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For many years, consumers living in apartments and condos have been enjoying the benefits of multichannel television service provided through freely negotiated service agreements between the television service providers (multichannel video programming distributors – or MVPDs – like cable TV and private cable companies) and the owners or managers of the apartments and condos where they live (multi-dwelling units or MDUs).
These agreements can allow cable TV companies to provide additional benefits and, in many cases, significant discounts to residents who subscribe to the service.
Now, however, the Federal Communications Commission (FCC) seems to be on the verge of outlawing these freely negotiated contracts – not only future contracts, but every such agreement that now exists in the country.
Most legal observers believe that the FCC lacks the legal authority to issue such regulations. However, should the FCC proceed to act, it will hurt consumers, interfere with traditional private contract rights and infringe on the traditional rights of the states to govern such agreements.
First and foremost, any such action by the FCC would be a detriment to consumers. Apartment and condo residents benefit from agreements where the owner or operator of a building says to a cable company “in exchange for exclusive rights to serve our building, we want dedicated customer service representatives, special channels, upgraded facilities and services and volume discounts.”
In fact, it’s reported that consumers who have service subject to such agreements have received discounts of up to 35 percent in their cable television rates. The pending FCC action, were it to abrogate existing agreements, would deprive consumers of these benefits.
Moreover, some cable companies, especially smaller ones, say that without the economic efficiencies provided by exclusive service agreements, they would be foreclosed from serving most apartment and condo buildings.
In many cases, if each individual unit can choose among multiple competitors, it becomes uneconomical for many of the providers to serve the building at all. As a result, volume discounts go away, as do many of the other benefits negotiated on behalf of residents by property owners.
The FCC’s reported plan would also infringe on the prerogatives of state and local governments who are best situated to make decisions regarding their citizens and the local services provided to them. The authority to regulate private contracts belongs to state governments.
In fact, at least 18 states have already enacted laws that regulate agreements between MVPDs and MDU owners or managers. Significantly, not a single one of those state laws abrogated service agreements in effect at the time the law was passed, as the FCC reportedly would.
Any action by the FCC to preempt and invalidate the service agreement laws of every state in the nation and to bar states from deciding their own policies in this area in the future would be a massive overreach.
As far back as 1984, Congress considered and rejected prohibiting access agreements leaving the regulation of such agreements to the states. And as recently as 2003, the FCC again agreed that it should not do so.
The FCC should once again recognize that abrogating existing contracts would be fundamentally unfair and overstep the authority granted by Congress. Not only would it infringe on the negotiated rights of the parties to such agreements, it would also take away the numerous benefits that consumers enjoy under these agreements.
Contractual issues like these continue to be best left to the marketplace under the watchful eye of the states.
Hal Stratton served as New Mexico’s Attorney General from 1987-1990 and as a state representative from 1979-1986. He was also chairman of the U.S. Consumer Product Safety Commission from 2002-2006.