Apartments Don’t Want FCC to Regulate Exclusive Video Deals

In the NPRM, the FCC asks several dozen questions, including what constitute anticompetitive situations, if the Commission retrospectively can void contracts it deems unfair, and whether exclusive contracts benefit consumers. Apartment trade groups told us customers often get discounts on cable service in buildings that have exclusive contracts. The NPRM links wider video competition to broadband deployment, FCC Chmn. Martin’s lead priority as the U.S. lags many other countries in fast Web service. “The ability to offer video to consumers and the ability to deploy broadband networks rapidly are linked intrinsically,” the NPRM said, seeking input “on whether the use of exclusive contracts… impedes the achievement of the interrelated federal goals of enhanced multichannel video competition and accelerated broadband deployment.”

The FCC wants data that argue for or against regulatory intervention. Topics of interest include descriptions of exclusive accords’ typical lengths, apartment dwellers video fees and what services are included, the NPRM said: “How often have competitive entrants confronted exclusive access agreements, what are the terms of those agreements, and are those agreements becoming more prevalent?” Some questions touch on the recent video franchise order meant to speed Bell entry into new markets by reducing the time it takes to get local permission to sell TV. The NPRM asked whether video providers seek to lock apartment building owners into lengthy contracts as rivals negotiate for franchises to serve the vicinity. The agency wants to know existing state video rules’ effect on Commission authority. About a dozen states already regulate exclusive video deals, with N.Y. and others barring them, said a cable lawyer.

Section 628b of the Act seems to authorize the FCC to intervene in anticompetitive MDU contracts, agency officials said last week, but the NPRM asks whether that’s so. The introduction to Section 628 says its aim is to increase availability of cable and DBS programming “to persons in rural and other areas not currently able to receive such programming, and to spur the development of communications technologies.” Cable and communications lawyers said 628 limits exclusive programming deals between video providers and content producers but doesn’t apply to apartment TV. “It does seem a bit of a stretch for the FCC to suggest it has jurisdiction,” said a communications lawyer. Another attorney concurred, saying 628 has “never been a mandate to regulate anything else, and in particular to regulate agreements between video providers and apartment buildings… It’s just not the way the statue has been interpreted.” In a Sept. 8 letter to the FCC, NCTA said “nothing in the legislative history of section 628 remotely suggests that it was intended to give the Commission a mandate to promote competition in any ways it sees fit. Rep. Tauzin, a principal sponsor [of the 1992 Cable Act], made clear what everyone has always understood, namely that section 628 deals with access to programming.”

Title 2 of the Act may let the FCC ban some exclusive phone deals, but Title 6 rules don’t seem to let the agency do the same with video, said a cable lawyer. In this week’s NPRM, the FCC said it will seek new data to update an earlier rulemaking that asked if it should extend a ban on exclusive contracts for office buildings to apartments. But the agency hasn’t issued recent orders on exclusive residential video deals, said communications lawyers. After earlier reviews, the FCC decided not to regulate apartment building video.

Don’t fix what’s not broken, said apartment lobbying groups and some communications industry lawyers. National Apartment Assn. (NAA), National Multi Housing Council and others said residents benefit from exclusive deals by getting pay-TV discounts and escaping the costs of installing coaxial cable and other gear. “An apartment property can usually only sustain one provider of each type of service -- voice, video and data -- economically because the revenue per tenant to the provider is far less than revenue generated in a commercial office building,” said Jim Arbury, National Multi Housing Council senior vp: “If Verizon gets mandatory access, you will eventually see most of the competition vanish when it comes to video and data.”

Apartment video providers accept profits shrunk by the cost of installing gear -- expense borne by homeowners -- said cable and apartment lawyers. “Exclusive arrangements have worked for the benefit of consumers,” said Gary Scarboro, exec. vp-Apartment Assn. of Greater Orlando: “Forced access by telecom companies creates expense for the consumer and property owner.” In exchange for absorbing costs, video providers own the wires between apartments. To sell video, a rival would have to install a 2nd set of lines. Cable-MDU deals don’t stop residents from buying DBS service, said Arbury. Some buildings use a satellite master antenna for video, installing a rooftop dish, said a cable lawyer.

Video rivals said exclusive deals pose insurmountable hurdles, depriving them of millions of potential customers. “Exclusive agreements with MDUs impede the availability of competition, restrict consumer choice in providers of video services and stall deployment of broadband,” a Verizon spokesman said: “The Commission voted 5-0 to address these issues, so clearly there is a level of agreement that exclusive contracts that shut out emerging competition may not be in the public interest.” RCN Senior Vp Richard Ramlall said: “We strongly advocated that the Commission prohibit these types of agreements in FCC proceedings in 1997 and 2003, and hope that in this new proceeding it finally puts an end to a practice long used by incumbent operators.” SureWest lauded the NPRM, while Media Access Project said poor renters could benefit most from the NPRM because grow video competition may lower cable bills. Almost 50 million people live in rental apartments, according to NAA.