In a surprising move, the Biden Federal Communications Commission (FCC) has proposed a rule that could make it harder for millions of Americans, especially those in multi-tenant environments (MTEs), to afford high-speed internet. This proposed rule, which hasn’t been made public, would ban bulk billing arrangements unless they include a tenant opt-out, a policy shift that further restricts the ability for providers to develop market-driven services for their customers.

Think of bulk billing as the Costco of the internet. It’s a practice where broadband service providers and owners of buildings like apartments and condos agree on a group rate for internet service. This setup allows the entire building to receive internet service at a reduced, collective rate, often up to 50% cheaper than individual contracts. It’s a lifeline for many, particularly lower-income families, elderly residents on fixed incomes, and students—all of whom might otherwise struggle to afford internet.

These arrangements are more than just discount deals; they are the free market at work driving value and investment for everyone. By simplifying service deployment, bulk billing makes it faster and less intrusive for residents to gain internet access, a daily necessity in our digital age. This is why the recent backlash against the FCC’s notice of proposed rulemaking (NPRM) from consumer groups and industry is both significant and justified.

The FCC has positioned this proposal as a means to enhance consumer choice and reduce costs for families in MTEs. FCC Chair Jessica Rosenworcel emphasizes that the proposal is designed to dismantle the existing barriers that often limit tenants to a single broadband provider, which she claims can lead to higher costs and less satisfaction. By proposing to allow tenants to opt out of bulk billing arrangements, the FCC is attempting to build a more competitive market where tenants can choose their preferred provider.

While claims of consumer choice sound good in principle, they overlook the essential benefits these bulk billing arrangements provide, such as affordability and broader access. If implemented, the ban could lead to higher internet costs for those who can least afford them. It also could lead to reduced capital investment to upgrade antiquated infrastructure in older buildings to modern high-speed fiber. In combination, these effects will widen the digital divide the FCC purports to close.

Moreover, the rule could face significant legal challenges regarding existing private contracts. Prohibiting ISPs from enforcing the financial terms of existing bulk billing arrangements could effectively nullify these contracts, an action beyond the FCC’s regulatory authority. Additionally, the rule attempts to regulate the landlord-tenant relationship indirectly through broadband providers, which is also a reach beyond the FCC’s direct jurisdiction, raising concerns about the scope of the FCC’s power.

Stakeholders across the spectrum, from service providers to advocacy groups, have voiced their concerns. They argue that the FCC’s proposal would inadvertently harm consumers by increasing costs, decreasing infrastructure deployment, and reducing access. Indeed, as seen in discussions and filings, such as those from the Coalition of Independent Internet Service Providers, bulk billing arrangements have been pivotal in increasing broadband penetration in underserved communities.

The proposed rule also poses a serious threat to the ability of companies to develop market-driven and innovative services that have long been the cornerstone of the U.S. internet marketplace. Bulk billing arrangements have historically allowed providers to experiment with different service models that cater to the unique needs of various communities. These models have enabled faster adoption of broadband services, facilitated the spread of new technologies, and encouraged competitive pricing that benefits consumers. By restricting these arrangements, the FCC would not only stifle these innovative approaches but also deter investment in new broadband technologies and infrastructure. Such regulatory interference undermines the market dynamics that have made the U.S. a global leader in internet service provision and digital technology development.

Finally, the proposed rule more broadly raises substantial questions about jurisdiction and the scope of the FCC’s regulatory authority. The Commission’s role is to oversee the communications landscape to ensure fair competition and protect consumer interests, not to dictate the terms of contracts between private parties. Legal experts and policymakers should closely scrutinize whether the rule exceeds the FCC’s existing statutory authority to avoid setting a dangerous precedent where the FCC could whimsically regulate any facet of business operations under the guise of consumer protection.

As we look to the future, maintaining a regulatory environment that encourages innovation and adaptation is crucial for continuing to drive the availability and quality of internet services across the nation. The FCC is on the verge of a decision, with a vote potentially occurring in the coming days. It is crucial that the commissioners consider the ramifications of their proposed rule. Rather than imposing a ban, the FCC could explore ways to preserve the benefits of bulk billing while addressing any legitimate market failures that are limiting competition.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].