Time Warner Cable 2014 Annual Report Download - page 19

providers of broadband Internet access services. It is uncertain what specific regulations the FCC will adopt or how any
such regulations might affect TWC. FCC action is expected in February 2015 or shortly thereafter. For further discussion
of the FCC’s net neutrality proceeding, see the discussion in “Business—Regulatory Matters—High-speed Internet
Access Services” and “Risk Factors—‘Net neutrality’ regulation or legislation could limit TWC’s ability to operate its
business profitably and to manage its broadband facilities efficiently and could result in increased taxes and fees imposed
on TWC.”
In addition, some of the poles TWC uses are exempt from federal or state regulation because they are owned by
utility cooperatives and municipal entities. These entities may not renew TWC’s existing agreements when they expire,
and they may require TWC to pay substantially increased fees. A number of these entities are currently seeking to impose
substantial rate increases. For further discussion of pole attachment rates, see the discussion in “Risk Factors—TWC may
encounter substantially increased pole attachment costs.”
Equipment regulation. The FCC has adopted regulations intended to promote the retail availability and sale of set-
top boxes and other equipment that can be used to receive digital video services. With the exception of certain one-way
devices such as digital transport adapters (“DTAs”), these regulations prohibit cable operators from placing into service
set-top boxes that perform both channel navigation and conditional access security functions. The FCC has not applied
these regulations to DBS operators. In December 2014, Congress enacted the STELA Reauthorization Act of 2014
(“STELAR”), which will repeal, as of December 4, 2015, the federal mandate banning cable operators from integrating
security into their set-top boxes. STELAR directs the FCC to establish an advisory committee of technical experts to study
and report findings and recommendations to promote the retail availability of set-top boxes. TWC is unable to predict
what, if any, proposals might be adopted and implemented or what effect such requirements may have on TWC’s
business.
In 2012, TWC joined with 14 other MVPDs and device manufactures to launch a Set-Top Box Energy Conservation
Voluntary Agreement (the “Set-Top Box Agreement”) to continue to improve the energy efficiency of set-top boxes
through 2017. In 2013, the Set-Top Box Agreement was expanded to include additional devices and establish more
stringent energy conservation commitments that will become effective in 2017.
Copyright regulation. TWC’s cable systems provide subscribers with, among other things, content from local and
distant television broadcast stations. TWC generally does not obtain a license to use the copyrighted performances
contained in these stations’ programming directly from content owners. Instead, in exchange for filing reports with the
U.S. Copyright Office and contributing a percentage of basic service revenue to a federal copyright royalty pool, cable
operators obtain rights to retransmit copyrighted material contained in broadcast signals pursuant to a statutory license.
The elimination or substantial modification of this statutory copyright license has been the subject of ongoing legislative
and administrative review and, if eliminated, modified or interpreted differently by the U.S. Copyright Office, could
adversely affect TWC’s ability to obtain suitable programming and substantially increase TWC’s programming costs or
copyright payments.
In addition, when TWC obtains programming from third parties, TWC generally obtains licenses that include any
necessary authorizations to transmit the music included in it. When TWC creates its own programming and provides
various other programming or related content, including local origination programming and advertising that TWC inserts
into cable-programming networks, TWC is required to obtain any necessary music performance licenses directly from the
rights holders. These rights are generally controlled by three music performance rights organizations, each with rights to
the music of various composers. TWC generally has obtained the necessary licenses, either through negotiated licenses or
through procedures established by consent decrees entered into by some of the music performance rights organizations.
Tax. Under the Telecommunications Act of 1996, DBS providers benefit from federal preemption of locally imposed
or administered taxes and fees on video services, including those borne by the Company and its customers. Several states
have enacted or are considering parity tax measures to equalize the tax and fee burden imposed on DBS and cable video
services. DBS providers have been challenging such parity efforts in the courts, Congress and, increasingly, state
legislatures in an effort to maintain their competitive pricing advantage and preclude states from implementing such parity
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