[Federal Register Volume 65, Number 18 (Thursday, January 27, 2000)]
[Notices]
[Pages 4425-4426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1861]


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FEDERAL COMMUNCIATIONS COMMISSION

[CS Docket No. 99-230, FCC 99-418]


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:  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.

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 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 http://www.fcc.gov/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

[[Page 4426]]

switching 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.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 00-1861 Filed 1-26-00; 8:45 am]
BILLING CODE 6712-01-P