Telcos: Ban Cable Exclusives

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AT&T and Verizon Communications are urging the Federal Communications Commission to promote competition by banning cable operators from maintaining exclusive service contracts with the owners of apartment buildings and other residential properties with multiple-dwelling units (MDUs).

Cable and phone companies are engaged in a competitive struggle to get as many customers as possible to sign up for their voice, video and high-speed data bundles. Apartment buildings are rich prizes because densely populated properties can help new providers gain some traction in the market at relatively low expense.

FCC LOOKING INTO IT

The FCC opened the debate in March with a notice of proposed rulemaking, another attempt by chairman Kevin Martin to clear away what he considers barriers to video competition.

Last December, the FCC adopted Martin-initiated rules that require local governments to act on phone company cable franchise applications within 90 days.

A few months later, the agency altered internal cable wiring rules to make it easier for new providers to access the wiring of cable incumbents.

Comcast, the National Cable & Telecommunications Association and other cable operators have told the FCC that the agency lacks legal authority to abrogate service contracts between cable operators and landlords and that market conditions do not warrant federal intervention.

“The marketplace for MDU consumers is already intensely competitive, and consumers are reaping the rewards of that competition,” Comcast, the largest U.S. cable company, told the FCC.

Cable has an important ally in the battle: landlords.

A coalition of landlords called the Real Access Alliance, which controls nearly 5 million rental units, told the FCC, told the commission to stay out, echoing cable’s view about lacking legal authority.

“There is no market failure here that would justify government,” the RAA said.

The group added that the FCC should try to regulate activity in 500,000 U.S. apartment buildings by placing restrictions on cable companies.

“The [FCC] cannot avoid its lack of authority by attempting to regulate only the service provider. An agency cannot do indirectly what the law prevents it from doing directly,” RAA said.

In their comments, AT&T and Verizon accused cable incumbents of using exclusivity to exclude second and third providers from serving apartment buildings. As a result, both have asked the FCC to bar cable from entering new exclusive deals or enforcing existing ones.

“This is a critical time in the development of multichannel video competition and, unless the [FCC] acts promptly to limit the use of exclusive access arrangements, large numbers of residents in MDUs are at risk of missing the opportunity to choose among alternative wireline providers,” AT&T said in FCC comments filed July 2.

ACCESS TO THOUSANDS

Citing U.S. Census figures, AT&T said that 24.6 million households are in buildings with more than one unit. In an effort to quantify the exclusivity problem, AT&T pointed to comments filed at the FCC by SureWest Communications, Verizon, and Carolina Broadband that thousands of apartment units in their service territories were off-limits due to exclusive cable contracts.

But AT&T said that estimating the number of apartment buildings under exclusive contracts was difficult because the deals are kept secret until a new entrant tries to service a property.

“Nevertheless, there is a consensus that exclusive access arrangements with MDUs have become prevalent and are becoming more so and that such agreements can and have been used to frustrate cable competition just as new providers are attempting to enter the video services market,” AT&T said.

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