Court Bans Exclusive Deals Between Cable Providers, Condo Associations

Published October 1, 2009

Condominium residents may soon have more options among cable providers because of a recent federal court decision, but that could come at the price of government micromanaging of contracts between cable companies and potential customers.

In May the U.S. Court of Appeals for the District of Columbia Circuit upheld a 2007 ruling by the Federal Communications Commission banning exclusive contracts between cable providers and condominium associations. The FCC said the contracts prevented competition in that share of the market.

The National Cable and Telecommunications Association appealed the decision, but it lost when the court of appeals ruled the FCC did not overstep its authority.

‘Dramatically Restricts Freedom’

One technology analyst believes the Appeals Court made the wrong decision.

“The government should not invalidate contracts between private parties,” said Daniel Ballon, a senior technology fellow for the San Francisco-based Pacific Research Institute. “Though justified as pro-consumer, this decision dramatically restricts the freedom of consumers to get the best deal.

“Contracts allow consumers to choose whether they value lower prices or more flexibility,” Ballon added. “Without this freedom, consumers will face fewer choices and higher prices.”

Other Contracts Allowed

One of the most distressing aspects of the ban, Ballon says, is the fact that condo associations frequently enter into these kinds of exclusive contracts with a wide range of vendors—from garbage collectors to parking garage managers and janitorial services. Cable contracts should be no different, he argues.

“If landlords and homeowner associations cannot use contracts to get the best deal in telecommunications, perhaps the same should apply to gardening, painting, or renovations,” Ballon said. “Why should landlords be allowed to give one company an exclusive gardening contract, when this clearly hurts competing gardeners?”

Prices Rise, Service Suffers

The ban may also adversely affect the pocketbooks of condo renters and owners.

“Condominium owners will now end up paying higher prices for services,” said Steven Titch, a policy analyst at the Los Angeles-based Reason Foundation. “Volume always makes for a better deal, as when you are in collective bargaining or buying in volume. If a condo association can represent 300 users, they’re going to get a better deal because it’s that much more beneficial to the provider. It’s a form of competition.”

The ban on exclusive cable contracts could affect more than just condo owners. In the long run, Titch says, the inability to take on exclusive contracts could reduce overall services in certain areas.

“It’s these types of volume deals that create cash flow to network service providers, and it means service rolls out that much faster,” Titch said. “For instance, Verizon is now rolling out FIOS. If they can get an anchor contract in a condominium in a particular city area, the contract will justify them running fiber optics to the whole area.”

Aricka Flowers ([email protected]) writes from Chicago.