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Open Access for Apartment Buildings

Doug Dawson

San Francisco recently passed an interesting ordinance that requires that landlords of apartments and multi-tenant business buildings allow access to multiple ISPs to bring broadband. This ordinance raises all sorts of regulatory and legal questions. At the most recent FCC monthly meeting, the FCC jumped into the fray and voted on language that is intended to kill or weaken the ordinance.

The FCC's ruling says that a new ISP can't share wiring that is already being used by an existing broadband provider. I call this an odd ruling because there are very few technologies that share wires between competitors — with most fast broadband technologies a new ISP must rewire the building or beam broadband wirelessly. This means the FCC's prohibition might not make much of a difference in terms of overturning the San Francisco ordinance. The only competitive broadband technology that routinely uses an existing wire is G.Fast, and even that can only be used by one broadband provider at a time and not shared. I can't think of any examples of a practical impact of the FCC ruling.

The FCC's ruling is odd for a number of other reasons. It's certainly out of the ordinary for a federal agency to react directly to a local ordinance. My guess is that the FCC knows that many other cities are likely to jump onto the open access bandwagon. Cities are getting a lot of complaints from apartment tenants who don't have access to the same broadband options as single-family homes.

The FCC ruling is also unusual because it violates the FCC's overall directive from Congress to be pro-competition. The FCC order clearly falls on the side of being anti-competitive.

What I find most striking about this decision is that this FCC gave up authority to regulate broadband when they killed Title II regulation last year. I guess what they meant was that they are giving up regulating broadband except when it suits them to regulate anyway. It's an interesting question if the agency still has the authority to make this kind of ruling. It's likely this lack of regulatory authority that forced the FCC to make such a narrow ruling instead of just overturning the San Francisco ordinance. I always knew it wouldn't be long before the FCC selectively wanted back some of their former Title II authority.

The MDU market has an interesting history. Historically the large apartment buildings were served by the incumbent providers. The incumbents often stealthily gave themselves exclusive rights to serve apartments through deceptive contractual practices, and the FCC prohibited some of the most egregious abuses.

For many years competitors largely weren't interested in apartments because the cost of rewiring most building was prohibitive. In the last few years, the MDU market has changed significantly. There are now wiring and wireless technologies that make it more affordable to serve many large apartment buildings. There are now numerous competitors operating in the space. Many of them bring a suite of services far beyond the triple play and also bring security, smart camera solutions to make tenants feel safe, smart sensors of various kinds, and WiFi in places like hallways, stairwells, parking garages and outside. These new competitors often require an exclusive contract with a landlord as a way to help cover the cost of bringing the many ancillary services.

There is another regulatory issue to consider. There have been several laws from Congress that have been tested in the courts that give building owners the right to keep ISPs off their premise — this applies to single-family homes as well as the largest apartment buildings. It won't be surprising to see building owners suing the City for violating their property rights.

Yet another issue that muddies the water is that landlords often elect to act as the ISP and to build broadband and other services into the rent. Does the San Francisco ordinance prohibit this practice since it's hard for any ISP to compete with 'free' service?

Another area affected by the ordinance might best be described as aesthetics. Landlords often have stringent rules like requiring that ISPs hide wiring, electronics boxes, and outdoor enclosures or huts. It's a bit ironic that the City of San Francisco would force building owners to allow in multiple ISPs and the myriad wires and boxes that come with open access. San Francisco recently got a favorable court ruling saying that aesthetics can be considered for small cell deployments and it seems odd in MDUs that the City is favoring competition over aesthetics.

At the end of the day, I think the City might be sorry that they insinuated themselves into an extremely complicated environment. There are likely dozens of different relationships today between landlords and ISPs, and it seems like a slippery slope to try to force all apartment owners to offer open access.

I know cities have been struggling with the open-access issue. They receive complaints from apartment tenants who want different broadband options. It's not hard to understand why a city with a lot of apartment dwellers might feel compelled to tackle this issue. I know other cities that have considered ordinances like the San Francisco one and abandoned the issue once they understood the complexity.

The City made an interesting choice with the ordinance. The City elected to require open access to help foster consumer choice. However, it's possible that the long-term results might not be what the City expected, and the ruling could drive away the creative ISPs who elect not to compete in an open-access environment.

It seemed almost inevitable that the City ordinance will be challenged by somebody — but the courts were a more logical place to fight this battle than at the FCC. If anything, the FCC has just clouded the issue by layering on a toothless prohibition against the sharing of wires.

By Doug Dawson, President at CCG Consulting
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