DIRECTV 2006 Annual Report Download - page 35

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THE DIRECTV GROUP, INC.
We depend on the Communications Act for access to cable-affiliated programming and changes
impacting that access could materially adversely affect us.
We purchase a substantial percentage of our programming from programmers that are affiliated
with cable system operators. Currently, under certain provisions of the Communications Act governing
access to programming, cable-affiliated programmers generally must sell and deliver their programming
services to all multi-channel video programming distributors on non-discriminatory terms and
conditions. The Communications Act and the FCC rules also prohibit certain types of exclusive
programming contracts involving programming from cable-affiliated programmers.
Any change in the Communications Act or the FCC’s rules that would permit programmers that
are affiliated with cable system operators to refuse to provide such programming or to impose
discriminatory terms or conditions could materially adversely affect our ability to acquire programming
on a cost-effective basis, or at all. The Communications Act prohibitions on certain cable industry
exclusive contracting practices with cable-affiliated programmers are scheduled to expire in
October 2007 and may not be renewed or extended.
In addition, certain cable providers have denied us and other MVPDs access to a limited number
of channels created by programmers with which the cable providers are affiliated. The cable providers
have asserted that they are not required to provide such programming due to the manner in which that
programming is distributed, which they argue is not covered by the program access provisions of the
Communications Act. Challenges to this interpretation of the Communications Act have not been
successful, and we may continue to be precluded from obtaining such programming, which in turn
could materially adversely affect our ability to compete in regions serviced by those cable providers.
Although the FCC recently addressed some of these issues in a limited fashion by placing access
conditions on certain regional sports networks affiliated with Time Warner Cable, Inc. and Comcast
Corporation, it is not clear that such provisions will be sufficient to assure our continued access to this
programming on fair and nondiscriminatory terms.
Carriage requirements may negatively affect our ability to deliver local broadcast stations, as well as
other aspects of our business.
The FCC’s interpretation, implementation and enforcement of provisions of SHVIA and
SHVERA, as well as judicial decisions interpreting and enforcing these laws, could hamper our ability
to retransmit distant network and superstation signals, reduce the number of our existing or future
subscribers that can qualify for receipt of these signals, impose costs on us in connection with the
process of complying with the rules, or subject us to fines, monetary damages or injunctions. In
implementing SHVIA, the FCC has required satellite carriers to delete certain programming, including
sports programming, from the signals of certain distant stations. Compliance with those FCC
requirements, may require costly upgrades to our broadcast system. Further, a recent FCC order
interpreting the requirement that satellite carriers retransmit local digital signals with ‘‘equivalent
bandwidth’’ of significantly viewed digital signals may constrain our ability to deliver such significantly
viewed digital signals.
We have limited capacity, and the projected number of markets in which it can deliver local
broadcast programming will continue to be constrained because of the must carry requirement and may
be reduced depending on the FCC’s interpretation of its rules in pending and future rulemaking and
complaint proceedings, as well as judicial decisions interpreting must carry requirements. We may not
be able to comply with these must carry rules, or compliance may mean that we are not able to use
capacity that could otherwise be used for new or additional local or national programming services.
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