Commissioners Concerned About Martin Bid to Ban Apartment Video Exclusives

The draft has gotten more attention from commissioners in recent weeks, with a vote likely soon, said agency officials. Bells support authorizing the FCC to keep cable operators and building owners from signing more exclusives, but are split on whether to void existing deals. Cable executives have visited commissioners’ offices more than a dozen times this month to lobby against any rules.

A “large majority” of commissioners has doubts about whether the FCC has the power to abrogate contracts, an agency official said. Some commissioners want the regulator to start a comprehensive review of all inside wiring rules to ensure that there’s no disparity in how the FCC treats video, voice and broadband providers, said the official. Another FCC source said he expects the apartment order to stir a rumpus on the eighth floor. A third source said all commissioners have questions about the agency’s legal authority, but haven’t decided whether they think the FCC can void the agreements.

Commissioners seem to agree that the agency should keep additional contracts from being signed, said an FCC official and a telecommunications attorney. They said there doesn’t seem to be much opposition to outlawing future deals. The most inflammatory element of Martin’s draft order would throw out existing deals, said agency and industry sources. Bells’ claims that exclusives hurt consumers seem to resonate with some commissioners, said a telecommunications lawyer. But on the eighth floor concern has arisen about whether the FCC has authority to apply the ban to all video providers, said a cable attorney. Martin said his order would bans all deals because they hurt consumers’ ability to choose among pay- TV providers (CD Oct 15 p6). But he was closed-mouthed on the source of the FCC’s power to enact rules affecting property owners.

Apartment owners and cable operators claim exclusives benefit renters by making it easier for pay-TV providers to pay for wiring buildings because they get guaranteed access. Fewer than 5 percent of multiple dwelling units have perpetual agreements with video providers, said Jim Arbury, senior vice president of the National Multi Housing Council. The council has been recommending for a decade that members limit deals to eight years, he said. About 50 million Americans live in apartments, said the National Apartment Association.

Apartment owners haven’t decided whether they would sue over the rules, but they do have a “problem” with the proposal, said Arbury. “You ban exclusives and basically hand the marketplace to the big telephone companies because they're really the only ones with landline voice service that a property has to have,” he said. “You really want competition here between the big phone and cable companies” so building owners can “play one off against the other in negotiations,” he said. Verizon wants regulation because some apartment video agreements run a decade or longer, a company lawyer said. “The commission has a great opportunity here to ensure that these agreements which were entered into at a time before there was competition in the market don’t prevent millions of Americans” for having pay-TV choice.

Section 628 of the 1992 Cable Act lets the FCC ban all exclusives, Verizon executives told Commissioner Robert McDowell Oct. 9, an ex parte filing said. The company wants the ban to end in five years unless the commission deems an extension warranted. “The proposed rule would only address the actions of video providers, and would not regulate property owners in any way,” said the ex parte. The company lawyer said in an interview that Verizon’s proposal “is very narrowly tailored.” But Qwest has told the FCC that it should bar new exclusives only until there’s more competition for TV. AT&T sought a ban on all agreements without requesting they sunset.

The FCC would be well within its authority to ban all exclusives, as USTelecom wants, said Glenn Reynolds, the group’s vice president for policy. The group hasn’t weighed in on whether such rules should sunset, as member Verizon proposed. One reason the FCC needs to act is that in recent months cable operators have signed more exclusives, with an eye to “keeping new entrants out of the market,” Reynolds said in an interview. Regulation of exclusives won’t affect property owners’ rights, because multiple-dwelling unit owners wouldn’t be regulated, he said: “There has been a fair amount of confusion early on about what folks have been asking for in this docket… The commission is not being asked in any respect to regulate MDU owners. What they're being asked to do is to prohibit unreasonable practices by regulated entities.” In the past, the FCC has retroactively barred some types of contracts, said Reynolds. “It certainly would not be an extraordinary” move, he said.

Charter wants a sunset so it can keep serving apartment buildings under previous agreements. CEO Neil Smit floated the proposal in meetings last week with Martin, Media Bureau Chief Monica Desai, and Commissioners Jonathan Adelstein, Michael Copps, McDowell and Deborah Tate. “It takes substantial investment in advanced wiring to deliver [to] residents digital signals, high definition [TV], high speed Internet access and choice in voice service” via VoIP to apartment dwellers, said an ex parte. “Limited-term exclusive agreements help to assure that the advanced wiring investment will be available for Charter’s use.”

Cox wants all cable and telecommunications inside- wiring rules reviewed if the FCC acts on video exclusives, former Commissioner Kathleen Abernathy (2001-2005) told bureau officials Oct. 12. There’s support for such an approach inside the FCC, said an agency official. Abernathy said a review should “address certain inconsistences between the two regimes and the practical ramifications” of them, according to an ex parte. Other cable operators lobbying against anti-exclusive rules in October included Advance/Newhouse, Comcast and Time Warner Cable, according to filings.