The Federal Communications Commission is expected tomorrow to ban future - and nullify existing - exclusivity contracts between cable television providers and apartment building owners. The move is designed to open the doors for competitors, potentially driving down prices.
Groups such as Verizon Communications Inc. and AT&T Inc. lobbied for change, hoping to gain new customers in Maryland and elsewhere while taking on cable television leaders such as Comcast Corp. But traditional cable companies and those representing apartment building managers criticized the move, arguing that the action will hurt renters.
"The property manager is not going to be able to go out and shop the contract for the best prices," said Katherine K. Howard, chairwoman of the Maryland Multi Housing Association's legislative committee. "And the tenant ... is not going to have the lower prices offered to them."
Property managers who sign such deals, which can extend up to 25 years, say they get better cable television rates from companies, including Comcast, because they promise to buy in bulk. Managers in turn use those rates as selling points to attract new tenants.
But the FCC and supporters of the change say allowing tenants to choose their cable provider will create competition that will drive down prices.
"Cable rates have risen faster than the rate of any other communications service," FCC Chairman Kevin J. Martin told a symposium earlier this month, concluding that the reason for the disparity was that "the cable industry needs more competition."
From 1995 to 2005, basic cable rates rose 93 percent from an average of about $22 per month to roughly $43 per month, and they now hover about $50. Meanwhile, other communications services with multiple competitors, such as those offering long-distance and wireless telephone services, have seen costs shrink.
Some say the unchecked cable rise is caused by a monopoly situation held by certain companies.
"There are consumers right now who would like a choice, but their condo or apartment ownership or management is locked in to a long-term, exclusive-access agreement, which bars consumers from choosing another provider," said David Fish, a Verizon spokesman.
"Why shouldn't people who live in apartments or condos have the same choices as everyone else? And why should any company be able to block those choices?" Fish said.
It's difficult to gauge how many of these contracts are in place across the country. They're often confidential and unadvertised. And no complaints about lack of access to competitors have been lodged with the state's attorney general, which acts as a clearinghouse for consumer concerns, said spokeswoman Raquel Guillory.
Verizon launched its cable television service, dubbed FiOS, in parts of Howard County last year. Since then, it has added portions of Prince George's, Montgomery, Baltimore, and Anne Arundel counties to the list.
About 425,000 households have access to FiOS in Maryland. And roughly 40,000 people in northern Anne Arundel County have access to cable through Millennium Digital Media. Satellite service providers like DirecTV also offer television subscriptions throughout Maryland, though studies have shown they don't have much effect on existing cable prices, according to the FCC.
That leaves Comcast as the main cable option in Maryland. Comcast chief executive Brian L. Roberts recently said about 10 percent of its subscribers live in buildings where exclusivity contracts are in place.
"Consumers will lose significant benefits if the FCC interferes in this marketplace," Comcast spokeswoman Sena Fitzmaurice said in a statement.
About 17 states and the District of Columbia already have laws on the books that prevent new exclusivity contracts, though the practice was grandfathered into some contracts, according to Comcast. (Maryland is not among the 17 states.) If the FCC indeed strikes those contracts down tomorrow, it would be an unprecedented move.
National and local cable groups denounced the possibility yesterday, saying it was unlawful and inappropriate for the federal government to invalidate current contracts, particularly when the FCC has already said the contracts were reasonable in both 1997 and 2003.
"It would be unheard of for the commission to abrogate existing contracts. If they do, it would guarantee years of litigation," Fitzmaurice added.
Lee Baylin, a Towson attorney, knows firsthand what litigation with Comcast is like. He has represented property owners looking to exit such cable contracts twice, winning one case and losing another.
"They've always fiercely protected every one of these contracts out there. Once they start losing them, it becomes a bit of an avalanche," he said. Baylin was able to help a mobile home operator offer a competing cable service in Florida. He said prices fell 33 percent to 50 percent.
"The bottom line for the consumer is the more [companies] you've got in the market, the cheaper it is," Baylin said.
Pamela Martin, of Southern Management Corp., which maintains about 20,000 apartments in Maryland, welcomed the idea of choice if it's available.
"There's just not been a choice in any of our markets that we've been in for TV until recently," Martin said. "We embrace customer choice."