Brownstein Client Alert, July 16, 2019
The Federal Communications Commission (“FCC”) has launched a review of arrangements between building owners and communications companies that govern the provision of communication services to building tenants. The purpose of the review is to determine whether any of these arrangements may be inhibiting competition for broadband services or exacerbating the “digital divide” between those having access to high-speed internet services and those without such access. The FCC’s review is critically important for service providers and the owners of apartment buildings, condominiums, shopping malls, cooperatives, commercial offices—virtually any building or campus housing multiple tenants. The FCC calls these spaces multiple tenant environments or MTEs. Initial comments will be due 30 days after the FCC’s rulemaking notice is published in the Federal Register, which should occur in the next few weeks. The FCC’s rulemaking notice can be found here.
The FCC has long been concerned about the ability of competing providers to gain access to MTEs. At the same time, it has recognized that overly burdensome rules regarding the sharing of in-building network facilities could dampen the incentive of providers to invest in those facilities in the first place. Although the FCC does not have jurisdiction over building owners, it has exercised its authority over telecommunications carriers and cable companies to bar certain practices it deems anticompetitive. Carriers and cable companies, for example, cannot enter into agreements with building owners to be the exclusive provider of services to tenants. A number of other types of arrangements, such as revenue sharing agreements, exclusive marketing rights, sale and leaseback of wiring inside the buildings, exclusive rooftop rights for antennas, have, to date, been allowed. In this proceeding, the FCC proposes to take another look at such arrangements.
Types of Arrangements Under Scrutiny
Revenue Sharing Agreements
Revenue sharing agreements, as their name suggests, involve various arrangements through which the building owner receives some form of consideration in return for providing access to the building’s tenants. Consideration could take the form of a percentage of the revenue generated from subscriber fees, a one-time payment (sometimes called a door fee) based on the number of units in the building, or an agreement to contribute to the building’s infrastructure, such as providing free Wi-Fi in common areas. The FCC seeks comment on whether to require the disclosure of such arrangements or, if found to have anticompetitive effects, whether they should be restricted or banned.
Rooftop Antenna and DAS Facilities
The FCC is seeking comment on the benefits and drawbacks of exclusive agreements for access to space on rooftops to deploy wireless antennas and related facilities. These facilities are often used to transmit information back to central switching points—called backhaul services. The agency seeks comment on the prevalence of such agreements and their common terms and conditions. Some competitive providers argue that these exclusive agreements reduce competition without providing benefits to building tenants. Others state that they promote deployment by encouraging building owners to provide rooftop space. The FCC asks if it should bar such arrangements if found to hinder broadband competition for building tenants.
The FCC also is seeking comment on arrangements regarding deployment of distributed antenna systems (“DAS”), which are small, in-building antennas connected by inside wiring that help boost wireless signals. The agency recounts claims by some providers that some DAS are dedicated to a single wireless provider that may charge “monopoly” rents or preclude access to other wireless carriers. The FCC also identifies concerns that exclusive arrangements covering older DAS systems may hinder deployment of new, 5G wireless services. The agency seeks comment on the validity of such claims and whether any action is required.
Exclusive Wiring or Marketing Arrangements
One of the major considerations in providing services to MTEs is obtaining access to, or gaining permission to deploy, wires to the individual units in the building. There are a number of existing rules regarding the control and use of inside wiring. The FCC is seeking comment on arrangements that might offer a single provider exclusive use of inside wire, such as when a provider sells the inside wiring to the building owner and then leases it back under some form of exclusive arrangement—a sale and leaseback arrangement. The agency asks if such arrangements violate FCC rules or are otherwise anticompetitive. The FCC has previously concluded that exclusive wiring arrangements do not “absolutely” preclude competitive entry and it asks if that finding still holds.
Exclusive marketing arrangements grant one provider exclusive rights, often in exchange for some form of payment, to engage in certain marketing activities within the building, such as setting up a booth in common areas. The FCC has previously found that such arrangements may reduce costs to subscribers or help defray deployment costs. While not revisiting that finding, the agency nevertheless asks if there are some exclusive marketing arrangements that effectively operate to exclude competitors. Some competitors have complained that the agreements have been interpreted by building owners as creating a risk of litigation if they give their residents a choice of internet provider.
State and Local Regulations/Preemption of San Francisco Ordinance
In addition to contractual arrangements, the FCC seeks comments on state or local regulations or policies that have either proven effective in enhancing competition, or, conversely, that deter broadband deployment in MTEs. Some states, for example, have mandatory building access laws.
In addition to seeking comment on the practices outlined above, the FCC also preempted a San Francisco ordinance to the extent it required the sharing of inside wiring that is currently being used by another provider.
As indicated above, the FCC’s inquiry into these common arrangements between building owners and communications providers may have profound implications for both parties and they may wish to provide relevant information or otherwise comment in response to the myriad of questions posed in the rulemaking notice. As noted, initial comments will be due within 30 days of the notice’s publication in the Federal Register, and reply comments will be due 30 days thereafter.
This document is intended to provide you with general information regarding the FCC seeking comment on whether to impose new restrictions on certain exclusive arrangements between building owners and broadband communication providers. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions.