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Where is the FCC's Annual Video Competition Report?

Progress Snapshot
Release 4.11 May 2008

by Barbara Esbin and Adam Thierer*

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The Federal Communications Commission (FCC) is required by law—the 1992 Cable Act, to be exact—to produce an "Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming," otherwise known as the "Annual Video Competition Report."[1] These annual reports are eagerly awaited not merely by lawmakers but everyone who monitors developments in the video marketplace. The reports are particularly important because they provide a goldmine of data and information about industry trends.

Twelve installments of the Annual Video Competition Report have been produced since the requirement took effect, but the 13th annual report has inexplicably been stuck in regulatory limbo for almost two years. This begs the question: Where is the FCC's annual video competition report?

The 12th Report was published in March 2006 and summarized 2005 data. Yet it remains the most recent report from the FCC regarding data and developments in this fast-moving field. The FCC did, however, adopt the 13th Annual Video Competition Report at an agency meeting in late November of last year.[2] Of course, there is a difference between adopting and releasing a report. Despite voting to approve the report, the Commission has still not released the report to the public or to Congress, as they are required to do by law.

It is noteworthy that the Notice of Inquiry launching the first annual report, which determined from scratch the scope of the report and type of information that would be required, was adopted and released on the same day, May 19, 1994, and a 261 paragraph report was adopted four months later, on Sept. 19, 1994 and released a mere nine days later.[3] Until recently, and with few exceptions, the FCC has consistently released the NOI initiating its annual assessment by about June of each year, and an annual report some 6-8 months later.[4] For the first ten years, the annual report was never released later than four weeks into the following year; the 13th annual report (2006 report) is now more than 14 months later than that.[5] A quick perusal of the FCC's website indicates that the basic form, content and information sought in these annual assessment items have changed little since 1994.[6] Last year, according to the Nov. 27th News release, the NOI for the 14th annual report (2007 report) was adopted on the same day as the 13th annual report. And, like the 13th annual report, the NOI too, is "missing in action." What possible justification could exist for failure to release a notice of inquiry requesting essentially the same market data for the 14th time?

As Commissioner Robert McDowell pointed out in his partial dissent to the issuance of the report last November, the report was already "about nine months overdue to Congress."[7] And now, roughly another six months have passed since that vote occurred but the agency has still not produced the Report. If the Commission felt comfortable voting on the report last November, one wonders why they could not have also released it to Congress and the public at the same time, or at least shortly thereafter. Worse yet, when the report comes out, it will reflect the state of the video marketplace as of June 30, 2006, which is when the last reporting cycle ended. This means the Report is well over a year past due and that when it is finally released, the data will be almost two years old.

Although the motivations or causes for delay of this report are impossible to know, it is difficult to avoid speculating that one cause of delay in releasing the report is its failure to provide the critical empirical support for FCC Chairman Kevin Martin's "70/70" plan for expanding the Commission's powers over the cable industry, a plan that was widely discussed in the weeks leading up to the report's adoption last November.[8] The delay becomes all the more puzzling when one stops to think about what is at issue: this is an "annual assessment of the status of competition in the delivery of video programming" required to be delivered to Congress under the Act. Unlike many of the policy or rulemaking items routinely held up for "post-adoption" edits, this item is primarily a compilation of data, which either exists in the form adopted by vote of the full Commission, or does not exist. A six-month post-adoption delay in release of such a report must be a record-setter.

Importantly, however, when the FCC voted on the latest annual report at that November meeting, the agency did released a handful of findings from the report, albeit without much fanfare. These findings are quite encouraging. For example, the summary noted that the overall number of national programming networks available in America now stands at 565 channels. That is up from just 70 channels in 1990, an astonishing increase in program choices. Importantly, the FCC's summary of the upcoming report also noted that, "Of the 565 networks, 84 (14.9 percent) were vertically integrated, or affiliated, with at least one cable operator." What the summary fails to mention, however, is that vertical integration has fallen steadily since the first Annual Video Competition Report was issued, when over 50 percent of all channels were affiliated with a cable operator. Indeed, the video marketplace exhibits less vertical integration than ever before. As far as vertically integrated industries go, no impartial observer would conclude that this industry is being controlled by "gatekeeper," pay TV platforms, as some critics suggest. Most new pay TV channels today are independently owned and offer an unprecedented diversity of programming options. This trend is a strong sign of how healthy and vibrantly competitive this marketplace is today.

The summary of the upcoming report also mentioned that although cable continues to serve the largest percentage of MVPD subscribers, its market share had fallen to approximately 68.2 percent as of June 2006 (this is down from 69.4 percent as of June 2005 and 71.6 percent as of June 2004, as reported in the 12th Annual Report). Significantly, the summary notes that market share of cable's largest competitor, DBS service, had increased as of June 2006 to 29 percent (up from 27.7 percent as of June 2005).[9] Similarly, the summary finds that the number of MVPD subscribers choosing all other delivery technologies represents 2.6 percent of all subscribers in June 2006, a date that preceded what the FCC itself has called the "significant development" of serious telephone company entry into video markets. Surprisingly, rather than being a source of pride that the FCC's implementation of the cable competition provisions of the 1992 Cable Act had been a success, adoption of the 13th annual report was accompanied by indications that the FCC planned to engage in new and far reaching regulation of cable operations.

Regardless, it sounds like there is plenty to look forward to when the 13th Annual Video Competition Report finally is released. Let's hope that's done before the 15th report is due.

*Barbara Esbin is a senior fellow and director of the Center for Communications and Competition Policy at The Progress & Freedom Foundation. Adam Thierer is a senior fellow and director of the Center for Digital Media Freedom at The Progress & Freedom Foundation. The views expressed in this report are their own, and are not necessarily the views of the PFF board, fellows or staff.
  1. See Communications Act of 1934 § 628(g), 47 U.S.C. § 548(g).
  2. "FCC Adopts 13th Annual Report to Congress on Video Competition and Notice of Inquiry for the 14th Annual Report," Federal Communications Commission, Press Release, November 27, 2007, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-278454A1.pdf
  3. Implementation of Section 19 of the Cable Television Consumer Protection and Competition Act of 1992 Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Notice of Inquiry, 9 FCC Rcd 2896 (1994); Implementation of Section 19 of the Cable Television Consumer Protection and Competition Act of 1992 Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, First Report, 9 FCC Rcd 7442 (1994).
  4. The Commission's previous notices of inquiry and reports appear at: Implementation of Section 19 of the 1992 Cable Act (Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming), 1994 Report, 9 FCC Rcd 7442 (1994), 1994 NOI, 9 FCC Rcd 2896 (1994); 1995 Report, 11 FCC Rcd 2060 (1996); 1995 NOI, 10 FCC Rcd 7805 (1995); 1996 Report, 12 FCC Rcd 4358 (1997), 1996 NOI, 11 FCC Rcd7413 (1996); 1997Report, 13 FCC Rcd 1034 (1998), 1997 NOI, 12 FCC Rcd 7829 (1999); 1998 Report, 13 FCC Rcd 24284 (1998), 1998 NOI, 13 FCC Rcd 13044 (1999); 1999 Report, 15 FCC Rcd 978 (2000), 1999 NOI, 14 FCC Rcd 9617 (1999); 2000 Report, 16 FCC Rcd 6005 (2001), 2000 NOI, 15 FCC Rcd 13563 (2000); 2001 Report, 17 FCC Rcd 1244 (2002), 2001 NOI, 16 FCC Rcd 13330 (2001); 2002 Report, 17 FCC Rcd 26901 (2002), 2002 NOI, 17 FCC Rcd 11579 (2002); 2003 Report, 19 FCC Rcd 1606 (2004), 2003 NOI, 18 FCC Rcd 16042 (2003); 2004 Report, 20 FCC Rcd 2755 (2005), 2001 NOI, 19 FCC Rcd 10909 (2004); 2005 Report, 21 FCC Rcd 38776 (2005), 2005 NOI, 20 FCC Rcd 14177 (2005); 2006 Report, adopted Nov. 27, 2007, http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-278454A1.pdf; 2006 NOI, MB Docket No. 06-189, News release http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-267863A1.pdf (adopted Oct. 12, 2006, released Oct. 20, 2006)(it does not appear that the NOI has ever been published in the FCC Record).
  5. A comparison of the adoption/release intervals for the first twelve annual reports reveals the following: the average adoption/release interval for the NOI initiating each survey is about 5 days; the shortest interval was same day adoption and release in 1994; and the longest interval was 20 days in 1995. Again excluding the 13th annual report, the average adoption/release interval for the reports is about 15 days; the shortest interval was 4 days in 1995; and the longest interval was about 31 days in 1996.
  6. http://www.fcc.gov/mb/csrptpg.html
  7. http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-278454A6.pdf
  8. Stephen Labaton, "FCC Planning Rules to Open Cable Market," New York Times, November 10, 2007, www.nytimes.com/2007/11/10/washington/10cable.html?_r=1&oref
    ; Jim Puzzanghera, "Do Numbers Add Up to
    Reregulating Cable?" Los Angeles Times, November 13, 2007,
    William Triplett, "FCC Mulls Cable TV Intervention," Variety, November 19, 2007, www.variety.com/article/VR1117976302.html?categoryid=14&cs=1.
  9. Just a month earlier, in a separate docket, the FCC acknowledged that "more recent data indicates that the portion of MVPD subscribers served by DBS operators is now over 30 percent." See Implementation of the Cable Television Consumer Protection and Competition Act of 1992, Development of Competition and Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act: Sunset of Exclusive Contract Prohibition, Review of the Commission's Program Access Rules and Examination of Program Tying Arrangements, MB Docket No. 07-29, 07-198, Report and Order and Notice of Proposed Rulemaking, 2007 FCC LEXIS 6642 (FCC 2007) at ¶ 23 n.100 (citing June 2007 cable operator submissions in MB Docket Nos. 07-29, 06-189)(2007 Program Access Extension Order).


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