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DAVID CONNELLL
And then there were two.
The Federal Communication Commission's latest report on the multichannel video market shows cable's only vibrant competition is coming from direct broadcast satellite (DBS) providers.
Wireless cable services (MMDS), local exchange carriers (LEC) and open video systems have been stagnant, at best, or have seen a decline in their subscriber numbers.
Cable maintains a dominant share, serving 80% of the 84.4 million households that subscribe to what the government calls multichannel video program distributors (MVPDs).
Despite an apparent lock on the market, National Cable Television Association insists the report shows competition is developing in the MVPD marketplace.
"This year's FCC report on the state of video competition confirms the irrefutable trend of the last five years: Direct broadcast satellite is cable's head-on video competitor and is rapidly becoming a significant competitor in data, as well," NCTA spokesman David Beckwith says. "This competition is reason enough to reject government micro-management of these communications markets."
The DBS companies posted large gains between June 1999 and June 2000, jumping from 10.1 million household subscribers to almost 13 million subscribers, rising nearly three times the cable subscriber growth rate. DBS subscribers now represent 15.4% of all MVPD subscribers.
Cable continued to grow, also. Cable companies reached 67.7 million subscribers as of June 2000, an increase of 1.5%. According to the Bureau of Labor and Statistics, which contributed to the report, cable prices rose faster than the rate of inflation, up 4.8%, opposed to a 3.2% increase in the Consumer Price Index.
Other services aren't doing as well.
"Currently, the wireless cable industry provides competition to the cable industry in only limited areas," the commission report says. "MMDS subscribership fell from 821,000 subscribers to 700,000 subscribers between June 1999 and June 2000, a decrease of 14.7%."
The report goes on to say that MMDS spectrum will be used to provide video services in "limited areas" and that most of the spectrum will be turned over for high-speed data services.
The commission also notes Sprint and MCI WorldCom have acquired most of the larger MMDS operators and plan to convert them to non-video communications services.
Local exchange carriers are also pulling out of the MVPD market, preferring to market DBS services instead, the report says. Bell South appeared to be the exception to this trend, the FCC says, offering MMDS service in an area that covered 3.5 million homes.
However, the company announced in December it would phase out that service and transition its customers to EchoStar's DISH Network service.
In addition, SBC Ameritech and Verizon have indicated they are looking to sell their video delivery assets.
Subscriber numbers for open video systems have remained stagnant over the past year, the FCC says, with a paltry 60,000 subscribers, representing less than 0.1% of all MVPD subscribers. There is only one open video service operator conducting business, the commission notes, and it is looking more and more like a cable system.
"RCN owns the only operating open video system and currently serves areas surrounding Boston, New York, Washington, D.C., and San Francisco," the FCC says. "In several areas for which it holds OVS certifications, or portions of those areas, RCN has converted its systems to franchised cable systems"
On the programming front, the commission says vertically integrated programming has fallen from last year's total of 37% of programming to 35%.
However, the commission also notes that the number of satellite-delivered programming services decreased by two networks from 283 to 281, after increasing steadily in recent years.
"We recognize that the terrestrial distribution of programming, including in particular regional sports programming, could eventually have a substantial impact on the ability of alternative MVPDs to compete in the video marketplace," the report says. "Noncable MVPDs continue to experience some difficulties in obtaining programming from both vertically integrated cable programmers and unaffiliated programmers who continue to make exclusive agreements with cable operators."
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