FCC Sunsets the “Viewability” Rule for Hybrid Analog/Digital Cable Systems and Extends the HD Carriage Exemption for Small Cable Systems

The “Viewability” Rule Sunsets
The Federal Communications Commission (FCC) issued a decision today sunsetting the existing “viewability” requirements governing cable’s delivery of local broadcast signals as of Dec. 12, 2012. The decision does not change the cable industry’s underlying “must carry” obligation to offer certain local broadcast signals to every cable subscriber, but it does eliminate the need for cable systems to retransmit these broadcast signals simultaneously in both analog and digital formats. The decision should reduce the burden that the existing viewability (or “dual carriage”) rule imposes on cable’s limited bandwidth.

Most cable systems today offer their subscribers both analog and digital services. Under the existing FCC regulations, these hybrid systems are required to deliver must carry broadcast signals in both digital and analog to ensure that the signals can be “viewed” by every cable subscriber, regardless of the nature of the television equipment deployed in the subscriber’s residence. The FCC adopted this viewability requirement in 2007 (as the broadcast industry itself was preparing to transition from analog to digital delivery), but it did not make the rule permanent. Indeed, the rule was scheduled to sunset today unless the Commission ordered otherwise.

Many had expected the FCC to extend the viewability rule as a routine matter. The FCC, however, revised its original interpretation of the statutory “viewability” provision in light of intervening changes in technology and the video marketplace. The FCC concluded that these changes now weigh in favor of eliminating the inherent inefficiencies of a dual carriage requirement and allowing operators to redeploy bandwidth previously devoted to duplicative analog carriage for HD and broadband services. The FCC noted that the vast majority of cable customers today already make use of digital equipment, and that Digital Transport Adapters (DTAs) now provide inexpensive access to digital signals. Accordingly, the FCC concluded that requiring subscribers to secure digital-capable equipment is no longer inconsistent with a cable operator’s must carry obligation to make broadcast signals “viewable.” The FCC clearly was influenced by the First Amendment implications of extending the viewability rule under current circumstances. The decision notes that “the doctrine of constitutional avoidance counsels us to interpret the Act as not imposing a rigid analog-carriage requirement on cable operators, where the record establishes a reasonable, less burdensome alternative that meets the statutory objectives.”

To avoid the existing dual carriage obligation after the Dec. 12th sunset, however, an operator must be prepared to offer digital equipment to basic-only subscribers at “minimal additional cost,” which the FCC suggests ordinarily would not exceed $2 per month. The FCC’s decision explains, “Materially higher leasing fees . . . could deter subscriber willingness to order the equipment needed to ensure viewability on a hybrid cable system.” The FCC also expects cable operators to notify their subscribers at least 30 days in advance of deleting the analog version of a must carry signal and explaining the subscribers’ equipment options. Finally, the FCC relied on commitments by NCTA and ACA that their eight largest members will notify affected must carry stations 90 days prior to suspending analog delivery.

The HD Carriage Exemption for Small Cable Systems is Extended
In the same Order, the FCC extended the existing exemption from the high-definition (HD) carriage requirement for small cable systems for another three years (until June 12, 2015). The FCC had previously determined that the cable industry’s statutory obligation to deliver must carry broadcast signals “without material degradation” ordinarily requires that cable systems deliver the HD version of a must carry station’s primary signal. It recognized, however, that this obligation would impose an unreasonable cost and technical burden on certain small systems. Accordingly, it created a three-year HD compliance exemption for systems with 2,500 or fewer subscribers (and not affiliated with a cable operator serving more than 10 percent of all MVPD subscribers), as well as those systems with an activated channel capacity of 552 MHz or less. In extending the existing exemption, the FCC concluded that “the exemption remains necessary to protect the viability of small systems and their service to rural and smaller market consumers.”