Comcast 2011 Annual Report Download - page 20

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 juris-
diction, 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 franch-
ises 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 Communica-
tions 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 regulations establish franchising processes and obligations for new entrants that are different from those
applicable to existing providers. For example, these regulations 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 statefranchisewhereacompeting 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.
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 and Localism Act of 2010 (“STELA”) made
revisions to a cable operator’s compulsory copyright license to remove a number of uncertainties regarding
the license’s operation. In particular, STELA clarifies that, in exchange for certain additional payments, cable
operators can limit the royalty calculation associated with retransmission of an out-of-market broadcast sta-
tion to those cable subscribers who actually receive the out-of market station. The new law also clarifies that
cable operators must pay additional royalty fees for each digital multicast programming stream from an out-of
market broadcast station they retransmit that does not duplicate the content of the station’s primary stream.
It also establishes an audit mechanism for copyright owners to review a cable operator’s copyright royalty
reporting practices. As required by STELA, the Copyright Office, the GAO and the FCC all issued reports to
Congress in 2011 that generally supported an eventual phase out of the compulsory licenses, although they
also acknowledged the potential adverse impact on cable and satellite subscribers and the absence of any
clear marketplace alternative to the compulsory licenses. If adopted, a phase-out plan could adversely affect
our ability to obtain broadcast station programming and substantially increase our programming costs.
High-Speed Internet Services
We provide high-speed Internet services over our cable distribution system. In 2002, the FCC ruled that high-
speed Internet services such as ours are interstate information services that are not subject to regulation as a
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