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FCC Voids Exclusive Cable Service In Apartments

By  Wesley Heppler, Robert G. Scott
10.31.07
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At its Oct. 31 meeting, the Federal Communications Commission announced its expected order declaring that exclusive access and service clauses in video contracts between cable operators and multiple-dwelling units (MDUs) are unenforceable. The Commission’s decision does not apply to exclusive marketing or bulk service agreements, although it launched a further proceeding for additional review of those types of arrangements.

It is unclear when this order will become effective, but it is not now binding law. There is no text of the decision available yet. After the effective date, however, the order will apply to existing as well as future contracts: the FCC did not provide any transition or grandfathering period for existing agreements. The order will apply even in states where state MDU access laws have been enacted regardless of whether those laws grandfathered existing exclusive contracts. With or without a court order that prevents enforcement of the order pending court challenges, it should be expected that video competitors will approach MDU landlords seeking to negotiate access rights despite pre-existing exclusive access or service agreements.

Anticipating what he viewed as an almost certain appeal from cable providers, Commissioner Robert McDowell voted for the order with some reservation. He raised questions about its legality, noting that in 2003, the FCC addressed MDU exclusivity and declined to act, and that cable providers have stated in their comments that they entered into exclusive contracts in reliance on the order. He also raised the possibility of takings claims brought by providers as a result of the order, stating that such claims may have merit.

Further details should emerge from the text of the Commission’s order when it is released. Given Chairman Kevin Martin’s sense of urgency for this issue, the FCC is likely to release that text as soon as possible. Representatives of various interest groups, including cable operators, have indicated publicly their intention to challenge the order in court.

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