FCC Opens MTE Broadband Competition Inquiry; O'Rielly Questions Certain Authority

FCC commissioners approved 3-0 a notice of inquiry on ways to improve broadband deployment, competition and innovation in residential and commercial multiple tenant environments (MTEs). Commissioners also unanimously approved a payphone order and NPRM that would waive certain auditing and reporting duties while the agency considers eliminating the requirements. Both Wireline Bureau items were adopted at the commissioners' meeting Thursday.

The MTE notice seeks comment on the state of broadband competition in apartment and condo buildings, shopping malls and cooperatives, said a release. It asks whether there are state and local regulations that inhibit broadband competition and deployment, whether the FCC should take action on service providers' exclusive marketing and bulk-billing arrangements, how revenue-sharing deals and exclusive wiring arrangements between property owners and ISPs may affect broadband competition, and about any other practices that may affect ISP competition in MTEs.

Officials said the NOI asks about commission authority under Communications Act sections 201(b) and 628, which it has used previously for MTEs. Rules bar telecom and video providers from entering "into exclusive agreements that can stifle competition," the release said. The officials said the notice explores the extent to which the agency could use Section 253 to curb state or local restrictions. The queries were teed up in a June 1 draft item.

Chairman Ajit Pai said the commission heard barriers sometimes limit broadband competition in MTEs. He said the NOI seeks "an accurate snapshot" of the market and the commission will examine whether it can "incentivize" ISPs to further invest in deployment to MTEs. Noting conflicting arguments about various issues, he said the agency is focused on collecting facts, because: "We're faced with tough questions of both law and economics."

There are reports the ban on exclusive agreements is being circumvented, said Commissioner Mignon Clyburn, citing the possibility some MTEs simply may reject competing services. "Some provide network operators’ marketing materials in their new resident welcome packets, which encourages residents to purchase services from those specific companies," she said. "Some companies even offer property owners a revenue sharing deal, which may actually incent anticompetitive practices. We ask if these practices are predatory, and if it is determined that they are, they should end."

Commissioner Mike O'Rielly questioned some of the item's ideas. He doesn't believe the FCC has authority to regulate MTE market practices such as web advertisements or brochure placement in buildings or welcoming packets. He suggested the FTC could address some concerns, including about unfair or deceptive acts. If the FCC reclassifies broadband as a Title I information service, "much of the discussion would seem to be moot," he said. "My previous views on Section 706 as legal authority are well known and the idea of applying Title II to an information service solely because the facilities might also carry a legacy voice service would be a deeply questionable step that could discourage the deployment of broadband."

The NOI "raises notable questions" about a possible federal government role and includes "a much-needed examination of whether state and local regulations are hindering broadband providers’ efforts to enter new markets,” said USTelecom CEO Jonathan Spalter. Public Knowledge supported the action and said the agency "should move quickly to propose and adopt rules" to prohibit anti-competitive practices.

The payphone NPRM meanwhile proposes to eliminate annual auditing and reporting duties that appear outdated, said a release. The duties apply to carriers completing payphone calls to ensure payphone operators are properly compensated. As an alternative, the item also asks about allowing carriers to self-certify. The order waives the auditing and reporting duties for 2017 and 2018 while the commission conducts the rulemaking (a draft item targeted 2017).

Pai said the number of payphones dropped from 2.1 million in 1999 to 99,832 at the end of 2016. The FCC has heard that complying with the audit rules now costs carriers "a large fraction of, if not more than, the total compensation the audits are meant to verify," he said, noting one carrier spent five times more than the compensation it owed to payphone providers. "If ever a situation called for examining whether a regulation was outdated -- whether the marketplace had changed, whether the costs outweighed the benefits -- this is it. We’ll figure out if these audits are net beneficial. And if they aren’t, we’ll clear them off the books."

Clyburn hopes "efficiencies from this and other rulemakings" can improve service, "especially to underserved populations." O'Rielly invited parties to make further proposals to remove payphone rules and hoped other outdated rules will be removed through a telecom biennial review. He also said rules should contain sunset provisions so the commission either proactively extends them if needed, or they lapse automatically if not.

AT&T and USTelecom welcomed the action (see here and here), with AT&T facetiously asking: "There are still payphones?"