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

AGENCY:

Federal Communications Commission.

ACTION:

Notice of inquiry.

SUMMARY:

The Commission is required to report annually to Congress on the status of competition in markets for the delivery of video programming. On July 25, 2000, the Commission adopted a Notice of Inquiry to solicit information from the public for use in preparing the competition report that is to be submitted to Congress in December 2000. The Notice of Inquiry will provide parties with an opportunity to submit comments and information to be used in conjunction with publicly available information and filings submitted in relevant Commission proceedings to assess the extent of competition in the market for the delivery of video programming.

DATES:

Comments are due by September 8, 2000, and reply comments are due by September 29, 2000.

ADDRESSES:

Office of the Secretary, Federal Communications Commission, 445 12th Street, S.W., Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT:

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

SUPPLEMENTARY INFORMATION:

This is a synopsis of the Commission's Notice of Inquiry in CS Docket No. 00-132, FCC 00-270, adopted July 25, 2000, and released August 1, 2000. The complete text of this Notice of Inquiry is available for inspection and copying during normal business hours in the FCC Reference Center (Room CY-A257) at its headquarters, 445 12th Street, SW, Washington, D.C. 20554, and may be purchased from the Commission's copy contractor, International Transcription Service, (202) 857-3800, 1231 20th Street, NW, Washington, D.C. 20036, or may be viewed via internet at http://www.fcc.gov/csb/.

Synopsis of Notice of Inquiry

Section 628(g) of the Communications Act of 1934, as amended, directs the Commission to annually report to Congress on the status of competition in the market for the delivery of video programming. This Notice of Inquiry (“Notice”) is designed to assist the Commission in gathering data and information on the status of competition in markets for the delivery of video programming for our seventh annual report (“2000 Competition Report”). The Commission will report on the current state of competition and report on changes in the competitive environment since our 1999 Competition Report was submitted to Congress.

We seek information that will allow us to evaluate the status of competition in the video marketplace, prospects for new entrants to that market, and its effect on the cable television industry and consumers. We are interested in evaluating the extent to which consumers have choices among video programming distributors and delivery technologies. We seek to compare video distribution alternatives available to consumers. In particular, we seek data that will allow us to compare video programming offerings, prices for programming services and associated equipment, and any other services provided (e.g., telephony, data access). Industry members, interested parties, and members of the public should submit information, comments, and analyses regarding competition in markets for the delivery of video programming.

In order to facilitate our analysis of competitive trends over time, we request data as of June 30, 2000, and ask parties, to the extent feasible, to submit data and information that is current as of that date. Comments submitted in this proceeding will be augmented with information from publicly available sources. In addition, we expect to use data collected in recent Commission proceedings and reports such as the broadband inquiry pursuant to Section 706, the annual report of cable television systems (Form 325), and the annual report on cable industry prices.

Video distributors using both wired and wireless technologies serve the market for the delivery of video programming. Video programming distributors include cable systems, direct broadcast satellite (“DBS”) service, home satellite dish (“HSD”) service, private cable or satellite master antenna television (“SMATV”) systems, open video systems (“OVS”), multichannel multipoint distribution service (“MMDS”), and over-the-air broadcast television service.

We seek to evaluate video programming distributors in the context of an overall video programming marketplace. For this assessment, we solicit data and information that will show how broadcast television, cable television, telephone, satellite, equipment suppliers and other competitors compare in terms of relative size and resources (e.g., revenues) and indicate the extent to which participants have the ability to enter each others' markets. We request data that measures the audience reach of large video programming distribution firms as well as their control over the video market and information on the ability of video distributors to expand into new markets such as local telephony and data services.

Congress and the Commission have sought to eliminate barriers to competitive entry and establish market conditions that promote competition to foster more and better options for consumers at reasonable prices. Beginning with the 1992 Cable Television Consumer Protection and Competition Act of 1992 (“1992 Act”), Congress removed several barriers to competition. The Telecommunications Act of 1996 (“1996 Act”) seeks to extend the pro-competitive provisions of the 1992 Act and to establish a “pro-competitive de-regulatory national policy framework” for the telecommunications industry by increasing opportunities for firms not traditionally associated with the provision of video services to enter into the video marketplace. The 1996 Act repealed the prohibition against an entity holding attributable interests in a cable system and a local exchange carrier (“LEC”) with overlapping service areas as well as removing regulatory barriers to the entry of public utility holding companies into telecommunications, information services.

For this year's report, we seek comment and information on the extent to which changes in the Communications Act and the Commission's rules have encouraged new competitors in the market for the delivery of video programming. We also seek comment on any remaining, or impending, statutory or regulatory barriers to new entrants in the video market. For example, the prohibition on cable exclusivity in the program access rules ceases to be effective on October 5, 2002, unless the Commission finds that the prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming. The Commission is required to begin a proceeding to review these rules in 2001, therefore, we seek comment on the standards that should be employed in this review and on the process for undertaking it.

In addition, Section 612(g) of the Communications Act provides that at such time as cable systems with 36 or more activated channels are available to 70% of households within the United States and are subscribed to by 70% of those households, the Commission may promulgate any additional rules necessary to provide diversity of information sources. We seek, through data gathered in this proceeding, to determine if the cable industry has reached the benchmarks specified in this provision and seek comment on how the requirements of this provision should be met.

As in previous reports, we seek factual information and statistical data about the current status of incumbent video programming distributors and any changes that have occurred during the past year. We also seek the following financial information for each video distribution firm.

In addition, we seek information and analysis on the degree to which viewers or consumers consider the different types of video programming distributors to be substitutes. We request any information available on the extent to which customers have switched from one provider or technology to another one. We request that commenters provide information on those factors responsible for the switch, such as relative prices, service offerings, availability or lack of “favorite” programming, technical problems, ease of use, or special features available with a specific technology. Finally, we invite comment on a variety of issues associated with specific segments of the video programming distribution industry as well as any other relevant comments.

Cable Television

Last year, we reported that franchised cable operators had approximately 67 million subscribers and an 82% share of the multichannel video programming distribution market. We also reported increases in cable subscribership, channel capacity, and viewership. Have these increases recurred this year? We seek to update and refine our report on the performance of the cable television industry and request data and comments on the current state of competition in this segment of the video programming distribution market. We invite comment and request data on cable television's financial performance, capital acquisition and disposition, system transactions, rates, programming costs, subscribership, viewership, and new service offerings.

We further seek comment on how cable operators package programming for consumers. Are cable operators restructuring their programming tiers now that cable programming service tier (”CPST”) rate regulation has ended? If so, to what extent are operators shifting programming from the basic service tier (”BST”) to the CPST and creating smaller basic tiers (i.e., “lifeline” tiers)? To what extent are operators shifting services to create uniform program offerings across their regional or clustered systems? We are interested in information on whether, and if so how, cable operators are restructuring their programming packages and tiers of service as a result of actual or potential competition. We also seek comment on whether, and to what extent, these efforts are intended to differentiate cable service from that of competing video services.

Direct-to-Home Satellite Services

We seek updated information about direct-to-home (“DTH”) satellite services, which includes direct broadcast satellite (”DBS”) and home satellite dish (“HSD” or “C-Band”) services. Previous reports have noted the continued growth of DBS subscribership and the increased proportion of video programming subscribers choosing alternatives to cable television. We also observed a decline in the number of HSD subscribers. Are these trends continuing? Are there identifiable differences between consumers who choose to subscribe to DBS rather than cable or another video programming distributor? How do DBS rates for a package of programming and equipment compare to equivalent packages offered by cable?

On November 29, 1999, the Satellite Home Viewer Improvement Act of 1999 (“SHVIA”) became law. One of the key elements of the SHVIA is that it permits satellite carriers to offer their subscribers local TV broadcast signals in their local markets, through an option referred to as “local-into-local.” We seek data and information on the number of markets where local-into-local service is offered, or will be offered in the near future, including the number and affiliation of the stations carried.

Broadcast Television

In this Notice, we seek information on the role of broadcast television in market for distributing video programming. We request information regarding the extent to which broadcast television competes as a distribution medium with multichannel video programmers for audiences or for advertising revenue.

Broadcasters are in the process of rolling out digital television (“DTV”). Currently, there are close to one hundred television stations broadcasting over-the-air in digital format. While the Commission undertakes a review of the digital television rollout every two years, its focus is on the technical buildout of systems rather than the role of DTV in markets for the delivery of video programming that is our focus.

Wireless Cable

In the 1999 Competition Report, we reported an almost 18% decline in MMDS video subscribers. The decline in subscribership is a trend that has continued from previous years. However, the industry is in the process of expanding service offerings to include two-way communications services, such as Internet. What effect will this have on MMDS subscribership trend and what effect does the decline of MMDS subscribership have on the status of video competition and consumer choice? We request fact-based projections and forecasts on the future of video programming distribution via MMDS technology.

Satellite Master Antenna Systems

Video distribution facilities that use closed transmission paths without using any public right-of-way known as SMATV or private cable systems, primarily serve multiple dwelling units (“MDUs”) such as apartment buildings. The 1999 Competition Report noted growth in SMATV subscribership based on the comments of the National Cable Television Association. As was reported, the increase in SMATV subscribers may be attributable to the inexact method used for estimating SMATV subscribers. In order to provide the most accurate and reliable estimate of SMATV subscribership, we request data for SMATV markets, including subscribership levels, service areas, and the identities of the largest operators. We also request information on the types of services offered by SMATV providers and the price charged for those services. How do the programming packages offered and the price of SMATV service compare to those of incumbent cable operators?

Open Video Systems

We request information on the operation of open video systems, including the number of homes passed, the number of subscribers, and the types of services being offered on OVS. To what extent are open video systems joint ventures between video service providers and other entities (e.g., utility companies, Internet service providers) and what are the arrangements among the participants in such ventures? An OVS operator must make channel capacity available for use by unaffiliated programmers. Are unaffiliated programmers seeking carriage on open video systems? How many programmers and what type of programming is being offered on this basis?

Local Exchange Carriers and Utilities

For the 2000 Competition Report, we request information regarding LECs, long distance telephone companies, and utility companies that provide video services. What delivery technologies are being used? Is the entity providing video services as part of a joint venture? With respect to LECs, we request information about the current status of their activities and any changes that have occurred since the 1999 Competition Report. In addition, we request updated information on franchised cable systems operated by LECs, both within their telephone services areas and outside those regions.

Home Video

In 1990, the Commission concluded that home video provides competition to cable television, at least with respect to the premium and pay-per-view programming services. Subsequently, we have reported on developments in the home video marketplace in our annual reports. We seek comment on whether these technologies should continue to be considered competitors with broadcasting and multichannel video programming distributors given the changes in the marketplace. We also seek information and updated statistics regarding home video sales and rental market.

Internet Video

We also seek comment and fact-based projections as to when and if Internet video will become a viable competitor in the market for the delivery of video programming. We request information on the technological, legal, and competitive factors that may promote or impede the provision of video over the Internet. What technical parameters must be established and what technical, economic, or regulatory barriers exist to prevent Internet or DSL delivered video becoming an effective competitor to the more established distribution systems?

Programming Issues

In past years, we have relied heavily on publicly available information and data from a variety of sources to compile our profile of video programming practices and ownership. For this year's report, in order to get the most accurate picture of MSO ownership in national video programming services, we ask video distributors to supply us directly with programming information.

We request information on recently launched programming and planned programming launches. We seek ownership information for each new and planned programming service. We also ask commenters to provide the actual launch date for new services and the currently scheduled launch date for planned services? To what extent does the success of a new programming service depend on the tier of service on which it is placed? To what extent does the success of a new programming service depend on its being associated with one of the largest cable system operators? To what extent does the success of a new programming service depend on its being associated with the brand name of an existing channel?

As in previous reports, we will continue to report on the effectiveness of our program access, program carriage and channel occupancy rules that govern the relationships between cable operators and programming providers.

Technical Advances

Cable operators and other video programming distributors continue to develop and deploy advanced technologies that allow them to deliver additional video programming and options, high speed data access, telephony service and other services to consumers. In this section, we request information on the various aspects of these technical advances and how they affect competition in the markets for video programming.

System Upgrades

Cable operators have made substantial investments to upgrade their plant and equipment to increase channel capacity, create digital services, or offer advanced services such as high-speed, switched, broadband telecommunications capability. We seek information on whether these investments are continuing at the same pace as in previous years and what role, if any, the ability to provide advanced broadband services plays in attracting and retaining subscribers to cable firms.

Convergence

In the 1999 Competition Report, we observed that the most significant convergence of service offerings has been the pairing of Internet service with video services. One method of implementing this convergence is through the widespread deployment of modems by cable operators. Cable firms have begun finalizing the technical standards (Data Over Cable Service Interface Specification or “DOCSIS”) intended to provide manufacturers with a set of standards that will enable the production of interoperable cable modems. We seek comment on the current and future effect of video programming distributors providing Internet and other data services to their subscribers.

Consumer Equipment

As digital services and other new technologies are deployed by video programming distributors, changes in consumer premises equipment design, function, and availability may affect consumer choice and competition between firms in the video programming market.

Along with cable modems, cable operators are also deploying set-top boxes, integrated receiver/decoders, and navigation devices or receivers that facilitate or differentiate video distributors' service offerings. Thus, we seek comment on the compatibility and availability of customer premises equipment used to provide video programming services. Specifically, we ask commenters to provide information regarding the development of specifications for interoperable set-top boxes, including updated information on the progress of Cable Television Laboratories, Inc.'s OpenCable process. We also seek information on the retail availability of navigation devices to consumers. What types of devices are available at retail and what are their capabilities? Is existing equipment compatible with the OpenCable? Finally, to what extent are consumers now purchasing equipment, including DOCSIS compliant cable modems rather than renting from video programming distributors?

Electronic Programming Guides

An electronic programming guide (“EPG”) is a software-based service or device offered by cable operators and other video programming distributors to consumers to navigate, organize, and differentiate video program offerings. For this year's report, we request updated information on the extent to which video programming distributors offer or plan to offer EPGs to their subscribers. We ask commenters to provide data on the number and different types of available electronic programming guides. We are interested in whether each EPG is nationally or locally produced and whether nationally distributed EPGs can be customized for local program offerings. We seek information regarding the ownership of nationally distributed EPGs, particularly with respect to their affiliation with video programming distributors.

Case Studies

In recent Competition Reports, we presented several case studies of local markets where cable operators faced actual competition from new entrants. This year, we request information on the effects of actual and potential competition in local markets where consumers have a choice among video programming distributors. In particular, we seek updated information on video programming services in those areas included in our previous case studies to determine whether the initial effects of competition continue. We also seek data regarding other areas where head-to-head competition exists, or is expected to exist in the near future, between cable and other video programming distributors, or among various types of video programming distributors. How has such competition affected prices, service offerings, quality of service, and other relevant factors? What regulatory changes have facilitated head-to-head competition in local markets between or among video programming distributors? What barriers still exist which inhibit further competition?

Ex Parte

There are no ex parte or disclosure requirements applicable to this proceeding pursuant to 47 CFR 1.1204(b)(1).

Filing of Comments and Reply Comments

Pursuant to applicable procedures set forth in 47 CFR 1.415 and 1.419, interested parties may file comments on or before September 8, 2000 and reply comments on or before September 29, 2000. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS) or by filing paper copies.

Comments filed through the ECFS can be sent as an electronic file via the Internet to <http://www.fcc.gov/e-file/ecfs.html>. Generally, only one copy of an electronic submission must be filed. If multiple docket or rulemaking numbers appear in the caption of this proceeding, however, commenters must transmit one electronic copy of the comments to each docket or rulemaking number referenced in the caption. In completing the transmittal screen, commenters should include their full name, Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e-mail. To get filing instructions for e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and should include the following words in the body of the message, “get form <your e-mail address.” A sample form and directions will be sent in reply.

Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding commenters must submit two additional copies for each additional docket or rulemaking number. All filings must be sent to the Commission's Secretary, Magalie Roman Salas, Office of the Secretary, Federal Communications Commission, 445 12th Street, SW, Room TW-A325, Washington, DC 20554. The Cable Services Bureau contact for this proceeding is is Marcia Glauberman at (202) 418-7200, TTY (202) 418-7172, or at mglauber@fcc.gov.

Parties who choose to file by paper should also submit their comments on diskette. These diskettes should be submitted to Marcia Glauberman, 445 12th Street, S.W., Room 3-A738, Washington, D.C. 20554. Such a submission should be on 3.5 inch diskette formatted in an IBM compatible format using Microsoft Word for Windows or compatible software. The diskette should be accompanied by a cover letter and should be submitted in “read only” mode. The diskette should be clearly labelled with the commenter's name, proceeding (including the lead docket number in this case [CS Docket No. 00-132]), type of pleading (comment or reply comment), date of submission and the name of the electronic file on the diskette. The label should also include the following phrase “Disk Copy—Not an Original.” Each diskette should contain only one party's pleadings, preferable in a single electronic file. In addition commenters must send diskette copies to the Commission's copy contractor, International Transcription Service, Inc., 1231 20th Street, NW., Washington, DC 20036.

Ordering Clause

This Notice is issued pursuant to authority contained in Sections 4(i), 4(j), 403, and 628(g) of the Communications Act of 1934, as amended.