Due to competition from direct broadcast satellite (DBS), cable operators have seen their share of the U.S. market for multichannel video programming distribution ("MVPD") services decline from 100% a decade ago to about 75% today, according to the FCC's newly released "Tenth Annual Report on Competition in Video Markets." A decade ago, federal regulators expected local exchange telephone companies ("LECs") to launch video systems and become the primary competitors to cable systems. Significant LEC entry into the video marketplace has failed to materialize. The most notable exception is BellSouth, which currently operates overbuild cable systems in 14 franchise areas, passing 1.4 million homes. Nevertheless, a number of incumbent LECs are planning to offer video services over their existing phone lines. Over 100 municipal utilities have also entered the market for multichannel video. However, these competitors, along with others using more diverse delivery technologies (i.e., overbuilders, wireless cable systems, private cable systems), only serve a proportionately small number of subscribers and only in limited geographic areas. The FCC report also finds that Internet video is still not seen as a direct competitor to traditional video services. The predominant challengers to the cable operators remain the two DBS providers. Some highlights of the report:
- As of June 2003, 94.1 million households subscribed to MVPDs, an increase of more than 56% over the last ten years.
- Between June 2002 and June 2003 alone, the number of DBS subscribers grew from about 18.2 million households to more than 20.4 million households.
- The number of cable subscribers continues to grow, reaching almost 70.5 million subscribers as of June 2003, up from the 57.2 million cable subscribers at year-end 1993. In the last several years, however, cable subscribership has declined such that as of June 2003, there was approximately the same number of cable subscribers as there were at year-end 1999.
- The total number of non-cable MVPD subscribers grew from 3.1 million as of year-end 1993, to 11.23 million as of June 1998, to 23.7 million as of June .
- Between June 2002 and June 2003, cable prices rose 5.1% compared to a 2.1% increase in the overall Consumer Price Index (CPI). Concurrently with these rate increases, however, the number of video and non-video services offered increased, including a substantial increase in the number of video channels, increased use of cable (as measured by a substantial increase in cable viewership), and the addition of advanced service offerings.
- The rapid consolidation of cable operators slowed somewhat in 2003. For example, the four largest operators served about 51.7% of all U.S. cable subscribers in June 2002, and in June 2003, that number was down to about 50.5% of all U.S. cable subscribers.
