October 31, 2007 12:12 PM PDT

FCC bans exclusive TV deals for cable

Apartment dwellers will soon have more choice when it comes to TV service providers, thanks to a new rule adopted Wednesday by the Federal Communications Commission that bans cable operators from striking exclusive contracts with apartment buildings.

Specifically, the FCC's order will prevent building owners from establishing deals that lock residents into only one TV provider. The rule impacts all new contracts between cable operators and apartment building owners. It also applies to all existing contracts that have exclusivity clauses.

The FCC says roughly 30 percent of Americans live in what are called multiple dwelling units, or MDUs. The new rules should provide more choice for such dwellers as telephone companies like AT&T and Verizon Communications start offering TV services targeting this market.

"I believe that people that live in apartment buildings deserve to have the same choices as people that live in the suburbs," FCC Chairman Kevin Martin said during the commission's open meeting. "There is no reason that consumers living in apartment buildings should be locked into one service provider."

But while the FCC may have opened up some choice in the TV market, it didn't apply the rules evenly to all companies offering TV service, including satellite TV companies and smaller private cable operators. These companies also use exclusive contracts to lock in customers in apartment buildings. But they are currently excluded from the exclusivity rules.

Phone companies, such as AT&T and Verizon, which also offer TV service, will be included in the new rules. Seventeen states and Washington, D.C., already ban exclusive contracts.

Commissioner Michael Copps expressed concern that the rules may favor certain companies over others. But he said the FCC would soon be looking to extend the rules to all TV providers.

"Happily we will be addressing these competitive parity issues in the next six months," he said. "In the meantime, I would caution any MVPDs (multichannel video programming distribution providers) seeking to take advantage of this regulatory lag time that they do so at their own risk."

Even though all five of the FCC's commissioners supported the adoption of the new rules, Commissioner Robert McDowell said he felt that the FCC was standing on shaky legal ground in applying the rules to existing contracts. He said that in 2003, the FCC actually encouraged these types of arrangements so that cable operators would wire older buildings with cable infrastructure. He said the commission is opening itself up for legal challenges by not allowing these older contracts to expire before applying the new rule.

"To flash cut to a new regulatory regime without a sensible transition period only begs for an appeal that could result in a court throwing out all of our order, the good with the bad," he said.

Dan Brenner, senior vice president for law and regulatory policy for the National Cable and Telecommunications Association, characterized the action to terminate existing contracts as "legally suspect."

He said he was also disturbed by the inconsistencies in the order.

"If eliminating exclusive contracts for some video providers is good for consumers, then it should have been applied to all providers," he said in a statement.

Martin defended the commission's action to apply the rules to existing contracts by saying that cable operators have had at least four years to recoup their costs and that it was time to end these types of agreements.

Chairman Martin has long had a contentious relationship with the cable industry. Over the years, he has been a strong proponent of a la carte cable pricing, which would allow people to pick and choose the TV channels they wanted instead of subscribing to an entire package of channels. The cable industry has long fought the a la carte model, saying it would cost consumers far more than what they pay today.

The cable industry has also butted heads with Martin over the implementation of cable cards, a technology that is supposed to help spur a retail set-top box market and give consumers more choice over the type of devices they use to access and get services from their cable operators.

An order requiring all cable set-top boxes to have separate security on cable cards went into effect this summer. The cable industry claims that it has been forced to implement technology that is expensive and provides little use to consumers.

But Martin has defended his positions by saying that he is simply protecting the interests of consumers. During that meeting he said cable prices shot up 93 percent between 1995 and 2005, and that cable is the only industry regulated by the FCC that has seen such price increases during this period. By contrast, telecommunication services have all seen drastic declines in pricing for consumers.

Even though the FCC seemed to single out cable in the MDU market, the commission tried to level the playing field in another area. Also at the Wednesday meeting, the FCC extended rules that were adopted earlier this year that streamlined the video franchising process for new entrants--like the phone companies--to the incumbent cable providers.

But the cable industry doesn't believe the FCC went far enough, because the order only applies to new franchise agreements. This means that cable operators must wait until their current franchise agreements expire to realize the benefit of the new rules, while the telecommunications industry can enjoy those benefits today.

Martin once again said his main interest was in protecting consumers.

"As I have said before, I am committed to seeing that consumers are able to realize the benefits of competition in the forms of better services and lower prices," he said. "I hope that the regulatory parity that we establish in this order helps to achieve this goal."

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12 comments

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Wait a minute!
"The new rules should provide more choice for such dwellers as
telephone companies like AT&T and Verizon Communications
start offering TV services targeting this market."

How can AT&T lobby for and get a non-exclusive contract ruling,
when they have just such a deal with Apple?
Posted by Gringras (29 comments )
Reply Link Flag
This doesn't have a lot to do with AT&T
Sure, they'll be able to have an easier time selling its TV service, but it's more of the FCC's idea to do this than the telecos. Beside, this is totally different than the AT&T/iPhone exclusive contract. Sure, if you want the iPhone you're "stuck" with AT&T, but you can go with a different phone if you don't want AT&T. But with the exclusive contracts with appartment dwellings and cable providers, you can't get any other television service unless you move.
Posted by aka_tripleB (2211 comments )
Link Flag
Competition?
I still am curious what this 'competition' thing is for cable TV. In my area there is only one provider- Comcast. There is nobody else so there's no concept of competition. They raise their rates and you have no choice except pay or go without.

In an apartment complex, you have even less choice- you use whatever is given to you. You can't go to the apartment manager and tell them you want XYZ cable instead of ABC. They aren't going to let you run new cabling from the street to the individual units. It's simply not going to happen.

Unless you can get that 'last mile' of cabling open and free to the market competition, then all of this is a moot point. In my area it was attempted and Comcast simply bought out all the companies.

Competition? Nope.
Posted by Vegaman_Dan (6683 comments )
Reply Link Flag
What about internet access?
The article talks at length about competition and cable "TV"
providers (and I agree with Vegaman_Dan's statement, there isn't
competition), but what about the cable co's and cable "INTERNET"?
Apartment dwellers are also locked in with whatever high-speed
INTERNET provider the complex has signed on with.
Maybe it's covered under the same umbrella, but the lack of the
word "INTERNET" was quite conspicuous to me.
Posted by GGGlen (491 comments )
Reply Link Flag
I don't think so
Apartment dwellers are not locked in with [the] provider the complex has signed on with. At least, not the majority of apartment dwellers in Manhattan where Columbia Univ did a research paper on this statistic last year. The vast majority of building complexes here have opted out of signing on with any cable provider and do not offer cable to their tenants. Tenants must work directly with Time Warner Cable here. I've been a customer of theirs for 37 years. Nowadays because of advances in video technology at low cost, I no longer have much interest in TV and Cable channels. I subscribe to the rock bottom package of eight channels I hardly ever watch in order to get my cable internet connection at a discounted bundle rate.

Yes, I agree cable internet pricing is an outrage. Because so many complained, the cable companies devised a new stunt to screw the customer - offer slower broadband at a cheaper monthly rate; the marketing idiots are working hard to destroy consumer respect for the product. It doesn't cost the cable internet cos one cent more to offer the standard highest speed. The price for standard high speed cable and DSL (not the degraded speed product) should be more or less $15 to $20 monthly. And if you want HBO SHO ESPN etc thrown in, add ten dollars.
Posted by i_made_this (302 comments )
Link Flag
OH MY GOSH!!
The problem that more and more apartment dwellers are facing is not exclusivity contracts with cable companies, but exclusivity contracts with satellite companies. A friend of mine is living with this right now. She left an apartment complex where Qwest and DirecTV had signed an exclusivity contract, and her only choice for TV was DirecTV, at $42 a month, plus equipment rental, along with the outrageous price DirecTV charges up front for the "rental" DVRs. Then she moved to another building with the same contract with DirecTV!!

She WISHES she could get Comcast! Hey FCC, how about making the rule cover cable's biggest competitor?
Posted by rdlink (18 comments )
Reply Link Flag
Yea!
About time the strangle hold of slow to upgrade cable had. Now they will have to stay on top of upgrades and tech, or washed out like the cathode ray tube for Television. Teleco's have the upper hand now with the light.
Posted by QuietStormX (48 comments )
Reply Link Flag
Hallelujah!
its about time this happened. It made no since to me that only Comcast got to provide television service, and that if you wanted any other provided it either cost a rediculous extra monthly fee, or you couldn't get them.
Posted by clsmithj (89 comments )
Reply Link Flag
Property rights?
While consumers may feel this is a boon to them, and rightfully so, it does leave a question of property rights to consider.

Apartments are owned by private companies. I don't see why the property owner should be limited from doing with their property as they see fit. If their property is only wired for one provider, there are other apartments that may offer other options. This is, or was, just simple limitation based on the property owner's preference. If you want added choice, buy a house or buy a condo where you have more options as a property owner. If you can't afford to purchase a house or condo where you do have property rights, maybe it's time to consider whether having cable is really a priority you should be worried about.
Posted by sumwatt (69 comments )
Reply Link Flag
Re: Property rights?
What about property rights?

There's no reason a tenant in an apartment should be treated any differently than anybody who owns a private house when it comes to a choice in utilities.

Something else to keep in mind is that this doesn't JUST happen in apartments. It also happens in regular single home developments.

How about their "property rights"? Why shouldn't they be able to make the choice for themselves?

"Telcos, cable and other video providers also increasingly are making exclusive marketing deals, especially with upscale single-family home developments."

From: <a class="jive-link-external" href="http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_5736864,00.html" target="_newWindow">http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_5736864,00.html</a>

I can imagine WHY a builder or a company who owns large complexes would make an "exclusive" deal, but I'd be willing to bet it's for their own benefit, not that of the people buying their houses or living in their apartments.

Charles R. Whealton
Charles Whealton @ pleasedontspam.com
Posted by chuck_whealton (521 comments )
Link Flag
About time and exaclty what I have been saying...
This is whave I have been saying on other forums

"Your right it is a "choice" of where you live, what you pick out to wear, your electronics and so forth. The thing is if you have 3 companies out to get you. Let?s just say Comcast, Cox, and Qwest. Now let?s throw in the DirecTV and Dish Network. Now I know they are satellite providers but they need to be in this discussion. Now Cox and Comcast are big cable providers, both of which are in my area. The thing is Qwest is in my service area as well. Now I could get Dish and DirecTV but unfortunately I do not have a direct line of sight to the big satellite in the sky. Now that was my "choice" where to live in my apartment complex. The thing is MDU's, Condominiums, and Apartment Complex?s are controlled by either by one or more people. If I had a direct line of sight in the sky I would get it for more channels for a real inexpensive deal. Thing is I am unable to signal to my area because another building is in my way. So what is my other choice? Only Cox, like I said Comcast and Qwest are in my area as well. Unfortunately my complex has signed an exclusive deal with Cox, so I can not get Comcast, nor do I want that either, or Qwest of which I would like to have. I am able to get a signal from Comcast and Qwest I asked them personally. So, in order to get service a middle man was put in motion. The only person benefiting from this is the owner(s). We as the people are being stripped of competitive sales/marketing that is the point. It's a freedom of "choice". True, there are laws and contracts but when a contract such as cable is being stripped of competing fairly with the masses are stepping on Federal laws. I would like to have the same deal as satellite providers. If you are able to get a signal from DirecTV or Dish you have a right to that service within requirements. The same should be put in motion for all cable providers, if you live within the coverage area and meet the requirements you should have access to those services."

nuff said.
Posted by jemsick (2 comments )
Reply Link Flag
FCC Bans Exclusive TV Deals for Cable .. .
That's nice for apartment dwellers, what about those of us who have no alternative in an entire county. We live in a rural county and have only 1
cable provider, and only get Broadband (Cable Modem) from One provider and their prices are ridiculous. We have no choice other than a satellite. Ours is a take it our way or don't get it at all situation, that should not be. We also have a choice of 2 cell phone providers. If apartment dwellers think they are being singled out, let them try living here a while. Talk about Culture Shock, I experience it every time I leave the house.
Posted by Leeland Webster (4 comments )
Reply Link Flag
 

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