we seek comment on such arrangements in a Further Notice of Proposed Rulemaking. See Section V. C, inpa. 73 Several states have considered this issue and reached the same conclusion. In Connecticut, "[ c] ontracts for access and wiring between telecommunications providers and [building] owners" cannot include "[ alny term that grants an exclusive license to any telecommunications provider." Conn. Gen. Stat. Ann. $ 16- 247c- 6( a)( 3) (1997). In Massachusetts, the Department of Telecommunications and Energy recently adopted a rebuttable presumption agalnst exclusive contracts, noting that an exclusive contract "is more likely than not anticompetitive and, therefore, not conformable to statute." Mass. DTE 98- 36- A, Slip Op. At 30 (Massachusetts Nondiscriminatory Access Order). In Nebraska, the Public Service Commission (PSC) found exclusive contracts and marketing agreements between telecommunications companies and landlords to be "anti- competitive and . . . against public policy." The Nebraska PSC further determined that "[ e] xclusionary contracts are barriers to entry and marketing agreements can have a discriminatory effect." Nebraska MDU Order at 6. 74 See Jean Tirole, The Theoty of Industrial Organization, Chapter 4, (1 997). 75 See id. at 187- 198; Aghon, P. & Bolton, P., "Contracts as Barriers to Entry," 77 American Economic Review, No. 3,388- 401 (June 1987). 15 Federal Communications Commission FCC 00- 366 existence of incumbent LEC exclusive contracts covering some buildings actually would make it more difficult for the entrants to serve other buildings economically. Thus, exclusive contracts between incumbent LECs and building owners may impede the development of competition in the market for local telecommunications service. 30. Although competitive LECs currently hold only a relatively small share of the local telecommunications market as compared to incumbent LECs, we believe that it is necessary to prohibit both competitive and incumbent telecommunications service providers from entering into exclusive access contracts in commercial settings, in order to ensure competitive neutrality in the market. Competitive providers are growing in this market, and new entrants are actively seehng to win customers, especially customers in commercial office buildings, that are now served by the incumbent LEC. In this environment, applylng an exclusive contract prohibition only to the incumbent LEC could distort competitive outcomes and ill serve end user interests. Moreover, in the case of competitive LECs, an exclusive contract may essentially constitute a device to create market power. That is, such a contract could entrench a competitive LEC as the sole provider in a building-- or as one of two providers, along with the incumbent LEC- and foreclose any further competition. We note that competitive LECs support a ban on exclusive access contracts for all telecommunications providers, as discussed below. 3 1. An exclusive contract may benefit a building owner when it possesses some market power over tenants, such as where tenants are already committed to long- term leases and moving costs are prohibitive. Where that is the case, building owners may have the ability and incentive to engage in behavior that does not maximize tenant welfare, including the possible use of exclusive contracts. The interests of tenants would not be accounted for in the arrangement between the building owner and the telecommunications provider. We find the assumption that building owners may possess such market power reasonable, at least as a short run matter. Although a tenant has the apparent option to express dissatisfaction with the building owner's choice of local telecommunications service provider by moving to a new building, this choice, as a practical matter, is often not available. The long duration of commercial leases, spanning from five to fifteen years, 76 and typically significant relocation costs may preclude or limit the feasibility of relocation (or the threat of relocation) as a remedy. In addition, zoning laws, environmental regulations, and similar constraints can impede the construction of new office space, resulting in persistent shortages in some local markets and conferring market power on existing owners. 32. We recognize that economic literature shows there are also circumstances in which exclusive contracts may be socially efficient and beneficial. For example, with an exclusive contract, a buyer may be able to obtain advantageous sales arrangements fiom sellers of goods or services, the benefit of which is then passed on to consumers. 77 In addition, where new, sophisticated services become available, as in telecornmunications today, an exclusive contract may be needed in order to give the service provider the incentive to spend adequate resources educating and informing potential customers. We emphasize, though, that no party in t h ~s proceeding has argued that these potential benefits are present in the provision of telecommunications service in commercial MTEs. Indeed, the record lacks any evidence of benefits to competition or consumer welfare fiom the use of exclusive contracts in commercial settings, and commenters that would be subject to the prohibition on such contracts support it. 78 Unlike in the residential context, parties do not allege that exclusive contracts are necessary to give competitive 76 Winstar Reply comments, Exhibit 1, at 9 (Economic Analysis of the Market for Building Access). 77 That is, the buyer may be offered a lower price on a per unit basis if the seller can guarantee the buyer's demand for the particular good or service will be hgh. 78 See, e. g., AT& T Comments at 25; Bell Atlantic Comments at 5; GTE Comments at 16; Sprint Comments at 20. 16 Federal Communications Commission FCC 00- 366 providers incentives to provide options to tenants in commercial MTEs. For example, Real Access Alliance has argued that in the commercial context, a typical building generates enough revenue to support multiple providers. 79 Given the apparent lack of benefits in this context, we find that we should not allow exclusive contracts to restrict competitive access and consumer choice. Further, under these circumstances, we see no value in distinguishing among exclusive access arrangements based on the length of the contract or the market position of the camer. 33. In residential markets, by contrast, we do not have enough information in this record to determine whether we should forbid exclusive contracts under some or all circumstances. Some parties argue that in the residential context, potential revenue streams from any one building are typically not enough to attract competitive entry without exclusive contra~ ts.~~ These paties also argue that forbidding exclusive contracts would undermine our cable inside wiring rules by giving former cable providers rights to remain in the building.* ' Other parties argue that we should forbid exclusive contracts without di~ tinction.~~ The record as a whole, however, lacks specific relevant information regarding residential MTES. '~ We therefore are requesting further comment on whether to forbid or limit residential exclusive contracts, as well as on certain other specific issues relating to practices akin to exclusive contracts, in a Further Notice of Proposed ~u l e r n a k i n ~.~ 34. In sum, the record before us indicates that exclusive contracts for telecommunications services in commercial settings hold the potential for limiting tenants' choices, without any countervailing benefits. As noted earlier, an exclusive contract has the immediate and direct effect of limiting telecommunications choices to tenants in an affected building. Only by incurring the time, resources, and expense of actually relocating to another building (possibly even breaking a long- term lease) can a tenant obtain the access to choices we believe was contemplated by the 1996 Telecommunications Act. We note, however, that we view the need for a prohibition of exclusive contracts as primarily a temporary one designed to address a transitional problem. Two aspects of the current situation should change over time. First, competition in the provision of local telephony services will continue to grow, and once competition is well established in commercial markets, it is unlikely that contracts with building owners that are harmful to tenants would be sustainable. Second, over time the market power that building owners may take advantage of today will diminish, as tenants' existing lease 79 See June 16 Real Access Alliance Letter. Real Access Alliance states that an average- sized office building can yield over 13 times as much revenue as a medium- sized apartment building ($ 240,000 vs. $18,000) and a medium- sized office building can yield 4 times as much revenue as a medium- sized apartment building ($ 360,000 vs. $90,000). 80 Id. 8 I Id. We note that by limiting the rule to commercial buildings, we generally avoid any possible effect on cable inside wiring rules because cable service providers typically do not serve commercial buildings. 82 See Teligent Comments at 17- 19; WinStar Comments at 25. 83 For example, Real Access Alliance provides data for residential video, then concludes without additional support that the same reasoning applies to telecommunications. Parties arguing for a rule against all exclusive contracts do not address residential buildings specifically. 84 See Sections V. B & V. C , infia. We also note that we have sought comment in another proceeding on whether we should forbid or limit exclusive contracts for video programming services. See Inside Wiring Report and Order and Second Further Notice of Proposed Rulemaking, 13 FCC Rcd at 3778- 80, 258- 266. 17 Federal Communications Commission FCC 00- 366 arrangements expire and they are increasingly able to take advantage of opportunities to relocate to other existing or new office space offering preferable telecommunications services. 35. We conclude that we have authority to prohibit telecommunications carriers fiom entering into exclusive contracts with commercial building owners or their agents for the provision of service that necessarily and inseparably includes interstate exchange access service. 85 We agree with AT& T that exclusive contracts perpetuate the very "barriers to facilities- based competition" that the 1996 Act was designed to eliminate. 86 Similarly, WinStar argues that exclusive access contracts completely contradict the competitive mandate of the 1996 Act and, therefore, should be banned. 87 WinStar in particular contends that the Commission has jurisdiction to adopt rules prohibiting the incumbent LECs from entering into such arrangements since an exclusive access arrangement would render the Commission's decis~ on to require incumbent LECs to provide access to in- building wiring as an unbundled network element meaningless. 88 Given that, in today's marketplace, exclusive contracts for telecommunications service in commercial settings impede the pro- competitive purposes of the 1996 Act and appear to confer no substantial countervailing public benefits, we find that a camer's agreement to such a contract is an unreasonable practice. Therefore, these contracts implicate our authority under Section 201( b) of the Act to prohibit unreasonable practices. 36. We note that existing exclusive contracts, in addition to new exclusive contracts, may be a barrier preventing customers from obtaining the benefits of the more competitive access environment envisioned in the 1996 Act, and that the Commission has previously exercised its authority to modify provisions of private contracts when necessary to serve the public interest. 89 We recognize, though, that the modification of existing exclusive contracts by the Commission would have a significant effect on the investment interests of those building owners and carriers that have entered into such contracts. Thus, we are inclined to proceed cautiously in this area, ' and seek further comment in the Further Notice of Proposed Rulemaking on whether we should prohibit carriers from enforcing exclusive access provisions in existing contracts in either commercial or residential MTEs. 37. We emphasize that the prohibition on future exclusive contracts that we adopt today applies to all common carrier contracts in commercial settings that effectively restrict a building owner or its agent from providing access to any other telecommunications service provider. Thus, by "exclusive contract" we do not mean only a contract that gives the contracting provider the sole right to serve a building. Rather, we also proscribe, for instance, a contract with a competitive LEC that could permit 85 Section 201( b) expressly authorizes the Commission to regulate "[ all1 charges, practices, classifications, and regulations for and in connection with [interstate or foreign] communication service," to ensure that such practices are "just and reasonable." 47 U. S. C. 3 201( b). As the D. C. Circuit recently held, the Commission thus has undoubted power to regulate the contractual or other arrangements between common carriers and other entities, even those entities that are generally not subject to Commission regulation. See Cable & Wireless v. FCC, 166 F. 3d 1224, 1230- 32 (D. C. Cir. 1999). 86 AT& T Comments at 25- 26. 87 Winstar Comments at 24- 25. 88 See WinStar Comments to Second Further Notice of Proposed Rulemaking in CC Docket No. 96- 98 (rel. April 16, 1999) filed May 26, 1999 at 14. 89 Western Union Telegraph Co. v. FCC, 815 F. 2d 1495,1501 (D. C. Cir. 1987); Competition in the Interstate Interexchange Marketplace, Memorandum Opinion & Order on Reconsideration, 10 FCC Rcd 442 1, y 5 n. 15 (1995); Competition in the Interstate Interexchange Marketplace, Report & Order, 6 FCC Rcd 5880, y 151 (1991). 18 Federal Communications Commission FCC 00- 366 access to that party and the incumbent, but deny access to any other competitor. 90 Similarly, we forbid any contract that would limit access to providers using a particular technology. In addition, we emphasize that contracts between building owners and local carriers that do not explicitly deny access to competing carriers, but nonetheless establish such onerous prerequisites to the approval of access that they effectively deny access, are also prohibited. Finally, we note that contracts may be oral in nature. For the reasons discussed above, we find that all these types of contracts in the commercial context only hold the potential to restrict customer choice, and not to promote choice and competition. Thus, all fall within the rule we adopt today. Parties that allege that a carrier has entered into a contract in violation of the prohibition we adopt today may file a complaint with the Commission under Section 208 of the ~c t .~' 38. We recognize that some premises are used for both commercial and residential purposes. First, we define "commercial" for purposes of this rule to encompass all non- residential uses, including, for example, government and non- profit office^.^ ' Second, we address instances where a single premises includes both commercial and residential uses. In these cases, a building owner may choose to offer separate access agreements to the residential and commercial portions of the premises, in which case a carrier may enter into an exclusive contract to serve the residential area but not the commercial area. Where, however, a single access agreement covers the entire premises, we find it most consistent with the purposes of our rule to determine its status as residential or commercial by predominant use. Thus, for example, an apartment building that includes retail or professional establishments on the ground floor would be considered residential, whereas an office building that includes one or a few residential users would be considered commercial. We believe that in most instances the predominantly residential or commercial character of a property will be clear on the facts. To the extent there is a question whether a particular property is predominantly residential or commercial in use, we will decide such disputes on a case- by- case basis. 39. We believe that today's action will have little effect, if any, on existing state statutes and regulations governing exclusive telecommunications contracts. First, to the extent any state law prohibits exclusive contracts more broadly than our rule, that prohibition would not conflict with our rule and would remain enforceable. Thus, for example, states may continue to forbid exclusive contracts in residential as well as commercial settings. 93 Second, based on the record, it appears that states which have enacted exclusive contract regulations either have been more rigorous than our rules or have paralleled the principles of our regulation in important respects. 94 Thus, while state regulation that 90 We note that the State of California similarly bars de facto exclusive contracts. California "prohibit[ s] all carriers from entering into any type of arrangement with private property owners that has the effect of restricting the access of other carriers to the owners' properties or discriminating against the facilities of other carriers such as [competitive LECs]." Order Instituting Rulemaking on the Commission 's Own Motion into Competition for Local Exchange Service, 1998 WL 1109255, Slip Op. at 48 (Cal. P. U. C. Oct 22, 1998). 91 See 47 U. S. C. $208. 92 We note that hotels, or similar establishments, are not covered by the prohibition against exclusive contracts because hotel guests are not "tenants" w i h the meaning of our rules. At the same time, to the extent that a hotel itself is a tenant in a commercial building, our prohibition against exclusive contracts would apply. Thus, a telecommunications carrier providing service in an MTE that includes a hotel as one of its tenants would be prohibited from entering into an exclusive contract. 93 See, e. g., Nebraska MDU Order at 6; Conn. Gen. Stat. Ann. 8 16- 247 1 (1 997); Massachusetts Nondiscriminatoly Access Order at 30; 16 Tex. Admin. Code 9 26.129 (Sept. 7,2000). 94 For example, Massachusetts permits a service provider or property owner to rebut the presumption that an exclusive contract is anticompetitive by showing that the contract benefits tenants and is therefore in the public (continued.. . .) 19 19 Federal Communications Commission FCC 00- 366 conflicted with our rules on exclusive contracts would potentially be subject to preemption, we do not believe as a practical matter this situation will arise very often. However, to the extent any state's law is alleged to directly conflict with our rules, we will consider the alleged conflict if necessary on a case- by- case basis. 40. .ilso, we note that our rule is not intended to prevent a premises owner from entering into an exclusive contract when it is acting as a purchaser of telecommunications service on behalf of its affiliated entities, such as subsidiary units, or employees. For example, we recognize that certain state governments develop and administer exclusive contracts for the public agencies or offices under their jurisdiction. Similarly, a college or university may enter into an exclusive contract on behalf of its affiliated schools, departments, faculty, and staff. 95 Given that the purpose of our prohibition on exclusive contracts is to ensure consumer choice, it would not be consistent with this purpose to restrict exclusive arrangements with property owners that are affiliated in this manner with their tenant consumers, and we therefore do not reach such arrangements. C. Access to Wiring 41. In this section, we take the following actions regarding the demarcation point that marks the division between telecommunications network wiring under LEC control and wiring under building ownerlend user control: (1) clarify that the Commission's demarcation point rules, including the revisions adopted in this section, govern the control of inside wiring and related facilities for purposes of competitive access, as well as the control of these facilities for purposes of installation and maintenance; (2) establish procedures to facilitate the relocation of the demarcation point to the MPOE at the building owner's request in MTEs; (3) require LECs to disclose the location of the demarcation point where it is not located at the MPOE; and (4) resolve pending issues in the Commission's demarcation point proceeding in CC Docket 88- 57. We believe that these actions will facilitate access to telecommunications inside wiring by competitive providers of local telecommunications services. 96 In addition, we decline to require a uniform relocation of the demarcation point to the MPOE for the reasons discussed below. 1. Background 42. In the Competitive Networks NPRM, we requested comment on how our rules governing the location of the demarcation point between facilities controlled by the local telephone carrier and the (Continued fiom previous page) interest, considering such factors as the duration of the contract, the contracting provider's status as a new entrant, the effect of the exclusive contract on the development of competition and new technology, and efficiency benefits. Massachusetts Nondiscriminatoly Access Order at 30. Similarly, our regulations permit the waiver of any provision of our rules for good cause shown. See 47 C. F. R. 5 1.3 (rules may be suspended, revoked, amended, or waived for good cause shown). Thus, in order to comply with both the Massachusetts and the federal regulations, a provider seeking to enter into an exclusive contract must both make the required public interest showing before the Massachusetts Department of Telecommunications and obtain a waiver fiom the Commission. 95 See Education Parties Comments at 10. % We note that the Competitive Networks NPRM also raised the issue of whether the Commission should amend its rules governing cable inside wiring so that telecommunications service providers, as well as multichannel video programming distributors (MVPDs), can take advantage of procedures governing the disposition of home run wiring when an incumbent MVPD no longer has a legally enforceable right to maintain its home mn wiring in a building. As discussed in the Further Notice of Proposed Rulemaking, Section V. E, infra, we conclude that we lack sufficient information in the record to determine whether to take this action, and seek further comment on the issue. 20 Federal Communications Commission FCC 00- 366 property owner in multiple unit premises impact competitive provider access and whether modification of those rules is appropriate to promote competitive ac~ ess.~ ' 43. At the time the current telecommunications inside wiring rules were established, there existed essentially no competition in the market for the provision of local telephone services. In the time since the enactment of the Telecommunications Act of 1996, many competitive LECs have begun provid~ ng services that were once the exclusive domain of the incumbents. There is evidence, however, that continued incumbent control over much of the wiring in some MTEs has hindered the development of facilities- based competitive LECs as viable competitors by unnecessarily requiring them to deal with their competitors in order to serve these location^.^ ' On the other hand, other parties argue that building owner control over inside wiring obstructs the growth of competitors that use unbundled local loops, because they would often not otherwise need to deal with the building owner. 99 In addition, some argue that the Commission's rules create confusion regarding the location of the demarcation point and have permitted demarcation points to be located at inaccessible places. 44. The Commission adopted its demarcation point rules in 1984, in order to foster competition in the market for installation and maintenance of telecommunications inside wiring - the wiring that connects customer premises equipment (CPE) to the public switched telephone network (PSTN) and to other CPE. '" The new rules established a "demarcation point" that marks the end of wiring under control of the LEC and the beginning of wiring under the control of the property owner or subscriber. lO' Thus, the new rules permitted telecommunications subscribers and premises owners to assume or assign responsibility for installation and maintenance of inside wiring, which previously had been managed solely by the LECs under tariff. ''* 97 See Competitive Networks NPRM, 14 FCC Rcd at 12708- 9, 65- 67. 98 See, e. g. Teligent Comments at 78; Winstar Comments at 67. 99 See letter fiom Jason D. Oxman, Senior Government Affairs Counsel, Covad Communications Company, to Leon Jackler, Staff Attorney, FCC, dated Aug. 24,2000 (Covad Letter). Further, building owners would not be obligated to provide "conditioned" lines capable of transmitting Digital Subscriber Line @SL) signals, as are incumbent LECs. 100 See Petitions Seeking Amendment of Part 68 of the Cormnission's Rules Concerning the Connection of Telephone Equipment, System and Protective Apparatus to the Telephone Network, First Report and Order, CC Docket No. 81- 216,97 FCC 2d 527 (1984) (1984 Demarcation Point Order); 47 C. F. R. $5 68.3,68.213. 101 See 47 C. F. R. $ 68.3. This section currently defines the Demarcation Point for multiple unit premises as follows: "( 1) In multiunit premises existing as of August 13, 1990, the Demarcation Point shall be determined in accordance with the local carrier's reasonable and non- discriminatory standard operating practices. Provided, however, that where there are multiple demarcation points w i t h the multiunit premises, a demarcation point shall not be fitrther 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. (2) In multiunit premises in which wiring is installed after August 13, 1990, including major additions or rearrangements of wiring existing as of that date, the telephone company may establish a reasonable and non- discriminatory practice of placing the demarcation point at the minimum point of entry. If the telephone company does not elect to establish a practice of placing the demarcation point at the minimum point of entry, the multiunit premises owner shall determine the location of the demarcation point or points. . . ." Id. 1 02 See 1984 Demarcation Point Order, 97 FCC 2d 527. In several related orders, the Commission determined that the installation and maintenance of inside wiring no longer constituted a common canier offering under Title I1 of the C o ~c a t i o n s Act and therefore detariffed the installation and maintenance of inside wiring. See Modifications to the Uniform System of Accounts for Class A and Class B Telephone Companies Required by (continued. . . .) 2 1 21 Federal Communications Commission FCC 00- 366 45. In 1990, the Commission revised the demarcation point definition to increase the amount of wiring that may come under the control of the property owner or subscriber. Io3 At the same time, in the case of MTEs, the Commission sought to make the definition flexible enough to accommodate existing buildings. Therefore, in multi- tenant buildings existing as of August 13, 1990, the demarcation point is determined in accordance with the carrier's reasonable and nondiscriminatory practices. For new installations, or m~ jor renovations, subsequent to August 13, 1990, the carrier may establish a practice of placing the demarcation point at the MPOE."~ Where the camer chooses not to do so, the premises owner may determine the location or locations of the demarcation point. 105 46. In 1997, the Commission again revisited the issue of the demarcation point on reconsideration of the 1990 Demarcation Point Order and Further NPRM."~ The Commission clarified that the relocation of the demarcation point to the MPOE cannot be undertaken unilaterally by the incumbent LEC without the property owner's consent, except in the case of major modifications, renovations, or rearrangements. Io7 The Commission further stated that, for the purposes of Section 68.3, a request for relocation by the property owner would be considered a major modification or rearrangement of the wiring. Io8 The 1997 Demarcation Point Order also included a Further Notice of Proposed Rulemalung that requested comment on, among other issues, p m p d modifications to the demarcation point rule. 'Og Two pet~ tim for chiication and mmsideration were filed in response to issues clmmed on &- on in the 1997 Demarmtion Point Order. I" In January, 2000, the Commission released an order (Continued from previous page) Detariffmg of Customer Premises Equipment and Proposed Detariffmg of Customer Provided Cable Wiring, CC Docket No. 82- 681, Report and Order, 48 Fed. Reg. 50534 (1983); Detariffmg the Installation and Maintenance of Inside Wiring, CC Docket No. 79- 105, Second Report and Order, 51 Fed. Reg. 8498 (1986); Detarifiing the Installation and Maintenance of Inside Wiring, CC Docket No. 79- 105, Memorandum Opinion and Order, 1 FCC Rcd. 1190 (1986). I03 See In the Matter of Review of Sections 68.104 and 68.213 of the Commission's Rules Concerning Co~ ection of Simple Inside Wiring to the Telephone Network, Report and Order and Further Notice of Proposed Rulemaking, CC Docket 88- 57,5 FCC Rcd 4686 (1990). (1990 Demarcation Point Order and Further NPRM). 104 The MPOE is defined as "either the closest practicable point to where the wiring crosses a property line or the closest practicable point to where the wiring enters a multiunit building or buildings." 47 C. F. R. § 68.3. 105 We note that the definition of the demarcation point for telephone company communications facilities is not identical to the demarcation point defmition for cable television facilities for purposes of the cable inside wiring rules. 47 C. F. R. 5 76.6( mm). In 1997, we declined to establish uniform rules to govern the demarcation point for cable and telephone service providers. See Inside Wire Report and Order and Second Further NPRM, 13 FCC Rcd at 3719- 30, fl 129- 151. 106 See, In the Matter of Review of Sections 68.104 and 68.2 13 of the Commission's Rules Concerning Com~ ction of Simple Inside Wiring to the Telephone Network and Petition for Modification of Section 68.213 of the C o d s i o n ' s Rules fiied by the Elemnic Industries Association, Order on Reconsideration, Second Report and Order and Second Further Notice of Proposed Rulemaking, CC Docket No. 88- 57, RM- 5643,12 FCC Rcd 1 1897 (1997) (1997 Demarcation Point Order). 107 Id. at 11915. 108 Id. at n. 104. 109 Id. l 10 One petition requested that the Commission clarify that it intended to give only prospective effect to its interpretation of the demarcation point defmition in the I997 Demarcation Point Order. Bell Atlantic Petition for (continued.. . .) 22 Federal Communications Commission FCC 00- 366 that addressed issues regarding the enhanced wire quality standards raised in Ftim relatmg to the I997 Demarcation Point Order." ' However, the order deferred consideration of the remaining demarcation point issues raised in the two petitions for clarification and reconsideration to the Competitive Networks proceeding. 47. As noted above, the current inside wiring rules do not specifically contemplate the new and complex issues involved with competition in the market for local teleconlmunications services. To this end, in the context of promoting competition for the provision of telecommunications service in MTEs, the Competitive Networks NPRM requested comment on how the Commission's existing rules governing the location of the demarcation point impact competitive provider access to inside wiring in MTES." ' In particular, the Competitive Networks NPRM asked commenters to consider whether the Commission should adopt a uniform demarcation point for purposes of competitive access, either at the MPOE or at some other point, for all or some class of multiple- unit premises owners. In addition, the Competitive Networks NPRM asked commenters to consider whether the person who controls wire and related facilities for purposes of installation and maintenance must necessarily be the same person who exercises control for purposes of competitive access, and, if not, whether we should apply different standards for each of these purposes. 48. The Competitive Networks NPRM also sought comment on the potential treatment of inside winng owned or controlled by an incumbent LEC as an unbundled network element under Section 25 1 (c)( 3) of the Communications ~c t ."~ In November, 1999, the Commission issued the UNE Remand 0rder, Il4 which established as an unbundled network element the "inside wire" sub- loop. That order defined the loop element as terminating at the demarcation point and required incumbents to make available on an unbundled basis any portion of the local loop as a subloop element, including that portion between the property line and the demarcation point. The W E Remand Order further required incumbent LECs to allow interconnection at any accessible terminal, and to establish a single point of interconnection (SPOI) upon a request from a competitive provider where such a point does not already exist. (Continued from previous page) Clarification and Reconsideration of the 1997 Demarcation Point Order (Bell Atlantic Petition) at 2. The other petition requested that the Commission clarify that its statement in footnote 104 does not authorize unilateral changes by the premises owner to demarcation point location. BellSouth Petition for Clarification and Reconsideration of the 1997 Demarcation Point Order (BellSouth Petition) at 3- 4. 111 Review of Sections 68.104 and 68.213 of the Commission's Rules Concerning Connection of Simple Inside Wiring to the Telephone Network, CC Docket No. 88- 57, Third Report and Order, 15 FCC Rcd 927 (2000) (2000 Demarcation Point Third Report and Order). 112 See Competitive Networks NPRM, 14 FCC Rcd at 12708, y 65. 113 See 47 U. S. C. 5 25 l( c)( 3) (requiring incumbent LECs to provide requesting telecommunications carriers unbundled access to elements of their networks on just, reasonable, and non& scriminatory terms). In 1996, pursuant to Congress' mandate in Section 25 1, the Commission promulgated rules establisbg unbundled network elements (UNEs), and duected incumbent LECs to make them available to competitors. Local Competition First Report and Order, 11 FCC Rcd at 15697- 99, fl392- 397; see 47 C. F. R. 5 5 1.3 19( b). The rules were challenged and remanded to the Commission for clarification of the standards by whlch UNEs were defined. Iowa Utilities Board, 525 U. S. 366. In April, 1999, the Commission sought comment on these standards. See Second Further Notice of Proposed Rulemaking, CC Docket No. 96- 98, 14 FCC Rcd 8694 (1999). 114 See UNE Remand Order. 23 Federal Communications Commission FCC 00- 366 2. Discussion a. Application of Demarcation Point Rules to the Provision of Competitive Telecommunications Sewice 49. As discussed abov,:, the Commission's Part 68 demarcation point rules were designed to enable the creation of a compet~? ive market in the installation and maintenance of inside wiring, and did not contemplate the use of that wiring to provide competitive local telecommunications service. In light of the developing competition spawned by the 1996 Act, and the subsequent need for competitive providers to gain access to inside wiring, we will apply our demarcation point rules to facilitate access to inside wiring for the purpose of providing competitive local telecommunications service. Thus, we clarify that the Commission's demarcation point rules, including the revisions adopted below, govern the control of inside wiring and related facilities for purposes of competitive access, as well as the control of these facilities for purposes of installation and maintenance. In the sections below, we adopt several revisions to our demarcation point rules that we believe will foster competition in the local telecommunications market in MTEs, while maintaining the competitive framework for the installation and maintenance of inside wiring. b. Location of the Demarcation Point 50. A number of comrnenters contend that uniformly establishing the demarcation point at the minimum point of entry would promote facilities- based competitive access to MTES." ' As discussed above, there is evidence in the record that incumbent LECs in many instances are using their control over on- premises wiring to obstruct or delay competitive access. ll6 Placing the demarcation point at the MPOE would eliminate the potential for such abuses by permitting competitive camers to obtain access to inside wire by dealing solely with the premises owner. While our unbundling rules adopted in the UAJE Remand Order provide requesting carriers with a right of nondiscriminatory access to inside wire owned or controlled by incumbent LECs, requesting carriers claim they continue to face difficulty gaining access to MTEs due to incumbent obstruction. Moving the demarcation point, they state, would allow all facilities- based carriers to interconnect with the inside wiring, which would be controlled by the premises owner, at the same point and on the same terms." ' 5 1. The record indicates, however, that establishing the demarcation point at the MPOE would disadvantage those competitive LECs that rely on leasing unbundled loops, including most DSL"~ providers, by limiting the availability of the inside wire as part of the loop e~ ement. ''~ Currently, where the demarcation point is at or near the customer's unit, competitive LECs may obtain access to the incumbent LEC's existing wiring inside the building as part of the unbundled loop (or as a separate subloop element). Relocation of the demarcation point to the MPOE, however, would result in a 115 See ALTS Comments at 22; AT& T Reply Comments at 25; WinStar reply Comments at 61; see also GTE Comments at 7- 8. 116 See Section IV. A, supra. 117 See Teligent Comments at 80. 118 Digital Subscriber Line (DSL) is a broadband data protocol that provides service over the high frequency portion of conventional copper lines. It is most commonly provided by collocating facilities in a central office of the incumbent LEC and transmitting the signal over unbundled local loops. I19 See Covad Letter. 24 Federal Communications Commission FCC 00- 366 decrease in the amount of wiring within the building that is available to competitive LECs as part of the loop, which by definition ends at the demarcation point. 120 Thus, competitive LECs that rely on unbundled loops would have to negotiate with both the incumbent LEC and the building owner for each building they seek to serve, thus increasing their costs significantly. Those cornrnenters also raise the possibility that certain building owners would refuse to allow access at all or impose terms which would make the provision of service infeasible. Moreover, commenters allege, their problems are exacerbated by the practice of some incumbent LECs of leaving wires unconnected at the demarcation point, when it is located at the MPOE. This practice not only requires competitive LECs to incur the expense of dispatching their own technicians to the building, but draws the attention of the premises owner to the possibility of extracting concessions from carriers for access to the wiring. 121 52. Further, several commenters argue that uniformly moving the demarcation point would give rise to legal and practical difficulties, especially in existing b ~i 1 d i n ~s .I ~~ These arguments are not without merit. It is indisputable that the incumbent LECs have made considerable investments over the years in network facilities, and while much of that investment has likely been depreciated or recouped in the rate base," 3 the facilities remain of some value to the incumbents. We agree with GTE that requiring a uniform relocation in existing buildings would be an enormous u n d e r t a l ~n ~.' ~~ 53. In light of these concerns, we decline to mandate a uniform demarcation point at the MPOE. The record shows that although moving the demarcation point to the MPOE would reduce costs and facilitate deployment for competitive LECs that rely on their own facilities to reach MTEs, it would increase costs and hinder deployment for camers that rely on unbundled local loops. In the absence of convincing evidence that the benefits to one group of competitors would significantly outweigh the harms to the other, we find the best course is to continue the leave the choice in the first instance to the building owner. 54. At the same time, we take several actions to clarify the building owner's options and facilitate its exercise of its options for the benefit of First, we clarify that in all multiunit I20 See UNE Remand Order, 15 FCC Rcd at 3773,7168. 12 1 Whether this practice is consistent with the goals of the 1996 Act is beyond the scope of this proceedmg, and we therefore decline to comment on it here. 122 See Bell Atlantic Comments at 9; BellSouth Reply Comments at 17 12; See CAIS, Inc. Reply Comments at 6. 124 See GTE Reply Comments at 6. 125 We do not credit several arguments suggesting that we reduce the likelihood tha the location of the demarcation point will be at the MPOE. For example, we find no support for BellSouth's assertion that service quality would suffer if the demarcation point were moved, nor for its assertion that it would lose good will with its customers because of problems with inside wiring no longer under its control. BellSouth Comments at 8. The record also does not support BellSouth's claim that property owners will not be able to undertake responsibility for wiring their premises. Id at 19- 20. Indeed, the Real Access Alliance has stated that its members advocate having such choice in the hands of premises owners and feel it is the best way to provide tenants with choice in advanced telecommunications services. See June 16 Real Access Alliance Letter. We also reject the argument of BellSouth that permitting building owners to control the inside wiring would discourage the placement of fiber facilities in the building and thus discourage the provision of advanced services. We believe that where demand for advanced services exists, there will be s6cient incentive for incumbent LECs, competitive LECs and other third p h e s to undertake the installation of fiber facilities regardless of the location of the demarcation point. Moreover, contrary (connnued.. . .) 25 25 Federal Communications Commission FCC 00- 366 premises, the incumbent carrier must move the demarcation point to the MPOE upon the premises owner's request. Section 68.3( b)( 2) specifies that in multiunit premises in which inside wiring is installed or subject to a major modification after August 13, 1990, if the canier does not elect to place the demarcation point at the MPOE, the premises owner shall determine the number and location of the demarcation point or points (e. g., a single point at the MPOE). '~~ In the 1997 Demarcation Point Order, the Commission found that a multiunit premises owner's request to move the demarcation point to the MPOE constitutes a major modification for the purposes of Section 68.2( b)( 2). I2' Thus, even in multiunit premises in which the original wiring was installed prior to August 13, 1990, the premises owner may require the carrier to move the demarcation point to the MPOE. We disagree with BellSouth's assertion in its petition for clarification and reconsideration of the 1997 Demarcation Point that the premises owner should be required to negotiate changes in the demarcation point location with the carrier serving the building. 12' We believe that it would impede the development of facilities- based competition if a camer could refuse a premises owner's request to move the demarcation point to the property line in order to prevent the connection of inside wiring to a competitive canier. Thus, we affirm that under Section 68.3 of the Commission's rules, a carrier must move the demarcation point to the MPOE upon the request of a multiunit premises owner, and we deny BellSouth's petition. 55. Second, although we have previously required incumbent LECs to move the demarcation point to the MPOE at the premises owner's request, we have left the terms of relocation and the procedures for negotiating those terms up to the parties involved. The comments of building owners are generally favorable to these rules giving the owner the right to request a that the demarcation point be placed at the MPOE. '~ ' However, the record indicates that the lack of any guidelines for such terms may provide a disincentive for the parties to negotiate effectively. We hold that in order to fbrther competition, a request by a property owner to relocate the demarcation point to the MPOE must be dealt with in a reasonably timely and fair manner, so as not to unduly delay or hinder competitive LEC access. We therefore direct incumbent LECs to conclude negotiations with requesting building owners in good faith and within 45 days of the initial request. Building owners may file complaints with the Commission for resolution of allegations of bad faith bargaining by LECS. '~ ' AS each situation will vary greatly depending on such characteristics as the age and complexity of the inside wiring, and any previous agreements and practices, we find that this approach will facilitate competition, while protecting the valid property interests of the parties. '31 These rules will apply as well to competitive LECs where they have installed or have had control of the inside wiring. (Continued from previous page) to BellSouth's contention, the record indicates that building owners would be wilhg to pay for and maintain such facilities. Iz6 47 C. F. R. §68.3( b)( 2). 127 See I997 Demarcation Point Order, 12 FCC Rcd at 11915 n. 104; see 47 C. F. R. § 68.3@)( 2). 128 BellSouth Petition at 4. 129 See Real Access Alliance comments at 59. 130 See47 U. S. C. $ 208; 47 C. F. R. §§ 1.720- 1.736 (1999). 131 In thls context we see no reason to distinguish between buildings constructed prior to and after August 13, 1990. Therefore we hold that these rules shall apply to all existing buildings regardless of when constructed. 26 26 Federal Communications Commission FCC 00- 366 56. The record further indicates that uncertainty as to the actual location of the demarcation point leads to confusion on the part of both building owners and competitive LECS. '~* This confusion can lead to additional expense and delay in the provision of service. Competitive LECs need this information in order to know with which party to negotiate interconnection to the inside wiring. The record contains instances where neither or both the incumbent LEC and building owner claimed ownership of the inside wire, causing delay in the ability of the competitive LEC to commence service to its customers. '33 While our current rules require that incumbent LECs must make the location of the demarcation point available to building owners upon request by the owner, we are concerned that the information may not be provided in as prompt a manner as it reasonably should be. '34 The incumbent LECs are generally in the best position to know the location of the demarcation point, and we believe that they should not be permitted to use their control over such non- proprietary information in order to frustrate competition. Because excessive delay may impose unnecessary costs and impede competition, we hold that if an incumbent LEC fails to produce this information within ten business days of the request, the premises owner may presume the demarcation point to be located at the MPOE. The availability of this information will facilitate fair negotiations, and may even negate the need for any negotiations where, for example, the building owner was unaware that the demarcation point is already at the MPOE. We further require that where LECs do not establish a practice of placing the demarcation point at the MPOE, they hlly inform building owners, at the time of installation, of their options regarding placement. 57. Finally, we note that where the building owner chooses to locate the demarcation point at the MPOE, responsibility for installation and maintenance may be contracted out to the incumbent LEC, a competitive LEC or other third party, '35 but control, including determining terms of access, would lie with the building owner. We require that where such duties are contracted to a carrier that is also providing service to that building, the carrier must deal with other LECs on nondiscriminatory terms. Similarly, we expect that those building owners who choose to take control of the inside wiring will exercise that control in a nondiscriminatory way, consistent with the goals of the Telecommunications Act and the public interest. 136 58. We anticipate that the measures described above will substantially reduce the potential for incumbent LECs to obstruct competitive access to MTEs. These changes will facilitate building owners' exercise of their option to relocate the demarcation point in existing buildings, and prevent incumbent LECs from abusing their control over information regarding the location of the demarcation point. Moreover, we emphasize that to the extent incumbent LECs continue to exercise control over on- 132 See Real Access Alliance Comments at 60; Bluestar Communications Reply Comments at 2. 133 Id. 134 See 47 C. F. R. 8 68.1 10( c). This section of the Commission's Rules requires LECs to make available all technical information regarding the configuration of wiring on the customer's side of the demarcation point, but it does not require that it do so in a specified time. Further, while this section allows the LEC to charge reasonable costs for this technical mfonnation, we believe that any costs incurred in providing the location of the demarcation point would be de minimis and that the LECs should provide this information freely. I35 This arrangement would be s d a r to that in single unit residential properties, where the customer has the option to pay a monthly fee to the incumbent LEC for inside wiring maintenance while retaining ownershp and control of that wiring. 136 See September 6 Real Access Alliance Letter. 27 Federal Communications Commission FCC 00- 366 premises wiring, they must afford access to that wiring as a UNE at forward- looking prices. '37 In light of all these safeguards, we believe it is not necessary or prudent at this time to mandate a uniform move of the demarcation point to the MPOE. Moreover, we believe that it is unnecessaj at this time to provide further guidance on legal or technical feasibility issues related to subloop unbundling. c. Remaining Issues in CC Docket No. 88- 57 59. As discussed above, several parties filed petitions for reconsideration of the 1997 Demarcation Point Order. Those petitions that did not relate to the demarcation point and control over access were resolved earlier this year. '38 However, we determined at that time to defer resolution of those petitions related to the demarcation point, as well as certain issues on which we sought further comment in the 1997 Demarcation Point Order pending our action in this proceeding. 3. Single Definition of Inside Wiring 60. In the 1990 Demarcation Point Order and Further NPRM, the Commission stated that the demarcation point definition applied to both simple and complex wiring instal~ ations. '~~ In response, several petitions were filed asserting that the Commission did not comply with Section 5 of the Administrative Procedures Act (APA) because it provided insufficient notice indicating that a change in complex wiring rules was being considered. I4' In the 1997 Demarcation Point Order, the Commission found that its revision of the demarcation point definition was proper under the APA because it was a "logical outgrowth of the proceeding. '4' Noting petitioners1 concerns about the Commission's decision to apply the revised demarcation point definition to complex wiring, however, the Commission inquired further into this issue in the 1997 Demarcation Point 0rder. I4' Specifically, the Commission requested comment on its proposition that the single demarcation point definition, as revised, avoids the confusion that could result fiom separate demarcation point definitions for simple and complex wiring, '43 encourages placement of the demarcation point at the MPOE for new multiunit installations, and "foster[ s] competition in the inside wiring installation and maintenance markets." '44 I37 To the extent parties raise issues regarding incumbent LEC compliance with the UNE rules, they are beyond the scope of this proceeding. Similarly, we do not address in this proceeding whether competitive LECs should also be required to afford access to wiring that they control w i t h MTEs under some statutory authority other than Section 25 l( c)( 3) of the Act. 138 See ZOO0 Demarcation Point Third Report and Order. 139 Complex wiring is defined as those installations of four or more lines. See 1997 Demarcation Point Order. 140 See 1997 Demarcation Point Order, 12 FCC Rcd at 11907; 5 U. S. C. 5 553. 14 1 Specifically, the Comxnission found that because the same demarcation point defmition had always applied to both simple and complex wiring, the parties should have realized that a change in the demarcation point definition would be likely to apply to both simple and complex wiring installations. I997 Demarcation Point Order, 12 FCC Rcd at 11925; see also Review of Sections 68.104 and 68.213 of the Commission's Rules Concerning Connection of Simple hide Wiring to the Telephone Network, Notice of Proposed Rulemaking, CC Docket No. 88- 57,3 FCC Rcd 1120 (1988). 142 1997 Demarcation Point Order, 12 FCC Rcd at 1 1925. 143 Id. at 11926. 144 See 1997 Demarcation Point Order. 28 Federal Communications Commission FCC 00- 366 61. We agree with commenters that support a single definition of the demarcation point, as it applies to both simple and complex wiring. We developed and have maintained a single demarcation point definition for both simple and complex inside wiring installations because it is simple, and consistent, and promotes consumer control over inside wiring by restricting the extent of network wiring on the customer's premises, yet is flexible enough to respond to the demands of complex, multiunit inside wiring facilities design. I4j We agree with comrnenters that changing the definition at this time would needlessly risk disruption and confusion, and is not supported by the record. '46 Consequently, we affirm the decision in the 1997 Demarcation Point Order maintaining the same demarcation point definition for both simple and complex wiring. 4. Safety Concerns Regarding the Placement of the Demarcation Point Away from the Building 62. In the I997 Demarcation Point Order, the Commission declined to modify the demarcation point definition to prohibit placement of the demarcation point away from the building. Some petitioners in that proceeding had expressed concern that locating the demarcation point a substantial distance ffom the building in which telephone wire is located could raise safety concern^. '^ ' Noting that the National Electrical Code (NEC) requires the placement of surge protection at or near the building, these petitioners concluded that if a network protector is placed by the camer at a demarcation point near the property line, and that demarcation point is a significant distance from the building, a second network protector should be installed where the wire enters the building. I4' The petitioners fin- ther opined that improper "coordination" between these two network protectors could pose a danger to telephone company personnel, customers, or private property. '49 Finally, the petitioners requested that the Commission modify its rules to prohibit location of the demarcation point away from a building, .or clarify that the NEC precludes such placement. '50 ' 63. In the 1997 Demarcation Point Order, the Commission responded to the petitioners by noting that building owners are generally responsible for safety standards and similar concerns relating to their property and equipment and that the record did not bear evidence of specific difficulties or problems relating to improper protector "co~ rdination." '~ ' Nonetheless, the Commission requested additional comment on whether it should continue to allow the demarcation point and network protector to be 145 1997 Demarcation Point Order, 12 FCC Rcd at 11905- 07. 146 Multi- Media Telecommunications Association (MMTA) Comments on the 1997 Demarcation Point Order at 1; Shared Communications Systems (SCS) Comments on 1997 Demarcation Point Order at 2- 3. 147 The petitioners were AT& T, GTE, Southwestern Bell (SBC), and TI.. 1997 Demarcation Point Order, 12 FCC Rcd at 11908,11926. 148 Specifically, petitioners argued that location of the demarcation point at the MPOE may require the installation of a second network protector at or near the buildmg in order to comply with the NEC. 1997 Demarcation Point Order 12 FCC Rcd at 11926- 27. 149 1997 Demarcation Point Order, 12 FCC Rcd at 11926. Network protector coordination refers to any activities required to ensure that the technical characteristics of multiple network protectors will not cause problems to the network or among themselves. 130 Id. 29 Federal Communicati~ ns Commission FCC 00- 366 located away from the building, at the property line. 'j2 The Commission also requested that commenters discuss, in the light of actual experiences, whether the presence and coordination of the second protector differs from other safety matters for which property owners are normally responsible. 153 Finally, the Commission solicited comments on the need to require camers to inform building owners of the need for a second protector and protector coordination for demarcation points and network protectors that are located at the property line. '54 64. All commenters on this issue in CC Docket 88- 57 agree that the current demarcation point definition is reasonable and should not be modified to prohibit location of the demarcation point at the MPOE. '" Commenters specifically mention that the current demarcation point definition is logical, is practical, affords customers and telephone companies needed flexibility, avoids needless disruption of current practices, and supports facilities- based c~ rn~ etition."~ While acknowledgng the possibility of safety concern^, '^ ' commenters agree that there is no record of "significant safety problems" and advise that it would be "unnecessary and inappropriate" to obligate carriers to notify customers of the possible need for network protector c o o r d i n a t i ~n .~~~ Commenters also agree that, where the demarcation point and the protector are located away from the building, building owners have the responsibility to ensure 152 Id. 153 Id. 154 Id. 155 -4meritech Comments on 1997 Demarcation Point Order at 2- 3; Bell Atlantic/ NYNEX Comments on 1997 Demarcation Point Order at 1- 2; GTE Comments on 1997 Demarcation Point Order at 3; SCS Comments on 1997 Demarcation Point Order at 2- 3. 156 Bell Atlantic- X Comments on 1997 Demarcation Point Order at 1- 2; SCS Comments on 1997 Demarcation Point Order at 2- 3. GTE notes that it has adopted a normal business policy of locating the demarcation point for simple inside wiring at the MPOE, and notes its agreement with the Commission's definition. GTE Comments on 1997 Demarcation Point Order at 3. Ameritech notes that the NEC does not refer to the demarcation point location, and that for various reasons property owners may prefer to limit the extent to which telecormnunications service providers may intrude on their property. Ameritech also reports that its standard practice is to locate the demarcation point at the property h e only for sophisticated commercial enterprises, as opposed to single tenant residences. Ameritech Comments on 1997 Demarcation Point Order at 2- 3. 157 GTE states that its company policy for wire extensions that serve separate buildings is to install protectors at both ends of any on- premises wire extension facihty that could accidentally come into contact with power facilities carrying voltages of 300 volts or more, or those that extend to a separate building more than 75 feet away. In its initial comments, GTE acknowledges that the addition of the second protector may confuse tenants and bullding owners as to the location of the demarcation point. It therefore stresses the need for proper coordination among carriers and building owners to enable accurate identification of the demarcation point location, and supports a rule requiring parties that locate simple inside wiring demarcation points at the property line to inform premises owners and tenants of the need for a second protector and protector coordination. GTE Comments on 1997 Demarcation Point Order at 4- 5. In its reply comments, however, GTE agrees with other commenters, now stating that "there is no need for the Cormmission to modify its rules to address safety and coordmation of a second protector," and that "all necessary coordination can be achieved easily without a rule change." GTE Reply Comments on 1997 Demarcation Point Order at 3 4 . 158 Bell Atlantic/ NYNEX Comments on 1997 Demarcation Point Order at 3; BellSouth Reply Comments on 1997 Demarcation Point Order at 3; GTE Reply Comments on 1997 Demarcation Point Order at 3 4 . 30