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Smaller MVPDs Would Incur Excessive and Unparalleled Costs To Simulcast In All-IP With Any New Set-Top Box Rules From FCC

Financial And Operational Challenges Of Compliance Would Pile On Burdens When Smaller MVPDs’ Pay-TV Business Model Increasingly “Unviable”

PITTSBURGH, August 30, 2016 - During meetings with the Chairman's Office and the Media Bureau of the Federal Communications Commission last week, the American Cable Association provided in greater detail the overwhelming costs required for smaller multichannel video programming distributors (MVPDs) to simulcast their existing video service in all-IP - a prerequisite to implementing the FCC's proposed set-top box regulations, an apps-based approach, or any similar proposal.

In its filing, submitted August 25, ACA explained that few smaller MVPDs have started or even plan to simulcast their video services in all-IP any time soon because of the substantial costs and operational challenges.

"Smaller pay-TV providers, many of whom serve rural America, confront a video business where margins are declining rapidly and even turning negative.  As a result, these providers cannot afford the added burden of complying with new set-top box regulations that would force them to spend substantial amounts of capital and many years of time launching a simulcast of their video service in all-IP," said ACA President and CEO Matthew M. Polka.  "If the FCC goes ahead with rules that force smaller providers to go all-IP, it would eliminate a wireline video service provider in many rural areas throughout the country, as well as inhibit investments in new, higher performance broadband infrastructure."

ACA found that nearly all smaller MVPDs would need to make major investments to increase the capacity of their existing networks to free up bandwidth to enable simulcasting in all-IP.  That would be in addition to having to purchase and deploy all-IP enabling equipment into their master headends, which ACA estimated would cost at least $2 million per system as noted in a mid-July meeting with the FCC.

The ACA filing itemized in greater detail all of the expenses for smaller MVPDs to simulcast in all-IP, particularly to increase their network capacity.  ACA's filing showed that costs would vary among its members based on multiple factors, but for smaller operators it would likely cost many millions of dollars, and for mid-sized operators it would likely cost tens of millions of dollars.  ACA included total costs for four hypothetical operators that track four types of ACA member profiles.

ACA pointed out that the costs to comply with new set-top box rules would far exceed the costs MVPDs incurred to comply with the FCC's last set of navigation device rules, which Congress eliminated as part of the STELA Reauthorization Act of 2014.  At the time of its adoption, the FCC's 2007 integration ban, which required cable operators to deploy set-top boxes that relied upon CableCARDs, was deemed a very costly regulation.

Polka continued, "In all of my time representing smaller cable operators before the FCC, I cannot recall the FCC ever contemplating a rule that would impose on small cable operators so great a direct financial and operational cost.  This burden of the proposed rules dwarfs that of the FCC's 2007 integration ban, which was imposed on these operators when they were better able to absorb it because they made far greater margins on their video business."

These meetings and filing build on letters that more than 25 smaller MVPDs submitted to the FCC since last week explaining that any cost over $1 million would put them out of business, lead them to cease offering video services, or require them to divert resources from planned investments in broadband.

About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 750 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/


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