FCC Ready to Ban Exclusive Cable Contracts
Deals With Developments, Apartment Complexes in Jeopardy
By Kim Hart, Staff Writer
Wednesday, October 31, 2007
Loudoun County neighborhoods were built five years ago, a
Dulles company won long-term exclusive contracts to provide
cable service to hundreds of residents.
At the time, OpenBand Multimedia was the only company willing to
invest millions of dollars to bring cable service to
less-populated areas. Some residents want a choice now that
Verizon Communications and others are offering competing TV
services, but they're locked into a contract that could last
Federal Communications Commission is set today to ban such
contracts between cable TV providers and the owners of apartment
buildings, condominium complexes and planned subdivisions.
Banning exclusive agreements could help promote competition and
reduce cable rates for an estimated 100 million consumers, FCC
members said in interviews.
The move will open the door for telephone giants Verizon and
AT&T, which now offer video services, and smaller cable
competitors such as
RCN. Those companies have argued that long-term cable
contracts lock them out of key markets.
Cable companies and apartment-building owners say exclusive
agreements allow them to offer reduced rates to residents.
Property owners can negotiate rates in return for guaranteeing a
large number of customers for cable providers, who in turn say
they could not otherwise afford to extend their networks into
The proposed ban has unanimous support from the five-member FCC.
Kevin J. Martin said in an interview that cable rates have
almost doubled over the past decade while rates for Internet and
wireless services have dropped because of competition.
Now that other companies are trying to go head-to-head with
cable operators, "we have to make sure we are removing any
barriers for people to be able to come in and compete," Martin
The FCC has pressured the cable industry to adopt more
competitive practices. Last year, it forced municipalities to
speed the process for phone companies to enter local television
markets. Another proposal up for a vote today would extend that
provision to cable companies.
"We want to even the playing field for similarly situated
players," Commissioner Robert M. McDowell said. "What's fair is
About a quarter of the
population lives in apartments, and industry experts estimate
that 5 to 10 percent of those buildings have exclusive
contracts. Many contracts last 5 to 10 years, while a small
number can last indefinitely.
Martin wants to abolish existing contracts as well as future
deals -- a reversal of the commission's previous ruling that
such exclusive contracts benefit consumers by letting landlords
negotiate lower rates.
"The commission can change its mind, but it's a bad precedent to
let the government undo contracts because of changes in public
policy," said Daniel Brenner, senior vice president of the
National Cable and Telecommunications Association. He questioned
the FCC's authority to regulate property owners' rights to enter
Brenner said cable prices have risen to reflect more
sophisticated programming technology, such as high-definition
The effect of eliminating such agreements would be magnified for
minority residents and senior citizens, many of whom live in
apartment buildings or retirement communities. Commissioners and
consumer groups say increasing competition would reduce prices
for minorities, seniors and people with low incomes. But some
minority advocates argue that cable operators would have no
incentive to reach low-income areas without exclusive contracts.
"These arrangements have helped provide companies with the
guaranteed customer base necessary to justify investing in some
of the more hard-to-reach places," said former
D.C. Council member Sandra C. Allen (D-Ward 8). "We have to
fight against the desire by some new entrants to only serve the
wealthiest residents while bypassing lower-income homes."
Seventeen states, including
Virginia and the District, have outlawed exclusive
agreements between cable companies and property owners, but the
rule is not always enforced.
Maryland allows the contracts, which would be prohibited by
the FCC's rule.
RCN, based in Herndon, has been shut out of
Montgomery County apartment buildings that have exclusive
deals, said Richard Ramlall, senior vice president of strategic
and external affairs. "The new FCC law would be very helpful to
us," he said. "We can finally knock on these doors and be
Not all smaller competitors would benefit.
Shenandoah Telecommunications, which serves parts of
and OpenBand in
Northern Virginia say they could not afford to extend their
networks without the return on investment guaranteed by
Cable companies often offer service at discounts in exchange for
bulk subscriptions. Some property owners fear that they will
have to pay more to rewire their buildings for competitors.
"That could drive up rents as the cost is shifted back to
developers," said Richard Holtz, chief executive of InfiniSys
Electronic Architects, a consulting firm that helps property
owners negotiate agreements with cable companies. "It's tough to
justify having more than one provider."