A great economic battle is emerging over who has the right to supply telephone and other services to renters in apartment communities and commercial office buildings. At issue is whether the government should require building owners to provide all telecommunications firms access to their properties, and whether the rates owners charge for such access should be regulated.
Currently, building access is freely negotiated between individual owners and telecom firms. But some providers are complaining to state and federal lawmakers that negotiating with property owners takes too long and is hindering their ability to build out their networks. They have asked the government for "forced-access" laws to enable them to bypass that process.
Put simply, forced access gives a telephone company or other telecom service unrestricted access to building rooftops, as well as wiring or wiring space inside buildings, without the prior approval of the property owner. Some telecom firms even want access, at little or no cost, to existing wires that are owned by either the property owner or another provider.
While the idea of expanding competition in the telecommunications industry with the stroke of a pen appeals to some policy makers, in reality it just is not that easy. To begin with, there are logistical and constitutional problems with forced-access laws. By providing service providers with uncompensated access to private property, such laws effectively amount to an unconstitutional "taking" of property. Additionally, the constant wiring and rewiring that occurs when owners are forced to allow a multitude of telecom providers to service the property not only damages the property, but it also compromises the ability of managers to adequately address building safety and fire hazards. Finally, and most importantly, such laws are not only unnecessary, but they would actually stifle competition.
The battle over forced access is being framed as an issue of competition. Telecom providers say that building owners are blocking their access to potential customers and that the only way they can effectively compete with the incumbents - i.e., the regional Bell companies - is by way of forced access. But will forced-access regulations actually create more competition? Or will they have the opposite effect?
As Jodi Case, manager of ancillary services at Alexandria, Va.-based AvalonBay Communities Inc., explained to Congress earlier this year, forced-access legislation will actually hurt competition. In her testimony, she explained that property-exclusive contracts negotiated between owners and providers enable start-up telecom firms to recoup the initial investment required to wire a property. Without this protection, these new service providers would not be able to compete with the large, incumbent providers. Consumers further benefit from these contracts because they allow owners to negotiate the best possible price and level of service on behalf of their residents.
"Forced access is certainly not the answer," says Laurie Baker of Houston-based Camden Property Trust. "At the same time, we have to encourage and support competitive providers of cable and telephone service. We need to do everything we can to help the newer companies so that we have leverage with the franchise operators for upgrading existing infrastructures and services. In the end, it is our residents who win."
How accurate are the claims of telecom firms that they need government intervention in order to access buildings? Not very. A recent independent survey found that nearly two-thirds (65%) of all requests fielded by building owners and managers from telecom firms within the last year either led to approval for building access or to contract negotiations. There are numerous valid reasons why a provider might be denied access: failure of providers to meet relevant building codes; refusal of providers to assume liability for the safety and security of the building infrastructure; lack of space; lack of a credible business track record; and no tenant demand for their services, among others.
In fact, claims of an access bottleneck run contrary to the telecom providers' own public statements. For example, on July 8, Winstar Communications announced it set a new company record and obtained access rights to more than 700 commercial buildings in the second quarter of 1999.
Another provider, Teligent Inc., reported a 37% increase in the number of leases or options signed for the same quarter. Furthermore, in their comments to the Federal Communications Commission (FCC), the telecom firms themselves admit they are not being harmed or restrained by market forces, they are only rarely denied access and most building owners will negotiate with them.
The success of these telecom firms lies in the simple economic fact that building owners know they have a vested interest in working with good, dependable providers. In today's competitive marketplace, property owners understand the availability of advanced telecommunications services is an important feature in attracting new residents or retaining existing ones. In the survey cited above, 61% of owners said resident/tenant interest was their primary motivation for offering telecommunications services.
That said, however, owners remind policy makers that they have a limited amount of leasable space. As the number of competitive service providers grows, owners clearly cannot accommodate every solicitation they receive.
What are the implications for owners if forced access becomes law? Owners, particularly those with upscale tenants, would likely be deluged with providers of all shapes and sizes clamoring for their right to service buildings. Among the unresolved questions in forced-access proposals is: What happens when 100 or more providers seek access? Should the owner conduct a lottery for the limited-riser space? Can providers who fail to get access because of space or roof limitations sue owners?
Even scarier for owners is the quality and reliability of service residents receive. What happens if a provider gains access and then goes bankrupt? What if a number of providers who cannot actually deliver service tie up the rights to a building and then auction off those rights to the highest bidder? Can a telecom provider assign contracts to other providers without any say from the owner? With the pace ofin telecommunications, it is possible that today's players may not be around in five years. What happens to the building and its residents/tenants then?
Where will this forced-access march stop? If the FCC or Congress give unrestricted access to telephone providers, what then is the legal justification for denying such rights to video andproviders as well?
The present situation best summed up by U.S. Rep. W.J. "Billy" Tauzin (R-La.), chairman of the House Subcommittee on Telecommunications, Trade and Consumer Protection. At a May 13, 1999 hearing, he asked, "Is it right to pass forced entry? And where do you stop? Do you say that everybody has a right? Does everybody have a right to that wire? Or does everybody have to run their own wire, put up their own antennae? And how many are you going to have? It gets real complicated."
Service providers backing forced-access legislation are simply trying to break into the fast-growing private marketplace for telecommunications services by changing the law rather than by competing for new business. But given the fact that telecom firms have not presented any credible evidence supporting their claims of market failure, the National Multi Housing Council, the National Apartment Association and the other nine real estate organizations forming the Real Access Alliance are urging the FCC and Congress to resist the urge to write new laws and instead let the marketplace work through this incredibly fast-changing technological era.
More information on the Real Access Alliance and the forced-access issue can be found at www.realaccess.org.