Landlords Risk Losing Grip on Tenants’ Internet Under Biden Plan

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Upstart broadband provider Sonic had a tough time signing up apartment residents in San Francisco -- until the city passed a law making clear that tenants aren’t limited by exclusivity deals their landlords have struck with internet service providers.

“We were able to knock down those barriers” and run lines into more buildings, Sonic’s chief executive officer and co-founder, Dane Jasper, said in an interview.

Sonic’s success may be a prelude to relief coming for the estimated 30% of Americans who live in apartment and condominium buildings and are limited in their broadband choices. President Joe Biden last week said he would ask the U.S. Federal Communications Commission to bar anti-competitive arrangements between landlords and service providers that advocates blame for poor service and high prices.

The move was part of a White House executive order to boost competition in sectors across the economy that have seen consolidation -- from agriculture to pharmaceuticals to technologies such as internet service. Biden’s plan faces opposition from business groups, with cable companies and landlords saying exclusivity deals help spread broadband investment.

At stake is a rich market of apartment and condominium dwellers that critics say has been carved up by providers.

Federal law prohibits exclusive access agreements between property owners and broadband providers. It doesn’t bar other practices, such as payments to the property owner, or exclusive marketing rights within a building.

Critics say those arrangements fortify buildings against entry by competing providers.

“What we saw happening was a modern form of payola, where cable companies and building owners were colluding to keep out competition,” said San Francisco City Attorney Dennis Herrera.

“Consumers were the ones who suffered,” Herrera said in an email. “We’re pleased to see that the Biden administration is urging the FCC to adopt San Francisco’s pioneering approach.”

Jessica Rosenworcel, acting chairwoman of the FCC, told reporters at a July 13 news conference that the one-third of the population who live in apartments “should have the benefits of competition.”

The FCC has considered rules on apartment broadband service since at least 2019, and Rosenworcel said she wants to take “a fresh look at and start talking to my colleagues.” She left unclear when the agency might act.

Landlords say there’s abundant broadband choice for apartment dwellers. There are at least two broadband providers in roughly 76% of apartment communities, real estate associations told the FCC in 2019 when the commission began a study of the issue that hasn’t yet concluded.

“Our members try to bring competition, to bring providers on site,” said Kevin Donnelly, vice president, government affairs for the National Multifamily Housing Council, an apartment industry group.

Good broadband is “an absolute essential” for attracting tenants, Donnelly said in an interview.

“It’s a competitive advantage,” Donnelly said. “That means they’re going to lure the very best providers.”

Jasper, the Sonic CEO, said he still finds what he politely terms “landlord hesitancy,” notwithstanding the 2017 San Francisco law that requires access.

“It’s quite infuriating,” said Jasper, who has built the business from its founding in 1994 to the largest independent broadband provider in northern California. “The default answer is always, ‘No.’ ”

The San Francisco law lays out steps for gaining access to building, such as site visits that give a chance to explain procedures to landlords and can help to persuade them, Jasper said.

Donnelly, of the National Multifamily Housing Council, said the San Francisco law acted mainly to boost “cherry picking” as providers flocked to luxury properties while doing little to spread broadband among less affluent groups.

Cable providers have argued against restricting exclusive wiring, exclusive marketing, and revenue sharing agreements. “Prohibitions and restrictions may inhibit investment and deployment in buildings,” NCTA - The Internet & Television Association, a cable trade group, said in a 2019 filing.

“Building owners are solely responsible for determining how many broadband providers may offer service to their tenants,” Brian Dietz, a spokesman for NCTA, said in an email Wednesday.

In his July 9 executive order, Biden “encouraged” the FCC to begin a rulemaking “to prevent landlords and cable and internet service providers from inhibiting tenants’ choices among providers.”

The FCC is independent, but in practice follows policy preferences of the White House. Right now the agency is in a partisan 2-to-2 split under the acting Democratic chairwoman, Rosenworcel. Some policy groups and lawmakers have urged Biden to nominate a permanent chair to move the agency toward a working Democratic majority.

Other cities could replicate San Francisco’s experience of greater competition if the FCC were to act, said Ernesto Falcon, senior legislative counsel for the Electronic Frontier Foundation, which backs more broadband service.

“It’s a very low-hanging fruit to promote competition in a lot of markets,” Falcon said in an interview.

©2021 Bloomberg L.P.

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