DIGITAL TRANSITION’S LEGAL HEADACHES FOR LOCAL GOVERNMENTS

Posted By: Joesph Van Eaton, Partner, Miller & Van Eaton, PLLC

After February 17, 2009, full-power television broadcast stations must transmit only digital signals and may no longer transmit analog signals. 47 U.S.C. §§ 309(j)(14) and 337(e). Cable operators, however, are not bound by this statutory deadline, and many plan to convert the broadcast signals back to analog and deliver them to subscribers. This has several advantages for the cable industry: it means that cable operators can advise consumers that, as long as they subscriber to cable, they can receive service without being required to obtain a digital converter box. Several are doing just that.

However, many cable operators face another problem: they do not have enough capacity to respond to anticipated customer demand for Internet, phone service and video services. So at the same time some operators are trying to maintain a market advantage by delivering some channels in an analog format, they are trying to free up bandwidth by converting channels to a digital format (analog channels require more bandwidth to deliver).

While localities may find that many consumers are unprepared for the broadcast digital transition, the real legal headaches for local governments are arising as cable operators go through their own, partial digital conversion (caution: in some places all channels are being provided in a digital format, or all subscribers already are required to have converters. In those places, the changes described below have little effect):

— Some operators are converting public, educational and government (“PEG”) channels to a digital format. This means that the channels cannot be received without a converter box, or without a digital TV. A box is required for every set a subscriber wishes to use to view the channels. Subscribers are already paying for the PEG channels through rates, and often pay a fee to support the PEG channels. The result of the conversion: basic local information may be less accessible, or cost more to receive.

–Some operators are converting some commercial channels on the lowest tiers to a digital format. In communities that can still regulate cable rates this is significant, because the rate an operator is permitted to charge for a tier of service depends on the number of channels being delivered to subscribers. The legal question: should channels be counted as “delivered” if a subscriber must obtain special equipment to view them?

— There are reports that some channels are being converted to a digital format without any notice being given to subscribers. Those channels effectively “disappear” on analog sets. What rights does a consumer have to notice before that happens? Note that from a marketing standpoint, if an operator had to clearly notify subscribers as to plans for digitizing channels, some operators might lose marketing points that they are trying to capitalize upon.

The changes have already resulted in legal actions – with good results for many localities. A district court in Michigan issued a temporary restraining order and preliminary injunction that stopped Comcast from changing PEG channels to a digital format. The court recently denied in large part a Comcast motion to dismiss the complaint that had led to the injunction. In that same order, the court indicated that it would refer certain questions to the FCC for determination – including questions as to whether conversion of the PEG channels to a digital format violates federal laws and regulations. That may occur soon. The FCC has already issued one decision imposing penalties on Cox for delivering some channels in a switched digital video format. In re Cox Communications, Inc., Fairfax County, Virginia Cable System, DA 08-2299, EB-07-SE-351 (October 15, 2008); see also Public, Educational, and Governmental (PEG) Access to Cable Television Before the House Subcomm. on Financial Services and General Government, September 17, 2008 (statement of Monica Shah Desai, Chief of the Media Bureau Federal Communications Commission).

The efforts by incumbent operators like Comcast to shift PEG channels to a digital format, while delivering other channels in an analog format is of great concern to many in the municipal and PEG community. However, as troubling, if not more so, is the approach to PEG by AT&T on its U-Verse system. AT&T delivers video using Internet Protocol. Despite the difference in the delivery technology, most commercial channels are delivered in a manner which allows them to be selected and viewed in much the same way that commercial channels are viewed on traditional cable systems.

PEG access programming is not delivered via a channel. It is delivered via what AT&T calls its “PEG application.” When one tunes a converter to “99,” the PEG application starts. After a significant delay, the viewer is presented with a menu that lists all PEG channels for every community within the designated market area served by its system. In some areas, the DMA is large enough that the list could include dozens of channels. The viewer then must scroll through the list, and select a feed: what the viewer then receives is a streaming video feed that many claim is inferior in quality and functionality to regular commercial video channels carried on the system. Among other things, the AT&T PEG application does not support closed captioning services, or other basic functions that are provided for commercial channels AT&T offers for its profit. The California Public Utility Commission’s Division of Ratepayer Advocates issued a consumer advisory and posted a video demonstration of the AT&T system, links to which can be found here.

What is already clear is that local governments will have a significant interest in ensuring that these proceedings result in rules that protect local interests and consumers. The issues surrounding the PEG channel changes and the digital conversion on cable systems will be played out in the courts and before the FCC – and likely very soon. It may require concerted, joint actions by localities to prevail.

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Posted in Telecommunications
Tags: digital, joseph, miller, Telecommunications, transition, van eaton