Federal Communications Commission FCC 15-41 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Annual Assessment of the Status of Competition in ) MB Docket No. 14-16 the Market for the Delivery of Video Programming ) SIXTEENTH REPORT Adopted: March 31, 2015 Released: April 2, 2015 By the Commission: Commissioner Pai issuing a statement. TABLE OF CONTENTS Heading Paragraph # I. EXECUTIVE SUMMARY.................................................................................................................... 1 II. INTRODUCTION................................................................................................................................ 12 A. Scope of the Report........................................................................................................................ 12 B. Analytic Framework ...................................................................................................................... 13 C. Data Sources .................................................................................................................................. 14 III. PROVIDERS OF DELIVERED VIDEO PROGRAMMING.............................................................. 16 A. Multichannel Video Programming Distributors ............................................................................ 16 1. Introduction ............................................................................................................................. 16 2. MVPD Providers ..................................................................................................................... 20 a. Cable, DBS, Telephone, and Other Providers .................................................................. 21 b. Horizontal Concentration.................................................................................................. 29 c. Vertical Integration........................................................................................................... 33 d. Entry Conditions............................................................................................................... 35 (i) Regulatory Conditions Influencing Entry .................................................................. 36 (ii) Market Conditions Influencing Entry......................................................................... 60 e. Recent Entry and Exit....................................................................................................... 65 3. MVPD Business Models and Competitive Strategies ............................................................. 71 a. Price Rivalry ..................................................................................................................... 72 b. Non-Price Rivalry............................................................................................................. 76 c. Business Models and Competitive Strategies of Select MVPDs...................................... 89 (i) Cable MVPD Business Models and Competitive Strategies...................................... 90 (ii) DBS MVPD Business Models and Competitive Strategies ..................................... 109 (iii) Telephone MVPD Business Models and Competitive Strategies ............................ 120 4. Selected MVPD Operating and Financial Statistics.............................................................. 130 a. Video Programming Pricing ........................................................................................... 131 b. Video Subscribers and Penetration ................................................................................. 133 c. Revenue .......................................................................................................................... 138 B. Broadcast Television Stations...................................................................................................... 141 1. Introduction ........................................................................................................................... 141 2. Broadcast Television Industry Providers............................................................................... 144 a. Horizontal Concentration................................................................................................ 151 3253 Federal Communications Commission FCC 15-41 b. Vertical Integration......................................................................................................... 156 c. Entry and Exit Conditions............................................................................................... 161 (i) Regulatory Conditions.............................................................................................. 162 (ii) Non-regulatory Conditions....................................................................................... 167 (iii) Recent Entry and Exit............................................................................................... 170 3. Broadcast Television Business Models and Competitive Strategies..................................... 172 a. Price Rivalry ................................................................................................................... 173 b. Non-Price Rivalry........................................................................................................... 178 4. Broadcast Television Station Operating and Financial Statistics.......................................... 189 a. Audiences........................................................................................................................ 193 b. Revenue .......................................................................................................................... 196 c. Profitability..................................................................................................................... 209 d. Investment and Innovation.............................................................................................. 212 C. Online Video Distributors............................................................................................................ 214 1. Introduction ........................................................................................................................... 214 2. OVD Providers...................................................................................................................... 217 a. Horizontal Concentration and Vertical Integration......................................................... 243 b. Conditions Affecting Entry and Exit .............................................................................. 247 (i) Regulatory Conditions.............................................................................................. 248 (ii) Marketplace Conditions ........................................................................................... 254 c. Recent Entry and Exit..................................................................................................... 270 3. Business Models and Competitive Strategies........................................................................ 276 a. Price Rivalry ................................................................................................................... 277 b. Non-Price Rivalry........................................................................................................... 285 4. Select OVD Operating Statistics and Financial Performance ............................................... 300 a. OVD Usage, Viewership and Subscribership................................................................. 301 b. Revenue .......................................................................................................................... 313 c. Investment....................................................................................................................... 318 d. Profitability ..................................................................................................................... 321 IV. CONSUMER PREMISES EQUIPMENT.......................................................................................... 323 A. Introduction.................................................................................................................................. 323 B. 4K/UltraHD Televisions .............................................................................................................. 324 C. CPE Used to Access MVPD Services ......................................................................................... 326 1. Leased CPE ........................................................................................................................... 326 2. Section 629 of the Communications Act............................................................................... 330 a. The History of Section 629 Implementation and CableCARD....................................... 331 b. The STELA Reauthorization Act of 2014 and Future Developments ............................ 334 D. CPE Used to Access OVD Services ............................................................................................ 335 E. Handheld and Mobile Video Devices.......................................................................................... 338 1. Mobile IP Devices................................................................................................................. 338 2. Specialty Mobile Devices.....................................................................................................