FCC opens door to MDUs, adds incumbents to streamlined franchise discussion

Oct. 31, 2007
OCTOBER 31, 2007 By Stephen Hardy -- The Federal Communications Commission (FCC) today made two moves that it believes will enhance competition for video services.

OCTOBER 31, 2007 By Stephen Hardy -- The Federal Communications Commission (FCC; search for the FCC) today made two moves that it believes will enhance competition for video services.

The FCC adopted a Report and Order banning exclusivity clauses for the provision of video services to multiple dwelling units (MDUs) and other real estate developments. It also adopted a Second Report and Order that extends the findings of its order designed to prohibit franchising authorities from "unreasonably" refusing to award competitive franchises for the provision of cable services. The first order focused on new market entrants; the extension should benefit incumbents.

The MDU order both bans the enforcement of existing exclusivity agreements as well as the creation of new ones. The FCC says such agreements, usually made between landlords and the incumbent cable-TV provider, constitutes an unfair method of competition or an unfair act or practice under Section 628(b).

The FCC also adopted a Further Notice of the Proposed Rulemaking that solicits input on whether it should extend this ban to cover exclusivity clauses entered into by DBS providers, private cable operators, and other service providers not subject to Section 628. The notice also seeks comment on whether the commission should prohibit exclusive marketing and bulk billing arrangements.

"As the Commission has found, from 1995 to 2005, cable rates have risen 93%," said FCC Chairman Kevin Martin in comments about the order. "Prices for expanded basic cable service have now almost doubled. The trend in pricing of cable services is of particular importance to consumers. Since 1996 the prices of every other communications service (such as long distance and wireless calling) have declined while cable rates have risen year after year after year.

"I believe that people that live in apartment buildings deserve to have the same choices as people that live in the suburbs," he continued. "In today's item, the commission found that people who live in apartment buildings often have no choice of companies when it comes to their video service provider. This is because building owners often strike exclusive deals with one cable operator to serve the entire building, eliminating competition. There is no reason that consumers living in apartment buildings should be locked into one service provider."

Not surprisingly, both Verizon and SureWest issued statements supporting the FCC's action.

The second order, which takes effect in 30 days, finds the following:

  • That the commission's findings in the First Report and Order that certain specified costs, fees, and other compensation required by local franchising authorities must be counted toward the statutory five percent cap on franchise fees, should be extended to incumbents.
  • That many of the commission's determinations relating to public, educational, and governmental and institutional networks should be extended to incumbents.
  • That its findings in the First Report and Order regarding mixed-use networks also apply equally to incumbents and new entrants, and should be extended to incumbents.
  • That other provisions regarding build-out and time limits for franchise negotiations are only applicable to new entrants.
  • And that the commission cannot preempt local or state cable customer service requirements, nor can it prevent local franchising authorities and cable operators from agreeing to more stringent standards.
However, the FCC also said that the order is not intended to enable incumbents to break current franchise agreements in order to broker better deals.

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