Multitenant buildings, rooftops, water and sewer systems, local rights of way--if cables, pipes, antennas, ducts or wires can be placed in these spaces, then telecom carriers want them.
The trouble is, alternative conduits aren't easy to obtain. That's because numerous local, state and federal lawmakers are locking horns over franchising and rights-of-way regulations, making the situation ripe for intervention by the FCC (www.fcc.gov), as well as the nation's highest court.
Federal courts, in fact, already are involved. For instance the U.S. 6th Circuit Court of Appeals (http://pacer.ca6.uscourts.gov/index.php) earlier this year ruled on a franchise case brought by TCG Detroit (now wholly owned by AT&T Corp., www.att.com) against the City of Dearborn, Mich. The city required TCG to pay a franchise fee to lay fiber optic cable within city limits. TCG refused and instead filed a lawsuit claiming that the city's ordinance violated both Michigan telecom law and the federal Telecommunications Act of 1996. The City of Dearborn said that the Telecom Act actually gave it the right to charge franchise fees, which are a percentage of company revenues paid to local governments to compensate them for using locally owned rights of way. A federal district court agreed with the city, ruling that the locality's ordinance treated all service providers equally and fairly.
Yet Ameritech Michigan (now SBC Communications Inc., www.sbc.com) wasn't being charged a franchise fee when TCG filed its lawsuit. Ameritech didn't pay a franchise fee, the district court noted, because a state mandate gave it freedom from such fees. The district court also ruled that TCG was challenging a fee that the Telecom Act permitted as long as it was fair, reasonable, competitively neutral and nondiscriminatory. The 6th Circuit agreed with the lower court's decision and TCG will pay up--around 4 percent of its gross revenues plus additional administrative costs--or take up the issue with either the FCC or a higher court.
Another high-profile case involving franchises, AT&T Corp. v. City of Portland, made it to the U.S. 9th Circuit Court of Appeals (www.ca9.uscourts.gov) this year as well, but the municipality didn't fare as well as Dearborn.
The 9th Circuit basically ruled that a lower court was wrong to tell Portland that it could force AT&T to open up its cable lines to ISPs in exchange for the city approving a transfer of Tele-Communications Inc.'s (www.tci.com) cable franchise over to AT&T. The telecom giant had acquired TCI, which, in addition to providing cable TV programming, also offered cable broadband Internet access. Portland, the 9th Circuit ruled, attempted to impose an open access condition on AT&T because the city said the company's cable broadband Internet access service was a "cable service" governed by the franchise. The appeals court disagreed, labeled the service a telecommunications service, and told Portland that it "may not directly regulate them through its franchising authority."
In other localities, such as Washington, many carriers are wading through the regulatory processes to access rights-of-way. The D.C. Department of Public Works, for instance, changed its fees and methods and instituted a building moratorium restricting carriers from building in the rights of way for several weeks earlier this year.
"It's difficult negotiating arrangements with municipalities to gain access to rights of way," says Tiki Gaugler, a telecom regulatory attorney in Washington. "And it's an issue that goes across the board, hitting all carriers."
Positive Outcomes
Other localities are inking franchise and rights-of-way agreements with service providers without going to court, illustrating the swinging regulatory pendulum across the nation.
The Lenexa City Council in Kansas just approved a 15-year franchise agreement for broadband service provider Digital Access (www.digitalaccessinc.com), which will offer cable TV, local and long-distance and high-speed Internet services to more than 17,000 homes and businesses in Lenexa beginning in 2001.
RCN Corp. (www.rcn.com) received franchise approval from the Board of Supervisors to provide residential telephony, cable and high-speed Internet access in San Francisco, where the company expects to start signing up customers by the end of the year.
The Houston City Council granted Grande Communications Inc. (www.grandecom.com) permission to build a fiber network to provide competitive digital and analog cable services to the city's businesses and homes, and OK'd plans by Western Integrated Networks LLC (WIN, www.winfirst.com) to build a fiber optic network to provide voice, data and video services. Grande will bring bundled high-speed Internet access, all-distance phone and cable entertainment services to Houston. William E. Morrow, vice chairman and CEO of Grande Communications, says the franchise agreement grants the company a 15-year contract to use Houston rights of way for an undisclosed fee. Construction, which is set to begin by the end of the year, must be completed in seven years. The city council granted WIN similar terms, and both service providers have franchise agreements with several other Texas cities.
So far, everyone seems happy with the agreements.
The Bottom Line
The impetus for service providers is that they need solid business plans to attract investors and to make money, so they have to negotiate the franchise and rights-of-way agreements, possibly giving up a little along the way. As long as it's reasonable, the service providers are willing to concede somewhat.
The City of Fort Worth, Texas, recently authorized WideOpenWest LLC (www.wideopenwest.com) to build a fiber optic broadband network to offer residents competitive cable TV, high-speed Internet and IP telephony services. By landing a deal with Fort Worth, WideOpenWest can advance its plans to provide services throughout the Dallas/Fort Worth metroplex.
"The Fort Worth franchise will enable our construction efforts to move forward on a massive scale to bring our services to customers as quickly as possible," said Julia McGrath, senior vice president and general manager for WideOpenWest.
No doubt relying on the AT&T-9th Circuit ruling, the city approved the buildout in exchange for WideOpenWest's agreement to open up its high-capacity, fiber optic network "for use on a fair, nondiscriminatory basis by any number of competing ISPs."
That's one agreement that probably won't end up in court.
But other franchise and rights-of-way battles will end up there, especially as broadband providers seek alternative conduits in new places, such as in water and sewer systems, and continue to threaten the cable industry with heated competition. And then there's the regulatory controversies associated with service providers seeking to place their wires or cables inside multitenant buildings or antennas on rooftops against the wishes of building owners. As of late September, that issue was expected to get further airing before the FCC.
Policy Forum Briefs
New lobbying efforts are in high gear for Congress to pass the Broadband Internet Access Act (S-2698, HR-4728). Introduced by Sen. Daniel Patrick Moynihan, D-N.Y., and Rep. Philip S. English, R-Pa., the measure would give broadband providers a five-year, two-tiered tax credit: 10 percent for deploying 1.5 megabit service to rural and low-income areas, and 20 percent for 22 megabit service to the same and other residential areas. The bill proposes closing the digital divide by giving access to rural areas and inner cities, which lack access to current broadband technology new-generation broadband services.
The Office of Management and Budget (w3.access.gpo.gov/usbudget/index.html) is considering two similar but competing House bills that would create a federal CIO to oversee the information technology divisions of each federal agency. Both bills, proposed by Reps. Thomas M. Davis, R-Va., and Jim Turner, D-Texas, would create the CIO as a presidential cabinet post. Presidential contender George W. Bush also supports creation of such a position.
In a line-sharing arbitration decision, the Illinois Commerce Commission (ICC, www.icc.state.il .us) said that Rhythms NetConnections Inc. (www.rhythms.com) has the right to place its own line cards in remote terminals owned by SBC Communications Inc. (www.sbc.com). The ICC's order also establishes a zero dollar charge for line-shared loops, shortened line-provisioning internals, and gives Rhythms access to SBC's Illinois back-office systems. The decision allows Rhythms to expand its market reach for high-speed services.
Sprint Corp. (www.sprint.com) is seeking licenses to offer broadband fixed wireless services via MMDS in 45 markets across the United States. The company filed applications with the FCC (www.fcc.gov), hoping to gain access to almost 25 million potential subscribers. Sprint already holds two-way MMDS licenses in Tucson and Phoenix, Ariz., where it's currently offering its Sprint Broadband Direct high-speed Internet access service.
Competitive telecom service providers are struggling to get access to local loops in Belgium, according to complaints filed with the European Commission (http://europa.eu.int). CLEC Versatel Telecom International N.V. (www. versatel.com) and DSL provider VersaPoint (www.versapoint.com) say that since March 1, they have repeatedly requested, and have been refused, access to local loops controlled by incumbent telco Belgacom S.A. (www. belgacom.be) The two competitors say that in each of their requests to Belgacom, they sought information about the telco's network architecture, including the address of all local exchanges, available capacity and collocation space. Virtually all of the competitors' requests since March 1 have been denied; one request awaits resolution.
Two state groups interested in local telecom issues are beefing up their advocacy efforts. The Maryland Coalition for Local Telephone Competition launched a new website (http://www.md4competition.org) giving telephone consumers access to the latest information about the state's local competition market. And a new group, the Illinois Coalition for Competitive Telecommunications, was formed in support of competition in the Illinois local phone market. The Illinois group plans to push competitive interests before the Illinois General Assembly, which next spring is set to rewrite its expiring telecom rules.
