CABLE TV
EXCLUSIVITY PROVISIONS VOIDED

The Federal Communications Commission (FCC) has ruled that provisions in cable TV contracts which grant cable companies exclusive access to common interest developments (and apartment buildings) are unenforceable. The FCC found that such exclusivity clauses harm residents by denying them "the benefits of increased competition, including lower prices and the availability of more channels with diverse content, as well as access to alternative providers of broadband facilities."

Telephone and Satellite Companies. The FCC order also applies to telephone companies which offer video services. However, the order does not cover satellite TV companies, and therefore exclusive service clauses in contracts between associations and companies such as DISH and DirectTV will remain effective.

Bulk Billing. The order does not prohibit bulk billing arrangements between a video provider and an association, wherein the association pays a monthly fee to a single video service provider on behalf all residents, regardless of whether any particular resident actually wants the services.

Exclusive Marketing. Additionally, the FCC order allows cable companies to enter into "exclusive marketing" agreements with associations, whereby competing video service providers are allowed into the development but are barred from marketing their services on the property.

Legal Loophole. Few companies would agree to spend the money necessary to install a new video system in an association without having the corresponding right to market their services to residents. Thus, such "exclusive marketing" clauses are a loophole in the current FCC order which could allow cable companies to maintain their exclusive service rights through the back door. These clauses are sometimes hidden in the small print legalese of cable agreements. Associations should have an attorney familiar with these issues carefully review all video service contracts prior to signing new agreements, and before any existing contract is allowed to automatically renew.

Further FCC Action. The FCC has stated that within the next six months it will consider whether to extend its order to satellite providers, ban bulk billing arrangements, and forbid the use of exclusive marketing agreements.

Effective Date. The full text of the FCC's report and order is set forth in FCC 07-189, released on November 13, 2007. The order is not yet effective, as it must be published in the Federal Register (which has not yet occurred) and the public must be given a 30 day comment period. Additionally, the cable industry and other affected persons will have the opportunity to appeal the order and request a delay in its implementation.

Updated by ADAMS KESSLER 4/1/2008