Washington Post 2005 Annual Report Download - page 28

regulatory burdens, although the FCC could still propose regulations that might restrict the Company's future ability to
modify the way it provides cable modem service.
Cable companies and others have begun to offer telephone service using a technology known as voice over Internet
protocol (VoIP) which permits users to make telephone calls over the Internet. Depending on their equipment and service
provider, some VoIP subscribers can use a regular telephone (connected to an adaptor) to make and receive calls to or
from anyone on the public network. The 1996 Act preempts state and local regulatory barriers to the offering of telephone
service by cable companies and others, and the FCC has used that federal provision to preempt specific state laws that
seek to regulate VoIP. Other provisions of the 1996 Act enable a competitor such as a cable company to exchange voice
and data traffic with the incumbent telephone company and to purchase certain features at reduced costs, and these
provisions have enabled some cable companies to offer a competing telephone service. Earlier this year, the FCC ruled
that a VoIP provider that enables its customers to make calls to and from persons that use the public switched telephone
network must provide its customers with the same ""enhanced 911'' or ""E911'' features that traditional telephone and
wireless companies are obligated to provide. This decision has been challenged on appeal, though VoIP providers in the
meantime have been required to comply, including by ceasing to offer VoIP services in areas where they cannot ensure
E911 compliance. The FCC took another step in extending certain requirements to cable modem providers by ruling that
Internet access providers and VoIP providers are subject to the requirements of the Communications Assistance for Law
Enforcement Act (CALEA), which requires covered carriers and their equipment suppliers to deploy equipment that law
enforcement can readily access for lawful wiretap purposes. The FCC ruling, if upheld on appeal, means that cable
modem (and DSL) providers and VoIP companies all would be subject to CALEA's requirements. It is difficult at this time to
gauge the cost of compliance, since the FCC has not finished writing those rules, but the Company's cable modem
operations are likely to incur additional non-recurring and recurring costs to comply with CALEA. During 2004 some states
sought to regulate VoIP service pursuant to their common carrier jurisdiction, but VoIP providers challenged these actions
before the FCC. Later in 2004, the FCC ruled that VoIP services are interstate services subject exclusively to the FCC's
federal jurisdiction. This decision, if upheld on appeal (consumer groups and some state regulatory commissions have filed
an appeal), is significant because it includes VoIP offered by cable systems as within the scope of activities that are not
subject to state telecommunications regulation. Legislation also has been introduced in Congress to accomplish the same
objective, though the prospect for passage of such legislation is uncertain.
Litigation also is pending in various courts in which various franchise requirements are being challenged as unlawful under
the First Amendment, the Communications Act, the antitrust laws and on other grounds. Depending on the outcomes, such
litigation could facilitate the development of duplicative cable facilities that would compete with existing cable systems,
enable cable operators to offer certain services outside of cable regulation or otherwise materially affect cable television
operations.
The regulation of certain cable television rates pursuant to the authority granted to the FCC has negatively impacted the
revenues of the Company's cable systems. The Company is unable to predict what effect the other matters discussed in this
section may ultimately have on its cable television business.
Education
Kaplan, Inc., a subsidiary of the Company, provides an extensive range of educational services for children, students and
professionals. Kaplan's historical focus on test preparation has been expanded as new educational and career services
businesses have been acquired or initiated. The Company divides Kaplan's various businesses into two categories:
supplemental education, which consists of the Test Preparation and Admissions Division, the Professional Division, Score!
Educational Centers, and FTC Kaplan Limited (formerly known as The Financial Training Company); and higher education,
which consists of Kaplan's Higher Education Division and several companies that provide higher education services outside
the U.S.
Through its Test Preparation and Admissions Division, Kaplan prepares students for a broad range of admissions and
licensing examinations, including the SAT, LSAT, GMAT, MCAT, GRE, and nursing and medical boards. This business can
be subdivided into four categories: KÓ12 (serving schools and school districts seeking assistance in improving student
performance using print- and computer-based supplemental programs, preparing students for state assessment tests and
for the SAT and ACT, providing curriculum consulting services and providing professional training for teachers); Graduate
and Pre-College (serving high school and college students and professionals, primarily with preparation for admissions
tests to college and to graduate, medical and law schools); Medical (serving medical professionals preparing for
licensing exams); and English Language Training (serving foreign students and professionals wishing to study or work in
the U.S.). Many of this division's test preparation courses have been available to students via the Internet since 1999.
12 THE WASHINGTON POST COMPANY