A recent FCC order bans certain types of contractual arrangements between building owners and telecommunications carriers or cable operators. The order: (1) bars exclusive revenue sharing agreements and graduated revenue sharing agreements; (2) requires disclosure of exclusive marketing arrangements; and (3) bans “sale and leaseback” inside wire arrangements. The revenue sharing and marketing disclosure rules apply to telecommunications carriers in multitenant residential buildings like apartments and condominiums and commercial buildings like office buildings or shopping malls (called MTEs). For cable operators, the new rules only apply to residential MTEs. The revenue sharing and disclosure rules apply to new and existing contracts. The order also bars cable companies from transferring their ownership of inside wiring to residential MTE owners and then leasing the wire back from the building owner.
Background
The FCC has long barred telecommunications carriers and cable companies from entering into agreements with building owners that prevent any other provider from entering the building. Certain other types of exclusive arrangements, such as exclusive revenue sharing or marketing arrangements, have until now been allowed. Some providers have argued that these other types of arrangements effectively preclude tenants from choosing their phone, cable or broadband provider. In response to these concerns, the FCC launched a new proceeding in 2017. Last summer, President Biden released an executive order encouraging the FCC to examine these practices that was quickly followed by an FCC Notice to update information on the state of competition in multitenant buildings, culminating in the recent order.
Specific Provisions
Revenue Sharing. To help building owners defray the costs of deploying networks in their buildings, providers often agree to make payments to owners from the revenue they receive from providing communications services to the tenants. The order bars two specific forms of revenue sharing arrangements. Providers will be barred from exclusive revenue sharing agreements that prevent the building owner from entering into revenue sharing agreements with other providers. Another type of arrangement results in the building owner receiving a higher percentage of revenue as the provider serves a larger number of tenants. The order bars these graduated revenue sharing arrangements, exclusive or otherwise. The order does not bar other forms of revenue sharing agreements or other forms of payment to building owners and it does not cap the amount of revenue that a provider may pay.
The ban on these types of revenue sharing agreements applies to both new contracts and existing arrangements. The bar on new contracts takes effect 30 days after the order is published in the Federal Register and the ban on existing arrangements will take effect 180 days after publication.
Disclosure of Exclusive Marketing Arrangements. The FCC order does not bar exclusive market arrangements between building owners and providers, but it does require their disclosure. These marketing agreements give one provider the exclusive right to market in the building. The disclosure must: (1) be included on all printed or electronic written marketing material from the provider directed at tenants or prospective tenants of the affected MTE; (2) identify the existence of the exclusive marketing arrangement and include a plain-language description of the arrangement and what it means; and (3) be made in a manner that it is clear, conspicuous and legible. The disclosure must inform tenants that the provider has the right to exclusively market its communications services to tenants in the building, that such a right does not mean that the provider is the only entity that can provide such services to tenants in the building, and that service from an alternative provider may be available.
The disclosure requirement applies to both new and existing exclusive marketing agreements. For new arrangements, the disclosure requirement will become effective after the Office of Management and Budget (OMB) approves the requirement. Disclosure of existing exclusive marketing agreements will take effect the later of OMB approval or 180 days after the FCC order is published in the Federal Register.
Sale and Leaseback of Cable Inside Wiring. Existing FCC rules have long required cable operators to make the wiring that they have installed and own inside apartments available to other providers if the tenant terminates the cable service. The FCC expressed concern that cable operators may be avoiding this obligation by selling their ownership interest in the wire to the building owner and then leasing it back on an exclusive basis. The order bars sale and leaseback arrangements, which it defines as a conveyance of a cable operator of its inside wiring to a residential MTE owner and then leasing it back on an exclusive basis. Although called a “sale,” the conveyance does not necessarily require monetary consideration.
The ban on sale and leaseback arrangements applies to such arrangements entered into since the FCC initiated the current proceeding in June 2017.
Next Steps
This order may not be the last word from the FCC on building access issues. The FCC intends to monitor developments and may take further, unspecified actions in the future. There are certain actions this order does not take that could be taken at a later date. For example, the order does not apply to broadband-only providers and it does not require sharing of in-use inside wires. Moreover, although the FCC does not have jurisdiction to compel property owners to allow providers to access their buildings, some states and localities may have the power and may be more willing to impose open access obligations on MTE owners in light of this order.
This document is intended to provide you with general information regarding an FCC order banning certain types of contractual arrangements between building owners and telecommunications carriers or multichannel video programming distributors. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.