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including both the deployment of broadband wire facilities and the use of
wireless transmission.
     Under the 1996 Telecom Act, local exchange carriers or any other cable
competitor providing video programming to subscribers through broadband wire
should be regulated as a traditional cable operator, subject to local
franchising and federal regulatory requirements, unless the local exchange
carrier or other cable competitor elects to deploy its broadband plant as an
open video system. To qualify for favorable open video system status, the
competitor must reserve two-thirds of the system's activated channels for
unaffiliated entities. The Fifth Circuit Court of Appeals recently reversed
certain of the Federal Communications Commission's open video system rules,
including its preemption of local franchising. That decision may be subject to
further appeal. It is unclear what effect this ruling will have on the entities
pursuing open video system operation.
     Although local exchange carriers and cable operators can now expand their
offerings across traditional service boundaries, the general prohibition remains
on local exchange carrier buyouts of co-located cable systems. Co-located cable
systems are cable systems serving an overlapping territory. Cable operator
buyouts of co-located local exchange carrier systems, and joint ventures between
cable operators and local exchange carriers 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 Federal Communications Commission with the limited authority to grant
waivers of the buyout prohibition.
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 Federal Communications Commission 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 Federal
Communications Commission 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 Federal Communications
Commission regulations prohibiting local cross-ownership between co-located
television stations and cable systems.
     Pursuant to the 1992 Cable Act, the Federal Communications Commission
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 Federal Communications
Commission rulemaking.
     MUST CARRY/RETRANSMISSION CONSENT.  The 1992 Cable Act contains broadcast
signal carriage requirements. Broadcast signal carriage is the transmission of
broadcast television signals over a cable system to cable customers. These
requirements, among other things, allow local commercial television broadcast
stations to elect once every three years between a "must carry" status or a
"retransmission consent" status. Less popular stations typically elect must
carry, which is the broadcast signal carriage requirement that allows local