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FCC Issues Full Video Competition Report

The FCC released its full annual video competition report Friday.

It had already outlined the major talking points last month in an open meeting in Keller,Tex., home of Verizon's inaugural FiOS (fiber optic) video service. That venue was no accident, with FCC Chairman Kevin Martin keen to promote price and service competition to cable and to advance the rollout of broadband service, with the Bush administration has said is a national priority.

The report found then, and still does, that Americans are "voracious" media consumers, voraciously consuming 8 hours and 11 minutes per day of television per household, and almost as much time individually per day on some form of media, the majority TV (four hours, 32 minutes).

The FCC concludes that consumers now have a choice, on average, of broadcast, cable, and two satellite services for their TV, as well as increased offers of bundled services--TV, Internet access, phone.

But it also concluded that rather than necessarily lowering cable prices, wired incumbents have responded by adding more services.

Arguably the key finding in the report is that cable may have met the magic 70/70 test.

According to the Communications Act, when cable is available to 70% of U.S. households, and 70% of that number are subscribers, cable will have become sufficiently dominant that the FCC is allowed to come up with new regulations to "promote diversity of information sources."

That could well mean giving telco video services help by way of easing local franchising restrictions, which Congress could mandate anyway in its current rewrite of the Communications Act.

Verizon was certainly hoping for that outcome. "The Competition Report substantiates the need for true wireline competition in video services if consumers are to realize the benefits of lower pricing and innovative services," said Susanne Guyer, senior VP, federal regulatory affairs, for Verizon.  "In markets where Verizon has been offering broadband-based video services, customers are benefiting from having a real choice of wireline video providers for the first time. We're encouraged by the Commission’s interest in eliminating barriers to video competition."

But the FCC says it has gotten different numbers for those figures, some above, some below, so it asking for comment on how best to figure out whether the 70/70 threshhold has actually been met.

Below are the highlights of the report, ripped from the electronic pages of the FCC.

• "The number of TV households and the number of MVPD subscribers increased in the past year.  As of June 2005, there were 109.6 million TV households, compared to 108.4 million in June 2004.  Of that number, approximately 94.2 million TV households subscribe to an MVPD service, as compared to 92.2 million as of June 2004. 

• "Cable serves the largest percentage of MVPD subscribers, but cable’s share of the MVPD market continued to decline.  As of June 2005, the FCC’s traditional measure indicates that 69.4 percent of MVPD subscribers received video programming from a franchised cable operator, as compared to 71.6 percent as of June 2004.  • "DBS subscribers comprise the second largest group of MVPD households, representing 27.7 percent of total MVPD subscribers as of June 2005, as compared to 25.1 percent in June 2004, an increase of over 10 percent.  DBS operators continue to add local-into-local broadcast television service.  In 167 of 210 television markets (i.e., designated market areas, or DMAs), covering 97 percent of all U.S. TV households, at least one DBS provider offers the signals of local broadcast stations (local-into-local service).  • "The number of MVPD subscribers choosing all other delivery technologies decreased, representing 2.9 percent of all subscribers in June 2005, as compared to 3.3 percent in June 2004.• "There are 15.36 million U.S. TV households that do not subscribe to an MVPD service and thus rely solely on over-the-air broadcast television for their video programming, representing 14 percent of all U.S. TV households.  The major broadcast networks now provide their most popular programming in high-definition.  Hundreds of local stations are using their digital channels to provide multicast programming, including news, weather, sports, religious material, music videos and coverage of local musicians and concerts, as well as foreign language programming.  • "BSPs served approximately 1.4 million subscribers, as of June 2005, representing 1.5 percent of all MVPD households. • "Incumbent local exchange carriers (“ILECs”) have reported plans to provide video service.  The larger LECs have accelerated their plans to roll out video services.  Verizon has received franchises from numerous local communities and began offering multichannel video service, under the brand name “FiOS,” in several of them.  SBC is planning to deploy an IP-enabled broadband network called “Project Lightspeed,” and Qwest and a number of smaller incumbent LECs are offering, or preparing to offer, MVPD service over existing telephone lines using VDSL or ADSL technologies.• "PCO subscribership has declined to one million subscribers this year, a decrease of 9.1 percent from last year’s 1.1 million.  More than one-hundred electric and gas utilities provide video service, 128 offered high-speed Internet access, 52 offered local telephone service, and 42 offered long distance telephone service.  Of the 102 offering video services, 10 are offering video-on-demand (VOD).  Wireless cable systems provide video competition to incumbent cable operators only on a limited basis.  The number of wireless cable subscribers has declined steadily from a peak of 1.2 million in 1996 to approximately 100,000 as of March 2005, down from an estimated 200,000 subscribers in April 2004.  • "Several major cellular telephone companies are offering video services through handheld devices such as mobile telephones.  Verizon Wireless rolled out V-Cast, a service that offers video programming to cellular telephone users, in February 2005.  • "The amount of web-based video provided over the Internet continues to increase significantly each year.  The sale and rental of home videos, including videocassettes and DVDs, offer consumers an alternative to the premium and pay-per-view offerings of MVPDs.  Video-on-demand services provided by cable, DBS, and Internet providers have emerged, in turn, as competitive alternatives to home video.   • "In 2005, we identified 531 satellite-delivered national programming networks, including ___ foreign-produced or foreign-langauge program channels. Of the 531 networks, 116 networks (21.8 percent) were vertically integrated with at least one cable operator.  We also identified, 274, or 51.6 percent, that are not affiliated with any cable operator or other media entity.  In addition, we identified 107 national, satellite-delivered nonbroadcast networks that are owned by a DBS operator or one or more national broadcast networks (i.e., Fox, ABC, CBS, NBC Universal, and Univision) and that are not also owned by a cable operator.  • "In 2005, we identified 96 regional networks, the same number as last year.  These networks provide programming of local or regional interest and are distributed to subscribers of one or more MVPDs in an area.  Of the 96 regional networks we identified, 44 networks, or 45.8 percent, were vertically integrated with at least one MSO.  There are 37 regional sports networks, representing 38.5 percent of all regional networks, devoted to sports programming, as compared to the 38 we reported last year.  Of the 37 regional sports networks, 17, or 5.9 percent were vertically integrated with a cable multiple system operator (MSO).

• "In 2005, the sale of DTV consumer electronics continued to accelerate.  Industry estimates indicate that 8.2 million HD-ready monitors will be shipped to retailers.  CEA reports that during the first six months of 2005, DTV products sold at a faster rate than during any previous comparable period of time, with 3.8 million DTV products sold, a 40 percent increase in unit sales from the same time period in 2004.  In 2005, the average retail price of a DTV set is expected to drop to $1,189 from $1,489 in 2004, down from the average price of $3,147 in 1998.  CEA states that currently several DTV models are available for under $700, and it expects that soon there will be DTV sets that sell for as low as $400.

• "The development and deployment of CableCARDs continued in 2005.  CableCARDs permit the reception of secured digital cable services without the addition of a set-top box.  As of November 30, 2005, there were 375 certified or verified models of CableCARD products collectively offered by 22 manufacturers, up from 60 models offered by 11 manufacturers the previous year.  One-way CableCARDs have been deployed to more than 90,000 subscribers by the ten largest MSOs.• "The video industry continues to evaluate the use of advanced compression technologies, such as MPEG-4/H.264 and Microsoft’s VC-1, to replace the MPEG-2 standard in order to decrease the amount of bandwidth required to transmit digital video.  These advances are expected to allow existing video delivery services to provide more programming and to decrease barriers to entry for new entrants to the MVPD market.• "In foreign markets, a number of incumbent operators and new entrants are providing Internet protocol television (IPTV) over DSL.  Services are offered generally through a “triple play” service package of video, telephone and broadband Internet access.  Operators also offer a wide selection of a la carte and themed video programming packages. "