Washington Post 2012 Annual Report Download - page 26

by Congress has negatively affected Cable ONE’s revenue. Certain other legislative and regulatory matters discussed in
this section also have the potential to adversely affect Cable ONE’s cable television, Internet and voice businesses.
Cable Television
U.S. Federal law requires or authorizes the imposition of a wide range of regulations on cable television operations.
Franchising. Cable ONE’s cable systems are required to obtain franchises from state or local governmental authorities
to operate. Those franchises typically are nonexclusive and limited in time, contain various conditions and limitations and
provide for the payment of fees to the local authority, determined generally as a percentage of revenues. Additionally,
those franchises often regulate the conditions of service and technical performance and contain various types of
restrictions on transferability. Failure to comply with all of the terms and conditions of a franchise may give rise to rights of
termination by the franchising authority. The U.S. 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, several states, including Idaho, Iowa, Kansas, Louisiana, Missouri, Tennessee and Texas—all
states in which Cable ONE operates cable systems—have enacted laws permitting 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 video service marketplace.
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 Cable ONE fall
within the effective-competition exemption, and Cable ONE 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, Internet and digital voice services—currently are exempt from
regulation.
“Must-Carry” and Retransmission Consent. U.S. 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 were required to make their
elections for the current 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, or to provide
cash compensation. This development results in increased operating costs for cable systems, which ultimately increases
the rates cable systems charge subscribers. In addition, there have been several public retransmission consent disputes
between broadcasters and cable providers in recent years, 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
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. The FCC initiated a
rulemaking proceeding in 2011 with respect to its retransmission consent rules, and that proceeding is pending. Changes
to the retransmission consent rules could materially affect the Cable ONE cable systems’ (and Post–Newsweek Stations’)
bargaining leverage in future retransmission consent negotiations. The Company cannot predict the net effect that such an
order would have on the Company. Congress may also pass legislation that would affect the must-carry/retransmission
consent regime, and the Company also cannot predict the net effect that such legislation would have on Cable ONE.
14 THE WASHINGTON POST COMPANY