Virginia ISP Locks Customers Into 25-75 Year Contracts; Sues Everybody When Monopoly Threatened

Legal Issues

from the 3/4-of-a-century-with-the-same-crappy-service dept

There aren’t many consumers out there who are pleased with long-term contracts, whether it’s their cellphone provider or their ISP. For most, a one or two-year exclusive contract makes it economically unfeasible to switch carriers at the drop of the hat. These contracts tend to result in lower quality service, as exclusive, lengthy deals rarely stoke the fires of innovation or improvement.

Now, take that 1-to-2-year deal and its attendant downside and extrapolate it to the length of a murder sentence. That’s the reality being faced by residents of Loudon County, Virginia.

With help from a local developer, OpenBand apparently convinced a lot of communities to sign exclusive franchise agreements that ran for between 25 to 75 years. While users in these developments could sign up for other TV or broadband services, they still had to pay the $150 monthly association fee to OpenBand.

If you can lock customers into a contract that runs their entire lifetime, you’re hardly going to be providing top notch service. Why? Because the pressure provided by competition is no longer an issue. OpenBand did what most companies would do in this situation — nothing.

Complaints grew and grew over the years, with customers saying it reached the point where they stopped contacting the ISP, given their exclusive arrangement resulted in them being totally unwilling to improve service. It got so bad, some locals wound up getting a second broadband provider — and just paid two bills for service with nothing they could do.

These complaints finally reached the FCC, which decided to implement some rules changes to make these long-term contracts illegal. The housing developments locked into these deals also pushed back, declining to renew their contracts with OpenBand.

This made OpenBand unhappy and it decided to respond the way most companies do when their monopolies are threatened — by filing lawsuits.

Last fall they decided to sue everyone, including the county Board of Supervisors, two supervisors individually, and several homeowners associations.

Despite the fact that the FCC itself has declared these long-term contracts to be anti-competitive and “forbidden” (by a 2007 FCC order banning “exclusivity clauses”), OpenBand is still trying to get its monopoly reinstated. Its arguments represent the “best” qualities of pedantic legal wrangling, boiling down to some very specific wording.

First, OpenBand claims that the FCC has no jurisdiction over its “arrangements” with Loudon County homeowners:

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…

OpenBand is attacking very specific wording here, attempting to justify its monopoly over the two other services (phone and internet) it provides. The second aspect of its argument relies on specific terminology as well — contracts vs. easements. One of the judges hearing the appeal has already sniffed this weasel-wording out.

“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.”

OpenBand’s arguments are already being challenged in the appeals court, which is rehearing the lawsuits brought against it by two Virginia homeowners’ associations. The lawsuits OpenBand filed against two Loudon supervisors and two homeowner’s associations are currently on hold, as all county judges have recused themselves from the case because of their familiarity with one of the defendants, an attorney who is also a former board member of one the HOAs.

Whatever the result of these lawsuits, OpenBand’s reputation is already mostly destroyed. It was already a cursed name in Virginia six years ago and looks as if it’s done nothing over the last half-decade to improve its service or its relationship with its “customers.” (It’s really tough to characterize people stuck in a 25-75 year contract as “customers,” hence the quotation marks. Customers usually have a bit of freedom when purchasing goods and services. The members of these HOAs clearly don’t.)

The fact that OpenBand is willing to spend millions ($4 million so far) to reclaim its monopoly clearly indicates that infrastructure and customer service are the last things on its mind. These short-sighted and recriminatory lawsuits will only make it that much tougher for it to land contracts (or “easements”) with anyone in the future. Even if it wins, it loses.

Filed Under: broadband, isps, monopolies
Companies: openband