Apartment Access: A Building Political Issue

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Washington -- When Congress passed landmark
telecommunications legislation three years ago, it may have overlooked the real estate
industry as an obstacle to full-blown competition in the local phone, Internet and
multichannel-video markets.

That's the opinion of some new entrants, which claimed that
landlords deny access unless they are paid hefty fees.

The real estate industry defended itself by saying that the
market is working fine, despite the occasional negative press clips that land on the desks
of federal regulators or members of Congress.

"Our members tell us that there is no problem,"
said Gerry Lederer, vice president of government and industry affairs for the Building
Owners and Managers Association International, which has 17,000 members that own or manage
8.5 billion square feet of commercial real estate.

John Windhausen, president of the Association for Local
Telecommunications Services, based here, said instances of building-access denial keep
pouring in from member companies trying to break into the local phone market.

"I don't know how many examples we have to come up
with to prove to [BOMA International] that it's a problem. We encounter these problems
every single day," Windhausen said.

ALTS members include fixed wireless players Winstar
Communications Inc. and Teligent Inc., the latter of which will be 40 percent-owned by
AT&T Corp.'s Liberty Media Group under a pending deal.

TAUZIN INTERVENES

The apparent stalemate between landlords and
telecommunications providers seeking access to residential and commercial properties got
so bad that House Telecommunications Subcommittee chairman Billy Tauzin (R-La.) called a
hearing last month to see if a little friendly encouragement would work.

Tauzin has let the press and public know that
building-access issues have affected him personally, telling audiences that he can't get
access to direct-broadcast satellite services in his northern Virginia apartment.

Tauzin said companies that Windhausen's group represents
might need help from Congress.

"I think they made a good case that without some
nondiscrimination language in terms of access, they are either being locked out or, in
some cased extorted, legally," he said.

"I don't want to get into set prices," he added,
"but I think we could very well establish a policy that allows for some
nondiscriminatory access, in which case you've either got to extort everybody equally, or
you can't extort anybody."

All sides agreed that the stakes are high. About 27 percent
of households are located in apartment buildings, and the geographic concentration of
apartment dwellers makes that sector an inviting target for cost-conscious new players.

Businesses large and small are also looking for
alternatives to the local phone monopoly for phone service, Internet access and
videoconferencing.

In the Telecommunications Act of 1996, Congress addressed
the rights of consumers to gain access to multiple video providers. The Federal
Communications Commission responded by pre-empting restrictive covenants enforced by
homeowner associations and by going so far as to allow renters to attach DBS dishes to
balconies without obtaining landlords' permission.

BOMA International has sued the FCC over its DBS decision.
The case is pending before a federal court of appeals.

PROBLEMS LINGER

Problems remain in the video market, according to Scott
Burnside, vice president of regulatory and governmental affairs for RCN Corp., a
facilities-based competitor challenging cable incumbents in Boston, New York and
Washington, D.C.

Burnside, in prepared testimony before Tauzin's panel, said
his company is often denied access due to exclusive contracts between landlords and cable
incumbents.

Where the company can obtain access, he added, it is not
always possible to serve consumers because landlords fear the disruptions associated with
new internal wiring jobs.

This leaves RCN dependent on the previously installed
wiring owned by the incumbent cable operator, and particularly on the critical portion
that extends from the outside of an apartment unit to a junction box located in a corridor
closet, which is often buried behind wood, plaster or sheet rock.

Notwithstanding FCC "inside-wire" rules designed
to help his company gain access to critical wiring, Burnside said, cable operators can use
their state-law-protected ownership rights to deny RCN access.

To overcome these problems, he called on Congress to pass a
new law that would void exclusive contracts between video providers and building owners;
mandate access to critical wiring, with incumbents fairly compensated for that use; and
override state laws that interfere with the aforementioned contract and access provisions.

"We do not seek to run roughshod over the preferences
of MDU [multiple-dwelling-unit] owners or managers. We do ask for an opportunity to sell
our services to MDU residents. If the residents or owners do not want such services, we
can accept that," Burnside testified.

One of RCN's fiercest competitors in New York is Time
Warner Cable. The MSO agreed that all players should have access to buildings, but it
didn't agree that it should be required to sell its embedded wires to a competitor merely
because it has lost a video subscriber to RCN.

"As competition develops, more and more customers may
want to get Internet from one provider, video from another provider and voice from a third
provider," said Arthur Harding, a Time Warner attorney with Fleischman and Walsh,
based here.

"Just because we lose the customer for cable service,
we might be able to get the customer for Internet service," he added. "If we
give up our wire, we can't do that."

Harding said Time Warner should not be penalized for
landlords' refusal to accommodate competing providers and to expand tenant choice.

COULD GET MESSY

"While the landlords may not like it, there is always
a way to get the second or third wire there," Harding said. "It may be expensive
and it may be messy, but it can be done."

Windhausen said it was possible that companies like Winstar
and Teligent might be able to rely on the FCC's video-access provisions because they
provide videoconferencing. The commission, he added, could rely on general authority to
promote local phone competition and weaken the grip of landlords. But he said those
indirect methods are inferior to a new piece of legislation.

"The FCC could use its ancillary authority. If they
try to use that authority, it's going to be tied up in the courts for quite a bit of
time," he said. "To avoid that litigation expense and delay, it would be much
cleaner to have a separate stand-alone piece of legislation."

Any building-access legislation, Lederer said, would have
to protect landlords' Fifth Amendment right to compensation from companies that intend to
occupy their property with telecommunications facilities. He suggested that a
congressionally imposed payment scheme would not produce fair-market value.

"How that compensation is worked out is best
determined in the marketplace, and not by government," Lederer said.

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