Washington Post 2012 Annual Report Download - page 37

things, how the incentive auction process should work and how the FCC should conduct a “repacking,” whereby the
FCC would require certain stations to move to new channel allotments so as to free up a nationwide block of spectrum for
wireless broadband use. The repacking and incentive auction process are subject to certain requirements established by
Congress in legislation enacted in February 2012. The FCC’s implementation of this legislation in the repacking and
incentive auction process could have an adverse effect on the Company. For example, a repacking could result in PNS
stations having smaller service areas and/or receiving more interference than they do today. Stations moving to new
channels also could incur significant expense. The legislation requires that stations be compensated for the expenses of
moving to a new channel from spectrum auction proceeds. The Company cannot predict whether a repacking will occur,
what effect it will have on the PNS stations’ coverage or whether the PNS stations will be fully compensated for expenses
that they incur in connection with a repacking.
Carriage of Local Broadcast Signals. The Communications Act and the FCC rules allow a commercial television
broadcast station, under certain circumstances, to insist on mandatory carriage of its signal on cable systems serving the
station’s market area (must carry). Alternatively, stations may elect, at three-year intervals, to forego must-carry rights and
allow their signals to be carried by cable systems only pursuant to a “retransmission consent” agreement. For stations that
elect must carry, only a single stream of video (that is, a single channel of programming), rather than a television
broadcast station’s entire signal, is eligible for mandatory carriage by a cable system operator. Thus, a television station
currently can obtain carriage of one or more digital multicast streams only through a retransmission consent agreement
with a cable operator.
Stations that elect retransmission consent may negotiate for compensation from cable systems in exchange for the right to
carry their signals. Each of PNS’s television stations is being carried on all of the major cable systems in each station’s
respective local market, pursuant to retransmission consent agreements.
Commercial television stations also may elect either mandatory carriage or retransmission consent with respect to the
carriage of their signals on DBS systems that choose to provide “local-into-local” service (i.e., to distribute the signals of
local television stations to viewers in the local market area). In 2008, the FCC ruled that if a DBS operator carries the
signal of any television station in a market in HDTV, it will be required to carry all other local stations in HDTV (rather than
in a lower resolution format). Recognizing the capacity and technological constraints faced by DBS operators, the FCC
established a four-year phase-in period, starting in 2009, during which DBS systems must progressively transition their
local-into-local markets into compliance with this “HD carry-one, carry-all” requirement. DISH Network (DISH) and DirecTV
have HDTV local station carriage in all of the PNS stations’ markets, and all PNS stations are carried in HDTV by both of
these DBS operators.
As with cable, television stations make DBS carriage elections between mandatory carriage and retransmission consent at
three-year intervals. On or prior to October 1, 2011, the Company elected retransmission consent status for its stations
with respect to major cable operators and the two DBS operators. These elections apply to the three-year period from
January 1, 2012, through December 31, 2014, and the stations are carried by the major cable and DBS operators
serving each station’s market pursuant to retransmission consent agreements.
In March 2011, the FCC initiated a rulemaking seeking comments on changes to the FCC’s retransmission consent rules,
many of which had been proposed by cable and DBS operators, 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. This rulemaking also sought comment on
limiting or eliminating the network nonduplication and syndicated exclusivity rules. Broadcasters opposed many of the
proposed rule changes on which the FCC sought comment, asserting that they would be contrary to the Communications
Act and the public interest. Changes to the retransmission consent and/or network nonduplication and syndicated
exclusivity rules could materially affect the PNS stations’ (and Cable ONE’s cable systems’) bargaining leverage in future
retransmission consent negotiations, and the Company cannot predict the net effect that such an order would have.
Congress may also pass legislation that would affect the must-carry/retransmission consent regime.
In August 2011, the FCC released a report on possible alternatives to the designated market area system and the
availability of in-state programming to viewers. Also in August 2011, the U.S. Federal Copyright Office released a report
assessing possible mechanisms for eliminating the cable and satellite statutory licenses. Finally, 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. All three reports were required by the U.S. Federal Satellite Television Extension and Localism
Act (STELA) and could be the basis for future legislative or regulatory developments on these issues. STELA also extends
the statutory copyright license for satellite carriage of distant broadcast television signals through December 31, 2014.
The Company cannot predict if or how the communications or copyright regimes may change, nor can the Company
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