05-17705. Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming

AGENCY:

Federal Communications Commission.

ACTION:

Notice.

SUMMARY:

The Commission is required to report annually to Congress on the status of competition in markets for the delivery of video programming. This document solicits information from the public for use in preparing this year's competition report that is to be submitted to Congress in December 2005. Comments and data submitted by parties will 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 on or before September 19, 2005, and reply comments are due on or before October 3, 2005.

ADDRESSES:

You may submit comments, identified by MB Docket No. 05-255, by any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
• Federal Communications Commission's Web site: http://www.fcc.gov/​cgb/​ecfs/​. Follow the instructions for submitting comments.
• People with Disabilities: Contact the FCC to request reasonable accommodations (accessible format documents, sign language interpreters, CART, etc.) by e-mail: [e-mail] or telephone: [phone] or TTY: 202-418-0432.

For detailed instructions for submitting comments and additional information on the rulemaking process, see the SUPPLEMENTARY INFORMATION section of this document.

FOR FURTHER INFORMATION, CONTACT:

Timothy May, Media Bureau, [phone], TTY [phone] or by e-mail at [e-mail].

SUPPLEMENTARY INFORMATION:

This is a synopsis of the Commission's Notice of Inquiry (NOI) in MB Docket No. 05-255, FCC 05-155, adopted August 9, 2005, and released August 12, 2005. The complete text of this NOI is available for inspection and copying Monday during regular business hours in the FCC's Reference Information Center, Room CY-A257, Portals II, 445 Twelfth Street, SW., Washington, DC 20554. The complete text is also available on the Commission's Internet Site at http://www.fcc.gov. Alternative formats are available to persons with disabilities by contacting Brian Millin at [phone] or TTY [phone]. The complete text of the NOI may also be purchased from the Commission's duplicating contractor, Best Company and Printing, Inc., Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone [phone], facsimilie [phone], or by e-mail [e-mail], or via its Web site http://www.bcpiweb.com.

Synopsis of Notice of Inquiry

1. Section 628(g) of the Communications Act of 1934, as amended, directs the Commission to report to Congress annually on the status of competition in the market for the delivery of video programming. This Notice of Inquiry (NOI) solicits data and information on the status of competition in the market for the delivery of video programming for the Commission's twelfth annual report (2005 Report). We request information, comments, and analyses that will allow us to evaluate the status of competition in the video marketplace, changes in the market since the 2004 Report, prospects for new entrants to that market, factors that have facilitated or impeded competition, and the effect these factors are having on consumers' access to video programming. Where possible and relevant, we request data as of June 30, 2005.

2. We encourage thorough and substantive submissions from industry participants and state and local regulators with the best knowledge of the questions and issues raised. We will augment reported information with submissions in other Commission proceedings. In the past, we have had to rely on data from publicly available sources when information has not been provided directly by industry participants. The Commission intends to seek out publicly available information relevant to this inquiry.

Competition in the Market for the Delivery of Video Programming

3. In the NOI, we ask commenters to provide data on video programming distributors, including cable systems, direct broadcast satellite (DBS) services, large home satellite or C-Band dish (C-Band) providers, broadband service providers (BSPs), private cable or satellite master antenna television (PCO) systems, open video systems (OVS), multichannel multipoint distribution or wireless cable systems (wireless cable), local exchange carrier (LEC) systems, utility-operated systems, and over-the-air broadcast television stations. We seek information on video programming distributed on videocassettes and DVDs through retail distribution outlets, over the Internet and via Internet Protocol (IP) networks.

4. We seek information and statistical data for each type of multichannel video programming distributor (MVPD), including the number of homes passed by each wired technology; the number of homes capable of receiving service via each wireless technology; the number of subscribers and penetration rates for each service (e.g., basic cable service, cable programming service tier or CPST, premium, or their equivalents provided by non-cable MVPDs, pay-per-view, video-on-demand (VOD)); channel capacities and the number, type, and identity of video programming channels offered, the channel capacity required for such offerings, and the available channel capacity of the system; prices charged for various programming packages; cost of programming inputs; industry and individual firm financial information, such as total revenue and revenue by individual company segments or services, cash flow, and expenditures; information on how video programming distributors compare in terms of relative size and financial resources; data that measure the audience reach of video programming distribution firms as well as relative control over the video distribution market; information on video distributor expansion into new markets such as local telephony and high-speed-Internet access, the percentage of subscribers taking these services, and the competitive advantages of offering these services; and information on new technologies being considered, tested, or deployed by MVPDs for video, voice and data.

5. We are interested in data and information on the number of homes capable of choosing among MVPD services. How many households can receive service from one or more providers (e.g., DBS, wireless cable, PCO) as well as an incumbent cable provider? We seek comments and data on the number of consumers with access to wireline overbuilders, such as the number of homes passed by more than one wireline MVPD, and why the availability is low relative to wireless alternatives. As part of this request, we want to identify markets where wireline competition exists today, where entry is likely in the near future, and where wireline competition once existed but failed.

6. We seek comments and information on the consequences for consumers of competition in the market for video programming. Has competition among MVPD services resulted in lower prices, more programming choices, better quality of service, more advanced services (both video and non-video) or other consumer benefits? Is there evidence of price competition?

7. We also ask whether the effect of competition varies depending upon the nature of the competitors. In particular, we seek data on relative prices in order to evaluate substitution between MVPD technologies (i.e., what are the prices of similar cable, DBS, LEC, OVS and BSP services). Also, how should we compare bundled service packages, such as video, voice, and high-speed data, among MVPDs? Are there barriers to entry in the market for the delivery of video programming, including regulations or statutory provisions that prevent new entrants from promptly deploying their networks and offering consumers new video service options?

8. We seek information on existing, planned, and terminated or merged programming services to assess the changes over the past year in the amount and type of video programming that is available to consumers. We request detailed information about programming networks including ownership, the type of programming services (e.g., national, regional, local) and the genre of programming services (e.g., sports, news, children's, general entertainment, and foreign language). We also seek information on the nature of trends in the status of programming networks' vertical integration with cable operators and with other media interests. We seek comment on programmers' access to MVPDs and their ability to gain carriage. We request comment on the effectiveness of our program access, program carriage, and channel occupancy rules.

9. We request information on children's, locally-originated, and local news and community affairs programming is distributed to consumers. To what extent is programming offered in languages other than English, nationally and locally? We seek comment on cable operators' public, educational, and governmental access and leased access channel. We ask for information on the programming provided by DBS operators in compliance with their public interest obligation. We also seek information on how video programming distributors package and market their programming. To what extent do MVPDs offer or plan to offer themed tiers, such as sports tiers or family tiers.

10. With respect to access to programming by persons with disabilities, we invite commenters to provide information regarding the accessibility of closed captioning and video description. We seek information on the quality, accuracy, placement, technology, and any instances of missing or delayed captions, and the amount of digital programming that contains closed captions translated from analog closed captions. We further seek information on the availability of video description, currently provided by programmers on a voluntary basis.

11. We seek comment on the availability and compatibility of customer premises equipment used to provide video programming and other services. We request information on the number of households that currently have analog television sets and the number of those television sets that are connected to an external set-top box that allows for the provision of various MVPD services. We request information on the number of households that have digital television sets and the number of those sets that are connected to set-top boxes for each type of service provided by such boxes.

12. We seek information on the retail availability of navigation devices to consumers, including the number of such devices that have been sold and the obstacles to equipment manufacturers and others for obtaining approval to attach devices to MVPD systems. We request information on the development and deployment of electronic programming guides (EPGs), including the number and type of EPGs that video programming distributors offer or plan to offer to their subscribers, and the technologies used to distribute EPGs.

13. We continue to monitor competition issues specific to video programming distribution in rural and smaller markets. How does competition differ between rural and smaller markets and larger and urban areas? We are particularly interested in information on the experiences of independent cable system operators (i.e., cable systems not affiliated with the largest MSOs) and the degree of upgrades of cable systems in rural and smaller markets. We request information on the programming offered in rural and smaller markets and any differences between these offerings and those available in larger markets. Similarly, we seek comment on any factors that are unique to competition in multiple dwelling units (MDUs).

Cable Television Service

14. For the 2005 Report, we seek updated information on the performance of the cable television industry. We request information regarding the investments that cable operators have made to upgrade their plant and equipment to increase channel capacity, create digital services, or offer advanced services. We request information on the deployment of various types and technical methods to increase capacity.

15. For individual cable multiple system operators (MSOs), we request information on the number of systems upgraded, the channel capacity (as measured in terms of analog channel capacity) resulting from upgrades, the digital channel capacity resulting from upgrades (including the digital to analog compression ratio used), the number of systems with digital tiers, the number of households where digital cable services are available, and the number of subscribers to these digital services. To what extent is the new capacity used for video services as opposed to non-video services? We seek information on cable operators who have launched or plan to launch digital simulcasts of their analog channel lineups on one or more of their systems. How would the structure and price of service tiers change if a system becomes all-digital?

16. We seek information on mergers and other cable system transactions during the past year, including the names of the buyer and seller, the date of the transaction, type of transaction (i.e., sale, swap, or trade), name and location of the system, homes passed and number of subscribers, and the price. We continue to monitor the practice of clustering, whereby operators concentrate their operations in specific geographic areas and request data regarding the effect of clustering on competition in the video programming distribution market. What effect does clustering have on economies of scale and scope vis-a-vis competition with overbuilders?

17. We seek comment on whether cable operators are changing the way they package programming. Are cable operators restructuring their tiers by shifting programming from the basic service tier (BST) to cable programming service tier (CPST) or from these tiers to digital or premium tiers? To what extent do cable operators offer multiple CPSTs or digital tiers? To what extent do they offer themed tiers, such as a family tier? Where cable operators provide digital tiers, are they creating additional digital programming genre packages (e.g., family, sports, and lifestyle theme tiers) that require an additional subscription fee?

18. Commenters are asked to provide information regarding the advanced service offerings by cable operators, such as video-on-demand, digital video recorders (DVRs), cable modem service, telephony, including Voice Over Internet Protocol (VoIP), and Open Cable Applications Platform (OCAP) applications. We seek information on cable operators that currently provide or plan to provide video-on-demand these services.

19. We also request information regarding the development of specifications for interoperable set-top boxes, i.e., set-top boxes that can be moved from one cable franchise area to another and function with any given cable providers local system in CableLab's OpenCable Process? What percentage of equipment is compatible with the OpenCable standards? We also seek information on the availability of CableCARDs, the removable security module which, when inserted in an OpenCable certified device enables the delivery of digital video programming and other services. We further ask for information on how many products are available with built-in “plug and play” functionality for one way digital cable service.

20. 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 percent of households within the United States and are subscribed to by 70 percent of those households, the Commission may promulgate any additional rules necessary to promote diversity of information sources. We request comment and supporting data that would be useful for determining an accurate homes passed statistic, including the number of homes passed by systems with 36 or more activated channels. We further seek information regarding how many homes passed by systems with 36 or more channels actually subscribe to cable service.

Direct-to-Home Satellite Services

21. We seek information and data that explain the factors contributing to DBS' growth in the video programming market and that can help us assess whether those characteristics will continue to position DBS as cable's principal competitor. We seek information on the geographic characteristics of direct to home (DTH) subscribers. Are they more likely to reside in urban areas than rural areas, or vice versa? To what extent do DBS subscribers reside in areas not passed by cable systems? Although DBS is a national service, we continue to monitor technical limitations, such as line of sight, which impede the availability of DBS. How many or what percentage of households cannot receive DBS service because they are not within the line of sight of the satellite signal? We request any consumer surveys identifying differences between consumers who choose to subscribe to DBS or C-Band, rather than choose cable or another video programming distributor. What percentage of new DBS subscribers are former cable subscribers?

22. We request information regarding the investments that DBS operators have made or plan to make to augment their satellite fleets and equipment to increase channel capacity or offer advanced services. We request information on current channel capacity and the deployment of various technical methods to increase capacity. We request data on prices for DBS programming packages and equipment. What is the typical cost of DBS equipment and installation?

23. We request updated information on the number of markets where local-into-local television service is offered, or will be offered in the near future, pursuant to the Satellite Home Viewer Improvement Act of 1999 (SHVIA), including the number and affiliation of the stations carried. What is the cost to consumers of local-into-local broadcast channels? What percentage of DBS subscribers subscribe to cable in order to receive local broadcast signals? On December 8, 2004, the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA) was enacted, which added new provisions to the Communications and Copyright Acts pertaining to the retransmission by DBS of distant broadcast signals. We request comment on the potential impact of SHVERA on DBS’ ability to compete in the MVPD marketplace.

24. With respect to large home satellite dish or C-Band service providers, our 2004 Report found a continued decline in subscriber activations, caused principally by C-Band subscribers switching to DBS because of the smaller, less expensive, and easier to use equipment. We seek information about programming and program packages that remain available for C-Band subscribers.

25. With respect to satellite delivered advanced services, we seek information on the status of current and future plans regarding both satellite-delivered high-speed Internet access with a telephone return path as well as two-way satellite delivered high-speed Internet access services offered by the satellite industry, including fixed satellite systems (FSS), DTH and DBS providers. We request information on set-top boxes with DVR capabilities, including number of subscribers purchasing or leasing this equipment. We also seek information on the rollout of HD programming to DBS subscribers.

26. In 2002, the Commission established the Multichannel Video Distribution and Data Service (MVDDS) in the 12.2-12.7 GHz band (12 GHz band), which is allocated to DBS on a primary basis. MVDDS spectrum may be used to facilitate the delivery of new video and broadband communications services, such as local television programming and high-speed Internet access. We invite comment on the status of MVDDS equipment and deployment.

Local Exchange Carriers

27. We have previously reported that incumbent LEC entry into the MVPD industry remains limited, but that recent developments indicated renewed incumbent LEC interest in providing video programming services. What is the current extent of deployment of these broadband networks? What are LECs' future deployment plans?

28. We seek information generally regarding incumbent LECs that provide video programming services. Are there any regulatory or statutory impediments to LEC entry in the video service market? To what extent are LECs operating cable systems? To what extent are LECs overbuilding incumbent cable systems' service areas? Do LECs that operate cable systems face special hurdles to providing video service? Are the services offered by fiber to the premises (FTTP) and fiber to the node (FTTN) comparable to those available via cable or satellite? We request comment on the status of planned incumbent LEC IP video and Internet Protocol television (IPTV) deployments.

Broadband Service Providers and Open Video System Operators

29. We request information regarding the provision of video, voice, and data services by Broadband Service Providers (BSPs), including municipal, independent and competitive local exchange carriers (CLEC) overbuilders, and open video system (OVS) operators. Are video programming services offered in combination with telephone and high-speed Internet access services and, if so, how are rates affected by the packaging of multiple services? How many, or what percentage of, BSP and OVS subscribers purchase video service alone, video and telephony, video and high-speed Internet access services, or all three services? We further seek comment on the current and potential effect of BSPs and OVS providers on the status of video competition. We seek comment on the characteristics that facilitate BSP competitiveness (e.g., number of subscribers, homes passed, geographical reach, demographics, and business models).

Electric and Gas Utilities

30. We seek information regarding utility companies that provide video services, including the extent to which video programming services are being bundled with telephone, high-speed Internet access, or other utility services? How does the ability to offer bundled services affect the relative competitive position of these utilities? In addition, several utility companies have been experimenting with “broadband-over-powerline” (BPL) technology, which uses power lines to carry high-speed data signals the “last mile” to the home. We seek comment on the extent to which BPL technology can or is being used to provide video programming services, either separately or together with voice and data services.

Internet Video

31. We seek updated information as to the quality of readily available streaming and downloadable video. We are particularly interested in what criteria should be used to compare picture quality of Internet-based video to video programming distributed by traditional broadcasters and MVPDs. We continue to seek information on the types of video services currently being offered over the Internet both in real-time and downloadable format. We also seek projections of whether and, if so, when Internet video will become a viable competitor in the market for the delivery of video programming.

32. With respect to IPTV, when used for video programming delivery by cable and other MVPDs, should IPTV be considered a separate service, or simply a different means of video programming transmission? We invite comment on whether and to what extent MVPDs are delivering IPTV over their broadband Internet connections, and information on the types of IPTV services that are planned or being deployed. We seek projections of whether and when IPTV will have a competitive impact on the market for the delivery of video programming. We also seek comment on what Digital Rights Management (DRM) and other security technologies IPTV providers use, and the effect of the choice of DRM on competition. In addition, we request comment on any other competitive or regulatory issues raised by the provision of IPTV over broadband Internet connections.

Broadcast Television Service

33. We seek data and comment on the role of broadcast television in the market for the delivery of video programming. We seek data on broadcast network and station audience shares, especially relative to those of non-broadcast programming services. We also request data on broadcast advertising revenue. To what extent has cable gained local, regional, or national advertising market share from broadcast television? To what extent are cable television and DBS retransmission consent negotiations providing broadcasters with an additional revenue source, either through direct compensation or through indirect benefits such as, for example, contracts for the carriage of affiliated programming? If the compensation is not direct, how is it accounted for? What forms of compensation are broadcasters receiving for retransmission consent?

34. We invite comment and seek data on a broad range of issues relating to the digital television (DTV) transition. We are most interested in the ways in which broadcast television stations' deployment of digital television service, and the DTV programming provided by MVPDs, impact competition in the video programming distribution market. Is the growth of DTV broadcasting making broadcast television a substitute for, or competitor of, MVPDs? We invite comment on current and projected levels of consumer access to and use of DTV, including over-the-air availability of DTV service and carriage of DTV programming by MVPDs, including satellite systems as well as cable systems. We also invite comment on programming content that is available in DTV formats, equipment that is used to receive DTV programming, and consumer education efforts.

35. We request information on how consumers receive television programming, and how many of these households have the capability to receive DTV programming. We request data on the number or percentage of households relying solely on over-the-air broadcast television for programming, as well as the number of MVPD households that rely on over-the-air reception for local broadcast service on one or more of their television sets not connected to an MVPD, by type of MVPD service. We specifically request information on the number of households that are able to receive DTV and/or high definition television (HDTV) programming either over the air or from an MVPD. We also seek comments on how these subscriber numbers are expected to grow over the next several years.

36. We seek information on the availability of over-the-air DTV service to viewers. What portion of the population has access to over-the-air DTV service? We request information regarding the carriage of DTV programming by MVPDs and plans to increase the amount of DTV programming carried. We request information regarding the amount and type of DTV programming (e.g., network, local, syndicated) currently offered by broadcasters. Last year, we reported on the efforts of several companies using broadcast spectrum for subscription video distribution via DTV streams. We seek updated information on the status of these efforts and other planned uses of DTV spectrum. We seek information regarding the equipment needed to receive DTV programming either over the air or from an MVPD.

Wireless Cable Systems

37. We recognize that wireless cable operators offer limited competition to incumbent cable operators. Many licensees of the Broadband Radio Service (BRS) and Educational Broadband Service (EBS) used by wireless cable operators to provide video service have chosen to focus on the delivery of non-video broadband services, such as high speed Internet service. We seek information on the factors that have led wireless cable operators to move away from offering video services over their platforms, including any concerning access to programming, bandwidth considerations, local regulatory considerations, and bundled service offerings.

Private Cable Operators

38. We request information on the types of services offered by private cable operators (PCOs), also known as satellite master antenna television (SMATV) operators. We seek information on the number of PCOs in the United States, the geographic areas they serve, the identification and size of PCO companies, the programming packages offered, and the prices of such packages compared to those of incumbent cable operators. In 2002, the Commission made PCOs eligible for CARS licenses, an action intended to enhance opportunities for PCOs to provide additional competition to incumbent cable operators. We seek comments as to whether CARS licenses are being used by PCOs as envisioned and whether the anticipated benefits are being achieved.

Home Video Sales and Rentals

39. We seek information regarding the home video sales and rental market, including data on the number or percentage of households with videocassette recorders and DVD players. We request information on the amount of programming available in DVD and VHS formats, for sale and rental, the cost of rentals, and how this compares with the cost of pay-per-view, video-on-demand, or near video-on-demand programming offered by MVPDs. We also seek information on Internet-based video sales and rental services and the effect, if any, they have on video distributors' service offerings, such as VOD and pay-per-view.

Commercial Mobile Radio Service Providers

40. We request information on the availability and deployment of mobile television services. How many mobile telephone users have access to and subscribe to video programming services? Are specialized telephones or other devices required to receive these services? How much do such services cost? In which markets are these services available? Are any other providers planning to launch similar services and is additional network capacity required to provide them? To what extent should mobile telephone providers that offer video programming be considered MVPDs? Although these services are just emerging, we seek comment on what impact, if any, they have on competition in the MVPD market.

Foreign Markets

41. We invite comment on the status of competition in foreign markets for the delivery of video programming to provide insight into the nature of competition in the United States and relative efficiency of market structures and regulations within the United States. We seek current information and case studies on video delivery in foreign markets. Specifically, we seek information regarding the differences between the United States and other markets in the distribution of video programming, including developments in video over IP, the digital television transition, and broadcast, cable and satellite competition. What regulatory models are associated with increased levels of competition in foreign markets?

Procedural Matters

42. Authority. This NOI is issued pursuant to authority contained in Sections 4(i), 4(j), 403, and 628(g) of the Communications Act, as amended, 47 U.S.C. 154(i), 154(j), 403, and 548(g).

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

44. Comment Information. Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments on or before September 19, 2005, and reply comments on or before October 3, 2005. Comments may be filed using: (1) The Commission's Electronic Comment Filing System (ECFS), (2) the Federal Government's eRulemaking Portal, or (3) by filing paper copies. See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).

• Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: http://www.fcc.gov/​cgb/​ecfs/​ or the Federal eRulemaking Portal: http://www.regulations.gov. Filers should follow the instructions provided on the Web site for submitting comments.
• For ECFS filers, if multiple docket or rulemaking numbers appear in the caption of this proceeding, filers must transmit one electronic copy of the comments for each docket or rulemaking number referenced in the caption. In completing the transmittal screen, filers should include their full name, U.S. 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, filers should send an e-mail to [e-mail], and include the following words in the body of the message, “get form.” A sample form and directions will be sent in response.
• Paper Filers: 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, filers must submit two additional copies for each additional docket or rulemaking number.

Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail (although we continue to experience delays in receiving U.S. Postal Service mail). All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.

• The Commission's contractor will receive hand-delivered or messenger-delivered paper filings for the Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building.
• Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.
• U.S. Postal Service first-class, Express, and Priority mail should be addressed to 445 12th Street, SW., Washington DC 20554.

People with Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to [e-mail] or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

Federal Communications Commission.

Marlene H. Dortch,

Secretary.