FCC Votes Down Deals Between Cable Operators, Multiple-Dwelling Units

The Federal Communications Commission members unanimously voted Wednesday to nullify exclusive deals between cable companies and apartments and other multiple-dwelling units and to ban any such clauses going forward, calling them unfair competition.

The commission found that the contracts favored incumbent cable operators and impeded cable competition and broadband deployment, pointing out that some 25%-30% of Americans, or close to 100 million, live in apartments, condos or managed communities.

The move opens the market to telephone companies getting into the video business to compete for those millions of eyeballs. The FCC also noted that such exclusive clauses had increased as potential competition for those MDUs had increased.

The nullification applies to cable companies only, but the commission also opened an inquiry into whether to apply it to satellite and other telecommunications-services providers.

The nation's largest cable company, Comcast, said the decision was anti-consumer and likely to raise rates, rather than lower them.

“Today's action by the FCC is a blow to consumers in apartment buildings and condos who will lose the benefit of significant concessions building owners have been able to negotiate on their behalf," Comcast said in a statement. "The net result is that many consumers are likely to wind up paying more for services if the FCC's interference in the competitive marketplace stands.”

Cable overbuilder RCN pointed out that many of the states in which it does business have already passed laws banning the exclusive deals, but said the decision was "a definite win for RCN and other competitive providers, since incumbent cable operators have long extracted exclusive agreements from landlords that have served to exclude new entrants from reaching their tenants. "

Verizon Communications was quick to praise the move. “Millions of consumers live in apartments, condos or other private developments and, until now, many of them have been denied the benefits of video competition as a result of exclusive access agreements used by cable providers to shield themselves from competition,” senior vice president of federal regulatory affairs Susanne Guyer said in a statement. “The FCC decision will provide access to new competitive options for residents of these properties, and it encourages further deployment of broadband networks.”

AT&T added its praise: “As AT&T ramps up U-verse TV to offer consumers new video choices, incumbent cable companies are actively walling off MDU residents from the benefits of competition through exclusive access arrangements,” the company said in a statement. “We applaud the commission’s ruling to bring the benefits of video competition to a large and rapidly growing segment of Americans. Without commission action, the anti-competitive effects would be felt for many years as these exclusive access agreements may last for several years or even perpetually.”

Media Access Project was happy as well: "Ending exclusive contracts for cable services will ensure that all Americans can enjoy the benefits of choice, such as lower prices and better service, wherever they live," said MAP VP Harold Feld.

While the decision was unanimous, commissioner Deborah Taylor Tate expressed concern about pre-empting state authority, and her fellow Republican commissioner, Robert McDowell, worried that the decision was ripe for a lawsuit. McDowell pointed out that the FCC itself in 2003 had encouraged such contracts to boost the rollout of service.

FCC chairman Kevin Martin countered that the landscape had changed and that there was new competition to cable. Martin added that the move would help to cut cable bills and benefit subscribers, including the 40% of apartment dwellers who are minorities.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.