News

ALERT: Proposed San Francisco Ordinance Jeopardizes MDU Owner Wiring Control

Published November 1st, 2016 by Valerie

There is currently a proposed ordinance for the city of San Francisco that would give control of the MDU wiring to the residents as opposed to the owners. The opening of the ordinance reads:

“Ordinance amending the Police Code to prohibit owners of multiple occupancy buildings from interfering with the choice of communications services providers by occupants, establish requirements for communications services providers to obtain access to multiple occupancy buildings, and establish remedies for violation of the access requirement.”

Obviously this is something that would impact service providers and owners alike. As the voice of the industry in the MDU space, please know that we are currently looking into this and wanted to bring it to your attention.

This is in effect an MDU mandatory access law that applies to all cable and broadband service providers (not just franchised cable operators) in both residential and commercial buildings. Not only would the law provide carriers with a mandatory right of access, but also with a right to use inside wiring owned by the property owner. Obviously, this initiative could have grave consequences for our industry, which depends on the negotiation of access agreements with MDU owners and HOAs.

Here are a few off-the-cuff remarks from attorney Carl Kandutsch (www.kandutsch.com) based on a first reading of the ordinance.

  1. The ordinance says in exchange for the use of the owner’s property (including inside wiring), the service provider must pay “just and reasonable compensation”. So the ordinance addresses the 5th Amendment issue in a generic way. However, the ordinance provides no guidance as to how “just and reasonable compensation” is to be determined. Therefore, it amounts to a huge invitation to litigation.
  2. The ordinance basically removes the property owner (or HOA) as the gatekeeper for access to the owner’s private property. This means that access to MDU property would cease to be a matter of negotiation and agreement between the owner and the service provider and would instead become a litigation issue to be settled in court.
  3. The ordinance applies retroactively to existing agreements that grant exclusive use of inside wiring to a particular service provider. All of these agreements would instantly become the subject of litigation involving the real estate industry, cable companies and the provider seeking access under the ordinance.
  4. In new construction projects, the service provider often provides and installs inside wiring, which then becomes the property of the owner, with exclusive use rights granted to the service provider. This sort of arrangement often helps in the financing of major construction projects. If the ordinance becomes law, service providers would have no incentive to finance the wiring of new buildings. The economics of construction would have to change, probably resulting in the use of less expensive wiring infrastructure, therefore lower bandwidth to units, and so on. Construction projects in less lucrative markets would likely share an undue portion of the burden.
  5. The ordinance says nothing about multiple service providers seeking access.
  6. Door fees and revenue share deals would cease to be confidential, because these deals set the de facto standard for “just and reasonable compensation” for use of wiring and other infrastructure. Presumably, compensation paid to owner for exclusive rights would stop.
  7. Although the ordinance addresses the exclusive use of inside wiring (by banning it), it says nothing about use of other owner-owned infrastructure such as conduit, space in telecommunications rooms and other facilities made available to broadband providers. If the owner granted exclusive use of conduit to a service provider, or space in a telecom room, would that violate the ordinance? Another litigation issue.
  8. What about the demarcation point for inside wiring? If the home run wiring is owned by the building owner, there must be a demarcation point where it connects to the provider’s distribution system. Where is that located? Often it is not stated in a cable or broadband access contract. If there is a lockbox, it is usually owned by the service provider. What happens when the provider refuses to let a company have access to the lockbox? In that case, it’s not the property owner who is preventing access but the provider who is not subject to the ordinance. Another litigation issue.
  9. Many cable agreements say that if an of the provider’s exclusive rights are impaired, the owner must repay a pro rata portion of the door fee. So were the ordinance to pass, cable companies would presumably demand reimbursement of door fees from property owners. More litigation, more chaos, less investment.

There are many other considerations in addition to those listed above. Please know that we are looking into this further and will keep you apprised of future developments.

Your support through membership and payment of your dues is what allows us to go to the mat and ensure that your business is protected. As such, just a reminder that if you have not paid your 2016 dues, please be certain to get those in to us to support these endeavors. This is an important reason why all independent broadband operators in the MDU space should be members of Multifamily Broadband Council.

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