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Developer-Owned Telecommunications Infrastructure

Today, many residential real estate developers are considering developing, constructing, installing, and operating telecommunications facilities for voice, video, and data information services in their developments. These facilities generally consist of optical fiber, broadband cable, copper cable, and wireless transmission media. The developers would install these facilities throughout their residential developments, whether single family or multi-dwelling, so as to connect each of the residences they plan to construct in their developments. Moreover, many developers specifically decide to install fiber throughout their developments prior to dedicating the streets and other rights-of-way in their developments to the public. Thus, when dedicating streets and other rights-of-way to the public, the developers generally will be in a position through plat submission to reserve to themselves certain easements through which they have installed fiber or broadband cable, or copper facilities. While such easements will generally be non-exclusive on dedication, typically developers will be in a position to control the sourcing of telecommunications, cable, and/or information services. Often developers create an affiliate or subsidiary to provide these services for a set price, over the facilities they have installed to the residents of the developments, thereby enhancing the value of their residential developments, and garnering additional revenue from their developments.

The developers' consideration of placement of telecommunications facilities in their developments raises a number of legal and regulatory issues, the answers to which depend upon the types of facilities and services that the developers may provide over the facilities they install. This article focuses on developers' installation of fiber optic facilities.

As a general rule, when a developer installs fiber throughout its development, the developer is not subject to any federal or state telecommunications regulations. The U.S. Federal Communications Commission ("FCC") only regulates the use of (1) fiber that is unlit, i.e., without optical and electrical equipment attached, and (2) dark fiber, if the fiber is leased or otherwise provided to telecommunications carriers on a common carrier basis. Thus, if a developer installs fiber, but does not attach optical and electrical equipment to it, and does not offer it to telecommunications companies indiscriminately, the developer is not going to be regulated as offering dark fiber on a common carrier basis. If developers later become common carriers, or decide to lease dark fiber (assuming developers have not already lit such fiber), on a common carrier basis, the leasing of such dark fiber in these circumstances may be deemed a form of communications services, falling within the FCC's jurisdiction and subject to regulation under Title II of the Communications Act.

Once developers install and light fiber facilities throughout their developments and become common carriers, developers may use the fiber to provide a number of communications services, including, but not limited to, telecommunications services -- that is, competitive local exchange service, cable television services, and information services.

The lighting of fiber implicates regulation by federal and state authorities, depending on which telecommunications services the developers decide to offer over their lit fiber installations.

For example, if developers decide to provide local exchange or long distance telecommunications services over fiber installed in their developments, developers will be deemed to be a common carrier and subject to regulation by the FCC under the Communications Act. As a common carrier, a developer will have the duty, among other things, to provide interconnection with other telecommunications carriers, to charge just and reasonable rates, and to apply just and reasonable practices to the rendering of services, including avoiding unjust and unreasonable discrimination. Moreover, if a developer acts as a competitive local exchange carrier by providing local exchange dial tone telecommunications service to residents, the developer cannot impose unreasonable or discriminatory conditions on the resale of its services, and must provide, to the extent technically feasible, number portability, dialing parity to competing providers, access to its rights of way, and comply with several other regulatory requirements.

Most states will also have regulatory authority over developers who are providers of telecommunications services, but with certain limitations. For example, states cannot prohibit developers from entering the telecommunications market as competitive carriers and providing interstate and intrastate telecommunications services. States, however, regulate the quality of service, local and intrastate exchange rates for service, and enforce certain other requirements to protect the public health and safety. Local jurisdictions retain the authority to manage public rights-of-way within their jurisdictions, and may require fair and reasonable compensation for developers' use of public rights-of-way, provided such compensation is imposed on a competitively neutral and nondiscriminatory basis. Moreover, some developers plan their rights-of-way so that they are situated in private easements, and do not actually use public rights-of-way when they install fiber or other nonwireless facilities to provide service to residents. Nonetheless, in such circumstances, developers' facilities may cross public rights-of-way, and in these situations, will likely be deemed use of public rights-of-way subject to certain regulations by local authorities.

If developers decide to provide cable services over the facilities they install, such as fiber or broadband cable, developers most likely will be deemed a cable operator, operating a cable television system. Although a cable system does not mean a facility that serves subscribers without using any public rights-of-way, certain court decisions, as well as FCC decisions, strongly suggest that developers' offering of cable services over fiber or broadband facilities installed on a private easement nevertheless constitute a cable system, because the easements used will necessarily follow, parallel, impinge upon, or cross public rights-of-way. Consequently, if a developer provides cable service over a cable system, the developer will likely be subject to regulation as a cable system under the Communications Act. However, developers are not subject to any interconnection requirements with other carriers, and will essentially control the content of material transmitted over their cable systems, with limited exceptions.

Further, to the extent developers decide to provide both cable and telecommunications services over the facilities they install, there will be limited local regulatory requirements applicable, such as certain franchising requirements.

To the extent developers decide to provide information services over the fiber facilities they install, the FCC has determined that such information service using cable or cable modems is an information service, and not subject to regulation as a common carrier service. Thus, developers' offering of cable modem service to provide information services, such as Internet access, to its customers is not currently subject to regulation.

If you want to learn more about this subject or the potential practical and legal issues raised when residential developers install telecommunications facilities in their residential developments — whether single family or multi-family dwellings — contact Michael L. Glaser at (303) 757-1600.

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