[Federal Register Volume 66, Number 18 (Friday, January 26, 2001)]
[Notices]
[Pages 7912-7913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-2375]


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

FEDERAL COMMUNCIATIONS COMMISSION

[CS Docket No. 00-132, FCC 01-1]


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

AGENCY: Federal Communications Commission.

ACTION: Notice.

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

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 the market for the delivery of 
video programming. On January 2, 2001, the Commission adopted its 
seventh annual report (``2000 Report''). The 2000 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, Cable Services 
Bureau, (202) 418-7200, TTY (202) 418-7172.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 2000 
Report in CS Docket No. 00-132, FCC 01-1, adopted January 2, 2001, and 
released January 8, 2001. The complete text of the 2000 Report is 
available for inspection and copying during normal business hours in 
the FCC Reference Center, 445 12th Street, SW., 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 2000 Report is available on the Internet at http://www.fcc.gov/csb/csrptpg.html.

Synopsis of the 2000 Report

    1. The Commission's 2000 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 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 also examines the market structure and 
competition. We evaluate horizontal concentration in the multichannel 
video marketplace and vertical integration between cable television 
systems and programming services. In addition, the 2000 Report 
addresses competitors serving multiple dwelling unit buildings 
(``MDUs''), programming issues, technical advances, and examines a 
limited number of cases where consumers have a choice between an 
incumbent cable operator and another MVPD in a specific market. The 
2000 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 (65 FR 49804) in this 
docket.
    3. In the 2000 Report, the Commission finds 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 market share 
continues to decline. As of June 2000, 80 percent of all MVPD 
subscribers received their video programming from a local franchised 
cable operator, compared to 82 percent a year earlier. There has been 
an increase in the total number of subscribers to non-cable MVPDs over 
the last year, which is primarily attributable to the growth of DBS 
service. However, generally, 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 84.4 million households 
subscribed to multichannel video programming services as of June 2000, 
up 4.4 percent over the 80.9 million households subscribing to MVPDs in 
June 1999. This subscriber growth accompanied a 2.4 percentage point 
increase in multichannel video programming distributors' penetration of 
television households to 83.8 percent as of June 2000. The number of 
cable subscribers continued to grow, reaching 67.7 million as of June 
2000, up about 1.5 percent over the 66.7 million cable subscribers in 
June 1999. The total number of non-cable MVPD households grew from 14.2 
million as of June 1999 to 16.7 million homes as of June 2000, an 
increase of almost 18 percent. The growth of non-cable MVPD subscribers 
continues to be primarily attributable to the growth of DBS. Between 
June 1999 and June 2000, the number of DBS subscribers grew from 10.1 
million households to almost 13 million households, which is nearly 
three times the cable subscriber growth rate. DBS subscribers now 
represent 15.4 percent of all MVPD subscribers, up from 12.5 percent a 
year earlier.
     Convergence of Cable and Other Services: The 1996 Act 
removed barriers to LEC entry into the video marketplace

[[Page 7913]]

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. The 
Commission previously reported that there had 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 had not yet 
occurred. This year, we find that the rate of entry by LECs appears to 
be slowing even by the most aggressive telephone companies, and several 
LECs have reduced or eliminated their MVPD efforts. Alternatively, only 
a limited number of cable operators have begun to offer telephone 
service and their strategies for deployment remain varied, with some 
companies deploying traditional circuit-switched telephone service and 
others either offering cable-delivered telephony on a limited basis, 
waiting until Internet Protocol (``IP'') technology becomes available, 
or continuing to test such service. The most significant convergence of 
service offerings continues to be the pairing of Internet service with 
other services. There is evidence that a wide variety of companies 
throughout the communications industries are attempting to become 
providers of multiple services, including data access.
     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. Non-cable MVPDs also 
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 multiple dwelling units (``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. Consumers historically reported that their inability 
to receive local signals from DBS operators negatively affected their 
decision as to whether to subscribe to DBS. This year's significant 
increase in DBS subscribership has been attributed, at least in part, 
to the authority granted to DBS providers to distribute local broadcast 
television stations in their local markets by the Satellite Home Viewer 
Improvement Act of 1999 (``SHVIA'') enacted on November 29, 1999. Under 
SHVIA, DBS operators can offer a programming package more comparable to 
and competitive with the services offered by cable operators.
     Horizontal Concentration: Consolidations within the cable 
industry continue as cable operators acquire and trade systems. The ten 
largest operators now serve close to 90 percent of all U.S. cable 
subscribers. In terms of one traditional economic measure, the 
Herfindahl-Hirschman Index or HHI, national concentration among the top 
MVPDs has increased since last year, although it remains below the 
levels reported in earlier years. 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, 44 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 decreased by two from 283 in 1999 to 281 in 
2000. 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 37 percent 
to 35 percent this year, continuing a five year trend. In 2000, one or 
more of the top five cable MSOs held an ownership interest in each of 
99 vertically integrated national programming services. The 2000 Report 
also identifies 75 regional networks, 27 of which are sports channels, 
many owned at least in part by MSOs, and 30 regional and local news 
networks that compete with local broadcast stations and national cable 
networks (e.g., CNN).
     Technological Advances: Cable operators and other MVPDs 
continue to develop and deploy advanced technologies, especially 
digital compression techniques, to increase the capacities and to 
enhance the capabilities of their transmission platforms. These 
technologies allow MVPDs to deliver additional video options and other 
services (e.g., data access, telephony, and interactive services) to 
their subscribers. To access these wide ranging services, consumers use 
``navigation devices.'' The Commission adopted rules that required 
MVPDs to unbundle security from other functions of digital set-top 
boxes by July 1, 2000. The cable industry reports that cable operators 
have met this deadline to have digital separate security modules 
available for consumers. Interface requirements and a certification 
process for the high-speed cable modems needed to access data services 
have also been developed. Cable modems are now for sale in selected 
markets. The Commission expects these developments to increase 
competition in the market for equipment used by subscribers. In 
addition, in the last year, interactive television (``ITV'') services 
are beginning to be offered through cable, satellite, and terrestrial 
technologies. ITV provides or has the potential to provide a wide range 
of services, including video on demand (``VOD''), e-mail, TV-based 
commerce, Internet access, and program-related content, using digital 
set-top boxes and other devices that interface with television 
receivers (e.g., WebTV).

Ordering Clauses

    5. This 2000 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 2000 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. 00-132 IS TERMINATED.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 01-2375 Filed 1-25-01; 8:45 am]
BILLING CODE 6712-01-U