FCC Adopts Rules to Promote Competitive Choice in MTEs

On February 15, 2022, the FCC released a Report and Order and Declaratory Ruling adopting new rules and clarifying existing rules regarding communications services in multiple tenant environments (“MTEs”).

Prohibition on Exclusive and Gradual Revenue Sharing Agreements: First, the FCC adopts new rules prohibiting telecommunications carriers and multichannel video programming distributors (“MVPDs”) from entering into and enforcing exclusive and gradual revenue sharing agreements (the FCC is not extending any of the rules in the R&O to broadband-only providers).

  • The FCC defined these agreements as follows:
    • Exclusive Revenue Sharing Agreement: an agreement in which a communications provider offers the MTE owner consideration in return for the provider obtaining access to the building and its tenants, and prohibits the MTE owner from accepting similar consideration from any other provider.
    • Gradual Revenue Sharing Agreement: an agreement in which a provider pays an MTE owner a greater percentage of revenue as its penetration in the building increases.
  • These new rules apply to services provided by:
    • (1) telecommunications carriers in both commercial and residential MTEs, and
    • (2) MVPDs subject to section 628(b) in residential MTEs.
  • These prohibitions apply to both the execution of new graduated or exclusive revenue sharing agreements and enforcing existing graduated or exclusive revenue sharing agreements on a going forward basis.
    • For existing contracts with such provisions, compliance with the prohibition on enforcing such agreements will be required 180 days after publication of the R&O in the Federal Register.
    • For new contracts, the prohibition on such provisions will take effect 30 days after publication of the R&O in the Federal Register.
  • The FCC concluded these agreements are anti-competitive and amount to de facto exclusive access agreements because they prohibit or strongly discourage competitive entry into an MTE.  Thus, providers are prohibited from entering into new or enforcing existing exclusive and gradual revenue sharing agreements.

New Exclusive Marketing Arrangement Disclosure Requirement: Second, the FCC adopts new rules requiring telecommunications carriers and MVPDs to disclose the existence of exclusive marketing arrangements that they have with MTE owners in simple, easy-to-understand language.

  • The disclosure must meet the following requirements:
    • Be clearly and conspicuously included on all written marketing material, including both electronic and print material, directed at tenants or proposed tenants of an MTE.
    • State that (1) the provider has the right to exclusively market its services to tenants in the MTE, (2) that this right does not suggest the provider is the only entity that can provide communications services to tenants in the MTE, and (3) that service from an alternate provider may be available.
  • This obligation applies to all exclusive marketing arrangements – both those that are already in place and those that are agreed to after the effective date of these rules.
    • For new arrangements, compliance with the disclosure requirement will become effective after the Office of Management and Budget (“OMB”) completes its review of the new requirement pursuant to the Paperwork Reduction Act (“PRA”).
    • For existing arrangements, compliance with the disclosure requirement will become effective the later of: (1) the OMB completing its review of the new requirements pursuant to the PRA; or (2) 180 days after publication of the R&O in the Federal Register.
  • The FCC found that many tenants in MTEs with exclusive marketing arrangements were confused about the availability of competitive service in the MTE, which dampened competition.

Clarification Regarding Section 76.802(j): Third, the FCC clarifies that section 76.802(j) of the FCC’s existing rules, regarding cable inside wiring, prohibits sale-and-leaseback arrangements.

    • The FCC concluded these agreements contravene the requirements on incumbent providers to take reasonable steps within their control to ensure that an alternate service provider has access to the home wiring at the demarcation point and to not use ownership interests they may have in the property located on the subscriber’s side of the demarcation point to prevent, impede, or in any way interfere with a subscriber’s right to use his or her home wiring to receive an alternate service.

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