Washington Post 2008 Annual Report Download - page 22

system. The general prohibition on integrated set-top boxes has the potential to increase the capital costs of cable
operators (because of the need to provide CableCARDs to customers and because the new type of converter box is
typically more expensive than the traditional integrated box) and, to the extent subscribers decide to buy their own boxes,
to reduce the revenues cable operators receive from leasing converter boxes (although in the case of the Company’s
Cable ONE subsidiary, that revenue is not material).
Other Requirements. Various other provisions in current federal law may significantly affect the costs or profits of cable
television systems. These matters include a prohibition on exclusive franchises, restrictions on the ownership of competing
video delivery services, a variety of consumer protection measures and various regulations intended to facilitate the
development of competing video delivery services. For example, the FCC’s program carriage rules govern disputes
between cable operators and programming services over the terms of carriage. Cable operators may not require a
programming service to grant it a financial interest or exclusive carriage rights as a condition of its carriage on a cable
system, and a cable system may not discriminate against a programming service in the terms and conditions of carriage
on the basis of its affiliation or nonaffiliation with such cable system. The FCC is considering proposals to make it easier
for independent programmers to bring such complaints and to expand the coverage of the rules to apply to cable systems
that carry programming owned by another cable operator.
In November 2007, the FCC issued rules voiding existing and prohibiting future exclusive service contracts for cable
video services to multiple dwelling units or other residential developments. In March 2008, the FCC extended the
prohibition to phone services, as well. Other provisions benefit the owners of cable systems by restricting regulation of
cable television in many significant respects, requiring that franchises be granted for reasonable periods of time,
providing various remedies and safeguards to protect cable operators against arbitrary refusals to renew franchises and
limiting franchise fees to 5% of a cable system’s gross revenues from the provision of cable service (which, for this
purpose, includes digital video service, but does not include cable modem service or digital voice service).
In November 2007, the FCC Chairman announced that the FCC would collect information from cable operators to
determine whether cable systems with 36 or more activated channels are available to 70% of households in the United
States and whether 70% of those households subscribe to cable. Upon such a finding, the Cable Communications Policy
Act of 1984 (“1984 Cable Act”) authorizes the FCC to promulgate “any additional rules necessary to promote diversity
of information sources.” It is unclear whether this provision applies solely to the FCC’s leased access rules or more
broadly. Although Cable ONE does not believe that this measure has been satisfied, and although the FCC has not yet
requested any additional information relevant to this issue, it cannot predict whether the FCC will reach the same
conclusion. Any additional regulations on Cable ONE’s business could have a negative impact.
In February 2008, the FCC issued revised commercial leased access rules that could substantially reduce the rates for
parties desiring to lease from 10% to 15% of the capacity on cable systems. The regulations also impose a variety of
leased access customer service, information and reporting standards. Implementation of these new rules has been stayed
by the courts, and certain of the rules also were rejected by the Office of Management and Budget (“OMB”) as
inconsistent with the federal Paperwork Reduction Act. Certain parties have requested that the FCC override the OMB
ruling, but no action has been taken on that request. If the new rules take effect, they will likely increase Cable ONE’s
costs and could cause additional leased access activity on Cable ONE’s cable systems. As a result, Cable ONE may
find it necessary to either discontinue other channels of programming or opt not to carry new channels of programming or
other services that may be more desirable to its customers.
In 2008, the FCC initiated a proceeding to consider changes in the rules applicable to cable operators and cable
programmers with respect to the disclosure of sponsorship identification and product placement advertising. This
proceeding remains pending.
Apart from its authority under the 1992 Cable Act and the Telecommunications Act of 1996, the FCC regulates various
other aspects of cable television operations. Longstanding FCC rules require cable systems to black out from certain
distant broadcast stations they carry syndicated programs for which local stations have purchased exclusive rights and
requested exclusivity and to delete, under certain circumstances, duplicative network programs broadcast by distant
stations. The FCC also imposes certain technical standards on cable television operators, exercises the power to license
various microwave and other radio facilities frequently used in cable television operations and regulates the assignment
and transfer of control of such licenses.
Internet Access Services
In 2005, the U.S. Supreme Court upheld the FCC’s classification of cable modem service as an “information service.” As
a result, cable modem service is not subject to the full panoply of regulations that applies to “cable services” or
10 THE WASHINGTON POST COMPANY