WASHINGTON -- The Federal Communications Commission, in an effort to reduce the spiraling costs of cable television, is preparing to strike down thousands of contracts this week that shut out competitors by giving individual cable companies exclusive rights to provide service to an apartment building, the agency's chairman said.
The new rule could open markets across the country to competition. It would be a huge victory for Verizon Communications and AT&T;, which have challenged the cable industry by offering their own video services. The two phone companies have lobbied hard for the provision. They have been supported in their fight by consumer groups, satellite television companies and small rivals to the big cable providers.
Commission officials and consumer groups said the new rule could significantly reduce cable prices for millions of subscribers who live in apartment buildings and have had no choice in selecting a company for paid television. Government and private studies show that when a second cable company enters a market, prices can drop up to 30 percent.
The change, which is set to be approved Wednesday, is expected to have a particular effect on prices for low-income and minority families. They have seen cable prices rise about three times the rate of inflation over the past decade. A quarter of U.S. households live in apartment buildings housing 50 or more residents, and 40 percent of the households headed by Hispanics and blacks live in such buildings.
"Exclusive contracts have been one of the most significant barriers to competition," said Kevin J. Martin, chairman of the commission, in a recent interview. Cable prices have risen "about 93 percent in the last 10 years," he said. "This is a way to introduce additional competition, which will result in lower prices and greater innovation."
The decision is the latest in a series of actions by the commission under Martin to put pressure on cable companies to lower their rates and make their markets more competitive. In December, in a 3-2 decision, the commission approved a proposal to force municipalities to accelerate the approval process for the telephone companies to enter cable markets.