Scott Burnside
Senior
Vice President
Regulatory
& Government Affairs
100
Lake Street
Dallas,
PA 18612
(570)674-1601
Fax
(570)674-1620
December 19, 2001
Josephine
Scarlett
Office of the Chief
Counsel
National Telecommunications
and Information Administration
Room 4713
HCHB
1401 Constitution Avenue,
NW
Washington, DC 20230
Re: Notice and Request for Comments on Deployment of Broadband Networks and Advanced Telecommunications.
Dear Ms.
Scarlett:
RCN Corporation (“RCN”) respectfully submits these comments to the
National Telecommunications and Information Administration (“NTIA”) in response
to the Notice and Request for Comments on Deployment of Broadband Networks and
Advanced Telecommunications, issued November 14 and published in the Federal Register on November 19, 2001,
at 66 Fed. Reg. 57941 (“Notice and Request”). In the Notice and Request, the NTIA
solicited input on a broad range of topics pertaining to the deployment of
advanced services. RCN appreciated
the opportunity to address many of these issues in person to Assistant Secretary
Nancy Victory and the NTIA staff present at the agency’s October 12, 2001, forum
on broadband deployment issues. In
these comments, RCN will elaborate on several issues addressed in the Notice and
Request that are of special concern to RCN as the nation’s first and largest
facilities-based competitive broadband provider of bundled phone, multi-channel
video, and highspeed Internet services.
Specifically, RCN will address in these comments: 1) local rights-of-way
access problems, which are perhaps the greatest impediment to the deployment of
broadband facilities, and 2) the current proposed tax credits for new broadband
facilities, which, although designed to create an incentive, will in fact
grossly tip the balance in favor of incumbent providers and therefore
deter the deployment of competitive broadband
infrastructure.
I.
About
RCN
RCN is the pioneer bundled service provider, and a veritable “poster
child” for broadband competition.
RCN has negotiated cable television and open video system (“OVS”)
agreements with some 80 localities.
The company is certificated as a competitive local exchange carrier
(“CLEC”) in numerous states. And,
unlike the vast majority of competitive telecommunications providers, RCN is
focused on bringing competitive services to the residential market. RCN currently is providing phone,
multi-channel video, and highspeed Internet service in the Boston, New York,
Philadelphia, Chicago, San Francisco and Washington, D.C. metropolitan areas, in
competition with the incumbent local and long distance telephone companies and
the incumbent cable television providers in those markets. RCN’s infrastructure at the beginning of
2001 passed 1.45 million homes; it will reach many more by year’s end.
From its position as the
foremost provider of competitive phone, multi-channel video, and highspeed
Internet services to residential customers, RCN represents precisely the kind of
competitive provider Congress sought to enable when it opened the
telecommunications market to competition in 1996. It is important to note, however, that
for RCN to become a viable competitor in the marketplace has required, and will
continue to require, a vast investment in broadband infrastructure, which can
only begin to yield revenue as RCN’s plant becomes operable and customers make
the switch from the incumbent’s service to RCN’s. Thus, it is essential that the statutory
and regulatory environment for broadband deployment continue to recognize the
fundamentally different challenges facing incumbents – who, although their
infrastructure may be outdated, nonetheless enjoy entrenched market share and an
ongoing revenue stream – and those facing competitors – who must finance and
build out their infrastructure, then capture market share, before beginning to
see profitability.
II. Access to Local Rights-of-Way as a Barrier to
Broadband Deployment
As Congress recognized when it enacted the Telecommunications Act of 1996
(“1996 Act”), access to local public rights-of-way at reasonable cost,
nondiscriminatory treatment of providers in granting access, and the removal of
local barriers to market entry, all are critical to the deployment of
competitive telecommunications infrastructure. This is especially so in the case of
creating broadband infrastructure, which requires, by definition, the widespread
deployment of new, state-of-the-art fiber optic networks.
In Section 253 of the 1996
Act, codified at 47 U.S.C. §253, Congress expressly prohibited state and local
statutes, regulations, or other legal requirements that “may prohibit or have
the effect of prohibiting the ability of any entity to provide any interstate or
intrastate telecommunications service.”
The purpose of this section, as Congress made clear in the House and
Senate Conference Report on the 1996 Act, is “to remove all barriers to entry in
the provision of telecommunications services.” Recognizing, however, that localities
need to retain their traditional police power authority to manage the physical
use of local rights-of-way so as to protect the public health, safety, and
welfare, and to be compensated for the costs of such rights-of-way management,
Congress also provided in Section 253 that: “Nothing in this section affects the
authority of a State or local government to manage the public rights-of-way or
to require fair and reasonable compensation from telecommunications providers,
on a competitively neutral and nondiscriminatory basis, for use of public
rights-of-way on a nondiscriminatory basis, if the compensation required is
publicly disclosed by such government.”
Unfortunately, many localities have used their control over essential
public rights-of-way to extract unlawful concessions from competitive broadband
providers and to impose regulation that goes beyond simple rights-of-way
management.
The Federal Communications
Commission and the federal courts, in subsequent decisions interpreting and
applying Section 253, have reviewed the legislative history and concluded that
Congress meant, in the exception quoted above, just what it said: that localities retain the limited
authority to manage their rights-of-way, but are not empowered to regulate
telecommunications providers generally.
According to the FCC, permissible rights-of-way management includes
coordinating construction schedules, regulating the time and location of
excavation in public streets, requiring the placement of facilities underground
instead of overhead (if consistent with the requirements imposed on other
utility companies), requiring fees to recover from each telecommunications
company a proportionate share of the increased cost of street repairs and paving
necessitated by excavations, enforcing zoning rules and building codes, and
appropriate insurance, bonding, and indemnification against any claims of injury
that might arise from a company’s excavation, and keeping track of various
networks in the rights-of-way to prevent interference among them. See In the Matter of TCI Cablevision of Oakland
County, Inc., 12 FCC Rcd. 21,396, at ¶ 103 (rel. Sept. 19, 1997); In the Matter of Classic Telephone,
Inc., 11 FCC Rcd. 13,082, at ¶ 39 (rel. Oct. 1, 1996).
Nonetheless, despite these
precedents and the clear intent of Congress, many localities, under the guise of
rights-of-way management, continue to impose onerous, discriminatory franchise
requirements and excessive fees wholly unrelated to use of the public
rights-of-way. Like a great many other CLECs and competitive providers of video
distribution services, RCN has experienced a wide variety of difficulties in
seeking access to local rights-of-way.
These difficulties have ranged from excessive delays, to the attempt to
extract excessive concessions, to refusals to treat incumbents in the same
fashion as proposed for RCN, to local efforts to regulate interstate
telecommunications, and, not least, to a wide variation in local policy and
practice. These factors have
materially slowed RCN in the build-out of its state-of-the-art fiber optic
plant, added substantially to its overhead and construction expenses, and
impaired the design and construction of integrated or unified systems in
multi-jurisdictional settings such as that in the Washington, D.C. metropolitan
area. In the most egregious cases –
and there are many – localities demand, as a condition of granting rights-of-way
access, that providers contractually waive their right under the 1996 Act to sue
to gain the localities’ compliance with the Act’s terms! For example, the City of San Francisco
required RCN, over RCN’s strenuous objection and as a condition of receiving a
cable franchise from the City, to execute language stipulating that RCN: “Agrees
that this Franchise was granted pursuant to processes and procedures consistent
with Applicable Law, and that it will not raise any claim to the contrary, or
allege in any claim or proceeding by Grantee against the City that any
provision, condition or term of Applicable Law or this Franchise at the time of
its acceptance was unreasonable, arbitrary, or void, or that the City had no
power or authority to make or enforce any such provision, condition or term . .
. [and] Releases, waives and
discharges forever, to the maximum extent permitted by Applicable Law, any and
all claims, demands, rights, and causes of action against, and covenants not to
sue, the City and its Agents, under any present laws, statutes, or regulations,
arising out of any acts, omissions, or matters relating to this Franchise as of
the Effective Date.” Although RCN
explicitly disagreed with the City that the City had authority under federal law
to demand certain concessions contained in the franchise, including the waiver
of rights clauses quoted above, RCN had no choice but to waive its rights, or
undertake lengthy and expensive litigation to obtain a franchise without the
offending terms.
1.
Rights-of-Way Access Problems Encountered by
RCN
The problems that RCN has
experienced in seeking access to local public rights-of-way to deploy its
broadband facilities fall into the following broad
categories.
A.
Inaction or Delayed
Action
In many cases, the principal problem has been that local authorities
vested with the responsibility and obligation to grant access to local public
rights-of-way do not know how to proceed with respect to competitive telecom or
video distributors. Their prior
experience has not encompassed the issues presented by numerous carriers seeking
access to the public rights-of-way.
These issues include coordination of numerous carrier requests, the need
for rapid determinations, and the need to assure equality in establishing access
rights. In some instances, the
incumbent telephone and cable providers historically have worked with the city
on an informal basis to gain approval of their construction projects as needed,
so there are no formal procedures in place for processing rights-of-way access
requests. The result is often
substantial delay, while local decision-makers think about how to deal with
competitors’ requests and contemplate what they would like to get in exchange
for access; occasionally such delay amounts to inactivity altogether. Some localities – fully aware that delay
is exceptionally costly to new entrants, because, as discussed above, they will
have no revenue until they can get their facilities built – also use delay as a
strategy to gain competitors’ acquiescence to discriminatory terms and
conditions. In the current market,
where capital is scarce and speed to market is key to competitive providers’
survival, providers often have little choice but to accept a locality’s terms in
order to commence construction, even where the terms violate the 1996
Act.
B.
Excessive Access
Fees
Many local authorities appear to believe that the competitive
telecommunications industry is an appropriate source from which to extract
substantial revenues. While some
jurisdictions have accepted the notion that fees should be based only on the
costs to the local government of supervising access, providing the requisite
support, maintaining records, or repaving streets, others ask for access fees,
both in cash and in services, which grossly exceed any conceivable cost to the
government and which are, pure and simple, revenue
generators.
The equality of access issue arises most commonly in the context of a new
competitor wishing to have use of the public rights-of-way to compete with the
incumbents who, of course, already
are using such public rights-of-way ubiquitously. Because the cost of installing
distribution plant is one of the major elements of a new entrant’s cost
structure, it is crucial that access to public rights-of-way be established on
an equitable basis. If the
incumbent’s plant uses public rights-of-way without making any payments
therefor, or if such payments are nominal, then competitors should not be asked
to pay more. Some local authorities
take the position that they would like to charge the incumbent as much as they
propose to charge the new competitor (although virtually never that the new
competitor should have access at the same nominal level as the incumbents), but
cannot do so because existing law or practice precludes increasing charges to
the incumbent. See, for example, the
Comments of the Department of Information Technology and Telecommunications of
the City of New York, filed in FCC Docket WT 99-217 on August 13, 1999. Furthermore, in many instances, RCN has
been asked to use underground ducts rather than aerial distribution for
aesthetic reasons. At the same
time, existing providers, with whom RCN competes, are allowed to continue use of
the less expensive aerial routes and even, in some cases, to use poles for
expansion while RCN is asked to construct its new facilities entirely
underground. In many of its cable
and OVS agreements, RCN has been required to agree to meet aggressive build-out
schedules that far exceed the speed with which incumbent providers were required
to build out their original, monopoly networks. These and other inequities in the
treatment of new entrants clearly violate Congress’ intent to create a level
competitive playing field.
D.
Variations In Local
Practice
In addition to the foregoing, the enormous variation in local practice
creates substantial burdens, delays, and costs for the new competitor. A carrier like RCN, which seeks to
provide service in hundreds of locations, must deal with an equal number of
local authorities, essentially each of which has its own procedures, priorities,
and approaches to setting rates, terms and conditions. Understandably, such variation is
endemic to the geographical diversity involved in establishing a wide-spread
system, and total uniformity cannot be expected. But the variation which does exist is so
substantial that it has become a significant barrier to the rapid and effective
deployment of facilities and development of competition. Not only does wide variation in policy
and practice lead to differences in the time required to secure access to public
rights-of-way, but in many instances contiguous communities, by requiring RCN to
follow wholly dissimilar procedures, have delayed the inauguration of service
not only in their own communities but in neighboring ones as
well.
E.
Unnecessary Or Burdensome
Application Procedures
In many jurisdictions, RCN has encountered efforts to secure information or obtain concessions from an applicant for public rights-of-way access that go well beyond any legitimate connection to rights-of-way management. Review of information such as corporate history, the types of service to be provided, other service areas being served and the like, is simply irrelevant to a public rights-of-way access request. RCN recognizes that certain inquiries are legitimate: local government is entitled to solicit information on the basis of which it can inquire about whether the applicant has previously been found responsible with respect, for example, to performing excavations or following standard safety procedures. The scope of such inquiries, however, must be carefully defined by rule and broader inquiry prohibited. While these inquiries may seem innocuous, responding to them in each of the many localities through which RCN’s networks travel, then waiting through lengthy review periods, is both burdensome and adds to already excessive delays. Similarly, RCN often is asked to agree to terms and conditions taken from traditional government contracts involving the expenditure of public monies, such as local hiring requirements, use of minority- and woman-owned subcontractors, and so on. Such requirements are wholly inappropriate when imposed in connection with rights-of-way access agreements, where no public monies are being expended (and, in fact, RCN is paying the locality a huge fee). Moreover, such obligations, however laudable in principle, are unwieldy when each of multiple jurisdictions through which a single network pass attempt to attach their own unique government contracting requirements to the project.
Again, because a single
broadband network typically must traverse multiple local jurisdictions, the
provincial concerns of one can delay broadband access for many. Many localities require city council
approval by ordinance as a pre-requisite to allowing a provider to access local
public rights-of-way. Thus, a small
group of recalcitrant council members or a single local mayor can hold up
construction of an entire network.
A similar problem can occur when local authorities retain outside
consultants or counsel who provide improper advice. In one such instance, involving a number
of municipalities in the Bucks County region to the northeast of Philadelphia,
RCN was unable to build out to communities in which it already had obtained
franchises, because an attorney retained by several other towns along the
planned network route advised those jurisdictions to demand a unlawful franchise
term to which RCN could not, and
would not, agree, namely: payment of a recurring 5% of gross revenues
franchise fee on the provision of broadband Internet services. Unable to reach an agreement with the
towns demanding this blatantly unlawful payment, RCN could not gain access to
essential rights-of-way and, therefore, was forced to abandon that entire
portion of its route. This example
illustrates the huge impact that overreaching local regulation in connection
with control of the rights-of-way can have in deterring the deployment of
broadband services. Although it may
seem incredible that a locality would deprive its constituents of the
opportunity to have access to additional broadband services in favor of clinging
to unreasonable compensation and other demands, Prince George’s County is one
such well-documented case. When
Prince George’s County enacted its over-reaching local franchise ordinance, Bell
Atlantic – having the time and resources that only incumbency can provide –
brought suit in federal court under Section 253 of the 1996 Act, challenging the
County’s requirements. The District
Court struck down the ordinance, but the Fourth Circuit reversed, holding that
the District Court should have looked first to state law, before preempting the
County ordinance under Section 253.
On remand, the District Court again found that the ordinance exceeded the
County’s authority, this time applying Maryland law. Through all of this litigation, over the
course of several years, the County has not budged from its initial position
and, in consequence, the vast majority of competitive broadband providers have
simply elected to construct their networks elsewhere.
2.
Suggested Remedies
The problems discussed above are real, and there is no question that
these problems, which virtually every competitive telecommunications carrier has
experienced, are inhibiting the deployment of broadband infrastructure. As the capital available for
construction of new infrastructure has contracted, so too have providers'
build-out plans, and companies like RCN are increasingly electing to simply
bypass those communities that have made accessing local rights-of-way too
difficult or costly.
To remedy the rights-of-way
access problems discussed above, RCN urges the NTIA to support legislation
and/or regulations to clarify and reconfirm the limited scope of local
rights-of-way management, and provide federal-level guidance to localities on
appropriate rights-of-way management policies, consistent with the 1996 Act,
that will foster uniformity, streamline and speed up the approval process, and
eliminate excessive and discriminatory fees and other access requirements. Specifically, the matters appropriate
for local rights-of-way management regulations, delineated in various FCC and
federal court decisions and summarized above, should be catalogued in an
amendment to the 1996 Act or new federal regulations. Although there is a significant body of
decisional law on the limited scope of local regulatory authority under Section
253, localities often are heard to contend that the cases are ambiguous,
inconsistent, or do not constitute binding precedent in their jurisdiction. Further litigation will not remedy this
problem; a clear, national policy statement is required. That policy statement, whether in
statute or regulations, should adopt from the relevant decisional law the
following elements:
·
localities are only
authorized to regulate – and therefore are only empowered to impose application,
approval, and access terms related to – the physical use and occupation of
public rights-of-way, and localities may not condition rights-of-way access on
unrelated terms and conditions;
·
an application for
rights-of-way access should be contingent only upon the provider’s agreement to
abide by the locality’s reasonable rights-of-way management regulations, and
should be approved within a reasonable time frame of no more than thirty (30)
days;
·
in the interest of making
broadband ubiquitously available at competitive prices, localities should
recover no more than their actual rights-of-way management costs from
telecommunication providers, and should not look to telecommunications
providers’ use of public rights-of-way as an opportunity to raise general
revenues; and
·
the terms, conditions, and
fees associated with access to public rights-of-way should be the same for
competitive as for incumbent providers, and should be consistently
applied.
These simple principles, if
applied nationwide and consistently enforced, will greatly reduce local barriers
to entry based upon localities’ control over the public rights-of-way, and will
greatly speed the deployment of broadband infrastructure throughout the
country.
III. Tax Credits
Will Inhibit, not Promote, the Deployment of Competitive Broadband
Facilities
RCN certainly does not oppose economic incentives to foster the rapid and
ubiquitous deployment of broadband to consumers. Indeed, as the major competitive
provider of bundled broadband services to residential customers, serving low,
middle, and high income customers alike, RCN has been a leader in increasing
broadband availability. It is
critical to the success of competition, however, that any economic incentives
for continued broadband deployment not favor incumbents to the detriment of
competitors, or one class of providers or service modality over another. It is in this regard that the current
legislative proposals to incentivize broadband deployment fall short. Each of the pending bills has as its
centerpiece tax credits for the deployment of equipment and facilities. Tax credits, of course, offset taxable
income, and income is what new entrants, by definition, do not have. Because of the cost-intensive nature of
constructing facilities-based broadband networks, even the most successful
competitive broadband providers are unlikely to see significant taxable income
in the near-term. Although some
proposals would allow the transfer of tax credits through the sale and
lease-back of facilities, such proposals assume the involvement of a third-party
– the facilities lessor – who is unlikely to pass the full benefit of the tax
credits it would receive back to the lessee competitive broadband provider. In this scenario, competitors would
receive a much-reduced benefit as compared with profitable incumbent
providers. Moreover, the long-term
success of competitive broadband providers will depend upon their ownership and
control of their own broadband networks, and will potentially be undermined if
competitors are required to rely upon leased facilities owned by others. Of far more use to competitive providers
would be amendments to the tax code, currently proposed, that would allow for
the sale of net operating losses for cash.
IV.
Conclusion
The competitive broadband industry is at a critical juncture. Administration policy on local rights-of-way access, incentives for deployment, and the other issues under consideration by the NTIA and addressed in the Notice and Request will significantly impact whether, as the national economy recovers, competitive broadband emerges as an engine of economic growth, or a casualty of entrenched interests. RCN appreciates the NTIA’s excellent work to date on these issues, and the opportunity to have input as the NTIA considers its agenda for the coming months. If we can be of further assistance in providing background on the issues presented in these comments, or otherwise, please do not hesitate to call upon us at any time.
Respectfully submitted,
Scott Burnside
Senior Vice President
Regulatory & Government
Affairs
cc:
Assistant Secretary Nancy Victory
392868.1