FCC Bans Cable-MDU Exclusives
By Ted Hearn -- Multichannel News, 10/31/2007 10:04:00 PM
Washington – Cable operators can’t enforce exclusive contracts with apartment building owners or sign new ones under a sweeping prohibition unanimously adopted by the Federal Communications Commission on Wednesday.
FCC chairman Kevin Martin promoted the ruling as an attempt to ensure that 90 million Americans who reside in multiple dwelling units (MDUs) were not entirely locked out by contract from sampling pay-video services provided by AT&T and Verizon.
“Trying to remove any barriers to those cable overbuilders is really critical if you want to hold down cable prices,” Martin said.
Not for the first time, Martin complained that cable rates had risen 93% from 1995 to 2005; and not for the first time, Martin failed to mention that he was referring to nominal cable rates that were not adjusted for inflation, programming quality improvements or channel additions.
Past FCC reports have shown that per-channel cable rates adjusted for inflation actually declined during the periods in which Martin said they effectively doubled. Martin has banned the FCC staff from analyzing cable rates on a per-channel basis.
The ruling -- which applies to AT&T and Verizon just as it does to Comcast and Time Warner -- does not place any restrictions on DirecTV and EchoStar and private cable operators, which are multichannel TV providers that do not need a local franchise because they don’t occupy public rights of way.
Although the FCC promised to examine exclusive deals by cable competitors, the National Cable & Telecommunications Association was upset the agency didn’t deal with it now.
“If eliminating exclusive contracts for some video providers is good for consumers, then it should have been applied to all providers,” said Dan Brenner, NCTA’s senior vice president for law and regulatory policy.
Brenner also complained that the FCC had no justification for voiding existing contracts. NCTA had argued that the FCC should have let current deals expire.
“The FCC’s action to terminate existing contracts is an unprecedented, legally suspect step that could harm consumers and jeopardize the delivery of advanced services to low-income neighborhoods where other video providers have chosen not to offer service,” Brenner said.
The real impact of the FCC’s action will be determined by landlords.
As one FCC member made clear, the fact that the FCC banned exclusive contracts involving cable operators did not mean that the agency had ordered landlords to sign deals with a second provider to compete with the cable incumbent.
It does “not give any video provider the right to enter an MDU over the objection of the property owner,” FCC Democrat Michael Copps warned.
In 2003, the FCC examined video competition in the apartment building market. According to FCC Republican Robert McDowell – who, unlike Martin, was not an FCC member in 2003 -- the FCC invited cable to seek exclusive deals, especially if the building was to receive service for the first time or was to be upgraded for digital service.
“I am concerned about the legal sustainability of the order, should it be appealed,” McDowell said. “To flash cut to a new regulatory regime without a sensible transition period only begs for an appeal that could result in a court throwing out all of our order, the good with the bad,” said McDowell, who only concurred with the decision.
Since 2003, Martin said, the market had changed because four years ago AT&T and Verizon were not eager participants in the pay-TV distribution business.
“In 2003, we were not seeing a widespread practice of competition by wired cable services,” Martin said. “It’s a very different landscape. The impact of exclusive provisions are very different today than it would have been in 2003 when there weren’t significant cable overbuilders.”
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When people ask if the Iraq war could get any worse, the answer is yes if FCC Chairman Kevin Martin was in charge of it. This is just another case of Chairman Martin using his pro-ma bell/anti-cable bias to promulgate rules that have no public benefit, but which gain him notoriety. Much like the nonsense about a-la-carte bringing prices down without affecting small programmers or the apples and oranges comparisons he makes with cable rates. Eight years ago citizens would not have had their monthly expense for cable, phone and internet around a hundred dollars.
The fact that the Republican appointed Chairman doesn’t care about the cable industry’s health, which has many employees and investors, is a little scary too. The next President, whether Republican or Democrat needs to fix this problem.
George T - 11/1/2007 12:12:00 PM EDT -
I need someone to clear this up for the common man. I live in a mdu. for 11 years we've have cable provider x because that was all there was to have. Now provider y has come in and forced their way into a contract with our condo board. I'm told that I will NO LONGER have the choice to still use provider x. I WANT provider X They have better service than the new provider y. I don't care if I pay twice...I want x that works....y does not have a good track record and I've heard nothing but nightmares and poor service and outages.
What is the bottom line here?
rider one - 11/1/2007 9:36:00 AM EDT -
Two comments. First, if the FCC's action doesn't give a wireline competitor access to the property "over the owner's objection," then what on earth does the ban mean?
Second, step back and think about how this ban will work in the real world. We're a cable operator who fully overbuilt our market 10 years ago. Typically our bulk deals with landlords include an exclusivity clause, and often such properties have been wired only by us. The landlord pays us a greatly reduced monthly rate for each rental unit, whether it's occupied or not, and recovers this cost in the rent.
How is this bulk contract affected by the ban? It would seem the FCC's action voids only the exclusivity clause; the rest of the contract stands. So if one of the tenants wants service from a wireline competitor, they'll be able to get it. But the landlord will be under no obligation to pay to have the competitor wire the building, or to cut the rent. The tenant will pay for our service through his rent, the competitor's service at retail and the installation cost to get the wireline competitor's service.
If a tenant wants service from a DBS competitor, he could have gotten it before the ban. He won't face any installation fees, but again his rent will not go down so he'll effectively be paying for our service and the DBS service that he orders retail.
Does anybody think there will be a stampede of tenants running out to pay for service twice?
Cable Pro - 11/1/2007 8:19:00 AM EDT -
I must commend Mr. Martin for his very consistant leadership and direction.
I have never seen a public official who so infuriates so many people, including myself, by demonstrating an uncanny ability to serve only his totally biased self interest. Not only does he use distorted interpretations of data to misrepresent the true facts to the public he also glorifies his ideals as the savior of the public interest. When are we going to be able to have a person in this position who truly will be servant of the public needs? he is talking about community involvement look to your local cable company.
Not extending the MDU policy to the dish companies is another flagarant demonstration of bias against the cable industry as well as the proposed digital must carry ruling for cable companies only. in many cases MDU residents receive lower rates than the single family unit dwellers due to a bulk deal. this will change with the ability to have a contract taken away.
cable guy - 11/1/2007 7:46:00 AM EDT
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