Statement of B. Bitz (5/13/99) (EAH00033.DOC;1)

"Forced Access is Unnecessary, Unmanageable and Unconstitutional"

Testimony of

The Building Owners and Managers Association,
(BOMA) International

Presented by

Brent W. Bitz
Executive Vice President
Charles E. Smith Commercial Realty L.P.

Before

Subcommittee on Telecommunications,
Trade and Consumer Protection
Commerce Committee
U.S. House of Representatives

May 13, 1999
Washington, D.C.

SUMMARY OF STATEMENT

· Office Buildings Need Robust Telecommunications Offerings
BOMA International and its members need -- and the record will document have supported -- a competitive telecommunications marketplace. Such a marketplace is important to our tenants and is, therefore, vital to us. Just as the telecommunica-tions industry has been revolutionized, and ultimately improved, by competition, our industry has recognized the challenges posed by an increase in customer sophistication and customer demands for new tele-communications services.

· Number of providers almost as important as numbers of services -- and the marketplace is working.
Studies have documented that for an office building to remain competitive in today's marketplace, it must offer tenants not only a wide array of telecommunications services, but also an array of choices in telecommunications service providers. Such a marketplace does not need government-mandated access; telecommunications competition is alive and thriving in office buildings. Hundreds of license agreements are being signed by office building owners and telecommunications service providers every day. These transactions are negotiated at arm's length and in a free market environment.

· Constitutional Rights
And while tenants may rely upon the marketplace to ensure their rights are protected, building owners will look to the U.S. Constitution for our defense.

· Joint Education
BOMA would suggest the C-LEC industry, rather than force us to spend our time fending off forced building entry legislation, join us in an educational effort.

Introduction:

Chairman Tauzin, Mr. Markey and members of the Subcommittee, good morning, I am Brent Bitz. Executive Vice President of Charles E. Smith Commercial Realty L.P. The Charles E. Smith Company owns and manages over 25 million square feet of property. We serve in excess of 2,000 tenants and we employ more than 1150 individuals, either directly or through contracts at our properties.

Background
Today I have the privilege of testifying on behalf of the over 17,000 property management professionals that comprise the Building Owners and Managers Association International . At BOMA, I currently serve as a senior member of the association's National Advisory Council and was appointed to serve as lead representative in meetings earlier this spring that we had with the C-LEC industry represented by Teligent.

The record will document BOMA International and its members need - and have supported -- a competitive telecommunications marketplace. Such a marketplace is important to our tenants and is, therefore, vital to us.

The BOMA membership, however, has consistently identified opposition to any governmental effort to mandate access to our properties as a leading advocacy issue. BOMA feels forced building access is unnecessary, unmanageable and unconstitutional.

Office Buildings Need Robust Telecommunications Offerings
Just as the telecommunica-tions industry has been revolutionized, and ultimately improved, by competition, our industry has recognized the challenges posed by an increase in customer sophistication and customer demands for new tele-communications services. Indeed, these demands will be (and already are) providing opportunities for our businesses to compete, one against the other, for market share. Our members aggressively market the characteristics of their properties, including telecommunications services .

BOMA, in cooperation with the Urban Land Institute, just released a study entitled, "What Office Tenant's Want." One portion of the study asked tenants to rank their top three intelligent building features and to indicate whether they would be willing to pay additional rent to have such a missing amenity.

From the array of 13 intelligent building features, survey respondents designated "Built in Wiring for Internet Access" as the number one required feature and placed in an almost statistical tie for positions two through five:

· Wiring for high speed networks,

· Conduits for cabling,

· Fiber optics capability,

· HVAC systems.

Seven out of ten survey respondents answered "yes" when asked if they would be willing to pay additional rent to have one of these intelligent building features added to their building.

Number of providers almost as important as numbers of services
In addition to the BOMA/ULI study, numerous other studies have documented that for an office building to remain competitive in today's marketplace, it must offer tenants not only a wide array of telecommunications services, but also an array of choices in telecommunications service providers. Because the commercial real estate business is fiercely competitive, we must provide our tenants with access to the latest telecommunications services or they will go elsewhere, and our buildings' operations will cease.

Marketplace is working.
In short, the marketplace does not need government-mandated access; telecommunications competition is alive and thriving in office buildings. Hundreds of license agreements are being signed by office building owners and telecommunications service providers every day. These transactions are negotiated at arm's length and in a free market environment.

Charles E. Smith Experience
We at the Charles E. Smith Commercial Realty L.P. are a testament to the competitive marketplace. We ensure that office consumers have access not only to the widest array of telecommunications services, but also have access to numerous service providers. At the Charles E. Smith Company today, we have eight alternative local exchange carriers providing service to our portfolio of 102 buildings. As I mentioned earlier, we have approximately 2,000 tenants in the buildings, which we either own or manage. I am not aware of a single incident where a tenant was unable to meet its telecommunications needs because of issues relating to its occupancy in one of our buildings. We have every conceivable type of tenant in our portfolio. Our tenants range from small entrepreneurs through sophisticated professional service firms and major government agencies. I am completely satisfied that the existing telecommunications service environment adequately meets my tenants' needs. In every case, if we were not able to meet a tenant's requirements through existing telecommunications service arrangements, they were able to deal with these service providers on a direct basis. At no time would we ever interfere with a tenant's desire to obtain improved service in this vital business area.

Mr. Chairman, every one of those license agreements were executed because they made business sense to all parties involved. Any government action or mandate would disrupt that environment. Moreover, the FCC, in its most recent broadband deployment docket, found no lack of broadband distribution nor competitive choice being offered in office buildings. As an industry, we are; therefore, at a loss to understand how the proponents of forced building entry could ask this Committee and this Congress to interject a static regulatory regime at the intersection of the business and the telecom-muni-ca-tions revolution.

Reciprocal Requirements
As a provider of commercial office space, one of the greatest challenges we have faced are instances where telecommunications service providers have elected not to do business with us or with the tenants in our buildings. In each case, the reason the C-LEC elected to pass on our business was that we did not represent an attractive-enough investment opportunity. As a businessman, while I am not happy with their decision I can accept it.

What I can not accept is the telecommunications industry's one-sided request for forced access, which benefits them with no balancing obligations for service. Since neither tenants nor building owners have the right to demand service from a provider, we do not think that the providers ought to be given the right to forced access. The telecommunications industry cannot have it both ways. They can not cherry pick the best opportunities for business and then unilaterally ignore the rest of our industry's tenants across this nation.

Unregulated Environment Works Best
We believe that an unregulated environment works best. Commercial tenants may rely upon market forces to ensure their access to not only a wide array of telecommunications services, but also a wide array of telecommunication service providers.

Constitutional Rights
And while tenants may rely upon the marketplace to ensure their rights are protected, building owners will look to the U.S. Constitution for our defense. But rather than going on at length about the constitutional protections we enjoy and a discussion of how a one-size-fits-all regulatory scheme for access is unmanageable, I have reduced those comments to paper as Appendix One and Two, respectively. I would like to conclude my testimony with a call for a cooperative relationship with the competitive local exchange industry.

Cooperation & Education
Mr. Chairman, we can understand the C-LEC industry's desire of a guaranteed marketplace. Some of my colleagues were hoping that perhaps we could have a 100 percent occupancy law passed. But as this Committee and this Congress have stated before: guaranteeing business success is not the role of government.

The C-LEC industry claims that it is being treated unfairly or differently from the incumbent local exchange carriers. If that is true, it is a transition issue. One that will work itself out as more and more building owners learn they may demand the same of incumbent providers that which they are demanding of competitive providers.

BOMA would suggest the C-LEC industry, rather than force us to spend our time fending off forced building entry legislation, join us in an educational effort --an education effort to inform building owners of their right to require incumbent providers to:

· Obtain their permission for access, and

· Comply with the same rules and regulations for gaining access to any given property that we are today asking of C-LECs.

BOMA is currently engaged in this education program. We have produced "Wired for Profit" which, in layman's language explains the world of competitive telecommunications services and then offers model license agreements to govern access to buildings. These license agreements do not discriminate between incumbent and competitive providers. We look forward to the day when all access to our buildings by any telecommunications service provider is governed by such a license.

Thank you for the opportunity to testify, and I welcome your questions.

APPENDIX ONE

"FORCED BUILDING ENTRY IS UNCONSTITUTIONAL"
Any attempt by Congress to directly, or indirectly by means of Federal Communications Commission actions, mandate access to multiple-unit buildings by telecommunications providers -- whether under the guise of defining demarca-tion points or otherwise -- would lead to a taking of private property under the Fifth Amendment.

The U.S. Supreme Court has held in Loretto v. TelePrompTer Manhattan, 458 U.S. 420 (1982), that any regulation allowing a tele-com-muni-ca-tions provider to emplace its cables in, on, or over a private multi-tenant building is a governmental taking and would violate the owners' rights under the Fifth Amendment. Involuntary emplacement of wires would be "taking" within the meaning of the Fifth Amendment subject to the requirement for compensation.

For the Congress or the Federal Communications Commission to mandate access for telecommuni-ca-tions providers' cables in and on private buildings would be just as unconstitutional as the New York statute that the Supreme Court held to be unconstitutional because it permitted TelePrompTer to run its coaxial cables in and on Mrs. Loretto's apartment building in New York City. See Loretto v. TelePrompTer Manhattan CATV Corp., 458 U.S. 419 (1982).

A. Congressional or Commission-mandated Wiring of Private Buildings Would be an Impermissible "Permanent Physical Occupation."

The physical requirement that a landlord permit a third party to occupy space on the landlord's premises and to attach wires to the building plainly crosses that clear, bright line between permissible regulation and impermissible takings.

Where the "character of the governmental action," the Supreme Court has said, "is a permanent physical occupation of property, our cases uniformly have found a taking to the extent of the occupation, without regard to whether the action achieves an important public benefit or has only minimal economic impact on the owner." Loretto, supra, at 434-35 (emphasis supplied), citing Penn Central Transportation Co. v. New York City, 438 U.S. 104, 124 (1978). B. Forced Carrier Access Satisfies the Legal Test for an Unconstitutional Taking.

No de minimis test validates physical takings. The size of the affected area is constitutionally irrelevant. In Loretto, supra, at 436-37, the Court reaffirmed that the "the rights of private property cannot be made to depend on the size of the area permanently occupied." Id. at 436-37.

The access contemplated by Congress is legally indistinguishable from the method or use of intrusion in Loretto, where the Court found a "permanent physical occupation" of the property where the installation involved a direct physical attachment of plates, boxes, wires, bolts and screws to the building, completely occupying space immediately above and upon the roof and along the buildings' exterior wall. Id. at 438.

Loretto settles the issue that government-mandated access to a private property by third parties for the installation of telecommunication wires and hardware constitutes a taking, regardless of the asserted public interest, the size of the affected area, or the uses of the hardware. In takings there is no constitutional distinction between state regulation (Loretto) and federal regulation (FCC proposed rulemaking).

C. "Just Compensation" for the Taking Requires Resort to Market Pricing.
The takings objection to mandated access to private property cannot be avoided by requiring the tele-com-muni-ca-tions service provider benefited thereby to make a nominal payment to the owner for access. In Loretto the New York statute at issue provided for a one-dollar fee payable to the landlord for damage to the property. The Court concluded that the legislature's assignment of damages equal to one dollar did not constitute the "just compensation" required by the constitution.

While Loretto does not address the question of whether the invalidity of a taking is avoided by payment from a third party, other courts have held that takings to benefit a private telecommunications provider are subject to heightened scrutiny. See Lansing v. Edward Rose Associates, 442 Mich. 626, 639, 502 N.W. 2d 638, 645 (1993). AMTRAK's condemnation and conveyance of the Boston & Maine's Connecticut River railroad tracks to the Central of Vermont Railroad after payment of compensation was narrowly upheld on the technicality that the condemnation was under the adjudicatory oversight of the Interstate Commerce Commission. Nat'l R.R. Passenger Corp. v. Boston & Maine, 503 U.S. 407, 112 S.Ct. at 1403-04 (l992). That degree of governmental involvement is not contemplated here.

The practical point is this, viz., that government cannot prescribe a nominal amount as compensation for access -- the affected property owner is constitutionally entitled to compensation measured against fair market value. See U.S. v. Commodities Trading Corp., 339 U.S. 121, 126 (1950) (current market value); Bell Atlantic, supra, at 337 n.3, 24 F.3d at 1445 n.3. Is ascertainment of the disputed market values of differing impingements on large numbers of highly diverse commercial and residential properties something that either the Commission or the courts are ready to handle?

Congress specifically has previously considered a mandatory access provision and the provision was deliberately omitted in the final version of the Cable Act to avoid a taking. There was not then, nor is there now we believe any Congressional intent to support takings of private property. Id. at 156-57, citing 130 Cong. Rec. H10444 (daily ed. Oct. 1, 1984) (floor statement of Cong. Fields). In Century SW Cable TV v. CIIF Associates, 33 F.3d 1068 (1994), the Ninth Circuit, following Woolley, reversed the trial court's application of Section 621(a)(2), because there was no evidence of an express dedication. The court found that installation of cable to individual units constituted a physical invasion under Loretto that was not authorized by the statute. Accord, TCI of North Dakota, v. Shriock Holding Co., 11 F.3d 812 (8th Cir. 1993).

The kind of forced building access contemplated here would largely replicate the provisions for forced building access in S. 1822 in the 103d Congress for forced building access, which died on the floor of the Senate in the fall of 1994. Such provisions would not have been needed if the Commission already had that authority.

APPENDIX TWO

"FORCED ACCESS IS UNNECESSARY AND UNMANAGEABLE"
There are sound and persuasive reasons why the Congress should not attempt to regulate access to private property. Governmental regulation would be unmanageable and it would interfere with effective on-the-spot management.

Not only is government intervention unnecessary, since property owners are already taking steps to ensure that telecommunications service providers can serve their tenants and residents, but it is undesirable. Such intervention could have the unintended effect of interfering with effective, on-the-spot property management. Building owners and managers have a great many responsibilities that can only be met if their rights are preserved, including compliance with safety codes; ensuring the security of tenants, residents and visitors; coordination among tenants and service providers; and managing limited physical space. Needless regulation will not only harm our members' interests, but those of tenants, residents, and the public at large as well.

1. Safety considerations; code compliance.
Building owners are the frontline in the enforcement of fire and safety codes, but they cannot ensure compliance with code requirements if they cannot control who does what work in their buildings, or when and where they do it. For government to limit their control would unfairly increase the industry's exposure to liability and would adversely affect public safety.

For example, building and fire codes require that certain elements of a building, including walls, floors and shafts, provide specified levels of fire resistance based on a variety of factors, including type of construction, occupancy classification, and building height and area. In addition, areas of greater hazard (such as storage rooms) and critical portions of the egress system (such as exit access corridors and exit stairways) must meet higher fire resistance standards than other portions of a building. The required level of fire-resistance typically ranges between twenty minutes and four hours, depending on the specific application. These "fire resistance assemblies" must be tested and shown to be capable of resisting the passage of floor and smoke for the specified time.

Over the past 10 years, penetrations of fire-resistance assemblies have been a matter of great concern, as such breaches have been shown to be a frequent contributor to the spreading of smoke and fire during incidents. The problem arises because fire-resistance assemblies are routinely penetrated by a wide variety of materials, such as pipes, conduits, cables, wires and ducts. An entire industry has been built around the wide variety of approaches that must be used to maintain the required rating at a penetration. It is not a simple issue of just filling up the hole -- the level of fire resistance required, the type of materials of which the assembly is constructed, the specific size and type of material penetrating the assembly, and the size of the space between the penetrating item and the assembly are all factors in determining the appropriate fire-stopping method.

Mandating access to buildings, without adequate supervision and control by a building's owner or manager, would allow people unfamiliar with a building the opportunity to significantly compromise the integrity of fire-resistance-rated assemblies. Tele-com-munica-tions service personnel are not trained to recognize the importance of such elements in a building's construction, much less to accurately assess the types of assemblies they are penetrating or assuming any responsibility as to code compliance. Thus, while perfectly competent to drill holes and run wire, they would be unable to determine the appropriate hourly rating of a particular wall, floor or shaft, and would not know how to properly fill any resulting holes or recognize those areas that they should not penetrate at all.

In fact, it is unlikely that a person punching holes and pulling cables would even consider patching the holes after they pulled their cables through. Many of these penetrations are made above suspended ceilings or in equipment rooms where there is little or no aesthetic concern.

Maintaining the integrity of fire-resistance-rated assemblies is already a challenge for building managers because of the large number of people and different types of service providers that may be working in a building. Nevertheless, currently a building operator can restrict access to qualified companies and can seek recourse, by withholding payment or denying future access, if the work is not done correctly. If building operators were forced to allow unlimited access to alternative service providers, or were prohibited from restricting such access, the level of building fire safety could be significantly jeopardized. It is essential that building owners and managers be able to continue to ensure in the future that those personnel performing work in a building do so in a manner that does not compromise other essential systems, including fire protection features; this has not been a generic problem in the past, where building owners and managers have retained control. We emphasize that these are not merely theoretical dangers -- we have received reports of actual breaches of firewalls from our members. The only way fire safety can be assured in the future is by allowing building owners and managers to determine who is permitted to perform work on their property.

The same applies to all other codes with which a building owner must comply. See, e.g., Article 800 (Communications Circuits) of the National Fire Protection Association's National Electrical Code (1993 ed.), specifying insulating characteristics, firestopping installation, grounding clearances, proximity to other cables, and conduit and duct fill ratios. Technicians of any single telecommunications service do not have all the responsibilities of a building owner and cannot be expected to meet those responsibilities. Yet the building owner is ultimately responsible for any code violations. Congressional or Commission interference in this area could thus have severe unintended consequences for the public safety.

While the Commission presently requires telephone companies to comply with local building and electrical codes, see Section 68.215(d)(4) of the rules, 47 C.F.R. § 68.215(d)(4), it could not practically enforce the codes, particularly where competing providers would have unrestricted access to common space.

2. Occupant security.
Building operators are also concerned about the security of their buildings and their tenants and residents, and in certain circumstances may be found legally liable for failing to protect people in their buildings. Telecommunications service providers, however, have no such obligations. Service technicians may violate security policies by leaving doors open or admitting unauthorized visitors; they may even commit illegal or dangerous acts themselves. Of course, these possibilities exist today, but at least building operators have the right to take whatever steps they consider warranted. The commenting associations' concern is that in requiring building operators to allow any service provider physical access to a building, the Commission may specifically grant -- or be interpreted as granting -- an uncontrolled right of access by service personnel.

It is simply impracticable for the Commission to develop any set of rules that will adequately address all the different situations that arise every day in hundreds of thousands of building across the country. Consequently, any maintenance and installation activities must be conducted within the rules established by a building's manager, and the manager must have the ability to supervise those activities. Given the public's justifiable concerns about personal safety, building operators simply cannot allow service personnel to go anywhere they please without the operator's knowledge, and the Commission should respect that authority.

3. Effective coordination of occupants' needs.
A building owner must have control over the space occupied by telephone lines and facilities, especially in a multi-occupant building, because only the landlord can coordinate the conflicting needs of multiple tenants or residents and multiple service providers. Although this has traditionally been more of an issue for commercial properties, such coordination may become increasingly important in the residential area as well. Large- scale changes in society -- everything from increased telecommuting to implementation of the new telecommunications law -- are leading to a proliferation of services, service providers, and residential telecommunications needs. With such changes, the role of the landlord or manager and the importance of preserving control over riser and conduit space is likely to grow.

Building owners must retain maximum flexibility over the control of inside wiring of all kinds. If a building operator chooses to retain complete ownership and control over its property -- including inside wiring -- it should have that right. Presumably, if this proves to be a good business practice, the market will reward building owners who decide to retain control over coordinating such issues.

On the other hand, other building operators may find that their tenants' needs require less hands-on management and control by the operator. There may be a market for buildings in which tenants and service providers work these issues out themselves. If there is, property owners will respond by letting the market grow on its own, simply because it is in their interests to serve their tenants as efficiently as possible.

Indeed, it is likely that there is demand for both approaches to managing a building. If so, any governmental action is likely to distort the market and interfere with the efficient operation of the real estate industry. Thus, to serve tenants' needs most effectively, building owners should be allowed to make their own decisions regarding the most efficient way to coordinate the activities of multiple service providers and tenants.

4. Effective management of property.
A building has a finite amount of physical space in which telecommunications facilities can be installed. Even if that space can be expanded, it cannot be expanded beyond certain limits, and it can certainly not be expanded without significant expense. Installation and maintenance of such facilities involves disruptions in the activities of tenants and residents and damage to the physical fabric of a building. Tele-com-munica-tions service providers have little incentive to consider such factors because they will not be responsible for any ill effects.

As with the discussion of fire and building codes above, telecommunications service technicians are also unlikely to take adequate steps to correct all the damage they may cause in the course of their work. They are paid to provide tele-com-munica-tions service, and as long as the tenant has that service they are likely to see their job as done. Since they do not work for the building operator, he has little control over their activities. If building management cannot take reasonable steps in that regard, building operators and tenants will suffer financial losses and increased disruption of their activities.

In one instance reported by a member, a cable operator installed an outlet at the request of a tenant but without notifying building management. To do so, the operator drilled a hole in newly-installed vinyl siding and strung the cable across the front of the building. Not only was this unsightly (affecting the marketability of the property), but the hole in the siding created a structural defect that allowed water to collect behind the siding. The building owner was able to resolve the matter under the terms of its carefully-negotiated agreement with the operator. If the Congress grants operators the right of access, however, building owners may find that they cannot rely on such agreements any longer.

5. Physical and electrical interference between competing providers.
Allowing a large number of competing providers access to a building raises the concern that service providers may damage the facilities of tenants and of other providers in the course of installation and maintenance. It also poses a significant threat to the quality of signals carried by wiring within the building. Competitive pressures may induce service providers to ignore shielding and signal leakage requirements, to the detriment of other service providers and tenants in the building, or they may accidentally cut or abrade wiring installed by other service providers or occupants.

The building operator is the only person with the incentive to protect the interests of all occupants in a building. Individual occupants are only concerned with the quality of their own service, and service providers are only concerned with the quality of service delivered to their own customers. Neither the Congress nor the Commission can possibly police all of these issues effectively. Consequently, building operators must retain a free hand to deal with service providers as they see fit. If one company consistently performs sloppy work that adversely affects others in the building, the building owner should have the right to prohibit that company from serving the building. Otherwise, the building owner will be unable to respond to occupant complaints and will face the threat of lost revenue because of matters over which it has little control.