FCC TOUTS CABLE RIVALS, MSOs CITE TIGHT CHANNEL CAPACITY
FCC officially opened its 8th annual video competition inquiry, once again asking cable operators, DBS providers and cable overbuilders to document their growth, spell out their new services and detail their costs. In notice of inquiry (NoI) approved unanimously Wed. and expected to be released in next few days, Commission said it also planned to seek such new information as cable and DBS provision of streaming video, interactive (ITV), other convergence services. Agency also said it would explore how many households “rely on over-the-air reception of local television stations on one or more of their television sets.” Finally, FCC said that for first time it would treat new breed of broadband service providers as separate category distinct from traditional cable overbuilders.
In his first appearance at Commission agenda meeting, new Cable Bureau Chief Kenneth Ferree played up growth of overall multichannel video market and surge in cable competition since FCC released its first video competition report in 1994. Ferree said total pay-TV penetration rose to 84% last year from 70% in 1994, while cable’s share of market fell to 80% from 93% 6 years earlier. He credited much of change to “rapid growth” of DBS, which now commands more than 15% share of multichannel video market.
Ferree also emphasized cable industry’s competitive role in upgrading its plant and introducing new digital services in last few years. Citing industry statistics, he said MSOs had invested more than $50 billion in new plant and plant upgrades since 1994 and had signed up 5.5 million digital cable and 3 million cable modem subscribers by mid-2000. He also said number of national cable networks nearly tripled to 281 between 1994 and 2000 while portion of networks affiliated with MSOs shrank to 35% from 53% in same period.
FCC Chmn. Powell said he was “struck” by satellite TV’s continued strong growth, particularly in rural areas. Speaking after Ferree’s presentation, he cited statistics showing that satellite penetration had reached 41% in Vt., 38% in Mont., 33% in Wyo. Despite analysts’ predictions that DBS growth would top out at some point, he said, satellite providers continued to provide growing competition to cable operators.
Powell also said he was “very interested” in seeing emergence of cable telephony as viable alternative to traditional Bell local phone service. Although FCC has “somewhat lost our focus on that,” he said, cable operators continue to make “dramatic strides” in providing competition to Bells. Calling cable telephony agency’s “greatest hope” for spurring phone competition, Powell got carried away, mistakenly saying that cable telephony subscribers had surged from 19 million to 20 million in 1999 to “something approaching 100 million” today. In reality, cable operators now have slightly more than one million telephony customers. FCC spokesman later said Powell misread confusing briefing chart that showed cable telephony subscribers growing to one million in 2001 from 198,000 2 years ago. “He didn’t realize the chart was in thousands, not millions,” spokesman said.
Separately, number of major MSOs responded to FCC’s voluntary survey of cable channel capacity and retransmission-consent negotiations. Not surprisingly, survey, which is part of Commission’s further notice of proposed rulemaking in continuing DTV must-carry proceeding, found cable operators generally boasting about their plant upgrades but complaining about continued bandwidth constraints. In between tables and graphs, they argued that dual-carriage requirements during nation’s digital TV transition would sap precious capacity needed for video-on-demand, interactive TV, cable telephony, high-definition TV, other new digital services. “Dual carriage would confiscate an additional 6 MHz of scarce channel capacity for programming services that do not even exist yet, or may never exist,” Insight Communications said. “Consumers benefit if cable operators are free to use their digital capacity for the things consumers want.”
Several MSOs told FCC they had signed or were negotiating digital retransmission consent deals with broadcasters. AT&T Broadband cited agreements with Fox and NBC and Comcast noted deals with “several network owned-and-operated station groups” that it declined to disclose because of confidentiality conditions. Cable One said it had “completed agreements that require the carriage of digital signals under a variety of contingencies” and was “actively negotiating agreements for approximately 15 television broadcast stations.” Insight and Cablevision Systems said they had no deals yet.