Washington Post 2005 Annual Report Download - page 27

if passed it could accelerate the development of duplicative cable facilities. In addition, the FCC in November 2005
initiated a proceeding seeking information on whether local governments are managing the franchising process in a manner
that facilitates entry by new companies.
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. In 2004, to facilitate provision of wireless broadband
services, the FCC adopted an order reconfiguring the 2.5 gigahertz band in which the MMDS services are licensed. Since
that decision, many of these licensees (now referred to by the FCC as Broadband Radio Service licensees) have
announced that they will use the spectrum to deliver broadband Internet access and will no longer seek to provide video
distribution services. Over the past decade, the FCC also has made other spectrum available for other video distribution
services, including Local Multipoint Distribution Service (""LMDS'') in the 31 gigahertz band and Multichannel Video
Distribution and Data Service (""MVDDS'') in the 12.2Ó12.7 gigahertz band, but the Company believes that none of
these systems are yet in operation in any of the areas where the Company provides cable service. Like DBS operators,
providers of these services would not be required to obtain franchises from local governmental authorities and generally
would 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
by a single cable operator and may have resulted in more consolidation in the cable industry. In 2001 the U.S. Court of
Appeals for the D.C. Circuit voided the FCC's revised rule on constitutional and procedural grounds and remanded the
matter to the FCC for further proceedings. The FCC has since opened a proceeding to determine what the ownership limit
should be, if any. If the FCC eliminates the limit or adopts a new rule with a higher percentage of nationwide subscribers a
single cable operator is permitted to serve, that action could lead to even greater consolidation in the industry.
In 1996 Congress repealed the statutory provision that generally prohibited a party from owning an interest in both a
television broadcast station and a cable television system within that station's Grade B contour. However Congress left the
FCC's parallel rule in place, subject to a congressionally mandated periodic review by the agency. The FCC, in its
subsequent review, decided to retain the prohibition for various competitive and diversity reasons. However in 2002 the
U.S. Court of Appeals for the District of Columbia Circuit struck down the rule, holding that the FCC's decision to retain the
rule was arbitrary and capricious. Thus there currently is no restriction on the ownership of both a television broadcast
station and a cable television system in the same market.
In 2002 the FCC issued a declaratory ruling classifying cable modem service as an ""information service.'' Concurrently,
the FCC issued a notice of proposed rulemaking to consider the regulatory implications of this classification. Among the
issues raised in that proceeding are whether local authorities can require cable operators to provide competing Internet
service providers with access to the cable operators' facilities, the extent to which local authorities can regulate cable
modem service, and whether local authorities can impose fees on the provision of cable modem service. In 2003 the
U.S. Court of Appeals for the Ninth Circuit, on an appeal from the FCC's declaratory ruling noted above, ruled that cable
modem service is partly an ""information service'' and partly a ""telecommunications service.'' In June 2005 the
U.S. Supreme Court reversed the Ninth Circuit and held that the FCC's classification of cable modem service as an
""information service'' was a reasonable interpretation of the statute. As a result, cable modem service is not subject to the
full panoply of regulations applied to ""telecommunications services'' or to ""cable services'' under the Communications
Act, nor is it subject to state or local government regulation. In the wake of the Supreme Court's decision, the FCC ruled in
August 2005 that a telephone company's offering of digital subscriber line (""DSL'') Internet access service is also an
""information service.'' At that time, the FCC adopted a general policy statement that the providers of cable modem and
DSL services should not interfere with the use of the Internet by their customers, but it declined to adopt any specific rules in
that regard. However, the FCC also initiated a rulemaking on what consumer protection requirements should apply in the
context of cable modem and DSL services. That rulemaking is currently pending and its outcome is uncertain. The
Company's Cable One subsidiary currently offers Internet access on virtually all of its cable systems and is the sole Internet
service provider on those systems. The Court's decision affirming the FCC's classification of cable modem service removes
some uncertainty surrounding the Company's ability to deliver Internet access without facing substantially increased
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