In February, the Federal Communications Commission (FCC) issued a new multifamily broadband rule that will have wide-reaching implications for both broadband providers and multifamily property owners.
The Report and Order and Declaratory Ruling was issued via a proceeding that apartment owners have been watching closely for nearly five years. The FCC opened this docket, under the title of “Improving Competitive Broadband Access to Multiple Tenant Environments (MTEs),” to examine the terms of agreements between broadband providers and owners of residential, office, and retail properties.
While perhaps well intended, the new rule disrupts the way many multifamily housing providers structure broadband partnerships and ultimately discourages broadband infrastructure investment.
What Are the Implications for the Multifamily Market?
The stated goal of the action is to boost competition, lower costs, and increase choice for consumers in the multifamily broadband market. However, the National Multifamily Housing Council (NMHC) and the broader real estate industry have continually argued that the order actually does nothing to help the renters it intends to serve.
NMHC and other industry advocates fear that this regulation of the multifamily broadband market could inadvertently discourage investment and harm deployment and maintenance of broadband networks, particularly in already underserved properties most in need of broadband deployment and modernization.
The existing partnership model has been extremely successful in ensuring the delivery of reliable, high-speed broadband to renters. The reality is that competition is already strong and broadband deployment in the multifamily area is working as intended, with nearly 80% of apartment properties having two or more broadband providers on site, according to recent industry survey data.
Unfortunately, the market is already signaling that deployment and maintenance agreements are slowing at the exact time we need to double down on our efforts to bridge the digital divide across the nation.
What Does the Order Do?
The order lays out three primary rules that require industry compliance. More specifically, it:
1. Bans exclusive and graduated revenue share agreements
The new rules ban cable operators and telecom providers from entering into new agreements that allow for an apartment owner to receive compensation on a graduated basis. Additionally, although uncommon, the rule prohibits broadband providers and property owners from entering into exclusive revenue share agreements. Both of these restrictions apply to existing and future contracts. It’s important to note that this provision does not prohibit other forms of cost or revenue sharing.
2. Clarifies that sale and leaseback wiring agreements are prohibited
Based on an updated interpretation of the FCC’s current cable inside wiring rules, the order establishes that “sale and leaseback” agreements are prohibited.
3. Requires providers to disclose exclusive marketing agreements to renters
Cable operators and telecom providers must now disclose the existence of any exclusive marketing agreement to all residents or prospective residents in marketing material or signage at a property.
Who Does the Order Affect?
The order is complicated, particularly because not all providers are subject to the new requirements. In fact, providers that offer only broadband services do not have to comply. Who must comply varies with each individual rule within the order, so providers should consult their legal team to fully understand compliance.
It’s also important to note that the order does not impose any obligations on property owners; put another way, the FCC has no authority to regulate property owners. However, the impact on multifamily property owners will be felt through the regulation of their provider partners.
What Can the Industry Expect Next?
This breakdown just scratches the surface, so providers and owners should be sure to consult an attorney for specifics on legal obligations.
The FCC has not yet indicated whether additional orders will be issued in this space. However, this proceeding remains open—meaning the FCC could adopt additional, related rules at some point in the future.
That’s why it’s now more important than ever that the industry continue its work to educate policymakers about the significant and costly work it does on a daily basis to deploy and maintain broadband networks in partnership with providers to ensure apartment residents have access to high-quality, reliable broadband.
NMHC will continue pressing policymakers to avoid imposing new regulations on providers and property owners that will ultimately work against our shared goal of boosting deployment and modernizing our broadband infrastructure, especially in low-income and smaller properties that desperately need these investments.
