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PRESS RELEASE

For more information contact: John Norcutt, President Bill Burhop, Executive Director Deborah Costlow, General Counsel (202) 857-6380

Washington, DC -- February 26, 1998

Regarding: In the FCC Matter of Telecommunications Service Inside Wiring; CS Docket No. 95-184 - Exclusive Contracts, Perpetual Contracts

On Monday, March 2, ICTA will file Reply Comments in the above Rulemaking. John Norcutt, ICTA President and CEO of OnePoint Communications, had this to say: "Congress and the FCC repeatedly say there is not enough competition in the cable - video market. This Rulemaking is critical if Private Cable Operators and other alternative providers are to compete with MSOs. Exclusive contracts are good for MDU residents and the marketplace should determine their use. Perpetual contracts are a barrier to increased PCO competition and need a "fresh look." This Rulemaking can do both."

Dr. Michael Whinston, a nationally known economist and Professor at Harvard and Northwestern, conducted an analysis of exclusive contracts. His findings will be filed with the ICTA Reply Comments and are synopsized below:

  • Exclusive contracts by PCOs serve an important pro-competitive role and may be essential for assuring the competitive participation of PCOs in the MDU market.
  • There is little risk of competitive harm arising from the use of exclusive contracts by PCOs.
  • The very low level of economies-of-scale present in PCO distribution technology indicates that a PCO is highly unlikely to use exclusive contracts to reduce competition in the MDU market or earn supra-normal profits.
  • The contracting environment in the MDU marketplace is very competitive, as noted in the recent FCC report on competition, and the increasing sophistication of MDU owners enhances their ability to negotiate well informed contracts with PCOs.
  • It is more likely that exclusive contracts would be utilized by franchise cable operators for anti-competitive purposes because they will use these contracts as a way of insulating themselves from competition by PCOs.
  • Overbuilding is not necessarily efficient and without exclusive contracts nothing prevents the franchise operator from using overbuilding as a tactic to put PCOs out of business.
  • PCOs and MDU owners seem to be in universal agreement that exclusive contracts are necessary to create an environment in which PCOs are willing to invest in MDUs. As stated by the Building Owners and Managers Association, "Without the right to enter into exclusive contracts, many building owners would be forced to deal with the incumbent cable operator and no one else."

Dr. Whinston concludes his analysis with the view that the FCC should be very careful not to restrict PCO use of exclusive contracts in any way that would jeopardize their ability to compete, that exclusive contracts are a benefit to MDU owners and residents when utilized by PCOs rather than by franchise cable operators and that the marketplace should determine their exact terms and conditions, such as duration.

Copies of the ICTA materials may obtained on March 2, by contacting the above parties.