Washington Post 2010 Annual Report Download - page 29

termination by the franchising authority. The Federal Communications Commission (“FCC”) has adopted rules designed to
expedite the process of awarding competitive franchises and relieving applicants for competing franchises of some
locally-imposed franchise obligations. The FCC also has extended certain of these “reforms” to incumbent cable
operators. Separately, a number of states (including Iowa, Kansas, Louisiana, Missouri, Tennessee and Texas—all states
in which Cable ONE operates cable systems) have enacted laws to permit video service providers to secure statewide
franchises, thereby relieving these providers of the need to seek multiple authorizations from various local franchising
authorities within a state. This development, which is especially beneficial to new entrants, is expected to continue to
accelerate the competition Cable ONE is experiencing in the marketplace for video service.
Rate Regulation. FCC regulations prohibit local franchising authorities or the FCC from regulating the rates that cable
systems charge for certain levels of video cable service, equipment and service calls when those cable systems are
subject to “effective competition.” The FCC has confirmed that some of the cable systems owned by the Company fall
within the effective-competition exemption, and the Company believes, based on an analysis of competitive conditions
within its systems, that other of its systems may also qualify for that exemption. Nevertheless, monthly subscription rates
charged for the basic tier of cable service, as well as rates charged for equipment rentals and service calls for many of
Cable ONE’s cable systems, remain subject to regulation by local franchising authorities in accordance with FCC rules.
However, rates charged by cable systems for tiers of service other than the basic tier—such as pay-per-view and
per-channel premium program services, digital video, cable modem and digital telephone services—and for advertising
currently are exempt from regulation.
“Must-Carry” and Retransmission Consent. Federal law provides that a commercial television broadcast station may,
subject to certain limitations, insist on carriage of its signal on cable systems located within the station’s market area.
Similarly, a noncommercial public station may insist on carriage of its signal on cable systems located either within the
station’s predicted Grade B signal contour or within 50 miles of a reference point in a station’s community designated by
the FCC. As a result of these obligations, certain of Cable ONE’s cable systems must carry broadcast stations that they
might not otherwise have elected to carry, and their freedom to drop signals previously carried has been reduced.
Commercial broadcasters have the right to elect at three-year intervals to forego must-carry rights and insist instead that
their signals not be carried by cable systems without their prior consent. Broadcasters must make their elections for the
next election cycle by October 1, 2011, with the elections effective January 1, 2012, through December 31, 2014. In
some cases, Cable ONE has been required to provide consideration to broadcasters to obtain retransmission consent,
such as commitments to carry other program services offered by a station or an affiliated company, to purchase
advertising on a station or to provide advertising availabilities on cable to a station. Many broadcasters have sought cash
payment from cable systems such as Cable ONE for the right to carry their signals. This development results in increased
operating costs for cable systems that ultimately increase the rates cable systems charge subscribers. In addition, there
have been numerous public retransmission consent disputes between broadcasters and cable providers in recent months,
which may prompt the FCC or Congress to impose new requirements on the negotiation process. Cable ONE cannot
predict whether these changes will be adopted or how any revised regulations would affect its business and operations.
In March 2010, several cable and direct broadcast satellite (“DBS”) operators and certain other parties filed a request for
a rulemaking at the FCC seeking certain changes to the FCC’s retransmission consent rules, such as authorization for
“interim carriage” of a broadcaster’s signal by cable and DBS operators after the broadcaster’s grant of retransmission
consent has expired, and limitations on the positions that broadcasters may take during negotiations. Broadcasters
opposed the rulemaking request, asserting that it would be contrary to the Communications Act of 1934, as amended
(the “Communications Act”), and the public interest. The FCC has announced that it will initiate a rulemaking proceeding
in 2011 with respect to its retransmission consent rules. Changes to the retransmission consent rules could materially affect
the Cable ONE cable systems’ (and the Post–Newsweek Stations, Inc. stations’) bargaining leverage in future
retransmission consent negotiations, and the Company cannot predict the net effect that such an order would have.
Congress may also pass legislation in 2011 that would affect the must-carry/retransmission consent regime.
Digital Television (“DTV”). FCC regulations require cable systems to ensure that all local must-carry broadcast stations
are “viewable” by all subscribers. Moreover, where a must-carry broadcast station’s signal is transmitted in high-definition
television (“HDTV”) format, cable operators generally are required to carry the signal in HDTV format. Although certain
smaller cable systems are not subject to these requirements, satisfaction of the generally applicable obligation could
increase Cable ONE’s costs by requiring it to expand the capacity of its cable systems or to delete some existing
programming to meet its carriage obligations for broadcasters’ DTV signals.
Pole Attachments. Federal law requires most telephone and power utilities to charge reasonable rates to cable
operators for utilizing space on utility poles or in underground conduits. The FCC has adopted two separate formulas for
calculating such rates: one for attachments by cable operators generally and a higher rate for attachments used to provide
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