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

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Federal Communications Commission.




This document is in compliance with the Communications Act of 1934, as amended, which requires the Commission to report annually to Congress on the status of competition in markets for the delivery of video programming. On December 30, 1999, the Commission adopted its sixth annual report (“1999 Report”). The 1999 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.

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Marcia Glauberman or Nancy Stevenson, Cable Services Bureau, (202) 418-7200, TTY (202) 418-7172.

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This is a synopsis of the Commission's 1999 Report in CS Docket No. 99-230, FCC 99-418, adopted December 30, 1999, and released January 14, 2000. The complete text of the 1999 Report is available for inspection and copying during normal business hours in the FCC Reference Center, 445 12th Street, S.W., Washington, D.C., 20554, and may also be purchased from the Commission's copy contractor, International Transcription Service (“ITS, Inc.”), (202) 857-3800, 1231 20th Street, N.W., Washington, D.C. 20036. In addition, the complete text of the 1999 Report is available on the Internet at​csb/​csrptpg.html.

Synopsis of the 1999 Report

1. The Commission's 1999 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”), wireless cable systems using frequencies in the multichannel multipoint distribution service (“MMDS”) and instructional television fixed service (“ITFS”), private cable or satellite master antenna television (SMATV”) systems, as well as 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.

2. The Commission further examines the market structure and issues affecting competition, including horizontal concentration, vertical integration, and technical advances. The 1999 Report addresses competitors serving multiple dwelling unit buildings (MDUs”) and evidence of competitive responses by industry players that face competition from other MVPDs. The 1999 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 (64 FR 36013) in this docket.

3. In the 1999 Report, the Commission concludes that competitive alternatives and consumer choices continue to develop. Cable television still is the dominant technology for the delivery of video programming to consumers in the MVPD marketplace, although its share continues to decline. As of June 1999, 82% of all MVPD subscribers received their video programming from a local franchised cable operator, compared to 85% 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 80.9 million households subscribed to multichannel video programming services as of June 1999, up 5.5% over the 76.6 million households subscribing to MVPDs in June 1998. This subscriber growth accompanied a 3.2 percentage point increase in multichannel video programming distributors' penetration of television households to 81.4% as of June 1999. The number of cable subscribers continued to grow, reaching 66.7 million as of June 1999, up almost 2% over the 65.4 million cable subscribers in June 1998. The total number of noncable MVPD households grew from 11.2 million as of June 1998 to 14.2 million homes as of June 1999, an increase of 26%. Noncable's share of total MVPD subscribers continued to grow, constituting 18% of all multichannel video subscribers as of June 1999, up from the 15% reported last year. The greatest growth of noncable MVPD subscribers was to DBS service. Between June 1998 to June 1999, the number of DBS subscribers grew from 7.2 million households to 10.1 million households. DBS subscribers now represent 12.5% of all MVPD subscribers, up from 9.4% a year earlier.
  • Convergence of Cable and Other Services: The 1996 Act removed barriers to LEC entry into the video marketplace in order to facilitate competition between incumbent cable operators and telephone companies. It was expected that local exchange telephone carriers would begin to compete in video delivery markets, and cable operators would begin to provide local telephone exchange service. Since the 1998 Report, there has been an increase in the amount of video programming provided to consumers by telephone companies, although the expected technological convergence that would permit use of telephone facilities for video service has not yet occurred. In addition, only a limited number of cable operators have begun to offer telephone service, and such service uses traditional telephone Start Printed Page 4426switching equipment rather than cable facilities. However, cable operators are beginning to develop and test Internet Protocol (“IP”) telephony. Since the 1998 Report, the most significant convergence of service offerings has been the pairing of Internet service with other service offerings. There is evidence that a wide variety of companies throughout the communications industries are attempting to become providers of multiple services, including video, voice, and data services. When compared with other communications industry segments that currently provide, or plan to provide, such combinations of services, we find that the cable television industry holds a relatively small market share. For example, in 1998, the total revenue for these segments of the communications industry (i.e., cable television, MMDS, DBS, television broadcasting, long distance telephone, and local telephone) was $334 billion. Of this total, cable operators represented 12.3% of the communications industry's revenues.
  • Promotion of Entry and Competition: Noncable MVPDs continue to report that regulatory and other barriers to entry limit their ability to compete with incumbent cable operators and to thereby provide consumers with additional choices. Noncable MVPDs continue to experience some difficulties in obtaining programming from both vertically integrated cable programmers and unaffiliated programmers who continue to make exclusive agreements with cable operators. In MDUs, potential entry may be discouraged or limited because an incumbent video programming distributor has a long-term and/or exclusive contract. Other issues also remain with respect to how, and under what circumstances, existing inside wiring in MDUs may be made available to alternative video service providers. In addition, consumers have historically reported that the primary disadvantage of DBS service is its lack of local broadcast signals. On November 29, 1999, a revised Satellite Home Viewer Act (“SHVA”) was signed into law, permitting satellite providers to distribute local broadcast signals within their local television markets. The Commission hopes that the revised SHVA will have a significant and positive effect on MVPD competition, and we plan to aggressively implement the new SHVA in order to facilitate consumer choice in the MVPD marketplace.
  • Horizontal Concentration: Consolidations within the cable industry continue as cable operators acquire and trade systems. The seven largest operators now serve almost 90% of all U.S. cable subscribers. However, in terms of one traditional economic measure, the Herfindahl-Hirschman Index or HHI, national concentration among the top MVPDs has declined since last year. DBS operators DirecTV and EchoStar rank among the ten largest MVPDs in terms of nationwide subscribership along with eight cable multiple system operators (“MSOs”). As a result of acquisitions and trades, cable MSOs have continued to increase the extent to which their systems form regional clusters. Currently, 40.4 million of the nation's cable subscribers are served by systems that are included in regional clusters. By clustering their systems, cable operators may be able to achieve efficiencies that facilitate the provision of cable and other services, such as telephony.
  • Vertical Integration: The number of satellite-delivered programming networks has increased from 245 in 1998 to 278 in 1999. Vertical integration of national programming services between cable operators and programmers, measured in terms of the total number of services in operation, declined from last year's total of 39% to 36% this year, continuing a five year trend. However, in 1999, one or more of the top six cable MSOs held an ownership interest in each of 101 vertically integrated national programming services. The 1999 Report also identifies 75 regional networks, of which 30 are regional or local news networks and 26 are sports channels, many owned at least in part by MSOs
  • Technological Advances: Technological advances 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) continue. 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.” The cable industry reports that it is making steady progress towards the development of specifications to separate out security and non-security functions for the interoperability of digital set-top boxes by July 1, 2000, as required by the Commission's rules. Interface requirements and a certification process for the high-speed cable modems needed to access data services have also been developed. When these processes are complete, additional competition in the market for equipment used by subscribers should be possible.

Ordering Clauses

5. This 1999 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. The Office of Legislative and Intergovernmental Affairs shall send copies of the 1999 Report to the appropriate committees and subcommittees of the United States House of Representatives and United States Senate.

7. The proceeding in CS Docket No. 99-230 is terminated.

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Federal Communications Commission.

Magalie Roman Salas,


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[FR Doc. 00-1861 Filed 1-26-00; 8:45 am]