Weighing in on the FCC WiFi Regulation and Enforcement at Convention Centers – The Problem, the Fines, the Arguments and a Rational Path Forward for Convention Centers

In 2013 and 2014 the FCC launched three investigations of business practices relating to WiFi service at convention centers. In January 2015 the FCC issued an unequivocal Enforcement Advisory prohibiting any form of intentionally blocking or disrupting personal WiFi hotspots. The FCC has also levied heavy fines on three companies, two which hold exclusive telecommunications contracts at convention centers. Now as of this writing, a possible court challenge to FCC’s enforcement actions looms. Meanwhile show managers and exhibitors who depend heavily on reliable WiFi for their event are engaged in a level of utility planning that they are not well prepared for or used to. How did things get to this point and is there a rational effective path forward for convention centers?

For wireless internet services, things took a turn about 5 years ago with the explosive growth in WiFi. The convention center controversy started to emerge when some articles appeared in two industry publications in 2012 and 2013. They were written by the founder and Sales Director of an independent WiFi provider. One of the articles was much more than an information and marketing piece, but rather a direct disparagement of convention center wireless business practices.  The fire for this controversy was really lit with the announcement by the FCC in October 2014 of a Consent Decree to settle allegations that Marriott Hotel Services Corp. interfered with and disabled WiFi networks established by consumers in Gaylord Opryland Hotel and Convention Center. The settlement included a $600,000 fine, a development of a compliance plan and an agreement for Marriott to submit usage and compliance reports.

A Brief Chronology

  • March 2013 – FCC receives a complaint from an individual attending an event at the Gaylord Opryland Convention Center in Nashville that Marriott management was “jamming” mobile hotspots so that you can’t use them in convention space. In subsequent FCC investigations Marriott admitted that one or more employees used containment features of a WiFi monitoring system to prevent consumers from connecting to the internet via a personal WiFi network.
  • June 24, 2014 – FCC receives informal complaint regarding WiFi blocking at several convention centers in Cincinnati, Columbus, Indianapolis, Orlando and Phoenix. All these centers are municipal or government authority owned and Smart City is the telecommunications contractor in each. .
  • August 25, 2014 – The American Hotel and Lodging Association (AHLA), Marriott International (managers of Gaylord Opryland) and Ryman Hospitality Properties (owners of Gaylord Opryland) submit a Petition for a Declaratory Ruling to Interpret 47 U. S. C. – Section 333. Section 333 of the Communications Act provides that “No person shall willfully or maliciously interfere with or cause interference to any radio communications of any station licensed or authorized by or under this Act or operated by the United States Government.”
  • October 3, 2014 FCC issues a Consent Decree to settle allegations that Marriott Hotel Services Corp. interfered with and disabled WiFi networks established by consumers in Gaylord Opryland Hotel and Convention Center. The settlement included a $600,000 fine, a development of a compliance plan and an agreement for Marriott to submit usage and compliance reports.
  • October 23, 2014 – FCC receives an informal complaint about WiFi blocking at the Baltimore Convention Center. The telecommunications contractor at the center is MC Dean.
  • December 2014 –Google, Microsoft, the CTIA and others issue comments supporting the FCC’s action and agreeing with FCC’s interpretation of Section 333, their right to enforce the regulations and recommending denial of the AHLA’s Petition.
  • December 2014 – Cisco issues comments to the FCC regarding the Petition for a Declaratory Ruling to Interpret 47 U. S. C. – Section 333.
  • December 30, 2014 – Marriott issues statement explaining that the matter does not involve in any way Wi-Fi access in hotel guestrooms or lobby spaces.
  • January 5, 2015 – Smart City Networks issues comments to the FCC regarding the Petition for a Declaratory Ruling to Interpret 47 U. S. C. – Section 333
  • January 27, 2015 – .The FCC issues an Enforcement Advisory regarding intentional interference of WiFi hotspots.
  • January 30,2015 The AHLA, Marriott International (managers of Gaylord Opryland) and Ryman Hospitality Properties (owners of Gaylord Opryland) formally withdraw Petition
  • August 18, 2015 FCC issues a Consent Decree to settle allegations that Smart City interfered with and disabled WiFi networks established by consumers in various convention centers where they had contracts to manage the telecommunications systems and networks. The settlement included a $750,000 fine, a development of a compliance plan and an agreement for Smart City to submit usage and compliance reports. In an FCC press release regarding this matter, the FCC characterized the presumed intent of Smart City’s “blocking “ as an effort to collect an $80 daily fee charged for using the convention center WiFi.
  • August 18, 2015 – In response to the August 18th FCC press release, Smart City issues a press release commenting thatthere was no finding by the FCC in the Consent Decreethat the Smart City’s equipment would automatically turn off devices in response to economic considerations (for instance: payment of an “$80 fee”).
  • November 2, 2015 – FCC releases a Notice of Apparent Liability for Forfeiture fining MC Dean $718,000 for maliciously blocking personal WiFi networks in the Baltimore Convention Center and for creating interference for certain WiFi networks outside the convention center. As part of this document, two FCC Commissioners make dissenting statements regarding the Notice.
  • November 2, 2015 – MC Dean issues press release stating their objections to FCC’s action and announcing their intent to challenge the FCC Notice.
  • November 10, 2015 – On Twitter, Smart City makes statement supporting MC Dean’s intention to challenge the FCC Notice.
  • November 18, 2015 – MC Dean issues a press release referencing support for the statements made by FCC Commissioner Pai in testimony before Congress. In that testimony Commissioner Pai specifically referenced MC Dean’s Notice of Liability and stated that MC Dean did not break FCC rules. Further, he characterized the fines against certain communications companies as “egregious violations of due process.” MC Dean reiterated their intention to challenge FCC’s Notice of Liability.

The Power and Momentum of Bad Publicity

It’s hard to get past sentiments expressed in the many articles, editorials and blogs written about this matter. The headlines and vivid language portended an ugly outcome. This was typical – “It’s About Damn Time: FCC Says Convention Centers Can’t Block Wifi. Another read, “A couple months ago, Marriott got busted by the FCC for blocking personal hotspots of its guests at its Gaylord Opryland resort in Nashville. It was a simple plan: break everyone’s WiFi at a tradeshow, and then charge exhibitors $1,000 a pop to access the “official” hotel WiFi”.

Convention centers were specifically mentioned in the FCC’s Enforcement Advisory. Convention centers and their telecommunications contractors have been damaged by unfavorable publicity. Some flaws and blunders in their business strategy, pricing model and a few inelegant customer service practices have been exposed. For most of the convention centers however, especially where Smart City was the contractor, the economically driven motivation for containing or blocking unauthorized WiFi signals of personal hot spots was exaggerated. Yet FCC seemed to seize on the on the “you have to pay to play” theme. It was this emotional trigger that drove the FCC’s public statements and actions.

In retrospect there’s always been tension bubbling beneath the surface. Exhibitors are naturally suspicious of service pricing by exclusive contractors – from an event’s general decorating contractor to services provided by convention centers and their exclusive concessionaires. But the strongest sentiment and I believe the catalyst for the FCC to issue their stern Enforcement Advisory were the many written statements submitted by well known companies and organizations who were asked to comment on AHLA’s Petition requesting a Declaratory Ruling to Interpret 47 U. S. C. – Section 333. Google described Marriott’s actions as engaging in “secret jamming”. One statement by the Open Technology Institute summed it best, “There is a critical distinction between inadvertent interference and the sort of knowing and anti-competitive, economically-motivated interference that Petitioners seek to make legitimate with this Petition.” The FCC review of public comments on the AHLA’s Petition and resulting Enforcement Advisory were not thorough or objective. Indeed there is a crusading element characterizing their actions. They focused on the alleged mercenary nature of the WiFi blockage or jamming which was undertaken to coerce users to pay exorbitant fees and upsetting the principled ideals of transparency and fairness. In quick succession after the commentaries were read and published, the FCC issued their Enforcement Advisory and the AHLA and Marriott formally withdrew Petition. This was followed with these public statements by FCC’s managers and Commissioners:

  • “It is unacceptable for any company to charge consumers exorbitant fees to access the Internet while at the same time blocking them from using their own personal Wi-Fi hotspots to access the Internet,” – Travis LeBlanc, Chief of the FCC’s Enforcement Bureau
  • “….last year a bunch of hotels banded together and filed a petition with the FCC. They asked the agency to bless their ability to block hotel guests from using their own Wi-Fi connections under the guise of network security concerns. . . . let’s not let this petition linger or create any uncertainty. I hope my colleagues at the FCC will work with me to dismiss this petition without delay.” – Commissioner Jessica Rosenworcel, speaking at the Commission’s “ at the State of the Net Conference
  • “The Communications Act prohibits anyone from willfully or maliciously interfering with authorized radio communications, including Wi-Fi. Marriott’s request seeking the FCC’s blessing to block guests’ use of non-Marriott networks is contrary to this basic principle.”, – FCC Chairman Tom Wheeler

At this point in time with FCC’s Enforcement Advisory already published, investigations were well underway at other convention centers. The telecommunications service providers at those convention centers were Smart City and MC Dean. The writing was on the wall for both of them – expensive fines, public embarrassment and unreasonable regulations.

The Fundamental Flaw in FCC’s Investigations and Actions

FCC’s investigations relied on a fundamentally flawed premise – exhibit halls and meeting rooms were classified as space open to the general public. Further, attendees were regarded as consumers compared to shoppers in a mall or travelers in a train station. As one reads through the narratives presented in the Consent Decrees, Enforcement Advisories, press releases, and finally the Notice of Apparent Liability you come to understand through the FCC’s descriptions, expressed and implied, that they really did not understand what a convention center is. Several of the commentaries from other corporations and organizations talk about hotel guests as the aggrieved parties. In Microsoft’s commentary they gave an example of a hotel guest subjected to blocking:

“A proprietary network operator taking actions in the name of improving its network’s reliability or performance could also leverage these actions to compete unfairly and harm consumers.For example, if a customer arrives at a hotel with her own Mi-Fi device and the hotel interferes with the customer’s connection to that personal hotspot, the hotel can effectively force the customer to purchase the hotel’s Wi-Fi services to gain access, even though the customer has already paid her mobile operator for personal hotspot capability. In effect, the Hotel Industry Interests’ proposal would allow entities to use unlicensed spectrum in a proprietary manner, e.g., as if they were operators of licensed spectrum, thereby limiting or preventing access by lawful devices to the unlicensed spectrum, which is a public resource. It is precisely that sort of radio frequency interference — whether through use of signal jammers or sending signals to de-authenticate rival access points—that Section 333 is designed to prevent.”

 

Microsoft tells a good story. It has a real “bully vs. innocent victim” quality to it, one that seemed to resonate with the FCC. There are other comments on the record by private citizens, all from the perspective of a hotel room guest. These comments are irrelevant however. Convention centers are not hotels and their customers are not guests in a rented hotel room. The FCC carried on however and in the Marriott Consent Decree put convention centers in the same sentence as “…..places accessible to the public, such as restaurants, coffee shops, malls, train stations, airports, convention centers and parks” (quote from FCC’s Enforcement Bureau Order – In the Matter of Marriott International Inc. and Marriott Hotel Services Inc. – October 3, 2014). The FCC sees trade show and convention exhibitors and attendees as the general public in a public space. Indeed they are not. A typical trade show advertises its event to those in the trade only. In fact many times they have the tag line as “trade only”. Exhibitors do not want to use their limited time discussing their product or service with someone who has no intention of buying it. Exhibitors are not just any company. Quite often exhibitors are juried as to whether they’ll be asked to exhibit. These shows have an order and discipline that keeps them on focus and clearly excludes the general public and exhibitors who are not part of the industry sector. Conventions and professional meetings have similar methods. The public is not invited to a medical convention or an engineering seminar. The agreement or contract between an event management company and the convention center is a License Agreement, not a property lease as in a multi tenant commercial building. Licensing agreements are fairly lengthy and complex documents. The scope of the agreement normally includes a time period, financial terms, insurance matters, exclusive rights retained by the owner including access and services (such as internet access) and restrictions and rules about the use of the space. Portions of centers such as the lobbies, entranceways and concourses are public. These areas often include art for public viewing, coffee shops, restaurants and other retail. The meeting rooms and exhibit halls are not “public” (exceptions are public consumer shows such as automobile or home improvement shows – these are not the core business of convention centers).These facts were cited in Smart City’s comments to the FCC:

“….most of the parties supporting the Petition seem to agree that devices in normal operation that do not pose a threat to security or to network reliability and are operating in a public space should not be subject to containment. These parties are urging the Commission to balance the public interest for protection against carte blanche interference with the need for reasonable network management practices that ensure safe and reliable WiFi service in non-public spaces (meeting rooms and exhibit halls) and during private events.”

Cisco also described a related situation by equating a WiFi network at a convention center with an enterprise network vs. a home WiFi network or an enterprise network the public routinely uses and business security is not such an issue. An enterprise network is a common way to classify a network with a higher level of management control where network administrators can view managed and authorized access points as well as those that are not. The administrator can determine whether an unauthorized access point is a security threat or is likely to cause a reliability problem. A decision can be made to take appropriate action. This description fits what should be the network capabilities at a convention center. In their comments to the FCC Cisco describes further:

“…..in public places or places where the public is routinely invited, users have   every reason to expect that they can make use of personal hot spot technology, unless the user’s device is presenting a security threat of some type to the co-located enterprise or service provider Wi-Fi network. That balance shifts in enterprise locations where many entities use their Wi-Fi networks to convey company confidential information, trade secrets, and for the safety and security of the firm and its employees. In these situations, enterprises must be able to assert policies on the use of wireless technologies for employees and guests in order to safeguard the network, data and devices. This is not a problem limited to critical infrastructure firms or sensitive government installations, but can extend to any enterprise. Similarly, service provider Wi-Fi networks are used by members of the public with the expectation that their data and devices will be secure, and service providers must have the flexibility to use network management technology to meet that expectation.”

 

Section 333 and Rule 15 – Inconsistencies, Contrary Language, Confusion and Lack of Due Process

On legal and technical matters, the FCC in their investigations of MC Dean appeared to double down on their justification of a $718,000 fine. In a long (21 pages) Notice of Apparent Liability for Forfeiture the FCC’s narratives are much more detailed and strident. I got the impression that the FCC took this opportunity to counter the arguments posed by Cisco months earlier. The Baltimore Convention Center may have been more aggressive than most in its deauthentication of unauthorized hot spots. Additionally, continuing those actions after publication of the Marriott Consent Decree was clearly impolitic. But again, the FCC relied on a premise which was fundamentally flawed as described above. If you are close to this controversy and have the patience to wade through all the semantic arguments on Rule 15 equipment or the true meaning of licensed radio stations, or if deauthentication fits the FCC’s meaning of interference, or the fair warning rule, you will find yourself agreeing at some point with the FCC and at times with the convention centers. That in itself is at least cause to consider a rulemaking review. The dissenting opinions of Commissioners O’Reilly and Pai point out the inconsistencies and confusion of the current regulations and recommend a thorough FCC review. They have made these statements in their dissent over the Notice of Apparent Liability (MC Dean) and most recently (FCC Commissioner Pai) in front of the House of Representatives Subcommittee on Communications and Technology.

Recommendations – Next Steps for Convention Centers

  1. Be Cautious About the Possible MC Dean Court Challenge with the FCC – The disagreements MC Dean has with the FCC align well with the positions of other convention centers and their contractors and the dissenting FCC Commissioners (Pai and O’Reilly). However, I believe that in court the FCC will make a convincing case that section 333 is broad enough that it can be applied to unlicensed WiFi operations. The peculiar thing about 333 and other rules is that arguments can just as easily be made in favor of the convention centers point of view. My belief therefore is that the process or forum where disagreements can be aired and discussed is as meaningful as the substance. What should be avoided is the possibility of this becoming a face saving exercise. If this happens, given the political winds, the FCC’s current Enforcement Advisory will probably prevail. I favor something akin to the AHLA’s Petition or any alternative forum where the issues can be discussed rationally and there is recognition that a convention center’s exhibit halls and meeting rooms are classified improperly by the FCC. The forum should be non confrontational, the players have to be well prepared and knowledgeable and the message has to be well crafted. I am aware that IAVM has organized a group, the WlFi Coalition, which includes convention center, telecommunications contractor (Smart City in this case) and event manager participation. I am no fan of committees but this is a good start. Hopefully the outcome of the group’s efforts will show that the convention center industry is a bona fide industry sector and their WiFi operations unique and set apart from the general public. Perhaps such a group would have standing to represent the convention center industry in discussions with the FCC.
  1. Don’t Give Up or Forfeit Wireless Services as an Exclusive Service – You’re in a serious business with serious players. To fail at this would tell the marketplace you are not. It will damage your brand. It will adversely affect event bookings and it will further erode service revenue.
  1. Demonstrate Competence in Supplying Wireless Service and Do It Consistently – You can’t really be exclusive unless you consistently demonstrate safe and reliable services. Your clients would prefer an elegant solution with a convention center designing and operating a reliable network with ample bandwidth and proper management practices to handle high density situations. They also expect security from potential problems such as a concentration of independent (unauthorized) WiFi users adversely affecting operations to be pre-emptive so problems are solved before they can happen. At this writing, CES is underway at the Las Vegas Convention Center. It will be interesting to see how things go. Cox Communications has the exclusive contract for telecommunications there, including WiFi. They have brought in several telecommunications sub-contractors to handle volume and help manage the massive network requirements for this show. If things go well and for the benefit of all convention centers, there is a wish list:
  • For the LVCC – Write a case study about the experience. This is not a request to give away technical secrets. Rather it is simply the good news which would lift the confidence of event managers who have many other things to worry about and I believe would prefer the elegant solution of a single competent telecommunications team that their exhibitors and attendees can count on.
  • Be conscious of keeping all the success stories out there through press releases and case studies. Do not sit quietly when untrue and exaggerated claims against you are made
  • For the trade show press and bloggers – Maybe you should write about it too.
  • For the independent suppliers of WiFi equipment – Rather than shoot arrows from your comfortable chair or acting as a proxy enforcer for the FCC, get some skin in the game; compete for a convention center telecommunications contract, take the risk and make the necessary capital investment, provide the day to day resources of talent, labor, administration and equipment, and sweat over ROI and profit/loss statements.
  1. Perform a Thorough Management Review of Policies, Contracts and PricingThe optimist’s guidance is usually to try and make an asset out of a liability. This controversy is a setback but also an opportunity to make things right. If and when the FCC gets around to re-considering something akin to the AHLA’s original Petition, some clean up and thoughtful review of policies and WiFi pricing will dampen the toxic emotional environment that propelled this controversy in the first place. Some obvious suggestions:
  • The negative consequences of exclusive contractors overreaching on price is nothing new. It’s an old recurring issue in the convention center business. When there are exclusive contracts based on minimum revenue guarantees and profit sharing, contractors can easily morph into accountants and bankers rather than service providers. Convention center managers have to be assertive and review pricing structures periodically. Most exclusive service contracts give centers the discretion to change prices. Pay attention to market trends, concepts of fair price can change rapidly.
  • Convention center management has to be directly involved all the time when exclusivity disagreements arise. As operators we have all experienced this. In my time at Javits we would periodically run into a disagreement on the exclusivity of food & beverage service, on corporate sponsorships and electric service. These matters can be handled and settled with finesse and good solid judgment. When they are settled in a heavy handed fashion, the controversy ferments and the results are usually ugly.
  • If you have a contract with a telecommunications firm don’t be constrained from taking action because of contract terms. Think about whether the contract needs to be amended in light of the current circumstances. There has to be a means of keeping pace with the rapid wireless communications changes and the business habits event attendees while keeping the business terms of fair commissions for the convention center and fair rate of return for the contractor.
  1. Think Very Seriously About Offering Free WiFi for the Entire Convention Center – Many of the convention centers already have implemented this in the public spaces. Only two that I know of offer WiFi throughout the center. The Boston Convention and Exhibition Center and the San Jose Convention Center offer it throughout with no conditions. Reports from Boston show that WiFi use has doubled since free WiFi was rolled out.Reckoning with free WiFi is a tough call for many but is the best course of action. There is an author Chris Anderson who wrote a book entitled “Free: The Future of Radical Price”. He has a clever way of addressing this issue:
  • If it’s digital, sooner or later it’s going to be free. In competitive markets price falls to marginal cost. The internet is the world’s most competitive market and the marginal costs of technologies it runs on –bandwidth, processing and storage – will become less each year. Free will become not just an option but an inevitability.
  • You can’t stop free. In the digital realm you can try and keep free away with laws and locks, but eventually the force of economic gravity will win. What that means is the only thing stopping your product from being free is a secret code or scary warning, you can be sure that there’s someone out there who will defeat it. Take free back from the pirates, and sell upgrades.
  • Sooner or later you will compete with free.
  • You can make money from free. People will pay for convenience, to save time, for status, for the things they love. Free opens doors, reaching new consumers.

If implemented, convention centers and their contractors will have an expense when previously there was reliable revenue. Also, free WiFi doesn’t mean diminished service and slow reaction to problems. In fact, I would expect service expectations to intensify.

Monetizing free WiFi may not be as foreign or daunting as you think. For convention centers and their contractors, there’s a few obvious ways to exploit free WiFi for revenue opportunities; classify free as basic service and up-sell premium on the WiFi guest portal; sell advertising through ads or a downloadable mobile app for local restaurants and entertainment; sell stuff; sell push notifications; run a concierge service. In fact there are many ways to exploit free and there are countless examples from other companies’ experience about what works and what doesn’t.

 

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