Charter 2011 Annual Report Download - page 37

25
Local franchise authorities have the ability to impose additional regulatory constraints on our business, which could further
increase our expenses.
In addition to the franchise agreement, cable authorities in some jurisdictions have adopted cable regulatory ordinances that further
regulate the operation of cable systems. This additional regulation increases the cost of operating our business. Local franchising
authorities may impose new and more restrictive requirements. Local franchising authorities who are certified to regulate rates
in the communities where they operate generally have the power to reduce rates and order refunds on the rates charged for basic
service and equipment.
Tax legislation and administrative initiatives or challenges to our tax positions could adversely affect our results of operations
and financial condition.
We operate cable systems in locations throughout the United States and, as a result, we are subject to the tax laws and regulations
of federal, state and local governments. From time to time, various legislative and/or administrative initiatives may be proposed
that could adversely affect our tax positions. There can be no assurance that our effective tax rate or tax payments will not be
adversely affected by these initiatives. As a result of state and local budget shortfalls due primarily to the recession as well as other
considerations, certain states and localities have imposed or are considering imposing new or additional taxes or fees on our services
or changing the methodologies or base on which certain fees and taxes are computed. Such potential changes include additional
taxes or fees on our services which could impact our customers, combined reporting and other changes to general business taxes,
central/unit-level assessment of property taxes and other matters that could increase our income, franchise, sales, use and/or property
tax liabilities. In addition, federal, state and local tax laws and regulations are extremely complex and subject to varying
interpretations. There can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would
be successful in any such challenge.
Further regulation of the cable industry could cause us to delay or cancel service or programming enhancements, or impair
our ability to raise rates to cover our increasing costs, resulting in increased losses.
Currently, rate regulation is strictly limited to the basic service tier and associated equipment and installation activities. However,
the FCC and Congress continue to be concerned that cable rate increases are exceeding inflation. It is possible that either the FCC
or Congress will further restrict the ability of cable system operators to implement rate increases. Should this occur, it would
impede our ability to raise our rates. If we are unable to raise our rates in response to increasing costs, our losses would increase.
There has been legislative and regulatory interest in requiring cable operators to offer historically combined programming services
on an á la carte basis. It is possible that new marketing restrictions could be adopted in the future. Such restrictions could adversely
affect our operations.
Actions by pole owners might subject us to significantly increased pole attachment costs.
Pole attachments are cable wires that are attached to utility poles. Cable system attachments to investor-owned public utility poles
historically have been regulated at the federal or state level, generally resulting in favorable pole attachment rates for attachments
used to provide cable service. In contrast, utility poles owned by municipalities or cooperatives are not subject to federal regulation
and are generally exempt from state regulation. On April 7, 2011, the FCC amended its pole attachment rules to promote broadband
deployment. The new order (the "Order") maintains the basic rate formula applicable to "cable" attachments in the 30 states
directly subject to FCC regulation, but reduces the rate formula previously applicable to "telecommunications" attachments to
make it roughly equivalent to the cable attachment rate. Although the Order maintains the status quo treatment of cable-provided
VoIP service as an unclassified service eligible for the favorable cable rate, there is still some uncertainty in this area. The Order
also allows for new penalties in certain cases involving unauthorized attachments that could result in additional costs for cable
operators. The new Order overall strengthens the cable industry's ability to access investor-owned utility poles on reasonable rates,
terms and conditions. Electric utilities filed Petitions for Reconsideration at the FCC and Petitions for Review in the D.C. Circuit
Court of Appeals seeking to modify or overturn the FCC’s Order. Charter and other cable operators have intervened in the court
proceeding in support of the FCC.
Increasing regulation of our Internet service product could adversely affect our ability to provide new products and services.
On December 21, 2010, the FCC adopted new “net neutrality” rules it deemed necessary to ensure continuation of an “open”
Internet that is not unduly restricted by network “gatekeepers,” which went into effect on November 20, 2011. The new rules are
based on three core principles of: (1) transparency, (2) no blocking, and (3) no unreasonable discrimination. The rules permit
broadband service providers to exercise “reasonable network management” for legitimate management purposes, such as