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FCC Set to Outlaw Exclusive Cable Deals

Telecoms win; landlords, cable companies lose

By Truman Lewis
ConsumerAffairs.com

October 29, 2007 

On the other hand, critics say the move is another in a long string of FCC decisions favoring AT&T and Verizon, which have been lobbying for just such an action.

FCC Chairman Kevin Martin says the exclusive contracts are a primary factor in the rapid rise of cable prices. Many consumer groups, satellite television companies and some smaller rivals support the measure.

Industry insiders note that many, though not all, non-profit consumer groups have become accustomed to large grants from telecom companies. Such grants have been known to color the groups' perspective, these individuals suggested.

AT&T and Verizon have spent billions of dollars upgrading their networks to carry digital television and high-speed Internet services. Meanwhile, their army of lobbyists has successfully lobbied the FCC to allow the telecoms to invade local cable markets without going through the franchise application process required of cable companies.

In effect, the FCC has been steadily "federalizing" telecommunications, taking away regulatory powers previously held by state and local governments, promising that rampant competition will break out as soon as AT&T and Verizon are allowed to crush their rivals.

Minority appeal

The big telephone companies and the FCC are portraying the looming decision as a victory for minority and low-income families. With 40 percent of Hispanic and African-American households living in apartment buildings, the new rule will supposedly bring them relief from the high cable rates that are said to result from exclusive contracts.

The exclusive contracts were originally intended to encourage the wiring of older residential buildings by cable and satellite companies.

Many landlords were wary of allowing antennas, distribution panels and extensive cabling to be installed in their buildings. In some cases, landlords were permitted to charge a fee in exchange for granting the contracts.

In arguing for the exclusive contracts a decade or two ago, the cable television industry used the argument now being used by the telecom companies -- the contracts were necessary to entice the cable companies to make the investment required to wire multi-family buildings.

Now the telecom companies say that, besides supposedly encouraging competition, outlawing the exclusive contracts will give them the incentive they would otherwise lack to begin wiring the buildings and poaching the cable companies' customers.

Inside out

"Nothing in the world of telecommunications is what it seems, or maybe everything is," said one longtime Washington consultant who has worked on telecom issues for decades.

"Basically, every argument can be applied to almost any situation, so you hear the warring parties using the same arguments their opponents used. Everything simply gets turned inside out and used over and over again," he said. "It's recycling at its best and, other than hot air, it doesn't contribute to global warming."

"It's your basic three-card monte game. Where's competition? Here it is. No, wait, it's over here."

Telecom welfare

Under Martin, the FCC has been quick to do the telecoms' bidding, always promising that its actions on behalf of AT&T and Verizon would benefit consumers.

Besides virtually eliminating the local franchise process for telephone companies -- but not for cable companies -- Martin's FCC last month approved a measure that requires the big cable companies to allow the telephone companies to buy the rights to programs produced by the cable companies or their affiliated firms.

The commission is also considering a measure that would require cable companies to lease channels to independent producers while at the same time considering rules that would allow the telephone companies to jack up the rates they charge to independent competitors who use their circuits.

Each of the seemingly conflicting measures is being promoted as a boon to competition.

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