In late October, the Federal Communications Commission (FCC) passed an order banning exclusive agreements between builder/developers and providers of multichannel video programming, by which it means cable operators. The National Cable and Telecommunications Association immediately went to court, seeking to stay the order. But the FCC is not likely to relent.
Once the ruling goes into effect–and pending any court action–builders and developers can no longer make deals with cable companies to serve as the exclusive provider of multichannel video service. However, the FCC also gave a notice of proposed rulemaking that could extend the ban to exclusive marketing and bulk bundling arrangements, other video providers, such as DirecTV and Echostar, and phone giants, such as Verizon and AT&T.
Mitchell F. Brecher, a telecommunications attorney with the Washington, D.C., firm of Greenberg Traurig, thinks a similar ban affecting telephone and Internet services may not be too far off. In a bulletin to clients on the ruling, Brecher wrote: "It is clear that the FCC action has created new challenges for residential housing developers' efforts to contract with video service providers and perhaps other telecommunications providers. Developers and homeowners' associations should be mindful of this FCC rule (and proposed additional rules) when negotiating with providers of video services and in structuring such agreements."
Verizon greeted the decision with a measure of glee–it really, really wants to be able to begin selling its FiOS TV service in all those apartments and co-ops in places like New York City, where cable operators have heretofore had the premises locked up. "The FCC decision will provide access to new competitive options for residents of these properties and encourages further deployment of broadband networks," said Susanne Guyer, Verizon senior vice president of federal regulatory affairs.
At Connexion Technologies, a Cary, N.C.-based builder and owner of high-speed private networks, the FCC ruling was received with aplomb. That's because Connexion's networks are service-provider agnostic, according to Max Kipfer, EVP of corporate development.
"We're not super pleased about this, but to some degree, it only affects cable operators," says Kipfer. Connexion, which reaches some 200,000 homes in aggregate, will carry any service provider on its networks so long as the pricing can meet its Service Level Agreements, which include a five-hour turnaround on customer service. Down the road, he says, "We want to be able to continue to do what we do. We certainly believe that the people building the networks should be excluded [from rules prohibiting exclusive marketing arrangements and bundles]."
Brecher is advising clients to "assume the rule is going to go into effect" and to include language in their contracts that limits the agreements' "exclusivity to the extent permissible by applicable law." Meanwhile, he says, if he were a builder or developer, "I would want to fight the proposal to extend this rule to exclusive marketing and bulk-service agreements."