Original Post Date: 2/23/23. Updated: 8/13/23
In Feb 2022, the FCC issued an order affecting all multifamily owners and telecom providers in America. The ruling is composed of 4 parts:
Sale and leaseback agreements for wiring are prohibited.
Graduated revenue sharing agreements are prohibited.
Exclusive revenue sharing agreements are prohibited.
Telecom providers must disclose exclusive marketing deals to residents.
Though it’s primarily telecom providers who are bound by the new order, it requires multifamily owners to change the nature of their agreements with them in order to stay compliant. Many owners are wondering what course of action to take.
Fortunately, there’s good news. These new prohibitions strengthen the case for one multifamily internet option with tremendous demand: Managed WiFi. Not only does it come with a long list of owner and resident benefits, the prohibitions set by the new FCC ruling have no effect on it. How can this be? We explain below.
Language in the FCC ruling is clear on who the prohibitions do and do not apply to. Here are the relevant statements, found in the Scope of Rules portion (Part III / Section B) of the ruling:
“Our rules addressing certain types of revenue sharing agreements and exclusive marketing arrangements apply to communications services provided by (1) telecommunications carriers in both commercial and residential MTEs (multiple tenant environments), and (2) MVPDs (multichannel video programming distributors) subject to section 628(b) in residential MTEs.” - Part III, Section B, Item 13
“…we did not extend our decisions to broadband-only providers.” - Part III, Section B, Item 14
“…we limit our rules regarding certain revenue sharing agreements and exclusive marketing arrangements to telecommunications carriers and covered MVPDs, and the specific MTE contexts described. References to “providers,” “MTEs,” and “MTE owners” in this Report and Order should be read to apply only to these entities and in these contexts.” - Part III, Section B, Item 15
Simply put, the ruling only applies to cable operators (MSOs, private cable operators, and direct broadcast satellite providers). None of it applies to broadband-only providers (e.g. Blueport, Fiberwave, Whitesky, Aerwave, Dish Fiber).
The ruling states the exclusion of broadband-only providers from the new prohibitions reflects “…an incremental approach to the problems identified” (Part III, Section B, Item 14). This makes sense because the “problems identified” all have to do with the perceived problematic nature of exclusive, graduated, and sale and leaseback agreements to market competition. And none of these apply to broadband-only services like Managed WiFi. Why? Because Managed WiFi is not a revenue share agreement. So all the language in the FCC ruling referring to such has no effect on it.
This is great news, particularly for multifamily owners already implementing Managed WiFi. Revenue share agreements have been the status quo for years, resulting in many owners feeling unprepared for the work now required to stay compliant. Some are playing the waiting game, waiting for their providers to reach out and propose a new compensation plan. Others are attempting to negotiate with the multiple ISPs in their building, trying to approximate the right share amount. They’re wondering what choices they have, let alone which one they should make in order to stay compliant with the FCC.
This new standard in multifamily internet offers exemption from the FCC ruling, allowing owners to avoid the challenges described above. It does this while providing an outstanding internet experience that also increases NOI. It commands premium rents and attracts and retains more residents. It’s also an agreement where the owner owns the network and chooses the margins. Most owners make more money per unit with Managed WiFi than they did with any previous graduated revenue share agreement.
We’ve written extensively on the nature and benefits of Managed WiFi in previous articles. Please look at Managed WiFi: The New Internet Standard in Multifamily and Managed WiFi 101: An Essential Guide For Owners for a more in-depth explanation.
The FCC ruling is causing lots of stress for a lot of owners. But because the prohibitions do not extend to broadband-only providers, Managed WiFI should be as appealing as it’s ever been. We encourage you to look closely at your numbers, note the expiration dates on your telco contracts, and consider a conversation about Managed WiFi. Getting the ball rolling a year in advance is ideal to allow time to review Managed WiFi as an alternative.