Let me introduce to you John Smith, your typical apartment landlord who is interested in sizable monthly payments from tenants and the phrase “no vacancy.”

Unfortunately, Smith's prospective tenants lately have been reluctant to enter into tenancy agreements because broadband Internet access via digital subscriber line (DSL) is not yet available in Smith's building.

Further, due to the prohibitive costs ($100 per apartment), the disruptions to residents of wiring and the inability to recoup costs for wiring common areas, DSL was not even an option that Smith wished to pursue.

The preceding scenario represents an instance where the apartment building and Internet customers can be substituted easily.

Instead of an apartment building, one can envision a hotel skyscraper or a corporate office complex. The costs for running fiber can be about $150,000 per mile in metropolitan areas and deployment times often are lengthy and unpredictable regardless whether the structure is an apartment building or an office complex.

Furthermore, some metropolitan areas have fiber moratoriums. The need for an Internet infrastructure to support high- speed access with easy setup and breakdown with minimal disruption to the existing infrastructure remains constant.

Why Wi-Fi?

The promise of Wi-Fi technologies addresses the speed of data and infrastructure cost issues.

With respect to speed, 802.11(b), one of the Wi-Fi standards, can obtain a maximum transmission speed of up to 11 megabits (MB) per second. To put this in context, it is about seven times faster than the typical DSL connection. 802.11(a) can obtain a maximum transmission speed of up to 50 megabits. A comparison of the time necessary to download a 100 MB file from a T1 line (8 minutes and 41 seconds), to 802.11(b) (2 minutes and 8 seconds) to 802.11(a) (26 seconds) provides ample illustration of the difference among the mediums.

With respect to infrastructure costs, there are virtually none as the technology is truly wireless and the transmission and receiving equipment is a fraction of the costs involved with implementing a comparative wireline infrastructure.

Numerous landlords such as John Smith are eagerly awaiting Wi-Fi technology to lure broadband-hungry tenants. A well-positioned provider or operator must be cognizant of the legal risks and the legislative or regulatory landscape to evaluate the costs and benefits associated with such a venture. Failure to adequately acquaint oneself may result in significant financial costs in the form of regulatory fees or undue hardship in the form of being on the receiving end of a Federal Communications Commission complaint for violating one of its regulations.

Below follows a brief overview of several of the potential legal and regulatory areas that demand a wireless provider's or operator's attention.

Legal risks of wireless technologies

The same wireless technologies that promise increased user flexibility, increased employee productivity and lower cost of network ownership also can expose network-based assets to considerable risks. While much of the discussion thus far has focused upon the risks stemming from unauthorized access (authentication) and stolen data (privacy), a number of legal issues also exist.

Although there are no specific federal statutes that define a minimum level of security for companies operating on the Internet, the issue is regularly an item of discussion among lawmakers and the information technology (IT) security industry.

In the 2002 Information Security Annual Survey, nearly two-thirds of IT security practitioner respondents say they would support a federal law requiring all organizations to adopt minimum security practices. The existence of the Gramm-Leach-Bliley Act (GLBA) and the Health Insurance Portability and Accountability Act (HIPPA) do impose liability on entities whose organizations are compromised and specific information is compromised. While GLBA and HIPPA only apply to financial and health care information, there is a move by privacy and civil liberties organizations to expand federal protection to other areas.

Furthermore, in a corporate setting, shareholders may be able to take advantage of state corporation statutes when corporate officers and directors fail to meet or address these obligations.

In addition to specific federal or state laws that may apply in this context, entities must be cognizant of the applicability of breach of contract and negligence claims. A breach of contract claim may result from a breach of a confidentiality provision, failure to satisfy an express or implied agreement to protect proprietary information or failure of a provider to offer a certain level of protection to its products or services. Negligence claims will arise when a party establishes by a preponderance of the evidence (defined by the courts as 51 percent likelihood) that the entity failed to use such care as a “reasonably prudent person would use under similar circumstances.” As the application of negligence claims to Internet intrusions remains largely untested in the legal arena, it still remains in one's best interest to err on the side of overly cautious.

Property rights also are likely to become an issue. While one's first impression may be that property rights do not apply to unlicensed spectrum, it would be a faulty assumption. Currently, disputes have arisen between airport authorities and wireless providers as to who has possession and the rights to provide wireless service on airport grounds. The potential revenue that can be gained or lost from the wireless service fuels the dispute, and such conflicts likely will become more common as the amount of potential wireless network revenue increases.

Although legal considerations should not always be considered risks, it is often necessary to characterize them as such in order to ensure they are given the due consideration that they deserve.

In addition to the host of traditional legal issues that a provider should be aware of including: liability, privacy concerns, third-party content issues, copyright and other intellectual property rights laws, wireless providers also must be cognizant of other less apparent legal issues, including regulatory classification issues and franchise regulations.

As an example, a wireless provider may unknowingly be deemed a common carrier and be responsible for complying with the regulations associated with the classification because the services are coupled with the wireless service.

Another example would be that a wireless provider may be considered a franchise, which in some states are required to register with the state and comply with disclosure procedures when marketing franchises.

Therefore, as much as possible, it is incumbent for a wireless provider to seek counsel as to the apparent and unapparent legal issues.

Additional spectrum allocations

The fevered pitch for additional unlicensed frequencies from consumers, manufacturers, the Wi-Fi Alliance and Congressional leaders has resulted in the release of a commission inquiry into examining the “possibility of permitting unlicensed transmitters to operate in additional frequency bands.”

Specifically, the commission is seeking comment on whether unlicensed use should be expanded to TV broadcast spectrum when it is not being used and also expanded to other bands, such as the 3650-3700 MHz. The commission claims that the potential allocation of additional unlicensed spectrum is a result of the “success” of the unlicensed device rules.

The Commission asserts that the success was a result of three factors. The first reason cited was that the bands are used primarily for ISM equipment that may not be impacted by interference from unlicensed devices, allowing for higher power and a greater operational range. The second reason is that the bands have sufficient spectrum to provide bandwidth uses such as video and permit multiple users to share spectrum. Third is the absence of restrictions placed on applications of devices that operate in the bands, allowing for unchecked device innovation and development.

In addition to the television stations in 13 metropolitan areas, one or two channels in the range of 14-20 are shared with the Private Land Mobile Radio Service (PLMRS) under Part 90 of the rules and the Commercial Mobile Radio Service (CMRS) under Part 20 of the rules. In the interest of the incumbents, the commission inquiry focused on whether geographic restrictions should be instituted on unlicensed operation where PLMRS or CMRS operations are present.

Should the legislation pass or the commission release an order, a substantial increase in the amount of unlicensed spectrum will be introduced into the marketplace.

Therefore, it is incumbent for wireless providers or operators to position themselves to avoid competition or disruption of current clients by entering into exclusive arrangements or providing a unique or tailored service.

Voice over wireless

In light of an open commission proceeding between voice over Internet providers (VOIP) and local exchange telecommunications providers, the introduction of voice over WLANs raises the potential for regulatory involvement.

The current controversy before the FCC stems from the argument that phone-to-phone Internet protocol (IP) telephony providers should not be responsible for submitting payment to local exchange carriers (LECs) known as access charges. Access charges are assessed upon all interexchange carriers that use local exchange switching facilities for the provision of interstate or foreign telecommunications services.

The FCC's 1998 Universal Service Report examined the issue of whether and to what extent services offered over the Internet should contribute to universal service.

In addition, the commissioners discussed not only the application of contributions to universal service, but also how these services should be regulated. Section 254(d) requires that “every telecommunications carrier that provides interstate telecommunications services” contribute to federal universal service mechanisms.

Therefore, the issue appears to hinge upon whether the entity provides “telecommunications service.” In the context of defining Internet “telecommunications services” the FCC examined computer-to-computer services in which calls are transmitted end-to-end in IP, with the computers on each end performing the protocol conversion from voice IP and back and phone-to-phone calls that use the Internet protocol.

The FCC reached the “tentative determinations” that computer-to-computer IP telephony services do not hold themselves out as telecommunications services, and phone-to-phone IP telephony services “bear the characteristics of telecommunications services.”

The practical effect of the commission's determination was that phone-to-phone providers “fall within the section 254(d) mandatory requirement to contribute to universal service mechanisms.”

It is important to note the FCC recognized that the subject matter pertains to “emerging services” and, as such, the tentative determinations may be reexamined to ensure that the FCC had “accurately distinguish[ed] between phone-to-phone and other forms of IP telephony.”

The development of WLANs voice services likely will be included in the commission's examination of the VOIP inquiry. As the technological differences between computer-to-computer and phone-to-phone continue to disappear, the “tentative determinations” of the Universal Service Report will become more and more difficult to maintain.

Wireless providers that couple their services with regulated services run the risk of triggering FCC regulation. Some of the potential commission regulations include regulatory fees, (Universal Service Fund, Telecommunications Relay Fund), obligations to charge just and reasonable rates and the requirement to submit to the FCC's formal and informal complaint rules.

As a result, it is incumbent on a wireless provider to carefully tailor its services in a manner to avoid an inadvertent regulatory classification and suffer the associated regulatory requirements.

Exclusive telecom contracts

In the spring of 2001, the FCC issued a new regulation that prohibited future exclusive contracts between all common carriers and commercial multi-tenant building owners. The practical effect of the commission regulation is to prevent one common carrier from enjoying a monopoly in a commercial multi-tenant environment.

The commissioners also noted that the prohibition may be applied to existing contracts and may be applied in the residential environment.

While one's first impression may regard the exclusive contract regulation as irrelevant to wireless services, it may in fact be a very costly assumption.

As an example, a company known as Vocera has developed an application where the user wears a badge that serves as a WLAN client with a built-in speaker-phone, thereupon providing voice services. While the commission has not yet been asked to review whether the specific regulation applies, (whether wireless services that provide some combination of voice and data can be prohibited from entering into agreements with commercial multi-tenant building owners) it may be motivated to do so in the near future.

The advantages and benefits of a new technology are usually the topics that garner the most attention.

Yet, the legal risks and the legislative or regulatory landscape deserve more, if not an equal amount of attention. Only with the assistance of competent counsel who is able to explain the legal and regulatory landscape will John Smith or any wireless provider be able to position themselves to weather any storm and achieve success in today's marketplace.

A full unabridged version of this article can be located at http://www.shulmanrogers.com/telecommunications.html

Jason Kerben is an attorney with the telecommunications group of the law firm of Shulman Rogers Gandal Pordy & Ecker. Kerben represents a number of wireless providers and tower owners before the Federal Communications Commission and local state public utility commissions. Contact Jason Kerben at 301-230-5200 or jkerben@srgpe.com