• by Wayne Friedman , September 14, 2007

Blame the new FCC carriage rules. Small cable operators will go out of business when the U.S. TV industry switches from analog to digital TV signals in February 2009, according to one cable association.

The American Cable Association, which represents small cable operators, said the FCC's recent decision ruling that cable systems carry all broadcasters' digital and analog signals means "some very small systems will have no choice but to shut down. Their small subscriber bases cannot support the costly equipment mandated by this order," according to a statement by Matthew Polka, president and CEO of the ACA.

The ACA said the extra labor costs and equipment could exceed $150,000 for systems. All that would mean a decrease--if not abandonment--of the growing broadband, video and voice services cable needed to be competitive.

The FCC does offer exemptions for some hard-pressed small cable operators--especially in systems of 552 MHz or less. But the ACA says this is meaningless because the outcome is far from certain. It also means operators will have to pay for another FCC process--which costs time and money.

Broadcasters have long pushed for dual carriage of digital and analog signals, arguing that millions of analog-only cable homes would suddenly lose access to local TV signals when broadcasters switch to digital TV. Estimates are 40 million homes and 120 million TV sets are connected to analog cable.

Cable operators argue that cable systems should only be required to inform their subscribers they need to lease a digital set-top box to get these stations.

The stations affected are not the 800 or affiliates of ABC, NBC, CBS and Fox that have been--or are--negotiating with cable operators for carriage in hopes of gaining extra revenues. These are stations that use the FCC-mandated must-carry rules to gain carriage--with no compensation.

In the 1992 Cable Act, Congress required cable operators to either negotiate for consent to retransmit a broadcaster's signal with a fee, or carry it on the cable network with no fee, depending on the broadcaster's choice. Typically, the bigger affiliate network stations can command a carriage fee.