Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming

[Federal Register Volume 64, Number 14 (Friday, January 22, 1999)]
[Notices]
[Pages 3514-3515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1388]



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FEDERAL COMMUNICATIONS COMMISSION

[CS Docket No. 98-102, FCC 98-335]


Annual Assessment of the Status of Competition in Markets for the 
Delivery of Video Programming

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: Section 628(g) of the Communications Act of 1934, as amended, 
47 U.S.C. 548(g), requires the Commission to report annually to 
Congress on the status of competition in markets for the delivery of 
video programming. On December 23, 1998, the Commission released its 
fifth annual report (``1998 Report''). The 1998 Report contains data 
and information that summarize the status of competition in markets for 
the delivery of video programming and updates the Commission's prior 
reports. The 1998 Report is based on publicly available data, filings 
in various Commission rulemaking proceedings, and information submitted 
by commenters in response to a Notice of Inquiry in this docket.

FOR FURTHER INFORMATION CONTACT: Marcia Glauberman or Nancy Stevenson, 
Cable Services Bureau (202) 418-7200, TTY (202) 418-7172.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 1998 
Report in CS Docket No. 98-102, FCC 98-335, adopted December 17, 1998, 
and released December 23, 1998. The complete text of the 1998 Report is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (Room 239), 1919 M Street, NW, Washington, DC, 
20554, and may also be purchased from the Commission's copy contractor, 
International Transcription Service (``ITS, Inc.''), (202) 857-3800, 
1231 20th Street, NW, Washington, DC 20036. In addition, the complete 
text of the 1998 Report is available on the Internet at http://
www.fcc.gov/Bureaus/Cable/WWW/csrptpg.html.

Synopsis of the 1998 Report

    1. The Commission's 1998 Report to Congress provides information 
about the cable television industry and other multichannel video 
programming distributors (``MVPDs''), including direct broadcast 
satellite (``DBS'') service, home satellite dishes (``HSDs''), 
multipoint distribution service (``MMDS''), local multipoint 
distribution service (``LMDS''), satellite master antenna television 
(``SMATV'') systems, and broadcast television service. The Commission 
also considers several other existing and potential distributors of and 
distribution technologies for video programming, including the 
Internet, home video sales and rentals, local exchange telephone 
carriers (``LECs''), and electric and gas utilities. The report 
includes as an attachment the results of an inquiry undertaken by the 
Cable Services Bureau focusing on cable television programming costs 
and related issues.
    2. The Commission further examines market structure and issues 
affecting competition, such as horizontal concentration, vertical 
integration and technical advances. The 1998 report addresses 
competitors serving multiple dwelling unit (``MDU'') buildings and 
evidence of competitive responses by industry players that are 
beginning to face competition from other MVPDs.
    3. In the 1998 Report, the Commission concludes that competitive 
alternatives and consumer choices are still developing but that cable 
television continues to be the primary delivery technology for the 
distribution of multichannel video programming and continues to occupy 
a dominant position in the MVPD marketplace. As of June 1998, 85% of 
all MVPD subscribers received video programming service from local 
franchised cable operators compared to 87% a year earlier. There has 
been an increase in the total number of subscribers to noncable MVPDs, 
most of which is attributable to the continued growth of DBS. However, 
there have been declines in the number of subscribers and market shares 
of MVPDs using other distribution technologies. Significant competition 
from local telephone companies has not generally developed even though 
the Telecommunications Act of 1996 (``1996 Act'') removed some barriers 
to LEC entry into the video marketplace.
    4. Key Findings:
    •  Industry Growth: A total of 76.6 million households 
subscribed to multichannel video programming services as of June 1998, 
up 4.1% over the 73.6 million households subscribing as of June 1997. 
This subscriber growth accompanied a 2.3% increase in multichannel 
video programming's penetration of television households from 75.9% to 
78.2% in June 1998. Noncable's share of total MVPD subscribers 
continued to grow, constituting 15% of all multichannel video 
subscribers as of June 1998, up from 13% over the June 1997 figure 
reported last year. The cable television industry has continued to grow 
in terms of subscribership (up to 65.4 million subscribers as of June 
1998, a 2% increase from the 64.2 million cable subscribers in June 
1997). The total number of noncable MVPD subscribers grew from 9.5 
million as of June 1997 to 11.2 million as of June 1998, an increase of 
over 18% since last year's report.
    •  Convergence of Cable and Telephone Service: The 1996 Act 
repealed a statutory prohibition against an entity holding attributable 
interests in a cable system and a LEC with overlapping service areas. 
It was expected that local exchange telephone carriers would begin to 
compete in video delivery markets, and cable television operators would 
begin providing local telephone exchange service. However, telephone 
entry into video markets has been slow to develop. Congress developed 
the Open Video System (``OVS'') framework as another means to encourage 
telephone company entry into the video marketplace. Thus far, however, 
few telephone companies have sought certification to provide video 
through OVS.
    •  Promotion of Entry and Competition: The Commission has 
continued to take steps to eliminate obstacles to competition, 
including the adoption and enforcement of rules that prohibit 
governmental and private restrictions that unreasonably interfere with 
a consumer's right to install the dishes and other antennas to receive 
programming services from (direct-to-home) DBS, wireless cable, and 
television broadcast; establish procedures to use internal wiring 
installed in an MDU building by the incumbent provider, facilitating 
owners' and residents' choice among providers; and increase the amount 
of spectrum available for wireless uses and eliminate restrictions on 
use, for the benefit of wireless providers. In addition, the Commission 
recently strengthened its enforcement procedures for the program access 
rules, which are designed to ensure that alternative MVPDs can acquire, 
on non-discriminatory terms, vertically-integrated satellite delivered 
programming.
    •  Horizontal Concentration: Nationally, concentration among 
the top MVPDs has declined since last year. As a result of acquisitions 
and trades, cable MSOs have continued to increase the extent to which 
their systems form regional clusters. The number of clusters of systems 
serving at least 100,000 subscribers is currently 117, down from the 
139 reported last year. Although the number of clusters declined, the 
trend for clusters to increase in subscribership or size appears to be 
continuing, and these

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clustered systems now account for service to approximately 52% of the 
nation's cable subscribers.
    •  Vertical Integration: The number of satellite-delivered 
programming networks has increased from 172 in 1997 to 245 in 1998. 
Vertical integration of national programming services between cable 
operators and programmers, measured in terms of the total number 
services in operation, declined from last year's total of 44% to just 
39% this year, the continuation of a four year trend. However, in 1998, 
cable MSOs, either individually or collectively, owned 50% or more of 
78 national programming services. A year earlier, cable MSOs owned 50% 
or more of 50 national networks.
    •  Technological advances: Technological advances are 
occurring that will permit MVPDs to increase both quantity of service 
(i.e., an increased number of channels using the same amount of 
bandwidth or spectrum space) and types of offerings (e.g., interactive 
services). In particular, cable operators and other MVPDs continue to 
develop and deploy advanced technologies, especially digital 
compression, in order to deliver additional video options and other 
services (e.g., data access, telephony) to their customers. To access 
these wide ranging services, consumers use ``navigation devices.'' In 
the last year, the Commission adopted rules and policies to implement 
Section 629 of the Communications Act, which is intended to ensure 
commercial availability of these navigation devices.
    •  Programming costs: The report includes as an attachment 
the results of an inquiry undertaken by the Cable Services Bureau 
focusing on cable television programming costs and related issues. This 
inquiry was commenced to follow-up on issues raised in last year's 
annual competition report and involved a voluntary questionnaire 
distributed to six multiple system operators. The Bureau found that, 
other than inflation adjustments, programming cost increases were the 
most significant factor contributing to rate increases. The rate of 
increase in programming costs between July 1996 and July 1997 was 
20.2%. Programming costs for the responding MSOs (for regulated 
services) were equal to approximately 24% of regulated revenues for 
that period. On average, about one-quarter of an operator's regulated 
revenues was used to pay for programming. Sports programming costs (for 
the period surveyed) did not increase at a disproportionally higher 
rate than other types of programming and played a fairly minor role 
(accounting for only 5.3%) in overall rate increases. The inquiry 
results do not reflect license fee increases owing to sports 
distribution rights agreements announced in late 1997 and 1998.

Ordering Clauses

    5. This 1998 Report is issued pursuant to authority contained in 
sections 4(i), 4(j), 403 and 628(g) of the Communications Act of 1934, 
as amended, 47 U.S.C. 154(i), 154(j), 403 and 548(g).
    6. It is ordered that the Office of Legislative and 
Intergovernmental Affairs shall send copies of this 1998 Report to the 
appropriate committees and subcommittees of the United States House of 
Representatives and the United States Senate.
    7. It is further ordered that the proceeding in CS Docket No. 98-
102 Is terminated.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 99-1388 Filed 1-21-99; 8:45 am]
BILLING CODE 6712-01-P