In December of 2016, the city of San Francisco boldly enacted the “Occupant’s Right to Choose Communications Services Provider” ordinance (also known as Article 52) that hinders a payola scheme cooked up between big cable companies like Comcast and landlords. In just a few short years since its enactment, a great number of apartments in San Francisco have at least four options for broadband service, including affordable gigabit fiber service. Fearing that other cities would follow suit, a whole range of associations and corporations that represent landlords and the cable industry pushed the Federal Communications Commission (FCC) hard to block these local efforts. For a federal agency tasked with promoting competition, it shouldn’t be a close call to simply ignore these groups. But that is not what the FCC plans to do next month.
How San Francisco Stopped Landlords and Cable Companies From Making Money by Taking Away Tenant Choice
The scheme is relatively straightforward: cable companies pay landlords for each tenant that they can get to subscribe to their particular cable service. The more tenants a landlord delivers to the cable company, the more money the landlord gets paid. That means a portion of a tenants’ cable bill is going to their landlord, on top of the rent they already pay. In fact, Comcast even offers landlords bonus money from the tenants’ cable bills that increases with the number of tenants using Comcast.
These revenue sharing agreements incentivize landlords, who like getting paid extra money by Comcast, to make sure Comcast is your only option. In return, Comcast enjoys monopoly status and monopoly profits, even if, technically, there are many broadband options in your city and neighborhood.
San Francisco’s local leadership regularly heard from tenants about the lack of choices, despite other ISPs being present. And ISP competitors to Comcast would often get requests for service only to be blocked by the landlord from entering the building. So the city decided to take action and established a legal right to apartment tenants to get whatever ISP they want through an ordinance. Article 52 effectively terminated a landlord’s ability to keep competitive ISPs out of their buildings. As the Board of Supervisors declared with its ordinance, “it is common in such buildings for property owners to allow only one provider to install facilities and equipment necessary to provide services to occupants.”
In San Francisco now, thanks to the local ordinance, a tenant can request service from any ISP. A landlord is only allowed to refuse their entry if it’s physically impossible, dangerous for health and safety purposes, or if the competitive ISP’s access would cause “significant, adverse effect on the continued ability of existing communications services to serve the property.” The competitor also has to pay the landlord “just and reasonable compensation” for the construction and entry costs associated with connecting the tenant. Violating the local law carries a liability of $500 a day plus attorney’s fees against the property owner. The law can be enforced with a lawsuit that can be brought by the city attorney, the competitor ISP, or the tenant.
Since the adoption of the ordinance, local fiber-to-the-home provider Sonic has gained access to approximately 300 multi-tenant buildings in San Francisco and the local wireless/fiber ISP Monkey Brains went from zero percent access to now being in 75 percent of the buildings in the city. Landlords essentially were forced to open their doors to all ISPs, or face liability far greater than the benefits derived from the cable payola scheme. Now, people are getting the benefit of choice—increasing the quality of their service, and lowering their monthly bills. And it happened in just a few years.
The FCC Is Poised to Act on a Fiction Drummed Up by Landlords and Comcast Rather Than the Facts of What Happened in San Francisco
Based on the FCC’s record, the problem the FCC seems to want to fix is “in use” wire sharing, on the grounds that it disrupts cable service. This is despite San Francisco explaining to the FCC how the ordinance functions, including the fact that landlords can refuse on the grounds of disruption of existing services. Still, the agency is convinced that there’s a problem that needs fixing.
The problem with the FCC’s rationale is that the issue appears to be a complete fiction. EFF has been unable to find examples of services being disrupted in the city. The complaint is dubious, since a landlord has a right to refuse entry to an ISP that disrupts currently existing services. So the complaints of the cable industry’s association (ie Comcast) and the landlords (who simply want to delete the SF ordinance in its entirety) should be called into question rather than followed as evidence of the ordinances’ allegedly negative impact on broadband deployment.
The ramifications of the FCC intervening on a purely local decision to open up apartment buildings for more broadband choices is fairly profound, because it would curtail other cities from copying the San Francisco ordinance for their renters. Whether intentional or not, the FCC will give landlords and their cable financiers grounds to reject competitive entry that did not exist prior to the FCC’s preemption. This also appears to prohibit cities from adopting forward-thinking open access fiber policies in the future through city code and other local laws. Not to mention, the FCC’s intervention in San Francisco doesn’t fulfill the agency’s actual job description: to promote competition.
San Francisco’s policy has been an undeniably good thing for local renters. EFF hopes that the FCC refrains from intruding on it, and that the agency will not issue a partial preemption of San Francisco’s ordinance at its July meeting.