Mandatory Access Statutes Kill Competition

By William J. Burhop, Executive Director

When Washington calls for more video competition, it is important to remember that exclusive contracts - perhaps better named "competition reality contracts" - are the result of a Private Cable Operator (PCO) and a Multihousing owner negotiating to provide the best service feasible to the building's residents; plus they enhance competition. Multihousing owners recognize that only if the PCO can be assured of realistic contract duration will it be economically feasible for the PCO to pursue its business plan and continue service in the multihousing building. Without this assurance, the PCO could not borrow the money and incur the costs necessary for wiring and providing service to a multiple dwelling unit (MDU) building. Therefore, without these realistic contracts, competition would be decreased because the incumbent franchised cable operator would have less competition. Then rates, quality of service and improvements would be less important to the franchise cable operator. The end result is that the consumer is hurt when the PCO and other alternative providers are not allowed to enter into "competition reality contracts."

In 15 states (see attached list with statutory authority) competition reality contracts are, in essence, already outlawed. Something very damaging for the consumer precludes them - Mandatory Access Statutes. These forced condemnation laws allow the franchise cable operator to wire and provide service in an MDU building regardless of whether the owner or tenants want the franchise operator there or not. Also, regardless of whether the multihousing owner and PCO had entered into a competition reality contract or not. These discriminatory laws force property owners and condominium associations to grant only franchised cable operators access to their private properties for the provision of cable services to residents, even in circumstances where these property owners and associations have arranged for and offer superior cable services to the residents using competitive providers such as PCOs. In addition, these mandatory access statutes do not prevent the incumbent franchised operator from engaging in exclusive contracting since PCOs do not fall within the scope of such statutes and thus cannot force an overbuild of the incumbent franchisee.

Such laws prefer the cable services of the franchised operator, rather than seeking to ensure in a neutral fashion that tenants simply have the ability to obtain video programming services from some source. In areas where mandatory access laws exist, the marketplace for the delivery of multichannel video programming services is skewed in favor of the franchised cable operator because the choice as to who the single supplier will be is seized from the landowner, as is the property on which the facilities of the cable franchisee are installed. Under such laws, while non-franchised operators are precluded from entering into exclusive contracts, franchise operators may enter into such contracts whenever they want.

It's clear that in most of the 15 states there are fewer competitors challenging franchise cable dominance than in non-mandatory access states. IMCC has documented that competition is more than twice as vigorous in non-mandatory access states, and more often than not, the competition that does exist in some mandatory access states existed prior to the passage of the forced access legislation and thus the capital investment was made at a time when overbuilding was unexpected. Property owners have proven reluctant or unwilling to contract with alternative providers where forced access via condemnation is available to the local franchisee. They simply will not suffer an overbuild of their properties even under circumstances where the franchisee's service and rates are less than optimal. Anyone willing to take the time to talk with PCO managers and multihousing owners will be told it would be imprudent for the PCO to provide service in mandatory access states because of the fear that they would be overbuilt by the franchised operator far before the PCO had made the venture profitable.

The forced installation of cable and telecommunication facilities on private property clearly constitutes a legal taking due to the permanent physical occupation caused by such installation. Private property owners have a constitutionally protected right to exclude third parties including cable and telecommunications providers, from their properties in the absence of a valid taking for public use and the payment of just compensation. In essence, this power of eminent domain is given to franchise cable operators for their economic benefit, for the exclusion of PCOs to compete, and for the disbenefit of multihousing owners and their residents.

These state or city mandatory access statutes or regulations were originally adopted under the argument that franchise cable operators needed this power in order to spread the use of cable and thereby make it feasible for the franchise cable operator to stay in business. This is an economic argument very similar to the argument stated above in support of competition reality contracts. However, the entire underpinning for mandatory access statutes has changed. There no longer is a need for the government to artificially subsidize or facilitate the spread of franchise cable systems at the expense of competitors. Competition is greatly impaired where discriminatory mandatory access laws exist. Such laws conflict with the reality that a competitive marketplace now exists for the delivery of multichannel video programming services, treating cable franchisees alone as if they were providing a pro-consumer, natural monopoly, utility-type service - which is certainly not the case.

IMCC has submitted numerous pleadings to the FCC urging the Commission to preempt mandatory access statutes. Thus far we have not convinced the FCC to override these state and local statutes. However, the FCC has pursued what may be viewed as alternative means of enhancing competition through the adoption of MDU inside wiring rules and the ECI ruling. Now the FCC is working on exclusive contracts, perpetual contracts and uniform pricing - all of which will influence PCO ability to offer services to multihousing buildings superior to that of franchise cable.

Unfortunately, franchised cable and telephone companies are endeavoring to convince more state legislatures and city councils to adopt these anti-competitive and anti-consumer mandatory access statutes and regulations. IMCC is working with the National MultiHousing Council and local multihousing organizations to prevent their adoption. We have battles active in Florida (for apartments), California, Maryland and Indiana; and more are brewing. Several PCOs have helped by testifying at hearings and sending letters and making telephone calls to state legislators explaining how mandatory access laws are counterproductive for the viewer.

You can help, too. Please inform IMCC of any such activity in your service areas.

The following states presently have mandatory access laws in place:

• Connecticut (Conn. Gen. Stat. § 16-333a (1975))
  
• Delaware, (Del. Ann. Tit. 26, § 613(1989)) (only if utility easements also exist)
• Florida (Fla. Stat. Ann. § 1232 (West 1982)) (still on the books with respect to condominium properties, although identical statute applicable in rental context found unconstitutional)
• Illinois (65 ILCS 5/11-42-11.1 (1993))
• Kansas (Kan. Stat. Ann. § 58-2553(b) (1982))
• Maine (Me. Rev. Stat. Ann. Tit. 14, § 710-B (1987))
• Massachusetts (Mass. Gen. L. Ch. 166A §22 (1995))
• Minnesota (Minn. Stat. Ann. § 2389.23 (West 1982))
• Nevada (Nev. Rev. Stat. Ann § 742 (Michie 1987))
• New Jersey (N.J. Rev. Stat. § 48.5A-49 (1982))
• New York (New York Exec. Law, § 39-19-10 (1986))
• Pennsylvania (68 Pa. Cons. Stat. Ann §§250.501-B et seq (1993))
• Rhode Island (R.I. Gen. Laws §39-19-10 (1993))
• West Virginia (W.Va. Code §5-18A-et seq. (1995))
• Wisconsin (Wis. Stat. §66.805 (1994))
• District of Columbia (D.C. Code Ann. §43-18444.1 (1981))