FCC Chairwoman Jessica Rosenworcel announced plans to introduce a Notice of Proposed Rulemaking that would expand customer choice in apartments, condos, public housing, and other multi-tenant buildings.
The NPRM will cover two new areas of regulation. The first is that tenants will be able to opt out of bulk billing arrangements where landlords build broadband or cable TV into the price of rent. It’s an interesting idea and will benefit tenants who don’t want to buy the forced services. Some landlords have padded profits for years with practices like distributing a bulk satellite TV feed to tenants at a markup. In a country where less than half of homes still want to watch linear cable programming, it seems likely that a whole lot of tenants will opt out of that service, given the option.
Allowing people to opt out of broadband is trickier. There are certainly landlords who buy bulk broadband and mark it up as a moneymaker. But there are many landlords today that recognize that having gigabit fiber broadband is a great marketing tool for their apartments. These landlords buy a bulk broadband connection and provide broadband to tenants at a price lower than what the tenants could find on the market. Nobody should be forced to buy something they don’t want, but if enough tenants opt out of this arrangement, the landlord will likely have to raise the rates for everybody else. This is a dilemma for landlords, and it could result in landlords ceasing to offer cheap broadband. That might disadvantage more households than it benefits.
It gets even trickier to think about the many arrangements that have been made to bring bulk broadband to public or low-income housing. If tenants can opt out of these arrangements to save a little money or lower rent, it could kill the model of bringing broadband to public housing.
The NPRM also proposes to “increase competition for communications service in these buildings by making it more profitable for competitive providers to deploy service in buildings where it is currently too expensive to serve consumers because tenants are required to take a certain provider’s service.”
This proposal really piques my interest. I’ve been thinking about it, and I can’t think of anything that regulators can do to make it cheaper to physically bring broadband into MDUs. Landlords often have restrictions on the way that ISPs can build infrastructure. For example, they might require outdoor drops to be buried. They might not allow the installation of communications devices like fiber ONTs on the outside of a building. They might have restrictions on not allowing open wiring in public spaces. They might require an ISP to get its own electric feed and meter.
It’s hard to think that the FCC could eliminate these kinds of restrictions. The FCC has run afoul in the past when creating rules that conflict with the rights of property owners for issues like inside wiring and antenna placement. It seems unlikely that the FCC can find a way to reduce the cost of physical and aesthetic restrictions, and I’m looking forward to see what the FCC has in mind.
There is nothing that the FCC can do to fix the market behavior of ISPs. New rules that improve the chance of ISPs to compete in large MDUs will be welcome news to some ISPs – but new rules might drive other ISPs away from the MDU market. It’s hard to think that these new rules will have a significant impact on the majority of MDUs in the country, which are eight units or less. It’s hard to think of any rules that will boost competition in smaller MDUs.
However, the FCC is right to keep trying. The National Multifamily Housing Council says there are currently 23 million apartment units in the U.S. A lot of current broadband rules and subsidies have been clearly aimed at improving broadband in single family homes. The FCC has tried for several decades to improve competition in MDUs trying rules that did things like making it harder for landlords to have exclusive arrangements with an ISP. But landlords and ISPs have always quickly found loopholes in every set of new rules.
The MDU issue is similar to the old Alternative Operator Service and Payphone issues of the 1980s and 1990s, and continues to be a thorn in the side of efforts to enhance price competition and service quality. Hotels still can charge exorbitant rates for phone calls from our rooms, but at least most customers bring their own cell phones and can gleefully bypass this.
When the property owner is making carrier choices for the end users, and the owner is not necessarily one of the end users, it creates all sorts of monetary incentives (commissions, upcharges, etc.) that do not necessarily encourage price and service competition.
And just like the AOS and Pay Phone issues of thirty-plus years ago, the best situation in MDU broadband will be when end users get to utilize the services that they prefer to use at a price and service level that they have agreed to.