U.S. cable industry says it is not “dominant,” no further regulatory intervention needed

Much like its Canadian counterpart, the cable industry in the United States argues that cable’s share of multi-channel video subscribers doesn’t amount to "dominance" in the marketplace and that no further program access rules are necessary. The National Cable & Telecommunications Association further disputes contentions by its rival satellite television distributors that cable prices have grown at a pace faster than inflation since deregulation. Below is an edited excerpt of the association’s August 30 submission filed with the Federal Communications Commission (FCC), which annually examines the status of competition in the market for the delivery of video programming. The full submission can be found here. As in the past years, the commission’s ninth annual inquiry on the status of competition in the market for delivery of video programming has provided a platform for cable’s competitors to promote a regulatory agenda. In an effort to obtain an artificial boost from the government, satellite providers and broadband overbuilders attempt to portray the video marketplace as virtually unchanged in the past six years. And they resort to sweeping assertions: cable has market power, is circumventing the program access rules, is engaging in predatory pricing, and is impeding competitive entry with exclusive contracts in multiple dwelling units (MDUs). Beyond demonstrating a strong desire to grow their already dramatically increased share as multi-channel programming distributors (MVPDs), they offer no concrete evidence of anti-competitive behavior by cable companies to warrant further regulatory intervention in the video marketplace. These competitor bromides cannot obscure the key facts of this ninth annual assessment: cable companies face formidable competition in the video marketplace; cable has gone from a 95 per cent share of multi-channel video subscribers in 1992 to a 76 per cent share today; DBS has grown from virtually no customers to over 18 million customers in eight years; and more than 22.27 million households choose a multi-channel video programming provider other than their local cable operator – an increase of nearly 2.3 million customers over last year. …The commission has taken steps, most recently in extending program access regulation for five more years, where it concluded such action is necessary to promote diversity in the distribution of video programming. But it should not skew the competitive marketplace by recommending to Congress other changes – such as expansive program access regulation or a ban on exclusive contracts in MDUs – where there is no basis for such action…EchoStar Satellite Corporation – now the fifth largest U.S. MVPD and growing at a rate of 23 per cent a year – argues that cable companies are maintaining their "immense market power" through "consolidation, clustering, digital and broadband bundling, and, in some cases, the outright refusal of its affiliates to sell programming to competitors." ...EchoStar further asserts that by any indicator – market share, pricing behavior, market foreclosure – cable companies have retained their "dominant position." But this easy rhetoric deserves closer analysis...For example, EchoStar points out that the FCC’s April 2002 Report on Cable Industry Prices concluded that cable prices rose 7.5 per cent during the 12-month period ending on July 1, 2001 and, by comparison, the Consumer Price Index increased 2.7 per cent during the same period. "Such price increases far outpacing inflation," EchoStar argues, "are also suggestive of the cable industry’s ability to exercise significant market power." But since cable prices were deregulated in March 1999, price increases have exceeded the rate of inflation by only about two per cent a year. Cable prices have in fact grown at a slower pace in the three years since deregulation (1999-2002) than they did in the three years prior to deregulation (1996-1999). This occurred in spite of spiraling input costs. …The commission should report to Congress that the market for the delivery of video programming is highly competitive, cable cannot be considered "dominant" and that further legislative or regulatory intervention would disserve consumers and undermine that pro-competitive goals of the Telecommunications Act.

U.S. cable industry says it is not “dominant,” no further regulatory intervention needed

Broadcast | September 12, 2002

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