The FCC has been saddling Internet service providers with harmful regulation from multiple angles, including its upcoming vote to reinstate net neutrality and the agency’s “digital discrimination” regulations. Those measures will surely have a negative impact on investment, but there’s another less noticed proposal that could lead to higher prices and worse service for consumers almost overnight.
Last month FCC Chairwoman Jessica Rosenworcel announced the consideration of a new rule to ban bulk-billing, whereby consumers in multi-tenant dwellings such as condo or apartment buildings can contract with internet service providers (ISPs) for bulk-rate pricing. Rosenworcel claims her intentions are to create more competition and thus lower prices for consumers, but this is like claiming consumers can save money by buying one egg at a time versus a dozen.
Bulk-rate billing has an irrefutable track record of helping reduce costs for building residents by empowering them to leverage their numbers for significantly lower cost service than can be achieved individually. The FCC learned this when it studied the issue in 2010 and concluded that “bulk billing arrangements predominantly benefit consumers, through reduced rates and operational efficiencies” and “the benefits to consumers of bulk billing arrangements outweigh their harms.”
The facts bear this out. Industry analysts note that bulk-billing reduces broadband costs in the neighborhood of 50-60 percent over retail prices, and in many cases even more. One commentator noted the prevalence of Wi-Fi bills that would normally run $70 per month discounted to a mere $15 for multi-tenant residents.
With any group arrangement, individual complaints are not unexpected. But what the FCC made crystal clear 14 years ago is that bulk billing is a net winner, lowering service costs for the vast majority of consumers who are happy with the arrangement.
Bulk billing is also a win for service providers, as the contracts provide them with the assurances they need to invest and buildout service, creating more competition in the marketplace. If bulk billing arrangements were to be nullified, the first effect would be a steep downturn in broadband investment. Next, fewer small ISPs would find themselves able to compete or survive given the higher risks of lower-volume agreements, resulting in fewer providers and therefore less overall competition for internet service.
The end of bulk billing will result in less competition and higher consumer costs, especially for those least able to afford the dramatic price increases sure to follow. Bulk billing offers savings for communities that disproportionately live in multi-resident buildings, including seniors on fixed incomes, people in public housing, and minority communities in more densely populated urban areas. These are the people who would be harmed most, as they witness sticker shock from their internet service bill stripped of its volume discount.
Other than maintaining control of pricing and service plans from Washington, there is absolutely no rational justification to ban bulk billing arrangements. This government overreach would deny the marketplace and consumers the right to negotiate prices for their mutual benefit. Given the anti-competitive and anti-consumer effects, the agency should discard its proposal.