Apartment building owners and developers, CATV companies, and competing video/internet providers take note: The Federal Communications Commission may ban or otherwise limit the enforcement of exclusive contracts for video/broadband service in the multiple dwelling unit ("MDU") setting.

In particular, the FCC recently initiated a rulemaking that could lead to the adoption of policies affecting thousands of exclusive service agreements between multiple dwelling unit (e.g., apartment building) owners, on the one hand, and video programming distributors (e.g., cable TV companies), on the other hand.

The FCC Notice seeks comment on the use of exclusive contracts in the MDU video provider marketplace and their impact on the twin federal goals of enhanced multichannel video competition and accelerated broadband deployment. Specifically, the Commission:

  • Seeks comment on current marketplace conditions for competing service providers attempting to obtain access to MDUs or other real estate developments.
  • Seeks comment on the impact of exclusive contracts on consumer choice and video competition, and whether the use of such contracts reduces the likelihood of competitive entry.
  • Tentatively concludes that the Commission has authority to regulate exclusive contracts for the provision of video services to MDUs or other real estate developments where such contracts are found to impede competition and impair deployment of those services.
  • Seeks comment on what specific steps the Commission should take to ensure that exclusive contracts do not unreasonably impede competitive video entry.

The FCC proceeding comes after the agency twice before concluded, in 1997 and again in 2003, that it should not take any action with respect to exclusive contracts in the apartment building setting. However, potential competing providers have increasingly complained that such contracts are depriving consumers of competitive choices. Moreover, in the office building context, the Commission has prohibited the enforcement of exclusive contracts for telecommunications services.

In contrast, building owners and developers maintain that exclusive arrangements often provide tenants with discounts, and video providers which enjoy such contracts have urged that these agreements are important to the recovery of their capital investment.

This proceeding will have important implications for real estate developers, tenants and video/internet access providers.