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

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

Thu, Mar 14th 2013 4:11am — Tim Cushing

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.

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Filed Under: broadband, isps, monopolies
Companies: openband

56 Comments

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relghuar, 14 Mar 2013 @ 4:21am

Even if it wins, it loses.
What exactly in all their behavior gave you an idea that providing any further services for more users has ever been their goal? That's pretty much the only thing they would need any reputation for, and somehow I think that's not quite their idea of winning...
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Ninja (profile), 14 Mar 2013 @ 4:30am

Even if it wins, it loses

Let us hope they lose and go out of business. Hopefully it'll send some clear signs to the other mammoths in this market. How is Google broadband doing? Are they going to expand?
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Anonymous Coward, 14 Mar 2013 @ 4:39am

The funny part is that people still fall for "exclusive rights" are good, we will take care of everfything just trust us and sign your rights away here please.
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G Thompson (profile), 14 Mar 2013 @ 5:03am

Hang on I always thought that "Exclusive dealing" which this contract seems to absolutely commit was illegal (or at the minimum unlawful) under the USA's Restrictive Trade Practices Act [forget the actual title or code]

And easements? they tried to state it was an easement (of any of the types)? Bwahahahaha
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Gracey (profile), 14 Mar 2013 @ 5:09am

Rather reminds me of an "energy" company we have here. I'm not associated with it, but my poor old aunt got sucked into it. After she sold her house and had to move into a nursing home the contract followed her ... for a product she no longer used. After she died, they wanted to charge us (the estate) for an "early cancellation" fee.

Essentially I told them if they wanted to sue a dead lady with no monetary estate, have at it. And then I'd make sure every newspaper and TV channel in Canada carried the story.

Never heard from them again.
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jeff (profile), 14 Mar 2013 @ 5:22am

The county officials who sign these contracts should be fired. This would set a precedent. If these government officials are held accountable, maybe they'll think twice before signing a deal like this in the future.
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Anonymous Coward, 14 Mar 2013 @ 5:25am

Re:
"The county officials who sign these contracts should be fired. This would set a precedent. If these government officials are held accountable, maybe they'll think twice before signing a deal like this in the future."

The county officials probably received kickbacks.
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Ninja (profile), 14 Mar 2013 @ 5:31am

Re:
What, Govt officials being held accountable for misdeeds against the population? Not happening. Now if they had harmed some big corporation...
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PopeRatzo (profile), 14 Mar 2013 @ 5:33am

lessons unlearned
It's not going to get any better until we start seeing some heads on pikes.
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DannyB (profile), 14 Mar 2013 @ 5:34am

Re:
More is needed than for them to merely go out of business.

The principles behind this need to be known so that even if they form a new business, potential customers can understand who they are dealing with.

"Oh, aren't you that other company that locked people into lifetime contracts and then provided crappy service and ignored complaints?"
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Anonymous Coward, 14 Mar 2013 @ 5:38am

A hundred and fifty a month? It's amazing they were able to string this out for as long as they did.

I remember a similar case where it was ruled that a condo/townhome ass or apt complex could not sign exclusive contracts in this same industry.

Another reason to avoid hoas like the plague.
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Anonymous Coward, 14 Mar 2013 @ 5:51am

Re:
Hoas per se are not a big problem the real problem underlying it all is that most people believe they can force others to do whatever they want them to do once they get some measure of power.

But yes under the current social culture, keep away of HOAs like the plague.
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Zakida Paul (profile), 14 Mar 2013 @ 6:01am

And here I thought my 2 year O2 contract was excessive.
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Anonymous Coward, 14 Mar 2013 @ 6:07am

I hear some Libertarians complain all the time about the big bad federal government, always hearing about "state rights" from them. This is what states rights looks like.
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Anonymous Coward, 14 Mar 2013 @ 6:18am

Doesn't the use of easements tell us that Openband is operating as a public utility?
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Anonymous Coward, 14 Mar 2013 @ 6:19am

If you're getting what you want you're a customer.

If you're forced to work for something you want no part of you're a slave. You might be a slave for 2 hours a month or more depending on your wages.
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Anonymous Coward, 14 Mar 2013 @ 6:21am

Anyone dumb enough to sign into an HOA deserves whatever they get. I'd live in a cardboard box before I signed one of those agreements.
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Anonymous Howard (profile), 14 Mar 2013 @ 6:21am

Re: Re:
Why do people get into contracts with a service provider for 25+ years, without proper service guarantee clause in the first place?
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Chuck Norris' Enemy (deceased) (profile), 14 Mar 2013 @ 6:29am

Re:
Wait! States rights? Was any of that mentioned? Nice try. Government is force. Our healthcare system is a mess. Now the federal government is forcing everybody to have insurance, dumping more money into an inefficient and broken system. If you don't get insurance, you get fined. If you don't pay your fines, you go to jail for tax evasion. That is what government force looks like.
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AndyD273 (profile), 14 Mar 2013 @ 6:37am

Re:
To be a little more accurate, this is local level government, not state level. That being said, there is a really good reason why we have multiple levels of government. Federal level can step in and make changes across the board, hopefully with the best interests on the majority of citizens in mind, like the FCC in this story.
State level can step in if the federal government goes a little to far in it's reactions.
You see this a bit with states legalizing pot, despite the DEA's wishes.
I'm not for anyone taking drugs and ruining the lives of others (self destruct if you want, but think of your family before you do) but it's pretty clear from the over full prisons and no slow down in the flood of illegal drugs that the current method isn't working; maybe we should try a different plan. For science.
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Lord Binky, 14 Mar 2013 @ 6:46am

So that's how you win at Monopoly. Sheesh, no wonder I always sucked at that game.
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Lord Binky, 14 Mar 2013 @ 6:48am

Re:
I saw cardboard box HOA's once. They required the boxes to be plain or painted only in gold/silver.
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Anonymous Coward, 14 Mar 2013 @ 6:53am

Re: Re: Re:
These agreements were all signed by HOAs/Housing developments, probably in exchange for big kickbacks.
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Wally (profile), 14 Mar 2013 @ 7:08am

Re: Re:
It isn't the county officials who signed it....it's people subscribing to the company who are getting 75 year contracts. Usually packages of normal cable/satellite companies offer 1 or 2 year contracts to stay on and most will charge an early termination fee (mine would be $35) but that's about it. OpenBand suckers customers into 25-75 year contacts and rather than coming up with a reasonable termination fee...they file suit against the customer for wanting to cut the cable.

Now that being said, I'm pretty sure that this is a Sherman Antitrust Act Violation...or something close to it.

All I know is that the county and city officials are not responsible for the contracts that a cable or broadband company acts upon its customers.
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Wally (profile), 14 Mar 2013 @ 7:13am

Re: Re:
"Our healthcare system is a mess."

If you think it's bad now...wait until the US Gvt. becomes the biggest health insurance broker in the nation. Obamacare is not universal healthcare...it's a tax law that pays into your insurance provided by the federal government. It's universal health insurance.
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jupiterkansas (profile), 14 Mar 2013 @ 7:17am

Re: lessons unlearned
Where can I buy some pikes?
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Avatar28 (profile), 14 Mar 2013 @ 7:21am

Re: Re:
It's not really on topic, but if you're smoking pot and it's ruining lives, you're doing it wrong.
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Avatar28 (profile), 14 Mar 2013 @ 7:24am

Are they being sued for breach of contract as well?
From the sound of it, people are having problems that they refuse to fix. Sounds to me like they aren't providing the service they are contracted to and therefore the contract should be able to be broken by the other parties.
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Cui Jin Fu, 14 Mar 2013 @ 7:29am

I live near the developments that have these onerous deals with OpenBand in place, and I've been thinking about buying a house in this area. Whenever I see a listing for those neighborhoods, I won't even consider it. The HOA fees are something like $300 a month, with much of that associated with the mandatory internet/phone/cable services.

I wonder if these developers realize these deals significantly decrease the appeal of their homes on the market.
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btrussell (profile), 14 Mar 2013 @ 7:57am

Re: Re: lessons unlearned
Seafood counter?

I like to catch my own through the ice though.
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Anonymous Coward, 14 Mar 2013 @ 8:19am

Re:
Better yet, they should be investigated for profiting personally from signing such a stupid contract, and thrown in jail for corruption if they did benefit financially from it.

Who in their right mind would sign a 25 to 75 year Phone & Internet contract, especially with so many other competitors with only 1 or 2 year contracts available? Even if they're slower today.
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Chris Rhodes (profile), 14 Mar 2013 @ 9:02am

Re:
Some of us libertarians are against all governments, both federal AND state. :)
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Niall (profile), 14 Mar 2013 @ 9:18am

Re: Re: Re:
Just don't get sick you two, unless you're nice and rich.

My god, the whining on the left bank of the Atlantic is epic! It nearly ranks up there with "OMG my gas costs only 1/3 what it costs in the rest of the West, instead of 1/7..." - and no, I am *not* exaggerating those proportions.
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silverscarcat (profile), 14 Mar 2013 @ 9:27am

Re: Re: Re: Re:
"OMG my gas costs only 1/3 what it costs in the rest of the West, instead of 1/7..."

Well, that's what you get for having reliable public transportation over there.
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Anonymous Coward, 14 Mar 2013 @ 9:30am

Re: Are they being sued for breach of contract as well?
It depends on how the contract is written. It's entirely possible that it was phrased so that the ISP was actually under no obligation to provide any service whatsoever.
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Vince, 14 Mar 2013 @ 9:35am

Why aren't the residents of these communities gathered outside the OpenBand offices with torches and pitchforks? I'm not advising they do that, of course...because that would be bad.
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Wally (profile), 14 Mar 2013 @ 10:59am

Re: Re: Re: Re:
Gas prices raise and fall with supply and demand. The harder it is to get to a place the higher the prices will get. That's a rather odd comparison to make to insurance forms.

The problem with Obamacare is that all it relates to is insurance brokerage...where the Federal Government is your insurance agent. The whole thing costs us 30% of our income in a separate tax on top of our federal income taxes.

There is no need for a massive supply and demand system in a health insurance situation unless you account for your specific individual rates going up or down depending on your health...Obamacare bases your rates in a tax basis of the national average health care cost...which is never universal and never should be.

Then there's the excuse that it pays for everything when it actually pays more than twice than what is necessary to pay for. Under Obamacare, a procedure that would normally cost $18,000 co-pay for normal insurance outside of Obamacare would cost the Federal Gvt. 60,000 for the same co-pay under Obamacare. Why? Because at some point the tax code actually makes the IRS pay back a certain percentage of the cost you put into them paying for you (sort if like social security taxes on steroids). So really, left or right wing...anyone capable of algebraic mathematics can test and retest all that.
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John Fenderson (profile), 14 Mar 2013 @ 11:24am

Re:
The developers don't seem to realize that the existence of a HOA all by itself decreases the value of the property.
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art guerrilla (profile), 14 Mar 2013 @ 11:41am

Re:
what are you, some kind of anarchist ? ? ?

don't you know that in bizarro world, everything illegal has been legalized (for the 1%), and everything necessary has been made illegal (for the 99%)...

...and *THAT'S* the way we like it ! ! !
(it must be, i mean, its 'our' gummint, aint' it ? ? ?)

damn commie...
quit yer bitchin' and get back to the gulag...

art guerrilla
aka ann archy
eof
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art guerrilla (profile), 14 Mar 2013 @ 11:51am

Re: Re: Re:
whoa there, big fella ! ! !

*perhaps* (PERHAPS) *technically* true; BUT (and, yes, that is quite a big butt you have there!), it is generally the county/municipal/HOA leaders who make contracts with these scum-sucking bastards to give them EXCLUSIVE rights to use the rights-of-way/easements for running their cables/fiber...

in other words, THERE CAN BE NO COMPETITION/alternatives due to these exclusive deals...

i am actually emailing with a local muni ISP to BEG them to extend out into the county, telling them that we will GLADLY donate an easement on our own properties to run the inertnet tubes, and take our damn tractors out and dig the damn trenches and lay the damn fiber OUR OWN SELVES...

however, i'm guessing this will come to naught, because the county HAS locked out ANY competition... fuckers...

(i have tried to get alternatives -from various satellite providers, to the local cable monopoly- but NONE of them will provide us service -EVEN IF THEY ARE TECHNICALLY CAPABLE OF DOING SO- because they have 'NON-COMPETE' agreements with each other...
i thought that was called 'collusion', but what do i know...)

art guerrilla
aka ann archy
eof
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art guerrilla (profile), 14 Mar 2013 @ 12:04pm

Re: Re:
...as the unhappy member of a very small HOA (in a rural area, no less!), i would unfortunately concur: while they CAN be a good organization to fulfill the actual/real needs of a subdivision, they simply -generally- do NOT fill that need, but instead provide a means for pettifogging tyrants to enforce stupid shit on their neighbors...

(seriously, it is EASY to see how our gummint is morally bankrupt when you see 'regular' people turn into raving lunatics over nothingburgers...)

what has happened with ours, is that a minority of entitled jerkoffs made serving on the board, etc SO MISERABLE, they have effectively run off anyone else from participating who didn't want to be tyrannical assholes like themselves, and so the minority of tyrannical assholes have effective run of the place...

'they' have spent THOUSANDS AND THOUSANDS of dollars on lawyers fees and liens to fuck over this one guy who refuses to pay his dues... now, the guy is in the 'wrong' (although i definitely sympathize with him), BUT spending almost ten thousand to collect about a $200 fee, is insane...
does not matter that EVERYONE else does not want to do this, they run the place and insist they 'must' do it...

(they are 'legally' wrong, but when you ask a lawyer if you need more lawyering, guess what they say ? ? ?)

yes, AVOID an HOA at all costs, if you can...
brings out the worst in people...

art guerrilla
aka ann archy
eof
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Internet Zen Master (profile), 14 Mar 2013 @ 1:51pm

Re: Re: lessons unlearned
Depends. Do you have a TARDIS? Because if you time-traveled back and visited Vlad the Impaler (aka Dracula), he might give you some for free.

Just remember to raise your hat to him, or else you might find it nailed to your head...
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John Fenderson (profile), 14 Mar 2013 @ 2:43pm

Re: Re: Re: Re:
telling them that we will GLADLY donate an easement on our own properties to run the inertnet tubes, and take our damn tractors out and dig the damn trenches and lay the damn fiber OUR OWN SELVES...

They might go for this. I was once setting up a home office in the middle of nowhere way back when multiple phone lines were essential. I needed 5. The phone company informed me "tough luck" as all of the available lines wer eused and they wouldn't add more until a minimum amount of backorders had piled up.

I offered to dig the trench and lay the lines myself if they'd inspect and hook them up when I was done. They accepted my offer, and I got my phone lines.
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Anonymous Coward, 14 Mar 2013 @ 6:06pm

Re: Re: Re: Re: Re:
People do not need health insurance, they need health care. The middleman is once again profiting at your expense while providing little to nothing in return.

What I find rather amusing is that the GOP dubbed Obamacare has its roots in republican proposals made in the 90s. Once again, they rail against that which they conceived.
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AssHat, 14 Mar 2013 @ 6:09pm

I'm sure they are fine. 75 years, just walk it off.
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Anonymous Coward, 14 Mar 2013 @ 6:49pm

Wow.......just...., WOW
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totalz (profile), 14 Mar 2013 @ 9:14pm

A twisted modern slavery...
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thecrud, 14 Mar 2013 @ 11:21pm

75 year contract
This is why there are guns.
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Anonymous Coward, 15 Mar 2013 @ 5:03am

I would be cool with a 75 year contract if I was getting 1gbps with the condition if the average speed surpasses that they must upgrade their shitty network.
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Andrew, 15 Mar 2013 @ 6:08am

Um... where are you quoting from?
I'm curious -- you are clearly quoting from somewhere else in this piece, but where? You don't cite your source for paragraphs such as the one beginning "With help from a local developer..."

I'd like to read the original story. (Plus, it's only polite to give credit to whomever wrote it.)
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Wally (profile), 15 Mar 2013 @ 6:43am

Re: Re: Re: Re: Re: Re:
The GOP realized it wouldn't work the way Obama wants it to work. Ohio had things like this proposed and as a result Ohio's Medicaid program is one of the strongest in the US. The problem isn't one side or the other but people not understanding that it's a brokerage program rather than actual fund streaming. Filling prescription holes and a less costly copayment was what most of the GOP proposed. The problem is that instead of relying on the social security system, Obamacare is a separate tax. What Obamacare is meant to do is not the issue, it's how it's funded and how much it costs that is the issue.
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kmcm (profile), 15 Mar 2013 @ 7:05am

I live in one of these HOA's and now we pay for sat tv too in order to get HD. In the suburbs of DC, HOA's are all over the place and a norm......... it is what it is. What happened in this case is that when the developer built the houses, they ran the HOA and the "HOA" locked into the agreement. Go figure the developer gets kickbacks every month through the scheme they set up with OpenBand. If the HOA was run by the homeowners and was the one to contract, it'd be a totally different story. If we were getting our money's worth, fine but we're not. This company is a sub of a top defense contractor....... goo gobs of $ to go around.
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Wally (profile), 15 Mar 2013 @ 7:07am

Re: Re: Re: Re: Re: Re:
"People do not need health insurance, they need health care."

Good luck trying to afford a dose of chemo therapy, medication that is roughly $20-$600 per pill for a 30 day supply, paying $350 an hour for a half hour visit to a doctor's office, and paying $30,000 in case you have to get your tonsils or appendix removed....without copay...which more than halves all that cost...

My medication is $92 per pill for a $30 day supply and all I pay is $6.56 in copayment. Why? Because I have health insurance. Obamacare doesn't cost the consumer, it costs the economy.
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Wally (profile), 15 Mar 2013 @ 7:09am

Re: Um... where are you quoting from?
Run your mouse cursor over each word you see in the article and click. There's your links....and proper accreditation.
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Anonymous Coward, 15 Mar 2013 @ 11:16am

Re: Re: Re:
I know this is a bit late but I have to correct you. I live in Southern Walk (one of the two OpenBand communities). You pay for the service via HOA fees. Basically by moving in to the wonderful communities you have to suck it up and deal with the contract that the HOA signed. It is literally a community intranet (no joke, I could nmap the entire subnet and see my entire neighborhood)
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Company Nesting Dolls, 15 Mar 2013 @ 12:27pm

Openband=MC Dean
Openband is part of MC Dean, so you have to wonder when people will realize that Openband is not just a part of the problem, but so is the parent company MC Dean.
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