In a move that immediately cancels all exclusivity contracts between cable TV operators and multifamily property owners, the Federal Communications Communication adopted an order Oct. 31 determining that such contracts stifled competition and violated the Communications Act. Specifically, the order prohibits the enforcement or execution of existing exclusivity clauses between video service providers and owners of multiple dwelling units and also bans the execution of new exclusivity contracts.
“All consumers, regardless of where they live, should enjoy the benefits of competition in the video marketplace,” FCC chairman Kevin Martin wrote in a statement accompanying the order. “Exclusive contracts between incumbent cable operators and owners of multiple dwelling units have been a significant barrier to competition. Today's order removes this barrier.”
NEW TERRITORY Not addressed in the order were several contentious issues that multifamily technology pundits say could prove detrimental to all parties involved. In particular, the FCC did not detail how new video providers would provide infrastructure and wiring to individual units within a given property. “It is $1,300 to $1,800 a unit to wire an apartment, and someone is going to have to assume that cost,” says Richard Holtz, CEO of InfiniSys, a multifamily technology consultant based in Daytona Beach, Fla. “Something has to pay for this.”
Also unanswered was how satellite operators will fit into the exclusivity ban. Although the commission did adopt a further notice of proposed rulemaking that will address satellite TV, as well as marketing exclusivity contracts and bulk provider contracts, no provisions exist in the current order. In a statement, FCC commissioner Michael Copps warned satellite providers not covered under the current order to stand down. “It may be that some multi-channel video service providers not covered by today's decision will attempt to fill the vacuum by marketing themselves as the only game in town,” Copps wrote. “Happily, we will be addressing these competitive parity issues in the next six months. In the meantime, I would caution any [video providers] seeking to take advantage of this regulatory lag time that they do so at their own risk.”
For Short Hills, N.J.- based Roseland Property Management, how the FCC follows up with policies on marketing and bulk contracts could have a direct operating impact on properties where those agreements are in play.
“The entire industry is paying attention to how the FCC follows up regarding [these] arrangements, because the people who do not have exclusive provider arrangements usually have exclusive marketing arrangements,” says Roseland vice president Josh Katz. “There are fees and marketing incentives associated with signing these agreements, and it will be interesting to see if the providers feel they need to continue to do that in order to remain competitive. We're certainly on notice right now and, to some extent, holding our breath.”
FCC spokesperson Marie Diamond says complete details of how the ruling will address these issues will come in the FCC's final order, adding that enforcement would likely follow standard FCC procedures. Diamond could not provide an estimated timetable for the finalization of the order.
Regardless, most multifamily owners will need to invest in additional building infrastructure to account for the slew of service providers now eligible to compete for resident subscription dollars. “The smart owners are putting in a standard infrastructure of one or two coax cables and two or three CAT-5s to a unit,” says Holtz, who also recommends running an empty micro-duct for future upgrades.
The real pinch of the ruling could come for student housing owners that typically sign exclusivity deals for both content and marketing rights. “You can't have 1,000 kids move in on a weekend and expect to hook up 1,000 kids' worth of services. Everything needs to be working when they move in,” Holtz says. “Across the industry, this is going to be an interesting challenge.”