The Federal Communications Commission has recently issued two orders that ban exclusive service contracts for phone, cable and internet for apartment buildings and condominium developments. Phone, cable and internet service contracts often exclude other providers from the developments, giving the service provider exclusive access to residents. In return, the provider often pays a fee to the developer, owner or condo association.
The FCC's orders claim that such exclusive contracts are anti-competitive and so violate federal law and policy. For this reason, the FCC declares that new contracts may not be exclusive, and that existing exclusive contracts are unenforceable.
Depending upon how such existing contracts are structured, condo developers, condo associations and apartment owners or developers could lose the payment of future fees from the cable and phone companies if the companies use this change in the law to break existing contracts. Developers who are now negotiating such contracts should take special care to ensure that these and other likely forthcoming changes in federal law signaled in these orders are considered when phone, cable, and internet contracts are negotiated.
Because of the uncertainty about rates in ongoing contracts raised by this FCC action, developers and others should be cautious about advertising that quotes phone, cable and internet rates.
Important Notice: This advisory has been prepared by Varnum, Riddering, Schmidt and Howlett LLP for informational purposes only and does not constitute legal advice.
