At its Oct. 31 open meeting, the Commission adopted an Order declaring exclusive access and service clauses in video contracts between cable operators and multiple-dwelling units (MDUs) — think apartment buildings — to be unenforceable. According to the FCC, such exclusive contracts can be harmful, and it expects that the rule change will result in greater choice for consumers and competition among video services providers. The Commission launched a further proceeding to determine whether it should take similar action against exclusivity clauses entered into by Direct Broadcast Satellite television providers, private cable operators, and other multichannel video programming providers. The further proceeding will also explore whether the Commission should prohibit other types of exclusive arrangements in the provision of video services. It is unclear when this order will become effective. The text of the decision has not yet been released, but once the new Order become effective, the rules will apply to existing as well as future contracts as the FCC did not provide any transition or grandfathering period for existing agreements. Given Chairman Kevin Martin’s sense of urgency for this issue, the FCC is likely to release that text as soon as possible. Representatives of various interest groups, including cable operators, have indicated publicly their intention to challenge the order in court. For more details about the Commission’s action please see DWT’s recent bulletin.
At the same Oct. 31st meeting, the Commission also adopted a Second Report and Order extending a number of cable franchising rules that previously applied only to new video competitors to incumbent cable operators. Earlier this year, the Commission had adopted rules streamlining the local cable franchising process for new video entrants (i.e., telephone companies) and clarifying that certain payments often demanded by local franchise authorities would be considered franchise fees and therefore counted against the 5 percent franchise fee cap. By its Second Report and Order adopted this week, the Commission decided to extend many of these rules to incumbent cable operators as well. According to Chairman Martin, extending these rules to incumbent cable operators will help level the playing field between new entrants in the video delivery market and existing operators. For more details about the Commission’s Second Report and Order, please see DWT’s recent bulletin on the issue.