Washington Post 2004 Annual Report Download - page 25

for DBS operators who wish to distribute the signals of local television stations to satellite subscribers in the markets served
by such stations. This Act continued the limitation on importing the signals of distant network-affiliated stations contained in
the original compulsory license for DBS operators.
The general prohibition on telephone companies operating cable systems in areas where they provide local telephone
service was eliminated by the Telecommunications Act of 1996. Telephone companies now can provide video services in
their telephone service areas under four different regulatory plans. First, they can provide traditional cable television
service and be subject to the same regulations as the Company's cable television systems (including compliance with local
franchise and any other local or state regulatory requirements). Second, they can provide ""wireless cable'' service,
which is described below, and not be subject to either cable regulations or franchise requirements. Third, they can provide
video services on a common-carrier basis, under which they would not be required to obtain local franchises but would be
subject to common-carrier regulation (including a prohibition against exercising control over programming content).
Finally, they can operate so-called ""open video systems'' without local franchises (although local communities can choose
to require a franchise) and be subject to reduced regulatory burdens. The Act contains detailed requirements governing
the operation of open video systems, including requiring the nondiscriminatory offering of capacity to third parties and
limiting to one-third of total system capacity the number of channels the operator can program when demand exceeds
available capacity. In addition, the rates charged by an open video system operator to a third party for the carriage of
video programming must be just and reasonable as determined in accordance with standards established by the FCC.
(Cable operators and others not affiliated with a telephone company may also become operators of open video
systems.) The Act also generally prohibits telephone companies from acquiring or owning an interest in existing cable
systems operating in their service areas.
The Telecommunications Act of 1996 balances this grant of video authority to telephone companies by removing various
regulatory barriers to the offering of telephone services by cable companies and others. The Act preempts state and local
laws that have barred local telephone competition in some states. In addition, the Act requires local telephone companies
to permit cable companies and other competitors to interconnect their equipment and facilities with the local telephone
network and requires telephone companies to give competitors access on an unbundled basis to certain essential features
and functionalities of that network (such as signal carriage from the subscriber's residence to the switching center). As an
alternative method of providing local telephone service, the Act permits cable companies and others to purchase
conventional telephone service on a wholesale basis and then resell it to their subscribers. In 2004 the FCC revised these
rules and limited the extent to which incumbent telephone companies must provide access to these features and
functionalities; the FCC also permitted incumbent telephone companies to increase the price they charge for such access.
At various times during the last decade, the FCC adopted rule changes intended to facilitate the development of
multichannel multipoint distribution systems, also known as ""wireless cable'' or ""MMDS,'' a video and data service that is
capable of distributing approximately 30 television channels in a local area by over-the-air microwave transmission using
analog technology and a greater number of channels using digital compression technologies. The use of digital technology
and a 1998 change in the FCC's rules to permit reverse path transmission over wireless facilities also make it possible for
such systems to deliver additional services, including Internet access. Also, in late 1998 the FCC auctioned a sizeable
amount of spectrum in the 31 gigahertz band for use by a new wireless service, which is referred to as the Local Multipoint
Distribution Service or ""LMDS,'' that has the potential to deliver television programming directly to subscribers' homes as
well as provide Internet access and telephony services. To date, however, there are no LMDS systems in operation that
deliver television programming or provide either Internet access or telephony. Separately, in 2000 the FCC approved the
use of spectrum in the 12.2-12.7 gigahertz band (the same band used by DBS operators) to provide a new land-based
interactive video and data delivery service known as the Multichannel Video Distribution and Data Service (""MVDDS'').
MVDDS providers will use ""reharvested'' DBS spectrum to transmit programming on a non-harmful interference basis using
terrestrial microwave transmitters. (While DBS subscribers point their dishes south to pick up their provider's signal, MVDDS
customers will aim their antennas north.) In January 2004 the FCC conducted an auction for the purpose of selecting
MVDDS licensees. Ten bidders won licenses in more than 190 markets, although the Company believes that no MVDDS
systems are yet in operation. MVDDS providers, like providers of other forms of wireless cable, will not be required to
obtain franchises from local governmental authorities and generally will operate under fewer regulatory requirements than
conventional cable systems.
In 1999 the FCC amended its cable ownership rule, which governs the number of subscribers an owner of cable systems
may reach on a national basis. Before revision, this rule provided that a single company could not serve more than 30% of
potential cable subscribers (or ""homes passed'' by cable) nationwide. The revised rule allowed a cable operator to
provide service to 30% of all actual subscribers to cable, satellite and other competing services nationwide, rather than to
30% of homes passed by cable. This revision had the effect of increasing the number of communities that could be served
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