Washington Post 2007 Annual Report Download - page 41

DBS operators the ability to distribute the signals of local television stations to subscribers in the stations’ local market
area (“local-into-local” service), subject to obtaining the consent of each local television station included in such a
service. Under an FCC rule implementing provisions of this act, DBS operators are required to carry the analog signals
of all full-power television stations that request such carriage in the markets in which the DBS operators have chosen to
offer local-into-local service. The FCC has also adopted rules that require certain program-blackout rules applicable to
cable television to be applied to DBS operators. In addition, the Satellite Home Viewer Improvement Act and
subsequent legislation continued restrictions on the transmission of distant network stations by DBS operators. Thus,
DBS operators generally are prohibited from delivering the signals of distant network stations to subscribers who can
receive the analog signal of the network’s local affiliate. Several lawsuits were filed beginning in 1996 in which
plaintiffs (including all four major broadcast networks and network-affiliated stations, including one of the Company’s
Florida stations) alleged that certain DBS operators had not been complying with the prohibition on delivering network
signals to households that can receive the analog signal of the local network affiliate over the air. The plaintiffs entered
into a settlement with DBS operator DirecTV, under which it agreed to discontinue distant network service to certain
subscribers and alter the method by which it determines eligibility for this service. In 2003, the plaintiffs obtained a
favorable verdict and an injunction against DBS operator EchoStar, and those actions were upheld by the U.S. Court of
Appeals for the Eleventh Circuit in May 2006. In October 2006, the lower court issued an order enjoining EchoStar
from providing the signals of out-of-market affiliates of the major broadcast networks to its subscribers (including, as
permitted by the relevant statute, subscribers who EchoStar could have provided signals to had it not violated the
importation restrictions) after December 1, 2006. EchoStar did stop providing those signals, but leased satellite
capacity to a third party who announced that it would provide distant network signals to those EchoStar customers who
would have been entitled to receive them from EchoStar absent the court order. That arrangement is currently being
challenged in court by the networks. In addition to the matters discussed above, the Company’s television stations may
also become subject to increased competition from low-power television stations, wireless cable services and satellite
master antenna systems (which can carry pay-cable and similar program material). Beginning in late 2005, the ABC
and NBC television networks and the MTV cable network began to make certain of their television programming
available on a fee-per-episode basis for downloading over the Internet to video-enabled iPod players. In 2006,
Google launched a service that distributes certain programming from the CBS television network, the National
Basketball Association and other sources for viewing on personal computers, as well as on portable video players.
Google charges a fee for some of the programming available on its service while other programming is provided free.
Major TV networks have started to offer some of their programming on their Internet sites, in some cases free of charge.
In September 2006, Apple Computer, Inc. announced a new device (initially referred to as “iTV”) that will display
programming downloaded over the Internet on television sets, and other vendors have begun to offer similar devices. If
these video-download services become popular, they could become a competitive factor for both the Company’s
television stations and, with respect to the conventional delivery of television programming, the Company’s cable
television systems. Such services might also present additional revenue opportunities for the Company’s television
stations from the possible distribution on such services of the stations’ news and other local programming.
Cable television systems operate in a highly and increasingly competitive environment. In addition to competing with
the direct reception of television broadcast signals by the viewer’s own antenna, such systems (like existing television
stations) are subject to competition from various other forms of video program delivery. In particular, DBS services
(which are discussed in more detail in the preceding paragraph) have been growing rapidly and are now a significant
competitive factor. The ability of DBS operators to provide local-into-local service (as described above) has increased
competition between cable and DBS operators in markets where local-into-local service is provided. Although DBS
operators are not required by law to provide local-into-local service, in connection with the 2003 acquisition by News
Corporation (“News Corp.”) of a controlling interest in DirecTV, DirecTV agreed with the FCC to provide that service in
all U.S. markets by the end of 2008. EchoStar has announced that it also intends eventually to provide local-into-local
service in all U.S. markets. While some smaller markets may not receive this service for another year or so, local-into-
local service is currently being offered by both DirecTV and EchoStar in most markets in which the Company provides
cable television service. News Corp. is a global media company that in the United States owns the Fox Television
Network, 35 broadcast television stations, a group of regional sports networks and a number of nationally distributed
cable networks (including the Fox News Channel, FX, the Fox Movie Channel, the Speed Channel and Fox Sports
Net). Its acquisition of a controlling interest in DirecTV was approved by the FCC in an order that, among other things,
requires News Corp. to offer carriage of its broadcast television stations and access to its cable programming services
to cable television systems and other multichannel video programming distributors on nonexclusive and nondiscrim-
inatory terms and conditions. Notwithstanding the requirements imposed by the FCC, this acquisition has the potential
not only to enhance DirecTV’s effectiveness as a competitor, but also to limit the access of cable television systems to
desirable programming and to increase the costs of such programming. Certain of the Company’s cable television
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