Pending FCC Ruling on MDU/MTE's

The FCC is going to rule on MTE's (Multi-Tenant Environments) FCC Docket 17-142. This ruling will effect both business (commercial buildings) and consumers alike. As you might expect, all stakeholders have weighed in on both sides of this issue. Building Owners, RIETS, Property Managers, along with the niche network companies focused on the MTE market, want to see exclusive marketing and access agreements continue. While businesses, consumers, advocacy and consumer protection groups, largely want to do away with exclusive marketing or access agreements that curtails or in many cases, outright eliminates any competition. This ruling will also address legacy inside wiring / cabling issues as well, although more impactful for residential MTE's. A discussion for another day.

Lets break this down a little. While some may argue, exclusivity can promote investment in new infrastructure if a supplier is more likely to do so under the premise their subscriber penetration will be higher. As a result their COS of sale may be lower, and thus, improving their overall ROI then makes the investment possible whereby otherwise, the economics might not have worked. This is met with the counter argument; Allowing exclusive agreements has been shown to do done nothing but increase rates, lower competition, lessen innovation, and frustrate IT Departments and Business Owners. Not to mention all the competitors with network at the tenant’s doorstep that made an investment themselves to get there, but are now faced with less market opportunity to compete as a result of a closed off building, campus, or mall. Why? Because a building owner wants their Vig. Please, come on! This is not a payphone, an ATM, or a vending machine.

While I do believe there are use cases for exclusive service rights. For instance, without the Cable Act, granting MSO's (Multi-System Operators) exclusive service rights by market / zip code for Cable TV, there was no chance rural locations would have been served to the extent they were. All the cities, counties, and communities were handsomely rewarded franchise fees, and every consumer who got power, got Cable TV, no matter how remote, in exchange. It made sense at the time.

However, things have changed. Fiber is much more readily available, Wi-Fi ranges are extended, Fixed Wireless has matured, 4G is prevalent and 5G has broad potential as a game changer. Business's want diversity and redundancy these days, actually, they always have, but it was not always economically feasible to have two or more high bandwidth connections but today it is. In fact, many businesses now have more than two broadband connections. This trend will continue as more and more business continuity is dependent on uninterrupted internet access and with the continued adoption of failover equipment, SD-WAN or otherwise.

MOReCOMM Solutions clients are typically multi-location enterprise businesses. We seek to find best of breed network solutions, procure it on behalf of our clients, while delivering equal or better rates, terms, conditions, and service levels. Or we may project manage an awarded network aggregator, ISP, CLEC or TEM on the fiduciary and transparent path to deliver the same. Either way, we are highly engaged in the sourcing and procurement process and feel the pain along with our clients, when the network is there, but can't get access.

Exclusive agreement roadblocks present themselves continually with my multi-location clients. Particularly with retail, clinic's, franchises, and other businesses that rely heavily on mall, strip-mall, mixed use, and multi-tenant commercial office space. I can see 5 or 10 carriers on-net at a location, yet only get one installed due to these types of agreements. Sometimes, we can get passed the roadblocks, maybe move the needle with a threatening letter to the FCC or State PUC. sometimes I'll get a REIT to back down because the clients overall retail space opportunity outweighs the comp a supplier may offer for the exclusivity. Sometimes it works because they just don't want the headache of a squeaky wheel. But too often, it's a complete waste of time because the local property manager does not want to lose their piece of the action. It is frustrating, and it's continually gotten worse, and is particularly prevalent among many large REIT owned malls.

I am optimistic that the ruling is going to be favorable for Tenants. It may not eliminate all the shenanigans, but I do believe enough so to make a difference. First, it just makes good sense not to ever prevent a viable competitor from competing, and inevitably, I believe the majority will rule in that direction.

While I cannot get any hints or guidance out of my friends at the FCC as to how this ruling might go, and I've tried, many times but everyone is just way to tight lipped, yet there are signs. I do read the arguments, I read the rebuttals, I even compare the rebuttals from years past to present day and I have seen those that are on the side of keeping the status quo, or mostly unregulated, have morphed from an argument of only maintaining the status quo to now, and if the status quo has to change, then please consider blah blah blah...blah blah.... blah blah blah portion of the status quo. I have argued policy with the FCC enough to know, this is a sign the ruling is likely leaning away from their ultimate goal, the status quo.

My advice for property owners and managers; You’re in the real estate business, stay in your lane, LEASE SPACE! My advice for small niche carriers that have bet the farm on the MTE exclusivity model; Diversify.

We'll see soon enough.

Keep an eye on FCC Docket 17-142, it's a BIG DEAL!