Expert Opinion
A new proposal by the Federal Communications Commission to ban ‘bulk billing’ could undermine one of the easiest ways Americans living in multi-tenant environments.
The author of this Expert Opinion is Nate Scherer. His bio is below.
It has always seemed intuitive that collective payment for a good or service is cheaper than individual payment. Whether it’s a family cell phone plan or a group of young professionals who choose to rent a house together, spreading the cost across a larger pool of people usually lowers expenses.
Yet, a new proposal by the Federal Communications Commission to ban “bulk billing” could undermine one of the easiest ways Americans living in multi-tenant environments (MTEs), such as apartments or condos, save money on broadband and video services.
In March, FCC Chairwoman Jessica Rosenworcel announced plans to eliminate bulk billing arrangements for Americans living and working in MTEs. Roughly one-third of Americans live in such environments and the Commission believes they should have the option to “opt-out” of arrangements that “impose a specific broadband service provider” on their household.
However, these arrangements work by allowing building owners such as homeowners associations and condominium owner associations to negotiate with internet service providers to provide broadband services to all units at a reduced rate. While the Commission says a ban is needed to “lower costs and address the lack of choice for broadband services,” eliminating such arrangements would have the opposite effect.
Rosenworcel describes the new plan as part of a larger push to “combat junk fees,” fees the Biden administration believes are a major problem. Yet, bulk billing arrangements are not an example of junk fees but rather, a singular fee wrapped in bulk. Banning them would inevitably expose renters to more fees, not less.
For instance, a customer in a multifamily unit may now have to pay an application fee, credit check fee, equipment deposit fee, and installation fee, among others. Collectively, these fees quickly add up, potentially leading the customer to reject service altogether. While such a scenario may seem far-fetched, the current phase-out of the Affordable Connectivity Program means more Americans will lack the necessary resources to remain online.
Bulk billing has played an instrumental role in helping close the digital divide and drive adoption in affordable housing communities. This is because those renters currently living in MTEs tend to be disproportionally disadvantaged Americans living on fixed incomes. Other vulnerable groups of Americans including students, seniors, and people of color, are also more likely to reside in such living arrangements, meaning a strict ban on bulk billing would harm those who can least afford it.
Research shows bulk billing agreements save consumers money
Research has consistently found that bulk billing agreements save consumers money since housing providers can negotiate better monthly rates and pass on cost savings to their residents. According to the internet provider Hotwire Communications, resident rates for bulk service agreements are as much as 50 percent lower than for individual retail plans. Other estimates put rate savings at closer to 60 percent. Whatever the exact number, bulk billing agreements save consumers money.
Unfortunately, these cost savings depend on providers continuing to have a steady customer base and 100 percent market penetration. Building owners are not forced into these contracts but rather agree to them willingly because of the good deals they provide on services. Allowing opt-outs would destroy this business model since the cost of implementing property-wide networks does not change, and fewer tenants paying into the system means higher prices for those remaining. Without a guaranteed contract, companies would no longer offer the same services at the same prices.
A ban on bulk billing would also undermine broadband innovation and deployment by making it more difficult for providers to receive a return on investment. That means less infrastructure investment in unserved and underserved communities. The National Multifamily Housing Council has warned that the ban could jeopardize “deploying new, advanced technology and “bridging the digital divide,” goals that the FCC claims to support.
The reality is that the FCC’s bulk billing ban is, fundamentally, a political proposal not borne of hard data. No evidence suggests that these agreements harm consumers or stifle competition. The Commission has previously stated that bulk billing arrangements “predominantly benefit consumers, through reduced rates and operational efficiencies, and by enhancing deployment of broadband.” For the Commission to reverse itself on this issue now is extremely concerning and counterproductive.
While there are undoubtedly some Americans who are dissatisfied with their options under bulk billing agreements, this dissatisfaction exists in any market. If abuse exists, it should be dealt with on a case-by-case basis. Simply banning these agreements could lead to higher prices and less competition, to the detriment of vulnerable Americans. The FCC would be wise to think long and hard before moving to ban bulk billing agreements.
Nate Scherer is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal. This piece is exclusive to Broadband Breakfast.
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