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

FEDERAL COMMUNICATIONS COMMISSION

[CS Docket No. 98-102, FCC 98-137]

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 June 23, 1998, 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

1998. The Notice of Inquiry will provide parties with an opportunity to

submit

[[Page 36689]]

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 July 31, 1998, and reply comments are due by

August 31, 1998.

ADDRESSES: Office of the Secretary, Room 222, Federal Communications

Commission, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Marcia Glauberman, 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. 98-102, FCC 98-137, adopted June 23,

1998, and released June 26, 1998. The complete text of this Notice of

Inquiry is available for inspection and copying during normal business

hours in the FCC Reference Center (Room 239), 1919 M Street, NW,

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.

Synopsis of the Notice of Inquiry

1. Section 628(g) of the Communications Act of 1934, as amended

(``Communications Act''), 47 U.S.C. 548(g), requires the Commission to

deliver an annual report to Congress on the status of competition in

markets for the delivery of video programming. The Notice of Inquiry

(``NOI'') is designed to assist the Commission in gathering the

information, data and public comment necessary to prepare its fifth

annual report on competition in markets for the delivery of video

programming (``1998 Competition Report''). The Commission expects to

use the information submitted by commenters to supplement publicly

available information and relevant comments that have been filed in

other Commission proceedings.

2. For the 1998 Competition Report, we request information and

comment regarding the cable industry, existing and potential

competitors in markets for the delivery of video programming, and the

prospects for increasing competition in these markets. We seek

information to update our assessment of the status of competition and

on changes in the competitive environment since our 1997 Competition

Report, summarized at 63 FR 10222 (March 2, 1998), was submitted to

Congress. Commenters also are invited to identify and comment on

existing statutory provisions and Commission regulations they perceive

as restraining competition or inhibiting development of robust

competition in markets for the delivery of video programming. We note

that, pursuant to section 623(c)(4) of the Communications Act, the

Commission's authority under section 623(c)(3) to review complaints

submitted by local franchising authorities concerning increases in

rates for cable programming service (``CPS'') tiers sunsets on March

31, 1999. See 47 U.S.C. 543(c)(3) and (c)(4). The information gathered

in this report will present the last comprehensive picture of the state

of cable competition prior to the sunset date. For this year's report,

to the extent feasible, we ask parties to submit data and information

that are current as June 30, 1998.

3. As in previous reports, we seek factual information and

statistical data regarding the status of video programming distributors

using different technologies, and changes that have occurred in the

past year. We ask for information on multichannel video programming

distributors (``MPVDs'') using predominantly wired distribution

technologies, including cable systems, private cable or satellite

master antenna television (``SMATV'') systems, and open video systems

(``OVS''). We also request data for those relying predominantly on

wireless distribution technologies, such as over-the-air broadcast

television, multichannel multipoint distribution service (``MMDS''),

instructional television fixed service (``ITFS''), local multipoint

distribution service (``LMDS''), direct broadcast satellite (``DBS'')

service, and home satellite dish (``HSD'') service.

4. In addition to statistical data on each of these delivery

services, we seek information regarding: (a) the number of homes passed

(for wired technologies) and the number of homes capable of receiving

service (for wireless technologies); (b) the number of operators; (c)

the identities of the ten largest operators (national market only); (d)

the number of subscribers and penetration rates; (e) channel capacities

and the number and types of channels offered; and (f) the number and

types of services offered. In addition, we request financial

information for each technology, including firm and industry revenues,

in the aggregate and by sources (e.g., subscriber revenues, advertising

revenues, programming revenues); cash flow; changes in stock prices;

investments; capital acquisition; and capital expenditures.

5. For each video programming distribution technology, we also

request information describing: (a) technological advances (e.g.,

deployment of digital services) that make or may make the technology

competitive; (b) the effort (including steps, costs and time) needed to

increase the number of homes passed or capable of receiving service;

(c) the effort (including steps, costs and time) needed to increase the

number of channels and types of services offered; and (d) regulatory

and judicial developments that affect the use of different

technologies. In addition, in evaluating the extent of competition

among various MVPDs' services or technologies, we seek information and

analysis on the degree to which viewers or consumers consider the

different types of MVPDs to be substitutes and on the extent to which

customers have switched from one provider or technology to another one.

6. In the NOI, we request information on interservice competition

and service to multiple dwelling unit (``MDU'') buildings. We further

seek information that will allow us to compare the cost to consumers of

subscriptions to, and equipment needed to receive, alternative MVPD

services (cable, DBS, MMDS, SMATV, or OVS) and to permit us to better

understand the factors considered by consumers when choosing among

alternative MVPDs. Further, we seek comment on the appropriate method

for comparing the services and costs of different MVPDs.

7. As in prior reports, we will provide updated information in the

1998 Competition Report on the structure of, and rivalry in, markets

for the delivery of video programming. To evaluate market concentration

at the local, regional and national levels, we ask commenters to

provide updated information on industry transactions, including

information on mergers, acquisitions, consolidations, swaps and trades,

cross-ownership, and other structural developments that affect

distributors' delivery of video programming. In local markets where

incumbent cable operators face competition from one or more other video

programming distributors, we seek information on: (a) the identity of

the competitors; (b) the distribution technology used by each

competitor; (c) the date that each competitor entered the market; (d)

the location of the market, including whether it is predominantly urban

or rural; (e) an estimate of the subscribership and market share for

the services of each competitor; (f) a description of the service

offerings of each competitor; (g) differentiation strategies each

competitor is pursuing; and (h) the prices charged for the service

offerings.

[[Page 36690]]

8. With respect to regional concentration (i.e., ``clustering''),

for cable and other MVPDs, we seek information on the geographic areas

served by particular companies and comment regarding the effects

industry consolidation and clustering have had on competition. We also

seek data regarding current national subscribership levels of all

MVPDs, changes in these levels since the 1997 Competition Report, and

the reasons for these changes, including whether such changes are the

result of merger and acquisition activity, marketing strategies, or

other factors. We also would like to evaluate MVPD service providers in

the economic context of the larger communications marketplace based on

their relative size and resources (e.g., revenues) and the extent to

which participants have the ability to enter each others' market.

9. In the 1998 Competition Report, we will update information on

existing and planned programming services, with particular focus on

those programming services that are affiliated with video programming

distributors. We seek information and ask a variety of questions on

programming services that are affiliated with cable operators,

affiliated with non-cable video programming distributors and

unaffiliated with any MVPD.

10. For this year's report, we also request information on the

various program options offered by each MVPD technology, including

exclusive program offerings, the number of channels available, and the

comparability of the program options and packages available with each

technology. We ask whether there are certain programming services or

specific classes of service that an MVPD needs to provide to

subscribers in order to be successful. We request information regarding

the extent that local cable operators or broadcasters are providing

local or regional news or sports channels. In addition, we solicit

information on the extent to which MVPDs offer or plan to offer

electronic programming guides. We also seek information on the extent

to which MVPDs are now offering or plan to offer consumers discrete

programming choices (i.e., service on an ``a la carte'' or individual

channel basis) rather than programming service packages (i.e., tiers of

programming services) and the technical feasibility of offering

programming in a customized manner. Moreover, we seek information and

comment regarding public, educational and governmental (``PEG'') access

and leased access channels.

11. We further seek information and analysis regarding the effect

of increased programming costs on rates, especially for cable service.

We request information and comment on the factors that affect

programming costs for cable operators and other MVPDs. We also ask

about the extent to which the increased programming costs are passed

through to MVPD subscribers and to advertisers.

12. As in previous reports, we will update our assessment of our

program access, program carriage and channel occupancy rules.

Commenters are asked to provide information regarding the effectiveness

of these rules. We request information on whether the coverage of the

program access rules is appropriate, on whether there have been any

cases of MVPDs being denied programming when a satellite delivered

service becomes terrestrially delivered or by non-vertically integrated

programmers, and on any other issues of concern relating to the

availability and distribution of programming.

13. We seek updated information on various technological advances

that may affect industry structure and competition in markets for the

delivery of video programming, including system upgrades and the

deployment of digital technology. We ask whether upgrades are being

undertaken only in specific geographic areas and whether they are

conducted mainly in response to competitive entry. We seek information

on the feasibility of combining distribution technologies (e.g., DBS

and SMATV) and data regarding MVPDs' current use of combined

distribution technologies. We also solicit data on estimated roll-out

or launch dates for new technologies. In addition, we note that an

important aspect of the technological developments taking place relates

to the deployment of set top boxes, integrated receiver/decoders, or

receivers that facilitate or differentiate MVPD service offering. We

ask commenters to identify and describe each type of device, including

its function and capabilities, its costs and availability to consumers.

14. Currently, basic and cable programming service rates are

deregulated where a cable operator faces ``effective competition'' as

defined in the Communications Act, 47 U.S.C. 543(l). We seek comment on

whether the existing test for effective competition is an appropriate

measurement of the existence of competition. Where commenters believe

it is not the correct measure of competition, all or in part, we ask

for suggested alternative means for determining competition.

15. In the last two reports, we examined several case studies of

local markets where cable operators faced actual competition from MVPD

entrants. We seek updated information on the effects of actual and

potential competition in these and other local markets where consumers

have, or soon will have, a choice among MVPDs, including specific data

regarding areas where head-to-head competition exists between cable and

other MVPDs, or among various types of MVPDs, and information on how

such competition has affected prices, service offerings, quality of

service, and other relevant factors.

16. We also would like to gather information on video delivery

competition for and within MDUs. We request information on how common

is it for consumers to have options to choose between or among MVPD

services within a particular MDU and how program offerings and prices

charged by competing MVPDs serving MDUs compare. We solicit information

on how many exclusive service contracts, and how many so-called

``perpetual'' exclusive contracts, exist in MDUs at present and whether

their use is increasing or decreasing. We request comment on the impact

that the recent inside wiring, over-the-air reception device

(``OTARD''), and cable bulk rate rules have had on MDU competition.

17. Finally, we request information regarding existing or potential

regulatory impediments that may deter entry or prevent expansion of

competitive opportunities in video program delivery markets. We also

ask commenters to identify specific Commission rules, policies or

regulations that ought to be reexamined in light of current competitive

opportunities within multichannel video programming markets.

Administrative Matters:

Ex Parte

18. There are no ex parte or disclosure requirements applicable to

this proceeding pursuant to 47 CFR 1.1204(a)(4).

Comment Dates

19. Pursuant to applicable procedures set forth in Secs. 1.415 and

1.419 of the Commission's Rules, 47 CFR 1.415 and 1.419, interested

parties may file comments on or before July 31, 1998, and reply

comments on or before August 31, 1998. To file formally in this

proceeding, participants must file an original and four copies of all

comments, reply comments and supporting comments. If participants

[[Page 36691]]

want each Commissioner to receive a personal copy of their comments, an

original plus ten copies must be filed. Comments and reply comments

should be sent to the Office of the Secretary, Federal Communications

Commission, Washington, DC 20554. Comments and reply comments will be

available for public inspection during regular business hours in the

FCC Reference Center (Room 239) of the Federal Communications

Commission, 1919 M Street, NW, Washington, DC 20554.

Ordering Clauses

20. This Notice of Inquiry is issued pursuant to authority

contained in sections 4(i), 4(j), 403 and 628(g) of the Communications

Act of 1934, as amended.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98-17831 Filed 7-6-98; 8:45 am]

BILLING CODE 6712-01-P