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TMCNet: Owners limit renters' phone, TV, Internet options: Landlords defend benefits of agreements with providers as FCC to examine possible ban

[October 25, 2007]

Owners limit renters' phone, TV, Internet options: Landlords defend benefits of agreements with providers as FCC to examine possible ban

(Dallas Morning News, The (KRT) Via Thomson Dialog NewsEdge) Oct. 25--Want to get some great new video service installed at your apartment? Your landlord may not let you.

Exclusive-service contracts limit choices at millions of apartments nationwide.

Such contracts bring captive audiences to service providers. Building owners, in exchange, get cash up front plus a cut of the money each tenant spends on telephone, television and Internet service.

Tenants get what they're given.

But that may change soon. The Federal Communications Commission may consider banning exclusive-service contracts when it meets in Washington next week.

Consumer groups and phone companies both support a the ban on grounds that exclusivity hurts tenants. Landlords and cable companies generally oppose any ban that negates existing contracts.

The tenants interviewed for this article unanimously said they want more choice.

"These service restrictions are a problem everywhere I've every looked to rent," said Chris Thompson, a Post Vineyard tenant who has only one option, AT&T Entertainment Services, for his cable television.

"I was an early satellite TV user because the options were so bad at my apartment in LA. ... When I was moving to Uptown, I found limited service at every apartment complex I checked. It's annoying, and it would be a lot worse if I had just bought a huge TV and couldn't get decent service for it."

Upstart television providers from California to Florida say exclusive-service deals shut them out of about 40 percent of all apartment buildings, but that figure understates exclusivity by excluding the contracts such providers land for themselves. Consumer advocates believe say landlords take money to bar competition at most the majority of apartment homes.

Here In Dallas, two a pair of big landlords said they greatly prefer exclusive-marketing agreements to exclusive-service deals.

"There's this perception that we money-hungry owners couldn't care less about residents, but that's just not true. We money-hungry owners want our residents to be very happy," said Steve Sadler, director of ancillary services for Post Properties. "Happy tenants stay much longer and recommend you to friends."

Wiring

Mr. Sadler said that while his company once signed exclusive-service contracts, it currently allows all service providers access to its 13 Dallas-area buildings.

"Wiring a multi-family building is both expensive and difficult, so there may be buildings that companies won't wire, but there aren't any buildings that we won't let companies wire," Mr. Sadler said.

His statement surprised officials from Time Warner Cable, who say they're eager to wire as many buildings as possible.

"We're very aggressive about getting into multi-family units," said Gary Underwood, a spokesman for the company, who noted they generally cost less to wire than suburban neighborhoods.

Another of Mr. Sadler's statements -- that tenants in all Post buildings can get HDTV packages -- surprised renters in several Uptown complexes. Tenants at Post Vineyard, Vintage and Cole's Corner all say they can't get any high-def from their service providers, Grande Communications in some buildings, AT&T in another.

Tenants who rent from other companies find themselves in a similar situation.

Gables West Village, a brand-new building on McKinney Avenue, offers high definition service through Time Warner, but residents can't get DirecTV, which currently offers more HD channels. Gables Residential, which operates 16 buildings around Dallas, did not return calls for comment.

Residents at the Marquis on Gaston cannot get any high-definition programming from AT&T, which already provides HD to some but not all the buildings it serves. CWS Apartment Homes, which owns the Marquis on Gaston and 17 other area buildings, also did not return calls for comment.

Many younger tenants were surprised to find limited service options. Veteran renters expected limits but still resented them.

Captive customers

According to testimony that Verizon Communications offered to the FCC, exclusive-service agreements often delay the deployment of new features such as HDTV because companies have little reason to upgrade for captive customers.

Others, however, argue that exclusive-service contracts can spur companies to upgrade technology faster than they otherwise would.

"The vast majority of the apartment complexes in this country were built decades ago. They weren't wired for high-definition television or broadband Internet, and they need very costly renovations before they can offer any of that," said Mr. Sadler, the Post executive.

"Companies don't want to risk that kind of investment unless they're guaranteed a decent return. An exclusive contract provides that guaranteed return and gives companies that incentive to invest."

Exclusive-service contracts also can lead to better deals for tenants.

"Property owners negotiate volume discounts at some of the apartment complexes we serve," said Luz Varela, a spokeswoman for AT&T, which supports the a ban despite having agreements some sort of agreement with the owners of 3 million apartments nationwide.

Of course, compared with to the money that building owners receive from rent, payments from entertainment service providers look pretty small.

"It's not a vital cash flow. It's gravy," said Matthew Hyder, a development manager at the Legacy Partners office in Dallas. The company is building three complexes around Dallas with 793 total units.

"Every deal is different," said Mr. Hyder, who noted that Legacy used the upfront money from one deal to upgrade the kitchen cabinets at one complex. "If less than half of the tenants do business with a company, you might get 6 percent of what they spend. If more than 90 percent sign up, then you might get 12 percent."

Another argument for exclusive-service deals revolves around property rights.

Owners "have a right to control what goes on in their property," said Comcast spokesman Andrew Johnson, speaking to told the San Francisco Chronicle.

"If they want Comcast to be the exclusive telecommunications provider to the property, that's what they want."

The FCC should weigh in on the matter next week, but its word may not be the final one. Observers expect a court battle, particularly if the FCC voids existing contracts in addition to banning future ones.

To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com.

Copyright (c) 2007, The Dallas Morning News
Distributed by McClatchy-Tribune Information Services.
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