Out of Control

I have direct experience with this. Some ten years back, when I lived in Chicago, I was on my condo’s committee to select a cable and Internet provider. At that time, Chicago was one of the few markets in the country that had all parts of the city to cable competition. It was a buyers’ market. We were able to negotiate a five-year deal, locking in a basic cable rate of $14.95 for all residents—half of what the published residential cable rate was at the time. We chose the provider from among five bidders. The FCC, or any government agency, has no right to tell me and my fellow condo owners that we cannot use our collective power to negotiate deals like this, at least until it explains how we were “denied the fruits of competition” by being among the first residents of the South Loop to have fiber optic cable connections directly to our units while saving $900 a piece over the course of five years.

Owners of rental properties have the same right. They have every interest in making their units marketable. Cable service is an amenity and it affects the value of their property, and, should they wish, they are entitled to take responsibility for selecting a service provider. If building owners can turn to the competitive market and negotiate a great deal, both owner and renter benefit. On the other hand, a ban on exclusive deals gives the owner no incentive to go out of his or her way to add cable. The renter, while free to select a provider, must deal with the hassle of hook-up and connection and will likely pay a higher monthly rate.

Finally, any rule like this opens the door to broader regulation of bulk cable and broadband service agreements. Like condo associations, homeowner associations that govern residential developments of single-family homes are free to enter such agreements. Real estate developers can enter into agreement with service providers on “greenfield” build-outs (see Friday’s blog for how this playing out with Utah’s UTOPIA project). Ban cable agreements with condo associations and apartment building owners, and the logical extension is to ban all agreements between any party or corporate association that represents multiple owners.

And sorry, I can’t muster much sympathy for Verizon when its spokesman says, “If you're going to serve a city like New York and you can’t get into apartment buildings, you’re pretty much going to be out of luck.”

Two words, Verizon: Try harder.

As for the FCC, I grow more disappointed with it each day, chiefly over its arbitrary approach to its mission. While endorsing network neutrality on one front, Martin seriously considered mandating neutrality for winners of the upcoming 700 MHz auction. As it is, the new rules introduce some troublesome requirements that interfere with free commerce. Elsewhere Martin wants to require cable companies to offer a la carte programming, despite that the economics are questionable and that the commission’s own staff recommended against it.

And let’s not forget Martin’s selective approach to content regulation. True,
as much as we may bristle, the FCC does have authority to regulate broadcast content. What got Martin into trouble with the courts was his arbitrary reasons for assessing fines. The moment he said certain four-letter words were acceptable on one program, but not another, he ceased being an enforcement officer and became a censor.

With its latest plan to halt exclusive deals with service providers, Martin and the FCC again are exceeding their authority. No where does it say cable competition must be house-by-house. It because of competition that building owners the power and ability to leverage a large number of potential accounts into savings and superior service. It would be foolish, counterproductive and much more harmful for consumers, if the FCC took this power away.