Washington Post 2012 Annual Report Download - page 29

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. Also in 2010, the FCC 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 or the extent to which the issues raised in this proceeding will be resolved.
In 2011, the FCC initiated a rulemaking proceeding to review a rule prohibiting encryption of the basic service tier. In
2012, the FCC amended its rules to allow cable operators to encrypt the basic service tier in all-digital cable systems if
they comply with certain consumer-protection measures. The Company cannot predict the impact of this decision on its
business, except that it is expected to decrease the burden of regulation on the cable industry as a whole.
In 2012, the FCC clarified and waived until June 3, 2014, the “open industry standard” that requires cable set-top boxes
to include a recordable, Internet Protocol (IP)-based output. Although these requirements are expected to impose costs on
cable operators, they now have additional time in which to comply.
In January 2013, the Department of Energy tentatively designated set-top boxes and network equipment as covered
consumer products and proposed to adopt a new test procedure for set-top boxes as part of its Energy Conservation
Program for Consumer Products and Certain Commercial and Industry Equipment. Imposing energy conservation
regulations on cable industry products could impede innovation and upgrades in set-top boxes and be costly to the cable
industry. The Company cannot predict whether, how or when the issues raised in this proposal will be resolved.
Disability Access. In September 2010, Congress passed the Twenty-First Century Communications and Video
Accessibility Act (CVAA). The CVAA directs the FCC to impose additional accessibility requirements on cable operators.
For example, pursuant to the CVAA, the FCC has reinstated the video description regulations that the FCC had adopted
in 2000 (which had been invalidated on appeal), with certain modifications specified in the CVAA. Thus, cable
operators that serve 50,000 or more subscribers must provide 50 hours of video description per calendar quarter during
prime time or on children’s programming, on each channel on which they carry one of the top five national nonbroadcast
networks. In addition, cable operators of all sizes must pass through video description that is provided for each broadcast
station or nonbroadcast network that they carry. Compliance imposes certain costs on the Company. The CVAA also
directs the FCC to adopt rules to help ensure that certain video programming distributors convey emergency information in
a manner that is accessible to persons who are blind or visually impaired. In addition, the CVAA requires the FCC to
subject devices designed to receive, play back or record video programming transmitted simultaneously with sound, such
as set-top boxes, to regulations governing (1) the display of closed-captioned video programming, (2) the transmission
and delivery of video description services and (3) the conveyance of emergency information. The Company cannot
predict the compliance deadline that the FCC will establish or the content of the rules it will adopt. Compliance with the
new rules could impose new costs on the Company.
Other Requirements. In February 2008, the FCC issued revised commercial leased access rules that require cable
operators to make a certain portion of their systems’ capacity available to parties desiring to transmit programming via
cable on a leased basis. These revised rules could substantially reduce the rates for parties desiring to lease capacity
on cable systems and 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 some of the rules were rejected by the Office of
Management and Budget (OMB) as inconsistent with the U.S. Federal Paperwork Reduction Act. Certain parties have
requested that the FCC override the OMB ruling, but no action has been taken on that request. The FCC has not
indicated its intent to move forward with implementation of these new rules. If they take effect, however, they likely will
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.
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