DIRECTV 2009 Annual Report Download - page 29

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DIRECTV
a timely and appropriate manner in markets in which we choose to retransmit the signals of
local broadcast stations. We have limited capacity, and the projected number of markets in
which we 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. For example, the FCC issued an order requiring
mandatory carriage of high-definition digital signals in an increasing number of markets each
year, requiring so-called ‘‘HD carry-one, carry-all’’ in all local markets served by 2013. We may
not be able to comply with these must carry rules, or compliance may mean that we will be
required to use capacity that could otherwise be used for new or additional local or national
programming services. Moreover, Congress may amend the must carry rules when it considers
SHVERA reauthorization. For example, Congress has in the past proposed legislation and may
in the future enact legislation that would require us to provide local channels via satellite in all
markets in the United States. We currently provide local channel coverage to approximately
155 markets representing approximately 95% of U.S. television households. If such legislation
were enacted, we would be required to provide local channel coverage to an additional 55
markets representing about 5% of U.S. television households on an accelerated timetable. We
believe that the capital expenditures and ongoing costs to provide this coverage would not be
covered by the incremental revenue from the additional subscribers we could potentially gain in
these markets. Moreover, depending upon the timetable imposed, we may not be able to comply
in a timely manner.
•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
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