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FCC Releases Notice of Proposed Rulemaking Seeking Comment on Exclusive Contracts for the Provision of Video Services to Multiple Dwelling Units

March 28, 2007

The FCC has released the text of the Notice of Proposed Rulemaking adopted on March 22, 2007 seeking comment on video providers' use of exclusive contracts in multiple dwelling units ("MDUs") and the impact of those contracts on video competition and accelerated broadband deployment. The Commission previously addressed this issue in 1997 and 2003, but decided against taking any action. Note that the FCC tentatively concludes that it is authorized to regulate exclusive contracts for video service, but seeks further detailed comment on its statutory jurisdiction to do so.

The Notice specifically poses the following questions for comment:

• To what extent do exclusive MDU contracts impede video competition, consumer choice and broadband deployment?

• How often do video providers confront exclusive MDU access agreements? Are such agreements becoming more or less prevalent?

• What are the typical terms and durations of those agreements?

• What is the current status of state mandatory access laws and what impact do they have on MDU competition issues?

• Do video providers seek exclusive MDU contracts in an effort to frustrate competitive entry?

• Do incumbent providers use the time during which new entrants are negotiating local franchises in order to obtain exclusive MDU contracts?

• Do exclusive MDU contracts mostly benefit new entrants, incumbent providers, or both?

• Would video providers be unable to provide service to MDUs or other real estate developments absent the protections afforded by exclusive contracts?
• Does the Commission have authority to regulate exclusive MDU contracts? How about contracts entered into by video providers other than incumbent cable operators? Should the Commission limit regulation of exclusive contracts only where the video provider at issue possesses market power?

• Does the Commission have authority to regulate only exclusive MDU contracts entered into after the effective date of the regulations or could it declare existing exclusive MDU contracts void or voidable?

• What is the effect of state mandatory access laws or other statutory or constitutional considerations on the Commission's authority in this area?

• Does the existence of exclusive MDU contracts within a community reduce the likelihood of competitive entry in the community?

• Are the costs associated with providing service to MDUs or other real estate developments significantly more than the costs of providing service in other areas? Is there more risk associated with serving these types of developments? Are the marketing costs higher in these areas? Is customer chum higher?

• How do the prices and services offered under the exclusive MDU contracts compare to those offered to other customers?

• Are additional payments typically made to MDU landlords by the video provider in return for exclusivity?

• What is the impact of perpetual contracts (incumbent cable operator exclusive MDU contracts that run for the term of the cable operator's franchise and renewals thereof)? Are perpetual contracts currently being executed? If so, are perpetual contracts anti-competitive, as they effectively bar any competitive entry, or are there instances in which the use of perpetual contracts enhances competition and broadband deployment?

• Should the Commission establish explicit rules to which contracting parties must adhere or specific guidelines for video providers and MDU landlords? Are there certain practices that should be deemed presumptively unreasonable?

Comments are due June 18,2007, and Reply Comments are due July 18, 2007. We would be pleased to respond to any questions regarding this matter.

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