Last June, the FCC released a Report and Order announcing that the FCC’s dual must-carry, or “viewability,” rule will sunset December 12, 2012.  The FCC’s 2007 “viewability” rule requires cable operators with hybrid analog-digital systems to carry digital must-carry signals in both analog and digital format.  

With the December 12, 2012 sunset date approaching, we cover below the steps cable operators can take to phase out carriage of analog must-carry signals on hybrid analog-digital systems. 

Background.  The Communications Act requires cable operators to make must-carry broadcast signals viewable by all of their subscribers. Operators of systems that carry both analog and digital signals, also known as “hybrid” systems, previously could comply with the viewability requirement for must-carry signals by carrying the must-carry signal in analog for all-analog subscribers, in addition to carrying a digital version or by transitioning to an all-digital system. 

New Rule.  After December 12, 2012, operators can make must-carry broadcast signals accessible to analog subscribers by “an effective means,” which may include offering conversion equipment for sale or lease, either for free or at an affordable cost.  

Note:  Hybrid systems must continue carrying must-carry stations in both analog and digital until December 12, 2012.  

Steps to Take Before Dropping Analog Carriage.  Hybrid operators that want to stop carrying must-carry stations in analog and provide the must-carry stations only in digital format can do so by: 

(i)               Offering analog subscribers conversion equipment for sale or lease, either for free or at an affordable cost that does not substantially deter use of the equipment.  To   the FCC, affordable means a monthly fee of no more than $2. 

(ii)              Providing 90 days prior written notice of the signal carriage change to affected broadcast stations; and 

(iii)            Providing 30 days prior written notice to customers affected by a service change.  

Note:  FCC rules prohibit the deletion or repositioning of broadcast stations during sweeps (generally February, May, July, and November). 

If you have any questions about the FCC’s viewability rules or small system HD carriage exemption, please contact Scott Friedman at (312) 372-3930 or sfriedman@cm-chi.com or James Moskowitz at (202) 872-6881 or jmoskowitz@cm-chi.com. 

FCC to Allow Cable Operator Acquisition of CLECs with Overlapping Service Territories 

This week, the FCC issued an Order that will permit cable operators to acquire a competitive local exchange carrier (“CLEC”) with a service territory that overlaps the cable operator’s.  This new ruling opens the door for cable operators to acquire CLECs that provide services in their markets. 

The Order came in response to an NCTA petition, filed last August, that argued that CLECs and cable operators should not be subject to the Communications Act’s cross-ownership prohibitions.  Under Section 652 of the Communications Act, buyouts and certain other transactions between cable operators and local exchange carriers (“LECs”), subject to certain exceptions, are prohibited.  Specifically, section 652(b), with limited exceptions, prohibits cable operators or their affiliates from acquiring more than a 10% financial interest, or management interest, in any LEC providing telephone exchange service within the cable operator’s franchise area (absent a waiver).           

In the Order, the FCC found that Section 652(b) “unambiguously prohibits” a cable operator from acquiring any LEC providing telephone exchange service within the cable operator’s franchise area (absent exception or waiver).  The FCC agreed, however, that it should exercise its general forbearance authority to forbear application of Section 652(b) as it applied to the acquisition of CLECs.  The FCC explained that these transactions pose little risk of competitive harm and often increase competition. 

While this Order opens the way for cable operators to acquire CLECs, the Commission emphasized that these transactions remain subject to several levels of regulatory review, including FCC review under Section 214 of the Communications Act, review by other federal government agencies, such as the Department of Justice and the Federal Trade Commission, as well as review under local franchises and state statutes. 

If you have any questions about the implications of the FCC’s Order allowing cable operator acquisition of CLECs, please contact Bruce Beard at (314) 394-1535 or bbeard@cm-chi.com or James Moskowitz at (202) 872-6881 or jmoskowitz@cm-chi.com.