Washington Post 2009 Annual Report Download - page 23

Pole Attachments. Federal law requires most telephone and power utilities to charge reasonable rates to cable operators
for utilizing space on utility poles or in underground conduits. The FCC has adopted two separate formulas for calculating
such rates: one for attachments by cable operators generally and a higher rate for attachments used to provide
“telecommunications services.” A number of cable operators (including the Cable ONE) are using their cable systems to
provide not only television programming, but also Internet access and digital voice. In 2002, the U.S. Supreme Court held
that the lower pole attachment rates apply not only to attachments used to provide traditional cable services, but also to
attachments used to provide Internet access services. The FCC has not yet determined whether digital voice provided by
cable operators is a “telecommunications service” that would trigger the higher pole attachment rates. Changes to Cable
ONE’s pole attachment rate structure could significantly increase its annual pole attachment costs.
Federal Copyright Issues. The Copyright Act of 1976, as amended, gives cable television systems the ability, under
certain terms and conditions and assuming that any applicable retransmission consents have been obtained, to retransmit
the signals of television stations pursuant to a compulsory copyright license. Those terms and conditions require all cable
systems that retransmit broadcast signals to pay semiannual royalty fees, generally based on the systems’ gross revenues
from basic service and, in certain instances, the number of “distant” broadcast signals carried. The compulsory license
fees have been increased on several occasions since this act went into effect. Since 1989, a separate compulsory
copyright license for distant signal retransmissions has applied to direct broadcast satellite (“DBS”), and in 1999,
Congress provided DBS with a royalty-free compulsory copyright license for distribution of the signals of local television
stations to satellite subscribers in the markets served by such stations. The cable compulsory license for local and distant
signals and the DBS local signal compulsory license are permanent, while the DBS distant signal compulsory license is
scheduled to sunset at the end of February 2010, although it is possible that the DBS distant signal compulsory license will
be extended. In addition, the cable and DBS compulsory licenses employ different methodologies for calculating royalties,
with cable using a percentage of revenues approach and DBS using a flat, per subscriber, per signal payment approach.
Congress is considering amendments to the cable compulsory license that could affect application of the compulsory
license to the retransmission of digital television broadcast signals, revise certain compulsory license reporting
requirements and change how statutory royalty fees are calculated. In addition, the Copyright Office is considering
requests for clarification of the application of the cable compulsory license to the retransmission of distant DTV broadcast
signals and for clarification and revisions of certain cable compulsory copyright license reporting requirements. Cable
ONE cannot predict the outcome of any such inquiries, rulemaking proceedings or legislative initiatives; however, it is
possible that changes in the rules or copyright compulsory license fee computations or compliance procedures could have
an adverse effect on its business by increasing copyright compulsory license fee costs or by causing Cable ONE to
reduce or discontinue carriage of certain broadcast signals that it currently carries on a discretionary basis.
Telephone Company Competition. Federal law permits telephone companies also to offer video programming
services. Over the past decade, telephone companies have pursued multiple strategies to enter the market for the delivery
of multichannel video programming services. Initially, some telephone companies partnered with DBS operators to resell a
DBS service to their telephone customers. Some telephone companies still do this, but other telephone companies have
entered into traditional franchise agreements with local and state franchising authorities and have constructed their own
video programming delivery systems. Still other telephone companies have developed other methods to deliver video
programming that, depending on the technology employed, may be regulated in a manner similar to the Company’s
cable systems. Some telephone companies have taken the 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. Increased competition from telephone
companies that provide competing services could have a material effect on Cable ONE’s business.
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 nonvideo 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
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