Frank Lovece in Bricks & Bucks on May 10, 2017
Once upon a time, cable TV/ Internet / phone providers offered co-ops and condos bulk-rate prices if some high percentage of apartments signed with the company. Then, for good measure, some providers paid quarterly "revenue-share fees" as an incentive.
How times have changed. Charter Communications, which is integrating Time Warner Cable and Bright House Networks, reportedly is offering boards a bulk rate only if the entire building signs up. So boards may find themselves paying out-of-pocket for apartments that don’t want cable.
"Let's say you're paying for Spectrum" – the brand name for Charter's service – "for 100 percent of the units," says attorney Tara Snow, a partner at Novitt, Sahr & Snow, who represents a building involved in one such an arrangement but can speak only in generalities because of a nondisclosure agreement. "You may have 90 or 95 percent of the apartments signing up, but you always have some units that don't." Which leads to the questions: how do you pay for it, and how do you apportion the cost?
There are two schools of thought. "One method is to have your building consider cable and high-speed Internet as amenities, like a laundry room,” Snow says. “It's part of the overhead cost of the building, and even if [a particular resident] doesn't use it, they still have access to it." Therefore, according to this school of thought, all residents pay for the amenity indirectly through their monthly maintenance or common charges.
The other method is to charge only users. “Let's say the building is getting a cheap rate and divides that up among the people who have cable," Snow says. If 100 percent of the apartments signed up, then each apartment is paying an equal share. But if fewer apartments sign up, the ones who choose to get Spectrum each pay a little more than otherwise. “Let's say, to pick a random number, that the bulk rate would be 50 bucks a unit, but each apartment is paying 55 bucks in order to cover the 10 units that aren't signed up," she says.
The latter method runs into particular difficulties because of attrition. People move out, and the new residents may want a different provider or may not want cable at all – a trend among millennials, who prefer a la carte streaming services such as Hulu, Netflix, and many others. Charter Communications lost 100,000 TV subscribers in the first quarter, in addition to 105,000 in the prior quarter, the New York Post reported last week, though the company added 428,000 broadband subscribers.
“People are cord-cutting,” says Brian Scally, vice president of Garthchester Realty, a management firm. “Most people who still want cable want to select their own cable/Internet/telephone provider.” Of the 64 properties he manages, Scally says, fewer than a dozen have signed up for a bulk rate, and those deals were signed years ago. “I haven’t brought anybody new to bulk rate,” he says.
“You’re locked in for a certain number of years,” adds Snow, which means that if half of the apartments drop out, the board would have to double the charges to the remaining subscribers. There's also the issue of company response when cable service is out or when a piece of equipment goes bad. What's the incentive for good service if a building is locked into a contract? And few co-op or condo boards have the means to take a major corporation to court. The $65 billion merger that resulted in the current Charter Communications has made it one of the largest such companies, alongside Comcast, AT&T, and Verizon.
Charter declined a request to comment for this article.
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