Residents of two Loudoun neighborhoods hoping to break exclusive cable television contracts negotiated by their developers are more optimistic about their prospects following a U.S. Court of Appeals hearing in Richmond last week.
The judges heard arguments Jan. 29 in lawsuits brought by the Lansdowne on the Potomac HOA and the Southern Walk at Broadlands HOA seeking to overturn the decades-long contracts requiring them to collect bundled payments from homeowners for telephone, television and Internet service provided by Dulles-based telecommunications company OpenBand. Critics argue the company’s services are not up to par with other providers in the region. The HOAs are challenging the legality of the service agreements, citing a 2007 Federal Communication Commission’s order barring exclusivity clauses. They also claim OpenBand’s control over telecommunications easements in the developments serve as a barrier to competition. OpenBand has defended its contracts and challenged the HOAs’ standing to file suit.
Last year a federal judge denied Southern Walk’s claims, while a different judge ruled in favor of Lansdowne’s arguments. The cases have been joined on appeal.
It is not clear when the Court of Appeals will issue a ruling, but there were some pointed words delivered by the judges during arguments.
“The FCC ruling, it seems so clearly directed at prohibiting exactly what is taking place here,” Judge J. Harvie Wilkinson III said as OpenBand began its arguments in the Lansdowne case. “And I am beginning to get the idea that these standing questions, these ripeness questions, a lot of them are just a fog that’s being thrown up [by OpenBand attorneys] to provide protection for a shell game that’s going on here with all these different companies and different agreements.”
Wilkinson repeated the sentiment when the discussion of the telecommunications easements owned solely by OpenBand were raised. He said it was all a part of an “evasive web” and that OpenBand appeared to be seeking “to evade the FCC exclusivity order by calling the contractual agreements…easements. It is one thing after another. The whole thing is a subterfuge.”
But OpenBand attorney Sanford Saunders argued that the easements were different contracts because they involve real property, and to rule them null and void the FCC would be “engaged in a taking.”
“If the FCC has engaged in a taking then the FCC has violated the Communications Act because the FCC if it engages in a taking has to at the same time establish a provision for compensating owners of property that is taken. And they didn’t do so,” Saunders said.
But Wilkinson countered that OpenBand was asking the court to essentially repeal the FCC order “because parties would invariably evade the order by styling all their exclusivity rights as easements henceforth.”
Saunders argued that in the 2007 order the FCC did not address easements specifically as being in violation of the exclusivity prohibition, but Judge Diana Gribbon Motz read from the amicus brief the FCC filed in the Lansdowne case, stating “it would be anomalous that a provider of video programming services could so easily evade the order merely by structuring its prohibited exclusivity as an easement rather than a contract.”
“It sounds to me they are taking a position,” Motz said.
Saunders also argued that neither Lansdowne or Southern Walk could receive the relief they seek from the courts because the FCC order only addresses video service and not Internet or telephone, both of which the communities get from OpenBand. Saunders said during arguments of the Southern Walk case that the relief sought from the court is “overreaching.”
“They are trying to provide homeowners with the option to buy a triple play—video, Internet and telephone,” he said. “The 2007 order only prohibits exclusivity as to video. There is no issue as to exclusivity to Internet and telephone services.”
The judges pointed out that residents would still be under an obligation to pay OpenBand for its services under the separate bulk billing agreement, even if residents did not use the services.
But the attorneys for both Lansdowne and Southern Walk said all the residents want is choice.
“[The HOA’s] whole purpose is to administer the telecommunications agreement for the benefit of the homeowners. The obligation is to do that to the best of our ability,” Kurt Rommel, Southern Walk’s attorney said, expanding later that “the harm we suffer is not being able to provide choice to our members. The redress that our homeowners would get, that we would be asking for on their behalf, would be the ability to contract with Verizon for FIOS services, the ability to contract with Comcast for their triple play…The homeowners want that choice.”
As Saunders pointed out to the court, Lansdowne had been told by Verizon that it would want a bulk billing agreement with 100 percent homeowner participation before extending service into the community. “They don’t have an offer from Verizon to be an alternative service,” he said.
But beyond Verizon, Lansdowne attorney Christopher Wright pointed to the Loudoun County franchise agreement with Comcast that requires the cable company to provide service to any community, unless there is another exclusive agreement in effect. “If that [OpenBand] exclusive agreement is ruled null and void, Comcast has a duty to provide service at Lansdowne on the Potomac,” Wright said.
Wilkinson also took issue with using Verizon’s offer to Lansdowne or the fact that no other company had approached OpenBand about using its easements to lay fiber as a positive argument.
“If I were in Verizon’s shoes or in Comcast’s shoes, I wouldn’t go in and explore making the investment that was necessary in terms of wires or cable when I was going to face a protracted legal fight,” he said. “Why would they enter that?”
Saunders argued that it is “presumptive” to say there would be a legal battle raised by OpenBand if another company tried to come into the communities, which prompted Motz to ask: “Why don’t you just, in writing, give up the exclusivity agreement if you are not planning on enforcing it?”
But Saunders said it was not as simple as saying OpenBand would not object. “The 2007 order doesn’t make the easements go away. The easements stay. Our rights to run our equipment stay. If anybody were to act even in providing alternative service, we don’t know where the wires are going to go we don’t know if the wires are going to have any impact.”