Lawyer Article

The Federal Communications Commission has now released its previously announced Notice of Proposed Rulemaking (“NPRM”) seeking comment on the use of exclusive contracts for the provision of video services to multiple dwelling units or other real estate developments (collectively "MDUs"). The Commission commenced this proceeding in light of allegations that the use of exclusive contracts for the provision of video services to MDUs creates a barrier to competitive entry. In general, the Commission questions whether the use of exclusive contracts “unreasonably impedes the achievement of the interrelated federal goals of enhanced multichannel video competition and accelerated broadband deployment and, if so, how [it] should act to address that problem."

The Commission previously had sought comment on the use of exclusive contracts in the MDU marketplace in a 1997 NPRM. It ultimately declined to take any action, concluding that it had insufficient information as to the extent to which such contracts were utilized and whether they had significantly impeded competitive access into the MDU market. The Commission now is essentially studying the issue anew and seeks comment on a number of issues relating to the prevalence, use and effect of exclusive contracts in today’s marketplace.

The NPRM largely consists of questions. For example, it poses the following questions regarding the ability of potential competitors to obtain access to MDUs: 

• To what extent do exclusive contracts impede the realization of our policy goals?
• How often have competitive entrants confronted exclusive access agreements, what are the terms of those agreements, and are those agreements becoming more prevalent?
• How has the multichannel video marketplace changed since adoption of our Inside Wiring Report and Order, and what effect have those changes had for consumers who live in MDUs or other real estate developments?
• What is the current status of state mandatory access laws and what impact do they have on the issues raised herein?

The Commission also "seek[s] comment on whether MVPDs seek exclusive contracts in an effort to frustrate competitive entry." More specifically, it questions whether "incumbent providers use the time during which new entrants are negotiating local franchises in order to obtain exclusive contracts?" The Commission also seeks information on who benefits from exclusive contracts -- new entrants, incumbent providers, or both and whether those entering into exclusive contracts would be unable to provide service to these MDUs or other real estate developments absent the protections afforded by such contracts.

The Commission tentatively concluded that it has the authority to regulate exclusive contracts where it finds that such contracts may impede competition and impair deployment of those services. Comment is sought on this tentative conclusion.

Lastly, the Commission questions whether action is needed to ensure competitive video access to MDUs. In this regard, it poses a number of questions designed to obtain information on the impact exclusive contracts have on consumer choice and video competition. It also seeks comment on whether limits on exclusive contracts should be limited to cases where the video provider at issue possesses market power as well as with respect to the use of "perpetual" contracts.

The comment deadline is June 18, 2007. Reply comments are due by July 18, 2007. The foregoing is just a summary of the NPRM. Please call us if you have any questions or would like a copy.

Please contact Mark Palchick (202/857-4411) or Howard Barr if you have any questions regarding this advisory.