FCC takes on anticompetitive broadband practices in MDUs

WaterWalk Las Colinas is a franchised property owned by a group of Wichita investors and led by Allan Dunne.
FCC regulations are regularly challenged on the grounds that the Commission lacks the authority to make its rulings.

Not for the first time, the FCC is examining the exclusivity deals that some landlords and communications service providers enter into to see if such arrangements inhibit competition in multiple dwelling units (MDUs) such as apartment buildings.

FCC Chairman Ajit Pai released a notice of inquiry (NOI) (PDF) on the topic “seeking comment on ways to facilitate greater consumer choice and to enhance broadband deployment in multiple tenant environments (MTEs) … The NOI seeks comment on whether additional Commission action in this area is warranted to eliminate or reduce barriers faced by broadband providers that seek to serve MTE occupants.”

The NOI refers most often to broadband, but the inquiry will also cover video services. Any new rules or invalidation of existing rules will affect telecom companies providing DSL and fiber-based services, along with their cable industry rivals.

The FCC is looking for information about any effects that revenue sharing agreements might have on service availability or competition among providers and if there are other practices it should be considering, including various exclusivity arrangements.

If the agency gathers enough compelling evidence that these activities are problems, it will consider issuing new rules to stem them.

Beyond that, the FCC is asking about state and local regulations that might inhibit broadband deployment or competition. The agency isn’t certain it has the authority to do anything about such regulations, but if they become a wide enough problem, it is seeking input on what remedies it might be able to pursue.

The agency last looked at the issue in 2008 and concluded that exclusivity arrangements between service providers and landlords do in fact inhibit competition. The FCC consequently outlawed such arrangements.

That ruling failed to eliminate the problem, however. Landlords quickly figured out several end-runs around the statute.

These include charging ISPs access fees (sometimes referred to as door fees) that can be prohibitive to competing ISPs, demanding revenue sharing agreements and entering exclusive marketing and advertising arrangements with one ISP, barring others from such activities on or near the premise.

In the 2008 action, the FCC also clarified some rules about ownership of wires in MTEs, but they apparently have a loophole: If a building owner owns the wires any ISP would use inside the building, then the owner is free to strike an exclusive deal with a single ISP.

In 2010, the FCC considered barring exclusive advertising and marketing agreements, but declined to do so.

Consumer advocates, along with smaller competitive ISPs, charge that all of those practices discourage competition and serve to keep prices artificially high.

The FCC document noted that that as recently as 2016, organizations including the service provider Incompas and the broadband trade organization ITTA have alleged that “competitive fixed and mobile broadband service providers continue to face challenges in expanding their service footprint because of various contractual arrangements in the MTE marketplace.”

While some state and local regulations enable or allow some of these practices, others have adopted regulations that were meant to encourage competition, but may have boomeranged.

For example, as the FCC noted in the NOI, the Multifamily Broadband Council (MBC) has asked the Commission to preempt a San Francisco ordinance requiring MTE owners to permit competing broadband providers to use existing wiring in the MTE upon request from an occupant.

This rule “may have the perverse effect of stifling broadband competition by privileging large, well-financed network providers over smaller ones which may be unable to enter into certain contractual terms (for example, undisturbed use of inside wiring or bulk billing arrangements) that may be necessary to secure the financing needed to deploy networks to multi-tenant buildings,” the FCC noted in the NOI.

FCC regulations are regularly challenged on the grounds that the Commission lacks the authority to make its rulings. In the NOI, the FCC asserted it has clear authority to rule on some of the matters it is seeking comment on, but it is also asking for comment on whether it has any authority at all on some potential measures, such as its ability to address state or local regulations.

And if that isn’t stuffing enough worms in a tiny can, the FCC is asking for comment on the potential impact of Chairman Pai’s proposal to reclassify broadband again, returning it to its status as an information service, rather than a communications service as it is currently designated.