THEDIRECTVGROUP November 29, 2006 VIA ECFS Ms. Marlene Dortch Secretary Federal Communications Commission 445 12th Street, S.W. Washington, DC 20554 Re: Ex Parte Presentation WT Docket No. 06-150 Service Rules for the 698-746, 747-762 and 777-792 MHz Bands Dear Ms. Dortch: Today, DIRECTV, Inc. (“DIRECTV”) filed Comments in response to the Notice of Inquiry issued in the Commission’s annual proceeding to assess the status of competition in the market for the delivery of video programming (MB Docket No. 06-189). In its Comments, DIRECTV raises certain issues concerning the outcome of the above-captioned proceeding, which remains pending before the Commission. In compliance Section 1.1206(b)(1) of the Commission’s ex parte rules, DIRECTV is hereby submitting a copy of its Comments in the above-captioned proceeding. Please direct questions concerning this matter to the undersigned. Sincerely, /s/ Stacy Fuller Vice President, Regulatory Affairs 444 N. Capitol Street, NW Suite 728 Washington, DC 20001 Phone (202) 715-2342 Fax: (202) 715-2413 [email protected] Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Annual Assessment of the Status of ) MB Docket No. 06-189 Competition in the Market for the ) Delivery of Video Programming ) COMMENTS OF DIRECTV, INC. Susan Eid Senior Vice President, Government Affairs Stacy R. Fuller Vice President, Regulatory Affairs DIRECTV, Inc. 444 North Capitol Street, N.W. Suite 728 Washington, DC 20001 (202) 715-2330 November 29, 2006 TABLE OF CONTENTS Page EXECUTIVE SUMMARY ........................................................................................................... iii I. DIRECTV CONTINUES TO EXPAND ITS SUBSCRIBERSHIP, SYSTEM CAPACITY, AND PROGRAMMING OPTIONS .........................................................2 A. DIRECTV’s Subscribership Has Increased.............................................................2 B. DIRECTV Has Expanded System Capacity............................................................3 C. DIRECTV Offers Diverse Programming Packages at Competitive Prices .............5 D. DIRECTV Continues to Expand Local-Into-Local Service ....................................7 E. DIRECTV’s Equipment Options Benefit Consumers .............................................9 II. DIRECTV FACES SIGNIFICANT COMPETITION IN THE VIDEO DISTRIBUTION MARKETPLACE .............................................................................10 III. FEDERAL AND LOCAL REGULATIONS IMPEDE COMPETITION BETWEEN CABLE AND DBS ......................................................................................15 A. Local Restrictions on Satellite Dishes May Deter Consumers from Choosing DBS .......................................................................................................16 B. DBS Carriage of Significantly Viewed Signals Is Limited by the Commission’s Overly Restrictive Interpretations of SHVERA ............................17 C. Multicast and HD Must Carry in Alaska and Hawaii Needlessly Require DIRECTV to Redirect System Resources .............................................................19 IV. CONCLUSION ................................................................................................................21 LIST OF EXHIBITS......................................................................................................................22 - ii - EXECUTIVE SUMMARY In 2006, DIRECTV increased its subscribership, now serving over 15 million subscribers, and expanded its system capacity and program offerings in order to become more competitive with other MVPDs. DIRECTV’s program packages include greater numbers of local-into-local, HD, foreign language, and public interest channels, in addition to a new family-friendly programming tier. DIRECTV currently offers SD local-into-local service in 142 television markets, including Alaska and Hawaii, which covers more than 94 percent of television households. In addition, DIRECTV offers HD local-into-local service in 49 markets, representing 65 percent of television households. DIRECTV also has been an innovator in technology, implementing MPEG-4 digital compression, DVB-S2 satellite modulation and coding, and Ka-band transmissions. Although DIRECTV offers more programming options to subscribers than ever before, it has kept subscription and equipment fees low and maintained an extremely competitive price structure. DIRECTV faces substantial competition from other MVPDs, particularly cable operators which continue to hold a disproportionate share of subscribers in local markets. Although cable’s share of the national MVPD market is declining, cable remains highly concentrated in many regions of the country. In assessing head-to-head competition among MVPDs, the Commission therefore must examine the competitive setting on a local or regional basis, rather than the national level. Moreover, DIRECTV faces regulatory obstacles not encountered by other MVPDs, which include: (1) local ordinances restricting the installation and placement of DBS dishes; (2) Commission rules that impede DIRECTV’s ability to carry SV broadcast signals; and (3) Commission rules that require DIRECTV to carry the multicast and HD signals of television broadcast stations in Alaska and Hawaii. The Commission should eliminate these regulatory disparities to ensure more vibrant competition and meaningful consumer choice in video programming services. - iii - Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Annual Assessment of the Status of ) MB Docket No. 06-189 Competition in the Market for the ) Delivery of Video Programming ) To: The Commission COMMENTS OF DIRECTV, INC. Pursuant to Section 1.415 of the rules of the Federal Communications Commission (“FCC” or “Commission”),1 DIRECTV, Inc. (“DIRECTV”)2 submits these comments in response to the Notice of Inquiry (“NOI”) released in the above-captioned proceeding.3 Over the past year, DIRECTV has increased its subscribership, system capacity, and program offerings in order to become more competitive with other multichannel video programming distributors (“MVPDs”), particularly incumbent cable operators. DIRECTV’s expanded program packages include greater numbers of local-into-local, high-definition (“HD”), foreign language, and public interest channels, in addition to a new family-friendly programming tier. DIRECTV now offers 1 47 C.F.R. § 1.415. 2 DIRECTV is the leading provider of direct-to-home (“DTH”) digital television services in the United States. DIRECTV’s affiliate DIRECTV Latin America, LLC (“DTVLA”) provides DTH video programming services in Puerto Rico and other locations in Latin America and the Caribbean. These comments provide data and information about DIRECTV’s operations in the United States but exclude data concerning DTVLA’s operations in Puerto Rico. 3 See Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Notice of Inquiry, MB Docket No. 06-189, FCC 06-154 (rel. Oct. 20, 2006) (“NOI”). In these Comments, DIRECTV raises issues concerning the outcome of certain docketed proceedings which remain pending before the Commission. In compliance with the Commission’s ex parte rules, DIRECTV is submitting a copy of these Comments in those proceedings under separate cover. See 47 C.F.R. § 1.1206(b)(1). more programming options to subscribers than ever before while keeping subscription and equipment fees low and maintaining an extremely competitive price structure. DIRECTV faces substantial competition from other MVPDs, particularly cable operators which continue to hold a disproportionate share of subscribers in local markets. In most cases, these cable operators are able to offer video, audio, interactive programming, telephony, data, and other entertainment services in bundled packages. In addition, DIRECTV faces regulatory obstacles not encountered by other MVPDs. These obstacles include: (1) local ordinances restricting the installation and placement of direct broadcast satellite (“DBS”) dishes; (2) Commission rules that impede DIRECTV’s ability to carry significantly viewed (“SV”) broadcast signals; and (3) Commission rules that require DIRECTV to carry the multicast and HD signals of television broadcast stations in Alaska and Hawaii. Although these regulations hinder DIRECTV’s efforts to compete for subscribers, DIRECTV continues to offer consumers extremely competitive rates and options for service and equipment. I. DIRECTV CONTINUES TO EXPAND ITS SUBSCRIBERSHIP, SYSTEM CAPACITY, AND PROGRAMMING OPTIONS. Over the past year, DIRECTV has provided service to more subscribers than ever before, expanded its satellite fleet, and increased programming offerings to subscribers while maintaining an extremely competitive price structure for programming packages and equipment. A. DIRECTV’s Subscribership Has Increased. The NOI seeks updated data and information concerning the number and characteristics of DBS subscribers.4 As of the end of June 2006, DIRECTV served approximately 15.51 million subscribers, an increase of 6 percent over the approximately 14.67 million subscribers 4 See NOI ¶ 42. - 2 - served on June 30, 2005.5 Virtually all of DIRECTV’s subscribers reside in areas passed by cable given cable’s 99 percent penetration rate.6 Although the percentage of U.S. households that cannot receive DBS service due to line-of-sight problems remains difficult to quantify, line- of-sight continues to affect the availability of DBS service to potential subscribers,