VII. MPOE Discussion

A. Definition

The FCC defines the MPOE as the closest practical point to where the utility's wiring crosses a property line or the closest practicable point to where the wiring enters a multiunit building or buildings. The LLDP was defined as the point at which the wiring under the control of the utility ends and the wiring under the control of the property owner begins. The FCC stated that the utility may establish the LLDP at the MPOE, but did not require it to do so.

In D.92-01-023, the Commission adopted the language of a proposed settlement (the settlement itself was not adopted) that provided that the LLDP should be located at the MPOE. This is the definition of the MPOE included in the proposed rules.

In D.93-05-014, the Commission clarified that the requirement in D.92-02-023 that the LLDP shall be located at the MPOE applies only to copper facilities.

At the time D.92-01-023 was adopted, CLCs did not exist. The CLCs believe that D.92-01-023 does not apply to them. The issue here is prospective in nature. We need not address the applicability of D.92-01-023 to CLCs. We must, however, determine what the rules should be for the future.

In order to encourage competition, we seek to ensure a level playing field. This generally means that all utilities should be subject to the same rules. In those instances where we have found that the ILECs have too much of an advantage, we have imposed restrictions on them that were not imposed on CLCs. In this proceeding, we will impose the same rules on all local exchange carriers.

Regarding the location of the LLDP at the MPOE, we see no reason why the same rules should not apply to all carriers. Additionally, there does not appear to be any specific reason why our requirement that the LLDP be at the MPOE should not remain. Therefore, we will require that any relocation of the MPOE or the LLDP result in the location of both at the same place, whether or not they were previously located at the same place.

In D.93-05-014, the Commission clarified that the requirement set out in D.92-02-023, that the LLDP be located at the MPOE, applies only to copper facilities. The proceedings that led to the present proceeding addressed only copper facilities. The determination of whether the LLDP should be located at the MPOE for facilities other than copper, is beyond the scope of this proceeding. Therefore, we will impose this requirement only on copper facilities.

The balance of these rules concern who may request, and who shall pay for, movement of the MPOE and/or the LLDP. There is no reason why these rules should be different depending on the technology used. Therefore, these rules will apply to all technologies, with the exception that the requirement that the LLDP be located at the MPOE shall apply to copper land line facilities only.

B. Movement of an Established MPOE

Verizon states that it should not be required to relocate an established MPOE on the same property because the rules promulgated by the FCC do not require it to do so. Verizon misses the point. The Commission directed that standards for MPOE relocation be developed in this docket. Whether relocation should be allowed at all is beyond the scope of this proceeding.

C. Applicability

Some of the comments received seem to be based on the assumption that these rules would apply only to ILECs. No party has demonstrated why ILECs should be treated differently from CLCs. Therefore, these rules apply to all local exchange carriers. Specifically, the MPOE/LLDP relocation rules apply equally to any utility that has an MPOE/LLDP.

D. Applicability to Single-Family Dwellings

Cox and DOD argue that these rules should apply to single-family dwellings. This proceeding was initiated to address continuous multi-tenant property. Single-family dwellings are beyond the scope of this proceeding.

E. Applicability to Non-Continuous Multi-Tenant Properties

DOD argues that these rules should apply to non-continuous multi-tenant properties. Pacific points out that it is unclear it as to whether a utility can be required to turn over facilities on a public right of way to the property owner as a result of the relocation. It is also unclear whether such a transfer would be legal. This proceeding was initiated to address continuous multi-tenant property. Applicability to non-continuous multi-tenant properties is beyond the scope of this proceeding.

F. Taking

Pacific and Verizon argue that facilities that are transferred to the property owner should be valued at fair market value. They claim that the use of net book value would constitute an unlawful taking.

The value of a business property is, to at least some degree, a function of the revenues it produces. The movement of the MPOE/LLDP will not restrict the incumbent utility's ability to provide service to its customers. Likewise, it will not affect the rates the utility may charge. Therefore, movement of the MPOE/LLDP will not affect the utility's revenues. Movement of the MPOE/LLDP may facilitate competition. If that is the case, it is the utility's ability to compete that will determine whether it loses or gains customers for its services. Therefore, we conclude that the utility's revenues will not be directly affected by movement of the MPOE/LLDP.

If one looks at the potential market for the facilities to be transferred, one finds that the only potential purchaser of the facilities is the building owner. The building owner's revenues come from rents. Movement of the MPOE/LLDP may make the property more attractive to potential renters. However, the rents that the property owner may charge are based on the market for the rental units. We have no reason to believe that movement of the MPOE/LLDP on a property is likely to affect the local rental market. In addition, movement of the MPOE/LLDP will increase the property owner's costs. Such costs may or may not be recovered through increased rents. In sum, the property owner's costs will likely rise while his or her rents may or may not. Therefore, relocation of the MPOE/LLDP may or may not be in the property owner's financial interest. As a result, we find that there is no significant market for the facilities that will be transferred to the property owner due to movement of the MPOE/LLDP.

Since we believe that there is no significant market for the facilities, and no loss of revenue to the utility, the only thing that remains is to make sure that the utility is no worse off due to the transfer. To make sure the utility is no worse off, the utility must recover its investment in the transferred asset. The

remaining unrecovered investment is the net book value. This is the amount that would be recovered from the property owner.

When the value of the transferred facilities is set at the net book value, the utility is no worse off after the transfer of the facilities than it would have been if the facilities were not transferred. Therefore, charging the property owner the net book value of the transferred facilities does not constitute an unlawful taking.

If we allow the utility to charge an undefined "fair market value" for transferred facilities, we provide the opportunity for the utility to raise the cost of or delay movement of the MPOE/LLDP. To the extent that such movement would encourage competition, this creates the potential for anti-competitive actions by the utility. Such a result would not be in the public interest.

Since the utility owns the existing facilities, it has a monopoly with respect to them. The property owner's only alternative, if technically feasible, is to build new facilities. Where the utility has a monopoly, the historical` practice is to set prices based on cost. In this instance, the cost is net book value.

For all of the above reasons, we believe that net book value constitutes just compensation for facilities transferred to the property owner as a result of movement of the MPOE/LLDP. Therefore, we will require that facilities transferred to the property owner as a result of movement of the MPOE/LLDP be valued at the net book value.

G. Utility Payment of Relocation Costs

Teligent proposes language that would have the utility initially bear the relocation costs. If other utilities use the facilities in the future, the utility would be allowed to recover a portion of the costs from them. However, these rules apply to situations where the relocation is not initiated by the utility. The beneficiary of the relocation is someone other than the utility, and the relocation is not necessary for the utility to provide service. Therefore, there is no reason that the utility should be required to pay for the relocation, and we will not adopt such a proposal.

H. Retention of Facilities by the Utility

Rule 5 provides that "The utility need not transfer property to the property owner if it is technically feasible to relocate the MPOE without such transfer, and if no state or federal statute, rule, regulation or order requires such transfer." Pacific states that such transfers will always be required, and that this sentence is unnecessary. DOD and Cox contend that the sentence could drive up the costs of some relocations. No party represents that the sentence is necessary. Therefore, we will remove it.

Teligent suggests that the utility should not be required to transfer facilities to the property owner provided that the utility would not be allowed to place restrictions on the removal, modification or replacement of the facilities that would otherwise be transferred. The utilities would also not be allowed to charge for the use of the facilities. Teligent does not explain, for example, who would own facilities that would replace or modify utility facilities, or to what standards such facilities would be built. Also, Teligent does not explain how a utility could be held responsible for the operation of facilities over which it has no control. This proposal is incomplete and unworkable. Therefore, we will not adopt it.

I. Who Can Request Relocation of the MPOE/LLDP?

The rules indicate that only the property owner can request relocation of the MPOE/LLDP. Some parties want tenants and other carriers to be able to request relocation of the MPOE/LLDP with the approval of the property owner.

Because the MPOE/LLDP is located on the owner's property, the owner's permission is necessary as a minimum. Tenants will come and go. Existing tenants may have different opinions and needs regarding the location of the MPOE/LLDP. Different tenants may have competing needs. The tenants' needs and desires are properly part of the landlord-tenant relationship. If there are differences of opinion between tenants regarding relocation, the landlord should be the one to resolve them. Therefore, the property owner should be the one to request relocation of the MPOE/LLDP. There is no reason, however, to prohibit the landlord from designating an agent to work with the utility on relocation of the MPOE/LLDP.

Other carriers only become involved when a tenant or landlord desires their services. They should work with the tenant and the landlord, or his or her agent, to arrange for the provision of their services.

Cox proposes that the property owner's agent be allowed to pay for the relocation. Our intention in allowing the property owner to act through an agent is for the convenience of the property owner. For example, it may be impractical for a property owner who owns many properties or who lives far away to make the arrangements for the relocation. Allowing the use of an agent will facilitate the relocation. Allowing the agent to pay for the relocation brings into question whether it is the property owner who is actually requesting the relocation. We see no reason why it is necessary for someone other than the property owner to pay for the relocation. Therefore, we will retain the requirement that the property owner pay for the relocation.

J. Income Tax Gross-Up Charge

Cox says that Pacific is inappropriately charging an income tax gross-up charge to projects associated with MPOE relocation. Therefore, Cox proposes that the income tax gross up charge not be applicable to MPOE/LLDP relocations because the relocation does not constitute an extension or an improvement. The issue concerns carrier compliance with D.87-09-026, and/or its tariffs. Therefore, the issue should be addressed through the filing of a complaint. To the extent that it requires an interpretation of the relevant federal income tax codes, a ruling should be requested from the Internal Revenue Service.

K. Resolution of Disputes

Cox proposes that the rules should be revised to provide that disputes over MPOE/LLDP relocation should be resolved in the same manner as for easement access disputes in the Right-Of-Way Decision (D.98-10-058). Teligent agrees. The purpose of this proceeding is to establish rules for relocation of the MPOE/LLDP. This should result in a reduction of such disputes. There is no reason to believe that there will be a large volume of such disputes that would justify establishing a special process for resolving them. Such disputes can be resolved through the filing of a complaint, or use of the expedited complaint procedure if appropriate.