[opendtv] Re: FCC report on video competition

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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