MDU Right of Entry Agreement - Bulk Cable Agreement - Door Fee - Revenue Share

The right-of-entry (or “ROE”) agreement is the legal agreement that allows the service provider to access private property for the purpose of providing broadband services to MDU residents.

Under a Bulk ROE agreement, the service provider provides its services to 100% of the residential units at the property, and the owner (or HOA) pays a monthly bulk fee. The bulk fee represents a discount, a fraction of the standard retail price that an individual resident would pay to the service provider for the bulk programming package. Each resident reimburses the owner/HOA for his/her portion of the bulk fee by payment of monthly rent or an HOA fee, as applicable.

Under a standard or “retail” ROE agreement, the service provider provides its service to any resident who subscribes to that service under a separate individual service agreement between the resident and the provider.

Although the FCC has prohibited the enforcement of exclusive ROE agreements at MDU properties (see Report and Order and Further Notice of Proposed Rulemaking, MB Docket No. 07-51 (rel. Nov. 13, 2007, the “Exclusivity Order”)), it is important to note that:

(a)  the FCC Order applies only to cable operators, that is, video service providers, including both traditional cable companies and telephone companies that have a franchise agreement with the State or local franchising authority allowing the provider to utilize public rights of way. The Order does not apply to satellite providers, such as DIRECTV and Dish Network, or their PCO distributors. Satellite providers are exempt from the ban and may still negotiate exclusive video service agreements for MDU properties, although this issue too remains on the FCC docket;

(b) the Order does not ban exclusive marketing agreements, bulk service agreements, although proposals to regulate those practices are still on the FCC’s rulemaking docket; and

(c) the Order and does not give providers mandatory access to MDU properties. Prohibiting the enforcement of exclusive access agreements with a single provider is not the same as granting equal access to all providers.

Notwithstanding the FCC’s Exclusivity Order, MDU owners and service providers are still able to negotiate what are in effect de facto exclusive ROE agreements by several means. Common methods of conferring monopoly status on a selected provider include granting exclusive on-site marketing rights and/or exclusive use of existing cable inside wiring owned by the property owner (or HOA).

Because access to private property (including access to common areas for on-site marketing purposes and access to wiring) is a valuable right, service providers often pay financial compensation to the property owner in exchange for access. Provider to owner compensation is typically paid in the form of an upfront “door fee,” based on the number of residential units at the property, and/or monthly or quarterly percentages of the provider’s recurring subscription revenue received from property residents.

An intelligent approach to negotiating an ROE agreement recognizes that fairness is the key to forming a lasting and mutually productive partnership between owner and service provider. Negotiation should not be viewed as a zero-sum game.