Washington Post 2011 Annual Report Download - page 26

several states, including Iowa, Kansas, Louisiana, Missouri, Tennessee and Texas—all states in which Cable ONE operates
cable systems, have enacted laws permitting video service providers to secure statewide franchises, thereby relieving these
providers of the need to seek multiple authorizations from various local franchising authorities within a state. This
development, which is especially beneficial to new entrants, is expected to continue to accelerate the competition Cable
ONE is experiencing in the video service marketplace.
Rate Regulation. FCC regulations prohibit local franchising authorities or the FCC from regulating the rates that cable
systems charge for certain levels of video cable service, equipment and service calls when those cable systems are subject to
“effective competition.” The FCC has confirmed that some of the cable systems owned by the Company fall within the
effective-competition exemption, and the Company believes, based on an analysis of competitive conditions within its
systems, that other of its systems may also qualify for that exemption. Nevertheless, monthly subscription rates charged for the
basic tier of cable service, as well as rates charged for equipment rentals and service calls for many of Cable ONE’s cable
systems, remain subject to regulation by local franchising authorities in accordance with FCC rules. However, rates charged
by cable systems for tiers of service other than the basic tier—such as pay-per-view and per-channel premium program
services, digital video, Internet and digital voice services—currently are exempt from regulation.
“Must-Carry” and Retransmission Consent. U.S. Federal law provides that a commercial television broadcast station
may, subject to certain limitations, insist on carriage of its signal on cable systems located within the station’s market area.
Similarly, a noncommercial public station may insist on carriage of its signal on cable systems located either within the
station’s predicted Grade B signal contour or within 50 miles of a reference point in a station’s community designated by
the FCC. As a result of these obligations, certain of Cable ONE’s cable systems must carry broadcast stations that they
might not otherwise have elected to carry, and their freedom to drop signals previously carried has been reduced.
Commercial broadcasters have the right to elect at three-year intervals to forego must-carry rights and insist instead that
their signals not be carried by cable systems without their prior consent. Broadcasters were required to make their
elections for the current election cycle by October 1, 2011, with the elections effective January 1, 2012, through
December 31, 2014. In some cases, Cable ONE has been required to provide consideration to broadcasters to obtain
retransmission consent, such as commitments to carry other program services offered by a station or an affiliated
company, to purchase advertising on a station or to provide advertising availabilities on cable to a station, or to provide
cash compensation. This development results in increased operating costs for cable systems, which ultimately increases
the rates cable systems charge subscribers. In addition, there have been several public retransmission consent disputes
between broadcasters and cable providers in recent years, which may prompt the FCC or Congress to impose new
requirements on the negotiation process. Cable ONE cannot predict whether these changes will be adopted or how any
revised regulations would affect its business and operations.
In March 2010, several cable and direct broadcast satellite (DBS) operators and certain other parties filed a request for
rulemaking at the FCC seeking certain changes to the FCC’s retransmission consent rules, such as authorization for
“interim carriage” of a broadcaster’s signal by cable and DBS operators after the broadcaster’s grant of retransmission
consent has expired, and limitations on the positions that broadcasters may take during negotiations. Broadcasters
opposed the rulemaking request, asserting that it would be contrary to the U.S. Federal Communications Act of 1934, as
amended (the Communications Act), and the public interest. The FCC initiated a rulemaking proceeding in 2011 with
respect to its retransmission consent rules, and that proceeding is pending. Changes to the retransmission consent rules
could materially affect the Cable ONE cable systems’ (and Post–Newsweek Stations’) bargaining leverage in future
retransmission consent negotiations. The Company cannot predict the net effect that such an order would have on the
Company. Congress may also pass legislation that would affect the must-carry/retransmission consent regime, and the
Company also cannot predict the net effect that such legislation would have on Cable ONE.
In August 2011, the FCC released a report on possible alternatives to the DMA system and the availability of in-state
programming to viewers. This report could be the basis for future legislative or regulatory developments on market definitions
and retransmission consent. The Company cannot predict what changes, if any, may occur, or the net effect that changes in
these areas would have on the Company’s cable and broadcast operations and on the Company overall.
Digital Television (DTV). FCC regulations require cable systems to ensure that all local must-carry broadcast stations are
“viewable” by all subscribers. Moreover, where a must-carry broadcast station’s signal is transmitted in HDTV format,
cable operators generally are required to carry the signal in HDTV format. Although certain smaller cable systems are not
subject to these requirements, satisfaction of the generally applicable obligation could increase Cable ONE’s costs by
requiring it to expand the capacity of its cable systems or to delete some existing programming to meet its carriage
obligations for broadcasters’ DTV signals.
14 THE WASHINGTON POST COMPANY