Lansdowne HOA Board caves on OpenBand

October 13, 2010

Dear Commissioners and Supervisors,

In March the Lansdowne on the Potomac community learned of OpenBand’s OVS franchise expiration. The HOA Board of Directors delivered a preliminary statement to the Cable and OVS Commission at its March hearing. Since that time the Lansdowne on the Potomac HOA, which happens to represent the largest number of OpenBand customers (2155 homes), has devoted many hours to assessing the level of resident dissatisfaction with OpenBand’s offerings and service, ascertaining which aspects of the video and other telecommunication services need significant improvement, and conferring with legal counsel. While not as outspoken as another HOA serviced by OpenBand, the Lansdowne HOA has been active in this issue and has monitored all activities surrounding it. A highly dissatisfied group of residents has been vocal in urging the HOA to speak against OpenBand’s franchise renewal in the hope that such action would lead to a renegotiation or dissolution of the existing provider contract.

From the start, it was obvious, even to OpenBand executives, that this franchise renewal period offered OpenBand customers a rare opportunity to seek changes and improvements, if only in video services. OpenBand customers are bound by exclusive bulk service agreements and are obligated to pay whether or not they use the telecommunications services. In the case of Lansdowne on the Potomac, the HOA’s contract with OpenBand runs 65 years, if OpenBand exercises its one-sided renewal options.

The Lansdowne on the Potomac HOA recognizes that neither the Cable & OVS Commission nor the Board of Supervisors typically has any purview over contracts entered into by the community’s developer. Therefore, the HOA appealed directly to OpenBand management to address the complaints of residents and modify the more unconscionable portions of the contract. One would think that a small, local video services provider that markets 24-7 customer service would be easy to meet with and open to discussions. Alas, the opposite was true. And the reason given? OpenBand’s small size. Indeed, it is a refrain repeated too often by OpenBand. In 2007 when the community asked why OpenBand was so slow to introduce HD channels, we were told to be patient because OpenBand was restricted in its contract negotiations due to its small size. Why is OpenBand required by contract to encrypt just about every channel? No leverage because OpenBand is a small player. Why is OpenBand experiencing delays of many months in obtaining equipment needed to complete the transition from analog to digital service? Yet again, not a large enough customer to get the manufacturer’s attention and enforce delivery dates. This means that the 40+ additional HD channels that were promised by summer 2010 won’t be part of the channel lineup until 2011. Lansdowne residents have long bemoaned inadequate DVRs plagued with limited memory and that lack popular common features, such as multi-room capability. The HOA was told that no such DVR was available for use with OpenBand’s system and that the most current generation equipment is always distributed. OpenBand’s anticipated announcement that a “new” DVR will soon be available should be cause for celebration, until one realizes that the particular modelhas been available from the manufacturer since 2008 and has been in use by some cable providers for more than 18 months. The multi-room capability is promised “sometime in 2011” to OpenBand customers. It seems as though OpenBand is just too small a provider to be able to offer new technology in a timely manner. So when the HOA was told that OpenBand management was too busy with the technical audit and other aspects of the franchise renewal to meet with its largest customer, the HOA Board members weren’t that surprised. But they pushed back and eventually won a meeting with OpenBand executives.

After a cordial meeting at which both parties were able to share their positions and concerns, there was hope that OpenBand would make some accommodations. But again there was talk of the franchise renewal requiring their complete attention. Then, suddenly, OpenBand counsel announced that OpenBand declined the HOA’s request to renegotiate OpenBand’s contract with the HOA. The best guess is that OpenBand is confident of its franchise renewal. After all, there were no glaring deficiencies in the technical audit. No one wants to interrupt video services to thousands of homes. Unfortunately, when the County signs the new video services franchise agreement, any incentive for OpenBand to address complaints or offer competitive services and technology is removed.

But there is something that the Cable & OVS Commission and Loudoun County Board of Supervisors can do to ensure that OpenBand’s customers receive the highest quality services at the most reasonable prices: you can make OpenBand’s video services franchise renewal contingent on resolving serious outstanding quality (technology and service) issues. The County could invoke special performance evaluation sessions per the franchise agreement. The Lansdowne HOA would be happy to participate. One of the benefits of this strategy is that ultimately the question of whether OpenBand’s failure to remain competitive with other local video services providers is a consequence of its small size or a result of long-term, one-sided contracts that eliminate market pressures will be answered.

Lansdowne on the Potomac is not asking for a termination of the contract or for unreasonable service standards and enhancements. Rather, the HOA is asking the County to require OpenBand to be the video services provider it purported to be in its testimony to the FCC during the 2007 and 2008 hearings on exclusive service contracts and bulk billing agreements. OpenBand management contended that its service agreements were competitively bid by the community associations. In reality the agreement between Lansdowne on the Potomac and OpenBand was entered into by the community’s developer. OpenBand also asserted, and continues to do so, that its exclusive service contracts with communities “result in more programming and more favorable prices to residents than would be otherwise available”. Similarly, OpenBand testified that “exclusive contracts often include provisions that require the service provider to furnish comparable or better products and services than the ILEC or MSO options. If the service provider does not stay competitive with (or ahead of) the market on price, technology and service factors, owners can terminate the contract and bargain as a group for a new contract.” Sadly, OpenBand’s two largest customers do not have a clause in their contracts that truly accomplishes this objective. Ironically, OpenBand proposed to the FCC that if that body felt compelled to regulate bulk service agreements, then the FCC should “limit [the] duration of such bulk service agreements to a reasonable period but with reasonable renewal rights upon agreement of the association and the provider”. The Lansdowne on the Potomac HOA heartily concurs. A five or ten year contract term with mutually agreed renewal clauses would be more in line with contracts offered by other area service providers. [Note that PDFs of two documents submitted by OpenBand to the FCC are attached to this e-mail letter.]

The Cable & OVS Commission and the Board of Supervisors have already received correspondence from OpenBand customers disputing OpenBand’s claim of “the highest quality services at reduced prices”. It is laughable to suggest that a community with half of the HD channels and VOD programs offered by other locally available cable providers/satellite services and with set-top equipment that offers limited features and fails at an alarming rate is receiving cutting edge video services. The Lansdowne HOA attempted to resolve service, equipment and contractual concerns directly with OpenBand, in a calm, methodical and professional manner. Those efforts yielded no concessions or movement on OpenBand’s part beyond a promise to “communicate more”. The HOA is compelled to remind the County that it may be faced with renewing a video services franchise agreement when a large percentage of the provider’s existing customers are protesting that renewal. Therefore, the Lansdowne on the Potomac HOA has no option but to urge the Cable & OVS Commission and the Loudoun County Board of Supervisors to protect the rights, interests and pocket books of County residents by granting a conditional renewal of OpenBand’s video services franchise.

Respectfully submitted,

The Lansdowne on the Potomac HOA Board of Directors

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