FCC Opens Up MDU Market

The Federal Communications Commission (FCC) has introduced a new ruling aimed at giving cable operators, telcos, and other service providers easier entry to the sometimes hard-to-crack video and voice service market for multiple-dwelling units (MDUs).

Telcos and other providers had previously complained that exclusive MDU contracts prevent them from entering the market. Verizon Communications Inc. (NYSE: VZ), which has been more vocal about the situation, introduced an "aggressive plan" last March designed to bring its fiber-fed FiOS Internet and video services to apartments, condos, and other MDU sites.

"New entrants to the video services and telephony markets should not be prevented from competing for consumers in multi-unit buildings based on costly and inefficient industry practices," the Commission said.

In the ruling, the FCC outlined two specific elements:

• Competitive video providers must not be forced to cut through sheetrock to connect their cable wiring to existing cable home wiring inside the MDU. Like brick and cinder block materials, sheetrock, the Commission said, is defined as "physically inaccessible" for the purpose of inside wiring.
• Competing telcos, meanwhile, must have access to the incumbent provider's inside wire sub-loops in MDUs at the terminal block in order to install service.
  
  

The second part of the ruling will ensure that service providers do not harm their competitors' facilities in MDU environments. "Such anti-competitive and tortuous behavior will not be tolerated," said FCC Commissioner Robert McDowell, in his statement on the matter.

FCC Chairman Kevin Martin noted that the agency also granted a petition from Cox Communications Inc. , which sought a "declaratory ruling regarding the scope of access to incumbent telephony companies' inside wire in apartment buildings."

The clarification on inside wiring rules "address the legal and practical bottlenecks that may currently stand in the way of fledgling competition," added FCC Commissioner Michael J. Copps, believing the rules will benefit both cable operators and telcos. "I see no reason why Americans who happen to live or work in multi-unit buildings should have a narrower range of choices when it comes to phone, video, and broadband services than Americans who live in single-family homes."

FCC Commissioner Jonathan Adelstein agreed with the "worthwhile steps" of the ruling, but he also expressed concern that rules for the use of cable inside wiring "may be in need of an overhaul" because, if special care is not taken, people living in MDUs stand to be "slammed" by service providers much in the way consumers have been by long distance service providers.

"Unless consumers only purchase bundles of services from either their cable or telephony company, customers may need to make decisions about which provider is entitled to use the existing wire, and which provider must install new inside wire," he said.

The National Cable & Telecommunications Association (NCTA) offered a mixed reaction to the FCC's action, having some concerns about the item on video wiring and sheetrock.

"We support a competitive marketplace and the current rules already allow that competition to thrive with no impediments. The Appeals Court reversed the last time the FCC made this finding. We will have to review the order closely before determining next steps," the NCTA said, in a prepared statement.

RCN Corp. -- a competitive cable provider with systems in Boston; New York; Pennsylvania; Washington; Chicago; and Los Angeles -- did one better by applauding the FCC's action.

"This is a significant victory for consumers living in multi-unit buildings who want a competitive choice in video, voice, and data. The FCC ruling ensures companies like RCN will not be handcuffed in competing effectively," said RCN President and CEO Peter Aquino.

Although the ruling aims to open up competition, incumbents will likely continue to have a distinct advantage. According to Frost & Sullivan , first-movers with an MDU stand to get 90 percent of the market, while a competing service provider might only hope to obtain a share of 30 percent to 35 percent.

— Jeff Baumgartner, Site Editor, Cable Digital News