MDU Sue: FCC Order Expected to Draw Litigation

It seems to be a matter of when, not if, someone will sue over the FCC‘s unanimous vote Wed to not only ban future MDU video contracts, but to annul existing contracts with cable operators. It could even end up being a building owner, real estate developer, or perhaps even a resident—rather than a cable op—who sues. Once again, cable is unhappy because the order doesn’t treat all video providers the same. Existing exclusive cable contracts for apartments, condos and other multiple dwelling units are voided, but existing telco contracts are not. Future exclusive video contracts for MDUs are not allowed for cable or telcos, but DBS providers and SMATVs (video providers that only serve MDUs) can still have exclusive contracts in the future. The FCC said it would issue a further notice seeking comment on whether these MVPDs should be subject to the same rules. Wed’s order couldn’t address those providers because they don’t fall under Sect. 628 of the Communications Act. The Commission believes that MDU contracts favor incumbent cable ops and hurt rivals like Verizon and AT&T, which said they needed the order to get into the MDU marketplace. “If eliminating exclusive contracts for some video providers is good for consumers, then it should have been applied to all providers,” NCTA svp, law & regulatory policy Dan Brenner said. It’s an argument cable raised in Dec when the FCC streamlined local franchising rules for telcos but not cable. On Wed, the FCC finally got around (3-2) to extending those same rules to cable—but NCTA says there still isn’t parity because the new rules only take effect after existing cable franchises expire. NCTA is challenging that order in court, questioning the FCC’s authority to interfere in the local franchise process. As for the MDU decision, Brenner said the “legally suspect” step could “harm consumers and jeopardize the delivery of advanced services to low-income neighborhoods where other video providers have chosen not to offer service.” Comcast piled on. “As noted by Commissioner [Robert] McDowell, the Commission’s unprecedented decision to abrogate existing contracts… will likely guarantee years of litigation and uncertainty for consumers,” said Sena Fitzmaurice, sr dir, corporate comm and govt affairs. Investment firm Oppenheimer described the FCC’s action as more of a “headline risk” than an operational one (did ya see this week’s NY Times piece?), noting that the bulk of cable’s MDU subs are in 18 states that guarantee providers’ access to MDUs. “The operators with the most significant exposure are those with large urban subscriber populations in ‘non-guaranteed access’ states such as CA,” Oppenheimer said.