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

FEDERAL COMMUNICATIONS COMMISSION

[CS Docket No. 99-230, FCC 99-148]

Annual Assessment of the Status of Competition in Markets for the

Delivery of Video Programming

AGENCY: Federal Communications Commission.

ACTION: Notice of inquiry.

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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 18, 1999, 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

1999. 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 August 6, 1999, and reply comments are due

by September 1, 1999.

ADDRESSES: Office of the Secretary, Federal Communications Commission,

445 12th Street, SW, 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. 99-230, FCC 99-148, adopted June 18,

1999, and released June 23, 1999. The complete

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text of this Notice of Inquiry 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.

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 sixth

annual report on competition in markets for the delivery of video

programming (``1999 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 1999 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 1998 Competition

Report was submitted to Congress. For this year's report, to the extent

feasible, we ask parties to submit data and information that are

current as of June 30, 1999. We also note that the information gathered

in this report will present the first comprehensive picture of the

state of competition in the video marketplace following the

deregulation of rates for cable programming service tiers (``CPSTs'')

on March 31, 1999.

3. Markets for the delivery of video programming are served by

video distributors using both wired and wireless technologies. Video

distributors include multichannel video programming distributors

(``MVPDs''), such as cable systems, direct broadcast satellite

(``DBS'') service, and home satellite dish (``HSD'') service, private

cable or satellite master antenna television (``SMATV'') systems, open

video systems (``OVS''), multichannel multipoint distribution service

(``MMDS''), and instructional television fixed service (``ITFS''), as

well as over-the-air broadcast television service.

4. 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. For the 1999 Competition Report, we seek information

and comment that will allow us to evaluate the status of competition in

the video marketplace, its effect on the cable television industry, and

prospects for increased competition. We are interested in evaluating

the extent that consumers have choices among video programming

distributors and delivery technologies and in comparing the various

video distribution alternatives available to consumers in terms of

video programming offerings, prices for programming services and

associated equipment, and other services provided (e.g., telephony,

data access). We invite comment on the effect of recent statutory and

regulatory changes on competition for the delivery of video services.

We request information regarding existing or potential regulatory

impediments that may deter entry or prevent expansion of competitive

opportunities in video program delivery markets, including specific

Commission rules, policies, or regulations that ought to be reexamined.

5. In recent Competition Reports, we presented case studies of

local markets where cable operators faced actual competition from MVPD

entrants. This year, we request 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. In particular,

we seek updated information on MVPD services in those areas included in

our previous case studies to determine whether the initial effects of

competition continue. We also ask commenters to provide specific data

regarding other areas where head-to-head competition exists, or is

expected to exist in the near future, between cable and other MVPDs, or

among various types of MVPDs. We further request information about how

competition has affected prices, service offerings, quality of service,

and other relevant factors.

6. In addition to analyzing case studies, in the 1999 Competition

Report, we want to present a broader picture of the current state of

competition on a local, regional, and national basis. We ask commenters

to assist us in this assessment of competitive alternatives available

to consumers by providing detailed information on the types of

competitive alternatives available, comparisons of the video and

nonvideo services offered, and the prices charged for these service and

associated equipment. We seek data on the number of television

households that can choose between two, three, four, or more video

programming distribution services and other information including: (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.

7. In the 1997 and 1998 Competition Reports, we considered multiple

dwelling units (``MDUs'') a separate submarket. For the 1999

Competition Report, we would like to update our information on video

delivery competition for and within MDUs. We request information

regarding the choices that consumers have among MVPD services within a

particular MDU, comparisons of the program offerings and prices charged

by competing MVPDs serving an MDU, and comparisons of the program

offerings and prices charged by MVPDs serving MDUs and competing MVPDs

serving the same geographic area.

8. 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. 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.

9. For each video programming distribution technology, we also

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

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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.

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

1999 Competition Report on the structure of, and rivalry in, markets

for the delivery of video programming. We intend to evaluate MVPD

market concentration as we have done previously and, thus, seek data

regarding current national subscribership levels of all MVPDs, whether

these levels have changed since the 1998 Competition Report, and, if

so, how significantly. To the extent national concentration has

increased or decreased for specific MVPDs, we ask commenters to discuss

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

results of merger and acquisition activity, marketing strategies, or

other factors. We request data that will allow us to report on cable

industry transactions, including information on mergers, acquisitions,

consolidations, swaps and trades, cross-ownership, and other structural

developments that affect distributors' delivery of video programming.

We further request information regarding transactions involving

noncable MVPDs that might affect competition in the video marketplace.

11. 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

ask commenters to discuss whether clustering has facilitated MVPDs'

ability to provide increased or improved services, such as additional

video and nonvideo services, lower prices, or better customer service.

12. In the 1999 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.

13. 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 request data on

the extent to which there are programming networks affiliated with

noncable MVPDs and whether such programming networks are available to

competing MVPDs. 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. Further, we solicit information

regarding increases in programming cost over the last year.

14. We are interested in how MVPDs package their programming,

particularly the extent to which they offer 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). We ask whether MVPDs offer ``mini-tiers,''

``lifeline'' basic tiers, or digital tiers and what are the technical,

economic, legal, or other considerations related to offering customized

programming packages. In addition, we ask whether MVPDs are offering

video and nonvideo services together (i.e., bundled services) and how

such combined services are offered and priced. We further solicit a

variety of information regarding: (a) Local and regional channels; (b)

public, educational, and governmental (``PEG'') access channels; (c)

leased access channels; (d) DBS channels used for ``noncommercial

programming of an educational or informational nature;'' and (e)

electronic programming guides (``EPGs'') offered by cable operators and

other MVPDs.

15. 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. We request comment on each of these rules,

especially whether the coverage of the program access rules is

appropriate and on any other issues of concern to video programming

providers or MVPDs relating to the availability and distribution of

programming.

16. In the 1998 Competition Report, we addressed the deployment of

digital technology and discussed recent activities to promote the

commercial availability of the equipment used to access video

programming and other services pursuant to the requirements of the

Telecommunications Act of 1996. For this year's report, we seek updated

information on system upgrades, particularly with respect to digital

technology. We request information regarding multiple system operators

(``MSOs'') that have created digital tiers and the types of programming

offered on these tiers. We seek similar information on upgrades and the

deployment of advanced technologies to provide digital programming and

other advanced services by MVPDs other than cable operators. We also

request information on the feasibility and use of combined distribution

technologies (e.g., DBS and SMATV). Moreover, we are interested in what

role, if any, the ability to provide advanced services plays in

attracting subscribers to video programming services and contributing

to the competitiveness of an MVPD.

17. Another important aspect of technological development is the

deployment of set-top boxes, integrated receiver/decoders, or receivers

that facilitate or differentiate MVPD service offering. In this year's

report, we plan to update the information provided in the 1998

Competition Report regarding the certification of set-top boxes,

including updated information on the progress of Cable Television

Laboratories, Inc.'s OpenCable'' process, and the availability of set-

top boxes through retail outlets.

18. In last year's report, we also observed that the cable industry

had begun the widespread deployment of cable modems and that CableLabs

was in the process of finalizing its Data Over Cable Service Interface

Specification (``DOCSIS'') intended to provide manufacturers with a set

of standards that will enable the production of interoperable cable

modems. We seek information regarding the availability DOCSIS compliant

modems and the extent to which consumers are buying rather than leasing

modems.

Administrative Matters

Ex Parte

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

this proceeding pursuant to 47 CFR 1.1204(b)(1).

Comment Dates

20. Pursuant to applicable procedures set forth in 47 CFR 1.415 and

1.419,

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interested parties may file comments on or before August 6, 1999, and

reply comments on or before September 1, 1999. Comments may be filed

using the Commission's Electronic Comment Filing System (ECFS) or by

filing paper copies. See Electronic filing of Documents in Rulemaking

Proceedings, 63 FR 24,121 (1998).

21. 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 files. 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 [email protected], and

should include the following words in the body of the message, ``get

form [email protected].

23. 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, SW, Room 3-A738, Washington, DC 20554.

Such a submission should be on 3.5 inch diskette formatted in an IBM

compatible format using WordPerfect 5.1 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. 99-230]), 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

24. 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.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 99-16832 Filed 7-1-99; 8:45 am]

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