News

FCC Looks to Void High-Rise Cable Contracts

3/22/2007 11:09 AM Eastern

Reacting to complaints by Verizon Communications, the Federal Communications Commission decided in a bipartisan fashion Thursday to consider new rules that would wipe out exclusive contracts that cable operators have signed to serve apartment buildings on an exclusive basis.

The imposition of such a ban would represent another attempt by Republican FCC chairman Kevin Martin to rely on regulatory tools to interfere with free-market actions taken by cable incumbents, even though the commission indicated that any ban would likely apply to all pay TV providers and not just cable companies like Comcast and Time Warner Cable.

But since cable operators have been accused of abusing exclusivity the most, the FCC rules would disproportionately affect cable MSOs.

Nevertheless, Martin said, “I do look forward to working on this in a platform-neutral way.”

Based on allegations filed by Verizon, the agency is troubled that cable operators can keep phone companies from the lucrative apartment building market through long-term, exclusive video deals. Apartment houses -- called multiple-dwelling units by the FCC -- are an attractive target because capital costs are lower when serving places where potential subscribers are densely packed.

“People who live in apartment buildings shouldn’t be captive to one video provider. They deserve choice, too,” FCC Democrat Jonathan Adelstein said moments before the 5-0 vote.

The commission already has rules that empower renters to install satellite-TV dishes.

The FCC is also concerned that if a phone company can offer voice and high-speed Internet access but not video to apartment dwellers, it won’t be able to compete with cable’s triple-play voice-video-data package.

The FCC launched a rulemaking -- a process that is likely to run at least one year before the adoption of any rules. The agency tentatively concluded that the law allows it to regulate exclusive contracts that impede video competition. Verizon asked the FCC to stop any pay TV provider from entering into new exclusive deals or enforcing existing ones with MDU owners or other real estate developments.

Brian Dietz, vice president of communications at the National Cable & Telecommunications Association, said the trade group hadn’t taken a position on the issue.

Last August, Verizon told the FCC that it had surveyed all 133 MDU properties “in and around Tampa, Fla.” -- territory served by cable incumbent Bright House Networks. It found that 46 properties with 17,622 units had exclusive deals with Bright House, and that the managers of another 25 other properties with 6,531 units either did not know or would not discuss any deals with Bright House.

“People shouldn't be denied their choice of cable-TV providers simply because they live in an apartment or condo building. Exclusive access deals between building owners or developers and cable companies deny consumers choice and keep cable rates high by blocking competition. The FCC is right to investigate this issue,” Verizon senior vice president of federal regulatory affairs Susanne Guyer said.

In his statement, Martin said the FCC would “refresh the record” on whether exclusive contracts are impeding competition in voice-telephony markets.

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