FCC aims to expand competition for internet service in apartment buildings

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In a unanimous vote, the Federal Communications Commission decided last week to open up apartment and condominium buildings to greater broadband competition.

A 2008 rule already in effect limited landlords’ ability to enter into exclusive agreements with cable and internet service providers, but there were loopholes that allowed providers and landlords to keep tenants locked in with an ISP – whatever whatever price he wanted to charge.

The new rule would require landlords to disclose these arrangements and give tenants more options.

Susan Crawford teaches law at Harvard. She said this FCC decision is pro-consumer but does not fully address key competition issues.

Susan Crawford: They say you can’t have exclusive marketing deals that aren’t disclosed. But there is no ban on exclusive marketing deals themselves. We also know that suppliers have often used what are called bulk billing agreements in buildings. So in exchange for access to the building, they will provide a wholesale price for all apartments in it, which also locks in landlords and tenants – and this is not affected by this regulation. So there are a variety of ways it won’t ultimately make much of a difference. It is very difficult to apply. And the big picture is that lines to the building are pretty uncompetitive in the United States, especially in metropolitan areas. It is therefore likely that the very low number of choices will remain in place.

Kimberly Adams: With all those caveats you mentioned earlier, if I am a tenant and am presented with an option for an ISP, what are my options? What can I do?

Crawford: Well, we put a lot of emphasis on apartment dwellers to organize themselves and come up to the landlord and say, ‘We would really like to have another choice. But other than that, the tenant doesn’t have much influence.

Adam: What shall we do now?

Crawford: The FCC will try to come up with rules to do their best to enforce this order they issued recently. And tenants, I hope, will learn that they should ask a lot of questions about the vendors who might possibly come into their building. So it might be in the nature of a consumer awareness campaign, just because you’re an apartment building doesn’t mean you should only have one choice of internet provider.

Adam: So what is, I guess, the point of all this?

Crawford: Well, it’s a pro-consumer movement. He’s telling the owners that people will be watching, I guess, if there’s any gains between the broadband provider and the owner. Look, the big picture is that cities and states are getting a huge payoff from cable companies — they’re getting 5% of video revenue from those providers. And so it’s not in their interest, really in their interest, to change the competitive image in metropolitan areas. If you live in Paris, for the past 12 years the French government has required all new buildings over 12 units to have fiber going to the basement of the building, so the landlord can’t block that. We don’t have anything like that in the US, nor do we have any rules that say you have to use city infrastructure that’s shared to provide internet access. And this is the case in many northern European countries. We are therefore in a rather backward situation in terms of competition as a whole.

Adam: What does this change mean for owners?

Crawford: Well, there are certainly no more exclusive revenue-sharing agreements allowed under this order. They should therefore not make such arrangements. They shouldn’t be engaging in a particular scam, which is having the broadband provider sell the wires they have in the building to the landlord and then having the landlord lease them to an exclusive supplier. It was being done across America, and the FCC blocked it. Owners will therefore have to be vigilant and pay attention to these rules.

Adam: Do you feel like this is actually going to make the internet cheaper for anyone?

Crawford: Look, we’re not addressing the deep structural lack of competition in America. This would require a much more courageous policy than that exemplified by this particular order. It’s a step, however, on the road to saying that high-speed Internet access is really a utility, like sewer, water and gas, that should be part of a prosperous life, no matter where. you live. We are therefore moving in this direction. We just have a long way to go.

Related Links: More from Kimberly Adams

Here is a link to the latest FCC decisionas well as the commission’s 2008 rule. In case you want more than one summary, PCMag has a good one.

During our conversation, Crawford mentioned that some cities and states get 5% of revenue from major internet and cable providers. There are a story on Governor.com explaining that “franchise fee”. But as the article notes, with more and more people “cutting the cord,” many states and cities across the country are trying to figure out how to get streaming companies to pay that franchise tax.

Suffice it to say, between where we are right now and the full recognition of broadband internet as a utility, many systems and rules will likely have to change.

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