[opendtv] Re: FCC report on video competition
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Fri, 30 Nov 2007 10:10:04 -0500
At 4:14 PM -0500 11/29/07, Manfredi, Albert E wrote:
(This got rejected the first time, due to some code issue with the
subject line.)
The two items from this that I find interesting are:
1. It seems very doubtful to me, using the FCC's numbers, that a 70/70
condition has been met with respect to cable (70 percent of households
have access to cable, and 70 percent actually subscribe to cable). If
DBS households account for about 20 percent of US homes, then the cable
share can be no more than about 67 percent. And I believe the current
DBS number is closer to 25 percent, which suggests cable gets perhaps 62
percent. In this report, they claim 29 percent of households subscribe
to DBS, which I would think makes this 70 percent figure attributed to
cable even more doubtful.
You are not taking into consideration the number of homes that
subscribe to both cable and DBS. Believe it or not, the number is
considerable. Unfortunately I know of no data source that accurately
reflects this overlap. And I might add that there is no reliable data
on homes that subscribe to a multi-channel service, but use an
antenna to receiver DTV broadcasts. And let's not forget that there
are many hotels and businesses with cable/DBS connections. How is
this info accounted for in the totals?
What the report does suggest is that more than 90% of homes subscribe
to a multi-channel service, even if they have one or more sets that
are used for off-air reception.
Remember that the 70/70 rule is based on homes passed. There is some
dispute about the percentage of homes passed. Some of this is due to
smaller rural operators who may not be reporting at all, or may be
reporting inaccurately. But the biggest problem with the numbers
comes from the contracts that cable has with with apartment
complexes. From what i understand, the cable industry does not break
down how many subscribers are "sitting behind" these contracts.
And then there's the issue of application of the rules. Remember the
85% test for DTV? We assumed that this would be applied on a
market-by-market basis, not as a number computed for the entire
country. Could the 70/70 rule be applied on a market by market basis?
If so, I suspect that the test would be met in more than half of the
markets in this country.
Sadly, none of this really matters. The reality is that nearly 90% of
U.S. homes are paying substantially more for their TV fix than they
would if there was real market competition. All of this hand waving
about cable versus DBS versus OTA, is just that. The reality is that
they are all operating as an oligopoly driven by the media
conglomerates.
If you doubt this, consider the following...
Why in the world would the Telcos spend billions in an attempt to
compete with cable and DBS, UNLESS there were some substantial
profits to be made?
The reality is that when the telcos come to town, they are offering
comparable bundles to the other services at comparable prices, that
increase a comparable amount on an annual basis. The reason for this
is obvious. Cable/DBS rates are not rising at 2-3 times the rate of
inflation because of infrastructure and operating costs. They are
rising because these industries are passing through the rapidly
increasing cost of subscriber fees. Each time the systems have been
upgraded to carry more channels, the cost of extended basic has
increased to cover the fees associated with those new channels. It is
likely that the cable and DBS companies are charging a bit more too,
but then they have to amortize the cost of these system
upgrades/satellites, etc.
There is another way to look at this. Within a decade it is likely
that we will be downloading most of our entertainment other than live
TV programming - mostly sports and a few reality shows like American
Idol. The telcos cost to build a new network is being buried in other
areas. Most of the fiber is already in the ground and paid for from
POTs revenues. Clearly the telcos want to have big broadband pipes to
compete with the big cable broadband pipes. And it is equally clear
that DBS is at a severe disadvantage, as they are not in a good
position to make the transition from hundreds of linear channels to
random access of thousands of programs...
Regards
Craig
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