By: Phil Veletzos

On the eve of possible new rules from the FCC affecting bulk service agreements, RealtyCom Partners offers the following survey of recent State and Federal rules that may impact infrastructure, service provider negotiations, and operations in multifamily properties. This summary is based on our practical experience in the multiple dwelling unit (MDU) telecom, and technology industries. We are not attorneys and therefore this is not legal advice. We strongly recommend our clients consider relevant local laws that may impact broadband access deployment, and chargebacks–and to consider obtaining legal advice from a local attorney experienced with such matters. 

Summary of State & Federal Rules

Federal Updates

FCC Bulk Billing Arrangements
Possible “opt-out” options for residents in properties with bulk agreements. Discuss direct resident billing with your service providers…just in case.

Digital Discrimination Rules
Effective January 2024: Rules against broadband access discrimination based on income, race, ethnicity, etc. Enforcement anticipated to begin September 22, 2024. Ensure competitive service levels to avoid complaints. Challenges are pending.

Expanding CBRS
Changes will increase wireless broadband access, affecting coverage areas that include an estimated 71 million people. May lead to enhance connectivity and control of building systems in MDUs.

State and Local Updates

Colorado
House Bill 24-1334: Mandates open access, for service providers upon tenant request.
House Bill 23-1095: Limits bulk service markups to 2% or $10.

Seattle
Chapter 7.25 Third Party Billing: Limits an Owner’s resale of a utility to a tenant to $2 per utility per month, not to exceed a charge of $5/month for all utilities.

San Francisco
Article 52: Protects residents’ rights to choose their telecom service providers. Requires property owners to facilitate new provider installations upon tenant request.

 

Federal

FCC – Pending Notice of Proposed Rulemaking – Bulk Billing Arrangements

On March 5th, the FCC announced a plan to, “address the lack of choice for broadband services” available to MDU residents. Industry followers are predicting the FCC may mandate an “opt-out” option for residents living at a property where a bulk agreement is in place allowing those residents to avoid any fees tied to the property’s data or video service. Although this would not require the bulk Service Provider to have direct subscriber billing capabilities, it may be a valuable option for Owners who don’t want to struggle with tracking the “opt-out” residents with the provider and their internal accounting department to make sure those residents are not invoiced. 

Given these possible changes, we have recommended our clients inquire from their bulk service providers if they have the capability to invoice residents directly (subscriber-based billing) and, should the Owner desire such a switch, the related contract/economic terms. This is especially relevant in cases where the Owner is paying the CapEx for the property’s Managed Wi-Fi system. Additionally, for projects under construction or in design, Owners should also ensure that the planned project has infrastructure to support the Service Provider for subscriber-based service delivery, and should there be a switch, that other building systems remain operational.   

Some providers offer a network-as-a-service option, where the owner would pay a fixed fee, per month, to keep the system operational. RealtyCom Partners has started negotiating these options where possible so that Owners can enter into agreements with a clear understanding of the system costs should this ruling pass.

FCC – New Rule Banning Digital Discrimination

The Infrastructure Act of 2021 mandated that the FCC adopt rules to facilitate equal access to broadband internet access. The FCC released those rules in January 2024 (47CFR 0,1,16) establishing a Task Force to Prevent Digital Discrimination and defining discriminatory access as “policies or practices, not justified by genuine issues of technical or economic feasibility, that:

(1) differentially impact consumers’ access to broadband internet access service based on their income level, race, ethnicity, color, religion or national origin, or (2) are intended to have such differential impact.” Both intentional discrimination (disparate treatment) and acts that result in discrimination without discriminatory intent are covered by the rule.

For non-intentional “disparate impact” discrimination statistical disparity alone will not establish liability, but the burden will be on “covered entities” to show that the challenged policy or practice is justified by “genuine issues of technical or economic feasibility.” The FCC took an expansive view of “covered entities” in section 91 to include not only service providers, but also entities that provide services that facilitate and meaningfully affect consumer access to broadband internet…” such as building owners, contractors, infrastructure owners, and landlords. 

The effect of this new rule is that multifamily owners, operators, and contractors may be the focus of complaints about disparities related to more than their opportunities to subscribe, but to the comparable speeds, capacities, latency, or other quality of service metrics starting September 22, 2024. Digital discrimination complaints are to be reviewed by an Enforcement Bureau monthly, and in coordination with the Consumer and Governmental Affairs Bureau, to evaluate any macro trends in geographic or demographic data to determine whether there is possible discrimination. Where credible evidence suggests that persons in a protected group were treated differently as the result of a policy or practice, the Enforcement Bureau, at its discretion, could use its authority to conduct investigations; issue Letters of Inquiry and subpoenas; conduct audits; inspect licenses and/or facilities; and collect information. Further, the Enforcement Bureau will use the full range of its enforcement options to enforce compliance, including the possibility of forfeiture penalties.

The rule was passed over strenuous dissent as an unprecedented attempt to establish federal control over the US broadband industry and has been challenged by industry groups including the US Chamber of Commerce in the Eighth Circuit Court of Appeals which has set oral argument for late September. Additionally, a group of senators led by Kevin Cramer (R-ND) and Mike Lee (R-UT) have introduced a Congressional Review Act joint resolution of disapproval to nullify the FCC’s digital discrimination rules. These objections will no doubt be bolstered by the recent Supreme Court Ruling in Loper Bright Enterprises v. Raimondo which eliminated the long-standing Chevron doctrine’s requirement and curtails the power of federal agencies in determining the meaning of statutory provisions.

While implementation of these new rules is still in process, Owners should evaluate the services offered to tenants to ensure and encourage that state-of-the-art services be made available to residents. Where service levels are not competitive with current technology standards, and to the extent possible, efforts should be made to invite new providers under existing contracts and property infrastructure. Failure to get ahead of this issue may lead to complaints and an inability to respond with adequate data to support the posture of the property’s position regarding broadband service availability for residents.

Expanding CBRS

On June 12, 2024, the FCC announced changes to how they model interference in the spectrum-sharing systems that control Citizens Broadband Radio Service (CBRS) effectively shrinking the size of protected areas. This opens coastal areas as well as military facilities, with an estimated population of 71 million, that will now gain uninterrupted CBRS wireless broadband access. The changes could also result in more use cases nationally including services for MDUs such as providing and facilitating an LTE network to provide ubiquitous coverage across properties for unit IoT connectivity and to provide centralized network control of building systems. The new propagation modeling won’t take effect immediately as testing is being required by the FCC before the changes are to be implemented.

State and Local Activity

Colorado

In early June, Colorado House bill 24-1334 made Colorado an Open Access State providing both processes and rules to govern service provider access to privately owned MDUs where tenants have requested service. The rules force Owners to consider the entry on the property of a licensed and insured service provider that can install their system within the physical spaces of the property. The new service provider would not be entitled to use any existing or planned wiring of the Owner or an existing Service Provider. Fair compensation is to be paid, but an owner would not have the ability to preclude access based on private property assertions alone. An Owner must demonstrate physical limitations at the property prohibit the provider from installing the facilities and equipment in the existing space.

This new legislation adds to last year’s Colorado House Bill 23-1095 restricting an Owner’s ability to charge residents for telecom “bulk” services with a markup rate of 2% or $10 above the amount the Owner was billed for said services. Therefore, any provision in a lease that violates this restriction is now void and unenforceable. This statute applies to agreements executed on or after June 5, 2023, the effective date of the act.

Seattle

Seattle code Chapter 7.25 Third Party Billing regulations limits an Owner’s resale of a utility to a tenant to $2 per utility per month, not to exceed a charge of $5/month for all utilities. This may negatively impact projected returns on the installation of a bulk internet-managed Wi-Fi deployment if the Owner’s payback for that capital investment and operational expense was planned by the addition of a “technology fee” to the monthly rent. Understanding these limits on the front end is critical to making sound technology investments that are intended to create better value and experiences for the residents while generating higher revenues for Owners. This particular rule makes it more likely that the rent as a whole will need to be increased to offset the cost of the managed Wi-Fi deployment which could also impact the project’s marketing and longer-term operations. 

San Francisco

The new Colorado law has similarities with San Francisco’s Article 52 which passed in late 2016 providing that no property owner interferes with the right of a resident to obtain telecom services from a provider of their choice. The Article requires that a tenant request be made to begin the evaluation process of a new provider servicing the property and how that might be accomplished. Property owners with exclusive access or exclusive use of wire agreements were not exempt from the requirements of the Article, which was preempted, in part, in 2019 by the FCC which clarified that the Article did not allow the sharing of any “in-use” wiring as a means of bringing a new provider to the property. 

Conclusion 

Understanding the federal, state, and local laws that may impact your property is important when designing the low voltage plan for new construction projects or when planning an upgrade in an existing property to a Managed Wi-Fi environment. 

These policy changes can add complexity and may make an Owner question the ROI of costly infrastructure, specifically if it may be better to have a service provider cover those costs through financing. Thoughtful low-voltage designs and upgrades that provide owners with the ability to adapt to changing environments are of value especially when tailored with negotiated contracts that have provisions that address those contingencies. Similarly, resident lease agreements and operations practices need to be viewed from the same lens allowing the Owner to adapt to new regulations and responsibilities. Getting the right technical and legal support is more critical than ever in the MDU/Technology space. The regulatory environment is also rapidly changing–not just for rental contracts and “junk fees”–but for broadband access and 3rd party billing which underscores the need for knowledgeable telecom legal representation and a local advisory council. Contents contained in this summary should not be taken as legal advice. We highly recommend you seek legal counsel to better understand how these rulings may impact your properties.