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FCC-12-81A1.Pdf Federal Communications Commission FCC 12-81 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Annual Assessment of the Status of Competition in ) MB Docket No. 07-269 the Market for the Delivery of Video Programming ) FOURTEENTH REPORT Adopted: July 18, 2012 Released: July 20, 2012 By the Commission: Commissioners McDowell and Pai issuing separate statements. TABLE OF CONTENTS Heading Paragraph # I. EXECUTIVE SUMMARY .................................................................................................................... 1 II. INTRODUCTION................................................................................................................................ 12 A. Scope of the Report........................................................................................................................ 12 B. Analytic Framework ...................................................................................................................... 15 C. Data Sources .................................................................................................................................. 16 III. PROVIDERS OF DELIVERED VIDEO PROGRAMMING.............................................................. 18 A. Multichannel Video Programming Distributors............................................................................. 18 1. Introduction ............................................................................................................................. 18 2. MVPD Structure...................................................................................................................... 25 3. MVPD Conduct....................................................................................................................... 85 4. MVPD Performance .............................................................................................................. 134 B. Broadcast Television Stations...................................................................................................... 155 1. Introduction ........................................................................................................................... 155 2. Broadcast Television Industry Structure ............................................................................... 158 3. Broadcast Television Industry Conduct ................................................................................ 188 4. Broadcast Television Industry Performance.......................................................................... 206 C. Online Video Distributors............................................................................................................ 237 1. Introduction ........................................................................................................................... 237 2. OVD Structure....................................................................................................................... 241 3. OVD Conduct........................................................................................................................ 285 4. OVD Performance................................................................................................................. 314 5. Consumer Behavior............................................................................................................... 336 IV. RURAL VERSUS URBAN COMPARISONS.................................................................................. 343 A. MVPDs ........................................................................................................................................ 345 B. Broadcast Stations........................................................................................................................ 356 C. OVDs ........................................................................................................................................... 357 V. KEY INDUSTRY INPUTS................................................................................................................ 359 A. Content Creation and Aggregation of Video Programming......................................................... 360 1. Overview ............................................................................................................................... 360 2. Distribution Strategies........................................................................................................... 377 B. Consumer Premises Equipment ................................................................................................... 388 1. CPE Used to Access MVPD Services. .................................................................................. 389 2. CPE Used to Access OVD Services...................................................................................... 399 Federal Communications Commission FCC 12-81 3. Handheld and Mobile Video Devices.................................................................................... 401 VI. PROCEDURAL MATTERS.............................................................................................................. 405 APPENDIX A: List of Commenters APPENDIX B: National Video Programming Services APPENDIX C: Regional Video Programming Services APPENDIX D: Regional Sports Networks I. EXECUTIVE SUMMARY 1. This is the fourteenth report (“14th Report” or “Report”) submitted by the Federal Communications Commission to the United States Congress on the status of competition in the market for the delivery of video programming as required by Section 628(g) of the Communications Act of 1934, as amended (the “Act”).1 In this Report, we focus on developments in the video marketplace in 2007, 2008, 2009, and 2010.2 As described below, the most significant trends since the last report relate to the increased deployment of digital technology, consumers’ rising demands for access to video programming anywhere and anytime, and the evolution of online video from a niche service into a thriving industry. 2. For the first time, we present information and data under a new analytical framework, which is consistent with the framework we have used in the recent wireless and satellite competition reports.3 For this Report, we categorize entities into one of three strategic groups – multichannel video programming distributors (“MVPDs”),4 broadcast television stations,5 and online video distributors 1 47 U.S.C. § 548(g). 2 While we focus on these four years, in many instances we find it useful also to recognize some more recent developments based on data that we have collected from third-party sources. See infra, ¶ 17. 3 See Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993 and Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, WT Docket No. 09-66, Fourteenth Report, 25 FCC Rcd 11407 (2010) (“14th Mobile Wireless Report”); Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993 and Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, WT Docket No. 10-133, Fifteenth Report, 26 FCC Rcd 9664 (2011) (“15th Mobile Wireless Report”); Third Report and Analysis of Competitive Market Conditions with Respect to Domestic and International Satellite Communications Services, Report and Analysis of Competitive Market Conditions with Respect to Domestic and International Satellite Communications Services, IB Docket Nos. 09-16 and 10-99, 26 FCC Rcd 17284 (2011) (“Third Satellite Competition Report”). 4 For purposes of this report, MVPDs are companies that offer multiple channels of video programming to consumers for a subscription fee. The term “MVPD” is defined more fully below in Sec. III.A.1. 5 We consider broadcast television stations separately for the 14th Report, as we have done in previous reports. Although broadcasters have transitioned to digital transmission and have the capability to offer additional linear channels, they still offer far fewer programs than are available from MVPDs and do not provide a subscription service. The Commission has previously held that broadcast television alone is not sufficiently substitutable with the services provided by MVPDs to constrain attempted MVPD price increases, and hence declined to broaden the MVPD product market. Accordingly, we treat broadcasters as part of a separate group. See 47 U.S.C. § 521(1); S. REP. NO. 102-92, at 8-12 (1991). See also General Motors Corporation and Hughes Electronics Corporation, Transferors, and The News Corporation Limited, Transferee for Authority to Transfer Control, MB Docket No. 03- 124, Memorandum Opinion and Order, 19 FCC Rcd 473, 509, ¶ 75 (2004) (citing Competition, Rate Deregulation, and the Commission’s Policies Relating to the Provision of Cable Television Services, MM Docket No. 89-600, Report, 5 FCC Rcd 4962, 5003, ¶ 69 (1990)); Application of EchoStar Communications Corporation, General Motors Corporation, and Hughes Electronics Corporation (Transferors) and EchoStar Communications (continued….) 2 Federal Communications Commission FCC 12-81 (“OVDs”).6 For each of these categories we examine industry structure, conduct, and performance. The following is an overview of our findings. 3. MVPDs. Cable MVPDs accounted for almost 60 percent of all MVPD subscribers at the end of 2010. This represents a decline in cable’s
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