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FCC expected to ban exclusive cable deals

The agency aims to give apartment renters more choices. Critics say the move could backfire.

October 30, 2007|Jim Puzzanghera | Times Staff Writer

WASHINGTON — Landlords often enter into exclusive deals with cable companies, leaving apartment dwellers with about as much say in who provides their pay television as they do in their building's color -- that is, none.

Now federal regulators are poised to invalidate those contracts as soon as Wednesday in hopes that competition from phone companies that are rolling out TV services will drive down prices.

Consumer groups support the move to strike down the deals and have joined Federal Communications Commission officials in complaining about rising prices for cable TV. They want to give phone companies and smaller cable operators a chance to compete.

"People who live in apartment buildings deserve to have the same type of competition and choices as people who live in suburbs," said FCC Chairman Kevin J. Martin, who is pushing a plan to strike down the deals. "I'm optimistic that if you have additional competition, you'll have lower prices."

Supporters said Martin's initiative would help minorities and the poor, who are more likely to live in apartments.

But some people worry that the plan could backfire.

Building owners complain that the price of pay TV will go up because they will lose the clout to negotiate deals with providers. And some minority groups worry that without the lure of exclusive contracts, companies won't extend service to low-income communities in the first place.

"You prevent the apartment owner from playing one provider off against another to get the best possible price and the best possible service," said Jim Arbury, senior vice president of the National Multi Housing Council, a trade group representing large-building owners, managers and builders. "The people aren't going to get the choice the FCC thinks they're going to get."

The cable industry is fighting the proposal. Industry executives say that they have invested millions of dollars to wire apartment buildings based on exclusive contracts and that voiding them would be unjust, if not illegal.

"That's not fair, plain and simple," said Dan Brenner, senior vice president of law and regulatory policy for the National Cable and Telecommunications Assn., which represents the major cable companies. The cable companies don't have a problem with prohibiting new exclusive contracts, he said, but they believe the FCC shouldn't invalidate existing ones.

California is one of about 30 states that allow exclusive contracts with apartment or condominium buildings. Brenner said the contracts normally run five to seven years, but phone companies said they often run longer, sometimes forever.

Martin said the FCC needed to do something to offset a 93% increase in cable rates during the last decade. Although rates for other telecommunications services, such as long-distance calling and cellphones, have dropped since Congress and the FCC loosened regulations in 1996, cable rates have gone in the other direction.

Competition from satellite TV hasn't reversed that trend, Martin said. The only thing that has driven down cable prices is another hard-wired TV service.

"I fundamentally believe that consumers ought to be able to have choices and they shouldn't have to be locked into one service provider," Martin said. His plan's imminent approval was first reported by the New York Times.

The FCC decided in 2003 not to outlaw exclusive contracts. Now, with Verizon Communications Inc. and AT&T Inc. selling TV services delivered over their lines, competition has arrived. The agency is poised to unlock the apartment building doors to let them in.

The phone companies said they had found many apartment and condominium buildings to be off-limits because of exclusive contracts with cable providers. The deals "are transparently designed to thwart competition from new entrants, such as AT&T, that are threatening to break cable incumbents' stranglehold" on pay TV, AT&T told the FCC in written comments.

Several consumer groups agreed. One of the most frequent complaints that Consumers Union receives is from people who have no choice in pay TV providers, said Joel Kelsey, the group's grass-roots coordinator.

"You should have an ability to enter into an agreement with whoever you choose, and you shouldn't be limited by your landlord, the cable company, the government or anybody else," he said.

The Minority Media and Telecommunications Council, a Washington-based nonprofit group, also wants the contracts banned.

The group said 40% of households headed by people of color are in buildings with 50 or more units, compared with 27.7% of the overall population.

"You have the paradigm of poor people not being able to receive the benefits of competition," said David Honig, the group's executive director.

But the National Coalition of Latino Clergy and Christian Leaders and the Latino Coalition, a nonprofit advocacy group, have warned the FCC that prohibiting exclusive contracts could leave minority and low-income residents with higher bills or no service at all.

"The advantages of these exclusive contracts are important selling points for apartment buildings in urban neighborhoods where residents wouldn't otherwise have the ability to negotiate the best price for cable TV or broadband services," Latino Coalition President Robert G. de Posada wrote to the FCC.

Martin countered that minorities and the poor should be the biggest beneficiaries.

"Minorities disproportionately live in apartment buildings," he said. "They'll disproportionately benefit from this."

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jim.puzzanghera@latimes.com

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