[Federal Register Volume 63, Number 40 (Monday, March 2, 1998)]
[Notices]
[Pages 10222-10224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5236]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

[CS Docket No. 97-141, FCC 97-423]


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

AGENCY: Federal Communications Commission.

ACTION: Notice.

-----------------------------------------------------------------------

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 January 13, 1998, the Commission released its 
fourth annual report (``1997 Report''). The 1997 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 1997 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, 
summarized at 62 FR 38008, July 16, 1997.

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

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 1997 
Report in CS Docket No. 97-141, FCC 97-423, adopted December 31, 1997, 
and released January 13, 1998. The complete text of the 1997 Report is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (Room 239), 1919 M Street, N.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 1997 Report is available on the Internet at 
http://www.fcc.gov/Bureaus/Cable/Reports/fcc97423.html.

Synopsis of the 1997 Report

    1. The Commission's 1997 Report to Congress provides information 
for 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, interactive video and data 
services (``IVDS''), local exchange telephone carriers (``LECs''), and 
electric and gas utilities.
    2. The Commission further examines market structure and issues 
affecting competition, such as horizontal concentration, vertical 
integration and technical advances. The fourth annual 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. The 1997 Report further 
discusses issues relating to federal laws and regulations concerning 
the emergence of a competitive MVPD marketplace. Finally, the 
Commission reports on video description of video programming.
    3. In the 1997 Report, the Commission concludes that the cable 
industry continues to occupy the dominant position in the multichannel 
video marketplace. As of June 1997, cable operators served 87% of 
households that receive multichannel video programming, down from 89% 
in September 1996. The Commission finds that there is a growing but 
still limited number of instances where incumbent cable system 
operators face competition from MVPDs offering similar services.

[[Page 10223]]

For example, while DBS providers have made subscribership gains, MVPDs 
using other distribution technologies, such as MMDS, have not posted 
comparable increases in subscribership. However, digital technology, 
now being tested and implemented, has the potential to improve the 
competitiveness of these services. Furthermore, implementation of 
digital television by broadcast television stations, the primary source 
of programming for most viewers regardless of distribution medium, has 
the potential to allow broadcasters to become more effective 
competitors with cable and other MVPDs. In addition, while the 
Telecommunications Act of 1996 (``1996 Act'') eliminated restrictions 
on entry by telephone companies into cable, the Commission finds LEC 
entry into video programming distribution has proceeded sporadically 
and is highly dependent on the business strategies of the individual 
companies.
    4. Key Findings:
     Industry growth: A total of 73.6 million households 
subscribed to multichannel video programming services as of June 1997, 
up 2.8% over the 71.6 million households subscribing as of September 
1996. The cable television industry has continued to grow in terms of 
subscribership (up to 64.2 million subscribers as of June 1997, a 1% 
increase from September 1996), revenues (a 12.2% increase between 
September 1996 and June 1997), and audience ratings (an 8.6% increase 
between September 1996 and June 1997, to an average 38 share for cable 
programming services). A Commission survey of cable industry prices 
indicates that the average monthly rate for a package consisting of the 
programming services offered on the basic and most popular cable 
programming service (``CPS'') tiers and a converter and a remote 
increased from $26.57 on July 1, 1996 to $28.83 on July 1, 1997, an 
increase of 8.5%. In addition, DBS subscribership increased from 3.5 
million at the end of September 1996 to 5.1 million homes at the end of 
June 1997 and SMATV subscribership increased from 1.1 million homes at 
the end of September 1996 to 1.2 million at the end of June 1997. 
However, HSD subscribership decreased from 2.3 million homes at the end 
of September 1996 to 2.2 million homes at the end of June 1997 and MMDS 
subscribership decreased from 1.2 millions to 1.1 million homes between 
September 1996 and June 1997. Moreover, two of the seven open video 
systems (``OVS'') certified by the Commission have begun operation and, 
as of June 1997, served 3,000 subscribers.
     Horizontal concentration: Local markets for the delivery 
of video programming generally remain highly concentrated and 
characterized by barriers to both entry and expansion by competing 
distributors. DBS service, available in almost all areas, constitutes 
the most significant alternative to cable television. Competitive 
overbuilding by franchised cable operators remains minimal but is 
increasing, particularly by LECs and appears, to varying degrees, to 
improve service and/or pricing where it exists. Video distribution 
competition within and for MDU buildings appears to be developing as a 
distinct market separate from neighboring areas.
     Vertical integration: The proportion of national 
programming services that are vertically integrated with cable 
operators declined slightly from last year's total of 46% to 40% this 
year. Eight of the 16 national programming services launched since the 
1996 Report have been vertically integrated with a cable multiple 
system operator.
     Promotion of entry and competition: The Commission has 
continued to take steps to eliminate obstacles to competition, 
including the adoption and enforcement of rules: prohibiting 
governmental and private restrictions that unreasonably interfere with 
a consumer's right to install the dishes and other antennas to receive 
programming services from DBS, wireless cable, and television 
broadcast; establishing procedures to use internal wiring installed in 
an MDU building by the incumbent provider, facilitating owners' and 
residents' choice among providers; and increasing the amount of 
spectrum available for wireless uses and eliminating restrictions on 
use, for the benefit of wireless providers. The Commission also has 
initiated proceedings intended to foster competition, including 
proposals to improve the efficiency of the rules requiring access to 
cable programming attributable to programmers that are vertically 
integrated with cable operators and a rulemaking, adopted pursuant to 
section 304 of the 1996 Act, seeking comment on rules to assure the 
commercial availability of navigation devices from manufacturers, 
retailers and other vendors not affiliated with any MVPDs.
     Technological advances: Advances in and development of 
digital technology will permit all distributors of video programming to 
increase the delivered quantity of service. Digital technology 
increases the number of programming channels that may be communicated 
over a given amount of bandwidth or spectrum space. MVPDs and 
broadcasters continue to pursue improved digital compression ratios and 
deployment of digital technology. In addition CableLabs recently 
announced its ``open standards'' initiative supporting development of 
advanced set-top boxes. The industry shift from proprietary technology 
to an open standard may lead to more manufacturers of the boxes, may 
spur a retail distribution market, and may prompt new high speed data 
and internet service providers.
     Convergence of cable and telephone service: At the time of 
the 1996 Act's passage, members of the local telephone industry 
indicated that they would begin to compete in video delivery markets, 
and cable television operators indicated that they would begin 
providing local telephone exchange service. The expectation was that 
there would be a technological convergence that would permit use of the 
same facilities for provision of the two types of service. This 
technological convergence has yet to take place. Almost all of the 
video service provided by LECs uses conventional cable television 
technology or wireless cable operations that stand alone from the 
provider's telephone facilities. The provision of telephone service by 
cable firms over integrated facilities remains primarily at an 
experimental stage. The one area in which many cable operators appear 
poised to compete head-to-head with local telephone companies is the 
provision of Internet access. Technology in this area appears to be 
rapidly advancing and service is being deployed on a commercial basis 
in a large number of cable systems.
    5. Finally, in the 1997 Report, the Commission provides Congress 
with additional information regarding video description, which is an 
aural description of a program's key visual elements intended to 
benefit viewers with visual disabilities. The 1996 Act required the 
Commission to report to Congress on appropriate methods and schedules 
for phasing video description into the marketplace and other technical 
and legal issues related to the widespread deployment of video 
description. On July 29, 1996, the Commission submitted its first 
report to Congress, 61 FR 19214, August 14, 1996, and indicated that it 
would report further on this issue in its 1997 Report. The Commission 
now finds that economic barriers, technical limitations, and unresolved 
legal issues continue to limit the availability of video description. 
We conclude that continued public funding for video description could 
further its development such that widespread

[[Page 10224]]

implementation could become feasible and create a commercial market for 
video description. In addition, advances in digital technology may 
allow the development and expansion of video description.

Ordering Clauses

    6. This 1997 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).
    7. It is Ordered that the Office of Legislative and 
Intergovernmental Affairs shall send copies of this 1997 Report to the 
appropriate committees and subcommittees of the United States House of 
Representatives and the United States Senate.
    8. It is Further ordered that the proceeding in CS Docket No. 97-
141 is terminated.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 98-5236 Filed 2-27-98; 8:45 am]
BILLING CODE 6712-01-P