Commissioners Overcame Worry on Exclusive Apartment Cable Ban
Commissioners overcame doubts about an FCC order banning exclusive deals between apartment buildings and cable providers because they decided the ban treats industry fairly, said agency officials. Commissioners unanimously voted for the order at Wednesday’s meeting, with Robert McDowell concurring out of concern it will draw lawsuits and conflict with states’ authority over the exclusive contracts (CD Nov 1 p2). At first glance, commissioners were suspicious of the order from Chairman Kevin Martin, thinking it might be anti-cable, said an FCC official.
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That skepticism faded when eighth-floor officials focused on the order’s legal reasoning, said two commission sources. Martin circulated the order in late August, but no other FCC member had voted on it as of last Thursday (CD Oct 26 p5). Commissioners feared imposing the order would have the agency overstepping its authority by banning contracts that were legal when signed. The as-yet-released order relies heavily on section 628 of the Communications Act, said FCC officials. Cable operators say that section deals mainly with program access and doesn’t empower the FCC to intervene in contracts. The industry also contends that the deals at issue keep cable rates down because long-term contracts help companies recoup the cost of wiring buildings for TV, broadband, VoIP and other services. According to the unpublished order, FCC standing to ban exclusive cable deals arises from the agency’s authority over the video franchising process, FCC officials said.
Commissioners had other reasons to green-light the order. Martin argued convincingly that exclusive arrangements stifle competition by keeping apartment and housing development dwellers from subscribing to other companies for TV, said sources. No commissioner wanted to “stand up” for exclusives’ potential benefits, an official said. Commissioners seem to agree that exclusive arrangements generally hurt customers, said officials.
Martin’s commitment to issuing another order on exclusive arrangements between apartments and video providers other than cable operators helped pave the way by at least one commissioner for Wednesday’s vote, said a source. Commissioners didn’t include all pay-TV providers in this week’s order because section 628 is limited to video providers laying cable in public rights of way, said another source. Satellite providers, private cable operators and other pay-TV companies will be addressed in a coming rulemaking notice, said two FCC officials. Martin has committed to issuing the order on deals between multiple dwelling units (MDUs) and video providers other than cable operators within six months of the Wednesday order’s appearance in the Federal Register, said a source. But some cable operators and commissioners want the FCC treat all multichannel video programming distributors (MVPDs) the same. Time Warner Cable CEO Glenn Britt argued for that in Oct. 24 meetings with Commissioners Jonathan Adelstein, Michael Copps, aides to Commissioners Deborah Tate and McDowell and an aide to Martin. “We further explained that neither Section 628(b) nor any other provision of the Communications Act provides authority to regulate private contracts between MVPDs and MDU owners,” said an ex parte filing of the meetings.
Also within six months, Martin agreed to issue rules on other types of exclusive arrangements between video companies and multiple dwelling unit operators, said two FCC officials. They confirmed comments made Wednesday by Adelstein. The order will address bulk billing arrangements in which all residents in a building or housing development must pay a flat fee for video service. Video marketing deals in which apartment buildings grant one company the sole right to advertise their services in common areas such as lobbies also will be examined.
Buttressing commissioners’ ban on cable exclusives was pressure from lawmakers, said an official. A letter from New York senator and Democratic presidential candidate Hillary Clinton opposing the contracts wielded particular influence, said a source. Clinton has received complaints about lack of competition, she wrote in an Oct. 24 letter to Adelstein and Copps. Clinton’s office didn’t return a message right away seeking comment. “I have heard from many of my constituents in New York about the need for consumer choice in their video and broadband options,” she wrote. “I hope you will support a decision in this proceeding that will bring the benefits of competition in terms of technology, choice and price to consumers who occupy such units in New York and elsewhere.” But the state bans such deals, said a spokeswoman for the New York Public Service Commission. That puts it among about 20 states with such rules and may make the concern about New York residents moot.