Washington Post 2008 Annual Report Download - page 21

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. In 2006, the FCC adopted rules intended to accelerate the local franchising process by requiring
local franchising authorities to act on franchise applications within 90 days and prohibiting those authorities from
imposing special fees and payments on providers of such service. Local franchising authorities sought judicial review of
these rules, but the rules were upheld on appeal. Separately, a number of states (including Iowa, Kansas, Missouri,
Tennessee and Texas—all states in which the Company operates cable systems) have enacted laws to permit telephone
companies and others to provide video program distribution service through a statewide franchise, thereby relieving these
providers of the need to seek multiple authorizations within a state from various local franchising authorities. All of these
developments are expected to continue to accelerate the competition Cable ONE is experiencing in the marketplace for
video service.
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
to be used for non-video services and permitted transmitters to be deployed in cellular patterns. As a result of these rule
changes, the 2.5 GHz and other frequency bands (including the 1.7 GHz and 2.1 GHz bands in which the FCC
auctioned spectrum in 2006) now are being adopted for the delivery of two-way broadband digital data and high-speed
Internet access services capable of covering large areas. Initially, these services were going to be provided on a fixed
basis, delivering access to houses and businesses, but they now are expected to accommodate mobile devices, such as
laptop computers with a wireless adapter card. These wireless networks are expected to use a variety of advanced
transmission standards, including an increasingly popular standard known as WiMAX, and may result in the increased
availability of mobile video services. Also in 2006, a number of cellular telephone providers introduced or expanded
subscription services that deliver full-length television programs or video clips directly to cellular telephones, although at
present, these services are capable of supporting only a limited number of available video streams. In 2008, the FCC
auctioned additional spectrum in the 700 MHz band, which historically has been used for analog television
broadcasting, and it is expected that this additional spectrum will be used to accommodate broadband, video and other
services to mobile devices. Although it is not yet clear what effect, if any, the increased availability of mobile video
services will have on the cable television industry, these developments likely will increase the number of competitive
alternatives to Cable ONE’s services.
Horizontal and Vertical Ownership Limits. In December 2007, the FCC reinstated its horizontal cable ownership rule,
which governs the number of subscribers an owner of cable systems may reach on a national basis, providing that a
single company could not serve more than 30% of potential cable subscribers (or “homes passed” by cable) nationwide.
Judicial challenges have been brought with respect to the revised rule that is virtually identical to the prior restriction that
was invalidated on constitutional and procedural grounds by the U.S. Court of Appeals for the DC Circuit in 2001. The
FCC also has proposed reinstating vertical ownership restrictions that would cap the percentage of a cable system’s
channel capacity that could be used to carry channels in which the operator has an ownership interest.
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 DC 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.
Set-Top Boxes. Pursuant to a Congressional directive to promote competition in the retail market for set-top converter
boxes, the FCC adopted rules barring cable operators from deploying set-top boxes with “integrated” security and
navigation functions and requiring cable operators to support boxes and other devices designed to accept plug-in cards
(known as “CableCARDs”) that provide the descrambling and other security features that traditionally have been included
in the integrated set-top converter boxes leased by cable operators to their customers. Those rules took effect on July 1,
2007 after the FCC rejected requests that it generally delay their implementation until 2009. However, the FCC has
granted some individual requests for waiver and has pending before it additional requests, including one such request
filed by Cable ONE to allow it to offer low-cost, HD-capable integrated set-top boxes to subscribers of its Dyersburg, TN,
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