Cablecos seeking customers in multidwelling units (MDUs) now will have to woo those potential users just like any other business trying to land a sale. In other words, the era of cable exclusivity in MDUs is extinct – that is, except for deals already in place. But for the most part, from here on out, operators will have to compete against telco and satellite for MDU tenants’ eyeballs, and property owners won’t be able to dictate who their occupants rely on for pay TV.
The change – a paradigm shift, really, for residents of apartments and condos where cable has reigned supreme – comes thanks to a federal appeals court ruling this week. D.C. Circuit judges upheld a 2007 FCC vote that barred certain MDU pay-TV exclusivity agreements. For years, cable firms have held exclusive contracts with MDU owners, and for a while, that didn’t much matter since cable had few rivals. But as satellite service grew mainstream, and as telco TV blossomed from idea to execution, companies such as Verizon Communications Inc. (VZ) lobbied the FCC for the right to access MDUs, too. The FCC sided with the telco industry almost two years ago and the case then went to appeal.
This week’s decree dealt another blow to the cable industry, which, despite its success in offering the triple play, continues to fight backlash over ever-rising prices and stingy basic programming options. Cable now will be forced to rethink its business model as it faces challengers in MDUs. However, there is one good tidbit for cable: The court finding does not apply to exclusive arrangements already signed.
That caveat marks a tiny win for members of the National Cable & Telecommunications Association (NCTA), the association that protested the FCC’s decision. But overall, the verdict means cable will have to go head-to-head against the likes of behemoths Verizon and AT&T Inc. (T), as well as some formidable CLECs such as Grande Communications. And for those providers, the recent court outcome is indeed positive.
Telco TV Will ‘Make Inroads’
AT&T, Qwest Communications International Inc. (Q) and Verizon have secured “a major advantage in urban and suburban markets as they continue to make inroads into cable's triple-play subscriber base,” said Jessica Zufolo, senior telecom analyst for investment bank Medley Global Advisors, in a May 26 note to clients. The LECs should fare particularly well in cities including Atlanta, Boston, Dallas, Los Angeles, Miami, New York “and other high-margin, urbanized areas,” she said.
