Comcast 2010 Annual Report Download - page 19

Table of Contents
15
Comcast 2010 Annual Report on Form 10-
K
perform both channel navigation and security functions. As a
result, most set-top boxes that we purchase must rely on a
separate security device known as a CableCARD, which
adds to the cost of set-top boxes. In addition, the FCC has
adopted rules aimed at promoting the manufacture of plug-
and-play TV sets and other equipment that can connect
directly to a cable distribution network system with a
CableCARD and receive one-way analog and digital video
services without the need for a set-top box. In 2010, the FCC
adopted additional CableCARD regulations that, among other
things, require cable operators to provide a credit to
customers who use plug-and-play equipment purchased at
retail instead of the set-top box included with an operator’s
service package and allow customers with plug-and-play
equipment to self-install CableCARDs rather than having to
arrange for a professional installation. The FCC also is
considering proposals to supplant CableCARD with another
technology that would enable retail video devices to work on
any MVPD system, not just a cable system. These proposals
could impose substantial costs on us and impair our ability to
innovate. In addition, the NBCUniversal Order requires us to
fulfill commitments designed to improve the parental control
tools and information available to parents, including
navigation and blocking upgrades to certain set-top boxes.
MDUs and Inside Wiring
FCC rules prohibit exclusive video service access
agreements between cable operators and MDUs or other
private real estate developments. FCC rules also make
unenforceable the exclusivity provisions of our pre-existing
access agreements and facilitate competitors’ access to the
cable wiring inside such MDUs.
Pole Attachments
The Communications Act permits the FCC to regulate the
rates that pole-owning utility companies (with the exception of
municipal utilities 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 attachment rate standards. The FCC
or a state could increase pole attachment rates applicable to
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. Utility companies initiated a proceeding in
2009 at the FCC seeking to apply the telecommunications
services pole rate to all poles over which cable operators
provide phone services using interconnected VoIP
technology, which is the type of technology we use for our
phone services. However, in May 2010, the FCC proposed to
reduce the rate for telecommunications service pole
attachments down to a level that is at or near the rate for
cable attachments; this proposal is pending.
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 authorities to establish reasonable
requirements for public, educational and governmental
access (“PEG”) programming, and some of our franchises
require substantial channel capacity and financial support for
this programming. The NBCUniversal Order contains various
PEG-related conditions, including a requirement that we do
not migrate PEG channels to digital delivery on our cable
system until the system has converted to all-digital
distribution or until the government entity that is responsible
for the system’s PEG operations expressly agrees. The
Communications Act also contains provisions 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.
FCC rules establish franchising processes and obligations for
new entrants that are different from those applicable to
existing providers. For example, these rules limit the range of
financial, construction and other commitments that
franchising authorities can request of new entrants and
preempt certain local “level playing field” franchising
requirements. 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. 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
new entrant provide service to all parts of the franchise area
or permitting the new entrant to designate only those portions
it wishes to serve. Certain of these statutes allow incumbent
cable operators to opt into the new state franchise where a
competing state franchise has been issued for the incumbent
cable operator’s franchise area. However, even in those
states, the incumbent cable operators often are required to
retain certain franchise obligations that are more burdensome
than the new entrant’s state franchise. We believe that we
have been and continue to be disadvantaged as a result of
these rules and statutes.
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 contained in broadcast signals. The possible
modification or elimination of this copyright license is the
subject of ongoing legislative and administrative review. The
Satellite Television Extension