FCC on HOA Exclusive contracts

Started by ZurielC • 18 replies • 3130 views

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ZurielC (Florida)
Posts: 7

Posted:

All,

Some of you might have read that the FCC is now banning long term contracts with cable tv providers. I have now started a website to support the FCC. I live in Live Oak Preserve where we the Board have tried every way to get out of a unethical contract left behind by the builder and his brother who owns the cable (PCO) company. For those of you are on the same boat is we are in please visit www.banbulkbilling.com to express your concerns and support the FCC. There you will also find details on petition instruction to fill a comment with the FCC.

Has any one here been able to get out of their long term cable contracts?

Regards,
ZC

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quoting from the FCC rule:

"No cable operator or other provider of MVPD service subject to 47 U.S.C. § 548 shall enforce or execute any provision in a contract that grants to it the exclusive right to provide any video programming service (alone or in combination with other services) to a MDU. All such exclusivity clauses are null and void"

I take this to mean that Exclusive Contracts are not in and of themselves void, it's just that any provisions or clauses regarding exclusivity that they are contain are void. In other words, you may have negotiated a reduced "bulk" rate with the cable company who provides you with service. I don't see this FCC rule as prohibiting such a contract, it just says that the cable company can't sue you for breach of contract if you decide to go out and get another cable provider, but the other provisions of the contract are still enforceable. This may explain why some HOAs cannot get out of their contracts.

Put it another way. You can go out and sign a 3-year contract with company A. Then, you learn that you can get a better deal by getting a 5-year contract with company B. Since company A's contract is not exclusive, you have a perfect right to do that, but that doesn't mean you can cancel your contract with company A. If your contract with company A were exclusive, you wouldn't be able to sign a contract at all with company B.

By the way. I'm not only on the board of our HOA, but I also happen to be our town's representative on our local Cable TV Advisory Council. Lucky me!

MC2 (Virginia)
Posts: 26

Posted:

The FCC ruling just extends to the exclusivity part of the contract. The FCC is taking comments if they should extend the ban to "Bulk Billing".

If you want to submit comments go to: http://fjallfoss.fcc.gov/prod/ecfs/upload_v2.cgi on proceeding enter 07-51

If you want to read comments go to: http://fjallfoss.fcc.gov/prod/ecfs/comsrch_v2.cgi on proceeding enter 07-51

This is the new Scam to lock new communities for a long period of time. In my case the developer who is in control of the HOA had entered to a 75 year term contract with the HOA. He created a "special entity "LLC" and made the contract with the HOA "Inc".
There is also the disclosure of the contract in my case the HOA made a contract with the LIM and the LIM made a contract with COX. I tried to get a copy of the contract between COX an LIM and I wasn't successful.

As you well know as the town's representative Cable TV council it is very unrealistic to have a long term contract with a service provider for 75 year. Technology changes everyday and my community will not have the chance to get another service provider. The only solution is pay twice for telecommunication services. Can you say this is good for competition!!!

If you live in a community with a bulk billing agreement and would like to change that:
1- Submit a reply comments to the FCC Website by March 7, 2008.
2- Go to WWW.banbulkbilling.com and post your situation.

MC
Virginia Beach, VA

BruceF1 (Connecticut)
Posts: 2,535

Posted:

MC,

75 years? Ouch!!

You see the picture the same way I do. As of now, only the exclusivity portion of contracts is affected. Other issues have not yet been decided upon.

I agree, any long term agreement with anyone about anything is undesirable. I see nothing wrong with a 2 or 3 year contract, but I'd back away from anything longer than that, especially beyond 5 years.

Our community has no long term contracts. Cable TV in this state is regulated by the state Department of Public Utilities Control. Rates for each franchise area are reviewed annually by the DPUC.

I have no problem with short term contracts and the power of mass purchasing. Your point about technoiogy changes is well taken. Unfortunately, that complicates the issue when you consider the infrastructure of a small area (ie, an HOA community) vs the infrastructure of the community at large (ie, the rest of the town with private homes). Who owns the infrastructure and who pays for the upgrade to keep up with technology? The problem is, when suppliers are competing to provide service, you are unlikely to find one who would be willing to upgrade the infrastructure and provide service at a reduced cost without also wanting a longer term committment in order to recover the cost of the upgrade.

Another problem clouding the issue is the fact that cable companies (and satellite TV providers as well) buy their programming services with bulk contracts which determine which channels they will carry, which tier different channels will be on, how many customers will be served, and so forth. Cable TV companies do not generally pay a-la-cart (per channel per customer) for TV programming, except for the premium channels. For example, a cable company will negotiate with Turner Broadcasting (a division of Time Warner) to carry TNT, TBS, Turner Classic Movies, The Cartoon Network, CNN, Court TV, and so on, as a package, and then with another provider, ie. Discovery Networks, for another package, and so on.

So, are bulk service contracts good? Perhaps, for short term intervals they are. The idea of using mass purchasing power to obtain a lower price is not new and exists in all markets. Companies are willing to offer a lower price per unit because when multiplied by the number of units to be sold their revenue is greater than it would be if they were to compete for the individual units separately. In this case, both the subscriber and the company benefit. However, the equal benefit begins to fade after a period, so only short term contracts make sense.

MC2 (Virginia)
Posts: 26

Posted:

Here is my take on bulk billing!!

I'm all to giving the consumer the level of service he need. By this I mean if I want just basic cable why I need to pay for other services I would not use. With our shrinking economy each homeowners is responsible for the payment if they use or not. I think this is a third party infringement on my private property. I like the liberty to select my service provider. One year contract is more than enough.

Answering your question: Who paid the upgrade to keep up with technology? What about the PCO and the Cable Providers. If the want to be in this "business" you have to be willing to pay the cost related to your business. The way you recoup your investment is by giving “good service”.

If you don’t agree with this opinion I can give you another point. What about each homeowner pays the cost of the wiring? Based on the information on the FCC Docket 07-51 the cost of wiring a new house is $650.00. More than that homeowners pay in light fixtures and appliances. In the case of rental properties the same thing they can install a new AC unit that at least cost $2,500.00 but they need subsidize from consumers (By exclusive and bulk billing agreements) to wire the apartments. What a shame!!

MC

I have attach one my previous comment to the FCC Docket 07-51

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BruceF1 (Connecticut)
Posts: 2,535

Posted:

MC,

While you were responding to my comment, I took the opportunity to review the comments posted on the FCC website as you suggested. By the way, I already saw yours among them.

As a result, I'm now wondering another point. Just what is meant by "other provider of MVPD service" in the existing FCC rule? Could this be interpreted to mean an HOA or the owner of an apartment building as well?

For example, suppose an apartment building owner negotiates with a cable provider to provide bulk service and then includes the cost of the service in the rental fee, or even charges for it separately. Does that apartment owner now, indirectly, become an "other provider of MVPD service"? How about an HOA that negotiates a similar contract and includes the cost in the association fee?

Certainly, I agree that the choice should be left up to the individual. That's what a free market economy is all about. In other words, maybe its OK for the owner of an apartment building or for an HOA to negotiate a bulk rate contract, but it should be up to the individual whether or not to avail himself or herself of the service. He or she should be free to obtain his or her own service and deduct the cost of the bulk service from the rental or association fee. Perhaps the cost of the TV service should be stated separately in the rental agreement or association fee and it should be optional.

We already have this problem with satellite TV. What if a person chooses to have satellite TV? If there is a negotiated contract for cable TV service and it is included in the rental or association fee, the individual still pays for that service even though he/she doesn't use it.

So, I'm wondering, if the apartment owner or HOA becomes an "other provider of MVPD service", does the apartment owner or HOA then become an "exclusive provider" if the cost is included in the rental or HOA fee and prohibits an individual from obtaining his or own service? In other words, does the present FCC rule permit an individual to obtain other TV service and deduct the cost of the "exclusive" service from his/or her fee? I think this remains to be answered.

Even if you do away with bulk service contracts, I'm not sure, in a practical sense, if the problem is really solved. It's not likely you will see cable providers competing for subscribers on an individual level. An apartment building or an HOA community is already prewired for service to be provided by a single cable company. Indeed, entire towns or sections of towns are often wired this way, and the closer you get to sparsely populated areas, the more likely this is to be the case. It's not economically feasible for a cable company to run cable across town for a handful of subscribers. In fact, many cable franchise agreements (at least in my state) require a cable company to run cable to sparsely populated rural areas in order to be granted the franchise. Otherwise, the cable companies wouldn't do it. It may cost about $650 to wire a house for cable, and the owner may be willing to pay for it, but what does it cost to get the cable service TO the house, and will the subscriber (or handful of subscribers) be willing to pay that? Then there's the issue of whether or not an apartment owner or an HOA can prohibit it. That may take still another ruling from the FCC.

So to sum it all up, here's what I think at this point (not cast in stone, because I'm not certain I have all the facts yet):

1. Apartment owners and HOAs should be able to negotiate reduced rates for their tenants or Unit Owners. Contracts should be short term, to provide ability for apartment owners and HOAs to renegotiate at periodic intervals.

2. The choice should be left up to the individual as to whether or not to use the negotiated service. The individual should not be forced to pay for the service if he or she chooses not to use it. As I said before, I'm not certain the present FCC rule doesn't take care of this. It remains to be seen. It hasn't been tested yet.

3. We're not likely to see competition between different cable providers. The choice is more likely to be between different TV programming providers, ie. cable, satellite, and phone companies. This is no different than what is available today for owners of private homes.

By the way, with respect to item number 2, this may be a special dilemma for HOAs. Since the primary income of an HOA is fees, there is no way for them to not include the TV service cost in the fees charged unit owners unless they can find a way to charge it separately. Then again, if they have to pay the cable provider for a certain number of units and can't, because not enough units subscribe, where does the difference come from? Do they then go back to the units that have TV service and have a special assement to cover that? Do the states' community association laws even allow this? If I'm correct in my assumption that the present FCC ruling allows individuals to not pay for cable service they do not want, there may be a terribe mess brewing.

MC2 (Virginia)
Posts: 26

Posted:

You ask:
As a result, I'm now wondering another point. Just what is meant by "other provider of MVPD service" in the existing FCC rule? Could this be interpreted to mean an HOA or the owner of an apartment building as well?
Answer:
See the Report and Order 07-51 it defines MVPD

You ask:
Does that apartment owner now, indirectly, become an "other provider of MVPD service"?
Answer:
By having an indirect or direct interest on the cable facility they become defacto cable operators and under the jurisdiction of the FCC see CFR 47.
You ask:
How about an HOA that negotiates a similar contract and includes the cost in the association fee?
Answer:
Still the same case

You say:
Certainly, I agree that the choice should be left up to the individual
Answer:
(We agree on this one) GREAT!

You say:
Maybe its OK for the owner of an apartment building or for an HOA to negotiate a bulk rate contract, but it should be up to the individual whether or not to avail himself or herself of the service. He or she should be free to obtain his or her own service and deduct the cost of the bulk service from the rental or association fee. Perhaps the cost of the TV service should be stated separately in the rental agreement or association fee and it should be optional.
Answer:
I theory this will be the way to deal to this situation. The reality is that these agreements are becoming a source of income for apartment owners and developers.

You say:
We already have this problem with satellite TV. What if a person chooses to have satellite TV? If there is a negotiated contract for cable TV service and it is included in the rental or association fee, the individual still pays for that service even though he/she doesn't use it.

Answer:
You should use you participation on your town cable council to bring relieve to this people. There are people that live in a fix income and can't afford pay double for the same service

You ask:
So, I'm wondering, if the apartment owner or HOA becomes an "other provider of MVPD service", does the apartment owner or HOA then become an "exclusive provider" if the cost is included in the rental or HOA fee and prohibits an individual from obtaining his or own service?
Answer:
In my case based on the Virginia State Commission Lawyer they are obtaining exclusivity by bundling these services even if the contract doesn’t have the “exclusive” and is bulk billing.

You ask:
In other words, does the present FCC rule permit an individual to obtain other TV service and deduct the cost of the "exclusive" service from his/or her fee?
Answer:
As you well know the FCC has authority over MVPD and maybe PCO. They don’t have authority over individuals.
No deduction you are responsible for the payment. Simple if you don't pay you will not get service and the HOA will put a lien on your Deed.

You say:
Even if you do away with bulk service contracts, I'm not sure, in a practical sense, if the problem is really solved. It's not likely you will see cable providers competing for subscribers on an individual level. An apartment building or an HOA community is already prewired for service to be provided by a single cable company. Indeed, entire towns or sections of towns are often wired this way, and the closer you get to sparsely populated areas, the more likely this is to be the case. It's not economically feasible for a cable company to run cable across town for a handful of subscribers.
Answer:
The FCC had made illegal to have any exclusive contracts to single homes. Check the “Cable Act”. In addition the City of Weston in Fl had made comment on the FCC explaining how the bulk billing is affecting competition.

That is why I say Ban Bulk Billing and Eclusive Marketing Agreements. FCC 07-51

By the way great discussion!!
MC

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MC2 (Virginia)
Posts: 26

Posted:

BruceF1,

By the way I currently pay $146.00 every month for services while everybody else pay $99.00 without having an exclusive bulk billing agreement.

If you are in a similar position let me know of post your situation in www.banbulkbilling.com

MC

MC2 (Virginia)
Posts: 26

Posted:

BruceF1,

By the way I currently pay $146.00 every month for services while everybody else pay $99.00 without having an exclusive bulk billing agreement.

MC
To the FORUM in general:
If you are homeowner and are in a similar position let me know of post your situation in www.banbulkbilling.com

MC

MC2 (Virginia)
Posts: 26

Posted:

BruceF1,

This is one of many ideas on how to ge cable operators to share wiring.

http://www.broadbandproperties.com/2001%20issues/Jan_2001_Features/How%20to%20Make%20an%20Incumbent%20.htm

Enjoy!!!

MC

MC2 (Virginia)
Posts: 26

Posted:

To all,

I made a mistake on the previous postings the correct site is http://banbulkbilling.com

BruceF1 (Connecticut)
Posts: 2,535

Posted:

MC,

Yikes! So, let me understand, you have a "bulk rate" agreement where you live and you pay MORE than a private individual for the SAME SERVICES? Wow!!

By the way, I find this a great discussion as well. You certainly seem to have done your homework. I fear, though, that we may have left some of our HOA friends behind. Although, if this discussion doesn't appeal to them, I guess they can find plenty of topics. On the other hand, it is definitely germane to HOAs, since many have bulk rate contracts, and just about every HOA has dedicated wiring for a single cable company, so in a way, cable service can only be by a single provider. If they have views on the subject, they're certainly welcome to jump in.

I also must add that I'm not opposed to your position, but I would like to understand it better. So, I may play “devil’s advocate” and challenge you. While I have no more influence with the FCC than you do, as a result of my activities on the Cable TV Advisory Council, I can have some influence at the local and state level. As far as HOAs are concerned, there are other avenues that can be pursued at this level.

I think we agree on, or that I understand most points, so let me review your recent post so we can concentrate on what remains. I'll do this by reviewing my statements and questions, as you did, together with my interpretation of your responses.

BF: As a result, I'm now wondering another point . . etc.
MK: See the Report and Order 07-51 it defines MVPD
BF: It says "multichannel video programming distributor" I guess this is anyone who purchases TV programs from one source and provides them to consumers. Under the right circumstances, this might be taken to mean an apartment owner or an HOA, although I’m not sure this meets the definition of 47CFR76

BF: Does that apartment owner now, indirectly, become an "other provider of MVPD service"?
MK: By having an indirect or direct interest on the cable facility they become defacto cable operators and under the jurisdiction of the FCC see CFR 47.
BF: Where? Please cite the specific section. I think it does, but where in Title 47 do you find it?

BF: How about an HOA that negotiates a similar contract and includes the cost in the association fee?
MK: Still the same case
BF: I may agree with you, but, as above. I can’t find it anywhere.

BF: Certainly, I agree that the choice should be left up to the individual
MK: (We agree on this one) GREAT!
BF: Agree here too, So far, so good.

BF: Maybe its OK for the owner of an apartment building etc.
MK: I theory this will be the way to deal to this situation. The reality is that these agreements are becoming a source of income for apartment owners and developers.
BF: Not sure I completely agree here. Let's call this Issue 1.

BF: We already have this problem with satellite TV.. etc.
MK: You should use you participation on your town cable council. . etc.
BF: I'm not aware of any such cases in my service area. On the local and state level, I can only speak for issues in my service area. Certainly, if I were aware of any, I would.

BF: So, I'm wondering, if the apartment owner or HOA becomes an "other provider of MVPD service" . . etc.
MK: In my case based on the Virginia State Commission Lawyer they are obtaining exclusivity by bundling. . etc.
BF: Don't disagree, but my response concerns HOAs. Let's call this Issue 2.

BF: In other words, does the present FCC rule permit an individual to obtain other TV service and deduct the cost of the "exclusive" service from his/or her fee?
MK: As you well know the FCC has authority over MVPD and maybe PCO. They don’t have authority over individuals. . . etc.
BF: Not sure I completely agree here either. Let's call this Issue 3.

BF: Even if you do away with bulk service contracts, I'm not sure, in a practical sense, if the problem is really solved . . etc.
MK: The FCC had made illegal to have any exclusive contracts to single homes. Check the “Cable Act”. . . etc.
BF: By the :”Cable Act” are you referring to PL 98-549? I can’t find it there or in Title 47 of the CFR. Can you point me to the right place or quote the section? I’m not certain I agree with you on this one either. Call this one Issue 4.

Now, I’ll address the “issues”.

Issue 1: “The reality is that these agreements are becoming a source of income for apartment owners and developers.”

How do you know this for a fact? I’ll agree that it may be possible, especially for apartment owners, but I’m not certain the same claim can be made for developers. If a developer is building a community where there is to be an HOA (or a condo community, or whatever), then that development must, I assume, also be covered by state laws regarding HOAs, and also possibly not-for-profit or non-profit corporations, conflict-of-interest laws, etc. Are you telling me there are no such laws or that the developer is ignoring them? The developer may be negotiating bulk service contracts, but if he is profiting from them, you can probably nail him on some violation of state statutes.

Issue 2: I agree that in an apartment building which is wired such that service is provided by a single provider, or even in a multiple dwelling condo, or an HOA community of single dwellings where the streets are pre-wired for a single cable provider, then a bulk contract where the price is built into the rent or association fee, that in effect, amounts to an exclusive contract. True, the individual may obtain his or her own service, but is not relieved from paying for the “bulk” service, and thus pays twice for service. I believe this is wrong, but I wonder if the present non exclusivity prohibition addresses this case. If it does, this is where I see the mess for HOAs may be

Issue 3: “As you well know the FCC has authority over MVPD and maybe PCO. They don’t have authority over individuals”

So what? If an apartment owner or an HOA, by virtue of a bulk service contract and its dedicated cable system is behaving as an MVPD (in other words, our earlier questions are answered in the affirmative), then it CAN be regulated by the FCC. There’s no regulation applied to the individual at all. Telephone companies, electric utilities, etc. all supply services to individuals and they are regulated, so I don’t see the issue here.

Issue 4: “The FCC had made illegal to have any exclusive contracts to single homes”

This contradicts your point in Issue 3. There you said the FCC can’t regulate individuals, here you say the “Cable Act” prohibits exclusive contracts between cable companies and private homes (individuals). If this is true, then Issue 3 is a non-problem since, according to this statement, it is prohibited already because we are dealing with defacto MVPDs (defacto cable providers) and individuals (renters, unit owners in an HOA, etc.).

I also have a problem with this one because it goes on all the time. The individual has every right to make whatever deal he or she wants with respect to any service, cable included. What about internet service to private homes? In a way it’s “exclusive” such that you may get a special rate, but you agree to pay a “cancellation fee” if you cancel early. How about bottled water delivery? Often, the same thing. Satellite TV? The same thing. You mean to say that cable is excluded from doing the same thing? Where’s the competition in that?

As I said earlier, I’m trying to understand your position. So, if you can clarify these points, it would help.

ZurielC (Florida)
Posts: 7

Posted:

BruceF1;

I want to address the below as we are in a 15 year contract where the service provider has not done one upgrade and has had several outages some lasting weeks. I rather not go back and forth on the other items as you and MC2 have this covered and it is going over the heads of others that don't understand this FCC regulation.

BruceF1:"I also have a problem with this one because it goes on all the time. The individual has every right to make whatever deal he or she wants with respect to any service, cable included. What about internet service to private homes? In a way it’s “exclusive” such that you may get a special rate, but you agree to pay a “cancellation fee” if you cancel early. How about bottled water delivery? Often, the same thing. Satellite TV? The same thing. You mean to say that cable is excluded from doing the same thing? Where’s the competition in that?"

Point1: I agree that some have options and some sign contracts but they also have options such as canceling and paying a possible fine. I can tell you that Verizon, DTV ,DISH have 1/2 year(s) contracts. Not 10+ yrs. That said why can we? An example of this would be my problem in Tampa. Our HOA would have to pay 13 years of $1.6 million to our provider to get out of the contract. Is this Far? I have been in technology for over 10+ and have managed ISP's. The wiring cost is used as a leverage (I know). In our case we found the documents showing the wiring cost for the whole location to be around 700K. Sure it is ok to protect initial investment but not at triple the cost. I don't think it cost that much to wire our community. I have a good one for you. Look at what is going on in Japan. They are planning on using a wireless TV system/Internet service that is far beyond what is available here. That will break the barrier down for us in the near future. That opens the competition. That is healthy. Not the “I will wire it but you have to pay me for 10+yrs”. See cable TV falls under a regulatory constraints of the government. Most have to request permission to operate to prevent monopolies. Look at what happened to Ma bell. I have several options where I live now I am stuck to one service. As a matter of fact local providers here are willing to pay our provider the money to take over and not hold us to exclusive agreements and still provide us a discount. Here is a question for you. How many of the PCO’s upgrade their service to keep up with today’s modern technological changes in a timely fashion?

Just my 2cents.
Z

BruceF1 (Connecticut)
Posts: 2,535

Posted:

ZurielC,
If I understand your post correctly, I believe we are pretty much on the same page. Short-term (ie 1, 2 or 3 years) might provide an arrangement that benefits both the supplier and the customer (ie, HOA). Sure, if there is any investment required by the provider, one might accept a cancellation clause where the cancellation fee is based on some portion of the contract remaining. This still allows a customer the option of getting out of a contract by making a trade-off as to whether, and when, to change suppliers. You might make a similar decision with your home mortgage. While you probably don't have a prepayment penalty, there are costs associated with getting and closing on a new loan. So, if you have a mortgage at a higher rate and an opportunity to get a new loan at a lower rate, part of the trade-off involves what you would save over time at the new, lower rate, vs what it would cost you to get a new loan. It should be no different with other contracts.
I see the long-term contracts as an issue. What you mention are long-term contracts, and the "buyout" of those contracts become exhorbitent because of the long time periods remaing. Furthermore, they don't make sense where technology changes so fast. Being financially locked in for a long time period provides no incentive for your provider to provide good service or keep up with technology advances, at least insofar as your development is concerned.

MC2 (Virginia)
Posts: 26

Posted:

BF: It says "multichannel video programming distributor" I guess this is anyone who purchases TV programs from one source and provides them to consumers. Under the right circumstances, this might be taken to mean an apartment owner or an HOA, although I’m not sure this meets the definition of 47CFR76
MK: 47USC522 (5) the term ``cable operator'' means any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system;

BF: Does that apartment owner now, indirectly, become an "other provider of MVPD service"?
MK: By having an indirect or direct interest on the cable facility they become defacto cable operators and under the jurisdiction of the FCC see CFR 47.
BF: Where? Please cite the specific section. I think it does, but where in Title 47 do you find it?
MK :47USC522 (13) the term ``multichannel video programming distributor'' means a person such as, but not limited to, a cable operator, a multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive-only satellite program distributor, who makes available for purchase, by subscribers or customers, multiple channels of video programming;

BF: How about an HOA that negotiates a similar contract and includes the cost in the association fee?
MK: Still the same case
BF: I may agree with you, but, as above. I can’t find it anywhere.
MK: See 47USC522 (13)

BF: Maybe its OK for the owner of an apartment building etc.
MK: I theory this will be the way to deal to this situation. The reality is that these agreements are becoming a source of income for apartment owners and developers.
BF: Not sure I completely agree here. Let's call this Issue 1.
MK : See you there…

BF: We already have this problem with satellite TV.. etc.
MK: You should use you participation on your town cable council. . etc.
BF: I'm not aware of any such cases in my service area. On the local and state level, I can only speak for issues in my service area. Certainly, if I were aware of any, I would.
MK: The below information will help you help others in your county if a complaint arrived.

BF: So, I'm wondering, if the apartment owner or HOA becomes an "other provider of MVPD service" . . etc.
MK: In my case based on the Virginia State Commission Lawyer they are obtaining exclusivity by bundling. . etc.
BF: Don't disagree, but my response concerns HOAs. Let's call this Issue 2.
MK: See you there…

BF: In other words, does the present FCC rule permit an individual to obtain other TV service and deduct the cost of the "exclusive" service from his/or her fee?
MK: As you well know the FCC has authority over MVPD and maybe PCO. They don’t have authority over individuals. . . etc.
BF: Not sure I completely agree here either. Let's call this Issue 3.
MK: See you there…

BF: Even if you do away with bulk service contracts, I'm not sure, in a practical sense, if the problem is really solved . . etc.
MK: The FCC had made illegal to have any exclusive contracts to single homes. Check the “Cable Act”. . . etc.
BF: By the :”Cable Act” are you referring to PL 98-549? I can’t find it there or in Title 47 of the CFR. Can you point me to the right place or quote the section? I’m not certain I agree with you on this one either. Call this one Issue 4.
MK: See you there

Now, I’ll address the “issues”.

Issue 1: “The reality is that these agreements are becoming a source of income for apartment owners and developers.”

How do you know this for a fact? I’ll agree that it may be possible, especially for apartment owners, but I’m not certain the same claim can be made for developers. If a developer is building a community where there is to be an HOA (or a condo community, or whatever), then that development must, I assume, also be covered by state laws regarding HOAs, and also possibly not-for-profit or non-profit corporations, conflict-of-interest laws, etc. Are you telling me there are no such laws or that the developer is ignoring them? The developer may be negotiating bulk service contracts, but if he is profiting from them, you can probably nail him on some violation of state statutes.
MK: Issue 1 A: In some of the cases on docket 07-51 a master exclusive communication easement has been awarded by the developer to a special purpose entity created and owned by the developer. Also all other utilities easement have been specified as to the specific service provided in order to prevent other communications service providers to come into the property via the utility easements. Once the property is locked, the special purpose entity enters into an exclusive bulk billing agreement with the cable operator. At the same time the special purpose entity creates a contract with the HOA under the control of the developer due to the property being under construction. The HOA under developer control sign the contract with clauses making the HOA financially responsible for the full amount of the special purpose entity cable bill. The special purpose entity with close to 100% penetration gets a marketing compensation upward of 14% of revenue. When homeowners move in that are made to sign a homeowners agreement with the HOA to pay for exclusive services; most places don’t disclosed the Master Communication Easement or the contract with the cable operator and instead develop a separate document without details or with improper disclosures. Whoala you have exclusivity!

The best brief description I seen about this controversial practice comes from: http://www.broadbandproperties.com/2006issues/feb06issues/Hardin%20-%20The%20Law.pdf

Also see attached comments from Broadlands resident in Virginia.

On the issue weather this is legal or not, these deals walk the line of legality but are not per-se illegal. Most state agencies won’t be able to help due to either been industry forums or just not having the legal authority. A lawyer’s opinion on what it would cost to get out of this contract is upward of $50K.

In my cases the developer entered the contract on the period of convenant control and directly against Condominium Code of the State of Virginia, yet my only recourse is a lawsuit. The developer still controls the HOA.

Issue 2: I agree that in an apartment building which is wired such that service is provided by a single provider, or even in a multiple dwelling condo, or an HOA community of single dwellings where the streets are pre-wired for a single cable provider, then a bulk contract where the price is built into the rent or association fee, that in effect, amounts to an exclusive contract. True, the individual may obtain his or her own service, but is not relieved from paying for the “bulk” service, and thus pays twice for service. I believe this is wrong, but I wonder if the present non exclusivity prohibition addresses this case. If it does, this is where I see the mess for HOAs may be
MK:Issue2A: No, Even when the HOA receives the cable payments, the HOA don’t make money out of these deals. The cable money just changes hands from the HOA to the special purpose entity (developer). The HOA does not lose income if exclusivity or bulk billing is banned. The purpose of banning bulk billing and exclusive contract is to stop these practices altogether, so you don’t have to pay to the HOA. That way I can pay my cable bill the old fashion way!!

Issue 3: “As you well know the FCC has authority over MVPD and maybe PCO. They don’t have authority over individuals”

So what? If an apartment owner or an HOA, by virtue of a bulk service contract and its dedicated cable system is behaving as an MVPD (in other words, our earlier questions are answered in the affirmative), then it CAN be regulated by the FCC. There’s no regulation applied to the individual at all. Telephone companies, electric utilities, etc. all supply services to individuals and they are regulated, so I don’t see the issue here.
MK:Issue3A: Answer still no to your original question. The FCC regulates the cable operator. The current or future rule does not permit the individual to obtain a deduction for other TV service from his HOA fee, nor it is or should be the intent. I believe people have proved capable of paying cable bills directly to the company and have done so for over 30 years.

Issue 4: “The FCC had made illegal to have any exclusive contracts to single homes”

This contradicts your point in Issue 3. There you said the FCC can’t regulate individuals, here you say the “Cable Act” prohibits exclusive contracts between cable companies and private homes (individuals). If this is true, then Issue 3 is a non-problem since, according to this statement, it is prohibited already because we are dealing with defacto MVPDs (defacto cable providers) and individuals (renters, unit owners in an HOA, etc.).

I also have a problem with this one because it goes on all the time. The individual has every right to make whatever deal he or she wants with respect to any service, cable included. What about internet service to private homes? In a way it’s “exclusive” such that you may get a special rate, but you agree to pay a “cancellation fee” if you cancel early. How about bottled water delivery? Often, the same thing. Satellite TV? The same thing. You mean to say that cable is excluded from doing the same thing? Where’s the competition in that?
MK: Issue4A: What I was trying to get to is the “MDU Loophole” that is the rule soon to be changed that allowed bulk billing and exclusive contracts to be valid in MDUs while prohibited elsewhere. Exclusive and bulk billing contracts are based on the MDU loophole and the deregulation of PCOs. This is why you see this type of agreements in condominium, apartments etc. Now developers are entering other types of properties deeds as “condominium” just so they can employ this loophole and apply exclusive and bulk billing contracts.

On exclusive contracts, you are comparing apples to oranges, for example; In an exclusive contract with cell provide, you have the option of getting the free phone with an exclusive 1 or 2 year service contract or get the phone at regular price and pay a monthly bill that you can cancel anytime. If you select the exclusive contract, there is full disclosure of the exclusive contract even when some of the letters are very small. You can also pay a fee and get out of the exclusive contract if you like. All those elements are missing from bulk and exclusive cable contracts, you can’t get out until the end of the contract and full disclosure is nonexistent. These may be services you don’t even want because now all developer is pushing the triple play. I have never seen a water delivery contract that last 15 years.

I hope you have a better understanding of the situation.

If you want to help the cause file comment on the FCC website and post your comments or visit http://www.banbulkbilling.com/

MC

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MC2 (Virginia)
Posts: 26

Posted:

HOA Members,

This is a textbook example on Exclusivity Agreements and Bulk Billing Agreements

http://fjallfoss.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf=pdf&id_document=6519862759

MC

MC2 (Virginia)
Posts: 26

Posted:

On The Hook For Your Neighbor's Cable Bill

This news article explains the economics consequences of exclusive bulk billing contracts on the HOA

http://www2.tbo.com/content/2008/mar/08/na-on-the-hook-for-your-neighbors-cable-bill/

MC

BruceF1 (Connecticut)
Posts: 2,535

Posted:

MC2,

I have not responded to your latest posts. Unfortunately, I am secretary of our HOA and I have minutes to write, meetings to prepare for and go to, etc. I am also layout editor for our newsletter and it's getting close to press time, so I am quite busy right now. Plus, I have to figure out what I owe the IRS (or, hopefully, I discover they owe me).

Meanwhile, keep posting relevant articles like you have been doing. I'm finding them informative.

MC2 (Virginia)
Posts: 26

Posted:

BruceF1,

Don't worry I just want to share the info I have available. These contracts are really bad to some HOAs specially new construction that are under declarant control.

Good luck with the IRS. I don't know how the do it, but most of the time we owe them :-)...

MC

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