******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** January 17, 1997 DA 97-131 Released: January 17, 1997Danny E. Adams, Esq. Kelley Drye & Warren LLP 1200 19th Street, N.W. Suite 500 Washington, DC 20036 Dear Mr. Adams: This letter is in response to your request for a letter ruling on an interpretation of Section 224 of the Communications Act of 1934, as amended. Specifically, you seek an opinion as to whether it would be unreasonable per se under Section 224(b) for a covered utility to demand a requesting telecommunications company, as a condition of entering into a pole attachment agreement, to waive all legal rights and remedies under Section 224. Your letter provides a hypothetical involving negotiations between a telecommunications carrier and a utility over the terms of a proposed pole attachment agreement. In your example, the parties have agreed to all issues, except for the inclusion of the following clause: By execution of the Agreement by its duly authorized representative, Licensee hereby accepts that the relationship of the parties shall be governed exclusively by this Agreement and Licensee waives any and all jurisdiction of federal, state or local regulatory authorities over the terms and conditions of this Agreement, access to Licensor's facilities, or any other matter respecting attachments to licensor's facilitates, including without limitation the fees, charges or rent due hereunder, for a period of ten years from the effective date. In the event that Licensee seeks relief from or alteration of any term or condition of this Agreement in whole or in part on the basis of any alleged jurisdiction of federal, state, or local regulatory authority, this Agreement shall immediately terminate and Licensee agrees that it shall promptly remove all its attachments from Licensor's facilities. Section 224 was enacted in 1978 in response to concerns raised by cable operators regarding unfair utility pole attachment practices. The intent was to minimize the effect of unjust or unreasonable pole attachment practices on the wider development of cable television service to the public. Amendments to Section 224 in the Telecommunications Act of 1996 ("1996 Act") were designed to address similar concerns arising from the anticipated entry of competitive telecommunications providers. Section 224, as originally enacted and as amended, acknowledges that parties in a pole attachment relationship do not have equal bargaining positions, and that the potential for barriers to competitive entry emanating from the lack of access or unreasonable rates is significant. Section 224(b)(1) states that "[s]ubject to the provisions of subsection (c) of this section, the Commission shall regulate the rates, terms and conditions for pole attachments to provide that such rates, terms and conditions are just and reasonable, and shall adopt procedures necessary and appropriate to hear and resolve complaints concerning such rates, terms and conditions." The provisions of Section 224(c) indicates that the Commission shall not regulate such rates, terms or conditions "where such matters are regulated by a State." Aside from this one exception, there is no other indication that the Commission need not regulate these issues. In Implementation of the Local Competition Provisions in the Telecommunications Act of 1996 ("Interconnection Order"), the Commission interpreted Section 224(f)(1) as a "directive" that requires a utility to "grant telecommunications carriers and cable operators nondiscriminatory access to all poles, ducts, conduits, and rights-of-way owned or controlled by the utility." The Commission explained that Section 224(f)(1) "seeks to ensure that no party can use its control of the enumerated facilities and property to impede, inadvertently or otherwise, the installation and maintenance of telecommunications and cable equipment by those seeking to compete in those fields." The 1996 Act also added Section 251 to the Communications Act. Section 251(b)(4) requires each local exchange carrier (LEC) "to afford access to the poles, ducts, conduits, and rights-of-way of such carrier to competing providers of telecommunications services on rates, terms, and conditions that are consistent with section 224." Together, Sections 224 and 251 indicate a Congressional intent that access responsibilities apply to LECs in the same fashion that they do to utilities. The Commission has previously indicated a preference for negotiations in the pole attachment context, however we also anticipate that negotiations for access and the resulting rates, terms and conditions will be conducted in good faith. As you have noted in your letter, covered utilities are required by law to comply with Section 224. You further suggest that such utilities should not be able to escape that obligation by forcing the users which the law is meant to protect to waive all their protective rights. We agree. In the Interconnection Order, the Commission considered a situation analogous to your hypothetical. Discussing the Section 251 requirement that incumbent LECs provide interconnection to new entrants, the Commission observed that new entrants have little to offer the incumbent. Rather, these new competitors "seek to reduce the incumbent's subscribership and weaken the incumbent's dominant position in the market. . . . Thus, an incumbent LEC is likely to have scant, if any, economic incentive to reach agreement." In that context, the Commission determined that a request by an incumbent that a new entrant contractually waive its legal rights or remedies could constitute a violation of the duty to negotiate in good faith imposed by Sections 251(c)(1) and 252: We reject the general contention that a request by a party that another party limit its legal remedies as part of a negotiated agreement will in all cases constitute a violation of the duty to negotiate in good faith. A party may voluntarily agree to limit its legal rights or remedies in order to obtain a valuable concession from another party. In some circumstances, however, a party may violate this statutory provision by demanding that another waive its legal rights. . . . [W]e find that it is a per se failure to negotiate in good faith for a party to refuse to include in an agreement a provision that permits the agreement to be amended in the future to take into account changes in Commission or state rules. Refusing to permit a party to include such a provision would be tantamount to forcing a party to waive its legal rights in the future. For the purposes of this letter, we think that the utility stands in a position vis-a-vis the competitive telecommunications provider seeking pole attachment agreements that is virtually indistinguishable from that of the incumbent LEC with respect to a new entrant seeking interconnection agreements under Sections 251 and 252 of the Act. We think it is contrary to the statute for a party to be pressured, as a condition of an agreement, to waive all its legal rights and remedies provided under the law. Efforts to compel such waivers constitute impermissible attempts to subvert the Congressional intent underlying Section 224. Upon review of your hypothetical, and our past statements regarding good faith negotiations, we conclude that demanding a clause like the one you described would be unreasonable per se, and a provision adopted as a result of such an unreasonable demand would be unenforceable as a matter of law. We trust that this letter helps to clarify the rights provided and the responsibilities imposed by Section 224. Sincerely, Meredith J. Jones Chief Cable Services Bureau