Washington Post 2010 Annual Report Download - page 31

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
transmission standards, including an increasingly popular standard known as WiMAX, and may result in the increased
availability of mobile video services.
In 2008, the FCC auctioned additional spectrum in the 700 MHz band, which historically has been used for television
broadcasting, and it is expected that this additional spectrum will be used to deliver broadband, video and other services
to mobile devices. In the meantime, enhancements to existing 3G services and the introduction of 4G services into the
marketplace by mobile wireless carriers means that smart phones and other handheld mobile devices already are
capable of receiving video streams through their broadband connections. Still other entities, including coalitions of
television broadcasters, are in the process of rolling out technologies that will permit consumers to view broadcast
television on their laptops, tablets, smart phones and other handheld 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.
In December 2006, Cable ONE purchased in the FCC’s Advanced Wireless Service auction approximately 20 MHz of
spectrum in the 1.7 GHz and 2.1 GHz frequency bands in areas that cover more than 85% of the homes passed by
Cable ONE’s systems. This spectrum can be used to provide a variety of advanced wireless services, including fixed and
mobile high-speed Internet access using WiMAX and other digital transmission systems. Licenses for this spectrum have an
initial 15-year term and 10-year renewal terms. Licensees will be required to show that they have provided substantial
service by the end of the initial license term to be eligible to renew, but there are no interim construction or service
requirements. Cable ONE is evaluating how best to utilize its spectrum.
Horizontal and Vertical Ownership Limits. In September 2009, a reviewing court struck down and remanded the
FCC’s horizontal cable ownership rule, which provided that a single company could not serve more than 30% of
potential cable subscribers (or “homes passed” by cable) nationwide. Although the reviewing court’s decision authorizes
the FCC to seek to justify the rule, it is not clear whether the FCC will attempt to do so. Separately, the FCC 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, but it has taken no action to
implement such restrictions. 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 has 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
(“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. The FCC has granted some requests for
waivers of this rule, 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, 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). In 2010, the FCC
adopted certain modifications to its set-top box and CableCARD rules, which included extending the relief previously
provided to Cable ONE to all cable operators nationwide. While this change should facilitate the availability of low cost
set-top boxes, other changes adopted by the FCC that impact how cable operators bill for set-top boxes and the types
of CableCARDs they must deploy could increase operational costs for such operators. The FCC also in 2010 initiated a
broader regulatory proceeding to consider whether it should require all multichannel video program distributors, which
include cable operators, to develop and provide a new, universal set-top box solution that allows access to both online
and traditional video. The Company cannot predict whether, how or when the issues raised in this proceeding will be
resolved.
Disability Access. In September 2010, Congress passed the Twenty-First Century Communications and Video
Accessibility Act. This act directs the FCC to impose additional accessibility requirements on cable operators. For
example, exactly one year after the act’s enactment date, the FCC must reinstate the video description regulations that
the Commission adopted in 2000 (but which had been invalidated on appeal), with certain modifications specified
in the act. Under the 2000 video description rules, cable operators that serve 50,000 or more subscribers, as of
September 30, 2000, must provide 50 hours of video description per calendar quarter during prime time or on
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