Washington Post 2010 Annual Report Download - page 30

“telecommunications services.” A number of cable operators (including Cable ONE) are using their cable systems to provide
not only television programming, but also Internet access and digital voice. In 2002, the U.S. Supreme Court held that the
lower pole attachment rates apply not only to attachments used to provide traditional cable services, but also to attachments
used to provide Internet access services. More recently, in May 2010, the FCC adopted new requirements relating to pole
access and construction practices that are expected to improve the ability of cable operators to attach to utility poles on a
timely basis. The FCC also at that time initiated a new regulatory proceeding to continue to consider the extent to which
uniform pole attachment rates should be applicable to all attachers, whether certain new pole attachment time lines and
other requirements should apply to pole owners to better facilitate network build-outs by cable operators and other
competitors, and whether certain improvements should be made to the pole attachment enforcement process at the FCC.
The Company cannot predict whether or when the FCC will adopt these rule revisions or the effect that they may have on
the Company. As a general matter, changes to Cable ONE’s pole attachment rate structure could significantly increase its
annual pole attachment costs.
Federal Copyright Issues. The Copyright Act of 1976, as amended, gives cable television systems the ability, under
certain terms and conditions and assuming that any applicable retransmission consents have been obtained, to retransmit
the signals of television stations pursuant to a compulsory copyright license. Those terms and conditions require all cable
systems that retransmit broadcast signals to pay semiannual royalty fees, generally based on the systems’ gross revenues
from basic service and, in certain instances, the number of “distant” broadcast signals carried. The compulsory license fees
have been increased on several occasions since this act went into effect. Since 1989, a separate compulsory copyright
license for distant signal retransmissions has applied to direct broadcast satellite (“DBS”), and in 1999, Congress provided
DBS with a royalty-free compulsory copyright license for distribution of the signals of local television stations to satellite
subscribers in the markets served by such stations. The cable compulsory license for local and distant signals and the DBS
local signal compulsory license are permanent, while the DBS distant signal compulsory license is scheduled to sunset at the
end of 2014, although it is possible that, as in the past, the DBS distant signal compulsory license will be extended. In
addition, the cable and DBS compulsory licenses employ different methodologies for calculating royalties, with cable using
a percentage of revenues approach and DBS using a flat, per subscriber, per signal payment approach.
The Copyright Office is considering requests for clarification and revisions of certain cable compulsory copyright license
reporting requirements. Cable ONE cannot predict the outcome of any such inquiries; however, it is possible that
changes in the rules or copyright compulsory license fee computations or compliance procedures could have an adverse
effect on its business by increasing copyright compulsory license fee costs or by causing Cable ONE to reduce or
discontinue carriage of certain broadcast signals that it currently carries on a discretionary basis.
Telephone Company Competition. Federal law permits telephone companies also to offer video programming
services. Over the past decade, telephone companies have pursued multiple strategies to enter the market for the delivery
of multichannel video programming services. Initially, some telephone companies partnered with DBS operators to resell a
DBS service to their telephone customers. Some telephone companies still do this, but other telephone companies have
entered into traditional franchise agreements with local and state franchising authorities and have constructed their own
video programming delivery systems. Still other telephone companies have developed other methods to deliver video
programming that, depending on the technology employed, may be regulated in a manner similar to the Company’s
cable systems. Some telephone companies have taken the position that the specific technology employed in delivering
video programming dictates whether a local franchise is required. The theory is that because the provider is not delivering
a “cable service,” as that term is defined in federal law, but rather is delivering an “information service,” which by law is
not subject to regulation by state and local governments, no local franchise is required. Neither the FCC nor the courts
have addressed this issue definitively, but in the meantime, most major telephone companies are entering into franchise
agreements to provide their video programming distribution services to consumers. Increased competition from telephone
companies that provide competing services could have a material effect on Cable ONE’s business.
Competition from “Over-the-Top” Video Programming. The continued proliferation of broadband services in the U.S. and
related increases in broadband capacities and speeds has enabled cable programmers and broadcast television stations to
“stream” their video content to consumers over the Internet. Although the Company has benefited generally from the growth in
broadband due to its role as a provider of broadband services, the continued and growing availability of cable programming
and broadcast television content on the Internet may result in less demand for the Company’s cable service offering. The
Company cannot predict how widespread this practice may become or the extent to which the integrated functionality and
ease of use of the cable television platform will continue to appeal to the majority of its subscribers.
Wireless Services. At various times over the past decade, the FCC has taken steps to facilitate the use of certain
frequencies, notably the 2.5 GHz and 3.1 GHz bands, to deliver over-the-air multichannel video programming services
to subscribers in competition with cable television systems. However, those services generally were not deployed
commercially in any significant way. Beginning in 2004, the FCC adopted rule changes that allowed the 2.5 GHz band
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