DIRECTV 2007 Annual Report Download - page 25

THE DIRECTV GROUP, INC.
rules in pending and future rulemaking and complaint proceedings, as well as judicial decisions
interpreting must carry requirements. For example, the FCC recently determined that cable
operators must engage in ‘‘dual carriage’’ of local broadcast signals as these broadcasters
upgrade their signals to digital transmission, and must make signals available to all viewers with
analog televisions after the transition to digital television is complete. This requirement has not
been extended to DBS systems, but could be in the future. In addition, the FCC is assessing the
degree to which satellite carriers are capable of carrying HD signals, or multicast digital
standard-definition channels, of local broadcasters, and the extent to which the Communications
Act requires mandatory carriage of such signals. 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.
•Public Interest Requirement. Under a requirement of the Communications Act, the FCC has
imposed certain public interest obligations on DBS operators, including a requirement that such
providers set aside four percent of channel capacity exclusively for noncommercial programming
of an educational or informational nature, for which we must charge programmers below-market
rates and for which we may not impose additional charges on subscribers. FCC rules also
require us to comply with a number of political broadcasting requirements to which broadcasters
are subject under the Communications Act, as well as limits on the commercialization of
children’s programming applicable to cable operators. We believe that we are in compliance with
all of these requirements, but some of them require our interpretations, which we believe are
reasonable and consistent with industry practice. However, if we are challenged, the FCC may
not agree with our interpretations. In addition, the FCC could, in the future, attempt to impose
additional public interest or content requirements on us, for example, by seeking to impose rules
on indecent programming.
•Emergency Alert System. The Emergency Alert System, or EAS, requires participants to interrupt
programming during nationally-declared emergencies and to pass through emergency-related
information. The FCC has adopted rules that require satellite carriers to participate in the
‘‘national’’ portion of EAS. It is also considering whether to mandate that satellite carriers also
interrupt programming for local emergencies and weather events. We believe that any such
requirement would be very difficult to implement, would require costly changes to our DBS/
DTH system, and, depending on how it is implemented, could inconvenience or confuse our
viewers. The FCC is also considering whether to require that EAS alerts be provided in multiple
languages or via text messages, which could also prove difficult and costly to implement
depending upon the nature of any such requirement adopted.
•Spectrum Allocation and License Assignment Rules. We depend upon the FCC’s allocation of
sufficient DBS frequencies and assignment of DBS licenses in order to operate our business.
DBS frequencies and available DBS orbital locations capable of supporting our business have
become increasingly scarce. While we have obtained additional DTH service capacity and
continue to explore new sources of DBS/DTH capacity, there can be no assurance that we will
obtain further capacity. In addition, the FCC had adopted a system of competitive bidding to
assign licenses for additional DBS frequencies. On June 21, 2005, the United States Court of
Appeals for the D.C. Circuit held that such an auction process was not authorized by statute.
The FCC subsequently voided the previous auction and implemented a freeze on applications
for authority to provide DBS service in the United States using new frequencies or new orbital
locations not assigned to the United States in the ITU Region 2 BSS Plan. On August 18, 2006,
the FCC began a proceeding to identify a new system for assigning DBS authorizations. There
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