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ACA Urges FCC To Retain HD Exemption For Must Carry TV Stations

The American Cable Association called on the Federal Communications Commission to extend for three more years an exemption that will allow eligible small cable systems to avoid financial hardship and consumer disruption by only carrying in analog format must carry TV signals transmitted to  their headend facilities in digital high-definition (HD) format.  ACA also asked the FCC to make permanent the exemption for analog-only cable systems.

"Retention of this exemption will serve the interests of small cable systems and their consumers because lifting the exemption now would be a significant burden on these systems.  For many of these systems, their financial situation has worsened and their unused channel capacity has decreased since the Commission initially adopted the exemption," ACA President and CEO Matthew M. Polka said. "The HD carriage exemption remains critical for the continued viability of these small systems."

ACA provided the FCC with the results of a recent ACA Member survey supporting the FCC's tentative conclusion that extending the exemption three more years would serve the public interest.  The ACA survey showed, at a minimum, that 52 ACA operator members representing 385 systems across the country are still relying on the HD carriage exemption. These top-level results submitted to the FCC were supplemented by granular breakdowns of the survey results.

The FCC adopted its HD exemption in 2008 in anticipation of broadcasters' transition the next year to digital-only transmission mandated by Congress.  The FCC ruled that all cable systems with less than 553 MHz of capacity or all cable systems with fewer than 2,501 subscribers (excluding  systems affiliated with large cable operators) would be allowed to provide HD signals of must carry TV stations in analog or digital standard definition (SD). The HD exemption applies to TV stations that invoke their right to uncompensated cable carriage - thus, the "must carry" moniker. The exemption expires on June 12, 2012, the third anniversary of broadcasters' DTV transmission.

In comments filed March 13 with the FCC, ACA said the burdens that transmitting must-carry signals in HD place on small systems operators are as great now, if not greater, than they were in 2008 when the FCC first adopted the HD carriage exemption.

Many cable operators with less than 553 MHz are channel locked. If forced to carry must carry signals in HD, these operators would be required to move other channels - including ones more desired than the must-carry channels - to less subscribed digital-only tiers that require customers to lease, purchase, or already own equipment capable of receiving digital signals. In other cases, not maintaining the exemption would compel dropping channels entirely.  Some operators of these systems indicated that they would shutter their systems altogether due to the increased regulatory burden.

For systems with fewer than 2,501 subscribers that currently rely on the exemption, the financial situation has become only worse over the past three years, ACA explained.  Costs for these systems keep rising precipitously, especially for programming, shrinking net income related to video. An FCC rule requiring such small systems to transmit HD must-carry signals would require additional equipment purchases and make these systems even less economical to operate. Putting more financial stress on marginal small systems would force them either to pass through costs that are very high on a per-subscriber basis (risking significant subscriber loss) or simply cease operations.

In the instances where small system operators decide to shut down, customer choice is restricted by removing services from the market, as well as removing the price discipline competition enforces. This harms consumers, even those not currently subscribing to the small systems affected by the HD carriage exemption, by allowing the remaining service provider to raise rates without any corresponding increase in service quality or other consumer benefits. It also harms consumers in those markets where DBS providers do not offer local-into-local services by potentially eliminating their access to local broadcast television offerings.

ACA said that consumers should not lose access to viable terrestrial alternatives to DBS as a result of the elimination of the HD exemption, adding that the harm from such loss clearly outweighs the benefits from receiving must-carry stations in HD.  The threat of increased consumer rates, decreased service offerings, complete loss of cable service, and reduction in competition warrants an extension of the HD carriage exemption.

"The FCC should extend its current HD carriage exemption so that systems that either have less than 553 MHz capacity or serve fewer than 2,501 subscribers that are not affiliated with large national operators can continue to retransmit the digital broadcasts of must-carry signals to their customers in analog-only. Failure to extend the HD carriage exemption will cause significant, direct consumer harm," Polka said.

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