News

Small Operators See Relief

8/08/2008 8:00 PM Eastern

Small cable operators could be just days away from scoring a major political victory at the Federal Communications Commission concerning the carriage of local TV stations’ digital signals.

With FCC chairman Kevin Martin’s support, the agency appears close to exempting a whole class of small MSOs from burdensome must-carry rules after broadcasters go all-digital on Feb. 17, 2009.

According to FCC and industry sources, the new rules would provide relief for all cable systems, regardless of channel capacity, that have 2,500 subscribers or fewer and are not owned by Comcast or Time Warner.

All cable systems at 552-Megahertz of capacity or less would be covered, with no limitation on ownership or number of subscribers.

The new rules could be adopted at the FCC’s Aug. 22 monthly open meeting, if not sooner, Martin told reporters during a conference call last Monday.

Martin’s Proposal
Systems must meet the following requirements to qualify for an exemption to the digital must-carry rules:
SOURCE: FCC officials, MCN Research
System Eligibility:
1. All systems with 2,500 subscribers or fewer, regardless of channel capacity, if not owned by Comcast or Time Warner Cable.
2. All systems with 552 MHz of capacity, with no ownership or subscriber limitations.
Relief:
1. No mandated carriage of HD programming.
2. Mandated carriage of must carry TV stations only in analog for three years after DTV transition.
3. Systems that have deployed set-tops without analog tuners are to distribute must-carry signals in analog and SD digital.

Martin’s new plan, according to FCC officials, would scale back rules adopted less than a year ago in preparation for all full-power TV stations’ transition to digital broadcasting.

Those rules became controversial when the American Cable Association, the trade group for small cable systems, complained on Capitol Hill that any cable company financially burdened by the policy would need to seek a waiver from the FCC. Joined by the National Cable & Telecommunications Association, the ACA called for a blanket waiver for small cable systems.

Martin, who initially resisted ACA’s approach, changed his mind after a few months and, in a personal appearance at ACA’s annual Washington policy summit in April, agreed to substitute the one-at-a-time waiver approach with a more general solution.

According to FCC officials, Martin’s plan would allow eligible small systems to carry DTV stations only in analog when stations rely on their mandatory cable carriage rights in federal law. The new carriage rule would take effect Feb. 18, 2009, and last three years.

“I think the best way for me to characterize this is that our understanding of the relief would be that our members would be permitted to carry digital must-carry signals in analog. Period,” ACA president Matt Polka said.

The NCTA is lobbying FCC officials to change the exemption to include systems with up to 5,000 subscribers and drop the ban on Comcast and Time Warner.

“Such action will allow these systems to provide each must-carry station’s signal to customers without incurring unnecessary, burdensome costs, and without having to use their evident limited channel capacity for duplicative signals” said NCTA vice president of communications Brian Dietz.

Polka estimated that the new rule would affect cable systems with about 3 million subscribers. The number of TV stations involved could not be determined because the FCC does not require stations to report whether they demand cable carriage or negotiate for it.

Martin’s plan would relax the old rule that required every cable system to deliver must-carry DTV stations in analog and digital unless the system had gone all-digital itself and no longer had analog subscribers.

Because so few cable systems are completely digital, the FCC adopted a de facto dual-carriage rule, the ACA and NCTA argued.

The trade groups complained that dual carriage was a redundancy that took up scarce bandwidth that could be allocated to other services, such as high-speed data and Internet protocol phone service.

Six cable programmers, including C-SPAN, Discovery Communications and The Weather Channel, sued the FCC over the dual must-carry rules in the U.S. Court of Appeals for the D.C. Circuit, claiming the rules discriminated against cable networks looking to obtain or maintain cable distribution.

The FCC’s old rules made even triple carriage a possibility because it required cable operators to deliver HD programming in its native format.

On the conference call, Martin provided a narrow interpretation of the new rules: “What we’re saying in this one is if you meet those [eligibility] requirements, then you’re not required to carry a high-definition version of the broadcast signals, to the extent it’s provided to them, for three years after the DTV transition.”

That left open the possibility eligible systems would need to carry must-carry stations in analog and standard-definition digital formats.

FCC officials said that Martin’s description was not consistent with the proposal he has circulated to the other four commissioners.

An FCC official said the only possibility of mandated analog-SD carriage would occur if the cable operator had distributed digital set-top boxes that lacked analog tuners.

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