FCC cable decision could benefit apartment dwellers

[New York Times News Service/Post-Intelligencer staff]

The Federal Communications Commission, hoping to reduce the spiraling cost of cable television, is preparing to strike down thousands of contracts this week that shut out competitors by giving individual cable companies exclusive rights to provide service to an apartment building, the agency's chairman says.

If enacted, the rule could affect tens of thousands of Seattle residents of apartment or condominium buildings that are locked into exclusive contracts with cable providers, said Jill Novik, a strategic adviser with the city's Office of Cable Communications.

"There could be a pretty substantial number of buildings in Seattle that could be affected by this," she said. "It's a big deal."

About 65 percent of Seattle residences subscribe to cable television, either from Comcast Cable or Millennium Digital Media, Novik said. In most areas, the companies don't compete.

Most apartment or condo buildings in the city have long-term contracts with one of the two cable companies. Typically, one of the companies wires the apartment building or condominium complex for cable service, in exchange for a long-term contract to be the sole cable provider for the building's residents.

The FCC ruling would effectively annul those contracts, opening the door to competition.

Although it could be a blow for the Seattle cable providers, consumers could ultimately benefit, Novik said.

Still, Seattle cable customers shouldn't expect immediate changes to their monthly bills or their choice of providers.

Cable companies facing the loss of their exclusive contracts likely would challenge the new rule in court, causing delays.

It's also unclear how quickly new cable providers could break into a particular market. One of the major issues will be determining who owns the cable wiring in apartment and condominium complexes. In Seattle, it would likely depend on the individual contract, Novik said.

If a building's cable wiring was owned by one of the cable companies, they might be required to allow a rival company to provide service -- but they also might be able to charge an access fee.

The new rule would be a huge victory for Verizon Communications and AT&T, which have challenged the cable industry by offering their own video services.

The two phone companies have lobbied aggressively for the provision. They have been supported in their fight by consumer groups, satellite television companies and small rivals to the big cable providers.

Government and private studies show that when a second cable company enters a market, prices can drop as much as 30 percent.

The change, which is set to be approved Wednesday, is expected to have a particular effect on prices for low-income and minority families. They have seen cable prices rise about three times the rate of inflation over the past decade. A quarter of American households live in apartment buildings housing 50 or more residents, but 40 percent of households headed by Hispanics and African-Americans live in such buildings.

"Exclusive contracts have been one of the most significant barriers to competition," said Kevin Martin, chairman of the commission. Cable prices have risen "about 93 percent in the last 10 years," he said.

"This is a way to introduce additional competition, which will result in lower prices and greater innovation."

The decision is the latest in a series of actions by the commission under Martin to put pressure on cable companies to lower their rates and make their markets more competitive. In December, in a 3-2 decision, the commission approved a proposal by Martin to force municipalities to accelerate the approval process for the telephone companies to enter new markets.

Last month, the commission approved a rule that requires the largest cable companies to provide programs produced by their affiliates to all of their rivals, including the phone companies and satellite television companies. The commission is also considering a proposal to make it less expensive for independent programmers to lease channels from cable companies.

Martin has also pressed the cable companies to offer so-called a la carte plans that would permit subscribers to buy individual channels, or groups of channels, at lower rates than they now pay.

The new rule would shift the bargaining power over cable and broadband services to apartment residents from landlords and tenant associations. It has been long sought by consumer groups as part of a broader effort to cut prices.

The change would be an abrupt reversal for the commission, which only four years ago ruled that such exclusive agreements sometimes actually promoted competition by giving landlords the leverage to negotiate for the best terms.

Commission officials said they had prohibited other exclusive contracts involving telecommunications, including those in commercial buildings, but trade groups representing cable companies and building owners have indicated they may challenge the commission's move in court.

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