[Editor’s Note: Bob Primosch is a Partner with the communications law firm Wilkinson Barker Knauer, LLP, Washington, D.C. (rprimosch at wbklaw dot com)]
The FCC has issued a Fourth Notice of Proposed Rulemaking to consider whether it should continue enforcing its “DTV viewability rule” for cable television systems. In addition, the FCC will consider whether certain small cable systems should remain exempt from the requirement that high-definition (HD) television signals be carried in HD. Comments are due March 12; reply comments are due March 22. A copy of the Fourth Notice is available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-12-18A1.pdf.
Adopted in 2007, the FCC’s DTV viewability rule requires cable systems to ensure that DTV must-carry signals are viewable by subscribers who have analog TV sets or do not subscribe to digital cable service. Cable systems must comply by carrying DTV must-carry signals in analog format to all analog cable subscribers, or, in the case of all-digital systems, by carrying DTV must-carry signals in digital format if all subscribers have the necessary equipment to view the broadcast content. The DTV viewability rule is scheduled to sunset on June 12, 2012 (five years after the DTV transition) unless the FCC extends that date via the Fourth Notice.
The FCC’s rules also generally require cable systems to carry all HD television signals in HD. In 2007, the FCC exempted the following from this requirement: (1) cable systems with 2,500 or fewer subscribers that are not affiliated with a cable operator serving more than 10 percent of all MVPD subscribers; and (2) cable systems with an activated channel capacity of 552 MHz or less. The primary purpose of the exemption was to provide small cable operators with additional time to upgrade their systems, without having to make large expenditures over a short period. Like the DTV viewability rule, the exemption will expire on June 12, 2012 unless the FCC extends that date via the Fourth Notice.
The Fourth Notice indicates that the FCC is considering a three-year extension of the June 12 sunset date for both the DTV viewability rule and the small system exemption from the “carry HD in HD” requirement. As to the DTV viewability rule, the FCC observes the following: “[A]vailable market evidence seems to indicate that the viewability requirements remain important to consumers. . .[A]s of the third quarter of 2011, more than twelve million cable subscribers were still reliant on analog cable delivery.” The FCC also states that “the vast majority of cable subscribers are served by ‘hybrid’ systems that provide both analog and digital service,” and that a potentially large number of digital subscribers on these systems still rely on analog cable service for a second television set in the home.
By the same token, the FCC asks for comment on whether enforcement of the DTV viewability rule beyond June 12 would impose an excessive economic and/or technological burden on cable systems. The FCC notes that “in some cases operators may be required to carry more than one version of a channel, using more bandwidth than they would if they carried only a single version, and in some cases they may be required to down-convert a broadcast signal to make the additional version available to analog subscribers.”
The FCC also seeks input on, among other things, whether the DTV viewability rule has motivated cable operators to migrate to all-digital service more quickly than originally planned, and, if so, whether such early digital migration has prompted analog subscribers to take digital service (or, conversely, whether analog subscribers have remained analog subscribers even though digital service is available). In cases where a cable system has migrated or will soon migrate to all-digital service due to the DTV viewability rule, commenting parties are asked to provide specific evidence as to the cable operator’s costs of early migration. More generally, the FCC asks for information about the costs of delivering analog signals versus the costs of providing all-digital service with subscriber equipment that allows DTV signals to be viewed by analog subscribers.
As to the “carry HD in HD” requirement,” the FCC has tentatively concluded that a three-year extension of the small system exemption is warranted. Relying on data submitted by cable systems on the 2010 Annual Cable Operator Report (FCC Form 325), the FCC states that “37 percent of small systems that reported data, and that would be eligible for the exemption, were still not providing any HD service.” The FCC asks for more current data on the number of exemption-eligible cable systems that are not providing HD service, and their reasons for doing so. Similarly, commenting parties are also asked to identify any cable systems that are eligible for the exemption but are complying with the rule anyway.
Finally, the FCC asks for comment on the business environment in which small systems currently operate, and how competition from other multichannel video programming distributors bears on the ability of small systems to comply with the rule. At the same time, “[h]as the exemption benefited small cable system operators by allowing them to direct capital expenditures to upgrade or introduce new services? . . . To the extent feasible, commenters should quantify in dollars any asserted costs and benefits.”
Again, comments and reply comments on the Fourth Notice are due March 12 and March 22, respectively. Viodi View will continue to monitor these items closely and report on new developments as they occur.