Washington Post 2012 Annual Report Download - page 27

In August 2011, the FCC released a report on possible alternatives to the Designated Market Area (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). 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 this
requirement, 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.
Pole Attachments. U.S. 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 another for attachments used to provide
“telecommunications services.” Several cable operators, including 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. In May 2010 and again in April 2011, the FCC adopted new
requirements relating to pole access and construction practices that were expected to improve the ability of cable
operators to attach to utility poles on a timely basis and to lower the pole attachment rate for telecommunications services.
The Company cannot predict the extent to which the ongoing court proceedings or these and other rule changes will
affect its ability over time to secure timely access to poles at reasonable rates. As a general matter, changes to Cable
ONE’s pole attachment rate structure could significantly increase its annual pole attachment costs.
U.S. Federal Copyright Issues. The U.S. Federal 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 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 2014, although it is possible that, as in the past, 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.
The U.S. Federal Copyright Office is considering requests for clarification and revisions of certain cable compulsory
copyright license reporting requirements. Cable ONE cannot predict the outcome of any such inquiries; 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.
In August 2011, the U.S. Federal Copyright Office released a report assessing possible mechanisms for eliminating the
cable and satellite statutory licenses. In November 2011, the Government Accountability Office released a report on the
effect that elimination of the compulsory licenses would have on the industry and viewers. These reports could be the basis
for future legislative or regulatory developments on these issues. The Company cannot predict if or how the copyright
regime may change, nor can the Company predict the net effect that changes to this regime would have on the
Company’s cable and broadcast operations or on the Company overall.
Telephone Company Competition. U.S. Federal law permits telephone companies 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, such as partnering with DBS operators or obtaining local franchise
agreements. Increased competition from telephone companies that provide competing services could have a material
effect on Cable ONE’s business.
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