Time Warner Cable 2010 Annual Report Download - page 22

Regulatory Matters
TWC’s business is subject, in part, to regulation by the FCC and by most local and state governments where TWC has
cable systems. In addition, TWC’s business is operated subject to compliance with the terms of the Memorandum Opinion
and Order issued by the FCC in July 2006 in connection with the regulatory clearance of the transactions related to TWC’s
2006 acquisition of cable systems from Adelphia Communications Corporation (“Adelphia”) and Comcast (the
“Adelphia/Comcast Transactions Order”), which is in effect until July 2012. Various legislative and regulatory
proposals under consideration from time to time by the United States Congress (“Congress”) and various federal
agencies have in the past materially affected TWC and may do so in the future.
The Communications Act of 1934, as amended (the “Communications Act”), and the regulations and policies of the
FCC affect significant aspects of TWC’s cable system operations, including video subscriber rates; carriage of broadcast
television signals and cable programming, as well as the way TWC sells its program packages to subscribers; the use of
cable systems by franchising authorities and other third parties; cable system ownership; the offering of voice, high-speed
data and transport services; and its use of utility poles and conduits.
The following is a summary of current significant federal, state and local laws and regulations affecting the growth
and operation of TWC’s business as well as a summary of the terms of the Adelphia/Comcast Transactions Order. The
summary of the Adelphia/Comcast Transactions Order herein does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of the Adelphia/Comcast Transactions Order.
Video Services
Subscriber rates. The Communications Act and the FCC’s rules regulate rates for basic cable service and
equipment in communities that are not subject to “effective competition,” as defined by federal law. Where there has
been no finding by the FCC of effective competition, federal law authorizes franchising authorities to regulate the
monthly rates charged by the operator for the minimum level of video programming service, referred to as basic service
tier or BST, which generally includes broadcast television signals, satellite-delivered broadcast networks and
superstations, local origination channels, a few specialty networks and public access, educational and government
channels. This regulation also applies to the installation, sale and lease of equipment used by subscribers to receive basic
service, such as set-top boxes and remote control units. In the majority of its localities, TWC is no longer subject to rate
regulation, either because the local franchising authority has not become certified by the FCC to regulate these rates or
because the FCC has found that there is effective competition.
Carriage of broadcast television stations and other programming regulation. The Communications Act and the
FCC’s regulations contain broadcast signal carriage requirements that allow local commercial television broadcast
stations to elect once every three years to require a cable system to carry their stations, subject to some exceptions,
commonly called “must carry,” or to negotiate with cable systems the terms on which the cable systems may carry their
stations, commonly called “retransmission consent.”
The Communications Act and the FCC’s regulations require a cable operator to devote up to one-third of its activated
channel capacity for the mandatory carriage of local commercial television stations that elect “must carry.” The
Communications Act and the FCC’s regulations give local non-commercial television stations mandatory carriage
rights, but non-commercial stations do not have the option to negotiate retransmission consent for the carriage of their
signals by cable systems. Additionally, cable systems must obtain retransmission consent for all “distant” commercial
television stations (i.e., those television stations outside the designated market area to which a community is assigned)
except for commercial satellite-delivered independent “superstations” and some low-power television stations.
In 2005, the FCC reaffirmed its earlier decision rejecting multi-casting (i.e., carriage of more than one program
stream per broadcaster) requirements with respect to carriage of broadcast signals pursuant to must-carry rules. Certain
parties filed petitions for reconsideration. To date, no action has been taken on these reconsideration petitions, and TWC is
unable to predict what requirements, if any, the FCC might adopt in connection with multi-casting.
In September 2007, the FCC adopted rules that require cable operators that offer at least some analog service
(i.e., that are not operating “all-digital” systems) to provide subscribers down-converted analog versions of must-carry
broadcast stations’ digital signals. In addition, must-carry stations broadcasting in HD format must be carried in HD on
cable systems with greater than 552 MHz capacity; standard-definition signals may be carried only in analog format.
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