News

Rooms With Two Views

10/26/2007 8:00 PM Eastern

The cable industry finds itself in yet another political wrestling match with Federal Communications Commission chairman Kevin Martin.

Backed by AT&T, Verizon Communications and now Sen. Hillary Rodham Clinton (D-N.Y.), Martin wants rules that would ban cable companies and property owners from keeping out other companies through the enforcement of agreements for exclusive access to all the apartments in a building.

The FCC has scheduled an Oct. 31 vote, but it was unclear last week whether Martin had the votes for his plan or would need to compromise. In September, Martin had to modify his plan for forced cable carriage of local digital-TV signals after failing to secure majority support.

In his new fight with cable, Martin is concerned that Comcast, Time Warner Cable and other multiple-system operators have locked up big apartment buildings through long-term deals that prevent competitors from getting into the same facility with their services. In a recent speech, Martin said the exclusivity ban he favors would disproportionately benefit minorities, claiming that 40% of all households headed by minorities reside in apartment buildings.

VOLUME DISCOUNTS

But Martin’s insistence that minorities would benefit under his rules was challenged by the Latino Coalition, which argued that bulk deals between building owners and cable companies have produced consumer discounts for cable programming services.

“The inability to negotiate valuable discounts with cable operators for urban renters will surely impact Latino and other minority groups,” Latino Coalition president Robert de Posada said in an Oct. 14 letter to Martin and other FCC leaders.

Long ago, Martin made clear he would not be satisfied with a ban that applied to future contracts. Instead, he is insisting the FCC’s new rules work to void all existing deals. Such a comprehensive rule is necessary, Martin has said, because some cable deals to serve multiple-dwelling units (MDUs) are perpetual.

Late last week, Clinton, considered the candidate to beat for the Democratic Party’s 2008 presidential nomination, weighed in on the issue, backing Martin’s view that the rules needed to address existing contracts.

“As you consider the issues in the ongoing MDU proceeding, I hope that any new set of rules will ensure that exclusive access arrangements are properly curbed both retrospectively and prospectively,” Clinton said in an Oct. 24 letter to the FCC’s two Democratic commissioners, Michael Copps and Jonathan Adelstein.

Clinton noted that opening the apartment building market was especially critical in the Empire State, where more than 50% of the population lives in apartment buildings or MDUs. New York has about 20 million residents.

“Like everyone else in the Information Age, they need access to affordable broadband in order to prosper and should be given the opportunity to choose which service is best for them,” Clinton said in a short but substantive letter.

The National Cable & Telecommunications Association and Comcast have both told the FCC that the agency lacks authority from Congress to void existing contracts, perhaps a warning that new FCC rules will be challenged in federal court.

Cable’s ally against Martin has been real estate interests, including the National Association of Real Estate Investment Trusts and the National Multi-Housing Counsel, both of which have said that their contracts with cable operators fall outside the FCC’s regulatory jurisdiction.

STATES HAVE ACTED

Some states have already addressed competition in large residential buildings. Clinton’s letter neglected to mention that New York is one of 18 states with a combined population of 121 million people that has a building-access law to prevent exclusive service deals.

“These laws cover [buildings] in such metropolitan areas as Boston, New York City, Philadelphia, Miami, Washington D.C., Chicago, Cleveland and Las Vegas. The fact that so many [multifamily dwellings] cannot be subject to exclusive access agreements under state law belies the perceived need for [FCC] action,” Comcast told the FCC.

Nevertheless, Clinton’s letter was a political coup for Verizon, which has been lobbying Martin for new MDU rules. In fact, a public relations firm working for Verizon circulated Clinton’s letter to reporters via email. Verizon is headquartered in New York.

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