The Business Council opposes this bill, which amends the public service law to prohibit building owners from discriminating against telephone companies wishing to provide service to tenants in multi-tenant properties. This would end exclusive marketing agreements between service providers and the building owners.
Under an exclusive marketing agreement, the cable provider obtains the exclusive right to market video service in an apartment building. Typically, the cable provider provides marketing materials in the leasing office or installs signage in the common areas of the buildings. In return, the cable provider typically provides the building owner with compensation. A service provider faces significant costs associated with wiring apartment buildings and providing video service. Agreements between building owners and video providers to secure marketing rights helps service providers reduce the risk associated with these investments. This reduced risk makes it more likely that the video provider will invest in new wiring and provide additional benefits to the building tenants.
Exclusive marketing agreements do not prevent competitors from serving residents in an apartment building and do not prevent consumers from opting to buy service from a competing provider. Other video service providers can and do reach residents through direct mailings and other forms of mass market advertising, the same type of advertising that they use to reach non-apartment dwelling residents. Exclusive marketing, unlike provisions granting the cable incumbents exclusive physical access, do not deny competitors physical access to consumers and are fundamentally different from the kinds of agreements that have been found by the FCC to harm competition.
Exclusive marketing agreements provide apartment residents with targeted information about a given provider, enhancing the quality of the information provided. The ability to provide such information aids competitive new entrants in overcoming the advantages of cable incumbency. Furthermore, video service providers may provide building owners and residents with special services and other benefits in exchange for these marketing advantages, including discounted services, demonstration accounts, discounted sign up fees and other benefits.
The Business Council believes that this legislation harms competition. The FCC has recognized the difference between exclusive access agreements and exclusive marketing agreements, and has stated that exclusive marketing arrangements do not “restrict citizens' ability to exercise their freedom to choose a cable provider to the same degree as an exclusive access provision that denies competitors physical access to a property.”
For these reasons, the Business Council opposes adoption of A2498-A.