Communications Subcommittee Holds Hearing on Video Competition in the Digital Age (October 22, 2009) PDF Print

SUBCOMMITTEE ON COMMUNICATIONS, TECHNOLOGY, AND THE INTERNET HEARING: VIDEO COMPETITION IN A DIGITAL AGE

 

OCTOBER 22, 2009

 

Today the Subcommittee will examine the state of competition for video programming.

 

In 1992, Congress recognized that the cable industry, which then dominated the market for the delivery of multichannel video programming, could use its control over that video programming to stifle competition. To engable competition in multichannel delivery, Congress enacted program access requirements to prevent cable operators with ownership interests in video programming from refusing to sell those programs to the emerging satellite providers. That requirement is broadly acknowledged as being essential to the birth of the DBS industry and the competition to cable it has brought. Congress also enacted program carriage requirements that prevent cable operators from discriminating against unaffiliated programming in favor of their affiliated networks.

 

The rules have been broadly successful. Without them, neither satellite television nor multichannel video delivered by phone companies, like Verizon’s FiOS or AT&T’s Uverse, could have entered the market. The rules have also been instrumental to the success of independent cable networks like the Food Network and Bravo. But when the program access provision was approved by Congress in 1992, it applied only to programs delivered by satellite to the multichannel distributor. Today what is commonly known as the terrestrial loophole has arisen as vertically integrated cable operators use fiber optics to deliver some programming to cable headends.

 

Fiber-based terrestrial networks have become economical alternatives to satellite delivery, particularly for regional sports and news programming controlled by regionally clustered cable operators. Cable operators which deliver programming terrestrially can block competing multichannel providers’ access to these highly popular program offerings.

 

These arrangements are troubling for sports fans who may have to choose between subscribing to the video programming provider of their choice or accessing the games of their favorite regional sports teams. In 2007, the FCC found that subscribership to DBS was 40 percent below what would otherwise be expected in Philadelphia, where a cable operator’s regional sports network has a lock on Phillies, Flyers and 76ers games. In San Diego, the Commission determined that lack of access to the regional sports network providing Padres games resulted in a 33 percent reduction in the households subscribing to DBS.

 

The problem of the unavailability of terrestrially delivered programming on DBS systems is even worse for some rural residents, for whom switching to cable service may not even be an option because a cable operator may not serve that area. If DBS companies and phone companies are precluded from carrying regional sports programming, it effectively bars many rural fans from viewing their teams.

 

We are interested in hearing from today’s witnesses about the terrestrial loophole that has arisen with the wide use of fiber optics. What benefits does use of the fiber optic delivery exemption confer on providers and consumers and what are the harms? What are the implications for multichannel competition?

 

We are also interested in other matters. The FCC has recently considered a number of program carriage complaints by independent programmers that a multichannel video programming distributor favored its own programming over the unaffiliated programming with respect to the terms and conditions of carriage. Does the FCC’s program carriage complaint process work as Congress intended, or should we consider modifications?

 

Finally, an increasing amount of video content is now available on the Internet. Some programming on the web is user-generated, such as the programming available on YouTube. Other Internet based services, like Hulu and the websites of the major television networks, offer full episodes of programming that aired on television as recently as the previous day. The more such programming migrates to the Internet, the less consumers may need to subscribe to a multichannel video programming distributor at all. At the same time, some websites that offer video content, such as ESPN360, are only available to subscribers of particular multichannel video programming distributors. What are the implications of these emerging business models for consumers and for competition in video distribution?

 

I expect that our knowledgeable witnesses will offer thoughtful analyses on these matters.

 

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