Comcast 2012 Annual Report Download - page 21

Table of Contents
utility companies are able to rebut certain presumptions in the new formula, and it is expected that most will attempt to do so. The
FCC ruling is under review in the U.S. Court of Appeals for the D.C. Circuit.
Vertical Ownership Limit
The FCC is assessing whether to revise a limit on the number of affiliated programming channels that a cable operator may carry on
a cable system. The FCC’
s previous limit of 40% of the first 75 channels carried on a cable system was struck down by a federal
appellate court in 2001, although the FCC continues to enforce it. The FCC previously clarified that, under the 40% limit, cable
systems with 75 or more channels must carry at least 45 unaffiliated channels. Our cable systems routinely carry more than 45
unaffiliated channels, and we currently comply with the 40% limit. Compliance could become more difficult depending on what
regulations, if any, the FCC adopts.
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 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 state
franchise immediately or later when 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.
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 station to those cable subscribers who actually
receive the out-of market station. The new law also clarifies that
Comcast 2012 Annual Report on Form 10-K
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