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FCC fines hotels that block hot spots

Fed up with Internet charges that can range into six figures, more meeting planners are instead using mobile hot spots to connect at conferences and conventions. But their efforts have at times been stymied, when the venues have electronically blocked the transmissions.

The Federal Communications Commission has recently been intervening in this high-tech game of cat and mouse. Last week, the commission proposed a $718,000 fine against M.C. Dean, the company that provides Internet services at the Baltimore Convention Center, over accusations that the company blocked Wi-Fi hot spots, as well as a $25,000 fine against Hilton Worldwide Holdings for what the agency called "apparent obstruction of an investigation" into Wi-Fi blocking.

"Clearly the FCC has taken a legal position," said Bjorn Hanson, clinical professor at the Preston Robert Tisch Center for Hospitality and Tourism New York University.

Last year, the commission fined Marriott International $600,000, then issued a warning in January that blocking hot spots in hotels and "other commercial establishments" was illegal. In August, the agency levied a $750,000 fine against Smart City Holdings, a company that manages Internet services in 28 convention centers. Consumers have a right, the commission said, to use hot spot technology like smartphones and wireless routers like MiFi without interference.

"It puts meeting planners in a better spot, because they know the FCC is behind them," said Eric Bracht, a senior consultant of audiovisual operations at the consulting company Electro-Media Design Ltd. "Now they have some backup."

In response, the hospitality industry has countered that the commission has overstepped its authority and has given poor guidance about how companies are allowed to manage their Internet connectivity. Wi-Fi networks created by hot spots, industry officials contend, are less secure and can interfere with their in-house networks.

M.C. Dean said in a statement that it planned to challenge the fine, and it and Hilton have said they disagree with the agency’s recent decisions. Both Marriott and Smart City also issued statements after their settlements, maintaining that they had broken no laws.

"From our point of view, we don’t believe that M.C. Dean has done anything to deliberately deceive our customers," said Peggy Daidakis, executive director of the Baltimore Convention Center.

The hospitality industry has plenty to lose. While business travelers grumble about having to pay $15 or $20 a night for Wi-Fi access at upscale hotels, those charges are a drop in the bucket compared with what event planners pay for Internet access in hotel conference space and convention centers.

Hanson estimated that U.S. hotels collected as much as $500 million in revenue from Internet charges last year.

"I did a meeting a few years ago in a convention center," said Donna Jarvis-Miller, director of membership and events for the American Public Human Services Association, who said the initial quote for Internet service gave the association sticker shock.

"It was close to $30,000, and that was just to buy out just a section of the convention center we were in," she said.

Now, Jarvis-Miller said, she brings in her own hot spot network for a fraction of the cost.

"They’ve offered to discount it deeply, but I’m always able to bring it in for less than what they’re offering," she said of her attempts to negotiate with hotels and convention centers.

Even that lofty sum is a relative bargain, though, compared with what some high-tech event producers pay. For the Consumer Electronics Show, which brings about 175,000 people to three convention facilities in Las Vegas every January, the bill for Internet access tops half a million dollars — and that does not include what the show’s 3,600-plus exhibitors spend if they need individual connections inside their booths.

"It is expensive, and each city has different rates," said Karen Chupka, a senior vice president for the Consumer Electronics Association.

Factors influencing the rate include what kind of technology is available and how recently it was added, she said, especially if the building is a public facility — as many convention centers are — that is required to choose its technology provider though a bidding process.

Chupka said technological factors like how much hard-line connectivity a group needs in addition to Wi-Fi also affects how much a venue will charge. Although Wi-Fi might work fine for checking email or conducting a brief product demonstration, activities that demand more bandwidth or more security, like transmitting a live broadcast or running credit cards, still often require wired Internet access.

Since many convention centers outsource functions like their network management, it can be harder for planners to haggle down the price of Internet access, but the arrangement spares the center from having to finance technological upgrades and might provide it with a commission as well.

"This last year, we’ve invested about $600,000 just upgrading our access points," Daidakis said. "I don’t have it, as a city agency," she said, whereas M.C. Dean can afford to make those kinds of big capital investments.

"Basically, you’re looking at six figures or more to wire up the place, and every couple of years you’ll probably want to do another low six-figure upgrade," said Ben Yalow, a recently retired information technology professional with experience setting up and configuring networks in hotels and convention centers.

"It is one thing convention centers are looking at and trying to figure out how they can continue with the demand, because the demand is only growing," Chupka of the Consumer Electronics Association said.

Daidakis said the Baltimore Convention Center receives a 35 percent commission on the Internet services that M.C. Dean sells to customers. It is money that the center, which runs at a deficit, needs, she said.

"We have to make up the gap between revenue and expenses," she said, "and we’re looking at our business partners.

The upshot is that planners either negotiate down to an amount they can afford or throw up their hands and go the hot spot route. Daidakis acknowledged that most of the nonprofit trade association clients the center hosts do receive a discount on the published rates for access, usually about 25 percent or more.

Hospitality industry experts predicted that the FCC’s recent actions would force event facilities to become more competitive in their pricing, so as not to lose out entirely on the Internet revenue stream.

"The Wi-Fi hot spots are certainly going to be more prevalent as people realize they can use them," Bracht said. "Since the FCC has come down on the side of the consumer, access will be a lot more discussed," and negotiations will become more commonplace.

"I think the long-term solution is going to be that convention centers and hotels drop their prices down to someplace reasonable," Yalow said. "They’re not going to make money off this the way they used to."

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