“Fully Competitive”
Association Cites Burgeoning Competition Among Video Providers and Increasing Choices in Programming as Evidence of a Vibrant Marketplace
Washington, D.C. – In comments filed today in the Federal Communications Commission’s 10th annual review of video competition, the National Cable & Telecommunications Association (NCTA) called upon the FCC to declare that “the video marketplace is fully competitive.”
NCTA said the past decade has witnessed “a steadily accelerating growth curve” in the level of competition among multichannel video and content providers, as well as in new products and services that have been introduced to consumers.
“When the Commission considers how the video marketplace has changed since it began preparing its annual reports almost a decade ago, the only reasonable conclusion that can be drawn is that the growth of competition – and the positive effects of that competition – have been remarkable,” said NCTA in its comments. “Consumers nationwide not only have a choice among providers of multichannel video programming, but the quality and array of video – and non-video – services available from those providers has expanded enormously. New competitors continue to grow and add customers every year, but competition in the marketplace is already vibrant.”
More competition among providers
The FCC completed its first report on competition in the video marketplace in 1994, shortly after the debut of direct broadcast satellite (DBS) service. The rapid growth and market success of DBS, which now claims 20 million households, has been key to the increasing competition in the marketplace, NCTA said.
“A decade ago, cable television operators served almost 100 percent of the nation’s multichannel video programming distributors (MVPD) subscribers,” NCTA said. “But today, consumers have the additional choice of at least two national DBS providers, and, as a result, cable operators now serve fewer than 75 percent of all MVPD subscribers.”
Those choices have in part spurred cable operators to invest heavily in expanding capacity and introducing popular new optional services, including digital cable, pay per view offerings, HDTV, video on demand, cable modem service, and competitive local telephone service, NCTA said. Cable’s efforts to bundle and market these services has produced a further competitive response from other video, data, and voice providers, some of which have joined forces to offer their own discounted packages of services, NCTA pointed out.
The availability to consumers of competing providers also refutes charges that cable operators exercise market power. “DirecTV and EchoStar are available to virtually the entire nation; they can and do add subscribers anywhere with virtually no extra costs. In these circumstances, where almost every cable subscriber has the opportunity to switch to at least two available substitutes, a relatively high market share is not indicative of market power. Independent financial analysts recognize that this is the case and that cable today faces strong marketplace competition,” NCTA said.
More and better programming
The volume and quality of original content being offered in the video marketplace also has benefited from the competitive boom, NCTA said. The number of channels of cable programming has increased, and cable has made available a wide array of locally originated programming – such as all-news channels, state public affairs networks, local origination channels, and regional sports networks – to better compete with DBS and local broadcasters. Ratings for cable programming have steadily and sharply increased to the point where cable networks now enjoy greater viewership than broadcast networks in primetime, NCTA said.
All of this has occurred during a period in which the “vertical integration” of cable programming services substantially has diminished.
“A decade ago, more than half of the cable networks available to viewers were owned by a cable operator, and the number of available channels on systems was smaller,” NCTA said. “Today, only one in five program networks are vertically integrated with operators, so even if one were to assume that vertically-integrated cable program networks have any advantage over non-vertically integrated networks in terms of carriage, the vast majority of channels are up for grabs among networks in which the operator has no ownership interest.”
A better way to look at prices
In its comments, NCTA offers economic evidence that the value of cable’s product has been steadily improving over time and is outpacing the cost of cable service.
Steven S. Wildman, James H. Quello Professor of Telecommunications Studies at Michigan State University, argues that a valid way of measuring prices of cable service over time takes into account the changes in the quality or value of the service. By focusing on the amount that subscribers on average pay per hour spent using basic cable services – actually watching cable channels – Wildman’s study shows that the real, inflation-adjusted price per hour of viewing has steadily and sharply decreased, by more than 15 percent in the last six years.
“By this measure, cable viewers appear to be substantially better off now than they were six years ago,” Wildman says in his study entitled “Assessing Quality-Adjusted Changes in the Real Price of Basic Cable Service,” which was included in NCTA’s comments.
“This is the way a competitive marketplace works,” NCTA concluded. “Multiple providers of services vie with each other for customers, each trying to differentiate themselves with unique new services while trying to match the new offerings of their competitors. And, as a result, the array of services now available to consumers – not only video programming services, but non-video services, as well – exceeds what was even imaginable when the Commission embarked on the first of these annual inquiries.”
NCTA is the principal trade association of the cable television industry in the United States. NCTA represents cable operators serving more than 90 percent of the nation's cable television households and more than 200 cable program networks, as well as equipment suppliers and providers of other services to the cable industry.