FCC Addresses Long-Standing Cable Inside Wiring Issues
On Jan. 29, 2003, the Federal Communications Commission (“FCC” or “Commission”) issued a First Order On Reconsideration And Second Report And Order in its cable inside wiring proceeding (CS Docket No. 95-184; MM Docket No. 92-260). The Order addresses issues regarding cable inside wiring raised in the Commission’s proposed rulemaking over five years ago.
I. Background Of The Proceeding
Until 1992, cable home wiring had been left entirely to private contracts and state property law. In 1992, Congress sought to address a limited problem concerning cable home wiring that existed in a few "overbuild" markets. Specifically, Congress had heard reports that some cable operators were making it difficult for customers to switch to a competing cable system by removing wiring inside the home upon termination of service. In Section 624(i) of the 1992 Cable Act, Congress directed the Commission to prescribe rules concerning the disposition of wiring within subscriber premises. Congress also specified that the FCC was not to regulate cable wiring within MDUs.
In its first (1993) rulemaking, the FCC abided by the limitations in its enabling legislation and adopted rules that practically governed only the transfer of wiring inside single family homes upon termination of service. Later, however, the FCC grew impatient with the pace of competition, and thus began a series of proceedings seeking to expand its cable inside wiring rules. In October 1997, the FCC issued an order adopting a new, federal regime governing inside wiring within MDUs, designed to grant more power to MDU owners and to private cable competitors.
In the “Report and Order” portion of the FCC’s 1997 Order, the Commission adopted the current set of inside wiring rules, including rules regarding:
- Disposition of “home run” wiring by cable operator upon termination by an MDU owner;
- Sharing of molding;
- Disposition of cable home wiring;
- Rejection of a common telco and cable demarcation point; and
- Permitting landlords to purchase and invoke procedures for Loop-Through wiring.
The Commission also rejected proposals for rules prohibiting exclusive agreements in MDUs and proposals that it preempt state access to premises laws. The Commission received numerous petitions for reconsideration of various issues in the Report and Order portion of the document.
In the “Second Further Notice” portion of the document, the Commission sought comment on the following topics:
- Whether to restrict exclusive agreements;
- Whether to ban perpetual exclusive agreements, or allow MDU owners to opt out of existing perpetuals (the so- called “fresh look”);
- Application of wiring rules to all Multichannel Video Programming Distributors (“MVPDs”) (such as SMATV and direct-to-home satellite providers);
- Whether to exempt small operators from signal leakage reports; and
- Whether to create a “virtual” demarcation point and require sharing of single wire.
Comments on the Second Further Notice were filed in December 1997 and reply comments in January 1998.
II. The January 2003 Order
For the most part, the Commission’s January 2003 Order contains no significant changes in the now five-year-old rules. The Commission made a number of rulings that were favorable to cable operators. Specifically, it rejected:
- Calls for restrictions on exclusive agreements;
- Calls for restrictions on perpetual agreements;
- Proposals for a so called "fresh look" that would allow landlords to opt out of existing perpetual agreements;
- Requests to eliminate the option for cable operators to remove their home run wiring upon termination;
- Requests to impose a default price for home run wiring of replacement or salvage value;
- Proposals to allow MDU owners to force existing cable operators and MVPDs to share inside wiring.
The Commission also generally rejected a variety of proposals and requests for reconsideration on various issues. It rejected:
- A proposal that the home run wiring rules apply only where an MDU owner allows unit-by-unit competition;
- A proposal to eliminate landlord control over wiring and giving only individual subscribers control over wiring;
- A proposal to require MDU owners to agree to purchase home run wiring at a price set through binding arbitration as a precondition to entering into negotiations;
- A recommendation that the building by building home run wiring rules not apply when the MDU owner receives compensation from the new alternative provider;
- A proposal to decrease the landlord’s 60-day notice requirement in cases of unit-by-unit competition;
- A proposal that the Commission include in its rules an express prohibition on unauthorized customer transfers;
- A proposal to exempt wireless providers from signal leakage requirements;
- A claim that the rule permitting alternative MVPDs to share a cable operator’s molding constitutes an unconstitutional taking of property; and
- A proposal that OVS operators not be permitted to avail themselves of the home run wiring rules.
The Commission did, however, adopt some changes. First, it concluded that the inside wiring rules will apply to all MVPDs in the same manner. This is a favorable ruling for cable operators from a simple standpoint of competitive parity. Second, the Commission decided to create an exemption from annual signal leakage reporting requirements for small, noncable MVPDs (serving less than 1,000 subscribers or 1,000 units). Third, the Commission concluded that in the event that the MDU owner or overbuilder chooses to purchase home run wiring, the new provider/owner must be given access to the wiring 24 hours before incumbent termination of service. This is a change from the previous rule that required the incumbent to make the wiring accessible to the alternate provider within 24 hours of actual termination (which would allow transition 24 hours after termination).
In a potentially problematic move, the Commission also adopted a proposal that wiring located behind sheet rock is deemed "physically inaccessible"—the practical effect of which is to move the “demarcation point” for such wiring (likely to the closest accessible facility closest or junction box). Moving the “demarcation point” has the consequence of converting the status of the wiring from "home run" to "home wiring," which in turn affects the cable operator's options and rights. This may be a point warranting reconsideration or appeal, as it could undermine what few rights cable operators had under the Commission’s existing rules and perhaps even under state and common law.
In another problematic ruling for cable operators, the Commission also refused NCTA’s request that it amend its rules concerning states that have access to premises laws. The Commission’s rules create a presumption that a cable operator does not have a right to remain in an MDU unless the operator obtains an injunction or ruling to the contrary within 45 days of a notice of termination from a landlord (if the operator has a legal right to remain in the MDU, the FCC’s rules are not triggered). NCTA and others had challenged the presumption as unlawfully preempting operators’ state law rights, and doing so in an unreasonable time frame. The Commission rejected the arguments on the ground that state courts would still have the ultimate power to enforce state access to premises laws.
A number of cable operators had also challenged the FCC’s authority to adopt “home run” wiring rules altogether. While the Commission rejected those arguments, relying on the Communications Act’s broad general grants of authority, Commissioner Martin included a separate statement in dissent on that issue, stating that he does not believe the Commission has jurisdiction to adopt or enforce home run wiring rules and that the Commission is overreaching with its claims of authority. After the Commission adopted its rules in 1997, an appeal had been filed in the U.S. Court of Appeals for the 8th Circuit (in St. Louis). The appeal has been stayed over the course of the years by agreement of the cable operator with the implicit understanding that it would allow evaluation of the outcome of the then-pending reconsideration petitions. No small part of the appeal would have focused on the Commission’s fundamental authority to adopt home run wiring rules. It is yet unclear whether and how the appeal will proceed in light of the new order.
On the whole, the Commission’s order generally maintains the contractual rights of cable operators in what has become a fairly well established, if imperfect, set of rules. However, the Commission’s action on the demarcation point may undermine the stability and utility of even the current rules. Cable operators may consider filing for reconsideration by the Commission on the issue to bring to its attention the ramifications of what otherwise may have appeared to be little more than a modification in the practical access to wiring.
If you have any questions regarding the Commission’s inside wiring rules, or about the ramifications of this latest decision, please contact us.
For a copy of the Commission’s decision, contact us, or it is available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-03-9A1.doc.