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California Telephone Association
FRIDAY REPORT
VOL 99-02 February 12, 1999

EMINENT DOMAIN LAW UNDER FIRE

Eminent Domain for California Wireless Carriers?

The Eminent Domain Law was, until recently, a seldom used provision that allowed public utilities to extend their facilities over private property when it is deemed in the "public interest". Today, that law is in jeopardy because of abuse by some of the new players in the telecommunications industry.

SB 177 has been introduced by Senator Steve Peace in response to a request from building owners and managers. The new bill amends the eminent domain law so that it precludes utilities offering competitive services from condemning any property for the purpose of competing with other entities in offering those services.

Prior to the introduction of competition, the telecommunications industry rarely, if ever, found it necessary to condemn property in order to gain access. Just having the threat of eminent domain was enough to convince property owners they should negotiate a reasonable deal and avoid protracted disputes. And once the monopoly provider installed its new lines, there would be no other such requests. But today, with literally hundreds of providers, all seeking to gain their competitive edge, property owners may be deluged with requests. And because each and every competitor has been granted eminent domain authority through its certificate of public convenience and necessity from the Public Utilities Commission, many are not reluctant to exercise that authority.

In early 1997 the California Law Revision Commission, at the request of the California Public Utilities Commission (CPUC), examined the possibility of making revisions to the eminent domain law. Its study found that, indeed, there was a problem developing with the potential for abuse of the law stemming from deregulated utility markets. But with respect to the telecommunications utilities, the abuse was already underway. The study questioned whether the law should continue to provide competitive businesses (as contrasted with monopoly businesses) with special rights not available in other industries.

The Law Revision Commission study proffered two options that could be considered. One would have local authorities - city or county - issue resolutions of necessity before a carrier could exercise their eminent domain authority. The other would have the CPUC exercise its authority over the utilities by either (a) requiring a resolution of the CPUC as a prerequisite to use of eminent domain, or (b) authorize the CPUC to adopt regulations controlling use of eminent domain. Either of these solutions would impose additional regulations for the industry to meet.

INFORMATIONAL HEARINGS

Informational hearings at the California Legislature have been likened to fishing expeditions. Until something bites, you don't know whether you're just wasting time or actually accomplishing some good. And like fishing, it's really not the results that count so much as the exercise one goes through. However, in the case of such hearings, the industry that may be the subject of the hearing generally hopes that nothing bites. That's because legislative "bites" can be hazardous to one's health.

Both chambers of the California Legislature have now held informational hearings for the telecommunications industry. On January 26, the Senate Energy, Utilities and Communications (EU&C) Committee, with its new chairperson, Senator Debra Bowen, started their hearing with good intentions to gather information from a wide array of industry and consumer representatives about issues important to each respective group. Unfortunately, the hearing digressed into a "beat-up-on-Pacific Bell" free-for-all when the subject of Caller ID was breached. While it appears the chair, like her predecessor, Senator Steve Peace, may have a particular dislike of Caller ID, there's no doubt she intensely dislikes the recent marketing practices Pacific has used to garner more Caller ID users. This issue has the potential to turn into an enormous "bite" that no one in the industry is going to like.

The second subject to bring controversy to the EU&C hearing centered on claims made by new competitors within the industry about Pacific's alleged anticompetitive interconnection practices. PDO Communications, a company with a novel approach to shared facilities (see accompanying article), claimed it was being denied an opportunity to provide its services because Pacific would not give away use of its local loop. This observer is not sure there was a lot of understanding of, or sympathy for, PDO's argument; but it provided an opportunity for others to "jump on", a practice all too common in such settings.

A couple of weeks later it would be the Assembly Utilities and Commerce (U&C) Committee's time for probing the telecommunications industry. New chairman, Assemblyman Rod Wright, started the hearing by announcing the release of a comprehensive briefing book. The book, prepared by committee staff, provides a comprehensive overview of the more important issues being debated at both the national and state levels.

The first group of presenters included representatives from the cable TV industry sharing their plans to extensively develop the high speed access and cable telephony businesses. Discussing their perceptions of changes underway in the telecommunications industry, they believed there will be a significant shift in the market once business and residential customers realize the advantages of exceptionally high speed data transmissions and the capabilities of the cable industry in this area.

CTA's testimony in both the Senate EU&C hearing and the Assembly U&C hearing, was presented by EVP Barry Ross. The comments focused on rural and high cost issues and their impacts on small and mid-size companies. Suggesting that policy makers and regulators must take an active role in assuring the residents of high cost areas do not become the telecommunications technology "have nots" of the coming decade, Ross outlined three essentials for their focus. First, eligible telecommunications carriers must be allowed an opportunity to recover the full cost of providing service in their high cost areas. Second, there should be incentives in place that encourage the deployment of much needed infrastructure in high cost areas. And finally, the artificial barriers that impede local carriers from providing advanced telecommunications services should be removed.

PDO vs. PAC BELL

Pacific Bell won the first round of a rather unusual debate with one of its new competitors; but, given the interest the commission had in the new idea being debated, one has to wonder how many more rounds will be won on reason and logic.

PDO Communications is a competitive local exchange carrier (CLEC) that is seeking to have access to Pacific Bell's local loop in order for it (PDO) to provide digital subscriber line service for Internet connections. The difference between the PDO request and the request of all other CLECs is that PDO wants the access for free! PDO boldly claims that, inasmuch as Pacific is already providing voice grade service on the same loop, the incremental cost of allowing PDO to share the same line and provide high speed digital subscriber loop service is zero. The company is seeking to unbundle a part of the loop, thus creating a subloop, and to have the primary carrier share this subloop for free.

In a commission decision on approval of an interconnection agreement between PDO and Pacific Bell, the commission approved all other portions of the agreement but held off making a decision on the request for the free sharing service. The proposed sharing of the loop, according to the commission, raises technical questions as to how such sharing would be physically accomplished: Are there different hardware needs to set up and maintain each company's individual user services? What means are necessary to avoid interference between each provider? What costs are entailed for the purchase of both the subloop and related hardware? What would be the result if a customer defaults or a service dispute arises regarding the service of only one of the providers sharing the loop?

Recognizing the Federal Communications Commission also has this issue on its radar screen, the CPUC decided to hold off until further study is completed.

Libby Kelley
Executive Director
Ad Hoc Associaiton of Parties concerned About the FCC's Radiofrequency Radiation Health and Safety Rules
aka: Council on Wireless Technology Impacts

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