Charter 2011 Annual Report Download - page 25

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have never been certified to regulate basic service cable rates (and order rate reductions and refunds), but they generally retain
the right to do so (subject to potential regulatory limitations under state franchising laws), except in those specific communities
facing “effective competition,” as defined under federal law. We have secured FCC recognition of effective competition, and
become rate deregulated in many of our communities.
There have been frequent calls to impose expanded rate regulation on the cable industry. Confronted with rapidly increasing cable
programming costs, it is possible that Congress may adopt new constraints on the retail pricing or packaging of cable programming.
For example, there has been legislative and regulatory interest in requiring cable operators to offer historically combined
programming services on an à la carte basis. Any such mandate could adversely affect our operations.
Federal rate regulations include certain marketing restrictions that could affect our pricing and packaging of service tiers and
equipment. As we attempt to respond to a changing marketplace with competitive pricing practices, we may face regulations that
impede our ability to compete.
Must Carry/Retransmission Consent. There are two alternative legal methods for carriage of local broadcast television stations
on cable systems. Federal “must carry” regulations require cable systems to carry local broadcast television stations upon the
request of the local broadcaster. Alternatively, federal law includes “retransmission consent” regulations, by which popular
commercial television stations can prohibit cable carriage unless the cable operator first negotiates for “retransmission consent,”
which may be conditioned on significant payments or other concessions. Broadcast stations must elect “must carry” or
“retransmission consent” every three years, with the election date of October 1, 2009, for the current period of 2012 through 2014.
Either option has a potentially adverse effect on our business by utilizing bandwidth capacity. In addition, popular stations invoking
“retransmission consent” have been demanding substantial compensation increases in their negotiations with cable operators.
In September 2007, the FCC adopted an order increasing the cable industry’s must-carry obligations by requiring most cable
operators to offer “must carry” broadcast signals in both analog and digital format (dual carriage). This requirement, which does
not currently include any obligation to carry multiple program streams included within a single digital broadcast transmission
(multicast carriage), is scheduled to expire in June 2012, but may be extended by the FCC. Additional government-mandated
broadcast carriage obligations could disrupt existing programming commitments, interfere with our preferred use of limited channel
capacity, and limit our ability to offer services that appeal to our customers and generate revenues.
Access Channels. Local franchise agreements often require 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
for commercial leased access by unaffiliated third parties, who may offer programming that our customers do not particularly
desire. The FCC adopted new rules in 2007 mandating a significant reduction in the rates that operators can charge commercial
leased access users and imposing additional administrative requirements that would be burdensome on the cable industry. The
effect of the FCC's new rules was stayed by a federal court, pending a cable industry appeal and an adverse finding by the Office
of Management and Budget. Under federal statute, commercial leased access programmers are entitled to use up to 15% of a
cable system's capacity. Although commercial leased access activity historically has been relatively limited, increased activity in
this area could further burden the channel capacity of our cable systems, and potentially limit the amount of services we are able
to offer and may necessitate further investments to expand our network capacity.
Access to Programming. The Communications Act and the FCC's “program access” rules generally prevent satellite cable
programming networks in which a cable operator has an attributable interest from favoring cable operators over competing
multichannel video distributors, such as DBS, and limit the ability of such vendors to offer exclusive programming arrangements
to cable operators. This exclusivity prohibition is scheduled to expire in October 2012, but the FCC has extended it in the past
and may do so again. Given the heightened competition and media consolidation that we face, it is possible that we will find it
increasingly difficult to gain access to popular programming at favorable terms. Such difficulty could adversely impact our
business.
Ownership Restrictions. Federal regulation of the communications field traditionally included a host of ownership restrictions,
which limited the size of certain media entities and restricted their ability to enter into competing enterprises. Through a series
of legislative, regulatory, and judicial actions, most of these restrictions have been either eliminated or substantially relaxed.
Changes in this regulatory area could alter the business environment in which we operate.
Pole Attachments. The Communications Act requires most utilities owning utility poles to provide cable systems with access to
poles and conduits and simultaneously subjects the rates charged for this access to either federal or state regulation. On April 7,
2011, the FCC amended its existing pole attachment rules to promote broadband deployment. The new order maintains the basic
rate formula applicable to “cable” attachments, but reduces the rate formula previously applicable to “telecommunications”