FCC Ready to Ban Exclusive Cable Contracts
Wednesday, October 31, 2007
When several 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 decades.
The 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 apartment buildings.
The proposed ban has unanimous support from the five-member FCC. Chairman 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 said.
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 fair."
About a quarter of the U.S. 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 such contracts.