Is your cable television service included in your rent or condo “services” fee? Have you ever called another provider and told service was not available at your address even through others outside of your condo neighborhood or apartment complex can sign up for service today? Chances are your landlord or property management company is receiving a kickback to keep competition off the property, while you may be stuck paying for substandard services you neither want or need. Worst of all, chances are it’s all legal and everyone is getting a piece of the action… except you.

Welcome to the world of Multiple Dwelling Unit (MDU) Bulk Service Agreements, the seedy underbelly of the anti-competitive cable and telco-TV world. When cable TV first got going, most people wanted access. In the early days, cable franchises were typically exclusive and cable companies maintained the upper hand in negotiations with apartment owners and property owners. Since the service was in demand, many property owners were told to sign whatever “Right Of Entry” Agreement (ROE) was put in front of them. Most contained clauses that guaranteed that cable company would get exclusive access to the property for as long as it was given a franchise to operate within that community. In other words, basically forever.

This turned out very handy when competitors started showing up. First on the scene were satellite television providers, which had a rough time dealing with landlords who loathed tenants installing satellite dishes that “ruined the aesthetics” of the property. Many rental agreements still restrict satellite television dishes in ways that make their use untenable. But things got much more serious when Verizon and AT&T got into the cable business. Initially, both companies found extending FiOS and U-verse to some rental and gated communities was blocked by the exclusive agreements held by cable operators. By 2007, the FCC finally acted to forbid exclusive service contracts, but the cable industry and property developers have played cat and mouse games with the FCC’s loopholes ever since.

Property Developers, Management Companies, Landlords, and Homeowner Associations With Their Hands Out

With the FCC’s 2007 declaration that exclusive contracts between cable companies and property owners were “null and void,” the power of the cable industry to negotiate on their terms was markedly diminished. Although many property owners applauded their new-found freedom to tell the local cable company to take a hike if they did not offer better service to their tenants, many others saw dollar signs in their eyes. With leverage now in the hands of the property owner, if the local cable company wanted to stay, in many cases it had to pay. Only the most brazen property owners kicked uncooperative cable companies off their properties, putting tenants at a serious inconvenience. Instead, many found life more peaceful and lucrative to stick with the existing cable company, signing a new contract for “bulk billing” tenants. On the surface, it seemed like a good deal. Property owners advertised that cable TV was included in the rent (and they paid a deeply discounted price per tenant) and the cable operator had a guaranteed number of customers, whether they wanted the service or not.

Bulk billing also proved a very effective deterrent for would-be competitors, who had to overcome the challenge of marketing their service while the tenant was already paying for another as part of their rent. As a result, telco TV competitors often stayed away from properties with bulk billing arrangements.

As broadband has become more prominent and threatens to become more important than the cable TV package, the cable industry has refined its weapons of non-competition. While they cannot force competitors off properties, they can make life very expensive for them. The latest generation of ROE agreements often grant access rights to the building’s telecommunications conduit, cabling, and equipment exclusively to the cable operator.

If Google Fiber, AT&T U-verse or Verizon FiOS sought to offer service on one of these properties, they would have to overcome the investment insanity of wiring each building with its own infrastructure, including duplicate cables, in separate conduits and spaces not already designated for the exclusive use of the cable company. Verizon in New York City has faced numerous obstacles wiring some buildings, including gaining access to the building itself. Intransigent on site employees, bureaucratic and unresponsive property management companies, and developers have all made life difficult for Verizon’s fiber upgrade.

AT&T often takes the approach “if you can’t beat ’em, join ’em” and offers its own bulk billing incentives, along with occasional commitments for fiber upgrades. Google Fiber can afford to skip places where it isn’t wanted, although with recent revelations that landlords can raise the rent by up to 11% with the arrival of Google Fiber alone, it may hurt to alienate that fiber to the home provider.

Kickbacks for New Developments = Windfall

Kickbacks for existing properties are lucrative, but nothing compared to the lucrative windfall new property developments can achieve with the right deal.

In 2013, one property developer in Maryland went all out for an exclusive deal with a provider that was going to get de facto exclusivity by using a convoluted series of entities and agreements designed to insulate the company from competition and a challenge from the FCC. A court later ruled the provider used an “elaborate game of regulatory subterfuge” using various corporate entities to escape potential competition.

Some lawyers devote a substantial amount of their practice to the issue of bulk contracts and ROE agreements. Carl Kandutsch serves clients nationwide, many trying to extricate themselves from bad deals of the past. In many cases, an attorney may be needed to find a way out of contracts that don’t meet FCC rules. Other communities sometimes have to buy out an existing contract. Many have to sit and suffer the consequences for years. One residential community found itself trapped with a service provider that was quietly protected by an “airtight contract” negotiated not with the property management company or the homeowner association, but the development’s original builder. The provider delivered lousy service and the community spent six years trying to get rid of the offending firm with no result until they hired an attorney. Although happy to be rid of the bad provider, the homeowner association ended up illustrating how pervasive this problem is after it signed a similar contract with another provider also handing out kickbacks.

Comcast pays up to 10% of a renter’s cable bill to the landlord. (Image: Susan Crawford)

Comcast is more creative than most. It calls its handouts: “Marketing Support Compensation.” The property owner gets an increasing reward for every tenant signed up for Comcast service. Once around two-thirds of tenants are subscribed, the owner gets up to a 10% take of each bill, plus a one time payment of up to $130 per tenant.

Because Comcast’s reputation often precedes it, customers reluctant to sign up without considering other providers will find that tougher to do because Comcast bans other providers from marketing their services to tenants with the support or cooperation of the landlord. In other words, no door hangers, free coffee, brochures in the lobby, or any other on-site promotions. In case a property owner forgets, Comcast sends reminders in the mail:

Comcast likes to remind landlords it has an exclusive. (Image: Susan Crawford)

Susan Crawford calls it “astounding, enormous, decentralized payola” and claims it affects millions of renters.

Crawford

“These shenanigans will only stop when cities and national leaders require that every building have neutral fiber/wireless facilities that make it easy for residents to switch services when they want to,” Crawford wrote. “We’ve got to take landlords out of the equation — all they’re doing is looking for payments and deals (understandably: they’re addicted to the revenue stream they’ve been getting), and the giant telecom providers in our country are more than happy to pay up. The market is stuck. Residents have little idea these deals are happening. The current way of doing business is great for landlords and ISPs but destructive in every other way.”

One real world example of how this deters competition comes from Webpass (recently acquired by Google), which offers gigabit Ethernet speeds in select MDUs in San Francisco, San Diego, Miami, Chicago, and Boston. The service comes with a low price, but that doesn’t get the company in the door, according to its president, Charles Barr.

Barr has been refused entry by multiple building owners who have agreements with Comcast, AT&T, or others.

“Tenants want us, but we can’t get in,” Barr said.

Crawford argues the FCC has once again been outmaneuvered by ISPs and their attorneys.

“Sure, a landlord can’t enter into an exclusive agreement granting just one ISP the right to provide Internet access service to an MDU, but a landlord can refuse to sign agreements with anyone other than Big Company X, in exchange for payments labeled in any one of a zillion ways,” added Crawford. “Exclusivity by any other name still feels just as abusive.”

This isn’t a new problem. Stop the Cap! first reported on these kinds of bulk buying arrangements back in 2010, all made possible by the FCC’s regulatory loopholes. Six years later, the problem appears to be getting worse.

The Federal Communications Commission is getting an earful from satellite provider Dish Network, upset with the agency’s proposal to boost regulatory fees covering direct broadcast satellite services by 125% this year.

If the FCC adopts its new fee structure, Dish will pay 24 cents per subscriber (up from 12¢) per year to cover the cost of full-time employees at the FCC who spend their days monitoring and regulating satellite television providers. Satellite companies will also pay a one-time fee of 3¢ per subscriber in 2016 to cover the FCC’s downsizing expenses.

The regulator has successfully found a way to cover some of its expenses by charging the companies it oversees “user fees.” In 2015, the FCC collected nearly $340 million in regulatory fees. This year, the FCC wants more, seeking to impose a temporary “facility reduction cost” surcharge that will cover the expenses of moving employees to new, smaller offices, or downsizing the current ones to save money. The FCC says that will cost an extra $44 million. Taxpayers won’t pay those expenses, but pay television customers ultimately will when providers pass both of those fees on.

Dish says the rate hike is unjustified because of its size and scope, and runs contrary to the FCC’s goal of minimizing consumer bill shock. The satellite provider also wants the FCC to explain how it can justify more than doubling user fees while downsizing.

If the FCC doesn’t answer, the American Cable Association, representing small independent cable operators, is willing to share their views on the matter. The ACA complains the FCC isn’t charging DirecTV and Dish enough, noting they are still getting preferential treatment over cable and IPTV providers that are being asked to pay $1 per subscriber this year.

“There is absolutely no basis for keeping the proposed DBS fee levels over 75% below those proposed for other entities in the Cable/IPTV category,” wrote ACA president Matt Polka in comments to the FCC. “DBS providers should be paying the same Media Bureau regulatory fee.”

Polka pointed to AT&T’s acquisition of DirecTV as an example of how disproportionate fees cost small independent cable companies much more on a per-subscriber basis than telecom giant AT&T has to pay for almost 20 million DirecTV satellite customers.

“AT&T, now the nation’s largest [pay TV company], operates two types of services – its U-verse IPTV service and its DirecTV DBS service,” noted Polka. “Yet, AT&T will be assessed starkly lower regulatory fees for its approximately 20 million DirecTV subscribers than it will pay for its approximately 6 million IPTV subscribers, even though all of these services make absolutely comparable use of Media Bureau […]  resources and AT&T’s advocacy […] is on behalf of all its [pay TV] subscribers.”

Polka wants fee parity – charging the same user fees for all providers, regardless of the technology they use.

“Doing so will avoid the competitive distortions the current fee structure creates by having cable operators and IPTV providers, most of whom are far smaller than the DBS providers, cross-subsidize the fee burden of their primary and direct competitors in the marketplace,” Polka argued.

Whatever fee structure is ultimately approved by the FCC, customers can be certain providers will pad those fees when passing them on to customers. For more than a decade, some providers have used regulatory fee increases amounting to spare change as an excuse to pass on new “regulatory surcharges” that are many times more than what those providers actually pass on to the government.

“It’s a price increase,” bluntly notes Mark Cooper from the Consumer Federation of America back in 2004.

This spring, The Consumerist broke down a typical AT&T U-verse bill loaded in junk fees and surcharges. (The RED numbers [1, 4-10, 13-14, 17-20, 22] are AT&T-originated fees, fake surcharges/bill padding, or fees that represent the cost of doing business; BLUE numbers [2-3, 11-12, 15-16, 21, 23-25] are real government fees passed on to local, state, and federal taxing authorities.)

Frontier Communications customers lucky enough to live in an upgraded or recently acquired service area may soon be getting Frontier Vantage, a new suite of enhanced products including a multichannel TV package, faster broadband, and phone service.

Frontier Vantage started life in Frontier’s fiber to the home market trial in Durham, N.C., and is set to accompany, not replace, the Frontier FiOS and U-verse brands, starting in a wide rollout in Connecticut. Much like the XFINITY brand today co-exists with Comcast, Frontier intends its new Vantage brand to signify a premium experience. It is part of Frontier’s larger plan to introduce IPTV service in more than 40 of its larger markets across the country over the next four years, with an even larger presence in former Verizon service areas in Texas, Florida, and California.

In all, Frontier expects to offer the enhanced service to more than eight million of its customers after upgrades are finished.

Frontier’s biggest challenge will be getting Vantage service to customers in its legacy service areas, where its reliance on ADSL and its slow broadband speeds are often inadequate for a shared broadband and IPTV platform. In upgraded service areas, other challenges are appearing, including firm rejections of Vantage in multi-dwelling units where complex owners have signed multi-year exclusivity contracts with cable operators.

“As far as Durham goes, some of the initial learnings are that we were locked out in many cases of securing long-term contracts with some of the apartments and condominium owners in the market because we didn’t have a video product other than a mini head-end that was using satellite, which was not the preferred solution,” said Frontier CEO Dan McCarthy in February. “In the first several weeks of introducing the product, we’ve already secured new contracts that would be substantial units right out of the gate. Our door-to-door sales process has been very successful so far, but we’re in the early days — it’s only been really about a month or so.”

McKenney

Much of the door knocking is taking place in Connecticut, where Vantage started replacing the older Frontier TV/U-verse platform on set-top boxes starting last Monday. Former AT&T customers have transitioned through three brand changes. Originally served by AT&T U-verse, Frontier’s acquisition of AT&T’s wireline facilities in the state introduced customers to Frontier U-verse/FrontierTV. As of this week, it is now VantageTV.

The new firmware introduces a Netflix “on-demand channel” (Ch. 800 in Connecticut) where subscribers can access Netflix content without having to use separate hardware like Chromecast or Roku. This is the first of several “apps” that Frontier will offer, allowing customers to reach Facebook, Twitter, home shopping, weather, and games over their set-top box.

Frontier also plans a ‘start-over’ feature that allows viewers to start at the beginning of a show already in progress, an enhanced on-screen program guide and easier access to a list of upcoming shows. A video-on-demand library will also be on offer, and Frontier claims it will include over 100,000 movies and TV shows.

Customers will also get a whole-home DVR that can record four shows at once on a 1TB hard drive. A limited number of markets will also be offered 4k video service.

Accompanying the TV package will be phone service and Internet access at speeds starting as 12Mbps up to 1,000Mbps, depending on the market and available infrastructure.

“This is the perfect time for Frontier to launch our premier products,” said Cecilia K. McKenney, executive vice president and chief customer officer and head of corporate marketing at Frontier. “‘Vantage’ conveys the ultimate customer experience and represents products and services that deliver value, solutions, and choice.”

[flv]http://www.phillipdampier.com/video/Frontier What is Vantage TV 3-24-16.mp4[/flv]

Frontier introduces Vantage TV to customers in Connecticut formerly served by AT&T U-verse. This introductory video shows Frontier’s new set-top box firmware includes direct support for Netflix. (2:16)

Despite cost savings expected to run into the billions from the combination of AT&T U-verse and satellite TV provider DirecTV, AT&T isn’t sharing any of their savings with you and has announced a nationwide rate hike for early 2016.

For the latest round of price increases, AT&T is focusing on its U-verse TV and telephone services, blaming “increased programming costs” and “service delivery expenses.”

All customers not on a promotional rate contract will be affected, starting with billing statements issued after Jan. 28, 2016.

• AT&T’s Voice 1000 plan is increasing to $30 a month and the Voice 250 plan will rise by $2, to $27 per month;
• U-family and U-family All-In tiers increase $2 a month;
• U100, U200, U200 All-In, U200 Latino and U200 Latino All-In up $3 a month;
• U300, U300 All-In, U300 Latino, U300 Latino All-In, U400, U450, U450 All-In, U450 Latino and U450 Latino All-In rise $4 a month;
• Non DVR-TV receivers increase $1 per month;
• Regulatory Video Cost Recovery Surcharge: up 1¢ per month;
• Broadcast TV Surcharge: increasing $1 per month (except 46¢ in Detroit, Biloxi, Miss., and Wilmington, N.C.)

AT&T claims its services remain a good value at the higher price because the company’s TV Everywhere service now allows mobile/tablet customers access to more than 270 live channels while inside the home and more than 205 channels when on the go.

Customers appear not to be impressed. AT&T admitted 92,000 U-verse customers left AT&T for good during the last quarter and analysts expect further customer losses during this quarter as AT&T refocuses its value conscious customers on cheap and easy to install DirecTV instead of U-verse, which can be costly to get up and running.

CEO Randall Stephenson also warned customers should expect a harder line on pricing due to the company’s ‘new focus on profitability.’ AT&T has cut back on promotional pricing and is especially reluctant to extend deals to customers with a “propensity to churn.” That means AT&T does not want to extend lower pricing to customers threatening to leave who are unwilling to pay the regular price after their deal ends. The company noted price sensitive customers often bounce back and forth between providers just to secure new customer pricing.