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Dueling With Dual-Carriage Concerns

Last week, I addressed an anxious audience assembled by the National Cable Television Cooperative to hear the news about the “DTV transition.” As the lawyer called to speak on regulatory issues, the news, for the most part, was bad. That experience prompted this essay.

Much of my cable lawyering has focused on broadcast-signal carriage. I have come to know it as the most heavily regulated area of cable and, at times, the most wrongly regulated.

Many “larger” small systems carry DTV signals today. HD content and competition are drivers. These systems will manage 2/17/09. At the same time, hundreds of “smaller” small systems retransmit only the analog signals of their local broadcasters, various satellite channels, and no HD content. Small subscriber bases do not yet support the investment. With the analog cutoff looming, these small cable operators must deal now with three key areas.

The Big Four. These systems must figure out now how they are going to deliver the Big Four (ABC, CBS, NBC, and Fox) to all subscribers after 2/17/09. At a minimum this means retransmission consent with analog conversion rights and DTV-to-analog conversion equipment. Retransmitting DTV and HD is a longer-term problem for these systems.

On this issue, networks and affiliate groups generally have accommodated small-system technology constraints. I encourage broadcasters to continue this practice. For anything more than analog carriage, these systems need more time.

DTV must-carry. Second, small operators need to figure out how to comply with mandated dual carriage. The DTV must-carry order mandates dual carriage for small systems that are not all-digital. That’s 99% of the sector. That leads to the third key area.

Exemptions or waivers. The American Cable Association advocates an exemption from dual carriage for “smaller” small systems — 5,000 subscribers or fewer or with capacity at 552 MHz or less. The National Telecommunications Cooperative Association, the rural telco trade group, concurs. So does the NCTA. FCC Commissioner Jonathan Adelstein calls for an exemption. Senators and congressman have also expressed concern. After all, isn’t rural broadband deployment more important than capacity and capital going to redundant channels?

So far, the FCC has declined to adopt an exemption. Instead, small cable operators face the anxious and uncertain prospect of ad hoc waivers. Worse, the Order tries to tighten the waiver gauntlet, suggesting that systems at 552 MHz of capacity or less might be eligible for capacity-based waivers only.

Fortunately, FCC regulations provide for broader grounds for relief. Overwhelming precedent supports granting cost-based waivers. For example, the FCC granted Emergency Alert System deferrals covering more than 1,000 small systems because the cost imposed a significant financial hardship. In most cases, alert equipment costs far less than dual-carriage equipment will. The standard of “significant financial hardship” cannot not be a moving target. The same standard must apply for dual carriage waiver requests.

The better approach? Adopt the exemption advocated by ACA and others.

In the meantime, an FCC waiver needs to be high on the ’08 list for hundreds of small systems.