Comcast 2008 Annual Report Download - page 12

MDUs and Inside Wiring
In October 2007, the FCC adopted an order prohibiting the
enforcement of exclusive video service access agreements
between cable operators and MDUs and other private real estate
developments. The order also prohibits the execution of new
exclusive access agreements. The order has been appealed by
the National Cable & Telecommunications Association (“NCTA”),
the cable industry’s trade organization. The FCC is also consider-
ing proposals to extend these prohibitions to non-cable MVPDs
and to expand the scope of the rules to prohibit exclusive market-
ing and bulk billing agreements. Because we have a significant
number of exclusive access agreements, the FCC’s order to
abrogate the exclusivity provisions of those agreements could
negatively affect our business, as would adoption of new limits on
exclusive marketing and bulk billing. The FCC has also adopted
rules facilitating competitors’ access to the cable wiring inside
such MDUs. These rules could also have an adverse impact on
our business as they allow our competitors to use wiring we have
deployed to reach potential customers more quickly and inex-
pensively.
Pole Attachments
The Communications Act permits the FCC to regulate the rate that
pole-owning utility companies (with the exception of municipal util-
ities and rural cooperatives) charge cable systems for attachments
to their poles. States are permitted to preempt FCC jurisdiction
and regulate the terms of attachments themselves, and many
states in which we operate have done so. Most of these states
have generally followed the FCC’s pole rate standards. The FCC
or a state could increase pole attachment rates paid by cable
operators. Additionally, higher pole attachment rates apply to pole
attachments that are subject to the FCC’s telecommunications
services pole rates. The applicability of and method for calculating
those rates for cable systems over which phone services are
transmitted remain unclear, and there is a risk that we could face
materially higher pole attachment costs. In November 2007, the
FCC initiated a proceeding to consider whether to modify its rules
governing prices for pole attachments. Among other issues, the
FCC is considering establishing a new unified pole attachment rate
that would apply to cable system attachments where the cable
operator provides high-speed Internet services and, perhaps,
phone services as well. The proposed rate would be higher than
the current rate paid by cable service providers but lower than the
rate that applies to attachments used to provide tele-
communications services. If adopted, this proposal could
materially increase our costs by increasing our existing payments
for pole attachments.
Franchising
Cable operators generally operate their cable systems under
nonexclusive franchises granted by local or state franchising
authorities. While the terms and conditions of franchises vary
materially from jurisdiction to jurisdiction, franchises typically last
for a fixed term; obligate the franchisee to pay franchise fees and
meet service quality, customer service and other requirements;
and are terminable if the franchisee fails to comply with material
provisions. The Communications Act permits franchising author-
ities to establish reasonable requirements for public, educational
and governmental access programming, and many of our franch-
ises require substantial channel capacity and financial support for
this programming. The Communications Act also contains provi-
sions governing the franchising process, including, among other
things, renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. We believe that
our franchise renewal prospects generally are favorable.
There has been considerable activity at both the federal and state
levels addressing franchise requirements imposed on new
entrants. This activity is primarily directed at facilitating local phone
companies’ entry into cable services. In December 2006, the FCC
adopted new rules designed to ease the franchising process and
reduce franchising burdens for new entrants by, among other
things, limiting the range of financial, construction and other
commitments that franchising authorities can request of new
entrants, requiring franchising authorities to act on franchise appli-
cations by new entrants within 90 days, and preempting certain
local “level playing field” franchising requirements. The FCC sub-
sequently adopted more modest franchising relief for existing cable
operators. We could be materially disadvantaged if the rules con-
tinue to set a different, less burdensome standard for some of our
competitors than for ourselves. From time to time, Congress has
also considered proposals to eliminate or streamline local franchis-
ing requirements for local phone companies and other new
entrants. We cannot predict whether such legislation will be
enacted or what effect it would have on our business.
In addition, approximately half of the states in which we operate
have enacted legislation to provide statewide franchising or to
simplify local franchising requirements for new entrants, thus reliev-
ing new entrants of many of the local franchising burdens faced by
incumbent operators. Some of these statutes also allow new
entrants to operate on more favorable terms than our current
operations, for instance by not requiring that the applicant provide
service to all parts of the franchise area or permitting the applicant
to designate only those portions it wishes to serve. Certain of
these state statutes allow incumbent cable operators to opt into
the new state franchise where a competing state franchise has
been issued for the incumbent’s franchise area. However, even in
those states where incumbent cable operators are allowed to opt
into a state franchise, we often are required to retain certain fran-
chise obligations that are more burdensome than the new
entrant’s state franchise.
Copyright Regulation
In exchange for filing reports and contributing a percentage of
revenue to a federal copyright royalty pool, cable operators can
obtain blanket permission to retransmit copyrighted material con-
tained in broadcast signals. The possible modification or
Comcast 2008 Annual Report on Form 10-K 10