Trying to promote pay-TV competition and keep prices in check, the Federal Communications Commission voted unanimously Wednesday to wipe out deals giving cable operators exclusive access to apartments, condos and other centrally managed real estate developments.
"People who live in apartments deserve the same choices as people who live in the suburbs," says FCC Chairman Kevin Martin. He notes that more than 25% of Americans live in apartments — including 40% of all homes headed by Hispanics or African-Americans.
Backed by groups such as Consumers Union, Martin says he was moved to act by seeing basic cable rates soar 93% since 1996, when they were largely deregulated. In addition, operators have accelerated efforts to sign exclusive agreements with landlords and tenant and owner associations as muscular competitors, led by phone giant Verizon, began to offer video services.
"Some of (the deals) lasted forever," Martin says. "Many of them lasted for many years, even if they didn't last in perpetuity."
That's a problem, supporters of the FCC decision say, because companies that also offer Internet and phone services as well as TV are more potent competitors than satellite services that on their own just provide video.
Basic cable rates "were 17% lower where (wired, non-satellite) cable competition was present," Commissioner Jonathan Adelstein said in a statement.
The FCC ruling doesn't affect deals by satellite companies. Federal law, however, bars either DirecTV or EchoStar from cutting deals to keep the other out of apartments or developments.
Martin adds that "we don't have any evidence" indicating that satellite providers have deals to block cable operators. The FCC asked for public comment on the matter.
Cable companies strongly hinted that they will appeal the FCC decision after they see the language of the final order, expected in about two weeks.
A provision that prevents operators from enforcing existing contracts — not just from signing new ones — is "an unprecedented, legally suspect step," Dan Brenner, senior vice president at the National Cable & Telecommunications Association, said in a statement.
Operators says the FCC decision may end up hurting consumers. Subscribers in apartment buildings and condos "will lose the benefit of significant concessions building owners have been able to negotiate on their behalf," says Comcast's CMCSA Sena Fitzmaurice.
They also question how many people will see a change from the FCC decision. At least 17 states, including New York, Illinois, Massachusetts, Florida and Pennsylvania as well as the District of Columbia, already restrict exclusive deals.
"We're only talking about a couple of million" people who might be affected, says Bruce Leichtman, president at Leichtman Research Group. "It's not a very big number."
Martin puts it differently: "If all these states already have laws saying that they can't (cut exclusive deals), then they shouldn't have existing contracts that would be covered" by the FCC vote.