There Must Be More to Life than Cable TV
Rising from the clutter of condos along the shoreline of Biscayne Bay in Miami Beach are two great, white, Y-shape relics of Sixties block architecture. Touted as the largest apartment complex in South Florida, the 1277-unit Morton Towers has been featured in the Latin American version of the popular show Lifestyles of the Rich and Famous and has served as a backdrop for MTV Latino. Edward Magland, director of leasing, also proudly points out that the Towers' cachet is such that several Latin American soap opera stars have chosen to make it their Miami address. Amenities include bayside dockage for powerboats and small sailboats, a private restaurant that provides room service, two swimming pools (one freshwater and one salt), a fitness center, and -- drum roll, please -- dirt-cheap cable TV.
While other apartment buildings in Dade have negotiated similar arrangements (known as bulk agreements) with local cable operators, Morton Towers has a particularly sweet deal. Bulk agreements are essentially group discounts A every unit in a large condominium or apartment building is equipped with cable, and the discounted cost of basic service becomes part of the rent or monthly maintenance fee. Only the so-called premium channels, such as Disney, Home Box Office (HBO), Cinemax, and Showtime, cost extra.
In August Morton Towers' management signed a ten-year deal with the North Miami-based Aventura Cable Corporation that supplanted Gold Coast Cablevision, which had been supplying cable TV to individual tenants. Besides free basic cable service, Aventura offered residents a savings on expanded service (an additional 21 nonpremium channels for $12.78 per month, versus the $25.82 Gold Coast had charged) and lower rates for premium channels ($10.59 apiece per month, compared to Gold Coast's rate of $11.13 to $14.48).
Gold Coast retaliated tout de suite with a special promotion: Morton Towers residents who chose Gold Coast over Aventura could receive all the nonpremium cable channels, plus HBO, Showtime, the Movie Channel, Cinemax, and the Disney Channel, for only $25.82 per month. (The company's other subscribers pay $72.48 for the same package; a comparable assortment from Aventura goes for $42.95). This is life as Adam Smith would have envisioned it, though the renowned economist may have overlooked the passion and the plotting, the telenovela-esque potential, of Miami Beach's cable wars.
If the occasion of two cable companies competing in the same neighborhood (much less the same apartment complex) sounds unusual, it is. Since the late Eighties, Gold Coast has held the franchise to deliver cable TV service from the tip of South Beach to the Broward County line for all homes east of the Intracoastal Waterway. Owing to the prohibitive cost of laying cable, such franchises were awarded by municipalities around the nation and function as de facto monopolies. The winning firm's only direct competition came from satellite antenna companies, such as Aventura Cable, who made use of the same programming sources as conventional cable companies but delivered their signals via rooftop-mounted satellite dishes. These companies also avoided the federal and municipal regulations that complicated life for their franchise-owning competitors, not to mention the five percent franchise fee. Technical details aside, the two services were virtually indistinguishable as far as viewers were concerned.
Given the flexibility of satellite antenna companies, turf battles between the two types of providers would seem inevitable. But according to Mario Goderich, the chief cable TV regulator for Dade County, the companies have pretty much coexisted peacefully, with cable firms tending to look the other way when satellite outfits won contracts for buildings within their franchise areas. Observes Goderich: "They just didn't look at competing with each other as aviable thing to do."
Then came the federal Telecommunications Bill of 1995 (pending in Congress), which is expected to deregulate the telephone and cable industries and allow nearly unfettered competition. Now, Goderich reasons, local cable and satellite antenna companies are frantic to stake claims before the market opens up.
Demonstrating an aptitude for aggressive advertising, Gold Coast followed up its offers with several under-the-door flyers to Morton Towers tenants. One extolled Gold Coast's hurricane-related programming, which included broadcasts of local storm-related information from the City of Miami Beach -- a feature not provided by Aventura: "Hurricane Erin demonstrates the value of 'real cable television.'. . . Unlike 'master antenna systems' that call their service cable television, legitimate cable companies, like Gold Coast Cablevision, keep you connected to both world events and your local community. That's because our local network doesn't end on the roof of your building." Another flyer compared Gold Coast's rates with "the Antenna System," and listed several additional services Aventura Cable does not provide.
Gold Coast's loss-leader maneuver infuriated Aventura's owners, who immediately accused the larger company of unfairly attempting to drive them out of the apartment complex. (Aventura Cable has about 10,000 customers in Dade, compared to the 50,000-plus served by Gold Coast, which is a subsidiary of the Denver-based company Rifkin and Associates.) "These guys are so arrogant," grouses Leo Delgado, Aventura's director of operations. "Their offer is a flagrant violation of the antitrust laws, Federal Communications Commission regulations, and county ordinances."
Not surprisingly, news of the cable war spread. When other Gold Coast customers got wind of the bargains the company was dangling before lucky Morton Towers residents, they were quick to express their chagrin. Gold Coast general manager Kevin Grossman confirms that he received at least one letter from an irate customer, who wrote, "Regarding our telephone conversation last week on the FREE and REDUCED RATES Gold Coast has offered to a select few on Miami Beach, I remain unsatisfied with your response. . . . Since there seems to be so much confusion about who is offered MONEY SAVING DEALS and why we will not receive the same low rates already offered to others, residents are beginning to feel cheated. I hope your response will help settle this indifference before people become even better informed of Gold Coast Cablevision's subjectivity."
Grossman dismisses such missives, noting that Gold Coast has always offered bulk discounts to apartment buildings. The company is merely employing a slightly different strategy at Morton Towers, Grossman explains, using the apartment complex as a test case for how to survive in the deregulated 21st Century. "As a result of the direction we're going in the future, we are conducting several price-sensitivity tests and Morton Towers is one of those tests," he sniffs. "Aventura is apparently trying to sabotage our efforts [by talking to the media]. But to us, this is only a piece of an entire plan that we have to gain intelligence and information to be better able to offer our services in the future."
Howard Weinberg, an attorney for Aventura Cable, says Gold Coast is deceptively trying to present the new prices as a limited-time-only promotion. "There's a loophole in the law for promotions," he contends. "Gold Coast wants to use the loophole as a sledgehammer to pulverize the competition. It's obvious that the minute Aventura abandons the building, Gold Coast will of course double their price. So this is not a promotion, this is an anti-competition ploy to protect their monopoly."
Weinberg and partner David Azrin have threatened to file two lawsuits if Gold Coast doesn't stop its "predatory pricing" and "disparaging advertisements." One suit would charge Gold Coast with violating federal antitrust laws and cable regulations, which require, among other things, a uniform rate structure. The second lawsuit would have grander ambitions: Azrin and Weinberg want to file a class action suit on behalf of all consumers in the Gold Coast area.
Terry Bienstock, an attorney for Gold Coast, maintains that the threatened lawsuits are groundless. "The gist of your predatory pricing claim is that Gold Coast is lowering its prices to consumers. The courts take a favorable view of this practice and are likely to recognize it as competitive conduct that benefits consumers," he wrote in a reply to Aventura's lawyers.
"It is clear to us that Aventura's threats are simply a response to Gold Coast's demand that Aventura not use the conduits and other equipment Gold Coast installed at Morton Towers," Bienstock says, referring to an earlier letter he had written to Aventura. "Wiring is the lifeblood of this business." Bienstock adds that several cable companies have successfully sued satellite companies over this issue.
Local and federal cable regulators are unsure about the possible merits of Aventura's threatened suits. Federal Communications Commission (FCC) regulations require that a cable company charge the same price for basic service throughout its franchise area, but exceptions are made for bulk agreements. Premium services can be priced any way the vendor sees fit.
Nevertheless, FCC spokesman Morgan Broman says Aventura might have a case if it files a complaint with the agency. "Conceptually, our goal is to provide competition," he explains. "And if competition is good for the consumer, we generally come down on the side of the consumer. We have the right to look at and regulate the prices of cable programming, though, and it sounds like this falls right into our area."
If the occasion of two cable companies competing in the same neighborhood sounds unusual, it is.