Apartment Complexes May Benefit From FCC Action Against Cable Contracts
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Consumers, at least those who live in large apartment complexes,
may be poised to win one for a change if an article by Stephen Labaton published
in The New York Times on Monday is correct.
According to the Times report, the Federal Communications Commission (FCC)
is considering striking down exclusive contracts between cable
companies and apartment building owners and/or tenant associations that may
have caused, in part, the rapid rise in the price of cable services.
It is apparently a common practice among owners of multiple family housing
to sign such exclusive contracts with a single cable provider to wire the apartment
building or buildings and then offer transmission services to tenants.
Kevin J. Martin, chairman of the FCC blamed these exclusive contracts, in part,
for the rapid rise in cable service prices not just within the apartment complexes
but community wide.
While tenants are free (depending on the physical configuration of the buildings)
to subscribe to satellite television, the level of competition afforded by satellite
providers has not noticeably impacted the price of cable services.
According to the article the new rule could lead to increased competition nationwide
and would be a huge victory for Verizon Communications and AT&T which have
lobbied aggressively against the lock-out from serving the apartment communities.
Consumer groups, small cable providers, and satellite providers have also been
fighting the restrictions.
FCC officials said that outlawing the monopolies could significantly lower
cable prices for millions of subscribers who live in apartment complexes and
had no choice in picking their providers. The Times, said that when a second
cable company enters a market subscription prices can drop as much as 30 percent.
The benefit is expected to be most strongly felt in low-income and minority
homes. Cable prices have risen about three times faster than inflation
over the last ten years (an unbelievable 93 percent increase) and while about
25 percent of American families are housed in apartment buildings with 50 or
more residents, 40 percent of Hispanics and African-Americans live in such buildings.
There may also be a spill-over to non-apartment dwellers. Smaller cable companies
and telephone providers may be encouraged to enter markets which they have previously
avoided because of high infrastructure costs.
The Times article did not address how the anticipated new ruling might impact
residents of condominiums and coops. It is possible that, because owners of
units under that type of ownership are assumed to be able to vote on the contracts
entered into by coop boards and condo associations, they would not be affected
by the FCC decision.
Only four years ago the Commission ruled that exclusive cable contracts could
promote competition by giving landlords the power to negotiate for the best
terms.
New York and a few other states have restrictions against landlords or tenant
associations from entering into exclusive contracts with cable companies but
there has never been an exclusive contract struck down because of such laws.
The FCC, consumer groups, and cable competitors claim that these rules are not
uniformly enforced.
The large cable companies, their trade organizations as well as apartment builders
and owners associations such as the National Multi-Housing Council were quick
to condemn the possible FCC action. The Times quoted Daniel
L. Brenner, Senior Vice President of the National Cable and Telecommunications
Association as saying "Exclusive contracts and building-by-building competition
can, in fact, promote investment, efficiency, and competition."
Others said that eliminating the exclusive contracts after cable companies
had invested heavily in installing and upgrading building systems would amount
to an illegal taking of property in violation of the Fifth
Amendment.
There is, however, precedent. The FCC has previously prohibited exclusive contracts
for telecommunications services in commercial buildings and has required telephone
companies that provide service to apartments to offer access to their wires
to rival companies. Both actions have been upheld by the courts.
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