FCC Chairman Ajit Pai said part of San Francisco's law was inconsistent with federal policy. Jacquelyn Martin/AP

The city found a novel way to give residents access to more broadband internet providers. Federal regulators just partly blocked it, but it’s not clear how.

In 2016, San Francisco passed a first-of-its-kind law giving tenants the right to choose their internet provider where they live. The law takes aim at apartment and condo buildings, telling landlords they can no longer strike deals with internet companies that block competitors from serving a building. In theory, if a certified internet provider wants to operate in a building, it just needs a tenant to request its services.

The law has been championed by digital rights groups as a way to give customers options in an industry that’s famously dominated by a few large companies like AT&T, Verizon, and Comcast. As cities across the country have worked to boost broadband competition, San Francisco’s law—known as Article 52 or the “Occupant’s Right to Choose a Communications Services Provider”—has stood out as a novel way to help small and upstart providers compete with the dominant players in the field.

On Wednesday, however, the Federal Communications Commission struck down part of the law in a decision that has caused confusion over what, exactly, is being overruled. Close watchers of the case say the ruling could halt the spread of a policy that showed promise for other cities—or it could have no effect at all.

The ruling targets a provision that grants internet companies access to the wires inside apartment buildings, the ones that link a resident’s equipment to the provider’s infrastructure in the ground. The FCC broadly referenced the wording of the law while specifically targeting a phrase that doesn’t appear in it.

The San Francisco ordinance says property owners can’t prevent internet service providers from installing their own equipment or using the wires that already exist within a building. The FCC’s decision seems to suggest the law requires that providers have access to wiring that’s already “in-use” simultaneously by another provider—a phrase that doesn’t exist anywhere in San Francisco's law.

San Francisco Mayor London Breed made that point in a letter earlier this month to FCC commissioners and House Speaker Nancy Pelosi, saying the draft of the FCC’s order mischaracterized the law it was weighing in on.

In a statement ahead of Wednesday’s vote, FCC Chairman Ajit Pai said that “if the city is correct, then there is no reason for it—or anyone else—to object to our narrow ruling today.”

Regardless of what is ultimately determined to be the meaning of the FCC’s decision, supporters of the law fear that the negative attention from federal regulators could scare other cities from trying the same kind of law.

“The FCC is swinging at something that doesn’t exist,” Ernesto Falcon, senior legislative counsel at digital rights group Electronic Frontier Foundation, told CityLab, adding that the move “stymies efforts to follow San Francisco’s lead.”

***

In the two years since it was unanimously passed by San Francisco lawmakers, the law appears to have been achieving its goal. At least two small internet service providers told CityLab that the law helped them gain access to buildings where they were previously shut out. In some cases, landlords and property management companies still weren’t letting providers in after tenants requested services, but providers could cite the law as leverage to help in those situations.

Before the law, tenants in about 96 buildings in San Francisco had requested service from Santa Rosa-based internet service provider Sonic, but building management wouldn’t allow it to deploy service, Sonic CEO Dane Jasper said. After the law took effect, Sonic was able to move into more buildings. It recently tallied fewer than 20 buildings in the city where agreements were still pending, Jasper said.

“Our focus is not to use the law as a cudgel, but rather to explain to both tenants and building owners what their rights and responsibilities are,” Jasper said.

San Francisco-based provider Monkeybrains has cited the ordinance with four property management companies in the city, said Preston Rhea, director of field operations at Monkeybrains. Three of those cases have been resolved, and Monkeybrains recently counted about a dozen buildings where it was considering citing the ordinance to gain access, Rhea said, since property management wasn’t moving forward with agreements even though tenants requested service.

“Our hope is that the decision that was made today actually changes nothing because it addresses a problem that doesn’t exist,” Rhea said in response to the FCC’s decision.

The access issue isn’t limited to San Francisco. In cities around the country, property owners and managers of multi-unit buildings often sign contracts with large providers that effectively block competitors. One common method is for providers to sign marketing agreements with owners that prevent other providers from advertising to tenants. Another is to sign maintenance contracts that block other providers from accessing a building’s wiring. Providers also sometimes cover the costs of installing wiring in a building—a move that many smaller providers say they can’t afford to compete with.

The wiring issue has been a sticking point for major providers, who argue that they need to recoup their investments into buildings where they installed wiring themselves. The companies threatened lawsuits as the San Francisco law was coming together, said Mark Farrell, the former city lawmaker who spearheaded the legislation. Within months of its passage, the Multifamily Broadband Council filed a challenge with the FCC, leading to Wednesday’s decision.

The trade group, which describes itself as “the voice for all non-franchised companies and their vendors that provide broadband-related services to multifamily communities,” argues that FCC rules on wiring of multi-tenant buildings, bulk billing arrangements, and network sharing arrangements should override local law. The National Multifamily Housing Council filed comments with the FCC supporting the Multifamily Broadband Council’s petition.

Kevin Donnelly, vice president of government affairs at NMHC, said his group was concerned by how San Francisco’s law could break existing contracts between providers and building owners. Relationships between owners and providers are the right way to drive investment and competition, he told CityLab.

“There is this knee-jerk reaction to say that property owners are in this for the money, that they’re seeking revenue from telecom providers, where that is increasingly less and less of a priority for our membership,” Donnelly said. “The number one driving factor in these conversations … is making sure that we have high-speed, high-quality, reliable product and with some level of high-service standard, because ultimately that's what residents want.”

Donnelly said the idea of San Francisco’s law spreading to other cities presented “a worst-case scenario” that would shift the cost for infrastructure deployment from providers to property owners. He called Wednesday’s FCC vote a positive step and said the group is still concerned about other parts of the law left standing.

The San Francisco Mayor’s Office and City Attorney’s Office did not immediately respond to requests for comment about what action, if any, they might take now to protect their efforts.

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