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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