PRESS RELEASE

Independent Multi-Family Communications Council
5335 Wisconsin Avenue, NW, Suite 800 t Washington, DC 20015
(202) 364-0882 t Fax (202) 364-3520 t E-mail: bburhop@ICTA-online.org

July 26, 1999
 

Ms. Katherine K. Hanley
Chairman
Fairfax County Board of Supervisors
12000 Government Center Parkway
Suite 530
Fairfax, VA 22035-0071

RE: Enhancing Cable Competition in Fairfax County

Dear Supervisor Hanley:

As Executive Director of Independent Cable and Telecommunications Association ("ICTA"), which represents literally hundreds of small and mid-size "private cable" and SMATV companies, I am constantly being asked whether anything can be done to increase the level of competition in the local cable markets.

The answer is an unqualified "YES."

As usual, the answer begins close to home in the local markets themselves. I am writing to you today to call your attention to one strategy that is already reaping competitive benefits in communities just like yours -- the use of a " fresh look" requirement in cable franchise renewals.

Let me back-up a step before explaining this new pro-competitive tool. Although several factors contribute to the lack of competitiveness in the local cable markets, one of the most important and intractable ones has been the existence of perpetual exclusive contracts that franchised cable operators foisted upon the owners of apartments, condominiums, coops, and other multi-dwelling units ("MDUs") in the days before alternatives were available in the market.

A sophisticated market for MDU cable services is developing today. MDU owners bargaining for an entire MDU can negotiate for the highest quality services at the best prices. As a result, when exclusive agreements are entered today, they typically are for a fixed term of years and include standards regarding quality of service, price, channel selection, special services, response times, and other performance factors.

By contrast, exclusive contracts that were "negotiated" prior to the advent of competitive alternatives are almost invariably "perpetual," either literally or, more commonly, by terms that grant the cable operators exclusive rights for the life of the cable franchise and any renewals thereof. Because such renewals are all but automatic, these contracts become, in practice, perpetual. As a result, MDU owners today continue to be bound by exclusive service contracts that were entered before there were any real choices in the market.

To combat these vestiges of a less competitive era, some towns and cities have begun to consider whether they should make a "fresh look" obligation part of any cable franchise renewal. The City of Plantation Florida, for example, recently required, in connection with its renewal of a cable franchise for MediaOne, that the cable operator grant each MDU owner affected by a perpetual agreement the option of terminating the existing agreement within ninety days of the franchise renewal. During this "fresh look" window, the MDU owner would then have the option of contracting with a competitive provider for cable services or renegotiating a contract (with a fixed termination date) with the incumbent cable operator.

Specifically, the City of Plantation now includes within its franchise agreement the following provision:

"Franchisee agrees that in no event shall it incorporate an automatic renewal or the length of time for which this franchise is granted as a term or condition within any contract or other agreement to provide cable service to a subscriber(s) other than the City. Franchisee hereby expressly agrees to renegotiate any such agreements in existence as of the date hereof so as to provide in such contracts for a fixed term for the non-exclusive provision of cable service independent of the City franchise, or in the alternative, at the subscribers option to terminate the agreement no later than 12:00 midnight on the ninetieth (90) day after the effective date of this Franchise Agreement. The Franchisee hereby agrees to provide written notice of the option described herein to all affected subscribers. Failure to comply with this Subsection shall be considered a material breach of this agreement."

The application of such a "fresh look" approach in the franchising process will help to speed the delivery of competitive cable alternatives to the residents of your community. By breaking the competitive stranglehold of the incumbent operators, you can help to make competitive market entry by new providers, like the members of ICTA, a reality.

I hope that this information has been helpful to you. If you would like further information about this process and what other towns and cities have done to enhance cable competition, please do not hesitate to write or call me at the address above.

Sincerely,

William J. Burhop

Executive Director Attached:
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List of MDU Owners