Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition remains on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures between
cable operators and LECs in the same market. The 1996 Telecom Act provides a few
limited exceptions to this buyout prohibition, including a carefully
circumscribed "rural exemption." The 1996 Telecom Act also provides the FCC with
the limited authority to grant waivers of the buyout prohibition.
ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION. The 1996
Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services (including cable television)
notwithstanding the Public Utility Holding Company Act. Electric utilities must
establish separate subsidiaries, known as "exempt telecommunications companies"
and must apply to the FCC for operating authority. Like telephone companies,
electric utilities have substantial resources at their disposal, and could be
formidable competitors to traditional cable systems. Several such utilities have
been granted broad authority by the FCC to engage in activities which could
include the provision of video programming.
ADDITIONAL OWNERSHIP RESTRICTIONS. The 1996 Telecom Act eliminates
statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national video program services. Although the 1992 Cable
Act also precluded any cable operator from serving more than 30% of all U.S.
domestic cable subscribers, this provision has been stayed pending further
judicial review and FCC rulemaking.
MUST CARRY/RETRANSMISSION CONSENT. The 1992 Cable Act contains broadcast
signal carriage requirements that, among other things, allow local commercial
television broadcast stations to elect once every three years between requiring
a cable system to carry the station ("must carry") or negotiating for payments
for granting permission to the cable operator to carry the station
("retransmission consent"). Less popular stations typically elect "must carry,"
and more popular stations (such as those affiliated with a national network)
typically elect "retransmission consent." Must carry requests can dilute the
appeal of a cable system's programming offerings because a cable system with
limited channel capacity may be required to forego carriage of popular channels
in favor of less popular broadcast stations electing must carry. Retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse effect on the Company's business. The burden
associated with "must carry" may increase substantially if broadcasters proceed
with planned conversion to digital transmission and the FCC determines that
cable systems must carry all analog and digital broadcasts in their entirety. A
rulemaking is now pending at the FCC regarding the imposition of dual digital
and analog must carry.
ACCESS CHANNELS. LFAs can include franchise provisions requiring cable
operators to set aside certain channels for public, educational and governmental
access programming. Federal law also requires cable systems to designate a
portion of their channel capacity (up to 15% in some cases) for commercial
leased access by unaffiliated third parties. The FCC has adopted rules
regulating the terms, conditions and maximum rates a cable operator may charge
for commercial leased access use. We believe that requests for commercial leased
access carriages have been relatively limited.