In a bid to reverse a Jan. 4 Federal Communications Commission ruling banning cable exclusivity contracts, the National Multi Housing Council and the National Apartment Association jointly filed a lawsuit Jan. 16 against the FCC. The associations are asking federal courts to strike down the FCC's recently issued regulations retroactively banning exclusive access agreements between cable providers and apartment owners.
The FCC ruling 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.
The NMHC and NAA contend that apartment owners utilize exclusive access contracts as a bargaining chip to negotiate lower rates, expand product availability, and enhance service standards for their residents. In their suit, the NMHC and NAA argue that the FCC lacks the legal authority to regulate agreements between private property owners and video providers and that the regulations are based on erroneous and unproven assertions about market conditions.
"These misguided regulations reveal a total lack of understanding on the FCC's part about how the multifamily video market actually works," said Jim Arbury, senior vice president of government affairs for the NMHC in a statement announcing the lawsuit. "Exclusive access contracts were the primary means through which apartment owners could force the large cable firms to lower their prices and improve their service offerings. By taking this bargaining tool away from owners, the FCC has essentially removed a key incentive the cable firms had to negotiate with apartment owners."
At the property level, industry observers say that the FCC ruling does little to change the current competitive landscape between cable operators and the telecom companies that support the ban. Apartment owners and managers are not required to give any video provider access to their property or easements into individual units and are still free to choose among providers, as long as an exclusivity clause is not the sole reason for turning down a particular vendor.
"You don't have to let someone on your property if you don't want them there. This ruling does not give any vendor that right," says Larry Kessler, CEO of Mt. Pleasant, S.C.-based InteliCable Group. "You can still enter contracts that are exclusive marketing agreements; you can enter into bulk agreements. You can still grant exclusive use of the existing interior wiring to a service provider." Kessler says the lawsuit is more an attempt to prevent precedent setting at the FCC, especially as exclusive marketing contracts and bulk provider contracts will be subjected to the commission's review within the next 12 months.
"Letting the FCC's exclusive access ban stand would establish a dangerous precedent that would allow the Commission to enact further regulations interfering with the private negotiations between property owners and telecom providers," agreed Arbury in the statement. "The FCC has failed to provide any evidence of a market failure that would justify government intervention. We are appealing these rules so the Commission cannot use the same erroneous exercise of legal authority or the same inaccurate/incomplete 'evidence' as the basis for future actions."
