The Free Market for Internet Access Stops at Apartments

Americans love to talk about the free market, especially conservative Republicans, many of whom are in a tizzy as its nominee, Donald Trump, has for better or worse pitched a protectionist agenda that promises to rip up the USA’s international trade deals. But when it comes to free markets, the reality is far more nuanced. And as anyone who lives in an apartment complex or in real estate terminology, multiple dwelling units (MDUS) knows, the free market certainly does not apply when it comes to internet (and cable) access, whether or not we continue in an age of net neutrality.

The growing problem in the U.S. seems rather counterintuitive when considering the fact that urbanization is on the rise as more millennials, and even empty-nesters, are moving back into the cities. Apartment buildings offer a great opportunity to install the fastest broadband and therefore expand access to the internet. After all, one reason why South Korea has long enjoyed its reputation as being the “most wired” country on the planet is because of the country’s literally sky-high population density.

But as Harvard Law professor Susan Crawford points out in a recent article, collusion between property management companies and the largest internet service providers in the U.S. often leaves citizens paying outrageous premiums for substandard internet access. Crawford highlights research suggesting that a neutral fiber and wireless infrastructure adds to a building’s long term value, but kickbacks given to landlords by internet providers leave tenants little choice but to sign, and overpay, for internet access.

These shenanigans are ongoing despite the fact that several years ago, the Federal Communications Commission (FCC) banned exclusive cable and internet deals within all apartments and MDUs. Internet service providers sued for an appeal, but a federal court upheld the FCC’s ban. Nevertheless, landlords and internet providers have simply found other ways to circumvent the law. As Crawford explains, all a landlord has to do is say “yes” to one provider and “no” to others. Even though the appellate court in Washington, D.C. ruled that the FCC has even more powers to regulate cable companies, the agency’s feeble attempts to do so in the past suggests this problem will not improve anytime soon. Many landlords are ignorant of current internet law, and renters are often too anxious to find a place that is at least somewhat affordable.

The results have several far-reaching effects. Fewer citizens have access to the internet as some simply opt out of internet and cable access since they end up being unaffordable; forcing residents to pay for terrible internet speeds slows down innovation and is a drag on business; and newer companies offering better services, faster speeds and lower prices are frozen out by the lack of competition. Expect this situation to get even more exacerbated as analysts suggest that the U.S. rental population will increase significantly over the next decade.

Image credit: Daniel Foster/Flickr