Before the

Federal Communications Commission

Washington, D.C. 20554

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| In the Matter of                 | * | CS Docket No. 00-132         |
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SEVENTH ANNUAL REPORT

**Adopted: January 2, 2001** **Released: January 8, 2001**

By the Commission: Commissioner Furchtgott-Roth dissenting and issuing a
statement.

**[Table of Contents]{.underline}**

[Paragraph]{.underline}

I. Introduction 1

A. Scope of this Report 2

B. Summary of Findings 5

II\. Competitors in the Market for the Delivery of Video Programming 16

A. Cable Industry 16

B. Direct Broadcast Satellite Services 60

C. Home Satellite Dishes 83

D. Multichannel Multipoint Distribution Service 86

E. Satellite Master Antenna Television Systems 91

F. Broadcast Television Service 98

G. Other Entrants 107

1\. Internet Video 107

2\. Home Video Sales and Rentals 114

H. Local Exchange Carriers 119

I. Electric and Gas Utilities 132

III\. Market Structure and Conditions Affecting Competition 135

A. Horizontal Issues in the Market for the Delivery of Video Programming
135

1\. Competitive Issues in the Market for the Delivery of Video
Programming 137

2\. Competitive Issues in the Market for the Purchase of Video
Programming 151

B. Vertical Integration and Other Programming Issues 172

1\. Status of Vertical Integration 172

2\. Other Programming Issues 177

C. Technical Advances 205

1\. Interactive Television 206

2\. Navigation Devices 208

3\. Cable Modems 211

IV\. Competitive Responses 213

A. New Case Studies 215

1\. Atlanta, Georgia, and Nearby Communities 215

2\. Lexington and Davidson County, North Carolina 219

3\. Wapakoneta, Ohio 223

4\. Various Communities in Orange County, Florida 228

5\. Laurens, Iowa 232

B. Preliminary Findings 235

V. Administrative Matters 239

Appendices

A. List of Commenters

B Cable Industry Tables

C. Horizontal Issues

D. Vertical Integration Tables

# introduction

1.  This is the Commission's seventh annual report ("*2000 Report*") to
    Congress on the status of competition in the market for the delivery
    of video programming.[^1] Section 628(g) of the Communications Act
    of 1934, as amended ("Communications Act"), requires the Commission
    to report annually to Congress on the status of competition in the
    market for the delivery of video programming.[^2] Congress imposed
    this annual reporting requirement in the Cable Television Consumer
    Protection and Competition Act of 1992 ("1992 Cable Act")[^3] as a
    means of obtaining information on the competitive status of markets
    for the delivery of video programming.[^4]

## Scope of this Report

2.  The *2000 Report* updates the information in our previous reports
    and provides data and information that summarize the status of
    competition in markets for the delivery of video programming. The
    information and analysis provided in this report are based on
    publicly available data, filings in various Commission proceedings,
    and information submitted by commenters in response to a *Notice of
    Inquiry* (*"Notice"*) in this docket.[^5] To the extent that
    information provided in previous annual reports is still relevant,
    we do not repeat that information in this report other than in an
    abbreviated fashion, and provide references to the discussions in
    prior reports.

3.  In Section II, we examine the cable television industry, existing
    multichannel video programming distributors ("MVPDs") and other
    program distribution technologies and potential competitors to cable
    television. Among the MVPD systems or techniques discussed are
    direct broadcast satellite ("DBS") services and home satellite
    dishes ("HSDs"), wireless cable systems using frequencies in the
    multichannel multipoint distribution service ("MMDS"), private cable
    or satellite master antenna television ("SMATV") systems as well as
    broadcast television service. We also consider other existing and
    potential distribution technologies for video programming, including
    the Internet, home video sales and rentals, local exchange telephone
    carriers ("LECs"), and electric and gas utilities.

4.  In Section III of this report, we examine market structure and
    competition. We evaluate horizontal concentration in the
    multichannel video marketplace and vertical integration between
    cable television systems and programming services. We also discuss
    competitors serving multiple dwelling unit ("MDU") buildings. We
    further address programming issues and technical advances. In
    Section IV, we examine a limited number of cases where consumers
    have a choice between an incumbent cable operator and another MVPD
    in a specific market and report on the effects of this entry.

## Summary of Findings

5.  In the *2000 Report*, we examine the status of competition in the
    market for the delivery of video programming, discuss changes that
    have occurred in the competitive environment over the last year, and
    describe barriers to competition that continue to exist. Overall,
    the Commission finds that competitive alternatives and consumer
    choices continue to develop. Cable television still is the dominant
    technology for the delivery of video programming to consumers in the
    MVPD marketplace, although its market share continues to decline. As
    of June 2000, 80 percent all MVPD subscribers received their video
    programming from a franchised cable operator, compared to 82 percent
    a year earlier.

6.  The total number of subscribers to both cable and non-cable MVPDs
    continues to increase. A total of 84.4 million households subscribe
    to multichannel video programming services as of June 2000, up 4.4
    percent over the 80.9 million households subscribing to MVPDs in
    June 1999. This subscriber growth accompanied a 2.4 percentage point
    increase in MVPDs' penetration of television households to 83.8
    percent as of June 2000.

7.  Since the *1999 Report*, the number of cable subscribers continued
    to grow, reaching 67.7 million as of June 2000, up about 1.5 percent
    from the 66.7 million cable subscribers in June 1999. The total
    number of non-cable MVPD subscribers grew from 14.2 million as of
    June 1999 to 16.7 million as of June 2000, an increase of almost 18
    percent.

8.  The growth of non-cable MVPD subscribers continues to be primarily
    attributable to the growth of DBS. DBS appears to attract former
    cable subscribers and consumers not previously subscribing to an
    MVPD. Between June 1999 and June 2000, the number of DBS subscribers
    grew from 10.1 million households to almost 13 million households,
    which is nearly three times the cable subscriber growth rate. DBS
    subscribers now represent 15.4 percent of all MVPD subscribers.
    There also have been a number of additional cable overbuilds in the
    last year. While the Commission has certified new open video
    systems, some OVS operators have converted portions of their systems
    to franchised cable operations. Over the last year, the number of
    subscribers to and market shares of HSD and MMDS subscribers
    continued to decline. However, the number of SMATV subscribers has
    increased slightly this year.

9.  During the period under review, cable rates rose faster than
    inflation. According to the Bureau of Labor Statistics, between June
    1999 and June 2000, cable prices rose 4.8 percent compared to a 3.2
    percent increase in the Consumer Price Index ("CPI"), which measures
    general price changes. Concurrently with these rate increases,
    capital expenditures for the upgrading of cable facilities increased
    (up 89.3 percent over 1998), the number of video and non-video
    services offered increased, and programming costs increased (license
    fees increased by 12.2 percent and programming expenses increased by
    16.2 percent). We also note that cable operators' pricing decisions
    may be affected where direct competition exists. Available evidence
    indicates that when an incumbent cable operator faces "effective
    competition," as defined by the Communications Act, it responds to
    such head-to-head competition in a variety of ways, including
    lowering prices or adding channels without changing the monthly
    rate, as well as improving customer service and adding new services
    such as interactive programming.

10. The Telecommunications Act of 1996 ("1996 Act")[^6] removed barriers
    to LEC entry into the video marketplace in order to facilitate
    competition between incumbent cable operators and telephone
    companies. At the time of the 1996 Act, it was expected that LECs
    would compete in the video delivery market and that cable operators
    would provide local telephone exchange service. We previously
    reported that there had been an increase in the amount of video
    programming provided to consumers by telephone companies, although
    the expected technological convergence that would permit use of
    telephone facilities for video service had not yet occurred. This
    year, we find that the rate of entry by LECs appears to be slowing
    even by the most aggressive telephone companies, and several LECs
    have reduced or eliminated their MVPD efforts. Most incumbent local
    telephone exchange carriers are seeking to sell their MVPD
    facilities (e.g., Ameritech and SNET's cable assets now owned by
    SBC, GTE's assets now owned by Verizon), preferring to market DBS
    service to their customers. BellSouth appeared to be the exception
    to this trend, offering MMDS service in an area covering 3.5 million
    homes and acquiring cable franchises in 21 areas with the potential
    to pass 1.4 million homes. In December 2000, however, BellSouth
    announced that it will phase out its wireless cable service and
    transition existing subscribers to EchoStar's DBS service, although
    it will continue to operate wireline cable systems. While the 1996
    Act created the OVS framework as a means of entry into the video
    marketplace by LECs, few telephone companies have sought
    certification. Alternatively, only a limited number of cable
    operators have begun to offer telephone service and their strategies
    for deployment remain varied. MSOs, such as Cox and AT&T, continue
    to deploy traditional circuit-switched telephone service. Others,
    like Cablevision and Comcast, are offering cable--delivered
    telephony on a limited basis, waiting until Internet Protocol ("IP")
    technology becomes available before accelerating their rollout of
    telephone service, or continuing to test such service.

11. The most significant convergence of service offerings continues to
    be the pairing of Internet service with other service offerings.
    There is evidence that a wide variety of companies throughout the
    communications industries are attempting to become providers of
    multiple services, including data access. Cable operators continue
    to expand the broadband infrastructure that permits them to offer
    high-speed Internet access. Currently, the most popular way to
    access the Internet over cable is through the use of a cable modem
    and personal computer. Virtually all the major MSOs offer Internet
    access via cable modems in portions of their nationwide service
    areas. A small portion of cable Internet access is delivered through
    a television receiver rather than a personal computer. Many cable
    operators also are planning to integrate telephony and high-speed
    data access. Like cable, the DBS industry is developing ways to
    bring advanced services to their customers. For example, DirecTV
    currently offers a satellite-delivered high-speed Internet access
    service with a telephone return path called DirecPC. EchoStar now
    offers its subscribers an interactive program guide and weather
    service from OpenTV, a company that produces interactive television
    technology, and will soon launch Wink-enhanced TV, which allows
    viewers to use their remote controls to access program-related
    information, request product samples or free coupons, or purchase
    merchandise directly from television. Many SMATV operators offer
    local and long distance telephone service and Internet access along
    with video service. In addition, digital technology makes it
    possible for MMDS operators, who provide video service in only
    limited areas, to offer two-way services, such as high-speed
    Internet service and telephony. Sprint and MCI WorldCom have
    acquired most of the larger MMDS operators with the intent to use
    the acquired frequencies to provide two-way, non-video
    communications services.

12. Non-cable MVPDs continue to report that regulatory and other
    barriers to entry limit their ability to compete with incumbent
    cable operators and to thereby provide consumers with additional
    choices. Non-cable MVPDs also continue to experience some
    difficulties in obtaining programming from both vertically
    integrated cable programmers and unaffiliated programmers who
    continue to make exclusive agreements with cable operators. In
    multiple dwelling units ("MDUs"), potential entry may be discouraged
    or limited because an incumbent video programming distributor has a
    long-term and/or exclusive contract. Other issues also remain with
    respect to how, and under what circumstances, existing inside wiring
    in MDUs may be made available to alternative video service
    providers.

13. Consumers historically reported that their inability to receive
    local signals from DBS operators negatively affected their decision
    as to whether to subscribe to DBS. This year's significant increase
    in DBS subscribership has been attributed, at least in part, to the
    authority granted to DBS providers to distribute local broadcast
    television stations in their local markets by the Satellite Home
    Viewer Improvement Act of 1999 ("SHVIA") enacted on November 29,
    1999.[^7] Under SHVIA, DBS operators can offer a programming package
    more comparable to and competitive with the services offered by
    cable operators. DirecTV now offers a package of local ABC, CBS,
    NBC, and Fox affiliates along with a national PBS feed in 38 markets
    for \$5.99 a month. EchoStar offers similar service in 34 markets.
    Moreover, in the last year, as required by SHVIA, the Commission has
    adopted rules for satellite companies with regard to mandatory
    carriage of broadcast signals, retransmission consent, and program
    exclusivity that closely parallel the requirements for cable
    service.

14. Our findings as to particular distribution mechanisms operating in
    markets for the delivery of video programming including the
    following:

-   Cable Systems: Since the *1999 Report*, the cable television
    industry has continued to grow in terms of subscribership (up to
    67.7 million subscribers as of June 2000, a 1.5 percent increase
    from June 1999), revenues (an approximate 13 percent increase
    between year end 1998 and year end 1999), audience ratings
    (non-premium cable viewership rose from a 42 share at the end of
    June 1999 to almost a 46 share at the end of June 2000), and
    expenditures on programming (an approximate 12 percent increase in
    program license fees paid by cable system operators). However, the
    number of national satellite-delivered video programming services,
    which had been increasing steadily in recent years, decreased by two
    networks, from 283 to 281, between June 1999 and June 2000.

-   The cable industry remains healthy financially, which has enabled it
    to invest in improved facilities, either through upgrades or
    rebuilding. As a result, there have been increases in channel
    capacity, the deployment of digital transmissions that provide
    better picture quality than can be offered through analog service,
    and non-video services, such as Internet access. Cable operators
    also offer telephony, although the use of integrated facilities
    remains primarily experimental with limited exceptions.

-   Direct-to-Home ("DTH") Satellite Service (DBS and HSD): Video
    service is available from high power DBS satellites that transmit
    signals to small DBS dish antennas installed at subscribers'
    premises, and from low power satellites requiring larger satellite
    dish antennas. As reported last year, DirecTV acquired medium power
    satellite provider PrimeStar. Following a transition period for
    PrimeStar's subscribers to convert to DirecTV's service, PrimeStar
    ceased to exist on September 30, 1999. DBS has over ten million
    subscribers, an increase of approximately 29 percent since the *1999
    Report*. Between June 1999 and June 2000, the number of HSD
    subscribers, measured as the number of HSD users that actually
    purchase programming packages, declined from 1.8 million to 1.5
    million, a decrease of 17 percent, that is likely due to subscribers
    switching to DBS. DirecTV and EchoStar are among the ten largest
    providers of multichannel video programming service. In June 2000,
    DBS represented a 15.4 percent share of the national MVPD market and
    HSD represented another 1.8 percent of that market.

-   Wireless Cable Systems: Currently, the wireless cable industry
    ("MMDS") provides competition to the cable industry in only limited
    areas. MMDS subscribership fell from 821,000 subscribers to 700,000
    subscribers between June 1999 and June 2000, a decrease of 14.7
    percent. With the advent of digital MMDS and the Commission's
    authorization of two-way MMDS service, it appears that MMDS spectrum
    will be used to provide video services in limited areas, and that
    most MMDS spectrum will eventually be used to provide high-speed
    data services. Wireless cable represented a 0.8 percent share of the
    national MVPD market in June 2000.

-   SMATV Systems: SMATV systems use some of the same technology as
    cable systems, but do not use public rights-of-way, and focus
    principally on serving subscribers living in multiple dwelling units
    ("MDUs"). SMATV subscribership has increased approximately 3.5
    percent since the last report, with the industry representing
    approximately a 1.8 percent share of the national MVPD
    subscribership as of June 2000.

-   Broadcast Television: Broadcast networks and stations are
    competitors to MVPDs in the advertising and program acquisition
    markets. They supply video programming directly to the approximately
    20 percent of television households that are not MVPD subscribers.
    Additionally, broadcast networks and stations are suppliers of
    content for distribution by MVPDs. Since the *1999 Report*, the
    broadcast industry has continued to grow in the number of operating
    stations (from 1599 in 1999 to 1663 in 2000) and in advertising
    revenues (\$36.6 billion in 1999, a 5.7 percent increase over 1998).
    While audience levels continue to decline, the four major television
    networks still account for a 50 percent share of prime time viewing
    for all television households. Broadcast television stations
    continue to deploy digital television ("DTV") service. There are 173
    television stations on the air broadcasting DTV signals, and digital
    simulcast of analog programming continues to increase.

-   LEC Entry: The 1996 Act expanded opportunities for LECs to enter the
    market for the delivery of video programming. In the *1999 Report*,
    we noted that it appeared that the rate of entry into the video
    marketplace by LECs might be slowing, even by the most aggressive
    LECs, and that several LECs had reduced or eliminated their MVPD
    efforts. This trend continued or accelerated this year. Most
    incumbent local exchange carriers are seeking to sell their MVPD
    facilities, preferring instead to market DBS service to their
    customers. One notable exception is BellSouth, which continues to
    pursue a number of methods for providing MVPD service. BellSouth has
    been the largest LEC investor in MMDS licenses, with its service
    area covering approximately 3.5 million homes. However, in December
    2000, BellSouth announced that it was phasing out this service and
    transitioning existing subscribers to EchoStar's DBS service. It has
    acquired 21 cable franchises in its telephone service area with the
    potential to pass 1.4 millions, provides service in 12 franchise
    areas, and is negotiating for additional franchises. Previously,
    Ameritech was the most significant LEC provider of in-region cable
    service, but recent reports indicate that SBC, its current owner,
    seeks to sell these cable assets. Verizon, which acquired GTE's 10
    competitive and one non-competitive cable franchises, is seeking to
    sell those cable assets. SNET, now also owned by SBC, currently
    offers service to 30,000 homes in 29 Connecticut localities, but is
    seeking permission from the state to discontinue this service. U  S
    West continues to offer video, high-speed Internet access, and
    telephone service over existing copper lines using very high speed
    digital subscriber line ("VSDL") in Omaha and Phoenix.

-   Open Video Systems: In the 1996 Act, Congress established a new
    framework for the delivery of video programming \-- the open video
    system ("OVS"). Under these rules, a LEC or other entrant may
    provide video programming to subscribers, although the OVS operator
    must provide non-discriminatory access to unaffiliated programmers
    on a portion of its channel capacity. The Commission has certified
    25 OVS operators to serve 50 areas. RCN owns the only operating open
    video systems and currently serves areas surrounding Boston, New
    York City, Washington, D.C, and San Francisco. In several areas for
    which it holds OVS certifications, or portions of these areas, RCN
    has converted its systems to franchised cable systems. The number of
    OVS subscribers has remained constant over the last year at
    approximately 60,000 subscribers. OVS subscribers now represent
    slightly less than 0.1 percent of all MVPD subscribers.

-   Internet Video: Currently, 56 percent of the U.S. population has
    Internet access. Real-time and downloadable video accessible over
    the Internet continues to become more widely available and the
    amount of content also is increasing. Despite the evidence of
    increased interest in Internet video deployment and use, the medium
    is still not seen as a direct competitor to traditional video
    services. Television quality Internet video requires a high-speed
    broadband connection, which most current broadband providers cannot
    guarantee. Also, deployment of broadband is far from ubiquitous.
    However, Internet users continue to download and use software for
    accessing Internet video and Web sites dedicated to streaming video
    continue to proliferate.

-   Home Video Sales and Rentals: The home video marketplace includes
    the sale and rental of video cassettes, DVDs, and laser discs. As in
    past reports, we consider home video sales and rentals part of the
    video marketplace because they provide services similar to the
    premium and pay-per-view offerings of MVPDs. Almost 86 percent of
    all U.S. households have at least one VCR. The number of homes with
    DVD players has grown rapidly since their introduction into the
    market, with the number of homes with DVD players expected to reach
    between 10 and 12 million by the end of 2000. The newest home video
    technology, the personal video recorder ("PVR"), was introduced
    in 1999. A PVR is a device connected to a television set that uses a
    hard disk drive, software, and other technology to digitally record
    and access programming. In the last year, TiVo and ReplayTV, the two
    PVR companies, have joined with MVPDs, equipment manufacturers,
    advertisers, and programmers to incorporate PVR technology into
    set-top boxes and develop content specifically for PVRs.

-   Electric Utilities: Since the *1999 Report*, several electric and
    gas utilities have announced, commenced, or moved forward with
    ventures involving multichannel video programming distribution.
    Utilities are not yet major competitors in the telecommunications or
    cable markets, but they generally possess characteristics, such as
    ownership of fiber optic networks and access to public
    rights-of-way, that could potentially help them become competitively
    significant. Moreover, deregulation of utilities, accompanied by the
    advent of competition, is prompting more utilities to diversify and
    find new revenue streams. Starpower, a joint venture between RCN and
    PEPCO, continues to expand the area where it offers voice, video,
    and high-speed Internet access in the Washington, D.C., area. Last
    year, we reported that Seren, a wholly-owned subsidiary of
    Minneapolis-based Northern States Power, offered cable and
    high-speed data access as an overbuilder in several Minnesota
    communities. It also offers service in the San Francisco Bay area
    and plans to expand its service area. Siegecom, funded by Blackstone
    Capital and a joint venture of Southern Indiana Gas and Electric and
    Utilicom, is offering bundled voice, video and data access services
    in Evansville and Newburg, Indiana, and has approached other
    communities about obtaining franchises. Digital Union, a subsidiary
    of the local utility in Austin, Texas, plans to overbuild the
    incumbent cable operator. Braintree, Massachusetts, granted a
    franchise to the municipal utility and plans to begin cable service
    by the end of 2000.

15. We also find that:

-   Consolidations within the cable industry continue as cable operators
    acquire and trade systems. The ten largest operators now serve close
    to 90 percent of all U.S. cable subscribers. However, in terms of
    one traditional economic measure, national concentration among the
    top MVPDs has increased since last year, although it remains below
    the levels reported in earlier years.[^8] DBS operators DirecTV and
    EchoStar rank among the ten largest MVPDs in terms of nationwide
    subscribership along with eight cable multiple system operators
    ("MSOs"). As a result of acquisitions and trades, cable MSOs have
    continued to increase the extent to which their systems form
    regional clusters. Currently, 44 million of the nation's cable
    subscribers are served by systems that are included in regional
    clusters. By clustering their systems, cable operators may be able
    to achieve efficiencies that facilitate the provision of cable and
    other services, such as telephony.

-   The number of satellite-delivered programming networks has decreased
    by two from 283 in 1999 to 281 in 2000. Vertical integration of
    national programming services between cable operators and
    programmers, measured in terms of the total number of services in
    operation, declined from last year's total of 37 percent to 35
    percent this year, continuing a five year trend. In 2000, one or
    more of the top five cable MSOs held an ownership interest in each
    of 99 vertically integrated national programming services. Sports
    programming warrants special attention because of its widespread
    appeal and strategic significance for MVPDs. The *2000 Report*
    identifies 75 regional networks, 27 of which are sports channels,
    many owned at least in part by MSOs. There are also 30 regional and
    local news networks that compete with local broadcast stations and
    national cable networks (e.g., CNN).

-   The program access rules adopted pursuant to the 1992 Cable Act were
    designed to ensure that other MVPDs can have access to
    vertically-integrated satellite delivered programming on
    non-discriminatory terms. We recognize that the terrestrial
    distribution of programming, including in particular regional sports
    programming, could eventually have a substantial impact on the
    ability of alternative MVPDs to compete in the video marketplace. We
    will continue to monitor this issue and its impact on the
    competitive marketplace.

-   Cable operators and other MVPDs continue to develop and deploy
    advanced technologies, especially digital compression techniques, to
    increase the capacities and to enhance the capabilities of their
    transmission platforms. These technologies allow MVPDs to deliver
    additional video options and other services (e.g., data access,
    telephony, and interactive services) to their subscribers. To access
    these wide ranging services, consumers use "navigation devices."
    Pursuant to section 629 of the Communications Act, which is intended
    to ensure commercial availability of these navigation devices, the
    Commission adopted rules that required MVPDs to unbundle security
    from other functions of digital set-top boxes by July 1, 2000. The
    cable industry reports that cable operators have met this deadline
    to have digital separate security modules available for consumers.
    Interface requirements and a certification process for the
    high-speed cable modems needed to access data services have also
    been developed. Cable modems are now for sale in selected markets.
    We expect these developments to increase competition in the market
    for equipment used by subscribers. In addition, in the last year,
    interactive television ("ITV") services are beginning to be offered
    through cable, satellite, and terrestrial technologies. ITV provides
    or has the potential to provide a wide range of services, including
    video on demand ("VOD"), e-mail, TV-based commerce, Internet access,
    and program-related content, using digital set-top boxes and other
    devices that interface with television receivers (e.g., WebTV).

# COMPETITORS IN THE MARKET FOR THE DELIVERY OF VIDEO PROGRAMMING

## A. Cable Industry {#a.-cable-industry .unnumbered}

16. This section addresses the performance of franchised cable system
    operators during the past year.[^9] We address five different areas
    of performance. First, we report on general performance in terms of
    available basic services, subscriber levels, and viewership. Second,
    we discuss the cable industry's financial performance, including its
    revenue, cash flow status, and stock valuations. Third, in the area
    of capital acquisition and disposition, we examine the amount of
    funds raised and describe how these funds are being used to upgrade
    physical plant and to acquire new systems. Fourth, we consider other
    performance indicators such as system transactions, cable
    overbuilds,[^10] and rates charged by cable operators. Lastly, we
    address advanced broadband services, including the growth of cable
    data access, digital broadband services, and broadband
    telephony.[^11]

### General Performance

17. Since our last report, the cable industry has continued to grow in
    homes passed,[^12] basic cable subscribership,[^13] premium service
    subscriptions,[^14] basic cable viewership, basic cable
    penetration,[^15] and channel capacity.[^16] Deployment of broadband
    service offerings also grew during 1999 and the first half of 2000,
    including increased offerings of digital video, Internet access
    through cable, interactive cable, and facilities-based broadband
    telephony.

18. ***Cable's Capacity to Serve Television Households***. The number of
    U.S. homes with at least one television (\"TV households\") was
    reported during the 1998-1999 television season as 99.4
    million.[^17] During the 1999-2000 television season the number of
    U.S. TV Households was reported as 100.8 million, and increase of
    1.4 percent over the prior year.[^18] The number of homes passed by
    cable was approximately 95.6 million at the end of 1998 and 96.6
    million at the end of 1999, and by the end of June 2000 was
    estimated to be 97.1 million, according to one source.[^19] The most
    widely used industry measurement of cable availability is the number
    of homes passed expressed as a percentage of TV households. In June
    2000, this statistic, homes passed as a percentage of TV households,
    was 96.6 percent, unchanged from the previous year.[^20] Some
    parties have proposed to use different measures of cable
    availability.[^21] The resulting statistic varies depending on the
    estimate of homes passed and whether the comparison is based on TV
    households, all households, all occupied housing units, or all
    housing units in the United States, as some have suggested.[^22] For
    example, one source estimates the number of homes passed as 91
    million homes, an estimate that is lower than the one provided by
    the source the Commission has used in recent *Reports*.[^23] If this
    estimate for the number of homes passed is compared to the number of
    all housing units, the largest number suggested for this comparison,
    the estimate of cable availability could be as low as 81
    percent.[^24]

19. ***Subscribership***. Basic cable television subscribership grew
    from 66.1 million subscribers at the end of 1998 to 67.3 million
    subscribers at the end of 1999, an increase of 1.8 percent.[^25] It
    continued to grow to an estimated 67.7 million subscribers by June
    30, 2000, a six month increase of approximately 0.6 percent.[^26]
    Basic cable penetration grew between 1998 and 1999, increasing from
    69.1 percent at the end of 1998 to 69.7 percent at the end of
    1999.[^27] Basic cable penetration remained unchanged at 69.7
    percent at the end of the first half of 2000.[^28] The percentage of
    TV households subscribing to cable continued to increase, rising to
    67.3 percent of all TV households by the end of 1999, and to 67.4
    percent by the end of June 2000.[^29] The number of homes
    subscribing to one or more premium cable services increased from
    35.3 million homes at the end of 1998 to 35.5 million homes at the
    end of 1999, an increase of 0.6 percent.[^30] For the first half of
    2000, premium cable subscribers increased again, reaching 35.8
    estimated subscribers, a six month increase of about 0.8 percent.
    The number of premium services to which homes are subscribing (known
    as \"premium units\") has decreased since the end of 1998, declining
    8.5 percent by the end of 1999 to 53 units and by June 2000,
    decreasing to 52.7 units.[^31]

20. ***Channel Capacity**.* As we have reported in the past, channel
    capacity has become more difficult to measure since the increased
    use of digital signal transmission.[^32] In October 1999, cable
    systems with a capacity of 30 or more channels accounted for 85.4
    percent of cable systems, or 8,236 systems.[^33] Cable systems with
    channel capacities of 54 channels or more accounted for 22.4 percent
    of cable systems in October 1999, or 2,164 systems.[^34] In
    addition, as of October 1999, 79 cable systems had a capacity of 91
    or more channels.[^35] In October 2000, it was reported that cable
    systems with a capacity of 30 or more channels accounted for 86.6
    percent of cable systems.[^36] This represents 8,032 systems
    nationwide.[^37] Systems with channel capacities of 54 channels or
    more accounted for 24.2 percent of cable systems in October 2000, or
    2,247 systems.[^38] And as of October 2000, over 100 cable systems
    had a capacity of 91 or more channels.[^39]

21. In October 1999, 98.6% percent of all cable customers subscribed to
    systems with capacities of 30 channels or more.[^40] Moreover, 64.2
    percent of all subscribers were served by systems with capacities of
    54 or more channels in October 1999.[^41] More than 4.7% of all
    cable subscribers subscribed to systems with channel capacity of 91
    channels or more.[^42] In October 2000, 99 percent of all cable
    customers subscribed to systems with capacities of 30 channels or
    more, and 68.5 percent of all subscribers were served by systems
    with capacities of 54 or more channels in October 2000.[^43] In
    addition, more than 6.5 percent of all subscribers are served by
    systems with capacities of 91 or more channels.[^44]

22. ***Viewership***. As reported last year, viewership shares of
    non-premium cable networks have continued to grow over the past
    decade, while viewership shares of broadcast television stations
    have steadily declined. This trend has continued over the past year.
    Audience share statistics for Monday through Sunday, 24 hours a
    day,[^45] show that non-premium cable audience shares rose 7.8
    percent from an average 42.2 share[^46] from July 1998 through June
    1999, to an average 45.5 share between July 1999 and June 2000.[^47]
    Monday through Sunday, 24 hours a day, broadcast television audience
    shares decreased 2.1 percent from an average 60.9 share from July
    1998 through June 1999, to an average 59.6 share between July 1999
    and June 2000.[^48]

23. ***Cable Networks***. In 1999, the number of basic cable networks
    increased from 139 to 147, a 5.8 percent increase.[^49] The number
    of premium networks increased 139 percent in 1999 from 18 at the end
    of 1998 to 43 at the end of 1999.[^50] The number of pay-per-view
    ("PPV") networks decreased 11 percent in 1999 from ten to nine
    networks.[^51] Half-year figures for 2000 are not available.

24. ***Programming Costs***. Programming networks incurred expenses of
    approximately \$5.8 billion for producing and acquiring programming
    in 1999, up 16.2 percent from 1998 expenses of \$4.9 billion.[^52]
    Reported estimates indicate that these programming network expenses
    will total \$6.4 billion by year-end 2000, a 10.3 percent increase
    over 1999. [^53] License fees paid by cable system operators to
    basic cable network programmers increased 12.2 percent, from
    approximately \$4.9 billion in 1998 to \$5.5 billion in 1999.[^54]
    Analysts estimate that in 2000 fees will increase by an additional
    10.9 percent to reach \$6.1 billion.[^55]

25. Other programming expenses incurred by cable operators include
    copyright fees for broadcast signal carriage pursuant to Section 111
    of the Copyright Act.[^56] As of December 12, 2000,[^57] copyright
    fees paid by cable system operators for broadcast signal carriage
    for the period January 1, 1999, to June 30, 1999, were \$55.6
    million.[^58] For the period July 1, 1999, through December 31,
    1999, fees collected were \$51.6 million, and for the period January
    1, 2000, to June 30, 2000, fees collected were \$53.1 million.[^59]

### Financial Performance

26. Data concerning cable industry revenue, cash flow, and stock prices
    indicate that the cable industry remained strong in 1999 and in the
    first half of 2000.[^60]

27. ***Cable Industry Revenue***. Annual cable industry revenue grew
    12.5 percent in 1999 over 1998, reaching \$36.7 billion.[^61] By the
    end of 1999, revenue per subscriber grew 10.3 percent to \$550.97
    per subscriber per year, or \$45.91 per subscriber per month. [^62]
    Analysts estimate that 2000 year-end total revenue will reach \$41.7
    billion, an estimated 13.6 percent increase over 1999,[^63] and that
    revenue per subscriber per year will reach approximately \$616.56,
    or \$51.38 per subscriber per month.[^64]

28. When cable system revenue is classified by source, advanced video
    service revenue (analog and digital) show the greatest amount of
    growth in 2000, as was also the case in 1999.[^65] Revenue from
    advanced video services increased 337.6 percent in 1999, reaching
    almost \$2 billion, as operators continued to roll out new
    services.[^66] Analysts estimate that revenue from advanced services
    will more than double between year-end 1999 and year-end 2000,
    reaching an estimated \$4.2 billion by the end of 2000.[^67] In the
    more traditional revenue-generating sectors of cable, the
    pay-per-view sector showed the greatest increase, generating almost
    \$1 billion in annual revenue in 1999, a 52 percent increase over
    the previous year.[^68] Industry analysts predict that pay-per-view
    will generate an estimated \$1.5 billion in revenue in 2000, an
    increase of almost 60 percent.[^69] Equipment and installation
    revenue increased 7.3 percent in 1999, from \$2.6 billion in annual
    revenue in 1998 to a little more than \$2.8 billion in 1999.[^70]
    Industry analysts predict this revenue sector will increase to an
    estimated \$3 billion by year-end 2000.[^71] In 1999, home shopping
    revenue declined by 1.1 percent and revenue from premium channels
    decreased by 1.9 percent.[^72] Annual revenue from local advertising
    increased from \$1.8 billion in 1998 to \$2.7 billion in 1999, a
    45.1 percent increase, and is expected to increase 16.5 percent to
    \$3.1 billion by year-end 2000.[^73] Revenue from the basic service
    tier ("BST") and from the cable programming service tier ("CPST")
    combined grew from \$21.8 billion in 1998 to \$23.1 billion in 1999,
    a 6 percent increase, and is expected to increase to \$24 billion by
    year-end 2000.[^74]

29. ***Cable Industry Cash Flow***. Cash flow is used to assess the
    financial position of cable firms. Cash flow is generally expressed
    as "EBITDA" (earnings before interest, taxes, depreciation, and
    amortization). Financial analysts reported that industry-wide cash
    flow increased 6.8 percent between the end of 1998 and the end of
    1999, from \$14.6 billion to \$15.6 billion.[^75] Cash flow will
    increase an estimated 10 percent, reaching \$17.2 billion by
    year-end 2000.[^76] In 1999, the cable industry generated \$233.88
    in annual cash flow per subscriber, \$8.01 higher than the \$225.87
    per subscriber generated in 1998.[^77] Analysts estimate that in
    2000, cash flow per subscriber per year will increase by \$19.59,
    reaching \$253.47.[^78] The ratio of cash flow to revenue ("cash
    flow margin") decreased from 45.2 percent in 1998 to 42.4 percent in
    1999, and is expected to decrease again to 41.1 percent by year-end
    2000.[^79]

30. ***Stock Prices***. Cable stock values grew more modestly in 1999
    and 2000 than in prior years. [^80] This is due in part to
    investors' eagerness for a return on investments made over the past
    several years, and increasing evidence of competition.[^81] For
    example, between February and May 2000, cable stocks stagnated amid
    increasing visibility of video competition from DBS, head-to-head
    overbuilders, and LECs providing a competitive data service
    product.[^82] Other factors contributing to the slow growth of cable
    stock values in 1999 and 2000 include psychological factors relating
    to rising interest rates and overall negative market
    conditions.[^83]

### Capital Acquisition and Disposition

31. ***Industry Financing***. The cable industry has typically relied on
    combinations of private and public financing, with the exact
    distribution of these combinations varying greatly from year to
    year. These year-to-year fluctuations in financing sources appear to
    be based on the availability of acceptable financing rates through
    private investors or capital lending institutions.

32. Between January and June 1999, the cable industry acquired
    approximately \$2.2 billion in public equity offerings (i.e., sale
    of stock), \$27 in private equity (i.e., financing from individuals,
    private corporations, venture capital firms and investment banks),
    \$13.6 billion in private debt (i.e., banks and other borrowings),
    and \$8.8 billion in public debt (i.e., sale of public bonds).[^84]
    By year-end, the cable industry had obtained approximately \$7.6
    billion in public equity offerings, \$5.4 billion in private equity
    financing, and the remaining \$16 billion in public debt
    markets.[^85] Between January 2000 and June 2000, the industry
    acquired \$225 million in private debt, \$815 million in public
    debt, and \$380 million in public equity offerings.[^86]

33. ***Capital Expenditures/Capital Investment***. In 1999, the cable
    industry spent a total of \$10.6 billion on the construction of new
    plant, upgrades, rebuilds, new equipment, and maintenance of new and
    existing equipment.[^87] This represents an 89.3 percent increase
    over the \$5.6 billion spent in 1998 for investments in plant and
    equipment, and for the expense of maintaining these
    investments.[^88] Analysts expect that operators will spend an
    estimated \$12.4 billion in 2000, an increase of 17 percent over
    1999.[^89] Of the \$10.6 billion spent in 1999, approximately \$1
    billion was for maintenance expense, \$500 million for new
    builds,[^90] \$2.5 billion for rebuilds,[^91] \$4.5 billion for
    upgrades,[^92] and \$2.1 billion for equipment.[^93] An industry
    association notes that cable operators have invested nearly \$36
    billion in upgrades since enactment of the 1996 Act.[^94]

34. Over the last several years, many of the large MSOs have invested
    more than a half a billion dollars each on maintenance, upgrades,
    rebuilds, and new services.[^95] In the case of Time Warner,
    MediaOne, and Comcast, some or all of the expenditures in 1999 and
    the first half of 2000 were associated with commitments made by
    those MSOs pursuant to social contracts with the Commission.[^96]
    For example, Time Warner reported capital expenditures of about
    \$2.1 billion in 1999 and is expected to spend \$1.8 billion in
    2000.[^97] Prior to its acquisition by AT&T, MediaOne spent
    approximately \$1 billion in 1999 upgrading and rebuilding its
    systems.[^98] Comcast reported cable-related capital expenditures of
    \$490 million in 1999, and is expected to spend approximately \$1.2
    billion by the end of 2000.[^99] AT&T's cable unit (without
    MediaOne) reported capital expenditures of \$2.4 billion in 1999 and
    analysts expect AT&T's cable unit (including MediaOne) to spend
    nearly \$5.2 billion in total capital in 2000, \$3.7 billion of
    which is expected to go toward rebuilding and upgrading
    systems.[^100] Adelphia reported capital expenditures of
    approximately \$850 million in 1999 and is expected to spend
    approximately \$830 million by year-end 2000.[^101] Cox reported
    capital spending of \$1.3 billion in 1999 and \$914 million in the
    first half of 2000.[^102] Cox is expected to spend approximately
    \$1.8 billion by year-end 2000.[^103]

### Other Performance Indicators

35. ***Cable System Transactions**.* The number of mergers,
    acquisitions, and exchanges between MSOs has fluctuated over the
    past few years. The number of systems sold decreased between 1998
    and 1999 from 119 to 90 systems.[^104] From January 2000 through
    June 2000, there were 22 transactions.[^105] The total number of
    subscribers affected by system transactions and the average size of
    systems sold (measured by the number of subscribers per system)
    continues to vary greatly from year to year.

36. While the number of subscribers affected by system transactions
    decreased by almost 13 percent between 1998 and 1999, from 22.4
    million to 19.5 million, the system size average increased 14
    percent from approximately 190,000 subscribers per system sold in
    1998 to approximately 217,000 subscribers per system sold in
    1999.[^106] Between January and June 2000, the number of subscribers
    affected by system transactions reached over 8.7 million with an
    average number of subscribers per system transaction at
    approximately 396,000, a half-year, per-system increase of over 80
    percent.[^107] The total dollar value of transactions increased
    between 1998 and 1999 from \$64.6 billion at year-end 1998 to 75.8
    billion at the end of 1999.[^108] The total dollar value of
    transactions between January 2000 and June 2000 was approximately
    \$55 billion.[^109]

37. ***Overbuilding***. Between 1995 and year-end 1999, competing
    franchises have been awarded for service to 369 communities in 34
    states, with the potential to serve more than 18.5 million
    homes.[^110] However, not all of the franchises awarded are
    currently operational. After a franchise is awarded, it can take a
    significant amount of time for the franchisee to build. An
    indication that an overbuilt system may be in operation occurs when
    an incumbent provider asks the Commission to determine that
    effective competition exists within its service area.[^111] Such a
    determination exempts the cable operator from regulation of its
    rates. As of July 2000, the Commission has granted petitions for
    determination of effective competition status on the basis of
    overbuild competition for approximately 330 individual communities.

38. As we have discussed in recent reports, the most notable
    overbuilders include Ameritech, now owned by SBC, Knology, RCN, and
    BellSouth.[^112] In the *1999 Report*, we indicated that Ameritech,
    now SBC, had suspended deployment of new operations.[^113] Reports
    indicate that SBC may now be seeking to sell its systems, though no
    final decision has been announced.[^114] RCN had approximately
    350,000 video subscribers and about 830,000 homes passed as of June
    2000.[^115] However, as with most overbuilders, RCN has not built
    out all of the homes for which it holds franchise awards. As of
    year-end 1999, RCN had an estimated 4.5 million homes under
    franchise and, as of June 2000, RCN held open video system ("OVS")
    certification for over 15 million homes.[^116] In early 2000,
    Microsoft co-founder Paul Allen invested \$1.65 billion in RCN
    through his holding company Vulcan Ventures, which also owns cable
    operator Charter Communications.[^117] This investment represented
    the first significant investment in a cable overbuilder made by an
    incumbent franchised cable operator.[^118] Knology reported
    approximately 97,000 video subscribers and 335,000 homes passed as
    of June 2000.[^119] Analysts report that Knology has approximately
    550,000 homes under franchise, and continues to seek new franchise
    agreements.[^120] BellSouth currently holds 21 franchises to provide
    cable overbuild service, and is providing service in 12 of these
    franchise areas with approximately 1.4 million homes passed.[^121]

39. As we have done in recent reports, we again provide a study of
    selected areas where incumbent cable operators face head-to-head
    effective competition.[^122] Our case-by-case analysis shows that
    such competition often results in lower prices, additional channels,
    improved services, or additional non-video services.[^123]

### Provision of Advanced Broadband Services

40. Cable operators continue to upgrade their networks at a rapid pace
    in order to add new service offerings. This year the industry began
    to see the commercial deployment of such new service offerings as
    video-on-demand and increased trials of telephony over cable
    systems.

41. ***Digital Video Services***. As discussed in last year's *Report,*
    cable systems using digital signal transmission can provide
    customers with superior video picture quality,[^124] increased
    programming options,[^125] and more advanced service offerings[^126]
    than customers can receive from cable systems using standard analog
    signal transmission.[^127] Most major cable operators offer digital
    video services.[^128] All operators offering digital video offer an
    increased number of basic and premium networks on a digital tier for
    an additional cost. Some are beginning to incorporate such advanced
    programming options as video-on-demand ("VOD") or near
    video-on-demand ("NVOD") into their digital tier. Such services
    allow subscribers to order pay-per-view movies at any time or on a
    time-staggered basis from a library of options. In addition, many
    cable operators are beginning to co-market personal video recorder
    ("PVR") services. As we discussed last year, PVRs provide VCR-like
    functionality including fast-forward, rewind, and pause.[^129]

42. Subscriber reception of digital video requires a set-top device to
    decompress and decode incoming digital signals and to translate the
    signals into the analog signals used by current television sets. In
    addition, digital set-top boxes can allow cable operators to offer
    such additional services as PVRs.[^130] Presently, cable operators
    provide set-top devices to the consumer for a monthly fee, though as
    we reported last year, the Commission anticipates that these devices
    also will become available to consumers through retail
    outlets.[^131] However, certain difficulties have delayed retail
    distribution. The Commission is currently assessing the
    effectiveness of its navigation devices rules to determine whether
    changes are required to meet the statutory objective of competition
    in the navigation devices market.[^132] Cable Television
    Laboratories ("CableLabs") continues to work on its effort to
    resolve technical issues through its OpenCable project.[^133] As
    reported last year, CableLabs was founded in 1988 by a consortium of
    cable operators in order to provide a clearinghouse for
    technological information for cable-related devices.[^134] CableLabs
    created the OpenCable project in 1997 to enable distribution of
    digital set-top boxes competitively at the retail level by producing
    a set of interface specifications that define technical
    specifications.[^135] OpenCable reached its initial goal of a common
    hardware platform in late June, 2000.[^136] OpenCable now seeks to
    enable interoperable interactive services and applications that can
    be offered by any cable system in North America through a common
    \"middleware\" approach.[^137] CableLabs has been evaluating
    responses to the OpenCable Software Request for Protocol ("RFP")
    issued in September 1999.[^138]

43. As of year-end 1999, there were more than 4.5 million digital cable
    subscribers industry-wide.[^139] As of June 2000, it is estimated
    that there were 5.5 million subscribers, an increase of 22 percent
    in just six months.[^140] Analysts predict that by year-end 2000
    there will be between 8.5 million and 9 million digital video
    subscribers in the U.S.[^141]

44. Cox is marketing its digital product in 16 markets and has
    approximately 560,000 subscribers.[^142] In September 2000, Cox
    began to offer VOD service for selected customers in San Diego,
    California. [^143] As of August 2000, Comcast provided approximately
    one million subscribers with digital cable service, and expects to
    offer that service to approximately 1.25 million customers the end
    of 2000.[^144] Comcast offers digital video service to more than 90
    percent of its subscribers.[^145] With its premier digital service
    offering, "Comcast Digital Plus" Comcast offers customers a total of
    250 channels with 45 premium channels.[^146] Comcast anticipates
    that video-on-demand will be introduced in 2001.[^147] As of June
    2000, Adelphia had approximately 342,000 digital video subscribers
    with a target of 800,000 digital video subscribers by year-end
    2000.[^148] As of year-end 1999, Time Warner offered digital video
    service in 30 of its systems with nine more systems anticipated by
    year-end 2000.[^149] Time Warner has 430,000 digital video
    subscribers.[^150] As of March 31, 2000, AT&T had 1.9 million
    digital video subscribers, and analysts expect that by year-end 2000
    AT&T will have over three million digital video customers.[^151]
    Charter Communications offers digital cable in 23 states to an
    estimated 375,000 subscribers.[^152] As part of its digital video
    service, Charter offers a video-on-demand product in some of its
    service areas, with broader deployment expected next year.[^153]

45. ***Internet and High-Speed Data Services***. Most American
    households still access the Internet using analog telephone dial-up
    modems at speeds of less than 56 kilobits-per-second ("kbps.")[^154]
    As of year-end 1999, 98.2 percent of all Internet households were
    accessing the Internet using dial-up modems.[^155] It is projected
    that telephone dial-up will remain the principal means of accessing
    the Internet until about 2004, when it is expected that only 49.7
    percent of Internet households will use dial-up access, with the
    remaining 50.3 percent accessing the Internet through broadband
    facilities.[^156]

46. As we reported in past years, the most popular way to access the
    Internet over cable broadband infrastructure is through the use of a
    cable modem and personal computer, with information transmitted over
    the cable system's wires.[^157] Cable modems allow users to access
    the Internet at speeds that range from fifty to several hundred
    times faster than telephone dial-up.[^158]

47. CableLabs created the cable modem standard, DOCSIS (Data Over Cable
    Service Interface Specification) in an effort to ensure the
    interoperability and retail sale of cable modem technologies.[^159]
    Equipment conforming to the DOCSIS standard is eligible to be
    CableLabs Certified.[^160] There are now 38 cable modem suppliers
    whose products have been certified by CableLabs on the DOCSIS 1.0
    standard.[^161] According to CableLabs, certification for DOCSIS 1.1
    has begun, although no modems have yet been DOCSIS 1.1
    approved.[^162]

48. Last year, we reported that as of July 1999, more than 32 million
    homes in the U.S. and Canada were passed by Internet access service
    through cable modem technology, with approximately one million U.S.
    subscribers.[^163] As of September 2000, cable modem service was
    available to approximately 62 million homes in the United States and
    Canada with more than 3 million U.S. subscribers.[^164]

49. Virtually all the major MSOs offer Internet access via cable modems
    in portions of their nationwide service areas.[^165] Unlike
    high-speed access offered through a telephone company where the
    customer can select the ISP of his own choice, the cable Internet
    service provider ("ISP") is selected by the cable provider and
    offered to customers in that cable operator's individual
    regions.[^166] Currently, most cable operators offer only one ISP to
    customers in a given system, although there has been a move recently
    within the industry to offer multiple ISPs to customers in a given
    cable system.[^167] On September 28, 2000 the Commission released a
    *Notice of Inquiry* to determine what regulatory treatment, if any,
    should be accorded to cable modem service and the cable modem
    platform used in providing this service.[^168] More specifically,
    the *Notice* seeks comment on the parameters the Commission should
    use in determining the appropriate level of access to cable networks
    for the provision of high-speed data services.[^169] Road Runner and
    Excite@Home are still the leading cable ISPs.[^170] As of August
    2000, \@Home reported two million cable modem subscribers and 32
    million cable homes passed.[^171] As of August 2000, Road Runner had
    one million subscribers.[^172] Other ISPs offering access over cable
    infrastructure include High Speed Access Corporation, The ISP
    Channel, Earthlink, Internet Ventures Inc., RCN, Befera Interactive
    Cablenet, and Convergence.com.[^173]

50. Among the MSOs offering high-speed Internet access are Cox, which as
    of June 1999, offered \@Home service to approximately 5.6 million
    homes, and was serving about 320,000 subscribers.[^174] Analysts
    expect that Cox will have about 460,000 subscribers by year-end
    2000.[^175] Comcast's \@Home service offering is available to more
    than 4.4 million households, in more than 20 markets.[^176] As of
    September 2000, Comcast had 250,000 subscribers with an additional
    100,000 subscribers expected by year-end 2000.[^177] As of June
    2000, AT&T (including the newly acquired MediaOne) had more than
    690,000 \@Home or Road Runner cable data subscribers.[^178]
    Cablevision Systems Corporation offers \@Home service to over 1.2
    million homes in Connecticut, Long Island, and other areas around
    New York City, with more than 93,000 subscribers.[^179] Charter
    offers Internet access through Charter Pipeline and High Speed
    Access Corporation.[^180] As of June 2000, Charter had an estimated
    144,000 high-speed data subscribers.[^181] As of June 2000, Time
    Warner offers Road Runner Internet access service in ten states to
    over 10.5 million homes, with almost 890,000 subscribers.[^182]

51. Although wireless and satellite broadband technologies continue to
    be deployed, telephone company DSL technologies remain the most
    significant competitors to Internet over cable.[^183] ADSL, the most
    widely used form of DSL, offers data speeds from between 1.5 Mbps
    and 6.1 Mbps, less than cable's maximum speed of 27 Mbps.[^184] As
    we reported last year, however, ADSL and DSL technologies in general
    have several advantages over cable broadband technology including
    guaranteed speed, which cable's shared network cannot offer.[^185]

52. Currently, the number of DSL subscribers is significantly less than
    the number of cable broadband subscribers. By June 2000, there were
    820,000 DSL subscribers compared to more than 2.3 million cable
    Internet access subscribers.[^186] The rollout of DSL and other
    broadband technologies, however, is accelerating.[^187] Analysts
    predict that by year-end 2000, there will be over 1.7 million DSL
    subscribers, compared to only 445,000 subscribers by year-end 1999.
    [^188] Some analysts predict that there will be more residential DSL
    subscribers than cable modem subscribers by 2002.[^189]

53. While both cable Internet access providers and DSL operators offer
    services at around the same price, the speed of the services offered
    by DSL providers and cable providers vary. For example Qwest offers
    a service with downstream data transfer rates of up to 640 kbps for
    \$19.95.[^190] Verizon (formerly Bell Atlantic) offers a service
    with data transfer rates of 256 kbps to 640 kbps downstream and 90
    kbps upstream for \$39.95 per month.[^191] By comparison, \@Home
    cable Internet access is priced at \$39.95-\$44.95 per month and
    offers transfer speeds of up to 2.9 Mbps downstream and 128 kbps
    upstream.[^192] However, as we reported last year, because bandwidth
    on cable networks is shared among users, most \@Home users
    experience data transfer rates of approximately 128 kbps.[^193]

54. In addition, as we have reported in the past, a small portion of
    cable Internet access is delivered through a television receiver
    rather than a personal computer.[^194] Using a dedicated browsing
    device that communicates with the cable set-top box, these services
    typically do not provide complete access to the Internet, but
    provide such basic applications as e-mail, Web browsing, and
    "hyperlinking" technology.[^195] These services are priced as low as
    \$9.95 per month, depending on type or service.[^196] Many of these
    services are now considered by industry analysts to be interactive
    television ("ITV") services, instead of Internet access
    providers.[^197] Nationwide providers of such service include WebTV,
    Worldgate, and America Online which provides AOLTV.[^198] Wink
    Communications offers a similar product marketed primarily as an
    interactive tool for the enhancement of multichannel video
    programming. Charter is planning to rollout an interactive
    television service called Diego Broadband which will provide
    interactive television and limited Internet functionality including
    e-mail, chat, and news and travel information.[^199]

55. ***Telephone Services Offered by MSOs***. Strategies for the
    deployment of telephone services by cable operators remains varied.
    Currently, only circuit-switched cable telephony is commercially
    deployed, but trials have begun for cable-delivered IP
    telephony.[^200] MSOs, such as Cox and AT&T, continue to deploy
    circuit-switched cable telephony.[^201] Others, like Cablevision and
    Comcast, are offering cable telephony on a limited basis, waiting
    instead for IP technology to become widely available before
    accelerating rollout of telephone services to customers.[^202]
    Several MSOs, including Comcast and AT&T, are currently testing IP
    telephony, while others are planning such trials.[^203] A few MSOs
    have not publicly announced any telephone strategy.[^204]

56. Before IP telephony can be commercially deployed, however, there are
    still several technical obstacles. As we reported last year,
    CableLabs is managing a project, called PacketCable, aimed at
    identifying, qualifying, and supporting products that support
    Internet over cable-based multimedia services such as IP
    telephony.[^205] On May 8, 2000, CableLabs announced the release of
    the final feature set for PacketCable residential IP voice service.
    [^206] The feature set was designed to give guidance to vendors in
    their development of products.[^207] The list of basic features
    represents the priority set of features that should be supported by
    IP voice equipment in order for cable operators to offer voice
    services commercially to residential customers.[^208] The list of
    extended features represents the complete set of features deemed
    necessary to sustain an ongoing IP-based voice service.[^209] On
    July 21, 2000, CableLabs announced successful completion of its
    second round of PacketCable interoperability testing.[^210] As a
    result of this testing, CableLabs released draft compliance test
    plans for PacketCable interface specifications.[^211]

57. As of year-end 1999, AT&T (including MediaOne subscribers) led the
    industry in cable telephony deployment with over 133,000 cable
    telephone subscribers.[^212] By June 2000, AT&T nearly doubled its
    subscribership to 234,000 cable telephone subscribers.[^213] In
    February and March 2000, AT&T entered into agreements with
    Cablevision and Time Warner, respectively, which provide for joint
    marketing of AT&T-branded telephony service on Cablevision and Time
    Warner systems.[^214] AT&T also signed an agreement with Insight
    Communications to co-market AT&T-branded all-distance telephony over
    Insight cable systems.[^215] In addition, AT&T signed an agreement
    with Comcast for the provision of AT&T-branded telephony over
    Comcast systems.[^216]

58. As of year-end 1999, Cox had over 100,000 subscribers and, by June
    2000, Cox reported an estimated 167,000 cable telephone
    subscribers.[^217] Comcast provides local telephone service
    primarily through telephony operations it has gained through system
    acquisitions.[^218] As such, it currently serves the majority of its
    12,000 circuit-switched telephony subscribers over the systems it
    acquired from Jones in Prince George's County, Maryland, and
    Alexandria, Virginia. However, Comcast offers a portion of its cable
    telephony service on its own systems in Ft. Lauderdale, Florida, and
    Baltimore, Maryland. [^219] Comcast is also conducting an IP
    telephony trial in New Jersey.[^220] Cablevision offers residential
    telephone service on Long Island and in Fairfield County,
    Connecticut.[^221] The service is a circuit-switched telephone
    offering over the Cablevision\'s cable network.[^222] As of year-end
    1999, Cablevision provided service to about 8,900 subscribers and,
    by June 2000, had 11,000 subscribers.[^223] Charter has three trials
    planned for late 2000, with one trial using IP technology and two
    using traditional circuit-switched technology.[^224]

59. ***Multi-Service Offerings***. To enhance their value to the
    end-user, over the last several years cable operators began to
    upgrade their networks in order to offer digital video, high-speed
    modem data services, and cable telephony.[^225] As we reported last
    year, aside from adding the value of "one stop shopping" for the
    consumer, the financial impact of offering multiple services (i.e.,
    video, voice, and data) can lower an operator's marginal risk.[^226]
    Analysts believe that the technology now exists to allow cable
    operators to effectively provide multiple advanced residential
    broadband applications and that the equipment needed to fully
    utilize the capabilities of the upgraded network will be available
    by the end of the year. [^227]

## Direct Broadcast Satellite Services

60. Direct broadcast satellite (\"DBS\") service is a nationally
    distributed subscription video service that delivers programming via
    satellite to a small parabolic \"dish\" antenna located at the
    viewer's home. There are currently four companies licensed by the
    Commission to provide DBS service: DirecTV, EchoStar (marketed as
    the DISH Network), Dominion Video Satellite, Inc. (marketed as Sky
    Angel) and R/L DBS Company.[^228] Of these, DirecTV, EchoStar and
    Dominion currently provide service.[^229] Last year we reported a
    number of changes in ownership for the DBS industry.[^230] This year
    the DBS ownership landscape has remained stable. However, it has
    been reported that General Motors, and its satellite subsidiary
    Hughes Electronics, is weighing the sale, spin-off, or other options
    for DirecTV, which it now owns.[^231] In 1999, Hughes acquired
    PrimeStar's medium powered satellite business and customers.[^232]
    The service was renamed "Primestar by DirecTV" and began a strategy
    of converting approximately 1.5 million former Primestar customers
    to its high powered DBS service.[^233] On September 30, 2000, the
    company announced that it had converted approximately 1.2 million of
    the former Primestar by DirecTV customers and would discontinue the
    medium power service.[^234]

61. ***Subscribership**.* DBS is the principal competitor to cable
    television service with 12,987,000 subscribers as of June 30, 2000,
    a gain of almost three million subscribers, and an increase of over
    28 percent since June 1999.[^235] DBS's share of MVPD households has
    grown to over 15 percent nationally.[^236]

62. DirecTV, which reported revenues of \$2.1 billion for the first six
    months of 2000, is the nation's leading DBS service and the third
    largest distributor of multichannel video programming.[^237] DirecTV
    had over 8.7 million subscribers as of June 2000, an increase of
    almost 15 percent from the 7.6 million customers reported as of June
    1999.[^238] These figures include 705,000 former "Primestar by
    DirecTV" subscribers who were transitioned to DirecTV's high-powered
    DBS service during the first six months of 2000.

63. As of June 2000, EchoStar reported a 65 percent increase in
    subscribers, from 2.6 million in June 1999 to more than 4.3 million
    subscribers as of June 2000.[^239] EchoStar is now the seventh
    largest MVPD in the United States.[^240]

64. Dominion, under the brand name Sky Angel, is a self-described
    Christian and family oriented DBS service. Sky Angel offers 16 video
    and 16 radio channels for \$9 a month.[^241] While the company
    currently serves fewer than one million subscribers, it estimates
    that the universe of television households with an interest in its
    niche programming is upwards of 23 million and expects to add seven
    million new subscribers in the next seven years.[^242] Because
    Dominion's transponders are currently located on an EchoStar
    satellite, Sky Angel subscribers may also receive DISH Network
    programming using the same 18-inch DBS antenna.[^243] Dominion
    estimates that 60 to 65 percent of its subscribers also subscribe to
    DISH Network programming. In addition, many Sky Angel customers also
    subscribe to a local cable service.

65. SBCA, the national trade organization of the satellite television
    industry, notes that the period between July 1, 1999, and July 1,
    2000, has been significant because of the consistent pattern of new
    subscriber acquisition by DBS providers.[^244] SBCA states that DBS
    is gaining over 8,000 subscribers per day, with an annual subscriber
    growth rate of 31 percent.[^245] In comparison, the annual
    subscriber growth rate for cable television is estimated to be
    between one and one and a half percent for 2000. Given this rate of
    increase for DBS, SBCA predicts that the DBS industry could reach 16
    million subscribers by the end of 2000.[^246]

66. DBS subscribership is growing in urban and suburban communities and
    is no longer viewed as a predominately rural service.[^247] While
    DTH (both DBS and HSD service) penetration varies nationwide by
    state from a low of less than six percent to a high of almost 40
    percent, the trend is toward growth in all geographic areas.[^248]
    Forty-four states now have penetration of more than 10 percent, as
    compared to the 40 states reported in 1999; 24 states have more than
    20 percent penetration, compared to 10 states in 1999; and three,
    mostly rural, states have more than 30 percent DTH
    penetration.[^249] According to DirecTV, its subscribers are
    distributed evenly across the continental United States with
    approximately 50 percent residing in urban counties and 50 percent
    living in smaller, rural counties.[^250] DirecTV also notes that
    approximately two-thirds of its new subscribers live in urban
    counties.[^251]

67. In a related development, several very small and rural cable systems
    have used a variety of schemes to add digital channels, expand their
    program offerings, and take preemptive action against aggressive DBS
    marketing without costly expenditures such as headend
    upgrades.[^252] These actions range from abandoning their cable
    plant and becoming authorized DBS dealers to forming partnerships
    whereby cable subscribers receive both cable service and satellite
    service from DBS overlay vendors such as HITS and WSNet.[^253]

68. ***Availability of Local Broadcast Stations***. This year's
    significant increase in DBS subscribership has been attributed in
    part to the authority granted to DBS providers in late 1999 to offer
    "local-into-local" service.[^254] Previously, DBS providers were
    restricted by copyright law from retransmitting local broadcast
    stations into the local television markets they served. On November
    29, 1999 the Satellite Home Viewer Improvement Act of 1999
    (\"SHVIA\") was enacted, under which satellite providers are now
    allowed to retransmit local and network affiliate signals into their
    local markets.[^255]

69. SBCA cites a Skytrends analysis of 13 designated market areas
    ("DMAs") where DirecTV and/or EchoStar have introduced
    local-into-local service. The study found that, between June and
    December 1999, prior to SHIVA, DBS operators added an average of
    4,002 new subscribers per month within each DMA. For the post-SHIVA
    period (January-June 2000), DBS operators added an average of 5,706
    new subscribers per month in each DMA, an increase of 43 percent
    over the pre-SHVIA period.[^256]

70. As of November 2000, DirecTV offers the local affiliates of ABC,
    CBS, NBC, and FOX in 38 markets for a package price of \$5.99 a
    month.[^257] DirecTV also provides a national PBS feed with every
    \$5.99 local station package. DirecTV plans to offer local
    affiliates in additional markets by the end of 2000.[^258] According
    to DirecTV, more than 40 percent of its customers in those markets
    subscribe to the local broadcast service and among new customers the
    subscription rate is 57 percent.[^259] Similarly, EchoStar transmits
    a local network package to its subscribers in 34 markets for \$4.99
    a month and offers the national PBS feed as an option for an
    additional one dollar per month.[^260]

71. The SHVIA also directed the Commission to undertake and complete
    rulemakings related to satellite carriage of broadcast stations
    within one year of enactment on November 29, 2000. As required by
    the SHVIA, the Commission established rules to implement mandatory
    carriage of broadcast signals ("must-carry"), retransmission
    consent, and program exclusivity with respect to satellite carriage
    of broadcast stations. Pursuant to the SHVIA, these rules are as
    comparable as possible to rules that govern cable carriage of
    broadcast stations. As further required by the SHVIA, the Commission
    revised the Individual Location Longley-Rice computer model used to
    predict subscriber eligibility to receive distant network stations
    and offered recommendations on the Grade B signal standard as it
    applies to such eligibility determinations.[^261]

72. ***DBS versus Cable***. Several commenters note that with the
    passage of SHVIA and the growth in subscribership, many of the
    differences between DBS and cable service have been
    eliminated.[^262] Others contend, however, that significant
    differences remain between the two services and they should not yet
    be considered substitutes.[^263]

73. In its comments, AT&T states that because DBS has a 15.8 percent
    share of the MVPD market, with subscriber growth 20 times as high as
    cable, plus exclusive sports programming and the ability to carry
    local signals under SHVIA, it is now a powerful presence in the
    marketplace that the Department of Justice has found to be a
    substitutable service for cable.[^264] On this basis, AT&T requests
    that the Commission relax or eliminate existing regulations and
    avoid new regulations for cable.

74. Like AT&T, NCTA points to the rising MVPD market share of DBS (15.25
    percent according to their estimates) as evidence that DBS providers
    are competitive alternatives to cable in every market.[^265] NCTA
    further states that there is evidence of a nationwide competitive
    threat from DBS to cable that has spurred cable operators to compete
    vigorously for subscribers. NCTA also points to offers of free
    equipment and free installation from DBS providers that have
    decreased high up-front costs and DBS monthly subscription fees
    comparable to those of cable.

75. In contrast, EchoStar states that effective competition has yet to
    arrive in the MVPD marketplace, although it concedes that DBS is
    perhaps the only true alternative to cable.[^266] According to
    EchoStar, increases in DBS subscriber counts have not been
    accompanied by comparable decreases in the number of cable
    subscribers or cable's market share. Therefore, the continuing
    market power of incumbent cable operators leads to unfair advantages
    including preferential access to video programming.

76. Others contend that the failure of DBS to restrain cable rates
    demonstrates that the two industries are competing for "a thin layer
    of affluent customers.... not necessarily swayed by incremental
    price differences."[^267] Finally, American Broadband notes a recent
    GAO study that suggests that DBS does not exert significant pricing
    pressure on cable service prices and has not brought about the level
    of competition between DBS and cable to conclude that the program
    access rules are no longer needed.[^268] GAO, which studied 1998
    cable rates, found that greater DBS penetration was correlated with
    somewhat higher cable rates and that the presence of a nonsatellite
    competitor, such as another cable company or a wireless cable
    operator, was more likely to result in lower cable rates.[^269]

77. ***Broadband Satellite Services**.* As with cable operators,
    satellite providers are developing ways to bring advanced services
    to their customers. Currently, DirecTV offers a satellite-delivered
    high-speed Internet access service with a telephone return path
    called DirecPC and a dual functioning (video and data) DBS antenna
    called DirecDUO.[^270] Future services aim for true two-way
    interactivity by eliminating the telephone return path.

78. A number of video providers and programmers have financial interests
    in WildBlue (formerly called iSKY), a satellite company that intends
    to use Ka-band spectrum and spot-beam technology to deliver two-way,
    high-speed data to residential markets beginning in late 2001.[^271]
    WildBlue plans to market its Ka-band Internet service for \$35-\$40
    per month and its set-top box for \$200.[^272] EchoStar also has a
    17.6 percent stake in Starband (formerly called Gilat-2-Home). On
    November 7, 2000, StarBand Communications launched a high‑speed
    Internet service using a single antenna capable of receiving
    EchoStar\'s Dish Network video signal as well as two-way, high-speed
    data.[^273] Starband is a joint venture whose partners include
    Israel-based Gilat Satellite Networks, EchoStar and Microsoft.[^274]

79. In 1999, America Online ("AOL") and DirecTV partnered to develop a
    set-top box to provide interactive and "web surfing" Internet
    services. The DirecTV/AOL partnership will soon begin marketing its
    \"AOL via DirecPC\" broadband service. The company expects to start
    the service using a two-way connection using Ku-band
    satellites.[^275] By 2003, DirecTV plans to switch to Ka-band
    technology for its new \"Spaceway\" service, which would offer
    faster connections than DirecPC\'s Ku-band service.[^276] DirecTV
    also formed partnerships with the TiVo Company to develop a
    PVR/set-top box with personalized television functions and with Wink
    Communications to provide interactive multimedia services.[^277]
    Despite the rollout of DSL and cable modems, analysts predict there
    will be a market for broadband satellite services principally in the
    estimated 20 to 30 million homes in rural and suburban areas that
    may be unable to receive cable or DSL for the foreseeable
    future.[^278]

80. ***Terrestrial Reuse of DBS Spectrum**.* In 1998, the Commission
    received a proposal by Northpoint Technologies, Inc. to reuse the
    direct broadcast satellite band at 12.2-12.7 GHz for a terrestrial
    service that would deliver multichannel video and one-way data
    services.[^279] On November 29, 2000, the Commission concluded,
    among other things, that a new terrestrial multichannel video
    distribution and data service ("MVDDS") can operate in the 12.2-12.7
    GHz band with incumbent broadcasting satellite services (including
    DBS) and voted to allow MVDDS services.[^280] Although the incumbent
    DBS licensees have agreed internationally to a sharing criterion to
    allow some additional satellite operations in the band, they opposed
    increased usage by terrestrial operations.[^281] According to SBCA,
    permitting such frequency sharing would cause harmful interference
    and service disruption for DBS customers.[^282] Northpoint has
    performed three sets of experimental testing that demonstrate that
    its technology can share spectrum with DBS and the DBS licensees
    have performed similar tests that refute Northpoint\'s claims of no
    interference.[^283] The Commission decision requires that MVDDS
    services operate on a "non-harmful interference basis" with the
    incumbent DBS services.[^284]

81. ***DBS Public Interest Obligation**.* Pursuant to the Cable Act of
    1992, DBS service providers must set aside a percentage of channel
    capacity for noncommercial programming of an educational or
    informational nature. [^285] The effective date for implementation
    of the DBS public interest obligations was December 15, 1999.[^286]
    EchoStar currently offers 19 channels of public interest programming
    under this provision of the Commission's rules.[^287] DirecTV
    carries nine noncommercial networks under these rules.[^288]

82. The public interest programming being offered by DBS consists of
    national channels, rather than the mostly locally produced content
    offered on cable public, educational, and government ("PEG")
    channels.[^289] Nevertheless, members of the public interest
    community are reportedly "disappointed" that the Commission's rules
    allow DBS operators to select the public interest programmers and
    the DBS industry's practice of limiting public interest programmers
    to short-term contracts.[^290]

## Home Satellite Dishes

83. The home satellite dish ("HSD") or C-band segment of the satellite
    industry continues to experience a decline in subscribership.
    Between June 1999 and June 2000, C-band subscribers fell from
    1,783,411 to 1,476,717, an average loss of 840 subscribers per
    day.[^291] In November 1999, Netlink Group, the leading provider of
    C-band programming sold its subscriber lists to EchoStar for \$10
    million, thus enabling EchoStar to solicit Netlink's subscribers.
    Netlink will receive a cash payment if any of its former subscribers
    actually converts to EchoStar.[^292]

84. Nevertheless, many current C-band subscribers remain loyal to the
    service and a small number of new subscribers has been added.[^293]
    For example, Paul Dowgewicz, a consumer who filed comments in this
    proceeding, states that he switched from cable to C-band because of
    the limited number of channels on his cable system, the greater
    variety of program types on C-band, and the ability to purchase
    C-band programming on a per channel basis.[^294]

85. It is expected that C-band will continue as a niche service for some
    time. As noted in the *1999 Report*, many existing HSD transponder
    leases extend past 2010 and within the last year, six new satellites
    have been launched to replace older satellites.[^295] In addition,
    new, digital equipment for C-band continues to be developed and made
    available to subscribers.[^296]

## Multichannel Multipoint Distribution Service 

86. MMDS systems, often referred to as \"wireless cable,\" transmit
    video programming and other services to subscribers through 2 GHz
    microwave frequencies, using Multipoint Distribution Service
    (\"MDS\") and leased excess channel capacity on Instructional
    Television Fixed Service (\"ITFS\") channels.[^297] An MMDS system
    must have a line-of-sight path between the transmitter or signal
    booster and the receiving antenna. Because of capacity limitations
    when using analog signals, MMDS operators can offer a maximum of 33
    microwave channels available in each market, including 13 MDS
    channels and 20 ITFS channels. Digital technology significantly
    increases the channel capacity, improves picture and audio quality,
    and makes two-way services, such as high-speed Internet access and
    telephony, possible.

87. As we reported last year, the MMDS industry provides competition to
    the cable industry for MVPD service only in limited areas.[^298]
    Sprint Corporation and MCI WorldCom, Inc. have acquired most of the
    larger MMDS operators, with the intent of using the acquired
    frequencies to provide two-way non-video communication services, and
    have begun trials of this service.[^299] WCA points out, however,
    that MMDS provides the only local competition to many cable
    operators.[^300] Such competition is particularly important, WCA
    indicates, in "...smaller markets and rural areas where cable
    overbuilds and/or DBS 'local into local' service \[i.e., offering
    local over-the-air broadcast stations to subscribers\] may not be
    available for the foreseeable future."[^301] Thus, while it appears
    that most MMDS licenses will not be used in the future to compete in
    the MVPD market, in some areas, MMDS constitutes the only
    competition to incumbent cable operators. The MMDS industry is
    currently transitioning from offering video programming to offering
    data services.[^302]

88. ***MMDS Households* *and Subscribership***. In 1999, the number of
    homes with a serviceable line-of-sight to an MMDS operator\'s
    transmission facilities was reported to be 62,500,000, and the
    number of homes actually capable of receiving an MMDS operator's
    signal ("homes seen") was reported to be 35,750,000.[^303] WCA
    states that there are approximately one million MMDS video
    subscribers.[^304] Other estimates indicate, however, that the
    number of MMDS subscribers has dropped to approximately
    700,000.[^305] At least one company, Nucentrix, is combining its
    MMDS spectrum with DBS service to offer a broader array of video
    services,[^306] as we reported last year.[^307] BellSouth continues
    to operate its MMDS video systems, as we report in more detail
    below.[^308] The combination of these trends indicates that
    companies will continue to use MMDS spectrum to provide video
    services, but only in limited areas, especially rural ones. It
    appears that most MMDS spectrum will eventually be used to provide
    high-speed data services.

89. ***Interexchange Carrier ("IXC") Investment***. We previously
    reported on MCI WorldCom's and Sprint's purchases of a significant
    number of MMDS operators.[^309] Over this past year, both MCI
    WorldCom and Sprint have moved forward with their plans to offer
    two-way high-speed Internet access over the MMDS licenses they
    acquired. MCI WorldCom began trials of the high-speed service in
    five cities (Boston, Jackson, Mississippi, Baton Rouge,
    Memphis,[^310] and Dallas-Fort Worth[^311]) and has filed
    applications with the Commission to offer the service in more than
    60 cities.[^312] Sprint has launched service in eight areas
    (Phoenix, Tucson, Houston, Silicon Valley, Denver, Colorado Springs,
    Salt Lake City, and Wichita, Kansas)[^313] and has filed
    applications to offer service in 45 additional markets, with a
    potential reach of 24.8 million homes.[^314]

90. ***Barriers to Competition***. BellSouth has indicated barriers to
    competition for MMDS operators. First, BellSouth contends that the
    consolidation and clustering of cable systems gives cable MSOs
    leverage vis-à-vis cable programming networks and broadcast
    networks, making them less willing to sell programming to cable's
    competitors.[^315] BellSouth further maintains that this
    consolidation and clustering increases the ability of vertically
    integrated MSOs to avoid program access obligations by delivering
    programming terrestrially,[^316] and increases incumbent cable
    operators' leverage vis-à-vis non-vertically-integrated programming
    networks.[^317] BellSouth therefore requests that the Commission
    extend the existing program access rules beyond the 2002 sunset, and
    that the Commission: (1) recommend that Congress eliminate the
    non-vertical integration and terrestrial delivery exceptions to the
    statute; and (2) either require strict justification of volume
    discounts or ask Congress to clarify the language in the
    statute.[^318]

## Satellite Master Antenna Television Systems

91. SMATV systems, also known as private cable operators, are video
    distribution facilities that use closed transmission paths without
    using any public right-of-way. [^319] SMATV systems are usually
    satellite-based and distribute television signals to households
    located in one or more adjacent buildings, primarily serving urban
    and suburban multiple dwelling units ("MDUs").[^320] In general,
    SMATV operators are subject to less regulatory oversight than
    traditional cable systems.[^321] Some SMATV systems use microwave
    transmissions and wires to serve multiple buildings that are not
    commonly owned.[^322] Under the 1996 Act, SMATV operators may use
    wires to connect separately owned buildings, as long as the wires do
    not traverse public rights-of-way.[^323]

92. SMATV operators consist of hundreds of small and medium size firms
    throughout the nation.[^324] Among the largest SMATV operators as of
    December 1999 were MidAtlantic Communications, Global Interactive
    Communications, Pace Electronics, Future Trak, LyncStar Integrated
    Communications, and OnePoint Communications Corp.[^325] These
    relatively large SMATV operators serve between 15,000 and 55,000
    subscribers each.[^326] Most SMATV operators serve approximately
    3,000-4,000 customers.[^327] According to NCTA, as of July 2000,
    SMATV subscribership remained relatively unchanged from a year
    earlier at 1.5 million subscribers.[^328]

93. Currently, many private cable operators offer the same services
    offered by franchised cable operators, including local and long
    distance residential telephone service, Internet access, and digital
    video.[^329] One source indicates that the average private cable
    operator offering SMATV video service usually delivers about 30-45
    channels.[^330] We have previously reported that SMATV operators are
    joining with satellite providers to combine analog antenna and DBS
    systems in order to increase service offerings.[^331] As we reported
    last year, this enables SMATV operators to offer as many as 200
    channels.[^332] This trend continues. As of year-end 1999, 43
    percent of SMATV operators said they plan to add DBS services over
    the next year.[^333] In addition, as many as 33 percent of private
    cable operators offer telephony as a licensed competitive local
    exchange carrier ("CLEC").[^334]

94. On June 22, 2000, the Commission adopted a *Report and Order*
    addressing the allocation of the 18 GHz band.[^335] The 18 GHz band
    is the spectrum that SMATV operators use for microwave transmission
    to serve multiple buildings that are not commonly owned. SMATV
    operators were concerned by a proposal set forth in the foregoing
    *Notice of Proposed Rulemaking* that would have terminated their use
    of the 18 GHz band.[^336] In the *Report and Order*, the Commission
    concluded that SMATV operators would not be able to compete
    effectively if the 18 GHz band were redesignated and ruled that all
    current use of this spectrum by SMATV operators may continue.[^337]

95. On July 13, 1999, the Commission adopted a *Notice of Proposed
    Rulemaking* seeking comment on a proposal to allow SMATV operators
    to use Cable Television Relay Service ("CARS") 12 GHz band channels
    to deliver video programming.[^338] Because SMATV systems do not use
    public rights-of-way, and are technically not cable operators, they
    have been ineligible for CARS licenses.[^339] In addition, the
    Commission sought comment on whether the CARS band should be
    expanded to include the frequency band segment from 13.20-13.25 GHz,
    currently designated for television broadcast auxiliary service.
    This proceeding is still pending.

96. Two years ago, we reported that on June 4, 1998, the Commission
    adopted a *Memorandum Opinion and Order* granting a motion for
    declaratory ruling filed by Entertainment Connections Inc. ("ECI")
    for a determination that it was not a cable operator and did not
    need a franchise under section 621 of the Communications Act.[^340]
    At issue was ECI's use of Ameritech's facilities to transport video
    programming across public rights-of-way to subscribers in MDUs.
    ECI's facilities are located solely on private property, not
    crossing any public rights-of-way, and Ameritech's facilities that
    deliver signals from ECI's headend facilities to the MDUs are not
    owned, managed, or controlled by ECI.[^341] In December 1999, the
    U.S. Court of Appeals for the Seventh Circuit upheld the
    Commission's *Order* in full.[^342] In October 2000, the U.S.
    Supreme Court declined to review the appellate decision.[^343]

97. On October 9, 1997, the Commission adopted a *Report and Order and
    Second Further Notice of Proposed Rulemaking* that amended the cable
    inside wiring rules to provide opportunities for new entrants
    seeking to compete in distributing video programming, particularly
    MVPDs seeking to provide service in MDUs.[^344] Specifically, the
    Commission\'s rules establish procedures for the disposition of
    cable \"home run\" wiring where the incumbent MVPD no longer has a
    legally enforceable right to remain in the building. The *Second
    Further Notice of Proposed Rulemaking* seeks comments on the
    advantages or disadvantages of exclusive contracts in promoting a
    competitive environment, and whether there are circumstances where
    the Commission should adopt restrictions on exclusive contracts in
    order to further promote competition in the MDU marketplace. The
    rules became effective on March 13, 1998, and the Commission is
    currently reviewing the petitions for reconsideration and comments
    filed in this proceeding.

## Broadcast Television Service

98. Broadcast networks and stations are competitors to MVPDs
    particularly in the advertising and program acquisition markets.
    Broadcast networks also compete with MVPDs by supplying video
    programming over the air, particularly to those who do not subscribe
    to an MVPD service. Additionally, broadcast networks and stations
    are suppliers of content for distribution directly to consumers and
    to consumers through MVPDs.[^345] Since the *1999 Report*, the
    number of commercial and noncommercial television stations increased
    to 1663 as of September 30, 2000, from 1599 as of July 31,
    1999.[^346] Total broadcast advertising revenues reached \$36.6
    billion in 1999, a 5.7 percent increase over 1998.[^347] Advertising
    revenues for the seven broadcast networks (ABC, CBS, Fox, NBC,
    PaxTV, UPN, and WB) alone reached \$18 billion in 1999.[^348] In
    comparison, cable programming networks earned \$8.3 billion in
    advertising revenue in 1999, an increase of 20 percent over
    1998.[^349]

99. During the 1998-99 television season, ABC, CBS, Fox, and NBC
    accounted for a combined average 50 percent share of prime time
    viewing among all television households, compared to 52 percent in
    the previous year. UPN and WB achieved a combined eight percent
    share of prime time viewing, the same as last year.[^350] The most
    recent data available for households subscribing to cable service
    indicate that programming originating on local broadcast television
    stations accounted for a combined 50.7 percent share of 24-hour
    viewing in the 1998-99 television season. Non-premium cable networks
    and pay cable services achieved a combined 56 percent share of
    24-hour viewing, down from 57 percent the previous season. (Reported
    audience shares exceed 100 percent due to multiple set
    viewing.[^351])

100. We reported previously on consolidation in the broadcast industry
     and on "repurposing" of content.[^352] Repurposing of programming
     is becoming more common, and NBC and PaxTV in particular appear to
     have expanded their relationship in this regard. NBC and PaxTV have
     already begun delayed rebroadcasts of NBC shows on PaxTV, such as
     the game show *Twenty One*.[^353] The two also agreed for the
     rebroadcast of NBC's *Nightly News*,[^354] but suspended
     implementation because of complaints from NBC affiliates.[^355] ABC
     is also involved with repurposing deals, such as showing its drama
     *Once and Again* on Lifetime and selling music-oriented
     made-for-television movies to VH1.[^356]

101. As we stated in the *1999 Report*, DTV could potentially enhance
     the ability of broadcasters to compete in the video
     marketplace.[^357] DTV allows broadcasters to transmit a very high
     quality signal (High Definition Television or HDTV), several
     standard definition signals ("multicasting"), or ancillary services
     in addition to broadcast signals. As of December 5, 2000, all of
     the top ten markets had at least two affiliates of the top four
     networks broadcasting DTV service, and six of those markets had all
     of the affiliates of the top four networks broadcasting DTV. One or
     more affiliates in Chicago, New York City, Dallas, and Boston have
     been granted extensions to complete construction.[^358] November 1,
     1999, was the deadline for the four network affiliates in markets
     11-30 (79 stations) to complete construction of their DTV
     facilities and to file license applications. As of December 5,
     2000, 19 of these DTV permittees have filed requests for extension
     of time to construct their facilities; 57 have completed
     construction and are on the air; 9 have special temporary authority
     to be on the air with DTV pending final action on their
     application. As of December 5, 2000, over 800 DTV construction
     permit applications had been acted upon. At present, 173 stations
     broadcast DTV signals.[^359]

102. Current use of DTV spectrum involves simultaneous broadcast of
     standard definition signals. For instance, 17 of the 18 comedy and
     drama series on CBS will be available in HDTV, with sponsorship by
     the digital television set producer Panasonic.[^360] ABC broadcasts
     "The Wonderful World of Disney" and "Monday Night Football" in
     HDTV, and NBC broadcasts "The Tonight Show with Jay Leno" and some
     movies in HDTV.[^361] Possible new broadcasting services using DTV
     include HDTV, multicasting, combining frequencies to provide
     packages of services, and interactive services such as delivering
     Internet content to computers. We previously reported on Geocast's
     plans to use Hearst-Argyle DTV spectrum to deliver Internet content
     to computers.[^362] In addition, broadcasters have formed two
     additional consortia to combine DTV spectrum to allow third parties
     to deliver services to consumers, including content delivery to
     televisions and computers.[^363]

103. Despite this potential, obstacles have impeded progress toward DTV
     transition. At the time of the *1999 Report*, among the four
     unresolved issues concerning DTV between the broadcast industry,
     the cable industry, and the consumer electronics industry: (1)
     direct connection of DTV receivers to digital cable
     televisions; (2) the provision of tuning and program schedule
     information to support on-screen program guides; (3) the labeling
     of DTV receivers; and (4) copy protection. The first two issues
     were largely resolved in an agreement embodied in a February 22,
     2000, letter to the Commission from the heads of NCTA and the
     Consumer Electronics Association. This agreement provided for
     technical specifications that permit the direct connection of DTV
     receivers to cable television systems, including signal levels and
     quality, and video formats. The agreement also selected the Program
     and System Information Protocol to support on-screen program
     guides.[^364] The third issue was resolved by a Commission order
     adopted on September 14, 2000, which established three categories
     of DTV receivers.[^365] The categories are designed to ensure that
     consumers will be fully informed about the capabilities of DTV
     receivers to operate with cable television systems.[^366] The
     fourth issue, copy protection, remains a point of contention, and
     the Commission continues to monitor industry progress on its
     resolution.[^367] In addition, the Commission continues to examine
     digital broadcast signal carriage issues, raised in the DTV Must
     Carry Notice.[^368]

104. We previously reported on disputes over the current DTV
     broadcasting standard (8-Level Vestigial Side-Band Standard
     ("8-VSB")), and a petition by Sinclair to switch to another (Coded
     Orthogonal Frequency Division Multiplex ("COFDM")).[^369] On
     February 4, 2000, the Commission rejected Sinclair's petition to
     switch to the COFDM standard, stating that numerous studies support
     using 8-VSB for DTV signals.[^370] Subsequently, the Advanced
     Television Systems Committee announced that it would form a task
     force on DTV reception.[^371]

105. ***Barriers to Competition***. Two commenters raise issues that
     relate to broadcasters' ability to compete with other MVPD
     providers. The first, Fox, argues generally that the trend toward
     competition and diversity in the video marketplace is continuing,
     but portions of the Commission's broadcast regulatory framework are
     based on an "an archaic vision of the market that bears no
     resemblance to today's competitive realities."[^372] Fox urges the
     Commission to accelerate and broaden the relaxation of its
     regulations so that they reflect a more competitive
     marketplace.[^373] Paxson raises issues relating to the transition
     to DTV. Paxson urges the Commission to take steps to ensure that
     the transition to DTV is successful, including "...to promote,
     protect, and facilitate digital video multicasting."[^374] Paxson
     also asks that the Commission, before November 13, 2000, put in
     place digital cable compatibility and copyright protection
     standards, begin adopting digital receiver standards, detail the
     technical requirements for digital must carry, and mandate that all
     televisions be capable of receiving digital and analog broadcast
     signals.[^375] Also, Paxson requests that the Commission determine
     that the existing DTV modulation standard will result in reliable
     reception, or permit use of an alternative standard or dual
     modulation standards.[^376] Finally, Paxson asserts that "\[a\]ll
     DTV broadcasters should have enforceable full digital must carry
     rights for cable, DTH, and all subscription-based multichannel
     video providers."[^377]

106. The continuing disputes detailed above, and, possibly, the high
     cost of digital television sets, have combined to slow consumer
     acceptance of and transition to DTV.[^378] As a result,
     broadcasters have only engaged in limited tests of various possible
     DTV products, such as HDTV, ancillary services, or some
     combination. It is therefore impossible to assess the competitive
     impact of DTV service on the MVPD market, other than to observe
     that the potential for a positive competitive impact remains.

## Other Entrants

### Internet Video

107. Real-time and downloadable video accessible over the Internet
     ("Internet video") continues to become more widely available.[^379]
     The number of homes with access to the Internet and the number of
     home users accessing Internet video have both increased over the
     last year, as has the amount of available content. As of November
     2000, 56 percent of the U. S. population had Web access from
     home.[^380] By November 2000, 35 million residential Web users had
     accessed streaming media, up 67 percent from November 1999 when
     only 21 million users had accessed streaming media[^381] However,
     despite the evidence of increased interest in Internet video
     deployment and use, the medium is still not seen as a direct
     competitor to traditional video services. Television-quality
     Internet video service requires a high-speed broadband connection
     of about 300 kbps or higher, which most current broadband providers
     cannot yet guarantee.[^382] In addition, deployment of broadband is
     not yet ubiquitous.[^383] Nevertheless, there have been a number of
     significant legal, technological, and business developments over
     the past year to report.

108. On June 8, 1999, Internet Ventures, Inc. and Internet On-Ramp, Inc.
     (collectively "IVI"), filed a Petition for Declaratory Ruling,
     requesting that the Commission issue a ruling that Internet service
     providers, such as IVI, are entitled to commercial leased access
     under section 612 of the Communications Act.[^384] In its Petition,
     IVI contends that the availability over the Internet of television
     broadcast stations and films through "streaming technology"
     demonstrates that the Internet provides the same video programming
     that television broadcast stations provide, and as such, ISPs are
     providers of video programming under section 612.[^385]

109. On February 18, 2000, the Commission issued a *Memorandum Opinion
     and Order*, that concluded that ISP Internet access service, such
     as that provided by IVI, does not constitute video programming as
     contemplated by section 612 of the Communications Act (i.e.,
     programming provided by, or generally considered comparable to
     programming provided by, a television broadcast station).[^386] The
     Commission noted that Congress did not expressly state that the
     leased access provisions require cable operators to make channel
     capacity available for anything other than video programming and,
     accordingly, section 612 cannot be read as requiring a cable
     operator to make channel capacity available to provide services
     that are not video programming, such as the Internet access service
     provided by IVI and other ISPs.[^387] The Commission declined to
     rule beyond the issue of whether the Internet provides the video
     programming comparable to that provided by television broadcast
     stations.[^388]

110. Some Internet video firms have recently faced difficulties with
     U.S. copyright laws. In June 2000, a lawsuit was filed in a U.S.
     District Court of Los Angeles by a dozen entertainment companies
     accusing the Web site, Record TV.com, of illegally using
     copyrighted television shows from a Los Angeles-area cable
     signal.[^389] Among other things, the lawsuit seeks to shut down
     the Web site, which allows users to record and replay shows online
     for free.[^390]

111. Canadian-based iCraveTV agreed to shut down in February 2000, in
     return for the withdrawal of copyright infringement lawsuits
     against it in the United States.[^391] JumpTV, successor to
     iCraveTV, has announced plans to stream U.S. television signals to
     Internet users in Canada using a new technology designed to prevent
     American residents from accessing its Web content.[^392] JumpTV
     hopes the new technology will help it avoid U.S. Copyright
     violations. However, JumpTV is currently facing copyright issues in
     Canada.[^393]

112. Despite these obstacles, Internet users continue to download and
     use software for accessing Internet video, and Web sites dedicated
     to streaming video continue to proliferate.[^394] For example,
     RealNetworks' RealPlayer, the dominant software program for
     accessing Internet video, has over 25.3 million users.[^395]
     Microsoft's Windows Media Player has more than 9.4 million users,
     and Apple's QuickTime has more than 7.2 million users.[^396] In
     addition, Web sites continue to increase offerings. NBC, for
     example, is planning to offer streaming video versions of daily
     newscasts from its owned-and-operated stations via its Web
     sites.[^397] Partnerships and marketing agreements between Web
     sites and traditional video providers have also emerged.
     Television.com has agreements with at least 10 broadcast and cable
     networks to test its plan to carry promotional videos and other
     programming on its television portal site.[^398]

113. As Web sites designed to provide video over the Internet increase
     in number, technological firms and services continue to facilitate
     streaming video and address its weaknesses. iBEAM Broadcasting's
     specially designed network offers DSL and cable operators 100
     percent streaming video availability for over 500,000 simultaneous
     Internet users, with one million simultaneous streams expected
     possible by year-end 2000.[^399] Arbitron has now joined Lariat
     Software in offering a service that measures and reports the
     viewership of streaming video.[^400] In addition, ChannelSeek and
     The Media Channel continue to catalogue and list available Internet
     video programming.[^401]

### Home Video Sales and Rentals

114. The home video marketplace includes the sale and rental of
     videocassettes, DVDs (formerly called digital video or versatile
     discs) and laser discs. [^402] As in past reports, we consider home
     video sales and rentals part of the video marketplace because they
     provide services similar to the premium and pay-per-view offerings
     of MVPDs.[^403] The home video industry considers cable television,
     direct broadcast satellite services, and broadcast television as
     its competition.[^404] It also views the developing near video on
     demand and video on demand services of MVPDs and streaming video
     over the Internet as potential competition.[^405]

115. Almost 86 percent of all U.S. households have at least one VCR,
     with nearly half of these homes owning at least two VCRs.[^406] By
     the end of 2000, the number of homes with DVD players is expected
     to reach between 10 and 12 million, up from 4.5 million a year
     earlier.[^407] In addition, about two million homes have laser disc
     players.[^408] U.S. consumers spent \$17.36 billion renting and
     buying prerecorded video in 1999, 2.4 percent more than in
     1998.[^409] Total rental revenue increased from \$8.10 billion in
     1998 to \$8.12 billion in 1999, with DVDs representing between five
     and ten percent of the overall rental business.[^410] Total revenue
     from video sales increased to \$9.24 billion in 1999, up from
     \$8.86 billion in 1998, with DVDs accounting for about 16 percent
     of that total.[^411]

116. There are between 24,000 and 25,000 video specialty stores selling
     or renting home video programming.[^412] There also are another
     8,000 to 10,000 retail outlets, primarily supermarkets and drug
     stores, that rent videos, but their numbers are declining.[^413]
     Discount department stores, including Wal-Mart and Target, and
     large electronic discount chains, such as Best Buy and Circuit
     City, compete with specialty video stores in the sale of
     videos.[^414] Over the past two years, the video retail industry
     has undergone a period of consolidation, with many independent
     operators selling to larger concerns or closing their
     businesses.[^415] The five largest video store chains had a 41
     percent market share of all video rentals in 1998.[^416] The
     largest stores can carry as many as 8,000 titles and 15,000
     videocassettes, DVDs, and video games.[^417] The video retail
     industry is the largest source of revenue for movie studios,
     generating approximately \$11.8 billion in 1999, three times the
     revenue received from theatrical distribution.[^418] In addition,
     since 1997, several video retailers have entered into revenue
     sharing arrangements with major movie studios under which they
     lease videos in return for a percentage of the rental
     revenue.[^419]

117. The Internet is opening up new possibilities for the video rental
     business by letting consumers search a store's inventory and
     reserve a movie online before going to the store to pick it up,
     although it is having a more noticeable impact on video
     sales.[^420] In particular, several of the largest video retailers
     sell video programming through Internet sites.[^421] Approximately
     \$400 million worth of videos (VHS and DVD) were sold online in
     1999.[^422] In addition, traditional video retailers are exploring
     various alternative forms of electronic entertainment delivery,
     including video on demand.[^423]

118. Last year, we reported on a new home video technology, the personal
     video recorder ("PVR"), offered by two companies, TiVo, Inc. and
     Replay TV Inc. (formerly Replay Networks).[^424] A PVR is a device
     connected to a television set that uses a hard disk drive,
     software, and other technology to digitally record and access
     programming. PVR technology allows a consumer to pause, replay,
     rewind, fast forward and otherwise time-shift even live television
     programs.[^425] While PVRs cannot play prerecorded videocassettes
     or DVDs, they make it relatively simple to record pay-per-view
     signals from digital platforms, such as DBS, and provide the user
     with the same level of control over the playback of a movie as home
     video provides.[^426] One source reports that 95,000 PVRs have been
     sold thus far.[^427] Other sources provide widely varying
     estimates, from 100,000 to 750,000, for the number of homes with
     PVRs by year end 2000.[^428] In the last year, TiVo and ReplayTV
     have joined with MVPDs, equipment manufacturers, advertisers, and
     programmers to incorporate PVR technology into set-top boxes and
     develop content specifically for PVRs.[^429] For example, both PVR
     services have entered into agreements with major cable MSOs to
     offer their services to subscribers.[^430] Universal Pictures is
     partnering with ReplayTV for an interactive advertising campaign
     and TiVo established a program that allows advertisers to load up
     to 30 minutes of content onto the TiVo hard drive.[^431] Also, a
     combined DBS/PVR receiver, developed by TiVo and DirecTV, became
     available in the fall of 2000.[^432] In addition, EchoStar offers a
     set-top box, the DISHPlayer, with PVR capabilities.[^433] In this
     regard, recently ReplayTV announced that it would no longer sell
     PVRs directly to consumers, and that it would focus on licensing
     its technology to cable and other television-oriented
     companies.[^434]

## Local Exchange Carriers

119. The 1996 Act amended section 651 of the Communications Act in order
     to permit telephone companies to provide video services in their
     telephone service areas. According to the statute, common carriers
     may: (1) provide video programming to subscribers through radio
     communications under Title III of the Communications Act;[^435] (2)
     provide transmission of video programming on a common carrier basis
     under Title II of the Communications Act;[^436] (3) provide video
     programming as a cable system under Title VI of the Communications
     Act;[^437] or (4) provide video programming by means of an open
     video system (\"OVS\").[^438]

120. In the *1999* *Report*, we noted that it appeared that the rate of
     entry might have been slowing by even the most aggressive LECs, and
     that several LECs had reduced or eliminated their MVPD
     efforts.[^439] This trend continued and accelerated this year. Most
     incumbent local exchange carriers ("ILECs") are seeking to sell
     their MVPD facilities, preferring instead to market DBS services to
     their customers.[^440] The exception to this trend is BellSouth,
     which continues to pursue a number of methods for providing MVPD
     service. Overall, it appears that there is a diminished likelihood
     that ILECs will be a major competitive force in the MVPD market, at
     least not over ILEC-owned and operated facilities. Some companies
     that function as competitive local exchange carriers ("CLECs"),
     most notably RCN,[^441] however, continue to pursue MVPD entry and
     competition aggressively.

121. ***MMDS**.* BellSouth had been the largest LEC investor in MMDS
     licenses and systems.[^442] Since the *1999 Report*, BellSouth has
     launched digital MMDS services in Jacksonville and Daytona Beach,
     Florida.[^443] BellSouth's MMDS service areas cover approximately
     3.5 million homes in Florida, Georgia, Louisiana, and
     Kentucky.[^444] BellSouth announced in December 2000, however, that
     it would shut down its MMDS systems, and transition its subscribers
     to EchoStar's DBS service.[^445] In addition, as previously
     reported, GTE operates a digital MMDS system in Oahu, Hawaii.[^446]
     Following its merger with Bell Atlantic,[^447] however, GTE (now
     Verizon) reportedly is seeking to sell all of its video programming
     assets.[^448]

122. ***In-Region Cable Franchises**.* Previously, Ameritech had been
     the most significant LEC provider of in-region cable service.[^449]
     In the *1999 Report*, we indicated that Ameritech, now owned by
     SBC, had suspended deployment of new cable operations and suspended
     negotiation of new franchise agreements.[^450] More recent news
     reports indicate that SBC is seeking to sell Ameritech's cable
     assets. These reports indicate that SBC is considering three
     options: (1) selling the cable systems; (2) entering into a joint
     venture for the cable operations and retaining some of the fiber
     for telecommunications uses; or (3) continuing operation of the
     cable systems, but without signing new franchises.[^451] No final
     determination by SBC on these options has been reported.

123. At the time of the *1999 Report*, in addition to its MMDS
     properties, BellSouth had acquired 21 cable franchises with the
     potential to pass 1.4 million homes, was providing cable service in
     12 of its franchise areas, and was negotiating with localities for
     additional franchises.[^452] This remains the case.[^453] We
     previously reported that GTE held ten competitive cable franchises,
     and one non-competitive franchise.[^454] As stated above, however,
     Verizon is seeking to sell these assets.[^455]

124. SNET, now also owned by SBC Communications, holds a statewide cable
     franchise in Connecticut, and currently offers service to 30,000
     subscribers in 29 localities.[^456] We previously reported that, on
     August 25, 1999, SNET applied for and received permission from the
     Connecticut Department of Public Utility Control ("DPUC") to
     suspend construction of its statewide network.[^457] Subsequently,
     SNET filed with the DPUC for permission to discontinue cable
     television service in Connecticut.[^458] This application is
     currently unresolved, and it is unclear what will ultimately happen
     to SNET's existing video assets.

125. U S West offers video, high-speed Internet access, and telephone
     service over existing copper telephone lines using very high speed
     digital subscriber line (\"VDSL\") in Omaha, Nebraska, and Phoenix,
     Arizona. U S West remains the only company in the country using
     VDSL for video distribution, and reportedly has 31,000 subscribers
     in Phoenix and 20,000 in Omaha.[^459] Following U S West's merger
     with Qwest,[^460] however, Qwest CEO Joseph Nacchio indicated in an
     interview that the company would halt expansion of VDSL service
     until the capital costs of setting up the service fall by 40
     percent per subscriber.[^461]

126. ***OVS**.* Although OVS is one of four means for LEC entry into
     video, the OVS rules do not preclude non-LECs from becoming OVS
     operators. Therefore some of the companies certified to provide OVS
     service are not LECs. The Commission has certified 25 OVS operators
     to offer OVS service in 50 areas, with some of the areas
     overlapping.[^462]

127. RCN is by far the largest OVS operator in the country, both in
     terms of certifications and in number of subscribers.[^463] RCN
     operates OVS facilities in New York City, Washington, D.C.,
     Gaithersburg, Maryland, South San Francisco, California, and some
     of the suburbs surrounding Boston.[^464] RCN has additionally been
     certified as an OVS operator in the city of Boston, Northern New
     Jersey, Philadelphia, Los Angeles, Chicago, Portland, Oregon,
     Seattle, Washington, and Phoenix, Arizona.[^465] RCN reports that
     it prefers to initiate service as an OVS operator, but that it will
     switch to a traditional cable franchise if the local franchising
     authority prefers.[^466] Thus, in some of the areas listed above,
     such as Boston, RCN started out as an OVS operator, but
     subsequently became a Title VI franchisee after negotiations with
     the local franchising authority. RCN reports that it has 292,000
     video subscribers, but does not indicate how many of these
     subscribers are served over OVS.[^467]

128. RCN reports that its business plan is unique in three ways. The
     first is that the networks that RCN is building are the most
     advanced in the world.[^468] Second, RCN's business plan is
     dependent upon delivering bundles of service (i.e., video,
     high-speed Internet, and local and long distance telephone
     together) to customers as opposed to individual services, thus
     generating multiple revenue streams and higher penetration
     rates.[^469] Third, RCN is concentrating on entering markets with
     high population densities, thus lowering the per customer cost of
     offering service.[^470]

129. ***Satellite***. We have previously reported on LEC efforts to
     market DBS services.[^471] These cross-marketing efforts continue.
     In addition, this year BellSouth announced that it would begin its
     own medium-power satellite service.[^472] BellSouth later
     indicated, however, that it would not launch the service.[^473]

130. ***Barriers to Competition***. RCN reports that it is experiencing
     multiple barriers to competitive entry. It claims that the major
     barriers are anticompetitive tactics of incumbent cable companies,
     delays in gaining access to local rights-of-way, pole attachment
     delays and excessive rates, adverse or delayed Commission
     decisions, and the inability to gain access to MDU inside
     wiring.[^474] Two examples given of anticompetitive tactics are
     cable incumbents seeking sensitive information from RCN under the
     OVS rules and denial of vital local programming, especially sports
     programming delivered terrestrially.[^475] RCN indicates that an
     inability to carry local sports programming will, in some markets,
     lower potential penetration rates to the point at which it will be
     unprofitable to enter.[^476] Delays in gaining access to local
     rights-of-way typically are due to prolonged negotiations with
     local franchising authorities, particularly involving financial and
     service obligations.[^477]

131. RCN urges the Commission to extend the program access exclusivity
     rules beyond their scheduled sunset in 2002.[^478] RCN further
     requests that the process employed in the relevant proceeding
     involve a more dynamic, "face-to-face" process than the traditional
     "notice-and-comment rulemaking" procedure.[^479] Finally, RCN
     emphasizes the importance of access to sports programming to the
     survival of entrants into the MVPD market.[^480]

## Electric and Gas Utilities

132. Since the *1999 Report*, several electric and gas utilities have
     announced, commenced, or moved forward with ventures involving
     multichannel video programming distribution. Utilities are not yet
     major competitors in the telecommunications or cable markets.
     However, as previously reported, they generally possess
     characteristics, such as ownership of fiber optic networks and
     access to public rights-of-way, that potentially could make them
     competitively significant.[^481] Moreover, deregulation of
     utilities, accompanied by the advent of competition, is prompting
     more utilities to diversify and find new revenue streams.[^482]

133. Starpower, a joint venture between RCN and Potomac Electric and
     Power Company ("PEPCO") in the Washington, D.C., area continues to
     expand the area in which it offers service.[^483] We previously
     reported on the activities of Seren, a wholly owned subsidiary of
     Minneapolis-based Northern States Power.[^484] Both Seren and RCN
     offer voice, video, and high-speed Internet access services over
     integrated networks. In addition to the communities Seren was
     serving, or had applied for franchises to serve last year, comments
     indicate that Seren has begun offering cable and high-speed
     Internet access service as a cable overbuilder in Sartell and Sauk
     Rapids, Minnesota.[^485] Seren is also offering service in the San
     Francisco Bay area, and has a franchise in Walnut Creek,
     California.[^486] Finally, reports indicate that Seren has
     expressed interest in offering service in Charlotte, North
     Carolina.[^487]

134. Siegecom, funded by Blackstone Capital and a joint venture of
     Southern Indiana Gas and Electric and Utilicom, is offering service
     in Evansville and Newburg, Indiana. Siegecom currently has 14,000
     subscribers and targets a total of 120,000.[^488] Siegecom offers a
     bundle of voice, video, and data access services, and has
     approached 22 other Indiana cities about obtaining
     franchises.[^489] Digital Union, a subsidiary of the local utility
     in Austin, Texas, plans to overbuild the incumbent cable
     operator.[^490] Finally, Braintree, Massachusetts, granted a
     franchise to the municipal electric utility, Braintree Electric
     Light Department, which is expected to begin offering cable service
     in December 2000.[^491]

# Market Structure and conditions affecting competition

## Horizontal Issues in the Market for the Delivery of Video Programming

135. The video programming market is comprised of two separate but
     related markets: (a) the market for the distribution of
     multichannel video programming to households, and (b) the market
     for the purchase of video programming by MVPDs. As explained in
     earlier reports, the market for the distribution of multichannel
     video programming is local in nature, while the market for the
     purchase of video programming by MVPDs is regional and national in
     nature.[^492] In the distribution market, the buyers are individual
     households as well as families living in multiple dwelling units
     ("MDUs"), and the sellers are MVPDs, including cable operators and
     other video service providers such as DBS providers. In the market
     for the purchase of video programming, the buyers are MVPDs, and
     the sellers are programming networks, studios and programming
     packagers.[^493]

136. In this section, we first review changes in the market for the
     distribution of video programming, including changes in the level
     of competition in that market between July 1999 and June 2000. In
     our discussion of competition in the distribution of video
     programming to households, we also examine developments unique to
     MDUs, a significant sub-set of the market. We then review the
     market for the purchase of video programming by MVPDs, and examine
     the effects that changes in concentration among MVPDs at the
     regional and national levels have had on this market in the last
     year.

### Competitive Issues in the Market for the Distribution of Video Programming

137. The market for the delivery of video programming to households
     continues to be highly concentrated and characterized by
     substantial barriers to entry which serve to increase the cost of
     potential entry into a rival's market.[^494] These barriers may
     include: (a) strategic behavior by an incumbent designed to raise
     its rival's costs, e.g., limiting the availability of certain
     popular programming from rivals; (b) local and state level
     regulations, e.g., causing rivals to incur a delay in gaining
     access to local public rights-of-way facilities; and (c)
     technological limitations, e.g., DBS and MMDS line-of-sight
     problems.[^495]

138. While competitive alternatives to the incumbent "wireline" MVPDs
     are developing and attracting an increasing proportion of MVPD
     subscribers, most consumers have limited choices among video
     distributors. A relatively small percentage of consumers have a
     second wireline alternative, such as an OVS or overbuild cable
     system, in addition to the traditional incumbent cable operator.
     While several "wireless" technologies are used to provide video
     programming service, DBS is the one wireless technology available
     to the majority of subscribers nationwide. Thus, homes are
     generally passed by only one wireline and one or more wireless
     MVPDs. Of the 33,000 cable community units nationwide, 330, or 1
     percent have been certified by the Commission as having effective
     competition as a result of consumers having a choice of more than
     one MVPD.[^496] In the Competitive Responses section of this
     Report, we describe the competitive response of both the incumbent
     and the new entrant in several of these communities. Incumbent
     operators are most likely to respond to competition by reducing
     their monthly charge for cable programming services and equipment,
     by offering additional channels, or by offering Internet and other
     telecommunications services.[^497]

139. As of March 2000, Ameritech was the largest wireline overbuilder,
     offering video service to approximately 300,000 subscribers.
     However, Ameritech's continued commitment to this market has become
     uncertain following its acquisition by SBC. SBC suspended
     completion and operation of any new cable franchises previously
     awarded to Ameritech that were not yet operational.[^498] RCN,
     another prominent overbuilder, on the other hand, is increasing its
     presence in major metropolitan areas. As of March 2000, RCN had
     approximately 300,000 video subscribers.[^499]

140. Several wireless MVPD technologies, including MMDS, SMATV, and DBS,
     deliver programming to individual households and MDUs and provide
     consumers an alternative to incumbent cable systems. While
     providing an alternative for some consumers, SMATV systems do not
     provide service throughout a local cable franchise area, and MMDS,
     which often serves larger areas than SMATV service, offers fewer
     channels than cable systems. The two principal DBS services are
     presumed to be technically available nationwide, although they may
     not actually be available to subscribers in MDUs or in households
     that are not within the line-of-sight of a DBS signal. Changes in
     the law enacted last year now permit DBS operators to offer local
     broadcast network signals in their local television market. This
     coupled with changes in DBS operators' marketing strategies are
     likely to make DBS even more viable as a competitor to cable.[^500]
     In November 1999, SHVIA eliminated the prohibition on DBS delivery
     of local network signals into their local television markets, and
     DBS operators have begun offering this service in a number of major
     television markets.[^501] In addition, DBS operators have started
     to lease both the satellite dishes and set-top boxes, thus reducing
     the large upfront costs previously associated with subscription to
     this service.

141. ***Recent Developments in the MDU Market***. The MDU market is a
     significant segment of many local MVPD markets. MDUs comprise a
     wide variety of high-density residential complexes, including high
     and low-rise rental buildings, condominiums, and
     cooperatives.[^502] According to one estimate, there are currently
     21.4 million MDUs in the U.S. That number is expected to grow to
     23.3 million by the year 2003.[^503] Historically, cable and SMATV
     operators were the primary providers of MVPD services to MDU
     subscribers. More recently, however, DBS has begun to supply
     programming to operators that serve MDUs and to MDU residents
     directly.[^504] SMATV operators, also known as private cable system
     operators, deliver an integrated package of services to MDUs using
     a variety of delivery technologies, including one or more microwave
     links.[^505] Traditional cable operators as well as the DBS
     providers, DirecTV and EchoStar, serve this market.[^506] Several
     private cable system operators have joined with DBS operators to
     provide video programming to MDUs.[^507] According to one report,
     DBS is projected to gain five million net new DBS MDU subscribers
     by 2005 and a corresponding net revenue of \$3.5 billion.[^508] DBS
     operators also have formed marketing-distribution alliances with
     several LECs aimed at MDUs and the residential market.[^509] Such
     alliances permit the LECs to offer "one-stop-shopping" for
     telecommunications services including voice, data, and video.[^510]
     In May 2000, WSNet of Austin, Texas, announced the launch of a new
     satellite video service designed for private cable and small and
     rural cable companies. Unlike DBS, WSNet provides over 190 digital
     channels only to SMATV and other small cable operators who in turn
     distribute these programming services to their subscribers.[^511]

142. Recently, a number of large SMATV cable operators, including OpTel,
     SkyView, and Cable Plus, have declared bankruptcy.[^512] In
     addition, SMATV operators, MidAtlantic Communications and OnePoint
     Communications, were acquired by cable MSO Comcast and by a
     regional Bell operating company ("RBOC") Verizon Communications,
     respectively. According to some analysts these developments have
     weakened SMATV's stature as a viable competitor to franchised cable
     operators in the MDU market.[^513]

143. A number of SMATV operators are offering bundled video, voice, and
     data services in order to compete more effectively with the
     traditional cable operators in the MDU market. RCN is one such
     company which uses a variety of technologies to serve MDUs,
     including cable, OVS, and traditional SMATV systems. RCN is
     currently providing video programming services in the MDU market in
     Boston, New York, Philadelphia, Chicago, San Francisco, and
     Washington D.C. areas. In the near future, RCN plans to expand its
     services to New Jersey, Baltimore, Los Angeles, Portland, Seattle,
     south Florida, and Phoenix metropolitan areas.[^514] In a majority
     of these areas, RCN offers a combination of video, high-speed
     Internet access, and local and long distance telephone
     services.[^515]

144. ***Competitive Issues in the MDU Market***. Commenters raise a
     number of issues that they contend adversely affect their ability
     to serve the MDU market. These include their inability to gain
     access to MDU inside wiring due to owners' objections for
     aesthetic, safety, or practical reasons, exclusive and/or perpetual
     contracts between incumbents and MDU owners, and the failure of the
     Commission's over-the-air-reception devices ("OTARD") rules which
     do not cover renters and owners who do not have exclusive use of
     areas suitable for antenna installation.[^516]

145. Commenters suggest that exclusive or perpetual contracts between
     incumbent MVPDs and MDU owners represent a barrier to entry into
     the MDU market.[^517] According to commenters, exclusive contracts
     often were entered into before the arrival of alternative MVPDs in
     the MDU market, and the continued existence of these contracts
     prevents the MDU owners and/or their tenants from having an
     opportunity to select among competing providers. According to the
     Independent Cable Telecommunications Association ("ICTA"), a
     significant portion of the MDUs in the U.S. are currently covered
     by perpetual contracts with incumbent franchised cable
     operators.[^518]

146. DirecTV argues that MDU residents have limited choices among MVPD
     providers because exclusive contracts or exclusive "rights of
     entry" between incumbents and property owners either discourage new
     entrants or make it impossible for them to enter the market.[^519]
     ICTA, on the other hand, contends that exclusive contracts give MDU
     residents bargaining power to collectively negotiate with several
     competing MVPDs for a favorable deal in pricing and services. A
     single resident or household, however, may not be able to demand
     very much in terms of services and pricing discount from MVPD
     providers.[^520]

147. RCN contends that a number of Commission decisions create barriers
     to entry to markets including the MDU market. It contends that
     delayed Commission decisions regarding access to existing inside
     cable wiring at a junction box when it is not practical to access
     the wiring at or near individual units have thwarted RCN's entry
     into this market.[^521]

148. On October 9, 1997, the Commission adopted a *Report and Order and
     Second Further Notice of Proposed Rulemaking* that amended the
     cable inside wiring rules to enhance competition in the video
     distribution market.[^522] The *Second Further Notice* sought
     comments on several issues including: (a) whether there are
     circumstances where the Commission should adopt restrictions on
     exclusive contracts in order to further promote competition in the
     MDU market; (b) whether the Commission should preempt state and
     local mandatory access laws in order to broaden the applicability
     of the Commission's inside wiring rules; (c) whether the Commission
     should exempt small MVPDs from signal leakage reporting
     requirements; (d) whether the Commission should extend its rules
     regarding customer access to cable inside wiring before termination
     of service to cover all MVPDs in the same manner that they apply to
     cable operators; and (e) whether to allow MDU owners to require
     that incumbent MVPDs share their wiring with competitive MVPDs. The
     Commission action in this proceeding is pending.

149. In a related action, on October 12, 2000, the Commission adopted
     measures to enhance the ability of competing telecommunications
     providers to provide services to customers in residential and
     commercial buildings or other multiple tenant environments
     ("MTEs").[^523] The adopted measures included a determination that
     utilities, including LECs, must afford telecommunications carriers
     and cable service providers reasonable and nondiscriminatory access
     to conduits and rights-of-way located in customer buildings and
     campuses, to the extent such conduits and rights-of-way are owned
     or controlled by the utility. The Commission also sought additional
     comments on whether it should extend its cable inside wiring rules
     to facilitate the use of home run wiring by telecommunications
     service providers where an incumbent cable provider no longer has a
     legal right to maintain its home run wiring in the building.

150. DirecTV asserts that the Commission's OTARD rules should be
     expanded to cover common areas for MDU residents.[^524] On November
     20, 1998, the Commission extended the OTARD rules to allow renters
     to install antennas within their "exclusive use" areas, i.e.,
     apartments, homes, gardens, patios, terraces, and balconies. The
     rules, however, do not extend to the installation of antennas on
     common property or on property to which a viewer does not have a
     right of access.[^525] DirecTV states that while the Commission's
     OTARD rules have encouraged some MDU landlords and owners to use a
     single dish for reception to prevent "dish clutter," the rule
     should be extended to renters and owners who do not have exclusive
     use of areas suitable for satellite reception.[^526]

### Competitive Issues in the Market for the Purchase of Video Programming

151. As explained in the *1998 Report*, buyers in the market for the
     purchase of video programming are MVPDs, including cable operators
     and other video service providers, and the sellers are primarily
     non-broadcast programming networks.[^527] This market tends to be
     regional or national since programmers seek to develop networks
     much broader than local cable franchise areas. For example, some
     programming services are intended for a nationwide audience (e.g.,
     CNN, USA) while others seek a regional audience (e.g., New England
     Sports Channel).

#### The Regional Market

152. For the past several years, cable operators have engaged in a
     regional strategy called "clustering." Many of the largest MSOs
     have concentrated their operations by acquiring cable systems in
     regions where the MSO already has a significant presence, while
     giving up smaller holdings scattered across the country. This
     strategy is accomplished through purchases and sales of cable
     systems, or by system "swapping" among MSOs.

153. ***Competitive Issues Related to Clustering***. Commenters contend
     that clustering of cable systems can create greater economies of
     scale and scope. It enables cable operators to offer a wider
     variety of broadband services at lower prices to customers in
     geographic areas that are larger than single cable franchise areas.
     Clustering can thus make cable operators more effective competitors
     to LECs whose local service areas are usually much larger than a
     single cable franchise area.[^528] The General Accounting Office,
     in its report on the changing status of competition to cable
     television, also found that ownership ties and clustering
     strategies may provide cost savings and possible competitive
     advantages.[^529] In addition, Commenters point out that clustering
     enables cable operators to: (a) defray costs over a number of
     systems and a larger subscriber base; (b) deliver a higher quality
     of signal to consumers; (c) offer more local and regional
     programming for consumers; (e) provide better customer service and
     fewer outages; (f) create more efficient interconnections which
     enhance educational and governmental uses; (g) develop more
     attractive joint consumer promotions and discounts with area
     retailers and others; and (i) increase advertising revenues which
     can, in turn, be used to offset a portion of programming and system
     upgrade expenses.[^530]

154. In the *1999 Price Survey Report*, the Commission reported that
     cable operators that were part of a cluster had, on average, higher
     monthly rates than operators that were not part of a cluster (i.e.,
     a positive relationship was found to exist between average monthly
     rates and clusters).[^531] AT&T contends that the Commission's
     *1999 Price Survey Report* incorrectly characterized the effects of
     clustering on average monthly cable rates.[^532] More specifically,
     AT&T argues that the Commission in its study failed to account for
     the number of subscribers by not weighting monthly prices paid for
     a package of service by the number of subscribers taking such a
     package. AT&T further contends that the Commission failed to
     include pertinent variables, such as the availability of Internet
     access and local telephony, in the regression equation estimating
     effects of clustering on monthly rates. AT&T reported finding an
     inverse relationship between average monthly rates and a clustering
     variable when it re-estimated the Commission's regression equation
     using 1999 Price Survey data but weighting average monthly rates by
     the number of subscribers.[^533] AT&T also estimated a modified
     version of the Commission regression equation using 1999 Price
     Survey data which included four additional variables: (a) the
     availability of Internet; (b) availability of telephony
     services; (c) number of franchise subscribers; and (d) number of
     subscribers taking a particular package of services.[^534]

155. In order to test the validity of AT&T's assertions, we modified the
     regression equation presented in the *1999 Price Survey Report* and
     added a subscriber variable (reciprocal of system subscribers) to
     the equation as AT&T suggested. This variable was similar to the
     subscriber variable used in earlier Commission analyses of the
     demand for cable services.[^535] Using 1999 Price Survey data, we
     estimated the modified regression equation and the results again
     showed a positive relationship between clustering and average
     monthly rates. More specifically, the sign, magnitude, and
     statistical significance of the coefficient for the cluster
     variable was similar to the coefficient reported in the *1999 Price
     Survey Report*.[^536] While clustering may help reduce programming
     and other costs as claimed by commenters, our findings show that
     these lower costs are not being passed along to subscribers in the
     form of lower monthly rates.[^537]

156. Several commenters assert harmful effects of clustering and
     regional concentration on program distribution.[^538] BellSouth
     argues that since a programming service cannot be successful
     without access to a critical mass of subscribers, programmers are
     becoming more reliant on large, well-clustered MSOs that
     effectively control distribution on a national or regional
     scale.[^539] Commenters also argue that clustering can facilitate
     evasion of the Commission's program access rules. Specifically, it
     is likely that cable systems in a large cluster will be linked
     through a fiber optic network enabling operators to offer
     telecommunications services as well as a cost-efficient means of
     delivering programming to its systems. However, if MSOs have an
     ownership interest in programming, fiber optic networks may give
     them an added incentive to "migrate" programming from satellite
     delivery to terrestrial (fiber optic) delivery because only
     satellite delivered programming is subject to the program access
     rules. Therefore, a vertically integrated incumbent may be able to
     prevent competitors from gaining access to terrestrially delivered
     programming.[^540]

157. ***Recent Developments in Clustering***. Since the previous report,
     cable MSOs have continued to undertake or announce system mergers,
     acquisitions, divestitures, swaps, and joint ventures in order to
     create regional clusters of contiguous cable systems.[^541] Most of
     these transactions resulted in the expansion of existing regional
     clusters of cable systems. AT&T, for example, has major clusters in
     Chicago, San Francisco/Oakland/San Jose, and Dallas, serving nearly
     80 percent of the cable subscribers in those areas.[^542]
     Similarly, Comcast's major clusters are in the
     Washington/Baltimore, Philadelphia, and Detroit areas. Charter is
     building major clusters in the Los Angeles area and in the Pacific
     Northwest.[^543] Cablevision has a very large cluster in the New
     York area. Clustering is not limited to incumbent cable MSOs. For
     example, RCN, an overbuilder, generally builds its systems in
     clusters around major cities. In December 1999, RCN announced
     acquisition of Chicago-based 21^st^ Century Telecom Corporation
     creating a cluster in the Chicago area.[^544]

158. Between July 1999 and June 2000, there were a total of 52
     transactions having an aggregate value of approximately \$71
     billion and involving 12.7 million subscribers, all intended to
     increase the size of existing cable clusters.[^545] At the end of
     1999, there were 114 clusters with approximately 44 million
     subscribers compared to 106 clusters and approximately 40 million
     subscribers at the end of 1998.[^546] In the largest cluster size
     category (over 500,000 subscribers), the number of clusters
     increased by 33.3 percent between 1998 and 1999, and the number of
     subscribers in these clusters increased by 21.4 percent.

159. ***System Mergers and Acquisitions***. Several notable mergers and
     acquisitions occurred during period from June 1999 to June 2000. On
     June 5, 2000, the Commission gave a conditioned approval to the
     transfer of control of licenses and authorizations from MediaOne
     Group, Inc. ("MediaOne") to AT&T Corporation ("AT&T").[^547] In a
     *Memorandum Opinion and Order*, the Commission ordered AT&T, within
     six months of completion of the merger, to inform the Commission
     what interests it will divest in order to come into compliance with
     the Commission's horizontal ownership and attribution rules. The
     Commission concluded that the merged firm without divestitures
     would serve 41.8 percent of the nation's MVPD subscribers. At about
     the same time the Commission approved the AT&T acquisition of
     MediaOne, GS Communications announced its intention to sell all its
     assets to Adelphia Communications. Following this acquisition,
     Adelphia will have 700,000 subscribers in its Virginia
     cluster.[^548]

160. In January 2000, America Online, Inc ("AOL"), a leading Internet
     service provider, announced its intention to acquire Time Warner
     for approximately \$51 billion. On February 11, 2000, AOL and Time
     Warner Inc. ("Time Warner") filed joint applications under sections
     214 and 310(d) of the Communications Act[^549] requesting
     Commission approval of the transfer of control to AOL Time Warner
     of licenses and authorizations controlled by AOL and by Time Warner
     or its affiliates or subsidiaries. The Federal Trade Commission
     approved the merger on December 14, 2000, and the Commission is
     currently reviewing AOL and Time Warner's petition for merger.

161. ***System Trades***. System-for-system "swaps" or trades enable
     MSOs to increase their regional clusters while minimizing financial
     outlays and avoiding capital gains taxes.[^550] Since our last
     report, many of the largest proposed swaps, as measured by number
     of subscribers, involved AT&T and Comcast in which AT&T agreed to
     sell 1.25 million of its Lenfest subscribers to Comcast for \$5.7
     billion in for a stock-and-debt transaction. This transaction was
     part of a deal between Comcast and AT&T when the former agreed to
     withdraw its bid to acquire MediaOne. In December 1999, Charter and
     AT&T announced a deal to swap subscribers in Missouri, Illinois,
     Alabama, Georgia, and Texas in order to create regional clusters
     for both companies. In April 2000, Cablevision swapped
     approximately 357,000 of its subscribers in Boston for AT&T's
     approximately 125,000 subscribers in New York, \$878 million in
     stock, and \$284 million in cash.[^551]

#### The National Market

162. Cable operators may have incentives to coordinate their decisions
     in the market for the purchase of programming on a national level.
     Concentration of ownership among buyers in this market is one
     indicator that coordinated behavior among buyers will be
     successful. Economic theory suggests that the level of competition
     is positively correlated to the number of firms in the relevant
     market, provided that there are no barriers to entry in the market.
     Concentration alone is not sufficient to determine whether a market
     is noncompetitive. If it is easy for new participants to enter the
     market, for example, highly concentrated markets may behave
     competitively. [^552]

163. ***Competitive Issues***. Several commenters raise concerns about
     the anticompetitive effects of horizontal concentration of
     ownership on the purchase of programming.[^553] BellSouth, for
     example, contends that programmers offer steep volume discounts
     exclusively to large MSOs that do not compete with each
     other.[^554] EchoStar argues that the significant bargaining power
     of large MSOs in obtaining programming presents a barrier to
     entry.[^555]

164. Another concern is that the excessive concentration of ownership
     may create "media gatekeepers" that could potentially bar entry of
     new programmers and reduce the number of media voices available to
     consumers.[^556] In the 1992 Cable Act, Congress recognized the
     potential harm of excessive concentration of ownership on new
     programming, and directed the Commission to place limits on the
     concentration of ownership of cable systems at the national
     level.[^557] At the same time, Congress also recognized the
     potential benefits to subscribers resulting from the size and scale
     of MSOs. In 1993, the Commission adopted a horizontal ownership
     limit prohibiting any person from having an attributable interest
     in cable systems that in the aggregate reach more than 30 percent
     of cable homes passed nationwide.[^558] The 30 percent rule was
     intended to strike a balance between: (a) limiting the possibility
     that large cable MSOs might exercise excessive market power in the
     purchase of video programming; and (b) ensuring that cable
     operators could continue to benefit from economies of size in order
     to encourage investment in new video programming delivery
     technology and the deployment of other advanced technologies and
     services.[^559]

165. Recognizing changes in the MVPD market, the Commission amended its
     horizontal ownership and related attribution rules in October
     1999.[^560] The revised cable horizontal ownership rules went into
     effect on May 19, 2000, the date that the United States Court of
     Appeals for the District of Columbia Circuit upheld the
     constitutionality of section 613(f)(1)(A) of the Communications
     Act.[^561] Under these rules, calculation of the horizontal limit
     is based on MVPD subscribers served rather than cable homes passed.
     In addition, the calculation of ownership limits in the new rules
     is based on all MVPD subscribers and not solely on the number of
     cable subscribers. For example, although DBS providers pass almost
     every home in the country, DBS provides service to approximately 15
     percent of all MVPD subscribers.[^562] This change reflects the
     changing nature of the national market for the purchase of video
     programming and, specifically, the growing importance of DBS in
     that market.

166. The Commission's new horizontal ownership rules prohibit any person
     from having an attributable interest in cable systems that in the
     aggregate reach more than 30 percent of MVPD subscribers (as
     opposed to cable homes passed) in the U.S.[^563] The 30 percent
     limit on ownership balances the interests of new cable programming
     networks and cable operators. Although a lower ownership limit
     would likely reduce the chances of collusion among cable operators
     and thereby increase a new cable network's chances of carriage, an
     ownership limit of 30 percent permits cable operators to acquire
     and cluster systems in order to gain efficiencies related to
     economies of scale and scope resulting in lower administrative
     costs, enhanced deployment of new technologies and services, and
     encouraging the extension into previously unserved areas.[^564]

167. In the *Horizontal Ownership Limits Order* Third Report and Order,
     the Commission held that all parties in violation of the rules on
     May 19, 2000, must come into compliance with the rules within 180
     days of that date. The Consumer Federation of America filed a
     petition for reconsideration of the *Horizontal Ownership Limits
     Order* on January 3, 2000. The comment period on the petition is
     now closed, and a decision is pending. The D.C. Circuit heard oral
     argument on petitions for review of the *Horizontal Ownership
     Limits Order* on October 17, 2000.

168. ***Concentration in the National Market for the Purchase of Video
     Programming***. Over the past year, cable operators continue to be
     the primary purchasers in the national market for the purchase of
     multichannel video programming. Since MVPDs pay for the programming
     they purchase on a "per-subscriber" basis, we used publicly
     available MVPD subscriber data to determine level of concentration
     in this market. We found that cable operators controlled 80.19
     percent of the total MVPD subscribers.[^565] At the same time,
     non-cable MVPDs continued to increase their share of the MVPD
     market which translates into increased program purchasing in that
     market. For example, DirecTV's share of the MVPD market increased
     from 9.23 percent in 1999 to 10.28 percent in 2000. Similarly, the
     share of EchoStar, another non-cable MVPD, increased from 3.23
     percent in 1999 to 5.11 percent in 2000.[^566]

169. The top four purchasers of video programming for distribution to
     the household or MDU market are AT&T (with a share of 19.07 percent
     of all MVPD subscribers), Time Warner (with a share of 14.92
     percent), DirecTV (with a share of 10.28 percent), and Comcast
     (with a share of 8.43 percent).[^567] The share of subscribers of
     these top four MVPDs has declined slightly over the past year. In
     1999, the four MVPDs with the largest subscribership served 53.94
     percent of all MVPD subscribers.[^568] In 2000, the top four MVPDs
     served 52.70 percent of all MVPD subscribers nationwide.[^569]
     However, the share of subscribers served by the top ten MVPDs
     increased by more than eight percentage points between 1999 and
     2000 from 74.95 percent in 1999 to 83.90 percent in 2000.

170. To assess the potential for market power resulting from
     concentration in the market for the purchase of programming, we
     employ the Herfindahl-Hirschman Index ("HHI").[^570] We used the
     reported MVPD shares to calculate HHI figures.[^571] The nationwide
     purchaser MVPD HHI is 954 -- considered "unconcentrated" under the
     Merger Guidelines.[^572] The HHI for 2000 is 31 points higher than
     the HHI of 923 reported last year.[^573]

171. To summarize, our examination of national MVPD concentration
     currently reveals that the market for the purchase of video
     programming by MSOs is less concentrated than the market for the
     distribution of video programming to consumers which remains highly
     concentrated. In the regional and national markets for the purchase
     of video programming, a number of large MSOs are consolidating
     their subscriber base, although the share of the two largest MSOs
     (AT&T and Time Warner) has declined during the past year.[^574] For
     example, AT&T's share of MVPD subscribers fell from 20.50 percent
     in 1999 to 19.07 percent in 2000. Time Warner's share changed
     slightly from 15.95 percent in 1999 to 14.92 percent in 2000.
     Although, shares of the top four largest MSOs have declined
     slightly since last year, shares of MSOs ranked 5^th^ to 10^th^
     increased relatively sharply between 1999 and 2000. Overall share
     of the top 10 largest MSOs increased from 74.95 percent in 1999 to
     83.90 percent in 2000. This explains a slight increase in HHI
     between 1999 and 2000.[^575]

## Vertical Integration and Other Programming Issues

### Status of Vertical Integration

172. This section updates the status of vertically integrated video
     programming networks in the MVPD market. Vertical integration
     occurs where a video programming distributor has an ownership
     interest in a video programming supplier or vice versa.[^576] These
     vertical relationships may have beneficial effects,[^577] or they
     may deter competitive entry in the video marketplace and/or limit
     the diversity of programming.[^578]

173. The total number of programming networks has grown and cable
     operators continue to consolidate and develop new ownership
     interests. The proportion of vertically integrated channels
     however, continues to decline. In 2000, there were 281 satellite
     delivered national programming networks, a decrease of two channels
     since 1999. Of the 281 networks, 99 networks, representing 35
     percent, were vertically integrated with at least one cable
     MSO.[^579] This is a decrease of two percent from 1999 when 104 of
     283, or 37 percent, of national programming networks were
     vertically integrated.

174. One or more of the top five cable MSOs holds ownership interests in
     each of the 99 vertically integrated services.[^580] AT&T, the
     nation's largest MSO, has interests in 64 national programming
     networks through its subsidiaries AT&T Broadband and Liberty Media,
     or 23 percent of all programming networks.[^581] In 1999, MediaOne
     held ownership interests in 12 national programming networks,
     representing four percent of programming networks. In June 2000,
     AT&T and MediaOne merged and MediaOne became integrated with AT&T
     Broadband. Cox Communications has interests in 28, or ten percent
     of all programming networks. Time Warner has an ownership interest
     in 34, or 12 percent of all programming networks. Comcast has
     ownership interests in 19 networks, which account for seven percent
     of all programming networks. Cablevision, through its programming
     subsidiary, Rainbow Media, owns 10 national programming networks,
     approximately four percent of all programming networks.

175. Vertical integration is not only associated with the largest cable
     system operators, but also the programming networks with the
     largest number of subscribers. Currently, nine of the top 20 video
     programming networks ranked by subscribership are vertically
     integrated with a cable MSO.[^582] In 1999, eight of the top 20
     were vertically integrated. However, it appears that a significant
     amount of video programming is controlled by only 11 companies,
     including cable MSOs, broadcasters, and other media entities.[^583]
     Of the top 20 programming networks in terms of subscribership, more
     than half (i.e., 12) are owned by one or more of these 11
     companies, with nine of these networks vertically integrated with
     cable MSOs. [^584] In addition, 11 out of the top 20 video
     programming networks ranked by prime time ratings are vertically
     integrated with cable MSOs.[^585]

176. This year we found 66 programming services that have been planned
     but are not yet operational, an eight percent decrease from the
     *1999 Report*'s count of 72 planned services.[^586] According to
     some sources, analog channel capacity is becoming scarce and may
     account for the slow down in the launching of new programming
     networks.[^587] The planned services count includes some overlap
     from previous years because it can often take several years from
     the announcement of a new programming network to its launch and
     initiation of service. For example, several of the 72 planned
     services counted in previous *Reports* have been launched during
     the past year and are now operating, while others have been aborted
     for various reasons.[^588]

### Other Programming Issues

177. As in previous years, this year's *Notice* requested comment on a
     number of programming issues apart from vertical integration and
     the status of existing and planned programming services. The
     *Notice* sought comment on the effectiveness of our current program
     access rules and whether the current scope of the program access
     rules are appropriate. The Commission also requested comment on the
     requirement that the Commission begin a proceeding to review cable
     programming exclusivity and cable program access rules and
     determine whether to preserve these rules or allow them to
     sunset.[^589] The *Notice* also asked if there are specific types
     of programming (e.g., movie, sports, or news channels) considered
     essential to the success of a programming distributor. Finally, the
     Commission sought new information about public educational and
     government ("PEG") access channels, a la carte offerings, and the
     effect of increased programming costs on rates charged to
     subscribers among other programming issues.

178. ***Program Access**.* The Commission's rules on competitive access
     to cable programming prohibit unfair and discriminatory practices
     by vertically integrated cable operators.[^590] The rules seek to
     promote competition and diversity in the multichannel video
     programming market by preventing vertically integrated programming
     suppliers from favoring affiliated video distributors over
     unaffiliated MVPDs in the sale of satellite-delivered
     programming.[^591] The program access rules apply to cable
     operators and to programming vendors that are affiliated with cable
     operators and deliver video programming via satellite to an MVPD.
     The rules prohibit any cable operator that has an attributable
     interest in a satellite cable programming vendor from improperly
     influencing the decisions of the vendor with respect to the sale or
     delivery, including prices, terms, and conditions of sale or
     delivery, of satellite delivered programming to any unaffiliated
     MVPD. The rules also prohibit vertically integrated satellite
     programming distributors from discriminating in the prices or terms
     and conditions of sale of satellite-delivered programming to cable
     operators and other MVPDs. In addition, cable operators generally
     are prohibited from entering into exclusive distribution
     arrangements with affiliated programming vendors. DBS providers,
     however, are not subject to most of the program access rules and
     are allowed to enter into exclusive programming arrangements.[^592]

179. The prohibition on cable exclusivity in the program access rules
     ceases to be effective on October 5, 2002, unless the Commission
     finds the prohibition continues to be necessary to preserve and
     protect competition and diversity in the distribution of video
     program.[^593] The Commission is required to begin a proceeding to
     review these rules in 2001. In the *Notice*, the Commission sought
     comment on the required review of the rules' sunset.

180. DirecTV and others urge the Commission to carefully examine this
     law in the context of the sunset provision, particularly in light
     of technical advances that have diminished the costs of terrestrial
     delivery and clustering that facilitates terrestrial delivery that
     allows cable operators to insulate themselves from the program
     access requirements.[^594] NCTA notes that the rules were intended
     to prevent incumbent cable operators from denying programming to
     new entrants and thereby ensure that consumers have a choice of
     providers.[^595] NCTA asserts that the current MVPD landscape is
     competitive and surpasses anything that Congress or the Commission
     could have imagined in 1992. Therefore, they argue, sunset of the
     rules is justified.[^596]

181. Several commenters maintain that, despite the presence of the
     program access rules, lack of access to programming, especially
     sports programming, remains a significant barrier to entry and an
     impediment to the successful development of a competitive MVPD
     business.[^597] According to these commenters, vertically
     integrated cable operators maintain a high degree of market power
     that enables them to dominate the programming market.[^598] NCTA
     disputes these assertions and points to the success and continued
     growth of DBS and other competitive MVPDs as evidence that the
     program access rules have served their purpose and should be
     allowed to sunset.[^599]

182. NCTA opposes any change in the scope of the current rules and
     dismisses concerns related to the so-called "terrestrial migration"
     of channels from satellite delivery to terrestrial delivery.[^600]
     The Commission has declined to apply the program access rules or
     equivalent restrictions to terrestrially delivered
     programming.[^601] In the *Program Access Order*, the Commission
     maintained that there were "no indications at this time that
     terrestrial delivery of programming formerly delivered by satellite
     is a significant competitive problem."[^602] The Commission
     indicated, however, that if a trend developed where vertically
     integrated programmers began to switch from satellite delivery to
     terrestrial delivery for the purpose of evading the Commission\'s
     rules, it would \"consider an appropriate response to ensure
     continued access to programming."[^603] Nevertheless, several
     commenters assert that terrestrial migration weakens the intent of
     program access rules and threatens the development of a competitive
     MVPD market.[^604] In addition, EchoStar recommends that the
     Commission use a more general provision of the program access
     rules, the unfair practices provision, as an umbrella under which
     the actions and contracts of unaffiliated programmers or
     programming delivered terrestrially may be covered.[^605]

183. ***Sports Programming***. Regional sports programming, continues to
     be an important segment of programming for video distributors. The
     comments of RCN, in particular, stress the importance of sports
     programming to video competitors. According to a survey
     commissioned by RCN, between 40 and 58 percent of cable subscribers
     would be less likely to subscribe to cable service if it lacked
     local sports.[^606] Of the 75 regional cable channels counted in
     this year's report, 27, or 36 percent, are sports channels.[^607]

184. The largest sports programming network, ESPN, owned by Disney,
     reaches 76 million television households. While ESPN dominates
     national sports programming, regional sports distribution is
     dominated by Fox Sports Net, which owns 67 percent (18 of 27) of
     the current regional sports networks. Fox Sports Net, jointly owned
     by News Corp and cable MSO Cablevision Systems, reaches 68 million
     television households. Both News Corp. and Disney also have
     interests in sports teams and sports venues making them vertically
     integrated at all levels of the sports industry.

185. Commenters assert that such vertical integration, especially with
     important sports programming, gives these programmers incentives to
     act as gatekeepers and engage in unfair strategies to control
     access to sports programming.[^608] Commenters note that vertically
     integrated entities may have an incentive to shift regional sports
     networks from satellite to terrestrial distribution and thereby
     avoid program access requirements.[^609] In addition, where a
     regional sports network is non-vertically integrated, a video
     distributor may enter into an exclusive contract with the program
     provider and, thus, deprive rivals of the programming.

186. DirecTV, in its comments, listed 23 regional sports networks
     (including 16 Fox Sports Networks) that are carried on its
     system.[^610] DirecTV carries regional sports networks in every
     regional sports market except Philadelphia were it was refused
     access to Comcast's SportsNet.[^611] Comcast, in its annual
     reports, remarks that its regional sports channel, SportsNet,
     provides a significant marketing advantage against satellite and
     other competitors.[^612]

187. EchoStar states that exclusivity deals between video programming
     distributors and sports leagues constitute a "significant
     impediment" to the promotion of stronger competition in the video
     distribution marketplace.[^613] Where a regional sports channel is
     non-vertically integrated, a cable MSO may enter into an exclusive
     contract with the program provider.

188. Clustering is also said to have an impact on access to sports
     programming.[^614] In the *1999 Report*, we noted that because most
     sports programming affiliate fees are based on subscriber volume,
     only well clustered, large MSOs can take full advantage of
     programming discounts.[^615]

189. Finally, it appears that more and more sports programming is
     distributed via cable in lieu of other outlets. Broadcasting &
     Cable magazine, in its annual survey of sports programming, notes
     that an increasing number of baseball games are being shown on
     cable rather than on broadcast television.[^616] The number of
     regular season baseball games on regional cable networks grew 5.5
     percent over last year according to Broadcasting & Cable. The
     industry magazine estimates that cable will air 123 more baseball
     games in 2000 than it did in 1999 and that cable networks will
     carry 760 more baseball games (2,310 versus 1,550) than broadcast
     television will air.[^617] This migration of games to cable is seen
     as an ongoing trend. Fox Sports Net, through an agreement with
     major league baseball, now has the cable rights to 27 of the 30
     major league baseball teams.[^618]

190. ***News Programming***. Local news channels have been on cable
     since at least 1986, when Cablevision Systems launched News 12 Long
     Island. This year, of the 75 regional programming networks counted,
     40 percent (30 networks) are regional news networks. Unlike sports
     programming, regional and local news networks have a more diverse
     ownership. A number of regional news networks are vertically
     integrated with cable MSOs but many are not.[^619]

191. Most regional news networks cover a single city or other limited
     geographic market, or subsections of that market (the New York City
     metropolitan area alone has six news channels).[^620] A handful of
     regional news networks, however, have elected to broaden their
     coverage. Statewide news channels are operating in Massachusetts,
     Texas, and Ohio. New England Cable News ("NECN"), is the oldest and
     most successful regional news network. NECN reaches almost 2.5
     million households, approximately 64 percent of cable homes in the
     six‑state region it serves. In the Boston market, the channel can
     be seen in 92 percent of cable homes.[^621]

192. ***PEG Programming***. Public, educational, and government ("PEG")
     channel set-asides are often required on cable systems by local
     franchising authorities.[^622] Approximately 15 percent of all
     cable systems carry PEG programming.[^623] Cable operators do not
     have ownership interests in PEG access programming, although some
     franchise agreements require that they provide services, production
     facilities, and equipment for the production of local programming.
     PEG programming is not, therefore, considered vertically
     integrated.

193. ***70/70 Benchmark***. Section 612(g) of the Communications Act
     provides for the Commission to promulgate rules necessary to
     provide diversity of information sources when cable systems with 36
     or more channels are available to, and subscribed to by, 70 percent
     of U.S. households. In the *Notice*, we asked whether the so-call
     "70/70" benchmark had been met and sought comment on how the
     Commission should implement this requirement. NCTA argues that the
     benchmark has not been met because, while cable systems with 36 or
     more channels are available to more than 70 percent of household in
     the US, only 65.5 percent of households subscribe to those
     systems.[^624]

194. Citing the legislative history, NCTA further states that section
     612(g) was intended solely to authorize the Commission to regulate
     the rates, terms, and conditions of leased access channels and not
     cable rules generally.[^625] AT&T supports NCTA's conclusions with
     respect to the 70/70 benchmark asserting that the statute applies
     solely to modifications to the leased access requirements and
     cannot be the basis for promulgating rules unrelated to leased
     access.[^626]

195. Paxson, however, disputes the arguments of NCTA and AT&T and urges
     the Commission to take advantage of the broad authority of the
     70/70 benchmark to adopt rules to remove and/or limit access to
     adult programming on cable in order to promote diversified, family
     programming.[^627]

196. ***A La Carte/Unbundling of Cable Programming Services Tiers***. In
     the *Notice*, we sought information on the extent to which MVPDs
     offer or plan to offer consumers programming choices on an "a la
     carte" or individual channel basis rather than in tiers of
     channels. Currently, the majority of programming networks are
     offered in tiers. Premium channels, such as HBO and Showtime, and
     some sporting events, such as boxing, are offered on an a la carte
     basis.[^628]

197. Unbundling of programming tiers is sometimes thought to provide
     more subscriber choice and greater competition among program
     services.[^629] However, operators maintain that tiering enables
     delivery of MVPD programming at the lowest per channel costs. In
     addition, if a cable subscriber does not have an addressable
     set-top box, a la carte delivery is not always technically
     feasible.[^630] It is also thought that subscribers are more likely
     to view new programming channels that are bundled on a tier with
     established programming.

198. In the *1999 Report*, we reported that some parties thought that
     the sunset of cable rate regulation and the growth in digital
     channels would serve as an incentive for cable operators to be more
     flexible in their packaging of programming channels.[^631] While
     this trend has not developed, the effect of digital upgrades, and
     the resulting ability to deliver more channels of programming, on
     how programming is packaged continues to be discussed. NBC
     President Bob Wright, for example, asserts that digital technology
     will allow programming distributors to package programs and even
     portions of programs, e.g. a music video, as data bundles that can
     be sold on a pay-per-view basis or as a la carte service.[^632]

199. ***SAP Channel***. The second audio program ("SAP") channel allows
     a video distributor to transmit an additional soundtrack. When the
     SAP channel is being used, a viewer can choose between the primary
     soundtrack and the additional, or second, audio track transmitted
     with the program. The SAP channel is most frequently used for
     alternative languages and video description. Video description is
     the description of key visual elements in programming inserted into
     natural pauses in the audio of the programming. It is designed to
     make television programming more accessible to the many Americans
     who have visual disabilities. On July 21, 2000, the Commission
     adopted rules that provide for the use of the SAP channel by large
     broadcast and cable television networks to provide programming with
     video description.[^633] In the *Notice*, we sought comment on SAP
     channel capacity in order to assess how this technology is being
     deployed.[^634]

200. Although we did not receive specific information about SAP channel
     capacity resulting from upgrades, we have found that some video
     programming distributors currently use the SAP to offer the choice
     between simultaneous English and Spanish audio. Each of the top
     four commercial broadcast TV networks has provided a Spanish
     language soundtrack as a second audio program, on at least an
     occasional basis.[^635] For example, ABC simulcasts its evening
     news and Monday Night Football in Spanish. HBO uses its SAP channel
     to provide a Spanish soundtrack for many of its programs and
     movies. There has been some limited use of the SAP channel for
     video described programming. PBS currently distributes a variety of
     regularly scheduled programming with video description, including
     *Arthur*, *Mister Rogers' Neighborhood*, *Mystery!*, *Nova*,
     *Masterpiece Theatre*, and *Nature*.[^636] Turner Classic Movies
     offers video described movies every Sunday evening and other
     described programming throughout the week.[^637] In addition to
     Spanish language and video description, the Weather Channel
     recently announced plans to use the SAP to add audio segments to
     the local weather inserts that appear during its programming.[^638]

201. ***Electronic Programming Guides***. Electronic Programming Guides
     ("EPG"s) continue to raise concerns because of their potential to
     influence channel selection and facilitate current and future
     interactive television functions.[^639] In addition, recent law
     suits between Gemstar-TV Guide, the leading EPG firm, and DBS
     operator EchoStar have raised antitrust and copyright infringement
     issues.[^640] The Commission has stated that it is "committed to
     encouraging the development of the market for electronic
     programming guide services."[^641]

202. On February 22, 2000, an agreement was reached between the Consumer
     Electronics Association ("CEA") and NCTA concerning the provision
     of program schedule and other information to support the navigation
     function of DTV receivers, including on-screen program guides or
     EPGs.[^642] The Commission anticipates that the implementation of
     the agreement will result in the adoption of certain standards for
     EPGs and will continue to monitor the progress made in implementing
     the agreement. [^643]

203. ***Programming Costs***. The Commission's most recent report on
     cable industry prices ("*1999 Price Survey Report*") asked cable
     operators to describe factors that led to changes in their rates.
     Both competitive and noncompetitive cable operators attributed more
     than half, 53 percent and 51 percent, respectively, of their rate
     increases to increases in programming costs.[^644]

204. Cable networks are projected to spend almost \$6.5 billion on
     programming in 2000. This figure includes all categories of
     programming − originals, acquisitions, movies and sports − and is
     double the expenditures made five years ago.[^645] Increased costs
     for sports programming and increasing competition for off-network
     acquisitions are said to be the driving factors in rising
     programming costs. ESPN, for example, recently raised its license
     fees to operators by 20 percent.[^646] As a result, ESPN will
     reportedly cost operators \$1 to \$1.20 per subscriber per month.
     By comparison, most non-sports channels have a licensing fee of
     less than 20 cents per subscriber per month.[^647]

## Technical Advances

205. Cable operators and other MVPDs continue to develop and deploy
     advanced technologies, especially digital compression techniques,
     to increase the capacities and to enhance the capabilities of their
     transmission systems.[^648] These technologies allow MVPDs to
     deliver additional video options and other services (e.g., data
     access, telephony) to their subscribers. In addition, cable
     operators continue to rebuild their cable plants and to upgrade
     their facilities for bandwidth expansion through other technical
     means, such as the electronic component upgrading of existing
     amplifiers, in order to offer more video programming and other
     services.[^649] In the last year, there have been a number of
     developments concerning navigation devices and cable modems that
     are used to access the wide range of services offered by MVPDs. In
     this section, we address interactive television technologies and
     update the information provided in the *1999 Report* regarding
     navigation devices and cable modems.

### Interactive Television

206. Interactive television ("ITV") services are beginning to be offered
     through cable, satellite, and terrestrial technologies.[^650] ITV
     provides or has the potential to provide a wide range of services,
     including video on demand ("VOD"), e-mail, TV-based commerce
     ("e-commerce"), Internet access, personal video recorder ("PVR")
     functionality, programming-related content, and electronic
     couponing.[^651] A cable subscriber accesses ITV services through a
     digital set-top box in the home and a content server at the cable
     headend.[^652] The latest digital set-top boxes cable operators
     have been deploying to add programming, which closely resemble
     mini-PCs, offer enough storage capacity to allow for feature and
     graphic rich interactive services. In order to offer interactive
     services, the cable operator chooses an operating system on the
     set-top box and service options.[^653] Among the first uses of ITV
     is VOD.[^654] The largest cable operators are beginning to deploy
     or are testing VOD, which qualifies as interactive because the
     consumer chooses when to buy the programming and gets a personal
     session with full control.[^655] VOD is currently being offered on
     at least six large cable systems: Cox systems in San Diego and
     Phoenix; Time Warner systems in Tampa Bay, Honolulu, and Austin;
     and the Charter system in Los Angeles. In addition to movies, the
     on-demand platform can be used to offer other specialized
     programming services (e.g., music videos, children's programming,
     ethnic programming) on a subscription or per program basis. One VOD
     service, Concurrent, is developing a personal video channel that
     will offer functionalities similar to a PVR. Beyond VOD, three
     types of ITV services are being developed or deployed by companies
     such as OpenTV. These services are (1) an overlay on the broadcast
     channel content, which will be available for free and will look
     like traditional television content, (2) a virtual channel that
     will be used for e-commerce and e-mail, and (3) a service that will
     allow the user to access Internet content through television.[^656]

207. DBS operators and broadcasters also are entering the ITV market.
     EchoStar offers its subscribers an interactive program guide and
     weather service from OpenTV and will soon launch Wink-enhanced TV,
     which allows viewers to use their remote controls to access
     program-related information, request product samples or free
     coupons, or purchase merchandise directly from television.[^657]
     DirecTV is introducing an ITV-enabled receiver using Microsoft
     technology and the Wink service that will allow viewers to record
     programming for later viewing, respond to on-air promotions using a
     remote, and use e-mail.[^658] Of the four major television
     networks, ABC is offering "enhanced TV" for some of its programming
     that allows viewers to use their personal computers to access
     interactive content synchronized with its network programming
     (e.g., play along with *Who Wants to Be a Millionaire?*).[^659] NBC
     offers WebTV enhanced broadcasts, primarily for news and sports,
     and plans to introduce a Saturday morning programming block for
     teens enhanced with interactive features, such as TV-based chats,
     message boards, and e-mails.[^660] CBS has partnered with WebTV to
     offer on-demand access via remote control for program-related
     information and e-commerce, live polling, and chat
     capabilities.[^661] Fox plans to launch Wink-enhanced technology to
     add interactive features to its entertainment programs, including
     program-specific information and interactive advertising
     capabilities, that can be accessed through a remote control.[^662]

### Navigation Devices

208. Section 629 of the Communications Act directed the Commission to
     adopt rules that allow consumers to obtain "navigation devices,"
     such as cable set-top boxes, remote control units, and other
     equipment, from commercial sources other than their cable
     providers.[^663] The purpose of section 629 and the Commission's
     rules adopted to implement it are to further the goal of providing
     competition in the communications marketplace by facilitating
     consumers' ownership of the equipment used to access video
     programming and other services. Specifically, in 1998, the
     Commission adopted rules that require MVPDs to unbundle security
     from other functions of the navigation device and by July 1, 2000,
     make available point-of-deployment modules ("PODs") to perform this
     function.[^664] On reconsideration, the Commission deferred
     application of the rules requiring a separate security module for
     analog-only devices.[^665] Thus, an MVPD subscriber will be able to
     obtain a set-top box without the security features ("host device")
     from retailers and only remain reliant on the MVPD to provide a POD
     for security functions.[^666]

209. When the navigation device rules were adopted, the Commission
     stated that it would monitor the development of the commercial
     availability of navigation devices and, in 2000, commence a
     proceeding to review of the effectiveness of the rules and to
     consider any necessary changes.[^667] In this regard, on September
     18, 2000, the Commission released a *Further Notice* seeking
     comment on: (a) whether the interface specifications developed by
     CableLabs allow consumer electronic manufacturers to build
     equipment that provides consumers a viable alternative to equipment
     provided by their cable operator; (b) the effect operator provision
     of integrated equipment has had on achieving a competitive market
     and whether the 2005 date for the phase-out of integrated boxes
     remains appropriate; (c) obstacles or barriers preventing or
     deterring the development of a retail market for navigation
     devices; and (d) what actions, if any, the Commission should
     initiate to achieve the statutory objective of competition in the
     navigation devices market. In addition, the Commission issued a
     *Declaratory Ruling* addressing a copy protection licensing
     agreement under development by CableLabs, the Dynamic Feedback
     Arrangement Scrambling Technique ("DFAST"). In various proceedings,
     interested parties alleged that this agreement violated the
     Commission rules because it requires that a copy protection
     encryption system be located in host devices contrary to the
     requirement that a cable operator's conditional access, or
     security, functions must be located in a separate POD device. In
     the *Declaratory Ruling*, the Commission noted that in the initial
     *Navigation Devices Report and Order* we contemplated the inclusion
     of copy protection measures in host devices and that such measures
     would not violate the security separation requirement. The
     Commission directed industry participants to finalize their
     negotiations and to report on the status of the DFAST license
     within 30 days of release of the *Declaratory Ruling*, including a
     final version of a completed DFAST license agreement. On October
     18, 2000, CableLabs and its members reported that substantial
     progress had been made regarding the specific terms of the copy
     protection requirements.[^668] On December 15, 2000, CableLabs
     submitted a final version of the DFAST license (now referred to as
     the POD-Host Interface, or PHI license).[^669]

210. Through the OpenCable project of CableLabs, cable industry groups
     have produced a set of interface specifications for digital set-top
     boxes, including the definition of a removable security
     function.[^670] As part of the standards setting process, the cable
     industry was required to file semi-annual reports with the
     Commission to assure that there is steady progress in meeting the
     schedule for development of specifications for a digital security
     POD module and for a digital security module interface.[^671] In
     its most recent report, submitted on July 7, 2000, the industry
     reports that cable operators met the July 1, 2000, deadline to have
     digital separate security modules available for consumers who
     obtain their digital host set-top boxes at retail stores because
     digital separate security modules from two manufacturers were
     verified as interoperable by CableLabs.[^672] The cable industry
     maintains that manufacturers of retailer-supplied boxes have all of
     the "build to" specifications they need to build a first
     generation, OpenCable compliant set-top box, although apparently no
     retailer has placed orders for such boxes.[^673] In addition,
     CableLabs is continuing its efforts to develop next generation
     navigation devices with "middleware" designed to enhance the
     portability of OpenCable products across brands and operating
     systems.[^674] The industry also reports that cable operators have
     undertaken a number of approaches to come into compliance with the
     navigation devices rules, including the duplication of analog
     scramble programming on digital tiers.[^675] The Consumer
     Electronics Retailers Coalition ("CERC"), however, maintains that
     the OpenCable project has failed to produce specifications that
     allow the manufacture of competitive products.[^676]

### Cable Modems

211. A cable modem allows cable subscribers to access high speed data
     services and interactive television, including the Internet,
     Internet Protocol ("IP") telephony, video conferencing, and
     telecommuting. Cable modem deployment continues to increase.[^677]
     As we previously reported, the CableLabs Certified Cable Modem
     Project (formerly known as Data Over Cable Service Interface
     Specification or DOCSIS) defines interface requirements for high
     speed cable modems and provides a method for certifying that cable
     modems available for retail sale are in compliance with the DOCSIS
     specifications.[^678] As of October 2000, CableLabs had certified
     38 companies for about 100 cable high speed data devices.[^679]
     This includes two peripheral component interconnect ("PCI") modems
     that are built inside personal computers.[^680] DOCSIS certified
     cable modems are now being sold at retail in some markets.[^681]
     For example, DOCSIS certified modems are available for sale to Cox
     Cable customers at a Circuit City store in Fort Walton Beach,
     Florida, its own branded store in New Orleans, and CompUSA stores
     in Oklahoma City, New England, Phoenix, New Orleans, and Northern
     Virginia.[^682] However, widespread retail availability has not yet
     occurred.[^683]

212. PacketCable, another CableLabs project, is intended to develop
     interoperable interface specifications for delivering advanced,
     real-time multimedia services over two-way cable plant. PacketCable
     will use IP technology to enable a wide range of services,
     including IP telephony, multimedia conferencing, interactive
     gaming, and general multimedia applications.[^684] In July 2000,
     CableLabs announced that it had successfully completed the second
     round of the PacketCable interoperability test and has begun
     releasing the compliance test plans that will provide a tool for
     gauging conformance of vendors' products with the PacketCable
     interface specifications.[^685]

# COMPETITIVE RESPONSES

213. In this section, we describe the initial responses of both
     incumbents and new entrants in several local franchise areas where
     the incumbent cable operator is facing competition from a new
     entrant. Generally, we find that in communities where head-to-head
     competition is present, the incumbent cable operator has responded
     to competitive entry in a variety of ways, such as lowering prices,
     providing additional channels at the same monthly rate, improving
     customer service, adding new services including high speed Internet
     and telephone services, or by challenging the legality of the
     entrant's activities.

214. We first examine several cases where the incumbent cable operator
     faced competition from new entrants. In each of these cases, the
     Commission has made a determination that "effective competition"
     exists.[^686] We then summarize our preliminary findings based on
     the case studies and examine the nature and duration of competitive
     responses of incumbents and new entrants.

## New Case Studies

### Atlanta, Georgia, and Nearby Communities

215. In June 1998, BellSouth Entertainment ("BSE"), a wholly owned
     subsidiary of BellSouth Corporation and an affiliate of BellSouth
     Telecommunications, Inc., began providing digital MMDS service to
     Atlanta and its surrounding areas.[^687] These communities around
     Atlanta are all served by MediaOne, the incumbent.[^688] BSE's MMDS
     transmitter sites provided a 35-mile predicted contour around
     Atlanta. This overlapped the incumbent cable operator's service
     areas and provided approximately 700,000 Atlanta area subscribers
     with the ability to choose between subscribing to the incumbent
     cable operator or BSE for their multiple video programming service.

216. BSE aggressively marketed its wireless digital services in Atlanta
     and the surrounding area in newspaper advertisements and
     billboards. It intended to lure cable subscribers, not through
     price competition, but with the promise of clear digital pictures
     and an array of choices, including up to 50 pay-per-view
     channels.[^689] As an initial promotional offer, BSE offered 160
     digital channels, which included a number of premium channels as
     well as local broadcast stations, for \$49.98 for two months.[^690]
     Initially, BSE also charged \$64.99 for installation. Subsequently,
     BSE began offering its 160 channel "premium pack," including local
     broadcast stations, for \$36.49 per month. For a limited time, BSE
     offered a rebate of one month's subscription fee, or the equivalent
     of the first month free to its premium pack subscribers, and
     lowered the charge for installation to \$29.99. BSE offered a
     two-year rate guarantee to its "preferred customers" if they would
     agree to a 24 or 36 months commitment to buy video service from
     BSE. It also promoted "one-stop-shopping" by offering mobile
     telephone service, Internet service, and combined billing for home
     telephone, cellphone, and Internet and business telephone service
     to its subscribers.[^691] As of February 1999, BSE gained
     approximately 18,500 subscribers for its MMDS service, or 4.3
     percent of all households in the Atlanta area.

217. MediaOne of Colorado, Inc. ("MediaOne") is the incumbent cable
     television operator in Atlanta, Georgia, and 56 surrounding
     communities, all of which overlap BSE's service area.[^692] After
     BSE's entry into the Atlanta area, MediaOne spent \$350 million to
     upgrade its Atlanta area systems, reconfigure its channel line-up
     to create more competitive product offerings, launch digital cable,
     and increase its marketing budget.[^693] MediaOne contended that it
     did not want to engage in a "price war" with its rival.[^694]
     Instead, MediaOne discontinued its new product tier and moved those
     channels to its expanded basic programming tier, thus delivering
     more channels at the same price. MediaOne offered digital services
     for less than \$10 per month with free upgrade installation and a
     new 17 channel movie package free for three months.[^695]

218. In July 1999, MediaOne filed a Petition for Determination of
     Effective Competition for its systems operating in Atlanta and the
     surrounding area.[^696] The Cable Services Bureau granted the
     petition on July 28, 2000.[^697] The Bureau found that 56 MediaOne
     communities lie within the interference-free contours of BSE's MMDS
     transmitters. Also, BSE's extensive marketing efforts ensure that
     potential subscribers are reasonably aware of its services.[^698]

### Lexington and Davidson County, North Carolina

219. Lexcom Cable Services ("Lexcom"), a wholly-owned subsidiary of
     Lexington Communications, Inc., an independent local exchange
     carrier, received a local cable franchise from the City of
     Lexington on May 17, 1997, and from Davidson County on May
     27, 1997. Lexcom began providing cable services in Lexington and
     Davidson County in October 1997.[^699] Lexcom offered 11 basic
     channels for \$6.05 per month, 47 expanded basic channels for
     \$24.90 per month, and HBO, Cinemax, Showtime and The Movie Channel
     for \$8 each per month. Lexcom also offered two pay-per-view
     channels.[^700] Since Lexcom distributed cable services without a
     converter or "set-top" box, its subscribers were able to use the
     "picture-in-picture" function of their TV sets while watching cable
     programming.[^701]

220. TWI Summit Communications/Summit Cable Services of Thom-a-Lex,
     Inc., and TW Fanch-One Co. ("Time Warner") is the incumbent cable
     television operator in the City of Lexington, North Carolina, and
     the two contiguous communities of Davidson and Rocky Mount. Two
     days after Lexcom began operating, Time Warner filed suit against
     Lexcom accusing its competitor of damaging its lines and
     trespassing.[^702] In its suit, Time Warner alleged that Lexcom
     moved its line illegally, without permission, and while doing so
     damaged Time Warner's lines and equipment. Time Warner lost
     approximately 225 of its subscribers to Lexcom within Lexcom's
     first few months of service.[^703] In response to Lexcom's entry,
     Time Warner proposed adding 32 channels to its video programming
     services.[^704] Recently, Time Warner completed its system upgrade.
     In addition to its basic service, it began providing digital
     service to its subscribers at an additional cost.[^705]

221. In March 2000, Lexcom launched cable modem service. Lexcom also
     added a new parental control feature to its service that allows
     parents to block adult-oriented programs from their children. It
     reduced the monthly charge for expanded basic service from \$30.95
     per month to \$28.95 per month.[^706] Time Warner launched its
     cable modem service in October 2000. As of October 2000, Time
     Warner was charging \$30.95 for its expanded basic service.[^707]

222. In February 1998, Time Warner filed a Petition for Determination of
     Effective Competition for its systems operating in Lexington,
     Davidson and Rocky Mount.[^708] The Bureau granted the Petition in
     July 2000.[^709] The Bureau found that Lexcom is able to provide
     cable service that overlaps both Time Warner's service and service
     areas.[^710]

### Wapakoneta, Ohio

223. On May 6, 1998, the City of Wapakoneta awarded a franchise for
     cable television service in Wapakoneta to TSC Communications, Inc.,
     d/b/a/ TSC Television ("TSC"). TSC is a wholly-owned subsidiary of
     Telephone Service Company, an independent telephone company which
     provides local exchange service to the city. Prior to beginning its
     cable service in Wapakoneta, TSC promoted its planned service to
     potential subscribers through advertising, an Internet web site,
     local seminars, and tours of its cable facilities. TSC was also
     featured in a number of local newspaper articles and advertised its
     services on the local telephone company's home page.[^711] TSC also
     made it possible for potential subscribers to sign up for service
     on line by using the local telephone company's Internet site.[^712]

224. TSC began providing cable service to Wapakoneta on March 22,
     1999.[^713] TSC's system used advanced hybrid fiber coaxial
     technology to distribute cable programming. It offered more than 70
     channels of non-broadcast cable programming services such as ESPN,
     HBO, and CNN, as well as local television broadcast channels.[^714]
     TSC charged \$28.65 per month for its 60 channel basic service
     tier. Its basic tier included channels such as Disney Channel and
     ESPN.[^715] TSC employed a new interdiction system which eliminated
     the need for the cable set-top box. As of April 2000, TSC had 150
     subscribers and it was expected to serve 3,000 additional
     subscribers in Wapkoneta and surrounding areas by year's end.[^716]

225. Time Warner Entertainment Company, L.P. ("Time Warner") is the
     incumbent cable television operator in Wapakoneta, Ohio. It passes
     100 percent of the households in Wapakoneta. The territorial
     boundaries of each cable television franchise holder, both the
     entrant and the incumbent, encompass the same territorial
     boundaries in the Wapakoneta area.

226. Prior to TSC's entry, Time Warner offered 30 channels on its basic
     tier. Upon TSC's entry, Time Warner, began offering 29 additional
     channels to its basic tier subscribers. Its basic tier, like TSC's
     basic tier, also included channels such as Disney Channel and ESPN.
     Time Warner was charging \$27.87 for its basic tier of
     programming.[^717] According to Time Warner it had lost
     approximately 80 subscribers to TSC at the time it filed its
     Petition with the Commission.[^718]

227. In May 1999, Time Warner filed its Petition for Determination of
     Effective Competition arguing that it faced effective competition
     from TSC.[^719] The Bureau granted the Petition on May 9, 2000,
     recognizing that potential subscribers were reasonably aware of the
     availability of TSC's services, and that TSC is able to provide
     cable service that overlaps Time Warner's service.[^720]

### Various Communities in Orange County, Florida

228. In 1998, two DBS providers, DirecTV and EchoStar, and an
     unaffiliated cable operator, Telesat Acquisition Limited
     Partnership ("Adelphia"), began providing cable programming
     services, comparable to those provided by the incumbent, Time
     Warner, in six communities in Orange County, Florida.[^721]

229. According to local advertisements, DirecTV offered up to 55
     pay-per-view movie choices per night, 14 different premium
     channels, 13 sports channels, and over 40 of "your favorite
     channels" for as little as \$19.99 per month.[^722] EchoStar
     offered services for \$19 per month including local channels and 12
     free months of a premium channel, 160 digital channels for about
     "\$1 a day", two free months of service, various other incentive
     packages, and equipment systems priced at anywhere between \$89 and
     \$179 with free delivery.[^723] Adelphia offered one free month of
     "value service", one free month of HBO and Showtime, and free
     installation for up to three outlets. Rates for its packaged
     services ranged from \$27.45 to \$47.35 per month. Along with its
     programming services, Adelphia also offered pager and long distance
     telephone service.[^724]

230. According to Time Warner, out of 155,874 households in its service
     area, Adelphia and the DBS providers serve 38,750 subscribers,
     i.e., approximately 25 percent of the households.[^725] In the
     affected Orange County communities, Time Warner responded to the
     newly introduced competition by offering various service packages
     ranging from \$22.01 to \$36.49 per month. It also offered separate
     premium packages ranging from \$9.95 to \$24.95 per month and
     reduced its basic service tier price to \$8.05 per month.[^726]

231. In September 1998, Time Warner filed a petition challenging the
     certification of Orange County, Florida, to regulate its basic
     cable service and equipment rates in the six affected Orange County
     communities.[^727] In May 2000, the Bureau granted Time Warner's
     petition.[^728] The Bureau found that Adelphia and the two DBS
     providers provide service to 25 percent of the households in Time
     Warner's service area and that Adelphia is able to provide MVPD
     service to households in Time Warner's service area without any
     regulatory, technical, or other impediments.[^729]

### Laurens, Iowa

232. In January 1997, the citizens of Laurens, Iowa, voted to have
     Laurens Municipal Communications Utility ("LCMU") operate a cable
     system in Laurens. That cable system began operating in December
     1998.[^730] LMCU is owned and operated by the City of
     Laurens.[^731] LMCU charged \$20.95 per month for a 43 channel
     basic service tier. Premium packages, each package consisting of
     several channels, were offered at \$10.95 per month.[^732] LCMU
     also offered free cable service through the end of January 1999 to
     those who signed up before December 31, 1998. As of February 1999,
     LCMU's cable system passed 100 percent of the 715 households in the
     City of Laurens, and was providing cable service to 495 of those
     households.[^733] According to one report, a majority of LCMU's
     subscribers formerly subscribed to the incumbent cable
     system.[^734]

233. TCI of the Heartlands ("TCI") is the incumbent cable television
     operator in Laurens. As of March 1999, TCI provided service to 139
     of the 715 potential subscribers in Laurens.[^735] Prior to LMCU's
     entry, TCI had 23 channels on its basic service tier. In response
     to LCMU's entry into the Laurens franchise area, TCI upgraded its
     system, added 22 new channels to its basic service, split its
     basic-only line up into separate basic and expanded basic tiers,
     and launched a digital tier.[^736] TCI was charged \$21.25 per
     month for its 45 channel extended basic service. TCI also offered
     digital service for \$10 with an additional charge of \$3.55 for
     equipment.[^737] LCMU did not offer any digital tier.

234. In March 1999, TCI filed a Petition for Revocation of Certification
     of the City of Laurens to Regulate Basic Cable Service and
     Equipment Rates because TCI, in Laurens, was subject to effective
     competition.[^738] In May 2000, the Bureau granted TCI's
     Petition.[^739] The Bureau found that LCMU's municipally owned
     cable system passed more than 50 percent of the households in the
     area and that LCMU and TCI have similar program offerings.

## Preliminary Findings

235. The case studies of communities where the Commission has found
     "effective competition" suggest that subscribers have benefited
     from "head-to-head" competition. Generally, in the communities
     studied, subscribers have seen decreased monthly charges for
     services and equipment. They have received additional program
     offerings and have access to "bundled" telecommunications services.
     Subscribers also have new digital services available.

236. It appears that the incumbent operators in the localities described
     above have made use of both "price" and "non-price" competitive
     responses. The cases described above also indicate that one of the
     new entrants in Orange County sought to attract subscribers by
     providing "bundled" pager and long distance service. To counter
     these service offerings, the incumbent operator in Orange County
     responded by reducing the rate for its basic service tier and
     increasing the number of service packages available at widely
     varied rates. In Lexington, both the entrant and the incumbent
     added cable modem to their service offerings.

237. In some cases, the incumbents have resorted to non-market
     responses. For example, in the City of Lexington and in Davidson
     County, North Carolina, the incumbent operator filed suit alleging
     that the entrant illegally moved connected lines and equipment
     which belong to the incumbent without permission. The incumbent
     also claimed that the entrant damaged such lines and equipment.

238. A majority of the new entrants discussed above are affiliated with
     local exchange carriers. This may be the result of the capital
     intensive nature of the cable television industry. LECs not only
     have relatively "deep pockets" with which to undertake such
     capital-intensive investment but they also have a customer base
     that is already familiar with their telephone and Internet
     services. From July 1, 1999, through June 30, 2000, the Bureau
     granted 12 petitions for effective competition, representing more
     than 150 communities, from entrants affiliated with LECs. Despite
     the presence of a large number of LEC-related entrants in the local
     markets for the distribution of multichannel programming, the
     future of such competition has become increasingly uncertain
     following SBC's acquisition of Ameritech, the largest LEC
     overbuilder.[^740] Similarly, other large LEC affiliated
     overbuilders are also considering selling there overbuild cable
     systems.[^741] The future of head-to-head competition and the
     extent of competitive benefits to consumers also depends on the
     successful penetration of DBS in local markets for the distribution
     of multichannel programming.

# administrative matters

239. This *2000 Report* is issued pursuant to authority contained in
     sections 4(i), 4(j), 403, and 628(g) of the Communications Act of
     1934, as amended, 47 U.S.C. §§ 154(i), 154(j), 403, and 548(g).

240. It is ORDERED that the Office of Legislative and Intergovernmental
     Affairs shall send copies of this *2000 Report* to the appropriate
     committees and subcommittees of the United States House of
     Representatives and the United States Senate.

241. It is FURTHER ORDERED that the proceeding in CS Docket No. 00-132
     IS TERMINATED.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Magalie Roman Salas
>
> Secretary
>
> **APPENDIX A**

[Initial Comments]{.underline}

American Broadband, Inc. ("American Broadband")

AT&T Corp. ("AT&T")

BellSouth Corporation, BellSouth Entertainment, Inc., BellSouth
Interactive Media Services, Inc.

and BellSouth Wireless Cable, Inc. ("BellSouth")

DirecTV, Inc. ("DirecTV")

Paul Dowgewicz ("Dowgewicz")

EchoStar Satellite Corporation ("EchoStar")

Fox Television Stations, Inc. ("Fox")

National Cable Television Association ("NCTA")

National Rural Telecommunications Cooperative ("NRTC")

RCN Corporation ("RCN")

Satellite Broadcasting and Communications Association ("SBCA")

Wireless Communications Association International, Inc. ("WCA")

[Reply Comments]{.underline}

Association of America's Public Television Stations, the Public
Broadcasting Service, and

the Corporation for Public Broadcasting ("APTS")

AT&T Corp. ("AT&T")

Comcast Corporation ("Comcast")

DirecTV, Inc. ("DirecTV)

National Association of Broadcasters ("NAB")

National Cable Television Association ("NCTA")

Paxson Communications Corporation ("Paxson")

RCN Corporation ("RCN")

State of Hawaii ("Hawaii")

Viacom Inc. ("Viacom")

APPENDIX B

TABLE B-1

Cable Television Industry Growth: 1992 - June 2000

(in millions)

<table>
<colgroup>
<col style="width: 10%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 9%" />
<col style="width: 11%" />
<col style="width: 11%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td rowspan="2">Year</td>
<td colspan="2"><p>Television Households</p>
<p>("TH")</p></td>
<td colspan="2">Homes Passed ("HP")</td>
<td colspan="2"><p>Basic Cable Subscribers</p>
<p>("Subs")</p></td>
<td rowspan="2"><p>HHs Passed by Cable</p>
<p>(HP/TH)</p></td>
<td rowspan="2">HHs Subscribing (Subs/TH)</td>
<td rowspan="2">U.S. Penetration (Subs/HP)</td>
</tr>
<tr class="even">
<td>Total</td>
<td><p>%</p>
<p>Change</p></td>
<td>Total</td>
<td><p>%</p>
<p>Change</p></td>
<td>Total</td>
<td><p>%</p>
<p>Change</p></td>
</tr>
<tr class="odd">
<td>1992</td>
<td>93.1</td>
<td>1.1%</td>
<td>89.7</td>
<td>1.5%</td>
<td>55.2</td>
<td>3.4%</td>
<td>96.3%</td>
<td>59.3%</td>
<td>61.5%</td>
</tr>
<tr class="even">
<td>1993</td>
<td>94.0</td>
<td>1.0%</td>
<td>90.6</td>
<td>1.0%</td>
<td>57.2</td>
<td>3.6%</td>
<td>96.4%</td>
<td>60.9%</td>
<td>63.1%</td>
</tr>
<tr class="odd">
<td>1994</td>
<td>94.9</td>
<td>1.0%</td>
<td>91.6</td>
<td>1.1%</td>
<td>59.7</td>
<td>4.4%</td>
<td>96.5%</td>
<td>62.9%</td>
<td>65.2%</td>
</tr>
<tr class="even">
<td>1995</td>
<td>95.9</td>
<td>1.1%</td>
<td>92.7</td>
<td>1.2%</td>
<td>62.1</td>
<td>4.0%</td>
<td>96.7%</td>
<td>64.8%</td>
<td>67.0%</td>
</tr>
<tr class="odd">
<td>1996</td>
<td>97.0</td>
<td>1.1%</td>
<td>93.7</td>
<td>1.1%</td>
<td>63.5</td>
<td>2.3%</td>
<td>96.6%</td>
<td>65.5%</td>
<td>67.8%</td>
</tr>
<tr class="even">
<td>1997</td>
<td>98.0</td>
<td>1.0%</td>
<td>94.6</td>
<td>1.0%</td>
<td>64.9</td>
<td>2.2%</td>
<td>96.5%</td>
<td>66.2%</td>
<td>68.6%</td>
</tr>
<tr class="odd">
<td>1998</td>
<td>99.0</td>
<td>1.0%</td>
<td>95.6</td>
<td>1.1%</td>
<td>66.1</td>
<td>1.8%</td>
<td>96.6%</td>
<td>66.8%</td>
<td>69.1%</td>
</tr>
<tr class="even">
<td>1999</td>
<td>100.0</td>
<td>1.0%</td>
<td>96.6</td>
<td>1.0%</td>
<td>67.3</td>
<td>1.8%</td>
<td>96.6%</td>
<td>67.3%</td>
<td>69.7%</td>
</tr>
<tr class="odd">
<td>June 00<sup>(e)</sup></td>
<td>100.5</td>
<td>0.5%</td>
<td>97.1</td>
<td>0.5%</td>
<td>67.7</td>
<td>0.6%</td>
<td>96.6%</td>
<td>67.4%</td>
<td>69.7%</td>
</tr>
</tbody>
</table>

^(e)^ June data based on year-end estimate by Paul Kagan Associates.

**Sources:**

**1992 to 1997:** [U.S. Television Households]{.underline}: Paul Kagan
Assocs., Inc., *Basic Cable Network Economics (1983-2007)*, Cable
Program Investor, Mar. 13, 1998, at 2; [Homes Passed]{.underline} and
[Basic Cable Subscribers]{.underline}: Paul Kagan Assocs., Inc.,
*History of Cable and Pay-TV Subscribers and Revenues*, Cable TV
Investor, Apr. 14, 1998, at 3.

**1998 to 1999:** [U.S. Television Households,]{.underline} [Homes
Passed]{.underline}, and [Basic Cable Subscribers]{.underline}: Paul
Kagan Assocs., Inc., *Paul Kagan's 10-Year Cable TV Industry Projections
(1998-2009*), The Cable TV Financial Databook 1999, Aug. 1999, at 10.

**June 2000(e):** [U.S. Television Households,]{.underline} [Homes
Passed]{.underline}, and [Basic Cable Subscribers]{.underline}: Paul
Kagan Assocs., Inc., *Paul Kagan's 10-Year Cable TV Industry Projections
(1999-2010*), The Cable TV Financial Databook 2000, Aug. 2000, at 10.

**TABLE B-2**

Premium Cable Services: 1992 - June 2000

(in millions)

+-----------+-------------+-------------+-------------+-------------+
| Year End  | Premium     |             | Premium     |             |
|           | Cable       |             | Units^2^    |             |
|           |             |             |             |             |
|           | Service     |             |             |             |
|           | Sub         |             |             |             |
|           | scribers^1^ |             |             |             |
+-----------+-------------+-------------+-------------+-------------+
|           | Year End    | \% Change   | Year End    | \% Change   |
|           | Total       |             | Total       |             |
+-----------+-------------+-------------+-------------+-------------+
| 1992      | 24.7        | 2.9%        | 46.5        | 7.9%        |
+-----------+-------------+-------------+-------------+-------------+
| 1993      | 26.4        | 6.9%        | 47.0        | 1.1%        |
+-----------+-------------+-------------+-------------+-------------+
| 1994      | 28.1        | 6.4%        | 47.4        | 0.9%        |
+-----------+-------------+-------------+-------------+-------------+
| 1995      | 29.8        | 6.0%        | 51.6        | 8.9%        |
+-----------+-------------+-------------+-------------+-------------+
| 1996      | 31.0        | 4.0%        | 54.6        | 5.8%        |
+-----------+-------------+-------------+-------------+-------------+
| 1997      | 31.5        | 1.6%        | 56.0        | 2.6%        |
+-----------+-------------+-------------+-------------+-------------+
| 1998      | 35.3        | 12.1%       | 57.9        | 3.4%        |
+-----------+-------------+-------------+-------------+-------------+
| 1999      | 35.5        | 0.6%        | 53.0        | -8.5%^3^    |
+-----------+-------------+-------------+-------------+-------------+
| June      | 35.8        | 0.8%        | 52.7        | -0.6%       |
| 00^(e)^   |             |             |             |             |
+-----------+-------------+-------------+-------------+-------------+

^(e)^ June data based on year-end estimate by Paul Kagan Associates.

^1^ Premium Cable Services Subscribers refers to the total number of
homes subscribing to one or more premium services. Each home is counted
once, regardless of the number of premium services to which it
subscribes.

^2^ Premium Units refers to the total number of premium subscriptions.
Each subscription is counted separately, thus may exceed the number of
premium subscribers.

^3^ The decrease in the number of premium units is due to the migration
of certain pay services to other tier categories. As such, the number of
units sold by those services are no longer counted here.

**Sources:**

**1992 to 1997:** Paul Kagan Assocs., Inc., *History of Cable and Pay-TV
Subscribers and Revenues*, Cable TV Investor, Apr. 14, 1998, at 3.

**1998 to 1999:** Paul Kagan Assocs., Inc., *Paul Kagan's 10-Year Cable
TV Industry Projections (1998-2009*), The Cable TV Financial Databook
1999, Aug. 1999, at 10.

**2000(e):** Paul Kagan Assocs., Inc., *Paul Kagan's 10-Year Cable TV
Industry Projections (1999-2010*), The Cable TV Financial Databook 2000,
Aug. 2000, at 10.

Table B-3

Channel Capacity by Cable Systems: October 1999 and October 2000

+-------------------+----------+----------+----------+-------+-------+
|                   | 1999     |          | 2000     |       | 99-00 |
+-------------------+----------+----------+----------+-------+-------+
| Channel Capacity  | Number   | Percent  | Number   | Pe    | Pe    |
|                   | of       | of       | of       | rcent | rcent |
|                   |          |          | Systems  | of    | C     |
|                   | Systems  | Systems  |          | Sy    | hange |
|                   |          |          |          | stems |       |
+-------------------+----------+----------+----------+-------+-------+
| 125+              | 8        | 0.08%    | 14       | 0.15% | 75.0% |
+-------------------+----------+----------+----------+-------+-------+
| 91 to 124         | 71       | 0.74%    | 88       | 0.95% | 2     |
|                   |          |          |          |       | 3.94% |
+-------------------+----------+----------+----------+-------+-------+
| 54 to 90          | 2,085    | 21.62%   | 2,145    | 2     | 2.88% |
|                   |          |          |          | 3.13% |       |
+-------------------+----------+----------+----------+-------+-------+
| 30 to 53          | 6,072    | 62.96%   | 5,785    | 6     | -     |
|                   |          |          |          | 2.37% | 4.72% |
+-------------------+----------+----------+----------+-------+-------+
| 20 to 29          | 833      | 8.64%    | 756      | 8.15% | -     |
|                   |          |          |          |       | 9.24% |
+-------------------+----------+----------+----------+-------+-------+
| 13 to 19          | 254      | 2.63%    | 219      | 2.36% | -1    |
|                   |          |          |          |       | 3.78% |
+-------------------+----------+----------+----------+-------+-------+
| 6 to 12           | 309      | 3.21%    | 256      | 2.76% | -1    |
|                   |          |          |          |       | 7.15% |
+-------------------+----------+----------+----------+-------+-------+
| 5 or less         | 12       | 0.12%    | 12       | 0.13% | 0%    |
+-------------------+----------+----------+----------+-------+-------+
| **Total**         | *        | **-**    | *        | \-    | \-    |
|                   | *9,644** |          | *9,275** |       |       |
+-------------------+----------+----------+----------+-------+-------+
| Sys. w/ 54+       | 2,164    | 22.44%   | 2,247    | 2     | 7.98% |
| channels          |          |          |          | 4.23% |       |
+-------------------+----------+----------+----------+-------+-------+
| Sys. w/ 30+       | 8,236    | 85.40%   | 8,032    | 8     | 1.41% |
| channels          |          |          |          | 6.60% |       |
+-------------------+----------+----------+----------+-------+-------+
| Sys. w/ less than | 1,408    | 14.60%   | 1,243    | 1     | -     |
|                   |          |          |          | 3.40% | 8.22% |
| 30 channels       |          |          |          |       |       |
+-------------------+----------+----------+----------+-------+-------+

All figures exclude systems for which channel capacity information was
not provided.

**Sources:**

**1999:** Warren Publishing, Inc., *Channel Capacity of Existing Cable
Systems*, Television & Cable Factbook: Services Volume No. 68, 2000
Edition, at I-98.

**2000:** Warren Publishing, Inc., *Channel Capacity of Existing Cable
Systems*, (unpublished figures -- subject to change).

Table B-4

Channel Capacity by Cable Systems: October 1999 and October 2000

+-------------------+----------+----------+----------+-------+-------+
|                   | 1999     |          | 2000     |       | 99-00 |
+-------------------+----------+----------+----------+-------+-------+
| Channel Capacity  | Number   | Percent  | Number   | Pe    | Pe    |
|                   | of       | of       | of       | rcent | rcent |
|                   |          |          | Sub      | of    | C     |
|                   | Sub      | Sub      | scribers | S     | hange |
|                   | scribers | scribers | (m       | ubscr |       |
|                   | (m       |          | illions) | ibers |       |
|                   | illions) |          |          |       |       |
+-------------------+----------+----------+----------+-------+-------+
| 125+              | 0.20     | 0.31%    | 0.86     | 1.39% | 330%  |
+-------------------+----------+----------+----------+-------+-------+
| 91 to 124         | 2.84     | 4.44%    | 3.20     | 5.15% | 1     |
|                   |          |          |          |       | 2.68% |
+-------------------+----------+----------+----------+-------+-------+
| 54 to 90          | 37.99    | 59.4%    | 38.46    | 6     | 1.24% |
|                   |          |          |          | 1.93% |       |
+-------------------+----------+----------+----------+-------+-------+
| 30 to 53          | 21.99    | 34.4%    | 19.00    | 3     | -1    |
|                   |          |          |          | 0.60% | 3.60% |
+-------------------+----------+----------+----------+-------+-------+
| 20 to 29          | 0.74     | 1.16%    | 0.48     | 0.08% | -3    |
|                   |          |          |          |       | 5.13% |
+-------------------+----------+----------+----------+-------+-------+
| 13 to 19          | 0.07     | 0.11%    | 0.04     | 0.06% | -4    |
|                   |          |          |          |       | 2.86% |
+-------------------+----------+----------+----------+-------+-------+
| 6 to 12           | 0.08     | 0.13%    | 0.06     | 0.10% | -2    |
|                   |          |          |          |       | 5.00% |
+-------------------+----------+----------+----------+-------+-------+
| 5 or less         | 0.004    | 0.01%    | 0.004    | 0.01% | 0%    |
+-------------------+----------+----------+----------+-------+-------+
| **Total**         | *        | **-**    | *        | \-    | \-    |
|                   | *63.91** |          | *62.10** |       |       |
+-------------------+----------+----------+----------+-------+-------+
| Sys. W/ 54+       | 41.03    | 64.20%   | 42.52    | 6     | 6.65% |
| channels          |          |          |          | 8.47% |       |
+-------------------+----------+----------+----------+-------+-------+
| Sys. w/ 30+       | 63.02    | 98.61%   | 61.52    | 9     | 0.47% |
| channels          |          |          |          | 9.07% |       |
+-------------------+----------+----------+----------+-------+-------+
| Sys. w/ less than | 0.89     | 1.40%    | 0.58     | 0.93% | -3    |
|                   |          |          |          |       | 3.09% |
| 30 channels       |          |          |          |       |       |
+-------------------+----------+----------+----------+-------+-------+

All figures exclude systems for which channel capacity information was
not provided.

**Sources:**

**1999:** Warren Publishing, Inc., *Channel Capacity of Existing Cable
Systems*, Television & Cable Factbook: Services Volume No. 68, 2000
Edition, at I-98.

**2000:** Warren Publishing, Inc., *Channel Capacity of Existing Cable
Systems*, (unpublished figures -- subject to change).

TABLE B-5

Growth By Network Type: 1998 - June 1999

  --------------- ------ ---------- --------- ---------- --------- --------- --------- ---------- --------- ---------- --------- --------- ---------
                  1998                                             97-98               1999                                      98-99     

  Network Type           Number of            Percent of           Percent             Number of            Percent of           Percent   
                         Networks             Networks             Change              Networks             Networks             Change    

  Basic/No-Chg                      139                  80.0%               6.1%                 147                  68.7%               5.8%

  Premium                           18                   10.3%               28.6%                43                   20.1%               138.9%

  Pay Per View                      10                   5.7%                66.7%                9                    4.2%                -10.0%

  Combination\*                     7                    4.0%                -46.2%               15                   7.0%                114.3%

  Total                             174                                      6.1%                 214                                      23.0%
  --------------- ------ ---------- --------- ---------- --------- --------- --------- ---------- --------- ---------- --------- --------- ---------

**Note:**

\* Combination refers to cable networks that fall under more than one
service category. For example, the Disney Channel, which is part of the
basic tier in some systems, and is sold as a premium service on other
systems, is considered a \"combination\" network.

**Source:**

**1998 to 1999:** National Cable Television Association, *National Cable
Video Networks By Type of Service: 1980 - 1999*, Cable Television
Developments, 1999/2000, at 6.

TABLE B-6

Cable Industry Revenue and Cash Flow: 1996 -- 2000

<table>
<colgroup>
<col style="width: 26%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 7%" />
<col style="width: 0%" />
<col style="width: 7%" />
<col style="width: 0%" />
<col style="width: 7%" />
<col style="width: 0%" />
<col style="width: 6%" />
<col style="width: 1%" />
<col style="width: 6%" />
<col style="width: 1%" />
<col style="width: 5%" />
<col style="width: 2%" />
<col style="width: 7%" />
<col style="width: 1%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td colspan="2">1996</td>
<td colspan="3">1997</td>
<td colspan="4">1998</td>
<td colspan="4">1999</td>
<td colspan="2">2000</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Total</td>
<td colspan="2">Total</td>
<td><p>%</p>
<p>Change</p></td>
<td colspan="2">Total</td>
<td colspan="2"><p>%</p>
<p>Change</p></td>
<td colspan="2">Total</td>
<td colspan="2"><p>%</p>
<p>Change</p></td>
<td colspan="2"><p>Estimated</p>
<p>Year-End</p>
<p>Total</p></td>
<td colspan="2"><p>%</p>
<p>Change</p></td>
</tr>
<tr class="odd">
<td>Avg Basic Subscribers (mil)</td>
<td>62.8</td>
<td colspan="2">64.2</td>
<td colspan="3">2.2%</td>
<td colspan="2">65.4</td>
<td colspan="2">1.9%</td>
<td colspan="2">66.7</td>
<td colspan="2">2.0%</td>
<td colspan="2">67.7</td>
<td>1.5%</td>
</tr>
<tr class="even">
<td><strong>Revenue Segments (mil.)</strong></td>
<td></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="odd">
<td>Basic Service and CPST Tiers</td>
<td>$18,395</td>
<td colspan="2">$20,008</td>
<td colspan="3">8.8%</td>
<td colspan="2">$21,830</td>
<td colspan="2">9.1%</td>
<td colspan="2">$23,135</td>
<td colspan="2">6.0%</td>
<td colspan="2">$24,445</td>
<td>5.7%</td>
</tr>
<tr class="even">
<td>Pay Tiers</td>
<td>$4,955</td>
<td colspan="2">$4,952</td>
<td colspan="3">-0.1%</td>
<td colspan="2">$5,084</td>
<td colspan="2">2.7%</td>
<td colspan="2">$4,989</td>
<td colspan="2">-1.9%</td>
<td colspan="2">$5,177</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td>Local Advertising</td>
<td>$1,662</td>
<td colspan="2">$1,925</td>
<td colspan="3">15.8%</td>
<td colspan="2">$1,850</td>
<td colspan="2">-3.9%</td>
<td colspan="2">$2,685</td>
<td colspan="2">45.1%</td>
<td colspan="2">$3,128</td>
<td>16.5%</td>
</tr>
<tr class="even">
<td>Pay-Per-View</td>
<td>$647</td>
<td colspan="2">$823</td>
<td colspan="3">27.2%</td>
<td colspan="2">$627</td>
<td colspan="2">-23.8%</td>
<td colspan="2">$954</td>
<td colspan="2">52.2%</td>
<td colspan="2">$1,522</td>
<td>59.5%</td>
</tr>
<tr class="odd">
<td>Home Shopping</td>
<td>$145</td>
<td colspan="2">$152</td>
<td colspan="3">4.8%</td>
<td colspan="2">$187</td>
<td colspan="2">23.0%</td>
<td colspan="2">$185</td>
<td colspan="2">-1.1%</td>
<td colspan="2">$202</td>
<td>9.2%</td>
</tr>
<tr class="even">
<td>Advanced Svcs (Ana./Dig.)<sup>1</sup></td>
<td>$91</td>
<td colspan="2">$208</td>
<td colspan="3">128.6%</td>
<td colspan="2">$452</td>
<td colspan="2">117.3%</td>
<td colspan="2">$1,978</td>
<td colspan="2">337.6%</td>
<td colspan="2">$4,238</td>
<td>114.3%</td>
</tr>
<tr class="odd">
<td>Equipment and Install</td>
<td>$2,055</td>
<td colspan="2">$2,320</td>
<td colspan="3">12.9%</td>
<td colspan="2">$2,631</td>
<td colspan="2">13.4%</td>
<td colspan="2">$2,824</td>
<td colspan="2">7.3%</td>
<td colspan="2">$3,029</td>
<td>7.3%</td>
</tr>
<tr class="even">
<td>Total Revenue (mil.) (Residential)</td>
<td>$27,950</td>
<td colspan="2">$30,388</td>
<td colspan="3">8.7%</td>
<td colspan="2">$32,661</td>
<td colspan="2">7.5%</td>
<td colspan="2">$36,750</td>
<td colspan="2">12.5%</td>
<td colspan="2">$41,741</td>
<td>13.6%</td>
</tr>
<tr class="odd">
<td>Revenue Per Subscriber</td>
<td>$445.06</td>
<td colspan="2">$473.33</td>
<td colspan="3">6.4%</td>
<td colspan="2">$499.40</td>
<td colspan="2">5.5%</td>
<td colspan="2">$550.97</td>
<td colspan="2">10.3%</td>
<td colspan="2">$616.56</td>
<td>11.9%</td>
</tr>
<tr class="even">
<td>Operating Cash Flow (mil.)<sup>2</sup></td>
<td>$11,972</td>
<td colspan="2">$13,369</td>
<td colspan="3">11.7%</td>
<td colspan="2">$14,602</td>
<td colspan="2">9.2%</td>
<td colspan="2">$15,600</td>
<td colspan="2">6.8%</td>
<td colspan="2">$17,160</td>
<td>10.0%</td>
</tr>
<tr class="odd">
<td>Cash Flow per Subscriber</td>
<td>$190.64</td>
<td colspan="2">$208.24</td>
<td colspan="3">9.2%</td>
<td colspan="2">$225.87</td>
<td colspan="2">8.5%</td>
<td colspan="2">$233.88</td>
<td colspan="2">3.5%</td>
<td colspan="2">$253.47</td>
<td>8.4%</td>
</tr>
<tr class="even">
<td>Cash Flow/Total Revenue</td>
<td>42.8%</td>
<td colspan="2">44.0%</td>
<td colspan="3">2.8%</td>
<td colspan="2">45.2%</td>
<td colspan="2">2.7%</td>
<td colspan="2">42.4%</td>
<td colspan="2">-6.2%</td>
<td colspan="2">41.1%</td>
<td>-3.1%</td>
</tr>
</tbody>
</table>

**Notes:**

^1^ Includes advanced analog, digital video, high-speed data, cable
telephony, interactive services, and games.

^2^ Cash flow and its proxies (e.g. EBITDA) are often used to value the
operations of a communications firm without regard to the firm\'s
capital structure. Cash flow from operations is the net result of cash
inflows from operations (revenue) and cash outflows from operations
(expenses), thus ignoring non-cash charges to net income such as
depreciation and amortization. Cash flow from operations indicates a
firm\'s ability to meet its net finance and investment obligations.

**Sources:**

**1996 to 1997:** [Average Number of Basic Subscribers]{.underline}:
Paul Kagan Assocs., Inc., *History of Cable and Pay-TV Subscribers and
Revenues*, Cable TV Investor, Apr. 14, 1998, at 3; [Revenue
Segments]{.underline}: Paul Kagan Assocs., Inc., *Paul Kagan\'s
10-YearProjections,* Cable TV Investor, May 20, 1997, at 9; Paul Kagan
Assocs., Inc., *Total Cable TV Advertising Revenue (1980-2007),* Cable
TV Financial Databook, Aug. 1998, at 15; [Operating Cash
Flow]{.underline}: Paul Kagan Assocs., Inc., *Estimated Capital Flows In
Cable TV*, Cable TV Finance, May 31, 1998, at 1.

**1998 :** [Average Number of Basic Subscribers]{.underline} and
[Revenue Segments]{.underline}: Paul Kagan Assocs., Inc., *Paul Kagan's
10-Year Cable TV Industry Projections (1998-2009*), The Cable TV
Financial Databook 1999, Aug. 1999, at 10-11; [Operating Cash
Flow]{.underline}: Paul Kagan Assocs., Inc., *Estimated Capital Flows in
Cable TV*, The Cable TV Financial Databook 1999, Aug. 1999, at 149.

**1999 to 2000(e):** [Average Number of Basic Subscribers]{.underline}
and [Revenue Segments]{.underline}: Paul Kagan Assocs., Inc., *Paul
Kagan's 10-Year Cable TV Industry Projections (1999-2010*), The Cable TV
Financial Databook 2000, Aug. 2000, at 10; [Operating Cash
Flow]{.underline}: Paul Kagan Assocs., Inc., *Estimated Capital Flows in
Cable TV*, The Cable TV Financial Databook 2000, Aug. 2000, at 150.

**TABLE B-7**

Acquisition of Capital: 1992 - June 2000

(\$ in million)

<table>
<colgroup>
<col style="width: 14%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 6%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 7%" />
<col style="width: 1%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 7%" />
<col style="width: 1%" />
<col style="width: 6%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td rowspan="2">Year</td>
<td colspan="3">Private Debt</td>
<td colspan="5">Public Debt <sup>2</sup></td>
<td colspan="5">Private Equity</td>
<td colspan="6">Public Equity</td>
<td rowspan="2">Total Capital Raised <sup>3</sup></td>
</tr>
<tr class="even">
<td><p>Sum</p>
<p>Raised</p></td>
<td colspan="2"><p>% of</p>
<p>Total <sup>1</sup></p></td>
<td colspan="3"><p>Sum</p>
<p>Raised</p></td>
<td colspan="2"><p>% of</p>
<p>Total</p></td>
<td colspan="3"><p>Sum</p>
<p>Raised</p></td>
<td colspan="2"><p>% of</p>
<p>Total</p></td>
<td colspan="4"><p>Sum</p>
<p>Raised</p></td>
<td colspan="2"><p>% of</p>
<p>Total</p></td>
</tr>
<tr class="odd">
<td>1992</td>
<td colspan="2">$(1,842)</td>
<td colspan="2">-77.2%</td>
<td colspan="3">$2,493</td>
<td colspan="2">104.5%</td>
<td colspan="3">$1,711</td>
<td colspan="2">71.7%</td>
<td colspan="4">$23</td>
<td>1.0%</td>
<td>$2,385</td>
</tr>
<tr class="even">
<td>1993</td>
<td colspan="2">$(3,584)</td>
<td colspan="2">-186.4%</td>
<td colspan="3">$5,280</td>
<td colspan="2">274.6%</td>
<td colspan="3">$62</td>
<td colspan="2">3.2%</td>
<td colspan="4">$165</td>
<td>8.6%</td>
<td>$1,923</td>
</tr>
<tr class="odd">
<td>1994</td>
<td colspan="2">$ 4,803</td>
<td colspan="2">87.0%</td>
<td colspan="3">$155</td>
<td colspan="2">2.8%</td>
<td colspan="3">$100</td>
<td colspan="2">1.8%</td>
<td colspan="4">$461</td>
<td>8.4%</td>
<td>$5,519</td>
</tr>
<tr class="even">
<td>1995</td>
<td colspan="2">$(714)</td>
<td colspan="2">-8.5%</td>
<td colspan="3">$4,495</td>
<td colspan="2">53.6%</td>
<td colspan="3">$1,191</td>
<td colspan="2">14.2%</td>
<td colspan="4">$3,419</td>
<td>40.7%</td>
<td>$8,391</td>
</tr>
<tr class="odd">
<td>1996</td>
<td colspan="2">$1,287</td>
<td colspan="2">23.4%</td>
<td colspan="3">$2,355</td>
<td colspan="2">42.7%</td>
<td colspan="3">$49</td>
<td colspan="2">0.9%</td>
<td colspan="4">$1,818</td>
<td>33.0%</td>
<td>$5509</td>
</tr>
<tr class="even">
<td>1997</td>
<td colspan="2">$103</td>
<td colspan="2">1.2%</td>
<td colspan="3">$6,252</td>
<td colspan="2">73.3%</td>
<td colspan="3">$1,942</td>
<td colspan="2">22.8%</td>
<td colspan="4">$230</td>
<td>2.7%</td>
<td>$8527</td>
</tr>
<tr class="odd">
<td>1998</td>
<td colspan="2">$194</td>
<td colspan="2">2.3%</td>
<td colspan="3">$6,174</td>
<td colspan="2">72.7%</td>
<td colspan="3">$200</td>
<td colspan="2">2.4%</td>
<td colspan="4">$1,927</td>
<td>22.7%</td>
<td>$8495</td>
</tr>
<tr class="even">
<td>1999</td>
<td colspan="2">$(320)</td>
<td colspan="2">-1.1%</td>
<td colspan="3">$16,115</td>
<td colspan="2">55.9%</td>
<td colspan="3">$5,385</td>
<td colspan="2">18.7%</td>
<td colspan="4">$7,648</td>
<td>26.5%</td>
<td>$28,828</td>
</tr>
<tr class="odd">
<td>June 00</td>
<td colspan="2">$225</td>
<td colspan="2">15.8%</td>
<td colspan="3">$815</td>
<td colspan="2">57.4%</td>
<td colspan="3">$0</td>
<td colspan="3">0.0%</td>
<td colspan="3">$380</td>
<td>26.8%</td>
<td>$1,420</td>
</tr>
<tr class="even">
<td><strong>Total: 1992 through June 00</strong></td>
<td colspan="5"><strong>$152</strong></td>
<td colspan="5"><strong>$44,134</strong></td>
<td colspan="6"><strong>$10,640</strong></td>
<td colspan="3"><strong>$16,071</strong></td>
<td><strong>$70,997</strong></td>
</tr>
<tr class="odd">
<td><strong>Avg Raised Per Year</strong></td>
<td colspan="5"><strong>$18</strong></td>
<td colspan="5"><strong>$5,192</strong></td>
<td colspan="6"><strong>$1,252</strong></td>
<td colspan="3"><strong>$1,891</strong></td>
<td><strong>$8,353</strong></td>
</tr>
</tbody>
</table>

^1^Column entitled \"% of total\" represents the percent of total
capital raised from financing sources for that given year.

^2^Public Debt is expressed in terms of net new public debt.

^3^Total Capital Raised equals private debt plus public debt plus
private equity plus public equity.

**Sources:**

**1992:** Paul Kagan Assocs., Inc., *Discussion with Elaine Blaisdell
Taylor, Research Associate,* Aug. 28, 1998.

**1993:** Paul Kagan Assocs., Inc., *Estimated Capital Flows in Cable
TV*, Cable TV Finance, May 31, 1998, at 1.

**1994:** Paul Kagan Assocs., Inc., *Estimated Capital Flows in Cable
TV*, The Cable TV Financial Databook 1999, Aug. 1999, at 149.

**1995 to 1999:** Paul Kagan Assocs., Inc., *Estimated Capital Flows in
Cable TV*, The Cable TV Financial Databook 2000, Aug. 2000, at 150.

**June 2000:** Paul Kagan Assocs., Inc., *Cable Financing Snapshot -
June*, Cable TV Finance, Sept. 8, 2000, at 10.

TABLE B-8

System Transactions: 1997 - June 2000

+-------------------+-------+-------+-------+-------+-------+-------+
|                   | 1997  | 1998  | 97-98 | 1999  | 98-99 | Jan   |
|                   |       |       |       |       |       | -June |
|                   |       |       | \%    |       | \%    | 2000  |
|                   |       |       | C     |       | C     |       |
|                   |       |       | hange |       | hange |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Number of Systems | 109   | 119   | 9.2%  | 90    | -     | 22    |
| Sold              |       |       |       |       | 24.4% |       |
+-------------------+-------+-------+-------+-------+-------+-------+
| Total Number of   | 10,58 | 22,46 | 1     | 19,51 | -     | 8,71  |
| Subscribers       | 2,265 | 6,200 | 12.3% | 1,206 | 13.2% | 3,975 |
+-------------------+-------+-------+-------+-------+-------+-------+
| System Size       | 9     | 18    | 94.5% | 21    | 14.8% | 39    |
| Average           | 7,085 | 8,792 |       | 6,791 |       | 6,090 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Number of Homes   | 16,91 | 36,39 | 1     | 30,28 | -     | 14,29 |
| Passed            | 8,571 | 7,730 | 15.1% | 5,516 | 16.8% | 4,571 |
+-------------------+-------+-------+-------+-------+-------+-------+
| No. of Homes      | 15    | 30    | 97.1% | 33    | 10.0% | 64    |
| Passed Average    | 5,216 | 5,863 |       | 6,506 |       | 9,753 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Total Dollar      | \$2   | \$6   | 1     | \$7   | 17.3% | \$5   |
| Value (mil.)      | 1,568 | 4,601 | 99.5% | 5,773 |       | 4,545 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Dollar Value      | \$    | \$    | 1     | \$    | 55.1% | \$2,  |
| (mil.) Average    | 197.9 | 542.9 | 74.3% | 841.9 |       | 479.3 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Dollar Val. Per   | \$    | \$    | 41.1% | \$    | 35.1% | \$    |
| Subscriber        | 2,038 | 2,875 |       | 3,884 |       | 6,259 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Dollar Val. Per   | \$    | \$    | 39.2% | \$    | 41.0% | \$    |
| Home Passed       | 1,275 | 1,775 |       | 2,502 |       | 3,816 |
+-------------------+-------+-------+-------+-------+-------+-------+
| Cash Flow         | 9.2x  | 13.1x | 42.4% | 16.2x | 23.7% | 20.3x |
| Multiple          |       |       |       |       |       |       |
+-------------------+-------+-------+-------+-------+-------+-------+

**Sources:**

**1997 to 1998** - Paul Kagan Assocs., Inc., *Cable System Sale Summary
(through December annually)*, Cable TV Investor, Jan. 29, 2000, at 7.

**Jan 2000 to June 2000 -** Paul Kagan Assocs., Inc., C*able System Sale
Summary (through June annually),* Cable TV Investor, Aug 11, 2000, at 9.

Table B-9

Examples of Cable Modem Deployments as of July 2000

+----------+-------------+---------+-------+--------------+-----------+
| System   | Location of | Monthly | In    | Service      | Type of   |
|          | Offering    | Rate    | stall | Provider^2^  | Service   |
|          |             | ^1^     | ation |              |           |
|          |             |         | Fee   |              |           |
|          |             |         | ^1^   |              |           |
+----------+-------------+---------+-------+--------------+-----------+
| Adelphia | FL, KY, MA, | \       | \$    | •Adelphia    | •         |
|          | NJ, NY, OH, | $29.95- | 49.95 | PowerLink    | Tel       |
|          | PA, SC, VA, | \$39.95 |       |              | co-return |
|          | VT          |         |       | • ISP        |           |
|          |             |         |       | Channel      | • Two-way |
+----------+-------------+---------+-------+--------------+-----------+
| AT&T --  | CA, CO, CT, | \       | \     | •@Home       | • Two-way |
| BIS      | FL, GA, IA, | $34.95- | $99.9 |              |           |
| (        | IL, LA, MA, | \$45.00 | 5-\$1 | •Road Runner | •         |
| includes | MI, MN ,    | i       | 50.00 |              | Tel       |
| former   | ND, NH, OH, | ncludes |       |              | co-return |
| M        | OR, PA, TX, | modem   |       |              |           |
| ediaOne) | UT, VA, WA  | rental  |       |              |           |
+----------+-------------+---------+-------+--------------+-----------+
| Bresnan  | MI, MN, WI  | \$39.95 | N/A   | •BresnanLink | • Two-way |
|          |             | i       |       |              |           |
|          |             | ncludes |       | •@Home       |           |
|          |             | modem   |       |              |           |
|          |             | rental  |       |              |           |
+----------+-------------+---------+-------+--------------+-----------+
| Cab      | CT, NY      | \$29.95 | \$1   | •@Home       | • Two-way |
| levision |             |         | 50.00 |              |           |
| Systems  |             |         |       |              |           |
+----------+-------------+---------+-------+--------------+-----------+
| Century  | NY          | \$39.95 | N/A   | •@Home       | • Two-way |
+----------+-------------+---------+-------+--------------+-----------+
| Charter  | AL, CA, CT, | \       | \     | • Charter    | • 500     |
|          | GA, MO, NC, | $29.95- | $99.0 | Pipeline     | kbps      |
|          | TN,         | \$49.95 | 0-\$1 |              | Svc.\     |
|          |             |         | 75.00 | •High Speed  | •         |
|          |             |         |       | Access Corp. | Two-Way\  |
|          |             |         |       |              | •         |
|          |             |         |       |              | Tel       |
|          |             |         |       |              | co-return |
+----------+-------------+---------+-------+--------------+-----------+
| Comcast  | AL, CA, DE, | \$29.95 | \$1   | •@Home       | • Two-way |
|          | FL, GA, IN, | --      | 49.00 |              |           |
|          | KS, MD, MI, | \$64.95 |       | • Expressnet |           |
|          | MO, NJ, PA, |         |       |              |           |
|          | SC, VA      |         |       |              |           |
+----------+-------------+---------+-------+--------------+-----------+
| Cox      | AZ, CA, CT, | \       | \$1   | •@Home       | • Two-way |
|          | FL, KS, LA, | $29.95- | 49.95 |              |           |
|          | MO, MS, NE, | \$44.95 |       | • Internet   | •         |
|          | NM, NV, OK, |         |       | Venutres     | Tel       |
|          | RI, TX, VA  |         |       |              | co-return |
|          |             |         |       | • Road       |           |
|          |             |         |       | Runner       |           |
|          |             |         |       |              |           |
|          |             |         |       | • Cox        |           |
|          |             |         |       | Express      |           |
|          |             |         |       |              |           |
|          |             |         |       | • ISP        |           |
|          |             |         |       | Channel      |           |
+----------+-------------+---------+-------+--------------+-----------+
| In       | GA, KY, NC, | \$29.95 | N/A   | •@Home       | • Two-way |
| terMedia | SC, TN      | -       |       |              |           |
|          |             | \$39.95 |       |              |           |
+----------+-------------+---------+-------+--------------+-----------+
| Jones    | VA          | \$29.9  | N/A   | •@Home\      | •         |
| In       |             | 5-43.90 |       | •Jones       | Two-way\  |
| tercable |             |         |       |              | •         |
|          |             |         |       |              | Tel       |
|          |             |         |       |              | co-return |
+----------+-------------+---------+-------+--------------+-----------+
| Marcus   | TX,WI       | \$49.95 | N/A   | •@Home\      | • Two-way |
|          |             |         |       | • High Speed |           |
|          |             |         |       | Access Corp. |           |
+----------+-------------+---------+-------+--------------+-----------+
| Time     | CA, FL, HI, | \       | \$1   | • Road       | • Two-way |
| Warner   | ME, MS, NC, | $39.95- | 00.00 | Runner       |           |
|          | NY, OH, TN, | \$44.95 |       |              |           |
|          | TX          |         |       |              |           |
+----------+-------------+---------+-------+--------------+-----------+

**Notes:**

^1^ Monthly rate and installation fees vary based on the type of service
and hardware received.

^2^ As of July 2000, all service providers are exclusive to a particular
location.

**Sources:**

Paul Kagan Assocs., Inc., *Cable Modem Deployments*, The Cable TV
Financial Databook 2000, Aug. 2000, at 75-83.

Michael Harris, *Commercial Cable Modem Launches in North America*,
Kinetic Strategies, Aug, 2000. *See*
http://www.cabledatacomnews.com/cmic/cmic7.html.

**APPENDIX C**

TABLE C-1

**Assessment of Competing Technologies^(i)^**

+-----------------+--------+---------+---------+----------+---------+
| **Technology    | **De   | **June  | **June  | **June   | **June  |
| Used**          | cember | 97**    | 98**    | 99**     | 00**    |
|                 | 96**   |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+
| (1) TV          | 97,0   | 97,     | 98,     | 99       | 100,    |
|     H           | 00,000 | 000,000 | 000,000 | ,400,000 | 801,720 |
| ouseholds^(ii)^ |        |         |         |          |         |
|                 | 1.15%  | 0.00%   | 1.03%   | 1.43%    | 1.41%   |
| > Percent       |        |         |         |          |         |
| > Change        |        |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+
| (2) MVPD        | 72,3   | 73,     | 76,     | 80       | 84,     |
|     Ho          | 70,950 | 646,970 | 634,200 | ,882,411 | 423,717 |
| useholds^(iii)^ |        |         |         |          |         |
|                 | 5.67%  | 1.76%   | 4.06%   | 5.54%    | 4.38%   |
| > Percent       |        |         |         |          |         |
| > Change        | 74.61% | 75.92%  | 78.20%  | 81.37%   | 83.75%  |
|                 |        |         |         |          |         |
| Percent of      |        |         |         |          |         |
| Households      |        |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+
| (3) Cable       | 63,    | 64,     | 65,     | 66       | 67,     |
|     Subscribers | 500,00 | 150,000 | 400,000 | ,690,000 | 700,000 |
|                 |        |         |         |          |         |
| > Percent       | 2.25%  | 1.02%   | 1.95%   | 1.97%    | 1.51%   |
| > Change        |        |         |         |          |         |
|                 | 87.74% | 87.10%  | 85.34%  | 82.45%   | 80.19%  |
| Percent of MVPD |        |         |         |          |         |
| Total           |        |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+
| (4) MMDS        | 1,1    | 1,      | 1,      | 821,000  | 700,000 |
|     Subscribers | 80,000 | 100,000 | 000,000 |          |         |
|                 |        |         |         | -17.90%  | -14.74% |
| > Percent       | 38.66% | -6.78%  | -9.09%  |          |         |
| > Change        |        |         |         | 1.02%    | 0.83%   |
|                 | 1.63%  | 1.49%   | 1.30%   |          |         |
| Percent of MVPD |        |         |         |          |         |
| Total           |        |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+
| (5) SMATV       | 1,1    | 1,      | 940,000 | 1        | 1,      |
|     Subscribers | 26,000 | 162,500 |         | ,450,000 | 500,000 |
|                 |        |         | -19.14% |          |         |
| > Percent       | 17.05% | 3.24%   |         | 54.26%   | 3.45%   |
| > Change        |        |         | 1.23%   |          |         |
|                 | 1.56%  | 1.58%   |         | 1.79%    | 1.78%   |
| Percent of MVPD |        |         |         |          |         |
| Total           |        |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+
| (6) HSD         | 2,2    | 2,      | 2,      | 1        | 1,      |
|     Subscribers | 77,760 | 184,470 | 028,200 | ,783,411 | 476,717 |
|                 |        |         |         |          |         |
| > Percent       | -3.71% | -4.10%  | -7.15%  | -12.07%  | -17.20% |
| > Change        |        |         |         |          |         |
|                 | 3.15%  | 2.97%   | 2.65%   | 2.20%    | 1.75%   |
| Percent of MVPD |        |         |         |          |         |
| Total           |        |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+
| (7) DBS         | 4,2    | 5,      | 7,      | 10       | 12,     |
|     Subscribers | 85,000 | 047,000 | 200,000 | ,078,000 | 987,000 |
|                 |        |         |         |          |         |
| > Percent       | 94.77% | 17.78%  | 42.66%  | 39.97%   | 28.86%  |
| > Change        |        |         |         |          |         |
|                 | 5.92%  | 6.85%   | 9.40%   | 12.46%   | 15.38%  |
| Percent of MVPD |        |         |         |          |         |
| Total           |        |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+
| (8) OVS         | 2,190  | 3,000   | 66,000  | 60,000   | 60,000  |
|     Su          |        |         |         |          |         |
| bscribers^(iv)^ | 0.00%  | 36.99%  | 2       | -9.09%   | 0.0%    |
|                 |        |         | 100.00% |          |         |
| > Percent       | 0.00%  | 0.00%   |         | 0.07%    | 0.07%   |
| > Change        |        |         | 0.09%   |          |         |
|                 |        |         |         |          |         |
| Percent of MVPD |        |         |         |          |         |
| Total           |        |         |         |          |         |
+-----------------+--------+---------+---------+----------+---------+

**Notes:**

(i) Some numbers have been rounded.

(ii) The year-end 1996 and June 1997 figures are the same because
     Nielsen's annual update does not take effect until September, the
     beginning of the new television season.

(iii) The total number of MVPD households is likely to be somewhat less
      than the given figure since some households subscribe to the
      services of more than one MVPD. *See* *1994 Report,* 9 FCC Rcd at
      7480 ¶ 74. However, the number of households subscribing to more
      than one MVPD is expected to be low. Hence the given total can be
      seen as a reasonable estimate of the number of MVPD households.

(iv) The decline in OVS subscribers between 1998 and 1999 reflects the
     conversion of portions of some OVS systems to franchised cable
     systems over the last year.

**Sources:\
**

(1) Television households: 1996 from Nielsen Media Research as cited in
    *TV Column*, Washington Post, August 26, 1997, at E4; 1998 from
    Nielsen Media Research as cited in Broadcasting & Cable, June 29,
    1998, at 70; 1999 from Nielsen Media Research as cited in
    Broadcasting & Cable, June 28, 1999, at 26; and 2000 from *Nielsen
    Media Research.*

(2) Total MVPD households: The sum of the total number of subscribers
    listed under each of the categories of the various technologies. See
    note (ii) above.

(3) Cable subscribers: 1996-97 from Paul Kagan Associates, Inc., *Paul
    Kagan's 10-Year Cable TV Industry Projections,* Cable TV Investor,
    May 20, 1997, at 9; 1998 from Paul Kagan Associates, Inc., *Paul
    Kagan's 10-Year Cable TV Industry Projections,* Cable TV Investor,
    August 10, 1998, at 4; 1999 from Paul Kagan Associates, Inc., *Cable
    Industry 10-YearProjections,* Cable TV Investor, June 25, 1999, at
    6; and 2000 from Paul Kagan Associates, Inc., *Cable Industry
    10-YearProjections,* Cable TV Investor, June 19, 2000, at 6.

(4) MMDS subscribers: 1996 from Paul Kagan Associates, Inc., *Wireless
    Cable Futures,* Wireless Cable Investor, December 31, 1996, at
    10-11; 1997 from WCA Comments for the *1997 Report* at 8. The 1998
    and 1999 subscribers estimated by the FCC; 2000 from NCTA Comments
    at 9.

(5) SMATV subscribers: 1996 from *Private Cable Growth,* Private Cable
    Investor, July 1997, at 3; 1997 subscribers were estimated by the
    FCC based on data from Paul Kagan Associates, Inc., *Private Cable
    Growth,* Private Cable Investor, July 1997, at 3; 1998 subscribers
    from NCTA 1998 Comments at 6; 1999 subscribers from NCTA 1999
    Comments at 5; and 2000 subscribers from NCTA Comments at 9.

(6) HSD subscribers: 1996-1997 from *DTH Subscribers,* SkyREPORT,
    November 1999, at 10; 1998-2000 from SkyReport.com at
    http://www.skyreport.com/dth_us.htm.

(7) DBS subscribers: 1995 from *DTH Subscribers,* SkyREPORT, January
    1997, at 8; 1996-97 from *DTH Subscribers,* SkyREPORT, November
    1997, at 10; 1998 from Minal Damani and Jennifer E. Sharpe, *U.S.
    DBS Marketplace: 1998,* The Strategis Group, July, 1998 at 6; and
    1999-2000 from SkyReport.com at http://www.skyreport.com/dth_us.htm.

(8) OVS subscribers: 1996 from Bell Atlantic Comments for *1996 Report*
    at 5*.* OVS subscriber count for 1997 through 2000 estimated by the
    FCC.

    **TABLE C-2**

Number and Subscriber Size of Major Cable System Clusters

**(Cumulative Figures)**

+--------+------+-------+-----+-------+------+-------+-----+-------+
| Range  | **19 |       | **  |       | **19 |       | **  |       |
| of     | 96** |       | 199 |       | 98** |       | 199 |       |
| Clu    |      |       | 7** |       |      |       | 9** |       |
| stered |      |       |     |       |      |       |     |       |
| Subsc  |      |       |     |       |      |       |     |       |
| ribers |      |       |     |       |      |       |     |       |
|        |      |       |     |       |      |       |     |       |
| **(    |      |       |     |       |      |       |     |       |
| thousa |      |       |     |       |      |       |     |       |
| nds)** |      |       |     |       |      |       |     |       |
+--------+------+-------+-----+-------+------+-------+-----+-------+
|        | **Cl | **Sub | **C | **Sub | **Cl | **Sub | **C | **Sub |
|        | uste | scrib | lus | scrib | uste | scrib | lus | scrib |
|        | rs** | ers** | ter | ers** | rs** | ers** | ter | ers** |
|        |      |       | s** |       |      |       | s** |       |
|        |      | **(m  |     | **(m  |      | **(m  |     | **(m  |
|        |      | illio |     | illio |      | illio |     | illio |
|        |      | ns)** |     | ns)** |      | ns)** |     | ns)** |
+--------+------+-------+-----+-------+------+-------+-----+-------+
| 1      | 76   | 10.3  | 49  | 6.7   | 33   | 4.6   | 41  | 5.4   |
| 00-199 |      |       |     |       |      |       |     |       |
+--------+------+-------+-----+-------+------+-------+-----+-------+
| 2      | 34   | 8.3   | 33  | 8.2   | 25   | 6.3   | 16  | 4     |
| 00-299 |      |       |     |       |      |       |     |       |
+--------+------+-------+-----+-------+------+-------+-----+-------+
| 3      | 11   | 3.7   | 11  | 3.8   | 20   | 6.7   | 20  | 6.8   |
| 00-399 |      |       |     |       |      |       |     |       |
+--------+------+-------+-----+-------+------+-------+-----+-------+
| 4      | 8    | 3.6   | 8   | 3.7   | 7    | 3.2   | 9   | 3.9   |
| 00-499 |      |       |     |       |      |       |     |       |
+--------+------+-------+-----+-------+------+-------+-----+-------+
| \>500  | 10   | 7.7   | 16  | 11.9  | 21   | 19.6  | 28  | 23.8  |
+--------+------+-------+-----+-------+------+-------+-----+-------+
| **T    | 139  | 33.6  | 117 | 34.3  | 106  | 40.4  | 114 | 43.9  |
| otal** |      |       |     |       |      |       |     |       |
+--------+------+-------+-----+-------+------+-------+-----+-------+

**Sources:**

Paul Kagan Associates, Inc., *Major Cable TV Systems/Clusters*, The
Cable TV Financial Databook, 1996, at 38-40; 1997, at 39-41; 1998, at
38-42; 1999, at 50-55; and 2000 at 40-42.

**TABLE C-3**

**1999 Concentration in the National Market for Purchase of Video
Programming^(1)^**

  ----------------------- ----------------------- -----------------------
  **Rank**                **Company**             **Percent of
                                                  Subscribers^(2)^**

  1                       AT&T                    19.07

  2                       Time Warner             14.92

  3                       DirecTV                 10.28

  4                       Comcast                 8.43

  Top 4                                           52.70

  5                       Charter                 7.36

  6                       Cox                     7.27

  7                       Adelphia                5.94

  8                       EchoStar                5.11

  **Top 8**                                       78.38

  9                       Cablevision             4.29

  10                      Insight                 1.23

  Top 10                                          83.90

  Top 25                                          89.75

  Top 50                                          92.14

                          HHI                     **954^(3)^**
  ----------------------- ----------------------- -----------------------

**Notes:**

(1) MSO subscriber totals as of June 1999, and reported in Top Cable
    System Operators as of June 2000, Paul Kagan Associates, Inc.,
    *Cable TV Investor,* October 10, 2000, at 12-13. There is no double
    counting of subscribers. If a cable operator is partially owned by
    more than one MSO, its subscribers are assigned to the largest MSO.
    Subscribers for DirecTV and EchoStar are based on SkyReport.com at
    http://www.skyreport.com/dth_us.htm.

(2) The total number of MVPD subscribers used to calculate the HHI is
    84,423,717 from Table C-1.

(3) The HHI is calculated on the basis of market shares for the top 67
    companies. Because all of the remaining MVPDs have very small shares
    of the market, an HHI calculation that included all cable system
    operators could only be slightly higher (no more than 2-3 points)
    than the given HHI.

    **TABLE C-4**

    **Concentration in the National Market for the Purchase of Video
    Programming**

**1997-2000**

  -------------- --------------- -------------- -------------- --------------
  **Market       **Percent of                                  
  Share**        MVPD                                          
                 Subscribers**                                 

                 **1997**        **1998**       **1999**       **2000**

  Top Share      25.54           26.48          20.50          19.07

  Top 2          41.51           42.62          36.45          33.99

  Top 3          48.46           48.94          45.68          44.27

  Top 4          54.30           54.63          53.94          52.70

  Top 10         72.26           71.04          74.95          83.90

  Top 25         84.96           80.99          84.92          89.75

  Top 50         89.92           86.08          89.58          92.14

  HHI            1166            1096           923            954
  -------------- --------------- -------------- -------------- --------------

**Sources:**

Data for 1997 through 1999 were taken from *Reports, 1997-99*. Data for
2000 are from Table C-2.

**TABLE C-5**

Announced Cable Transactions

July 1999 -- June 2000

+-----+---------+---+--------+-----------------+------+------+------+----+
| Y   | **      | * |        | **SYSTEMS**     | *    | **   | **PR | ** |
| EAR | BUYER** | * |        |                 | *PRI | SUBS | ICE/ | CA |
|     |         | S |        |                 | CE\* | (A   | SUB. | SH |
|     |         | E |        |                 | (Mil | ctua | ^\*\ | FL |
|     |         | L |        |                 | lion | l)** | *^** | OW |
|     |         | L |        |                 | s)** |      |      | M  |
|     |         | E |        |                 |      |      |      | UL |
|     |         | R |        |                 |      |      |      | T. |
|     |         | * |        |                 |      |      |      | ** |
|     |         | * |        |                 |      |      |      |    |
+=====+=========+===+========+=================+======+======+======+====+
| J   | Cox     |   | AT&T   | Oklahoma,       | 2    | 495  | 4    | 18 |
| uly |         |   |        | Louisiana,      | ,094 | ,000 | ,230 | .1 |
| --1 |         |   |        |                 |      |      |      |    |
| 999 |         |   |        | Arkansas,       |      |      |      |    |
|     |         |   |        | Nevada,         |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| J   | Cox     |   | Mult   | Topeka,         | 2    | 522  | 4    | 15 |
| uly |         |   | imedia | Oklahoma City   | ,350 | ,000 | ,502 | .6 |
| --1 |         |   |        |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| J   | Be      |   | King   | King City, NC   | 8.6  | 5    | 1    | 10 |
| uly | nchmark |   | Comm.  |                 |      | ,800 | ,483 | .8 |
| --1 |         |   |        |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| J   | TW      |   | ARH,   | Texas, West     | 45.7 | 18   | 2    | 15 |
| uly | Fanch   |   | Ltd.   | Virginia        |      | ,300 | ,497 | .2 |
| --1 | one     |   |        |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Jul | TCA     |   | Cab    | Leander,        | 87.5 | 23   | 3    | 14 |
| y-1 | Cable   |   | lev./L | Georgetown,     |      | ,000 | ,806 | .6 |
| 999 |         |   | eander | Williamson      |      |      |      |    |
|     |         |   | Pfluge | County,         |      |      |      |    |
|     |         |   | rville | Pflaugerville,  |      |      |      |    |
|     |         |   | &      | TX              |      |      |      |    |
|     |         |   | Will   |                 |      |      |      |    |
|     |         |   | iamson |                 |      |      |      |    |
|     |         |   | Cty.   |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| J   | TCA     |   | Car    | SW MO Cable TV  | 28.6 | 12   | 2    | 13 |
| uly | Cable   |   | thage, |                 |      | ,300 | ,325 | .3 |
| --1 |         |   | MO     |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| J   | Harron  |   | Chain  | Old Forge, et.  | 4.3  | 2    | 1    | 9  |
| uly |         |   | Lakes  | al., NY         |      | ,900 | ,509 | .1 |
| --1 |         |   |        |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Au  | M       |   | Cox    | Taunton, et     | 1    | 54   | 2    | 14 |
| g-1 | ediaOne |   |        | al., MA         | 45.8 | ,000 | ,700 | .4 |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Aug | Cox     |   | Me     | Enfield, CT;    | 1    | 51   | 2    | 13 |
| --1 |         |   | diaOne | Westerly, RI;   | 37.7 | ,000 | ,700 | .4 |
| 999 |         |   |        |                 |      |      |      |    |
|     |         |   |        | Holland, MA     |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Au  | A       |   | Ci     | Diamond Bar et. | 1    | 45   | 3    | 14 |
| g-1 | delphia |   | tizens | al., CA         | 57.5 | ,900 | ,431 | .4 |
| 999 |         |   | Cable  |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| A   | Galaxy  |   | Cencom | Northeast MO    | 2.0  | 1    | 1    | 7  |
| ug- |         |   | Ptnrs. |                 |      | ,600 | ,220 | .1 |
| 1   |         |   |        |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| A   | Bresnan |   | Fa     | Fairmont et.    | 10.0 | 4    | 2    | 14 |
| ug- |         |   | irmont | al., MN         |      | ,400 | ,284 | .1 |
| 1   |         |   | Cable  |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Se  | Bresnan |   | M      | Bemidji/Case    | 16.0 | 7    | 2    | 11 |
| pt- |         |   | idwest | Lake, MN        |      | ,100 | ,269 | .3 |
| 1   |         |   | Cable  |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| O   | Classic |   | Star   | PA              | 1    | 57   | 2    | 10 |
| ct- |         |   | Cable  |                 | 27.7 | ,000 | ,241 | .7 |
| 1   |         |   |        |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Oct | Cable   |   | Harmon | West Fargo, ND  | 14.6 | 7    | 1    | 9  |
| --1 | One     |   |        |                 |      | ,700 | ,896 | .5 |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| O   | A       |   | Harmon | Nebraska and    | 10.5 | 7    | 1    | 11 |
| ct- | merican |   |        | New Mexico      |      | ,500 | ,400 | .2 |
| 1   | Media   |   |        |                 |      |      |      |    |
| 999 | Group   |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Oc  | A       |   | C      | Cincinnati, OH  | 1    | 53   | 3    | 16 |
| t-1 | delphia |   | oaxial |                 | 75.0 | ,000 | ,302 | .5 |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| O   | TCI     |   | White  | White Sands, NM | 2.0  | 1    | 1    | 9  |
| ct- | C       |   | Sands  |                 |      | ,400 | ,459 | .3 |
| 1   | able/NM |   |        |                 |      |      |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| N   | Comcast |   | AT&T   | PA              | 5,6  | 1    | 4    | 19 |
| ov- |         |   |        |                 | 65.9 | ,259 | ,500 | .2 |
| 1   |         |   |        |                 |      | ,100 |      |    |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Nov | AT&T    |   | Ch     | Chico, CA;      | 2    | 80   | 3    | 16 |
| --1 |         |   | ambers | Edmunds, WA;    | 40.0 | ,000 | ,000 | .9 |
| 999 |         |   |        |                 |      |      |      |    |
|     |         |   |        | Ontario, OR;    |      |      |      |    |
|     |         |   |        | Payette, ID     |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| De  | Charter |   | AT&T   | St.Louis, MO;   | 2,4  | 704  | 3    | 15 |
| c-1 |         |   |        | Mascoutan, IL;  | 08.0 | ,000 | ,421 | .0 |
| 999 |         |   |        | Birmingham, AL; |      |      |      |    |
|     |         |   |        | GA              |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| De  | AT&T    |   | C      | Ft. Worth, TX;  | 2,3  | 632  | 3    | 15 |
| c-1 |         |   | harter | Boston, MA;     | 00.0 | ,000 | ,639 | .0 |
| 999 |         |   |        | Clarksville,    |      |      |      |    |
|     |         |   |        | TN; Santa Cruz, |      |      |      |    |
|     |         |   |        | CA;             |      |      |      |    |
|     |         |   |        | Willimantic, CT |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| De  | A       |   | Cable  | Cleveland, OH   | 1    | 306  | 5    | 20 |
| c-1 | delphia |   | vision |                 | ,530 | ,000 | ,000 | .6 |
| 999 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| De  | RCN     |   | 21^st^ | Chicago, IL     | 5    | 37   | 13   | N  |
| c-1 |         |   | C      |                 | 00.0 | ,000 | ,730 | ot |
| 999 |         |   | entury |                 |      |      |      | re |
|     |         |   |        |                 |      |      |      | po |
|     |         |   |        |                 |      |      |      | rt |
|     |         |   |        |                 |      |      |      | ed |
+-----+---------+---+--------+-----------------+------+------+------+----+
| De  | Cable   |   | Julian | Julian, CA      | 1.1  | 800  | 1    | 9  |
| c-1 | USA     |   | Cable  |                 |      |      | ,467 | .3 |
| 999 |         |   | vision |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| De  | Comcast |   | C      | Various         | 7    | 288  | 2    | 9  |
| c-1 |         |   | alPRES | MI/NJ/FL        | 50.0 | ,900 | ,596 | .2 |
| 999 |         |   |        | systems         |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| De  | USA     |   | P      | Eastern         | 8.6  | 6    | 1    | 7  |
| c-1 | Media   |   | acific | Washington and  |      | ,000 | ,425 | .5 |
| 999 |         |   | Sub    |                 |      |      |      |    |
|     |         |   | Cable  | Northwest       |      |      |      |    |
|     |         |   |        | Oregon          |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| De  | Time    |   | H      | Orange City, FL | 10.5 | 3    | 3    | 14 |
| c-1 | Warner  |   | unters |                 |      | ,400 | ,088 | .6 |
| 999 |         |   | Creek  |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| J   | America |   | Time   | Various systems | 50,6 | 7    | 6    | 20 |
| an- | Online  |   | Warner |                 | 88.0 | ,800 | ,499 | .5 |
| 2   |         |   |        |                 |      | ,000 |      |    |
| 000 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ja  | Cen     |   | P      | Mayaguez, PR    | 1    | 55   | 3    | 13 |
| n-2 | tennial |   | egasus |                 | 70.0 | ,500 | ,063 | .1 |
| 000 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ja  | Me      |   | New    | Rochester, NH;  | 80.0 | 25   | 3    | 15 |
| n-2 | trocast |   | E      | Sanford, ME     |      | ,500 | ,137 | .6 |
| 000 |         |   | ngland |                 |      |      |      |    |
|     |         |   | Cable  |                 |      |      |      |    |
|     |         |   | vision |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ja  | Omega   |   | B      | Various         | 55.0 | 26   | 2    | 10 |
| n-2 |         |   | resnan | Michigan        |      | ,000 | ,115 | .2 |
| 000 |         |   |        | systems         |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ja  | Bresnan |   | M      | Rhinelander, et | 27.5 | 8    | 3    | 16 |
| n-2 |         |   | idwest | al, WI          |      | ,400 | ,290 | .2 |
| 000 |         |   | Video  |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ja  | Galaxy  |   | Cable  | Various South   | 6.6  | 6    | 1    | 6  |
| n-2 |         |   | TV     | Dakota          |      | ,000 | ,100 | .5 |
| 000 |         |   | Assoc. |                 |      |      |      |    |
|     |         |   |        | and Nebraska    |      |      |      |    |
|     |         |   |        | systems         |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Fe  | A       |   | L      | South Gate et   | 30.0 | 12   | 2    | 20 |
| b-2 | delphia |   | iberty | al., CA         |      | ,700 | ,362 | .9 |
| 000 |         |   | cable  |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ma  | Sandler |   | James  | Various         | 1    | 64   | 2    | 12 |
| r-2 | Capital |   | Cable  | Michigan        | 42.0 | ,100 | ,222 | .1 |
| 000 |         |   |        | systems         |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ma  | Charter |   | Cable  | Kalamazoo, MI   | 1    | 49   | 3    | 17 |
| r-2 |         |   | vision |                 | 72.5 | ,400 | ,491 | .6 |
| 000 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ma  | M       |   | Mid-Am | Various         | 8.0  | 5    | 1    | 8  |
| r-2 | ediacom |   | erican | Illinois        |      | ,000 | ,600 | .8 |
| 000 |         |   |        | systems         |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ap  | AT&T    |   | Cable  | Boston, MA      | 1,7  | 357  | 5    | 22 |
| r-2 |         |   | vision |                 | 89.6 | ,900 | ,001 | .9 |
| 000 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ap  | Cabl    |   | AT&T   | Westchester et  | 6    | 125  | 5    | 22 |
| r-2 | evision |   |        | al., NY         | 27.6 | ,500 | ,001 | .9 |
| 000 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ap  | Mallard |   | Blac   | Various systems | 54.0 | 41   | 1    | 8  |
| r-2 | Cabl    |   | kstone | in Montana,     |      | ,800 | ,292 | .5 |
| 000 | evision |   | Cable  | Georgia,        |      |      |      |    |
|     |         |   |        | Wyoming, Idaho, |      |      |      |    |
|     |         |   |        | Washington,     |      |      |      |    |
|     |         |   |        | Utah, Oregon,   |      |      |      |    |
|     |         |   |        | and California  |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ap  | M       |   | Rapid  | Various         | 8.0  | 6    | 1    | 8  |
| r-2 | ediacom |   | Comm.  | Kentucky and    |      | ,000 | ,333 | .5 |
| 000 |         |   |        |                 |      |      |      |    |
|     |         |   |        | Illinois        |      |      |      |    |
|     |         |   |        | systems         |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ap  | Mallard |   | B&L    | Various         | 5.4  | 4    | 1    | 9  |
| r-2 | Cabl    |   | Cable  | Florida, Utah,  |      | ,900 | ,092 | .0 |
| 000 | evision |   | Comm   | and             |      |      |      |    |
|     |         |   |        |                 |      |      |      |    |
|     |         |   |        | Alabama systems |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ap  | Mallard |   | A      | West Central US | 2.8  | 2    | 1    | 8  |
| r-2 | Cabl    |   | lltech |                 |      | ,600 | ,070 | .2 |
| 000 | evision |   | Cable  |                 |      |      |      |    |
|     |         |   | TV     |                 |      |      |      |    |
|     |         |   | /Hurst |                 |      |      |      |    |
|     |         |   | Cable  |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ap  | M       |   | Tri    | Montgomery, et  | 1.8  | 1    | 1    | 8  |
| r-2 | ediacom |   | -Cable | al., MN         |      | ,300 | ,385 | .9 |
| 000 |         |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ap  | Mallard |   | High   | Systems in ten  | 2.3  | 1    | 1    | 8  |
| r-2 | Cabl    |   | Mo     | Montana cities  |      | ,800 | ,260 | .9 |
| 000 | evision |   | untain |                 |      |      |      |    |
|     |         |   | Comm   |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ma  | Cox     |   | Rapid  | Branson et al., | 30.0 | 12   |      | N  |
| y-2 | Classic |   | Comm   | MO              |      | ,000 |      | ot |
| 000 | Cable   |   |        |                 |      |      |      | re |
|     |         |   |        |                 |      |      |      | po |
|     |         |   |        |                 |      |      |      | rt |
|     |         |   |        |                 |      |      |      | ed |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ma  | Mallard |   | Plen   | Plentywood, MT  | .8   | 700  | 1    | 7  |
| y-2 | Cabl    |   | tywood |                 |      |      | ,155 | .9 |
| 000 | evision |   | Cable  |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ma  | Mallard |   | Baker  | Baker, MT       | .8   | 700  | 1    | 7  |
| y-2 | Cabl    |   | Cable  |                 |      |      | ,166 | .9 |
| 000 | evision |   |        |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ju  | A       |   | CATV/  | Kennebunksport  | 35.0 | 9    | 3    | 17 |
| n-2 | delphia |   | Ke     | et al., ME      |      | ,500 | ,684 | .0 |
| 000 |         |   | nnebun |                 |      |      |      |    |
|     |         |   | ksport |                 |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
| Ju  | A       |   | GS     | Frederick, MD;  | 6    | 122  | 5    | 14 |
| n-2 | delphia |   | Comm   | Culpepper       | 61.7 | ,700 | ,394 | .8 |
| 000 |         |   |        | County, VA;     |      |      |      |    |
|     |         |   |        | Inwood, WV;     |      |      |      |    |
|     |         |   |        |                 |      |      |      |    |
|     |         |   |        | Adams County,   |      |      |      |    |
|     |         |   |        | PA              |      |      |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+
|     |         |   |        | **Grand Total** | \$   | \$13 |      |    |
|     |         |   |        |                 | 73,4 | ,427 |      |    |
|     |         |   |        |                 | 31.5 | ,100 |      |    |
+-----+---------+---+--------+-----------------+------+------+------+----+

**Notes:**

\* The transaction prices are from Paul Kagan Assocs. The transaction
price is dependent upon the terms of each transaction and may or may not
include debt.

\*\* The calculation of Price/Basic Subscriber are from Paul Kagan
Assocs. These calculations are subject to rounding and reporting
inconsistencies.

**Source:**

Kagan Assocs., Inc., *Announced/Proposed Cable System Sales*, Cable TV
Investor, July 26, 1999 at 9; Aug Paul. 20, 1999, at 8; Sept. 10, 1999,
at 6; Nov. 24, 1999, at 8; Dec. 23, 1999, at 8; Jan. 29, 2000, at 7;
March 24, 2000, at 6; Apr. 30, 2000, at 8; June 19, 2000, at 8; Aug. 11,
2000, at 9; and Oct. 10, 2000, at 8.

**APPENDIX D**

TABLE D-1

MSO Ownership in National Video Programming Services

  ------------------------------ ------------ ---------------------------
  Programming Service            Launch Date  MSO Ownership (%)

  American Movie Classics (AMC)  Oct-84       Cablevision (75)

  Animal Planet                  Oct-96       AT&T (39.2), Cox (19.7)

  BET (Black Entertainment       Jan-80       AT&T (35)
  Television)                                 

  BET Action Pay-Per-View        Sept-90      AT&T (35)

  BET Gospel                     Nov-98       AT&T (35)

  BET Movies                     Feb-97       AT&T (35)

  BET on Jazz                    Jan-96       AT&T (35)

  Bravo                          Feb-80       Cablevision (75)

  Canales ñ (6 digital channels) Oct-98       AT&T (100)

  Cartoon Network                Oct-92       Time Warner (100)

  Cinemax                        Aug-80       Time Warner (100)

  CNN                            Jun-80       Time Warner (100)

  CNN Headline News              Jan-82       Time Warner (100)

  CNN International              Jan-95       Time Warner (100)

  CNN/SI                         Dec-96       Time Warner (100)

  CNNfn (The Financial Network)  Dec-95       Time Warner (100)

  Comedy Central                 Apr-91       Time Warner (50)

  Court TV                       Jul-91       AT&T (50), Time Warner (50)

  Discovery Channel              Jun-85       AT&T (49), Cox (24.6)

  Discovery Civilization         Oct-96       AT&T (49), Cox (24.6)

  Discovery En Espanol           Aug-98       AT&T (49), Cox (24.6)

  Discovery Health               Jul-98       AT&T (49), Cox (24.6)

  Discovery Home & Leisure       Oct-96       AT&T (49), Cox (24.6)

  Discovery Kids                 Oct-96       AT&T (49), Cox (24.6)

  Discovery People               Dec-98       AT&T (49), Cox (24.6)
  ------------------------------ ------------ ---------------------------

  -------------------------------- ------------ --------------------------
  Programming Service              Launch Date  MSO Ownership (%)

  Discovery Science                Oct-96       AT&T (49), Cox (24.6)

  Discovery Wings                  Jul-98       AT&T (49), Cox (24.6)

  E! Entertainment                 Jun-90       Comcast (40), AT&T (20)

  Encore                           Apr-91       AT&T (100)

  Encore Action                    Sept-94      AT&T (100)

  Encore Love Stories              Jul-94       AT&T (100)

  Encore Mysteries                 Jul-94       AT&T (100)

  Encore True Stories and Drama    Sept-94      AT&T (100)

  Encore WAM! America\'s Youth     Sept-94      AT&T (100)
  Network                                       

  Encore Westerns                  Jul-94       AT&T (100)

  Food Network                     Nov-93       AT&T(5.5), Cox (1),
                                                TimeWarner(1)

  FOX Sports Net (5 channels)      various      Cablevision (50)

  GEMS International Television    Apr-93       Cox (50)

  Golf Channel                     Jan-95       AT&T (14.4), Comcast
                                                (43.3)

  Great American Country           Dec-95       Comcast (100)

  HBO (Home Box Office)            Nov-72       Time Warner (100)

  HBO Plus                         Dec-75       Time Warner (100)

  HBO Signature                    Oct-93       Time Warner (100)

  HBO Comedy                       May-99       Time Warner (100)

  HBO Family                       Dec-96       Time Warner (100)

  HBO Zone                         May-99       Time Warner (100)

  Home Shopping (Spree!)           Sep-86       AT&T (19.7)

  Home Shopping Network            Jul-85       AT&T (19.7)

  Independent Film Channel         Sep-94       Cablevision (75)

  International Channel            Jul-90       AT&T (90)

  Kaleidoscope                     Sep-90       AT&T (12)

  Knowledge TV                     Nov-87       Comcast (97)

  MoreMAX                          Aug-91       Time Warner (100)

  MuchMusic USA                    Jul-94       Cablevision (75)
  -------------------------------- ------------ --------------------------

+-----------------------+-----------------+----------------------------+
| Programming Service   | Launch Date     | MSO Ownership (%)          |
+-----------------------+-----------------+----------------------------+
| Multimax: ActionMax   | June-98         | Time Warner (100)          |
+-----------------------+-----------------+----------------------------+
| Multimax: ThrillerMax | June-98         | Time Warner (100)          |
+-----------------------+-----------------+----------------------------+
| Odyssey Channel       | Oct-93          | AT&T (32.5)                |
+-----------------------+-----------------+----------------------------+
| Outdoor Life Network  | Jul-95          | Cox (33.3), Comcast (17),  |
|                       |                 |                            |
|                       |                 | AT&T (15.4)                |
+-----------------------+-----------------+----------------------------+
| Ovation: The Arts     | Apr-96          | Time Warner (4.2)          |
| Network               |                 |                            |
+-----------------------+-----------------+----------------------------+
| PIN (Product          | Apr-94          | Cox (45)                   |
| Information Network)  |                 |                            |
+-----------------------+-----------------+----------------------------+
| Prevue Channel        | Jan-88          | AT&T (51)                  |
+-----------------------+-----------------+----------------------------+
| QVC                   | Nov-86          | Comcast (57), AT&T (43)    |
+-----------------------+-----------------+----------------------------+
| Sci-Fi Channel        | Sept-92         | AT&T (19.7)                |
+-----------------------+-----------------+----------------------------+
| Sneak Prevue          | May-91          | AT&T (12)                  |
+-----------------------+-----------------+----------------------------+
| Speedvision           | Dec-95          | Cox (33.3), Comcast (15),  |
|                       |                 | AT&T (13.3)                |
+-----------------------+-----------------+----------------------------+
| Starz!                | Feb-94          | AT&T (100)                 |
+-----------------------+-----------------+----------------------------+
| Starz! Cinema         | May-99          | AT&T (100)                 |
+-----------------------+-----------------+----------------------------+
| Starz! Family         | May-99          | AT&T (100)                 |
+-----------------------+-----------------+----------------------------+
| Starz!2               | Mar-96          | AT&T (100)                 |
+-----------------------+-----------------+----------------------------+
| Style                 | May-99          | Comcast (40), AT&T (20)    |
+-----------------------+-----------------+----------------------------+
| TBS                   | Dec-76          | Time Warner (100)          |
+-----------------------+-----------------+----------------------------+
| Telemundo             | Jan-87          | AT&T (50)                  |
+-----------------------+-----------------+----------------------------+
| The Box Worldwide     | Dec-85          | AT&T (78)                  |
+-----------------------+-----------------+----------------------------+
| TLC (The Learning     | Nov-80          | AT&T (49), Cox (24.6)      |
| Channel)              |                 |                            |
+-----------------------+-----------------+----------------------------+
| TNT (Turner Network   | Oct-88          | Time Warner (100)          |
| Television)           |                 |                            |
+-----------------------+-----------------+----------------------------+
| Travel Channel        | Feb-87          | AT&T (49), Cox (24.6)      |
+-----------------------+-----------------+----------------------------+
| Turner Classic Movies | Apr-94          | Time Warner (100)          |
+-----------------------+-----------------+----------------------------+
| USA Network           | Apr-80          | AT&T (19,7)                |
+-----------------------+-----------------+----------------------------+
| Viewers Choice 1-10   | Nov-85          | Cox (20), Time Warner      |
| and Hot Choice (11    |                 | (17), AT&T (11.7), Comcast |
| multiplexed channels) |                 | (11)                       |
+-----------------------+-----------------+----------------------------+
| Women's Entertainment | Jan-97          | Cablevision (75)           |
| (formerly Romance     |                 |                            |
| Classics)             |                 |                            |
+-----------------------+-----------------+----------------------------+

**Notes:**

The sale of BET and its programming channels to Viacom is pending. The
sale is expected to be

completed early next year. *Communications Daily,* November 6, 2000, at
2.

AT&T has a 28% equity interest (6.9% voting) in Cablevision Systems and
a 25.5% ownership interest in TWE.

Canales ñ, AT&T Liberty\'s digital package of Spanish-language channels,
consists of FoxSportsAmericas, CBS Telenoticias, CineLatino, BoxTejano,
BoxExitos, and Canal 9.

**Sources:**

National Cable Television Association, *Directory of Cable Networks*,
Cable Television

Developments, Spring/ Summer 2000 at 32 through 135.

*Kim McAvoy, AOL TW Has Lock on the Top**, ***Broadcasting and Cable,
August 28, 2000 at 32.

BET Web site, http://www.bet.com.

Letter from Mark Hollinger, Executive Vice President and General
Counsel, Discovery Communications

Inc., to Marcia Glauberman, FCC Staff, February 3, 2000.

Leslie Cauley and Sally Beatty, *Cable Channel Oxygen Looks for
Investors,* The Wall Street Journal,

October 20, 2000.

Comcast Web site, http://www.comcast.com/companies/default.asp.

Cox Web site, http;//www.cox.com/corporate/factsheet.asp.

TABLE D-2

National Video Programming Services

Not Affiliated With a Cable Operator

  ----------------------------------------------------------- -----------
  Programming Service                                         Launch Date

  A&E (Arts & Entertainment)                                  Feb-84

  Adultvision                                                 Jul-95

  All News Channel                                            Nov-89

  America\'s Voice                                            Dec-93

  ANA Television Network                                      Dec-91

  Asian American Satellite TV                                 Jan-92

  BBC America                                                 Mar-98

  Biography Channel                                           Dec-98

  Bloomberg Information Television                            Jan-95

  B-Movie Channel                                             May-98

  BoyzChannel                                                 Oct-99

  Cable Video Store                                           Apr-86

  Canal de Noticias NBC                                       Mar-93

  Canal Sur                                                   Aug-91

  CBS TeleNoticias                                            1997

  CelticVision                                                Mar-95

  Channel America Television Network                          Jun-88

  Channel Earth                                               Mar-97

  Children\'s Cable Network                                   May-95

  Cine Latino                                                 Dec-94

  Classic Arts Showcase                                       May-94

  Classic Movie Channel                                       Nov-99

  CMT (Country Music Television)                              Mar-83

  CNBC                                                        Apr-89

  CNET: The Computer Network                                  Jan-95

  Consumer Resource Network                                   Dec-94

  Crime Channel                                               Jul-93
  ----------------------------------------------------------- -----------

  ----------------------------------------------------------- -----------
  Programming Service                                         Launch Date

  C-SPAN                                                      Mar-79

  C-SPAN2                                                     Jun-86

  Deep Dish TV                                                Jan-86

  Disney Channel                                              Apr-83

  Do-It-Yourself Channel                                      Sep-99

  Dream TV Network                                            Nov-96

  Ecology Channel                                             Nov-94

  Employment Channel                                          Feb-92

  ESPN                                                        Sep-79

  ESPN Classic Sports (formerly Classic Sports Network)       May-95

  ESPN2                                                       Oct-93

  ESPNEWS                                                     Nov-96

  Ethnic-American Broadcasting Co.                            1992

  EWTN: Global Catholic Network                               Aug-81

  Fashion Network                                             Jul-96

  Fifth Avenue                                                Mar-00

  Filipino Channel                                            Apr-91

  Flix                                                        Aug-92

  Fox Family Worldwide                                        Apr-77

  Fox News Channel                                            Oct-96

  Fox Sports Americas                                         Dec-93

  Fox Sports Direct                                           1989

  Fox Sports World                                            1997

  FX                                                          Oct-94

  FXM: Movies from Fox                                        Oct-94

  Galavision                                                  Oct-79

  Game Show Network                                           Dec-94

  Games and Sports                                            Mar-99

  Gay Entertainment Television                                Nov 95

  GirlzChannel                                                Oct-99

  Goodlife Television Network (formerly Nostalgia Channel)    Jun-98
  ----------------------------------------------------------- -----------

  ----------------------------------------------------------- -----------
  Programming Service                                         Launch Date

  History Channel                                             Jan-95

  History Channel International                               Dec-98

  Home & Garden Television                                    Dec-94

  HTV                                                         Aug-95

  Inspirational Network                                       Apr-78

  International Channel Network (7 channels)                  Various

  Jewish Television Network                                   1981

  Ladbroke Racing Channel                                     Nov-84

  Las Vegas Television Network                                Nov-91

  Lifetime Movie Network                                      Jun-98

  Lifetime Television                                         Feb-84

  Lottery Channel                                             Nov-95

  M2: Music Television                                        Aug-96

  MBC Gospel Network                                          Nov-98

  Military Channel                                            Jul-98

  Mor Music TV                                                Aug-92

  MSNBC                                                       Jul-96

  MTV "S"                                                     Aug-98

  MTV "X"                                                     Aug-98

  MTV Networks Latin America (formerly MTV Latino)            Oct-93

  MTV: Music Television                                       Aug-81

  Music Zone                                                  Apr-95

  My Pet TV                                                   Sep-96

  NASA Television                                             Jul-91

  National & International Singles Television Network         Apr-95

  NBA.comTV                                                   Jan-99

  NET - Political NewsTalk Network                            Dec-93

  Network One                                                 Dec-93

  Newsworld International                                     Sep-94

  Nick at Nite\'s TV Land                                     Apr-96
  ----------------------------------------------------------- -----------

  ----------------------------------------------------------- -----------
  Programming Service                                         Launch Date

  Nick Too                                                    Jan-99

  Nickelodeon/Nick at Nite                                    Apr-79

  Noggin                                                      Feb-99

  Oasis TV                                                    Sept-97

  Outdoor Channel                                             Apr-93

  Oxygen                                                      Feb-00

  Planet Central Television                                   May-95

  Playboy TV                                                  Nov-82

  Pleasure Channel                                            Jun-99

  Praise Television                                           Dec-96

  Recovery Network                                            Feb-97

  SCOLA                                                       Aug-87

  Shop at Home                                                Jun-86

  Showtime                                                    Jul-76

  Showtime Beyond                                             Sep-99

  Showtime Extreme                                            1998

  SingleVision                                                Jun-94

  SiTV                                                        Aug-00

  Soap Channel                                                Jul-98

  Spice                                                       May-89

  Spice Hot                                                   1998

  Student Film Network                                        Nov-94

  Sun TV                                                      Aug-96

  Sundance Channel                                            Feb-96

  Telemundo                                                   Jan-87

  The Erotic Network (TEN)                                    Aug-98

  The Health Network                                          May-99

  TMC (The Movie Channel)                                     Dec-79

  TNN: The National Network (formerly The Nashville Network)  Mar-83

  Toon Disney                                                 Apr-98

  Total Communications Network                                Nov-95

  Trinity Broadcasting Network                                Apr-78

  TRIO                                                        Sep-94
  ----------------------------------------------------------- -----------

  ----------------------------------------------------------- -----------
  Programming Service                                         Launch Date

  Tropical Television Network                                 Aug-96

  TV 5 - La Television Internationale                         Jan-98

  TV Asia                                                     Apr-93

  TV Games Network                                            unknown

  TV Japan                                                    Jul-91

  TVN Digital Cable (32 digital pay-per-view channels)        Feb-98

  U Network                                                   Oct-89

  Univision                                                   Sep-76

  ValueVision                                                 Oct-91

  VH-1                                                        Jan-85

  VH1 Smooth                                                  Aug-98

  VH1 Soul                                                    Aug-98

  VHI Country                                                 Aug-98

  Via TV Network                                              Aug-93

  Video Catalog Channel                                       Oct-91

  Weather Channel                                             May-82

  Weatherscan                                                 April-98

  Weatherscan Local                                           May-99

  Weatherscan Plus                                            Sep-99

  Weatherscan Radar                                           Jun-99

  WorldJazz                                                   Jul-95

  Worship Network                                             Sep-92

  Z Music                                                     Mar-93

  ZDTV: Your Computer Channel                                 May-98
  ----------------------------------------------------------- -----------

**Notes:**

Cable affiliates provide 95% of funding for C-SPAN and C-SPAN2, but have
no ownership or program control interests. DBS licensees provide the
other 5% of funding and also have no ownership or program control
interests.

**Sources:**

National Cable Television Association, *Directory of Cable Networks*,
Cable Television

Developments Spring/Summer 2000 at 32 through 135.

Leslie Cauley and Sally Beatty**,** *Cable Channel Oxygen Looks for
Investors**, ***The Wall Street Journal,

October 20, 2000 at 25.

Fifth Avenue Corporation**,** *5^th^ Avenue Channel Corp. Launches TV
Channel**, ***Press Release, March

6, 2000.

SiTV Web site, http:/www.sitv.com.

USA Networks Web site,
http://www.usanetworks.com/companies/usa.network.html.

News Corporation Web site, http://www.newscorp.com/body/html.

TABLE D-3

Regional Video Programming Services

  -------------------------------- --------- ---------- ----------- ---------------------------
  Programming Services                       Launch     MSO         
                                             Date       Ownership   
                                                        (%)         

  Arabic Channel                   Apr-91                           

  Arizona News Channel             Nov-96                           

  Automotive Television Network    Sep-95                           
  (ATN)                                                             

  Bay News 9                       Jul-94                           AT&T (49)

  BAYTV                            Jul-94                           AT&T (49)

  Cable TV Network of New Jersey   Jul-93                           

  California Channel               Feb-91                           

  Casa Club TV                     Jul-97                           

  Central Florida News 13          Oct-97                           

  ChicagoLand Television News      Jan-93                           
  (CLTV)                                                            

  CN8 - The Comcast Network        1996                             Comcast (100)

  Comcast SportsNet                Oct-97                           Comcast (46)

  County Television Network San    Jul-96                           
  Diego                                                             

  Ecumenical Television Channel    1983                             

  Empire Sports Network            Dec-90                           

  Florida\'s News Channel          Sep-98                           

  Fox Sports Arizona               Sep-96                           

  Fox Sports Bay Area              Apr-90                           

  Fox Sports Chicago               Jan-84                           Cablevision (45)

  Fox Sports Cincinnati            1989                             Cablevision (45)

  Fox Sports Detroit               Sep-97                           

  Fox Sports Intermountain West    1990                             

  Fox Sports Midwest               1989                             

  Fox Sports New England           Nov-81                           Cablevision (22.5), AT&T
                                                                    (50)

  Fox Sports New York              1982                             Cablevision (41.5)

  Fox Sports Northwest             Nov-88                           

  Fox Sports Ohio                  Feb-89                           Cablevision (45)

  Fox Sports Pacific               Unknown                          Cablevision (45)
  -------------------------------- --------- ---------- ----------- ---------------------------

  -------------------------------- --------- ---------- ----------- ---------------------------
  Programming Services                       Launch     MSO         
                                             Date       Ownership   
                                                        (%)         

  Fox Sports Pittsburgh            Apr-86                           

  Fox Sports Rocky Mountain        Nov-88                           

  Fox Sports South                 Aug-90                           

  Fox Sports Southwest             Jan-83                           

  Fox Sports West                  Oct-85                           

  Fox Sports West 2                Jan-97                           

  Hip Hop Network                  Jan-97                           

  Home Team Sports (HTS)           Apr-84                           AT&T (17)

  International Television         Apr-86                           
  Broadcasting (ITV)                                                

  Las Vegas One News               Apr-98                           

  Local News on Cable              Feb-97                           

  Madison Square Garden Network    Oct-69                           AT&T (18), Cablevision
  (MSG)                                                             (41.5)

  MediaOne News                    Dec-95                           AT&T (100)

  Midwest Sports Channel           Mar-89                           

  MSG Metro Guide                  Aug-98                           Cablevision (100)

  MSG Metro Learning Channel       Aug-98                           Cablevision (100)

  MSG Traffic and Weather          Aug-98                           Cablevision (100)

  Neighborhood News L.I.           Unknown                          Cablevision (75)

  New England Cable News           Mar-92                           AT&T (50)

  New England Sports Network       Mar-84                           
  (NESN)                                                            

  New York 1 News                  Sep-92                           

  News 12 Connecticut              Jun-95                           Cablevision (75)

  News 12 Long Island              Dec-86                           Cablevision (75)

  News 12 New Jersey               Mar-96                           Cablevision (75)

  News 12 The Bronx                Jun-98                           Cablevision

  News 12 Westchester              Nov-95                           Cablevision (75)

  News 8 Austin                    Sep-99                           

  News Channel 5+                  Sept-96                          

  News Now 53                      Jun-97                           

  News on One                      Oct-97                           
  -------------------------------- --------- ---------- ----------- ---------------------------

  -------------------------------- -------- ---------- ----------- ---------------------------
  Programming Services                      Launch     MSO         
                                            Date       Ownership   
                                                       (%)         

  News Watch 15                    Oct-99                          

  Newschannel 8                    Oct-91                          

  Nippon Golden Network            Jan-82                          

  NorthWest Cable News             Dec-95                          

  Ohio News Network                May-97                          

  Orange County NewsChannel        Sep-90                          

  PASS Sports (Pro-Am Sports       Apr-84                          
  System)                                                          

  Pennsylvania Cable Network (PCN) Sep-79                          

  Pittsburgh Cable News Channel    Jan-94                          
  (PCNC)                                                           

  PRISM                            Sep-76                          

  San Diego's News Channel 15      Jan-97                          

  Six News Now                     Jul-95                          

  South Florida News Channel       1998                            

  SportsChannel Florida            Dec-87                          AT&T (6), Cablevision
                                                                   (13.5)

  SportsChannel New York           1976                            

  Sunshine Network                 Mar-88                          AT&T (34.5), Comcast (16),
                                                                   Cox (5.3)

  Texas Cable News                 Jan-99                          
  -------------------------------- -------- ---------- ----------- ---------------------------

**Sources:**

National Cable Television Association, *Regional Video Services*, Cable
Television Developments,

Spring/Summer 2000, at 136 through 168.

Rainbow Media Holdings Web site,
http://www.cablevision.com/cvhome/cvrainb/rainbow.htm.

Fox Web site, http://foxsports.com/direct/index.sml.

TABLE D-4

Planned Programming Services

  -------------------------------------- --------------------------------
  Programming Service                    Planned Launch Date, If
                                         Announced

  American Legal Network                 TBA

  American West Network                  TBA

  Anti-Aging Network                     TBA

  Applause                               TBA

  Arts & Antiques Network                TBA

  Auto Channel                           TBA

  Baby TV                                TBA

  Beauty Channel                         4^th^ Qtr 2000

  BET Rap/Hip Hop                        TBA

  BET World Music Beat                   TBA

  Black Women's Television               2000

  Boating Channel                        TBA

  Booknet                                2000

  Bravo World Cinema                     TBA

  Children's Fashion Network             2000

  Chop TV                                TBA

  Collectors Channel                     TBA

  ComedyNet                              Jan 2001

  Crime Beat                             2001

  Documentary Channel                    1^st^ Qtr 2001

  Eurocinema                             TBA

  Fad TV (Fashion & Design Television)   3^rd^ Qtr 2001

  Fanfare (The Classical Music Channel)  TBA

  Fashion Network                        TBA

  GETv Network                           TBA

  Global Village Network                 TBA

  Hobby Craft Interactive                TBA
  -------------------------------------- --------------------------------

  -------------------------------------- --------------------------------
  Programming Service                    Planned Launch Date, If
                                         Announced

  Inspirational Network Digital Digiplex 2000
  (6 channels)                           

  Investment TV                          TBA

  Local News Network                     TBA

  Love Network                           TBA

  Martial Arts Action Network            TBA

  Museum Channel                         TBA

  Museum World                           TBA

  National Geographic Channel            Jan-2001

  Native American Nations Program        2001
  Network                                

  Noah's World International             2001

  Opportunity Television Network         TBA

  Orb TV                                 TBA

  Parents Television                     TBA

  Performance Showcase                   TBA

  Planet Central Television              TBA

  Premiere Horse Network                 TBA

  Puppy Channel                          2001

  RadioTV Network                        3^rd^ Qtr 2001

  Real Estate Network (TREN)             TBA

  Seminar TV Network (Seminar TV)        1^st^ Qtr 2001

  Senior Citizens Television Network     1^st^ Qtr 2001

  Showtime FamilyZone                    1^st^ Qtr 2001

  Showtime Next                          1^st^ Qtr 2001

  Showtime Women                         1^st^ Qtr 2001

  Skywatcher Channel                     TBA

  Spanish Shopping Channel               TBA

  TBD (Gen -- Y emphasis)                2000

  Starz Comedy                           2002

  Starz Kids                             2002

  The Catalogue Channel                  TBA

  The CEO Channel                        TBA
  -------------------------------------- --------------------------------

  -------------------------------------- --------------------------------
  **Programming Service**                **Planned Launch Date, If
                                         Announced**

  The Enrichment Channel                 TBA

  The Football Channel (TFN)             TBA

  The Gospel Network                     TBA

  The Recovery Network                   TBA

  The World Cinema Channel               TBA

  Theater Channel                        TBA

  Weatherscan Espanol                    TBA

  Youth Sports Broadcasting Channel      TBA
  -------------------------------------- --------------------------------

**Sources:**

National Cable Television Association, *Planned Services*, Cable
Television Developments,

Spring/Summer 2000 at 169 through 186.

The Martial Arts Network Web site, http://www.
Martia-arts-network.com/inves.\_pg.htm.

TABLE D-5

MSO Ownership in National Programming

+-----------+-----+-----+-------+-------+-------+----+------+-------+
| **S       | **  | **  | *     | **Me  | *     | *  | **C  | **Jo  |
| ervices** | Sub | AT& | *Time | dia** | *Comc | *C | able | nes^( |
|           | s.^ | T** | War   |       | ast** | ox | visi | 1)^** |
|           | (Mi |     | ner** | **    |       | ** | on** |       |
|           | l.) |     |       | One** |       |    |      |       |
|           | ^** |     |       |       |       |    | **S  |       |
|           |     |     |       |       |       |    | yste |       |
|           |     |     |       |       |       |    | ms** |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| AMC       | 7   |     |       |       |       |    | 75%  |       |
|           | 1.9 |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Animal    | 54  | 39  |       |       |       | 1  |      |       |
| Planet    |     | .2% |       |       |       | 9. |      |       |
|           |     |     |       |       |       | 7% |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| BET       | 5   | 35% |       |       |       |    |      |       |
|           | 8.5 |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| BET       | 10  | 35% |       |       |       |    |      |       |
| Action    |     |     |       |       |       |    |      |       |
| PPV       |     |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| BET       | \*  | 35% |       |       |       |    |      |       |
| Gospel    |     |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| BET       | 6.2 | 35% |       |       |       |    |      |       |
| Movies    |     |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| BET on    | 5   | 35% |       |       |       |    |      |       |
| Jazz      |     |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Bravo     | 5   |     |       |       |       |    | 75%  |       |
|           | 0.1 |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Canales ñ | \*  | 1   |       |       |       |    |      |       |
|           |     | 00% |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Cartoon   | 60  |     | 100%  |       |       |    |      |       |
| Network   |     |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Cin       |     |     | 100%  |       |       |    |      |       |
| emax^(2)^ |     |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| CNN       | 77  |     | 100%  |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| CNN       | 7   |     | 100%  |       |       |    |      |       |
| Headline  | 2.4 |     |       |       |       |    |      |       |
| News      |     |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| CNN Int'l | 10  |     | 100%  |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| CNN/SI    | 1   |     | 100%  |       |       |    |      |       |
|           | 5.4 |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| CNNfn     | 1   |     | 100%  |       |       |    |      |       |
|           | 1.7 |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Comedy    | 62  |     | 50%   |       |       |    |      |       |
|           |     |     |       |       |       |    |      |       |
| Central   |     |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Court TV  | 4   | 50% | 50%   |       |       |    |      |       |
|           | 4.7 |     |       |       |       |    |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Discovery | 7   | 49% |       |       |       | 2  |      |       |
|           | 7.8 |     |       |       |       | 4. |      |       |
|           |     |     |       |       |       | 6% |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Discovery | \*  | 49% |       |       |       | 2  |      |       |
| Civ       |     |     |       |       |       | 4. |      |       |
| ilization |     |     |       |       |       | 6% |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Discovery | \*  | 49% |       |       |       | 2  |      |       |
| En        |     |     |       |       |       | 4. |      |       |
| Espanol   |     |     |       |       |       | 6% |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+
| Discovery | \*  | 49% |       |       |       | 2  |      |       |
| Health    |     |     |       |       |       | 4. |      |       |
|           |     |     |       |       |       | 6% |      |       |
+-----------+-----+-----+-------+-------+-------+----+------+-------+

+-------------+------+----+-------+------+-----+----+------+------+
| *           | **S  | ** | *     | *    | **  | *  | **C  | **   |
| *Services** | ubs. | AT | *Time | *Med | Com | *C | able | Jone |
|             | (Mil | &T | War   | ia** | cas | ox | visi | s^(1 |
|             | .)** | ** | ner** |      | t** | ** | on** | )^** |
|             |      |    |       | **O  |     |    |      |      |
|             |      |    |       | ne** |     |    | **S  |      |
|             |      |    |       |      |     |    | yste |      |
|             |      |    |       |      |     |    | ms** |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Discovery   | \*   | 4  |       |      |     | 2  |      |      |
| H           |      | 9% |       |      |     | 4. |      |      |
| ome&Leisure |      |    |       |      |     | 6% |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Discovery   | \*   | 4  |       |      |     | 2  |      |      |
| Kids        |      | 9% |       |      |     | 4. |      |      |
|             |      |    |       |      |     | 6% |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Discovery   | 11   | 4  |       |      |     | 2  |      |      |
| People      |      | 9% |       |      |     | 4. |      |      |
|             |      |    |       |      |     | 6% |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Discovery   | \*   | 4  |       |      |     | 2  |      |      |
| Science     |      | 9% |       |      |     | 4. |      |      |
|             |      |    |       |      |     | 6% |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Discovery   | \*   | 4  |       |      |     | 2  |      |      |
| Wings       |      | 9% |       |      |     | 4. |      |      |
|             |      |    |       |      |     | 6% |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| E!          | 60   | 2  |       |      | 40% |    |      |      |
|             |      | 0% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Encore      | 13.1 | 10 |       |      |     |    |      |      |
|             |      | 0% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Encore      | \*   | 10 |       |      |     |    |      |      |
| Action      |      | 0% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Encore Love | \*   | 10 |       |      |     |    |      |      |
| Stories     |      | 0% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Encore      | \*   | 10 |       |      |     |    |      |      |
| Mysteries   |      | 0% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Encore True | \*   | 10 |       |      |     |    |      |      |
| St          |      | 0% |       |      |     |    |      |      |
| ories/Drama |      |    |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Encore WAM! | \*   | 10 |       |      |     |    |      |      |
|             |      | 0% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Encore      | \*   | 10 |       |      |     |    |      |      |
| Westerns    |      | 0% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Food        | 39.7 | 5. | 1%    |      |     | 1% |      |      |
| Network     |      | 5% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Fox Sports  | 68   |    |       |      |     |    | 50%  |      |
| Net         |      |    |       |      |     |    | \*5  |      |
+-------------+------+----+-------+------+-----+----+------+------+
| GEMS Intn'l | 5.5  |    |       |      |     | 5  |      |      |
| TV          |      |    |       |      |     | 0% |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Golf        | 26.2 | 1  |       |      | 43  |    |      |      |
| Channel     |      | 4. |       |      | .3% |    |      |      |
|             |      | 4% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Great       | 12   |    |       |      | 1   |    |      |      |
| American    |      |    |       |      | 00% |    |      |      |
| Country     |      |    |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| HBO         | 35.7 |    | 100%  |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| HBO Plus    |      |    | 100%  |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| HBO         |      |    | 100%  |      |     |    |      |      |
| Signature   |      |    |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| HBO Comedy  |      |    | 100%  |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| HBO Family  |      |    | 100%  |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| HBO Zone    |      |    | 100%  |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Spree!      | \*   | 1  |       |      |     |    |      |      |
|             |      | 9. |       |      |     |    |      |      |
|             |      | 7% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| HSN         | 52.6 | 1  |       |      |     |    |      |      |
|             |      | 9. |       |      |     |    |      |      |
|             |      | 7% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Independent | 14   |    |       |      |     |    | 75%  |      |
| Film        |      |    |       |      |     |    |      |      |
| Channel     |      |    |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Int'l       | 8.7  | 9  |       |      |     |    |      |      |
| Channel     |      | 0% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+
| Kaleidoscpe | \*   | 1  |       |      |     |    |      |      |
|             |      | 2% |       |      |     |    |      |      |
+-------------+------+----+-------+------+-----+----+------+------+

+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Ser   | S    | AT&T  | Time  | Media | Co    | Cox   | C     | Jones |
| vices | ubs. |       | W     |       | mcast |       | ablev | ^(1)^ |
|       | (M   |       | arner | One   |       |       | ision |       |
|       | il.) |       |       |       |       |       |       |       |
|       |      |       |       |       |       |       | Sy    |       |
|       |      |       |       |       |       |       | stems |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Know  | 20   |       |       |       | 97%   |       |       |       |
| ledge |      |       |       |       |       |       |       |       |
| TV    |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| More  |      |       | 100%  |       |       |       |       |       |
| Max   |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Much  | 19.1 |       |       |       |       |       | 75%   |       |
| Music |      |       |       |       |       |       |       |       |
| USA   |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Multi |      |       | 100%  |       |       |       |       |       |
| max:A |      |       |       |       |       |       |       |       |
| ction |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Multi |      |       | 100%  |       |       |       |       |       |
| max:T |      |       |       |       |       |       |       |       |
| hrill |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Od    | 28.3 | 32.5% |       |       |       |       |       |       |
| yssey |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Ou    | 13.5 | 15.4% |       |       | 17%   | 33.3% |       |       |
| tdoor |      |       |       |       |       |       |       |       |
| Life  |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Ov    | 7    |       | 4.2%  |       |       |       |       |       |
| ation |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| PIN   | 23.4 |       |       |       |       | 45%   |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| P     | \*   | 51%   |       |       |       |       |       |       |
| revue |      |       |       |       |       |       |       |       |
| Ch    |      |       |       |       |       |       |       |       |
| annel |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| QVC   | 65.4 | 43%   |       |       | 57%   |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| WE    | 24.7 |       |       |       |       |       | 75%   |       |
| (for  |      |       |       |       |       |       |       |       |
| merly |      |       |       |       |       |       |       |       |
| Ro    |      |       |       |       |       |       |       |       |
| mance |      |       |       |       |       |       |       |       |
| Clas  |      |       |       |       |       |       |       |       |
| sics) |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| S     | 46.9 | 19.7% |       |       |       |       |       |       |
| ci-Fi |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Sneak | 34   | 12%   |       |       |       |       |       |       |
| P     |      |       |       |       |       |       |       |       |
| revue |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| S     | 28   | 13.3% |       |       | 15%   | 33.3% |       |       |
| peedv |      |       |       |       |       |       |       |       |
| ision |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| S     | 9.7  | 100%  |       |       |       |       |       |       |
| tarz! |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| S     | 3.3  | 100%  |       |       |       |       |       |       |
| tarz! |      |       |       |       |       |       |       |       |
| C     |      |       |       |       |       |       |       |       |
| inema |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| S     | 3    | 100%  |       |       |       |       |       |       |
| tarz! |      |       |       |       |       |       |       |       |
| F     |      |       |       |       |       |       |       |       |
| amily |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| St    | 3    | 100%  |       |       |       |       |       |       |
| arz!2 |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Style | 6    | 20%   |       |       | 40%   |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| TBS   | 78.6 |       | 100%  |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Tele  | 17.6 | 50%   |       |       |       |       |       |       |
| mundo |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| The   | 24.5 | 78%   |       |       |       |       |       |       |
| Box   |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| TLC   | 72   | 49%   |       |       |       | 24.6% |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| TNT   | 77.1 |       | 100%  |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| T     | 31.5 | 49%   |       |       |       | 24.6% |       |       |
| ravel |      |       |       |       |       |       |       |       |
| Ch    |      |       |       |       |       |       |       |       |
| annel |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| TCM   | 40.2 |       | 100%  |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| USA   | 77.2 | 19.7% |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+
| Vi    | \*   | 11.7% | 17%   |       | 11%   | 20%   |       |       |
| ewers |      |       |       |       |       |       |       |       |
| C     |      |       |       |       |       |       |       |       |
| hoice |      |       |       |       |       |       |       |       |
| 1-10  |      |       |       |       |       |       |       |       |
+-------+------+-------+-------+-------+-------+-------+-------+-------+

**Notes:**

In addition to cable, other services such as MMDS (wireless cable),
SMATV (satellite master antenna television),satellite, including HSD
(home satellite dish) and DBS (direct broadcast satellite), broadcast
television and LPTV\\(low power television) may distribute these
signals. Subscriber figures may include these non-cable services.

^\*^Indicates that subscribership count is unknown or not available.

In April 1999, Glenn Jones, founder of Jones International, sold
controlling interest in cable MSO, Jones Intercable,to Comcast Cable
Communications. *See Comcast Announces Filing of Registration Statement
Relating to Partial Exchange Offer for Jones Intercable, Inc*. (press
release) August 23, 1999. *See also* Frank Witsil, *Augusta, Ga.-Based
Cable Firm to Adopt Comcast Name*, The Augusta Chronicle, September 29,
1999.

CNN International subscribership of 12.5 million includes domestic US
subscribers only. CNN international has 129 million subscribers outside
the U.S.

HBO subscriber numbers include HBO Plus, HBO Signature, HBO Comedy, HBO
Family, HBO Zone, and Cinemax , MoreMax, ActionMax, and Thriller Max.

**Sources:**

National Cable Television Association, *Directory of Cable Networks*,
Cable Television Developments,

Spring/Summer 2000 at 31 through 158.

Cablevision Online: *Database, Network Subscriber Counts*,
http://www.cablevisionmag.com/database.

TABLE D-6

Top 20 Programming Services by Subscribership

+----+---------------------+---------------------+---------------------+
| ** | **Programming       | **Number of         | **MSO Ownership     |
| Ra | Network**           | Subscribers         | Interest in**       |
| nk |                     | (Millions)**        |                     |
| ** | **(Top 20)**        |                     | **Network (%)**     |
+----+---------------------+---------------------+---------------------+
| 1  | TBS                 | 78.0                | Time Warner (100)   |
+----+---------------------+---------------------+---------------------+
| 2  | Discovery Channel   | 77.4                | AT&T (49), Cox      |
|    |                     |                     | (24.6)              |
+----+---------------------+---------------------+---------------------+
| 3  | USA Network         | 77.2                | AT&T (18.6)         |
+----+---------------------+---------------------+---------------------+
| 4  | ESPN                | 77.1                |                     |
+----+---------------------+---------------------+---------------------+
| 5  | C-SPAN              | 77.0                |                     |
+----+---------------------+---------------------+---------------------+
| 6  | CNN                 | 77.0                | Time Warner (100)   |
+----+---------------------+---------------------+---------------------+
| 7  | TNT                 | 76.8                | Time Warner (100)   |
+----+---------------------+---------------------+---------------------+
| 8  | Nickelodeon/Nick at | 76.0                |                     |
|    | Nite                |                     |                     |
+----+---------------------+---------------------+---------------------+
| 9  | Fox Family Channel  | 75.7                |                     |
+----+---------------------+---------------------+---------------------+
| 10 | TNN                 | 75.0                |                     |
+----+---------------------+---------------------+---------------------+
| 11 | Lifetime Television | 75.0                |                     |
+----+---------------------+---------------------+---------------------+
| 12 | A&E                 | 75.0                |                     |
+----+---------------------+---------------------+---------------------+
| 13 | Weather Channel     | 74.0                |                     |
+----+---------------------+---------------------+---------------------+
| 14 | MTV                 | 73.2                |                     |
+----+---------------------+---------------------+---------------------+
| 15 | CNN Headline News   | 72.4                | Time Warner         |
+----+---------------------+---------------------+---------------------+
| 16 | QVC                 | 72.2                | Comcast (57), AT&T  |
|    |                     |                     | (43)                |
+----+---------------------+---------------------+---------------------+
| 17 | TLC                 | 72.0                | AT&T (49), Cox      |
|    |                     |                     | (24.6)              |
+----+---------------------+---------------------+---------------------+
| 18 | AMC                 | 71.0                | Cablevision (75)    |
+----+---------------------+---------------------+---------------------+
| 19 | CNBC                | 71.0                |                     |
+----+---------------------+---------------------+---------------------+
| 20 | VH1                 | 68.3                |                     |
+----+---------------------+---------------------+---------------------+

**Notes:**

In addition to cable, other services such as MMDS (wireless cable),
SMATV (satellite master antenna television), satellite, including HSD
(home satellite dish) and DBS (direct broadcast satellite), broadcast
television and LPTV (low power television) may distribute these signals.
Subscriber figures may include these noncable services. Cable affiliates
provide 95% of funding for C-SPAN and C-SPAN2, but have no ownership or
program control interests. DBS licensees provide the other 5% of funding
and also have no ownership or program control interests.

**Source:**

National Cable Television Association, Top 20 Cable Networks, Cable
Television Developments, Spring/Summer 2000 at 20, 21.

**TABLE D-7**

Top 15 Programming Services by Prime Time Rating

  ---------- --------------------------- ----------------------------------
  **Rank**   **Programming Service**     **MSO with Ownership Interest
                                         (%)**

  1          USA Network                 AT&T (19.7)

  2          TBS                         Time Warner (100)

  3          TNT                         Time Warner (100)

  4          Nick at Night               

  5          Cartoon Network             Time Warner (100)

  6          Lifetime Television         

  7          A&E                         

  8          MTV                         

  9          History Channel             

  10         TLC (The Learning Channel)  AT&T (49), Cox (24.6)

  11         Sci Fi Channel              AT&T (19.7)

  12         FX                          

  13         TV Land                     

  14         HGTV                        

  15         Fox Family                  

  16         Comedy Central              Time Warner (50)

  17         Court TV                    AT&T (50), Time Warner (50)

  18         CNN                         Time Warner (100)

  19         E!                          Comcast (40), AT&T (20)

  20         APL                         AT&T (39.2), Cox (19.7)
  ---------- --------------------------- ----------------------------------

**Source:**

Paul Kagan Assocs., Inc., *Day Part Ratings Averages, Prime Time (2^nd^
Quarter)*, Cable Program Investor, Aug. 10, 2000, at 6.

**Dissenting Statement of Commissioner Harold Furchtgott-Roth**

**Annual Assessment of the Status of Competition in the Market for the**

**Delivery of Video Programming, CS Docket No. 00-132**

I must respectfully dissent from the 2000 \"Annual Assessment of the
Status of Competition in Markets for the Delivery of Video
Programming.\" As I have previously made clear, I do not believe that
the Competition Report, in its traditional form, fulfills our duties
under the Communications Act. *See generally* Dissenting Statement of
Commissioner Harold Furchtgott-Roth, Annual Assessment of Competition in
Markets for the Delivery of Video Programming, 15 FCC Rcd. 978 (2000);
Dissenting Statement of Commissioner Harold Furchtgott-Roth, Annual
Assessment of Competition in Markets for the Delivery of Video
Programming, 13 FCC Rcd 24284 (1998).

In particular, instead of examining the state of competition \"in the
market for the delivery of video programming,\" 47 USC section 628(g),
the Report artificially limits its analysis to the delivery of
\"multichannel video programming.\" Furthermore, the plain language of
section 628(g) suggests that the business of delivering video
programming constitutes a single \"market,\" *see id*. section 628(g)
(referring to \"the market\" for video programming delivery), not a
conglomeration of analytically discrete markets, as this report
presumes.[^742] Because I believe the definition of the relevant market
to be in error, I cannot sign on the ensuing analysis of that market.

[^1]: The Commission's previous reports appear at: *Implementation of
    Section 19 of the 1992 Cable Act (Annual Assessment of the Status of
    Competition in the Market for the Delivery of Video Programming)*,
    CS Docket No. 94-48, First Report ("*1994 Report*"), 9 FCC Rcd 7442
    (1994); *Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming*, CS Docket No. 95-61,
    Second Annual Report ("*1995 Report*"), 11 FCC Rcd 2060 (1996);
    *Annual Assessment of the Status of Competition in the Market for
    the Delivery of Video Programming*, CS Docket No. 96-133, Third
    Annual Report ("*1996 Report*"), 12 FCC Rcd 4358 (1997); *Annual
    Assessment of the Status of Competition in Markets for the Delivery
    of Video Programming*, CS Docket No. 97-141, Fourth Annual Report
    ("*1997 Report*"), 13 FCC Rcd 1034 (1998); *Annual Assessment of the
    Status of Competition in Markets for the Delivery of Video
    Programming*, CS Docket No. 98-102, Fifth Annual Report ("*1998
    Report*"), 13 FCC Rcd 24284 (1998); and *Annual Assessment of the
    Status of Competition in Markets for the Delivery of Video
    Programming*, CS Docket No. 99-230, Sixth Annual Report ("*1999
    Report*"), 15 FCC Rcd 978 (2000).

[^2]: Communications Act of 1934, as amended, § 628(g), 47 U.S.C. §
    548(g).

[^3]: Pub.L. No. 102-385, 106 Stat. 1460 (1992).

[^4]: The 1992 Act imposed a regulatory scheme on the cable industry
    designed to serve as a transitional mechanism until competition
    develops and consumers have adequate multichannel video programming
    alternatives. One of the purposes of Title VI of the Communications
    Act, Cable Communications, is to "promote competition in cable
    communications and minimize unnecessary regulation that would impose
    an undue economic burden on cable systems." 447 U.S.C. § 521(6).

[^5]: *Annual Assessment of the Status of Competition in the Market for
    the Delivery of Video Programming*, CS Docket No. 00-132, Notice of
    Inquiry (*"Notice"*), 15 FCC Rcd 13563 (2000). Appendix A provides a
    list of commenters and the abbreviations by which they are
    identified herein.

[^6]: Telecommunications Act of 1996, Pub.L.No. 104-104, 110 Stat. 56
    (1996).

[^7]: SHVIA was enacted as Title I of the Intellectual Property and
    Communications Omnibus Reform Act of 1999 (\"IPACORA\") (relating to
    copyright licensing and carriage of broadcast signals by satellite
    carriers, codified in scattered sections of 17 and 47 U.S.C.),
    Pub.L. No. 106-113, 113 Stat. 1501, 1501A-526 to 1501A-545 (Nov. 29,
    1999).

[^8]: Traditional economic measures (e.g., the Herfindahl-Hirschman
    Index or HHI) are based on market shares or the squaring of market
    shares such that large companies are weighed more heavily than small
    companies. The HHI (and apparent levels of concentration) decline
    with rising equality among any given number of companies in terms of
    market shares even if these firms individually have larger shares of
    the markets.

[^9]: A franchise is defined as an authorization supplied by a federal,
    state, or local government entity to own or construct a cable system
    in a specific area. Communications Act §§ 602(9), 602(10), 47 U.S.C.
    §§ 522(9), 522(10). A cable system operator is defined as \"any
    person or group of persons (A) who provides cable service over a
    cable system, and directly or through one or more affiliates owns a
    significant interest in such cable system; or (B) who otherwise
    controls or is responsible for, through any arrangement, the
    management and operation of such a cable system.\" Communications
    Act § 602(5), 47 U.S.C. § 522(5). *See also* 47 C.F.R. § 76.5(cc).

[^10]: An \"overbuild\" occurs when two or more wireline cable
    television systems directly compete for subscribers in a local video
    programming delivery market.

[^11]: The advanced broadband services discussed here include cable
    telephony and Internet Protocol ("IP") telephony, Internet access
    through cable modems, digital video, video-on-demand ("VOD") and
    near-video-on-demand ("NVOD"), and interactive guides/interactive
    programming.

[^12]: Homes passed is defined as the total number of households capable
    of receiving cable television service.

[^13]: We refer to all cable programming networks offered as a part of
    program packages or tiers as \"basic cable networks.\" The primary
    level of cable television service is commonly referred to as \"basic
    service\" and must be taken by all subscribers. The content of basic
    service varies widely among cable systems but, pursuant to the
    Communications Act, must include all local television signals and
    public, educational, and governmental access channels and, at the
    discretion of the cable operator, may include satellite delivered
    cable programming channels carried on the system. One or more
    expanded tiers of service, known as Cable Programming Service
    ("CPS") tiers for purposes of rate regulation, and often known as
    expanded basic, also may be offered to subscribers. These expanded
    tiers of service usually include additional satellite delivered
    cable programming channels and are available for additional monthly
    fees. Communications Act §§ 623(b)(7), 623(l)(1), 47 U.S.C. §§
    543(b)(7), 543(l)(2).

[^14]: Premium services are cable networks provided by a cable operator
    on a per channel basis for an extra monthly fee. Pay-per-view
    services are cable networks provided by a cable operator on a per
    program basis. Pay-per-view service is a separate category from
    premium service. Communications Act §§ 623(b)(7), 623(l)(2), 47
    U.S.C. §§ 543(b)(7), 543(l)(2).

[^15]: Basic cable penetration is defined as the ratio of the number of
    cable subscribers to the total number of households passed by the
    system.

[^16]: Channel capacity is defined as the maximum number of video
    channels that a system can carry simultaneously. Video channel
    capacity can be decreased on any given network simply by using
    bandwidth for other services such as Internet.

[^17]: Nielsen Media Research. Nielsen Media Research estimates the
    number of television households annually, and industry practice is
    to use this figure throughout the television broadcast season, which
    begins in September and ends in August of the following calendar
    year. Thus, the figure for TV households in June 2000 is the same as
    the figure for December 1999. In App. B, Tbl. B-1, we report the
    number of television households as of year-end 1999 and June 2000.
    These figures are from Paul Kagan Associates, and we use these
    estimates of television households for consistency with the
    remainder of reported figures in this section.

[^18]: U. S. Television Household Estimates September 1999, DMA
    Rankings, Nielsen Media Research.

[^19]: *See* App. B, Tbl. B-1.

[^20]: *Id*.

[^21]: In its comments, NRTC expresses concern that the percentage of
    homes passed by cable may not be as high as the Commission has
    reported in the past. Thus, it claims that the reported number
    misrepresents the actual availability of cable services,
    particularly among rural Americans. NRTC Comments at iii, and 6-8.
    NCTA contends that the notion that a large portion of rural America
    is likely to be unserved by cable now or in the near futures is
    untrue. It notes that, although it has been costly to serve areas
    with the lowest density of homes, the cable industry began in rural
    areas as a community antenna service. It states that the industry
    remains committed to building out to the lowest density that is
    economically feasible, a density that continues to become lower over
    the years. NCTA Reply Comments at 10-11.

[^22]: NRTC Comments at 7-8. *See also* National Telecommunications and
    Information Administration, United States Department of Commerce and
    Rural Utilities Service, United States Department of Agriculture,
    *Advanced Telecommunications in Rural America, The Challenge of
    Bringing Broadband Service to All Americans* ("NTIA/RUS Report"),
    April 2000, at 19, n. 62.

[^23]: NCTA Web site,
    http://ncta.cyberserv.com/qs/user_pages/Dev%28statedata%29.cfm
    *citing* data from Warren Publishing, Inc. Estimates of the number
    of homes passed by cable are derived from a number of sources and
    samples and, therefore, the reported variability among estimates is
    not unexpected.

[^24]: NRTC Comments at 6-8; NTIA/RUS Report at 19, n. 62. Using a lower
    numerator and a higher denominator results in a lower percent. *See
    also* NCTA Reply Comments at 10.

[^25]: *See* App. B, Tbl. B-1.

[^26]: *Id.*

[^27]: *Id.*

[^28]: *Id.* Basic cable penetration is defined as the ratio of the
    number of cable subscribers to the total number of households passed
    by the system.

[^29]: *Id.* The percentage of TV households subscribing to cable is the
    ratio of the number of cable subscribers to the total number of
    households with at least one television.

[^30]: *See* App. B, Tbl. B-2.

[^31]: *Id.* This decrease is attributed to a decrease in the number of
    services classified by the source as "premium."

[^32]: *See 1998 Report,* 13 FCC Rcd at 24295, n. 34.

[^33]: *See* App. B, Tbl. B-3.

[^34]: *Id.*

[^35]: *Id.*

[^36]: *Id.* While the available channel capacity data for 2000 may not
    be final, we continue to use the same sources we have in the past
    for comparison purposes. Use of October to October data is
    consistent with our *1997, 1998, and 1999 Reports*, and is the
    method Warren Publishing, Inc., uses to report channel capacity
    system statistics. Warren Publishing reports the percentage of all
    systems polled. For the purposes of this *Report*, the figures have
    been recalculated to report the percentage of systems responding to
    the Warren poll (*i.e.,* we subtract out the number of systems \"not
    available\" for response).

[^37]: *See* App. B. Tbl. B-3.

[^38]: *Id.*

[^39]: *Id.*

[^40]: *See* App. B, Tbl. B-4. Use of October to October data is
    consistent with our *1997, 1998, and 1999 Reports,* and is the
    method Warren Publishing, Inc., uses to report channel capacity
    system statistics. Warren Publishing reports the percentage of all
    systems polled. For the purposes of this *Report,* the figures have
    been recalculated to report the percentage of systems responding to
    the Warren poll (*i.e.,* we subtract the number of systems "not
    available" for response).

[^41]: *See* App. B. Tbl. B-4.

[^42]: *Id.*

[^43]: *Id.*

[^44]: *Id.*

[^45]: The audience statistics reported here are Nielsen Media Research
    measurements of television viewing 24 hours a day for an entire week
    (*i.e.,* Monday through Sunday).

[^46]: A share is the percent of all households using television during
    the time period that are viewing the specified station(s) or
    network(s). The sum of reported audience shares exceeds 100 percent
    due to multiple set viewing.

[^47]: Nielsen Media Research, *Total Day 24 hours 6 am - 6 am: Total US
    Ratings By Viewing Source*, Oct. 12, 2000. Nielsen reports
    non-premium, basic cable viewership as \"Ad Supported Cable\" and
    "All Other Cable." Premium services are classified as "Premium Pay."

[^48]: Nielsen Media Research, *Total Day 24 hours 6 am - 6 am: Total US
    Ratings By Viewing Source*, Oct. 12, 2000. "Broadcast" shares
    include network affiliates, independent, and public broadcast
    stations.

[^49]: These statistics regarding types of cable networks are from *NCTA
    Cable Television Developments*, Spring/Summer 2000. These totals
    differ from those reported in the Vertical Integration Section of
    this report. In that section, the information on cable networks is
    from *NCTA Developments* and additional sources. *See* App. B, Tbl.
    B-5.

[^50]: *Id*.

[^51]: *Id.*

[^52]: Paul Kagan Assocs., Inc., *Basic Cable Network Economics
    (1995-2010)*, Cable Program Investor, June 16, 2000, at 7.

[^53]: *Id.*

[^54]: *Id.* License fees are the fees charged by a cable network to
    allow an operator to deliver the network\'s programming. License
    fees reported here do not include superstation license fees, common
    carrier payments, and copyright fees.

[^55]: *Id.*

[^56]: Copyright Act, 17 U.S.C. § 111 *et seq.*

[^57]: Copyright fees, though technically due on a specific date, are
    collected on a rolling basis. We report the most current figures
    available.

[^58]: Copyright Office, Library of Congress, *Licensing Division Report
    of Receipts*, Dec. 12, 2000. Date of \"collection\" indicates the
    date the Copyright Office has deposited payments made by cable
    operators. Payments are due within a certain time frame around the
    copyright period, however, operators submit payments on a continuing
    basis.

[^59]: *Id.*

[^60]: *See* Paul Kagan Assocs., Inc., *Cable and DBS Stocks: The Year
    in Review,* Cable TV Financial Databook 2000, Aug. 2000, at 98.

[^61]: *See* App. B, Tbl B-6.

[^62]: *Id.*

[^63]: *Id.*

[^64]: *Id.*

[^65]: The "advanced video services" category includes both analog video
    services and digital video services. Advanced analog services
    provide users with certain two-way capabilities such as pay-per-view
    ("PPV") and near-video-on-demand ("NVOD"). Digital video services
    can provide superior video picture quality and increased channel
    capacity. Both digital and advanced analog services require the use
    of a set-top box. *See also* fn. 11 *supra*.

[^66]: *See* App. B, Tbl. B-6.

[^67]: *Id.*

[^68]: *Id.* The increase in revenues attributed to PPV is likely the
    result of increased sales, rather than increased rates. For example,
    in 1999, pro wrestling increased in popularity and Mike Tyson
    returned to boxing. In addition increases in digital video services
    provided customers more movie choices.

[^69]: *See* App. B, Tbl. B-6.

[^70]: *Id.*

[^71]: *Id.*

[^72]: *Id.*

[^73]: *Id.*

[^74]: *Id.* Basic cable rates are regulated at the local level. CPST
    rate regulation ended in March 1999. *See* 47 U.S.C. § 543 (c)(3),
    (c)(4).

[^75]: *See* App. B, Tbl. B-6.

[^76]: *Id.*

[^77]: *Id.*

[^78]: *Id.*

[^79]: *Id.* Cash flow margin is a commonly used financial analysis tool
    for determining a cable operator's operating efficiency,
    profitability, and liquidity.

[^80]: *See* Dennis H. Leibowitz, *Media and Communication Statistics:
    Monthly Reviews*, Donaldson Lufkin & Jenrette, Nov. 11, 1999-Sept.
    13, 2000, at 1; Paul Kagan Assocs., Inc., *Cable and DBS Stocks: The
    Year in Review,* Cable TV Financial Databook 2000, Aug. 2000, at 97.

[^81]: *Id.*

[^82]: Dennis H. Leibowitz, *Media and Communication Statistics: Monthly
    Reviews*, Donaldson Lufkin & Jenrette, Mar. 8, 2000, Apr. 10, 2000,
    May 10, 2000, and June 8, 2000, at 1. *See* ¶¶ 125, 128 *infra* for
    information on LEC data services.

[^83]: Dennis H. Leibowitz, *Media and Communication Statistics: May
    Review*, Donaldson Lufkin & Jenrette, June 8, 2000; Paul Kagan
    Assocs., Inc., *Cable and DBS Stocks: The Year in Review,* Cable TV
    Financial Databook 2000, Aug. 2000, at 97.

[^84]: Paul Kagan Assocs., Inc., *June 1999 Cable Financing Snapshot,*
    Cable TV Finance, June 30, 2000, at 8.

[^85]: *See* App. B, Tbl., B-7.

[^86]: *Id.*

[^87]: Paul Kagan Assocs., Inc., *Estimated Capital Flows in Cable TV,*
    Cable TV Finance, June 29, 2000, at 2.

[^88]: *Id.* The 1998 data may not agree with data for the same date(s)
    in our *1999 Report* because the data have been revised by the
    source.

[^89]: Paul Kagan Assocs., Inc., *Estimated Capital Flows in Cable TV,*
    Cable TV Finance, June 29, 2000, at 2.

[^90]: \"New builds\" are the construction of new cable plant where none
    existed before, primarily newly built homes.

[^91]: \"Rebuilds\" are improvements to existing systems that do not
    retain much of the old system plant and equipment. Instead, they
    consist of mostly new plant and equipment.

[^92]: \"Upgrades\" are improvements to existing cable systems that do
    not require the replacement of the entire existing plant and
    equipment.

[^93]: Paul Kagan Assocs., Inc., *Estimated Capital Flows in Cable TV,*
    Cable TV Finance, June 29, 2000, at 2.

[^94]: NCTA Comments at 5.

[^95]: Cable operators continue to rebuild and upgrade their systems to
    increase channel capacity and to develop facilities for advanced
    services.

[^96]: The social contract with Time Warner committed that MSO to spend
    \$4 billion on upgrades over a five-year period and to provide 100
    percent of its subscribers with 550 MHz service and 50 percent of
    its subscribers with 750 MHz service. *Social Contract for Time
    Warner,* 11 FCC Rcd 2788 (1995). Time Warner's annual social
    contract implementation report indicates that the MSO is ahead of
    schedule and fully expects to meet or exceed all its obligations
    under the Social Contract by the end of 2000. Letter from Stuart F.
    Feldstein to Deborah A. Lathen, Chief, Cable Services Bureau, March
    30, 2000, attaching Time Warner Cable Social Contract Progress
    Report 1999. The social contract with MediaOne commits that MSO to
    spend \$1.7 billion on upgrades over a four-year period ending
    December 31, 2000, and also to provide 100 percent of its
    subscribers with 550 MHz service and 50 percent of its subscribers
    with 750 MHz service. *Social Contract for Continental Cablevision,
    Inc.* (subsequently MediaOne), 13 FCC Rcd 11118 (1996). By the end
    of 1999, MediaOne had already invested \$3.58 billion during the
    contract period. MediaOne reports that it has surpassed its
    financial commitment under the social contract, and should exceed
    its original commitment by \$2.67 billion by the end of 2000. Letter
    from Margaret A. Sofio, Vice President -- Law, MediaOne Group, to
    Magalie Roman Salas, Secretary, Federal Communications Commission,
    March 31, 2000, attaching MediaOne Social Contract Annual Progress
    Report, 1999. The third MSO, Comcast reported that as of March 31,
    2000, it continues to provide services and materials and perform
    upgrades in accordance with the terms of the Social Contract.
    *Social Contract for Comcast Cable Communications, Inc.,* 13 FCC Rcd
    3612 (1997); Letter from Peter H. Feinberg, Attorney, Dow, Lohnes &
    Albertson, PLLC, to Magalie Roman Salas, Secretary, Federal
    Communications Commission, March 31, 2000, attaching Comcast Cable
    Communications 1999 Annual Social Contract Progress Report.

[^97]: Richard Bilotti, Benjamin Swinburne, and Megan Lynch, *Industry
    Review: The Marquis de Broadbandbur*y, Morgan Stanley Dean Witter,
    Oct. 3, 2000, at 47 ("Morgan Stanley Dean Witter -- Broadbandbury").

[^98]: Letter from Margaret A. Sofio, Vice President -- Law, MediaOne
    Group, to Magalie Roman Salas, Secretary, Federal Communications
    Commission, Mar. 31, 2000, attaching MediaOne Social Contract Annual
    Progress Report, 1999.

[^99]: Richard Bilotti, Benjamin Swinburne, and Megan Lynch, *Comcast:
    Second-Quarter Results and Fiscal Year-End Preview*, Morgan Stanley
    Dean Witter, Aug. 16, 2000, at 4; Dennis Leibowitz, *Broadcasting,
    Cable and Wireless: May 1- May 5, 2000*, Donaldson, Lufkin &
    Jenrette, May 5, 2000, at 12.

[^100]: Richard Bilotti, Benjamin Swinburne, Gary Lieberman, and Marc
    Nabi, *1Q00 Review/2Q00 Preview: Party on at the Oligopoly Lounge,*
    Morgan Stanley Dean Witter, Apr. 4, 2000, at 34; Morgan Stanley Dean
    Witter -- Broadbandbury at 65.

[^101]: Morgan Stanley Dean Witter -- Broadbandbury at 47; Richard
    Bilotti, Benjamin Swinburne, and Megan Lynch, *Adelphia: Coudersport
    Cocktail*, Morgan Stanley Dean Witter, June 20, 2000, at 45.

[^102]: Morgan Stanley Dean Witter -- Broadbandbury at 47 and 112.

[^103]: *Id.* at 112.

[^104]: This includes all systems bought and sold. *See* App. B, Tbl.
    B-8.

[^105]: Some transactions recorded on this table have been announced to
    the public but may not actually take place. Most recorded
    transactions do take place, although a few each year do not. *See*
    App. B, Tbl. B-8.

[^106]: *Id.*

[^107]: *Id.*

[^108]: *Id.*

[^109]: *Id.*

[^110]: Paul Kagan Assocs., Inc., *Cable TV Franchising Competition,*
    1995-1999 *Franchise Awards*, Cable TV Financial Databook 2000, Aug.
    2000, at 90-94. This includes 91 municipally operated cable systems
    as of year-end 1999. *See* Paul Kagan Assocs., Inc., *Municipal
    Cable Systems,* Cable TV Financial Databook 2000, Aug. 2000, at 95.

[^111]: 47 U.S.C. § 543 (l)(1); 47 C.F.R. § 76.905 (b).

[^112]: *1999 Report,* 15 FCC Rcd at 1037-42 ¶ 123-131. *See also* ¶¶
    121-129 *infra*.

[^113]: *1999 Report,* 15 FCC Rcd at 1037 ¶ 123. *See also* ¶¶ 121-129
    *infra*.

[^114]: John M. Higgins, *Ameritech to Sell Cable*, Broadcasting &
    Cable, March 13, 2000, at 6; *See also* ¶¶ 121-129 *infra*.

[^115]: RCN Corp., *RCN Reports Strong Second Quarter Results* (press
    release), July 31, 2000.

[^116]: Dennis H. Leibowitz, *Current Trends in Broadcasting, Cable,
    Advertising, Publishing, and Entertainment*, *February/March 2000*,
    Apr. 18, 2000, at 10-11; RCN Corp., *RCN Reports Strong Second
    Quarter Results* (press release), July 31, 2000. *See also* ¶¶
    121-129 *infra.*

[^117]: RCN Comments at 6.

[^118]: Vulcan Ventures holds 96 percent of cable operator Charter
    Communications.

[^119]: Knology, Inc., *Knology Reports Continued Strong Growth in 2^nd^
    Quarter 2000* (press release), Aug. 10, 2000.

[^120]: Dennis H. Leibowitz, *Current Trends in Broadcasting, Cable,
    Advertising, Publishing, and Entertainment*, *February/March 2000*,
    Apr. 18, 2000, at 11.

[^121]: Bell South Comments at 2; s*ee also* ¶¶ 121-129 *infra*.

[^122]: *See* ¶¶ 213-234 *infra.*

[^123]: *See* ¶¶ 235-231 *infra.*

[^124]: Digital video offers superior video picture quality because it
    is more likely to maintain signal integrity than analog video. As
    analog video signals travel from the cable operator to the
    subscriber, signals risk interference from equipment leaks or other
    hardware factors. Digital signals, on the other hand, are composed
    of discrete codes of information and carry error-correcting codes
    that can regenerate any lost data. Analog signals can be amplified,
    but little can be done to correct any distortion that may occur to
    the signal through transmission.

[^125]: In allocating bandwidth to digital video, an operator must
    determine the number of analog or otherwise unused channels to
    devote to digital video. In attempting to maximize the number of
    digital program channels per available bandwidth, operators have
    tried to maximize digital compression ratios.

[^126]: Advanced video service offerings enabled by digital signal
    transmission include electronic programming guides, video-on-demand,
    and interactive television ("ITV") which can include basic
    Internet-like functionality, such as real-time text messaging
    ("chat"), and e-mail.

[^127]: *See 1999 Report,* 15 FCC Rcd at 1002 ¶ 52.

[^128]: Jessica Rief Cohen and Nathalie Brochu, *Stocks Remained Under
    Pressure in 2Q00, Despite Solid Fundamentals*, Merrill Lynch, July
    28, 2000, at 17 ("Merrill Lynch -- 2Q00"). Analysts note that
    Cablevision has yet to roll out a digital product due to the
    strength of its advanced analog product, but that it is looking to
    rollout to 5,000 trial subscribers by the end of 2000. *Id.*

[^129]: *See 1999 Report,* 15 FCC Rcd at 1035 ¶ 119; *see also* ¶ 118
    *infra*.

[^130]: *See* ¶¶ 118, 206 *infra.*

[^131]: *See 1999 Report,* 15 FCC Rcd at 1002-03 ¶ 53. Section 629 of
    the Communications Act requires that the Commission adopt
    regulations to assure the commercial availability of navigation
    devices. In 1998, the Commission adopted rules to implement Section
    629. The purpose of Section 629 and the rules adopted thereunder is
    to assure consumers the opportunity to purchase navigation devices
    from sources other than their MVPD service provider. *See* 47 U.S.C.
    §549; *see also Implementation of Section 304 of the
    Telecommunications Act of 1996, Commercial Availability of
    Navigation Devices*, CS Docket No. 97-80, Report and Order, 13 FCC
    Rcd 14775 (1998)*; Implementation of Section 304 of the
    Telecommunications Act of 1996, Commercial Availability of
    Navigation Devices*, CS Docket 97-80, Order on Reconsideration, 14
    FCC Rcd 7596 (1999).

[^132]: *Implementation of Section 304 of the Telecommunications Act of
    1996 - Commercial Availability of Navigation Devices*, CS Docket No.
    97-80, Further Notice of Proposed Rule Making and Declaratory
    Ruling, 15 FCC Rcd 18199 (2000).

[^133]: CableLabs*, CableLabs Selects Three Firms to Serve as Primary
    Authors on Key OpenCable Software Specifications* (press release),
    Sept. 14, 2000.

[^134]: *1999 Report*, 15 FCC Rcd at 1004 ¶ 57; Cable Television
    Laboratories, Inc. ("CableLabs"), *What is CableLabs?,*
    http://www.cablelabs.com/start_here.

[^135]: *See* CableLabs*, CableLabs Selects Three Firms to Serve as
    Primary Authors on Key OpenCable Software Specifications* (press
    release), Sept. 14, 2000. *See also* CableLabs*, Open Letter to
    Companies Interested in Participating in OpenCable* (Request for
    Information), 1997. The goal of CableLabs is to attain interoperable
    digital set-top boxes manufactured by multiple vendors for sale at
    the retail level. This would allow consumers to purchase set-top
    boxes at retail outlets, rather than being required to lease the set
    top from the cable provider, as is current practice. Further,
    consumers will be able to use the same set top box even if they
    change cable provider. CableLabs, *CableLabs Selects Three Firms to
    Serve as Primary Authors on Key OpenCable Software Specifications*
    (press release), Sept. 14, 2000.

[^136]: CableLabs, *CableLabs Selects Three Firms to Serve as Primary
    Authors on Key OpenCable Software Specifications* (press release),
    Sept. 14, 2000*.*

[^137]: *Id.* "Middleware" is the operating software used on a set-top
    box device to allow applications to run. "Middleware" is similar to
    the operating systems on a personal computer.

[^138]: *Id.*

[^139]: Merrill Lynch -- 2Q00 at 17.

[^140]: *Id.*

[^141]: *Id*. *See also* Morgan Stanley Dean Witter -- Broadbandbury at
    14.

[^142]: Cox Communications, Inc., *Cox Communications Updates Investors
    on Successful Delivery of Advanced Broadband Communications
    Services* (press release), June 1, 2000; Cox Communications, Inc.,
    *Cox Communications Reaches Milestone of 1 Million New Service
    Subscriptions* (press release), July 31, 2000.

[^143]: Cox Communications, Inc., *Cox Communications Launches
    Movies-On-Demand Service in San Diego* (press release), Sept. 25,
    2000.

[^144]: Comcast Reply Comments at 7-8.

[^145]: *Id.* at 8.

[^146]: *Id.* at 7.

[^147]: *Id.* at 9.

[^148]: Richard Bilotti, Benjamin Swinburne, and Megan Lynch, *Adelphia:
    Second-Quarter Results and Fiscal Year-End Preview*, Morgan Stanley
    Dean Witter, Oct. 3, 2000, at 5-6; Dennis Leibowitz, *Broadcasting,
    Cable and Wireless: August 14-August 21, 2000*, Donaldson, Lufkin &
    Jenrette, Aug. 21, 2000, at 2.

[^149]: Paul Kagan Assocs., Inc., *Digital Cable Deployments,* The Cable
    TV Financial Databook 2000, Aug. 2000, at 84-89.

[^150]: *Id.*

[^151]: Laura Martin and Daniel P. Reingold, *Focus on Value: AT&T
    Cable*, Credit Suisse First Boston, June 21, 2000, at 7.

[^152]: Paul Kagan Assocs., Inc., *Digital Cable Deployments,* The Cable
    TV Financial Databook 2000, Aug. 2000, at 84-89; Richard Bilotti,
    Benjamin Swinburne, and Megan Lynch, *Charter: Second-Quarter
    Results and Fiscal Year-End Preview*, Morgan Stanley Dean Witter,
    Aug. 16, 2000, at 2.

[^153]: Richard Bilotti, Benjamin Swinburne, and Megan Lynch, *Charter:
    Second-Quarter Results and Fiscal Year-End Preview*, Morgan Stanley
    Dean Witter, Aug. 16, 2000, at 3-4.

[^154]: The maximum speed of an analog telephone dial-up modem is
    currently 56.6 kbps. Many 56.6 kbps telephone-line modems can be
    purchased for as low as \$29.99. *See* http://www.bestbuy.com. The
    typical cost of service from an Internet service provider is
    approximately \$19.95 per month depending on the features of the
    service, though some services offer connection for as low as \$9.95
    a month. *See* http://www.earthlink.net; *see also* www.erols.com.

[^155]: Richard Bilotti, Benjamin Swinburne, Megan Lynch, Scott Babka,
    and Gary Lieberman, *Broadband/CATV Industry Review: Building the
    Digital Home Network*, Morgan Stanley Dean Witter, July 1, 2000, at
    23 ("Morgan Stanley Dean Witter -- Digital Home Network"). Last
    year, we reported that approximately 65 percent of Internet users
    access the Internet using analog telephone dial-up modems. This
    year, we report the percent of households that access the Internet
    as there are multiple Internet users in a single household using a
    shared mode of access. *See 1999 Report*, 15 FCC Rcd at 1003-04 ¶
    55.

[^156]: Morgan Stanley Dean Witter -- Digital Home Network at 23.
    Broadband technologies include cable broadband, telephone company
    digital subscriber line ("DSL"), broadband wireless, and broadband
    satellite. By 2004, analysts expect 21.3 percent of households will
    access the Internet through cable broadband, 23.6 percent through
    DSL and 5.5 percent through wireless and satellite broadband
    technologies. *Id.* Broadband technologies allow users to access the
    Internet at much greater speeds than is available over traditional
    dial-up connections*. See 1999 Report*, 15 FCC Rcd at 1003-04 ¶¶
    55-56.

[^157]: *1999 Report,* 15 FCC Rcd at 1004 ¶ 56. The other means of
    accessing the Internet over cable broadband infrastructure is
    through the television using special equipment, as discussed in ¶ 54
    *infra*. Internet access via a cable modem enables access to a wide
    array of services including Web browsing, e-mail, streaming audio
    and video, local content, and CD-ROM servers. *See 1999 Report*, 15
    FCC Rcd at 1005 ¶ 58.

[^158]: Internet access over cable infrastructure offers a maximum
    downstream speed of 27 megabits-per-second (\"Mbps"). However,
    because cable broadband network capacity is shared among users and
    hardware limitations, most connections are between one and ten Mbps.
    Sanford C. Bernstein & Co., Inc. and McKinsey & Company, Inc.,
    *Broadband! A Joint Industry Study,* Jan. 2000, at 37-39
    ("Bernstein/McKinsey - Broadband!").

[^159]: *See 1999 Report,* 15 FCC Rcd at 1004 ¶ 57.

[^160]: CableLabs Certified means that a modem complies with CableLab's
    cable modem specifications which ensures that it will interoperate
    with qualified cable systems worldwide. CableLabs, *CableLabs
    Certifies More Modems* (press release), Oct. 20, 2000.

[^161]: CableLabs, *CableLabs Certifies More Modems* (press release),
    Oct. 20, 2000. *See also*
    http://www.cabledatacomnews.com/oct00/oct00-1.html.

[^162]: CableLabs, *CableLabs Concludes Milestone Modem Certification
    Wave* (press release), Dec. 15, 2000.

[^163]: *See 1999 Report,* 15 FCC Rcd at 1005 ¶ 58.

[^164]: Kinetic Strategies, Inc., *Cable Modem Market Stats &
    Projections,* Cable Datacom News, http://www.
    cabledatacomnews.com/cmic/cmic16.html.

[^165]: *See* App. B, Tbl. B-9. This list is not exhaustive. The MSOs
    listed here are examples of cable operators currently providing
    Internet access to subscribers in some of their service areas.

[^166]: Most cable providers hold interest in the chosen ISP and also
    provide proprietary content to that ISP. *See Inquiry Concerning
    High-Speed Access to the Internet Over Cable and Other Facilities,*
    GN Docket No. 00-185, *Notice of Inquiry* ("*High-Speed Access
    Inquiry*"), 15 FCC Rcd 19287 ¶ 10 (2000).

[^167]: Currently, most cable operators only offer their customers one
    ISP. However, some MSOs are beginning to offer customers a choice
    among two or three ISPs. For example, Time Warner has recently
    concluded a deal with Juno to provide Juno ISP service in addition
    to Road Runner ISP services, subject to Time Warner's pre-existing
    obligations with Road Runner. Time Warner also plans to offer AOL's
    ISP service over its cable systems. And Comcast has announced a
    multiple ISP trial with Juno making Juno available over certain
    Comcast cable systems. *See* Juno Online Services, Inc./Time Warner,
    Inc., *Juno and Time Warner Reach Agreement to Offer Juno Express
    Over Time Warner Cable Systems* (press release), July 31, 2000; Time
    Warner, Inc., *America Online and Time Warner Announce Framework for
    Agreements to Offer AOL Service and Other ISPs on Time Warner
    Broadband Cable Systems* (press release), Feb. 29, 2000; Comcast
    Cable Communications, Inc., *Comcast and Juno Announce Multiple ISP
    Trial* (press release), Nov. 29, 2000; Today, *Leading Cable MSOs
    Quietly Shift Toward Open Access*, Communications Daily, Apr. 6,
    2000, at 4-5. "\[a\]t least 7 of \[the\] 11 largest cable operators
    are looking at offering access to multiple ISPs on their high-speed
    broadband lines" *Id.*

[^168]: *See High-Speed Access Inquiry*.

[^169]: *Id.*

[^170]: As reported in our *1998* and *1999 Reports*, Excite@Home and
    Road Runner are technologically different from other cable ISPs in
    that each provide its own local network and own routing and caching
    (storage) servers, allowing for increased access to popular content.
    *See 1998 Report*, 13 FCC Rcd at 24316 ¶ 56 and *1999 Report*, 15
    FCC Rcd at 1005 ¶ 59. In March 2000, AT&T gained majority control of
    Excite@Home over its partners Cox and Comcast. *See* AtHome Corp.,
    *Excite@Home's Principal Cable Partners Extend Distribution, AT&T
    Assumes More Prominent Role* (press release), Mar. 29, 2000.
    Furthermore, through its merger with MediaOne, AT&T gained control
    over MediaOne's Time Warner Entertainment partnership interest in
    Road Runner which it is subsequently required to divest pursuant to
    Department of Justice decree. *See Department of Justice v. AT&T
    Corp. and MediaOne Group, Inc.*, Case No: 1.00CV01176 (May 2000). In
    February 2000, America Online Inc., filed an application with the
    Commission for the transfer of licenses in order to acquire Time
    Warner Inc. By acquiring Time Warner Inc., AOL would effectively
    acquire Time Warner's majority interest in Road Runner through the
    Time Warner Entertainment partnership. *See Applications of Time
    Warner Inc., and America Online, Inc. for Consent to Transfer of
    Control of Licenses*, CS Docket 00-30, Feb. 11, 2000. The Commission
    has not released its order in this proceeding.

[^171]: AtHome Corp., *Excite@ Home* *Surpasses 2 Million Broadband
    Subscribers* (press release), Aug. 23, 2000; AtHome Corp., *Excite@
    Home* *Reports Second Quarter 2000 Results* (press release), July
    19, 2000.

[^172]: Road Runner, *RoadRunner Hits A Million* (press release), Aug.
    23, 2000.

[^173]: Kinetic Strategies, Inc., *Cable Internet Service Providers and
    Systems Integrators*, Cable Datacom News,
    http://www.cabledatacomnews.com/cmic/cmic5.html.

[^174]: Cox Communications, Inc., *Cox Communications Reaches Milestone
    of 1 Million New Service Subscriptions* (press release), July 31,
    2000; Jessica Rief Cohen and Nathalie Brochu, *Stocks Remained Under
    Pressure in 2Q00, Despite Solid Fundamentals*, Merrill Lynch, July
    28, 2000, at 100.

[^175]: Jessica Rief Cohen and Nathalie Brochu, *Stocks Remained Under
    Pressure in 2Q00, Despite Solid Fundamentals*, Merrill Lynch, July
    28, 2000, at 100.

[^176]: Comcast Reply Comments at 9.

[^177]: *Id.* Comcast offers Expressnet high-speed data service in the
    systems it acquired from Jones in Arlington, Virginia, and
    Montgomery County, Maryland. *See* Kinetic Strategies, Inc.,
    *Commercial Cable Modem Launches in North America,* Cable Datacom
    News, http://www.cabledatacomnews.com/cmic/cmic7.html.

[^178]: Morgan Stanley Dean Witter -- Broadbandbury at 68. AT&T's
    originally owned systems provide \@Home service and those systems
    acquired from MediaOne offer Road Runner service.

[^179]: Cablevision Systems Corporation, *Cablevision Systems
    Corporation Reports Second Quarter Financial Results* (press
    release), Aug. 9, 2000.

[^180]: *See* App. B, Tbl. B-10.

[^181]: Merrill Lynch -- 2Q00 at 66-67.

[^182]: *Id.* at 142.

[^183]: *See* Morgan Stanley Dean Witter -- Digital Home Network at 23.
    *See also generally* Bernstein/McKinsey - Broadband! The acronym
    \"xDSL\" refers to a general class of digital subscriber line
    technologies. We report on ADSL because it is the most feasible for
    mass market deployment at this time. Another type of xDSL technology
    is VDSL, which is the fastest of xDSL technologies, performing at
    rates of up to 52 Mbps. VDSL is expensive to deploy and cannot
    function over sustained distances, thus it has not been widely
    deployed.

[^184]: *Second Inquiry Concerning the Deployment of Advanced
    Telecommunications Capability Pursuant to Section 706 of the
    Telecommunications Act of 1996*, CC Docket No. 98-146, FCC 00-290
    (rel. Aug. 21, 2000) at ¶36 n. 47.

[^185]: *1998 Report,* 13 FCC Rcd at 24314 ¶ 52. Another advantage is
    the ability to offer customers simultaneous, high-speed Internet and
    voice or facsimile capabilities over a single telephone. Dedicated
    lines that run from the telephone subscriber's home to the central
    office can guarantee the user a constant, high-speed rate of data
    transmission and security line. This means that there is no decrease
    in data transfer speeds as more users get online, unlike cable's
    shared network. *See* *1999 Report*, 15 FCC Rcd at 1007 ¶ 61.

[^186]: Telechoice Inc., *TeleChoice2Q00 DSL Deployment Summary,* at
    http://www.xdsl.com.

[^187]: *Second Inquiry Concerning the Deployment of Advanced
    Telecommunications Capability Pursuant to Section 706 of the
    Telecommunications Act of 1996*, CC Docket No. 98-146, FCC 00-290
    (rel. Aug. 21, 2000) at Tbls. D-2 to D-4. *See also*
    Bernstein/McKinsey - Broadband! at 33.

[^188]: *See* Morgan Stanley Dean Witter -- Digital Home Network at 23.

[^189]: *Id.* One analyst estimates that by year-end 2002 there will be
    approximately 10.1 million DSL subscribers and 9.1 million cable
    subscribers. *Id.*

[^190]: Qwest, *MegaBit Select,* http://www.uswest.com.

[^191]: Bell Atlantic Corp., *About Speed*,
    http://www.bellatlantic.com/infospeed/more_info/about_speed.html.
    Bell Atlantic also offers a service with data transfer rates of 960
    kbps to 1.6 Mbps downstream and 90 kbps upstream for \$99.95 per
    month. Bell Atlantic offers another service for \$189.95 a month
    offering transfer speeds of 4.48 Mbps to 7.1 Mbps downstream and 384
    kbps to 680 kbps upstream. *Id.*

[^192]: At Home Corp., *The Facts About Speed,* at
    http://www.home.net/speed.

[^193]: *1999 Report*, 15 FCC Rcd at 1008 ¶ 63.

[^194]: *1998 Report,* 13 FCC Rcd at 24315 ¶ 54; *1999 Report*, 15 FCC
    Rcd at 1008 ¶ 64.

[^195]: 1*999 Report,* 15 FCC Rcd at 1008 ¶ 64. Hyperlinking, in this
    context, is the technology that combines broadcast or cable
    television and telephone Internet connections to offer consumers
    access to supplemental information to television shows, one-button
    ordering, and the ability to play along with television shows when
    applicable.

[^196]: *See* WebTV*, Products, Classic, Pricing,* at
    http://www.webtv.com/products/classic/pricing.html. Web TV offers
    numerous levels of service ranging from \$9.95 to \$24.95. *See*
    WebTV at http://www.webtv.com

[^197]: *See* Spencer Wang, *Interactive Television*, ING Barrings
    Furman Selz, Sept. 2000.

[^198]: For an explanation of how the WebTV and Worldgate services
    operate, *see 1998 Report*, 13 FCC Rcd at 24315-6 ¶ 54. On June 19,
    2000, AOL announced the launch of its ITV service, AOLTV. AOLTV is
    currently being test marketed in select cities (Phoenix, Sacramento,
    and Baltimore), though a larger deployment is planned. The AOLTV
    service includes e-mail, chat, instant messaging, Web browsing and
    enhanced interactive programming, which allows viewers to interact
    with programming in which the programmer has included interactive
    content. *See* America Online, *America Online Launches AOLTV*
    (press release), June 19, 2000; *see also Applications of America
    Online, Inc. and Time Warner, Inc. for Transfers of Control, CS
    Docket No. 00-30*, *ex parte* letter from George Vradenburg, III,
    Senior Vice President, Global and Strategic Policy, AOL, Inc., and
    Timothy A. Boggs, Senior Vice President, Global Public Policy, Time
    Warner, Inc., to Deborah Lathen, Chief, Cable Services Bureau, Sept.
    29, 2000, at 4.

[^199]: Richard Bilotti, Benjamin Swinburne, and Megan Lynch, *Charter:
    Second-Quarter Results and Fiscal Year-End Preview*, Morgan Stanley
    Dean Witter, Aug. 16, 2000, at 3-4.

[^200]: As we have reported in past *Reports*, a cable telephony voice
    call and an IP telephony voice call both begin with special
    equipment that connects a household\'s twisted pair infrastructure
    with its cable infrastructure. Cable circuit-switched telephony,
    however, eventually turns the call over to traditional \"circuit
    switched\" processing, while IP telephony eventually turns the call
    over to the network of the Internet for IP processing. IP telephony
    processes voice telephone calls much like data are processed on the
    Internet; that is, digitized pieces of data are divided into
    discrete packets and are transported over the Internet following
    "the path of least resistance.\" This refers to the manner in which
    Internet data travels -- data packets take any path that does not
    resist transfer. The path of least resistance is not always the
    shortest path, but it is the most reliable path for the mass
    transfer of data.

[^201]: *See* Merrill Lynch -- 2Q00 at 23.

[^202]: *Id.*

[^203]: *Id.*

[^204]: *Id.*

[^205]: CableLabs, *Bukovinsky Selected to Blend CableLab's Packet Cable
    and Cable Modem Initiatives* (press release), Sept. 9, 1999.

[^206]: CableLabs, *CableLabs Issues Final PacketCable Feature Set for
    Residential IP Voice Service* (press release), May 8, 2000.

[^207]: *Id.*

[^208]: *Id.*

[^209]: *Id.*

[^210]: CableLabs, *PacketCable Ends Round 2 of Testing, Releases Draft
    Compliance Test Plans* (press release), July 21, 2000.

[^211]: *Id.* PacketCable compliance test plans would establish
    specifications that a manufacturer would have to meet in order to
    make a PacketCable compliant IP telephony.

[^212]: Merrill Lynch -- 2Q00 at 23.

[^213]: *Id.*

[^214]: AT&T Corp., *AT&T and Cablevision to Create High-Value
    Telecommunications Bundle for New York Metropolitan Area Customers*
    (press release), Feb 23, 2000; AT&T Corp., *AT&T and Time Warner
    Cable Announce Joint Marketing Agreement* (press release), Mar. 7,
    2000. AT&T has begun to market its service with Cablevision, but has
    not moved forward in its agreement with Time Warner. *See* AT&T
    Corp., *AT&T and Cablevision Unveil Plans to Give Customers
    "Something Extra"* (press release), May 4, 2000.

[^215]: AT&T Corp., *Insight Communications and AT&T Broadband Finalize
    Agreement to Offer Local Telephone Service* (press release), July
    24, 2000.

[^216]: Comcast Corp., *Two Companies to Collaborate in Offering*
    Telephony, (press release), May 16, 2000. Comcast's agreement with
    AT&T is contingent on AT&T partnering with at least two other MSOs.
    *Id.*

[^217]: Merrill Lynch -- 2Q00 at 23.

[^218]: Comcast Comments at 10.

[^219]: *Id.*

[^220]: *Id.* at 11.

[^221]: Cablevision Systems Corporation*, Cablevision Systems
    Corporation Reports Fourth Quarter and Full Year 1999 Financial
    Results* (press release), Feb. 17, 2000.

[^222]: *Id.*

[^223]: Cablevision Systems Corporation*, Cablevision Systems
    Corporation Reports Second Quarter Financial Results* (press
    release) Aug. 9, 2000; Cablevision Systems Corporation*, Cablevision
    Systems Corporation Reports Fourth Quarter and Full Year 1999
    Financial Results* (press release), Feb. 17, 2000.

[^224]: Merrill Lynch -- 2Q00 at 23.

[^225]: Morgan Stanley Dean Witter -- Digital Home Network at 3.

[^226]: *1999 Report*, 15 FCC Rcd at 1011 at ¶ 68.

[^227]: Morgan Stanley Dean Witter -- Digital Home Network at 3.

[^228]: R/L DBS holds a permit to construct a DBS system but has not
    launched a satellite or begun service. In August 1999, R/L DBS filed
    a petition requesting an extension of its build-out requirements in
    order to construct and launch a satellite for DBS service, 130
    SAT-EXT-95. On December 28, 2000, the Commission granted a 36-month
    extension of time to R/L DBS. *See* *Petition of R/L DBS Company,
    L.L.C. For Extension of its Direct Broadcast Satellite Construction
    Permit*, Memorandum Opinion and Order, DA 00-2852 (rel. Dec. 29,
    2000).

[^229]: Dominion was originally issued its DBS construction permit in
    1982. Seventeen years later, on May 17, 1999, the Commission granted
    Dominion Video Satellite, Inc. authority to commence operation of a
    DBS service using an EchoStar satellite currently in orbit. *See*
    *Dominion Video Satellite, Inc. Application for Minor Modification
    of Authority to Construct and Launch and to Continue Construction
    and Launch of Planned Satellite at 61.5° W.L*. File No.
    12-SAT-ML-97, IBFS File No. SAT-MOD-19961108-00132; Application *for
    Additional Time to Construct and Launch Direct Broadcast
    Satellites*, File No. 13-SAT-MP/ML-97, IBFS File No.
    SAT-MOD-19961108-00133; *Application for Launch Authority*, File No.
    108-SAT-LA-97, IBFS File No. SAT- L/A-19970814-00074, Order and
    Authorization, 14 FCC Rcd 8182 (1999). *See also*
    http://www.skyangel.com. Dominion expects to launch its own
    satellite sometime in 2003.

[^230]: *1999 Report,* 15 FCC Rcd at 1011 ¶ 69.

[^231]: *Hughes on Market?,* Television Digest with Consumer
    Electronics, Sept. 11, 2000, at 6. *See also*, David Lieberman,
    *Murdoch Tries To Sweeten Bid For DirecTV*, USA Today, Dec. 7, 2000,
    at 1B. In a related transaction, Hughes sold its satellite
    manufacturing operations to the Boeing Company in early October
    2000, for \$3 billion. Proceeds from the sale are expected to be
    used primarily to fund the growth of its DirecTV, DirecPC broadband,
    and Spaceway businesses. *See* *Hughes Finalizes Sale of Satellite
    Operations to Boeing* (press release), Oct. 6, 2000.

[^232]: *Tempo Satellite, Inc., Assignor and DirecTV Enterprises, Inc.,
    Assignee, Application for Consent to Assign Authorization to
    Construct, Launch and Operate a Direct Broadcast Satellite System
    Using 11 Frequencies at the 119 degrees W.L. Orbital Location, TCI
    Satellite Entertainment, Inc., Transferor And Primestar, Inc.,
    Transferee, Application for Transfer of Control of Tempo Satellite,
    Inc. EchoStar Satellite Corporation And Directsat Corporation,
    Applications for Special Temporary Authority to Operate a Direct
    Broadcast Satellite System*, Order and Authorization, 14 FCC Rcd
    7946 (1999).

[^233]: In previous years, we included a discussion of Primestar
    Partners, L.P. (\"Primestar\"), a medium-powered Ku-band Fixed
    Satellite Service (\"FSS\"), together with our discussion of
    high-powered Ku-band DBS providers. In May 1999, DirecTV acquired
    the assets of the now-defunct Primestar DTH service. *See* *1998
    Report,* 13 FCC Rcd at 24323 ¶ 61.

[^234]: *Hughes Announces DirecTV Subscriber Additions for the Third
    Quarter* (press release), Oct. 4, 2000.

[^235]: Appendix C, Table C-1. *See also* SBCA Comments at 7, Table 1.
    Current subscriber numbers from SkyREPORT at
    www.skyreport.com/skyreport.com/dth_us.htm.

[^236]: NCTA Comments at 9.

[^237]: Christopher Stern and Peter S. Goodman, *FCC Clears Purchase of
    Media One By AT&*T, Washington Post, June 6, 2000, at A01. *See
    also* DirecTV Comments at 11, http://www.hughes.com.

[^238]: DirecTV Comments at 10. Hughes expects to add over two million
    additional customers by the end of 2000. *Hughes Announces DirecTV
    Subscriber Additions for the Third Quarter* (press release), Oct. 4,
    2000.

[^239]: EchoStar Comments at 1.

[^240]: Christopher Stern and Peter S. Goodman*, FCC Clears Purchase of
    MediaOne By AT&T; Divestitures Required For \$58 Billion Deal*, The
    Washington Post, June 6, 2000, at 1. NCTA Comments at 3.

[^241]: Donald Matheson, *IMARK Signs Contract with Sky Angel Network*,
    Canada Stockwatch, April 10, 2000, at 1. Dominion expects to offer
    20 channels of video programming by year-end 2000.

[^242]: Information from telephone conversation with Robert Johnson,
    CEO, Dominion, November 9, 2000.

[^243]: Sky Angel subscribers who wish to receive the Dish Network must
    subscribe separately to each service. The Dominion/EchoStar
    satellite sharing arrangement is technical in nature and not a joint
    venture or merger. Information from telephone conversation with
    Robert Johnson, CEO, Dominion, November 9, 2000.

[^244]: SBCA Comments at 1-2.

[^245]: *Id*. at 8-9, Table 3.

[^246]: *Id*. at 8.

[^247]: *See* *1999 Report,* 15 FCC Rcd at 1016 ¶ 78.

[^248]: DTH subscribership in Hawaii is approximately one percent. DBS
    service to Hawaii did not begin until April of 2000 when EchoStar
    introduced a 44-channel service offering to the islands. *See* State
    of Hawaii Reply Comments at 2; SBCA Comments at Appendix A.

[^249]: SBCA Comments at 6 and Appendix A; NCTA Comments at 10-11.

[^250]: DirecTV Comments at 13.

[^251]: *Id*.

[^252]: Ouray Cablevision in rural Colorado ceased cable service and
    provided each of its 1,000 customers satellite service through
    EchoStar. *See* John Higgins, *Switching to Satellite TV*,
    Broadcasting & Cable, July 17, 2000, at 26.

[^253]: Linda Moss, *Eking Out a Living,* Multichannel News, August 7,
    2000, at 54.

[^254]: SBCA Comments at 5, 7-9.

[^255]: SHVIA was enacted as Title I of the Intellectual Property and
    Communications Omnibus Reform Act of 1999 (\"IPACORA\") (relating to
    copyright licensing and carriage of broadcast signals by satellite
    carriers, codified in scattered sections of 17 and 47 U.S.C.),
    Pub.L. No. 106-113, 113 Stat. 1501, 1501A-526 to 1501A-545 (Nov. 29,
    1999).

[^256]: SBCA Comments at 8.

[^257]: These markets are: Birmingham, Alabama; Phoenix, Arizona; Los
    Angeles, Sacramento/Stockton, San Diego, San Francisco/Oakland/San
    Jose, California; Denver, Colorado; Washington, D.C.; Miami/Ft.
    Lauderdale, Orlando/Daytona, Tampa/St. Petersburg/Sarasota, Florida;
    Atlanta, Georgia; Chicago, Illinois; Indianapolis, Indiana; Boston,
    Massachusetts; Baltimore, Maryland; Detroit, Michigan;
    Minneapolis/St. Paul, Minnesota; Kansas City, St. Louis, Missouri;
    Charlotte, Greensboro, Raleigh/Durham, North Carolina; New York, New
    York; Cincinnati, Cleveland, Ohio; Portland, Oregon; Philadelphia,
    Pittsburgh, Pennsylvania; Greenville, South Carolina; Memphis,
    Nashville, Tennessee; Dallas/Ft. Worth, Houston, San Antonio, Texas;
    Salt Lake City, Utah; Seattle/Tacoma, Washington; and Milwaukee,
    Wisconsin. *See Implementation of the Satellite Home Viewer
    Improvement Act of 1999: Broadcast Signal Carriage Issues*, CS
    Docket No. 00-96, Report and Order, FCC 00-417 (rel. Nov. 30, 2000)
    at Appendices D and E ("*SHVIA Signal Carriage Order*"); *see also*
    http://www.directv.com.

[^258]: DirecTV Comments at 12, footnote 25. The new markets listed in
    its comments are: Birmingham, Alabama, Greensboro, North Carolina,
    West Palm Beach, Florida, Columbus, Ohio, Austin and San Antonio,
    Texas. In these markets, the local channels will be received from
    the DirecTV satellite at 119 degrees WL and will require the use of
    a multi-satellite capable system. *See*
    http://www.directv.com/press/.

[^259]: DirecTV Comments at 13.

[^260]: EchoStar's DISH Network currently offers local channels in 34
    metro areas, including: Phoenix, Arizona; Los Angeles,
    Sacramento/Stockton, San Diego, San Francisco/Oakland/San Jose,
    California; Denver, Colorado; Washington, D.C.; Miami/Ft.
    Lauderdale, Orlando/Daytona, Tampa/St. Petersburg/Sarasota, Florida;
    Atlanta, Georgia; Chicago, Illinois; Indianapolis, Indiana; Boston,
    Massachusetts; Detroit, Michigan; Minneapolis/St. Paul, Minnesota;
    Kansas City, St. Louis, Missouri; Charlotte, Raleigh/Durham, North
    Carolina; Albuquerque, New Mexico; New York, New York; Cincinnati,
    Cleveland, Ohio; Portland, Oregon; Philadelphia, Pittsburgh,
    Pennsylvania; Greenville-Spartanburg, South Carolina; Nashville,
    Tennessee; Dallas/Ft. Worth, Houston, San Antonio, Texas; Salt Lake
    City, Utah; and Seattle/Tacoma, Washington. *See SHVIA Signal
    Carriage Order*. *See* *also* http://www.dishnetwork.com/ and
    http://www.skyreport.com/skyreport/local.htm.

[^261]: *Implementation of the Satellite Home Viewer Improvement Act
    1999: Broadcast Signal Carriage Issues, Retransmission Consent
    Issues*, CS Docket Nos. 00-96, 99-363, Report and Order, FCC 00-417
    (rel. Nov. 30, 2000); *Technical Standards for Determining
    Eligibility For Satellite-Delivered Network Signals Pursuant To the
    Satellite Home Viewer Improvement Act*, ET Docket No. 00-90, Report,
    FCC 00-416 (rel. Nov. 29, 2000); *Implementation of the Satellite
    Home Viewer Improvement Act of 1999: Application of Network
    Non-Duplication, Syndicated Exclusivity, and Sports Blackout Rules
    To Satellite Retrasmissions of Broadcast Signals*, CS Docket No.
    00-2, Report and Order, FCC 00-338 (rel. Nov. 2, 2000);
    *Implementation of the Satellite Home Viewer Improvement Act of
    1999, Enforcement Procedures for Retransmission Consent Violations*,
    Order, 15 FCC Rcd 2522 (2000); *Implementation of the Satellite Home
    Viewer Improvement Act of 1999, Retransmission Consent Issues: Good
    Faith Negotiation and Exclusivity*, CS Docket No. 99-363, First
    Report and Order, 15 FCC Rcd 5445 (2000).

[^262]: AT&T Comments at 3; NCTA Comments at 3.

[^263]: American Broadband Comments at 8-9; EchoStar Comments at 2.

[^264]: AT&T Comments at 2-5. AT&T refers to the Department of Justice's
    1998 decision to block Primestar Inc., from acquiring a high powered
    DBS slot owned by MCI and News Corp. Primestar was owned by a group
    of companies, including the largest cable MSOs at that time. The
    decision notes that "consumers view \[cable and DBS\] as similar and
    to a large degree substitutable." *See* Complaint, *United States v.
    Primestar, Inc*. No. 1:98CV01193 (D.D.C. 1998) at 63.

[^265]: NCTA Comments at 3.

[^266]: EchoStar Comments at 1.

[^267]: Christopher Stern, *Cable's Satellite Wars*, Washington Post,
    Aug 13, 2000, at H1.

[^268]: American Broadband Comments at 8. GAO Report to Congressional
    Requestors*, The Effect of Competition from Satellite Providers on
    Cable Rates*, July 2000 ("GAO Study").

[^269]: GAO Study at 7. The study found several demand, cost, and market
    structure factors were associated with cable rates.

[^270]: DirecPC uses a slightly larger dish antenna to view a FSS
    satellite in addition to the DBS satellite. *See* Hughes Network
    Systems, http://www.direcpc.com.

[^271]: WildBlue\'s investors include EchoStar, Liberty Media Group, TV
    Guide, Kleiner Perkins Caufield & Byers, TRW and TeleSat. *See*
    www.wildblue.com. *See also* *Satellite Broadband Company Chooses
    WildBlue Brand Name* (press release), Aug 14, 2000; Price Colman,
    *The Highway to High Speed*, Broadcasting & Cable, May 8, 2000, at
    30.

[^272]: *DBS Service Planned.(EchoStar And iSKY To Offer 2-Way Wireless
    Broadband Services*), Television Digest, April 3, 2000, at 9.

[^273]: *Starband Launches Two‑Way Satellite Internet Service,*
    Communications Daily, Nov. 7, 2000.

[^274]: Price Colman, *The Highway to High Speed*, Broadcasting & Cable,
    May 8, 2000, at 32.

[^275]: Monica Hogan, *DBS Providers Set Two-Way Broadband Plans,*
    Multichannel News, April 17, 2000, at 53.

[^276]: *Id*.

[^277]: Carmel Group, *Interactivity by Satellite and Cable: The Future
    of TV?*, DBS Investor, Sept. 1999, at 16.

[^278]: Price Colman, *The Highway to High Speed*, Broadcasting & Cable
    May 8, 2000, at 32.

[^279]: *See* *Non-Geostationary Satellite Services Proposed In the
    Ku-Band; Expanded Services to DBS Subscribers Also Considered*,
    General Action, ET Docket 98-206, Report No. GN 98-13 (1998). The
    Commission has also proposed to allow non-Geostationary Orbit Fixed
    Satellite Services (NGSO FSS) in this frequency range. In addition
    to its participation in ET Docket 98-206, Northpoint and its
    affiliates (under the name Broadwave USA) have filed license
    applications for the 12.2-12.7 GHz band covering the United States
    and competing terrestrial applications have been filed by Pegasus
    Communications and Satellite Receivers, Inc.

[^280]: The Commission also adopted a Further Notice of Proposed
    Rulemaking seeking comment on technical and service rules for
    licensing the new services*. Amendment of Parts 2 and 25 of the
    Commission's Rules to Permit Operation of NGSO FSS Systems
    Co-Frequency With GSO and Terrestrial Systems in the Ku-Band
    Frequency Band; Amendment of the Commission's Rules to Authorize
    Subsidiary Terrestrial Use of the 12.2-12.7 GHz Band by Direct
    Broadcast Licensees and Their Affiliates; and Applications of
    Broadwave USA, PDC Broadband Corporation, and Satellite Receivers,
    Ltd., to Provide A Fixed Service in the 12.2-12.7 GHz Band*, ET
    Docket No. 98-206, RM-9147, RM-92-45, First Report and Order and
    Further Notice of Proposed Rulemaking ("*New Fixed Satellite
    Services Order*"), FCC 00-418 (rel. Dec. 8, 2000).

[^281]: Paige Albiniak, *DBS Battles Northpoint*, Broadcasting & Cable,
    May 1, 2000, at 20. John M. Higgins, *The Next Big Thing?,*
    Broadcasting & Cable, August 7, 2000, at 23-30.

[^282]: SBCA Comments at 3, Appendix D.

[^283]: *See New Fixed Satellite Services Order*.

[^284]: *Id.*

[^285]: On November 19, 1998, the Commission adopted rules implementing
    Section 25 of the 1992 Cable Act, which requires that DBS providers
    must reserve four percent of their channel capacity exclusively for
    use by qualified programmers for noncommercial programming of an
    educational or informational nature. Channel capacity is determined
    annually by calculating the average number of channels available for
    video programming on all satellites licensed to the provider during
    the previous year. *See* *Implementation of Section 25 of the Cable
    Television Consumer Protection and Competition Act of 1992, Direct
    Broadcast Satellite Public Interest Obligations*, MM Docket No.
    93-25, Report and Order ("*DBS Public Interest Order*"), 13 FCC Rcd
    23254 (1998).

[^286]: *DBS Public Interest Order*, 13 FCC Rcd at 23309-10 ¶136; *see
    also* 47 C.F.R. § 100.5(c)(7). EchoStar initially failed to meet the
    deadline to begin public interest programming and was eventually
    fined \$11,000 for non-compliance with Commission rules. *See*
    *American Distance Education Consortium*, Declaratory Ruling and
    Order, 14 FCC Rcd 19976 (1999*). See also* *EchoStar Satellite
    Corporation, Licensee of Direct Broadcast Satellite System*, File
    No. EB-00-1H-0014, NAL/Acct No. X32080009 JJS, Notice of Apparent
    Liability for Forfeiture, 15 FCC Rcd 5557 (2000).

[^287]: EchoStar, *DISH Network Satellite Television Adds Five New
    Public Interest Channels* (press release), Dec. 19, 2000. *See also*
    www.echostar.com.

[^288]: *DBS Shows Diversity*, Television Digest, Sept 4, 2000, at 4.
    *See also* www.directv.com.

[^289]: Among DBS public interest offerings are Free Speech TV, Hispanic
    Information Telecommunications Network, WorldLink TV, Eternal World
    TV, Good Samaritan Network, Trinity Broadcasting, Brigham Young
    University, C-SPAN, NASA-TV, Northern Arizona University, The
    Research Channel, Clara+Vision, Inspirational Life, and StarNet.
    *See* *Competition to Cable*, Warren\'s Cable Regulation Monitor,
    September 11, 2000.

[^290]: *DBS Shows Diversity*, Television Digest, Sept 4, 2000, at 4.

[^291]: SBCA Comments at 7-8, Tables 1 and 3.

[^292]: Art Durbano, *50 Reasons Why Bigger is Better*, Satellite Orbit,
    March 2000, at 15.

[^293]: SBCA Comments at 6.

[^294]: Dowgewicz Comments at 1-2. Mr. Dowgewicz expressed concern,
    however, that HSD programming is increasingly being sold in bundled
    packages of programming thereby eliminating one of the service's
    advantages.

[^295]: *1999 Report*, 15 FCC Rcd at 1019 ¶ 84. Art Durbano, *50 Reasons
    Why Bigger is Better*, Satellite Orbit, March 2000, at 16.

[^296]: SBCA Comments at 6. Althought most C-band satellite receivers
    are analog and do not receive digital signals, C-band customers may
    buy a digital decoder/receiver in order to access and view digital
    programming.

[^297]: *Amendment of Parts 21 and 74 of the Commission\'s Rules with
    Regard to Filing Procedures in the Multipoint Distribution Service
    and in the Instructional Television Fixed Service and Implementation
    of Section 309(j) of the Communications Act - Competitive Bidding*,
    MM Docket. No. 94-131 and PP Docket No. 93-253, Report and Order, 10
    FCC Rcd at 9589, 9593 ¶ 7 (1995); *1996 Report*, 12 FCC Rcd at 4386
    ¶ 51 n.152.

[^298]: *1999 Report*, 15 FCC Rcd at 1019-20 ¶ 86.

[^299]: *See* ¶ 89 *infra*.

[^300]: WCA Comments at 2.

[^301]: *Id.*

[^302]: *See Amendment of Parts 21 and 74 to Enable Multipoint
    Distribution Service and Instructional Television Fixed Service
    Licensees to Engage in Fixed Two-Way Transmissions,* 13 FCC Rcd
    19112 (1998), *recon*., 14 FCC Rcd 12764 (1999), *further recon.
    pending. See also Mass Media Bureau Multipoint Distribution Service
    and Instructional Television Fixed Service Applications Tendered for
    Filing*, Public *Notice,* Report No. 148 (November 29, 2000) in
    which the Mass Media Bureau listed over 2200 applications for
    MDS/MMDS and ITFS that were tendered for filing during the initial
    two-way filing window pursuant to *Mass Media Bureau Provides
    Further Information on Application Filing Procedures and Announces
    Availability of Electronic Filing for Two-Way Multipoint
    Distribution Service and Instructional Television Fixed* Service,
    Public *Notice,* 15 FCC Rcd 11466 (2000).

[^303]: Paul Kagan Assocs., Inc., *Wireless Cable Sub Count and Revenue
    Projections, 1998-2009*, Wireless/Private Cable Investor, July 13,
    1999, at 4-5. (Paul Kagan Associates did not update this number for
    2000.) The number of homes with a \"servicable line of sight\"
    counts all homes which an MMDS operator is licensed to serve within
    a particular license area, regardless of technical limitations such
    as signal strength or blockage by terrain. The number of \"homes
    seen,\" on the other hand, is the number of homes that MMDS
    operators have the technical ability to serve. For more discussion,
    *see 1997 Report*, 13 FCC Rcd at 1081 ¶ 74, n. 272.

[^304]: WCA Comments at 3 *citing* Paul Kagan Assocs., Inc., *Wireless
    Cable -- Private Cable Investor*, Nov. 5, 1999, at 6.

[^305]: Paul Kagan Assocs., Inc., *Basic Cable Network Economics,
    1995-2010*, Cable Program Investor, June 16, 2000, at 7*.*

[^306]: *See, e.g.,*
    http://www.nucentrix.com/site/television/products/index.html.

[^307]: *1999 Report*, 15 FCC Rcd at 1020 ¶ 88.

[^308]: *See* ¶ 121 *infra*.

[^309]: *1999 Report*, 15 FCC Rcd at 1020-21 ¶ 89.

[^310]: MCI WorldCom, *MCI Worldcom To Test 'Fixed Wireless' Service In
    Boston* (press release), Mar. 27, 2000. One press report indicates
    that MCI Worldcom began commercial service in Memphis. TR Daily,
    *WorldCom Begins Rollout of MMDS Service*, Nov. 15, 2000, at 9.

[^311]: MCI WorldCom, *MCI Worldcom Adds Dallas To 'Fixed Wireless'
    Service Trials* (press release), Apr. 5, 2000.

[^312]: WorldCom, *WorldCom Seeks Broadband Fixed Wireless Authority*
    (press release), Aug. 14, 2000.

[^313]: Sprint, *Sprint Powers Wichita's Residential and Small Business
    Customers With New Broadband Wireless Service* (press release), Dec.
    5, 2000.

[^314]: KaganBROADBAND, *Sprint Takes Run at Bigger MMDS Footprint*,
    Aug. 24, 2000, at 1.

[^315]: BellSouth Comments at 3-5.

[^316]: *Id.* at 5-6. *See also* WCA Comments at 8-10 (particularly
    noting cable operators' successes at denying regional sports
    programming from competitors).

[^317]: BellSouth Comments at 6.

[^318]: *Id.* at 7-9. *See also* WCA Comments at 4-8 (requesting a
    thorough inquiry into the effects of a sunset) and 13-14.

[^319]: 1996 Act, sec. 301(a)(2), 47 U.S.C. § 522(7). SMATV systems do
    not use public rights-of-way, and thus fall outside of the
    Communications Act\'s definition of a cable system.

[^320]: SMATV providers receive and process satellite signals directly
    at an MDU or other private property with an on‑site headend facility
    consisting of receivers, processors and modulators, and distribute
    the programming to individual units through an internal hard‑wire
    system in the building. Regulatory changes in 1991 made 18 GHz
    technology available for the point-to-point delivery of video
    programming services, allowing operators to free themselves from
    large networks of coaxial or fiber optic cable and amplifiers.
    Operators using this technology are known as enhanced SMATV
    operators, and because of efficiency savings, they are more
    competitive with cable operators than standard SMATV operators.
    *1999 Report*, 15 FCC Rcd at 1022 ¶ 92.

[^321]: 1996 Act, sec. 301(a)(2), 47 U.S.C. § 522(7). For example,
    private cable and SMATV operators: (a) are not required to obtain
    cable television franchises; (b) do not face regulatory constraints
    on the geographic areas in which they may offer video services; (c)
    do not pay franchise and Federal Communications Commission
    subscriber fees; (d) are not obligated to pass every resident in a
    given area; (e) are not subject to rate regulation; and (f) are not
    subject to must carry and local government access obligations. *1997
    Report*, 13 FCC Rcd at 1085 ¶ 82, n. 296.

[^322]: *Id*. at 1085 ¶ 82. The Commission held in 1991 that microwave
    transmissions do not \"use\" public rights-of-way. *Amendment of
    Part 94 of the Commission's Rules to Permit Private Video
    Distribution Systems of Video Entertainment Access to the 18 GHz
    Band*, PR Docket No. 90-5, Report and Order, 6 FCC Rcd 1270, 1271 ¶
    10 (1991).

[^323]: 1996 Act sec. 301(a)(2), 47 U.S.C. § 522(7). Prior to the 1996
    Act, to qualify for this exception the buildings had to be under
    common ownership, control, or management. *1997 Report*, 13 FCC Rcd
    at 1085 ¶ 82, n. 297.

[^324]: *Id.* at 1085 ¶ 83.

[^325]: *Ten Largest Private Cable Operators/Multiple System Operators,*
    Private Cable & Wireless Cable, Dec. 1999, at 4.

[^326]: *Id.*

[^327]: *1999 Report,* 15 FCC Rcd at 1023 ¶ 94.

[^328]: NCTA Comments at 9. Last year, NCTA reported 1.45 million SMATV
    subscribers, which rounds to 1.5 million. *See 1999 Report,* 15 FCC
    Rcd at 1023-24 ¶ 95. This year NCTA reports 1.5 million SMATV
    subscribers. *See* NCTA Comments at 9.

[^329]: *See* Mor Allon, *Competition for Convergence: The Battle Cry
    for Bundled Services*, Private & Wireless Broadband, Sept. 2000, at
    32; *see also* Gerard Lavery Lederer, *Critical Connection?*,
    Private & Wireless Broadband, July 2000, at 28; *1998 Report*, 13
    FCC Rcd at 24342 ¶ 92; *1999 Report,* 15 FCC Rcd at 1024-25 ¶¶
    94-98. In previous years, we reported that SMATV providers offer
    other unique services such as closed-circuit security monitoring,
    voice mail, paging, and touch-screen monitor kiosk customer service.
    *1999 Report,* 15 FCC Rcd at 1024 ¶ 96.

[^330]: Mor Allon, *How the PCO Can Improve the Bottom Line Providing
    Bundled Services to MDUs*, Private & Wireless Broadband, June 2000,
    at 16. Last year we reported that the number of channels being
    offered by SMATV operators responding to an industry poll was
    approximately 89 channels, with a low of 50 channels and a high of
    200 channels offered. *1999 Report,* 15 FCC Rcd at 1024 ¶ 97. This
    figure is derived from the reports of 18 operators, and likely
    includes SMATV operators that offer video over a combined SMATV/DBS
    system.

[^331]: *1999 Report,* 15 FCC Rcd at 1024-25 ¶ 98. Such systems can
    offer residents traditional SMATV service alone, or a "bulk service"
    that combines traditional SMATV with select DBS feeds. Residents can
    also choose DBS on an a la carte basis and can thereby receive more
    channels than are available from bulk service. *Id.*

[^332]: *Id.* at 1024 ¶ 97.

[^333]: *Ten Largest Private Cable Operators/Multiple System Operators,*
    Private Cable & Wireless Cable, Dec. 1999, at 4. This information is
    based solely on responses to a Private Cable & Wireless Cable
    magazine survey.

[^334]: *Id.* at 5.

[^335]: *Redesignation of the 17.7-19.7 GHZ Frequency Band, Blanket
    Licensing of Satellite Earth Stations in the 17.7-20.2 GHz and
    27.5-30.0 GHz Frequency Bands, and the Allocation of Additional
    Spectrum in the 17.3-17.8 GHz and 24.75-25.25 GHz Frequency Bands
    for Broadcast Satellite-Service Use*, IB Docket No. 98-172, Report
    and Order ("*18 GHz Report and Order*"), 15 FCC Rcd 13430 (2000).

[^336]: *18 GHz Report and Order,* 15 FCC Rcd at 13446 ¶34.

[^337]: *Id.* at 13450 ¶41. "In consideration of the comments ... we
    conclude ...\[that\] private cable operators using the 18 GHz band,
    for both current and future operations, will not be able to compete
    effectively against franchised cable operators if we redesignate the
    18.3-18.55 GHz band..." *Id.*

[^338]: *1999 Report,* 15 FCC Rcd at 1023 ¶ 93; *Petition for Rulemaking
    To Amend Eligibility Requirements in Part 78 Regarding 12 GHz Cable
    Television Relay Service*, CS Docket No. 99-250, Notice of Proposed
    Rulemaking, 14 FCC Rcd 11967 (1999).

[^339]: 47 C.F.R. § 78.13.

[^340]: *See 1998 Report*, 13 FCC Rcd at 24340 ¶ 89; *see also
    Entertainment Connections, Inc., Motion for Declaratory Ruling,*
    Memorandum Opinion and Order ("*1998 ECI Ruling*"), 13 FCC Rcd at
    14277 (1998).

[^341]: *See 1998 ECI Ruling*.

[^342]: *City of Chicago v. FCC*, 199 F.3d 424 (7th Cir. 1999), *cert.
    denied*, 121 S. Ct. 71 (2000).

[^343]: *Id*.

[^344]: *Telecommunications Services Inside Wiring, Customer Premises
    Equipment, Implementation of the Consumer Protection and Competition
    Act of 1992: Cable Home Wiring*, CS Docket No. 95-184 and MM Docket
    No. 92-260, Report and Order and Second Further Notice of Proposed
    Rulemaking ("*Inside Wiring Order*"), 13 FCC Rcd 3659 (1998).

[^345]: *See 1995 Report*, 11 FCC Rcd at 2113-15 ¶¶ 112-115.

[^346]: *Compare* Federal Communications Commission, *Broadcast Station
    Totals as of August 30, 1999*, FCC News Release (Sept. 11, 1999)
    *with* Federal Communications Commission, *Broadcast Station Totals
    as of September 30, 2000*, FCC News Release (Nov. 29, 2000). Totals
    as of August 2000 are not available.

[^347]: Television Bureau of Advertising, *Total Local Market Broadcast
    TV Rises 1.7% in 4Q 1999* (press release), Mar. 8, 2000.

[^348]: *Id.*

[^349]: NCTA, *Cable Advertising Revenue: 1983-1998 (In Millions)*,
    Cable Television Developments, Summer 1999, at 9 (*citing* Paul
    Kagan Assocs., Inc., *Cable TV Advertising*, May 21, 1999, at 2).

[^350]: *People\'s Choice: Broadcast Network Prime-Time Ratings
    According to Nielsen Media Research, Sept. 13-19*, Broadcasting &
    Cable, Sept. 27, 1999, at 74. Figures were not available for PaxTV.

[^351]: NCTA, *Viewing Shares: Broadcast Years 1987/1988-1997/1998*,
    Cable Television Developments, Summer 1999, at 5 (*citing* Nielsen
    Media Research statistics).

[^352]: *1**999 Report*, 15 FCC Rcd at 1027 ¶¶ 104-105. "Repurposing"
    generally involves a re-run of broadcast content on a different
    network (cable or broadcast) shortly after it airs originally on
    network affiliate stations.

[^353]: Comm. Daily, *Mass Media*, Mar. 16, 2000, at 11. In addition, in
    some markets, PaxTV carried the Major League Baseball playoffs, the
    rights of which are owned by NBC, while NBC stations aired the
    Presidential debates. Comm. Daily, *Mass Media*, Oct. 4, 2000, at 9.

[^354]: Comm. Daily, *PAXTV To Air Brokaw Nightly News Minutes After NBC
    Affliliates*, Apr. 19, 2000, at 6.

[^355]: Comm. Daily, *Mass Media*, May 2, 2000, at 8.

[^356]: Jennifer Pendelton, *ABC Claims Cable Repeats No
    Cannibalization*, Cable World, Jan. 24, 2000, at 18.

[^357]: *1999 Report*, 15 FCC Rcd at 1028 ¶¶ 106.

[^358]: For an updated list on the status of DTV broadcasts, *see* the
    FCC Web site http://www.fcc.gov/mmb/vsd/files/dtvsum.html.

[^359]: *Id*.

[^360]: Comm. Daily, *Mass Media*, Sept. 29, 2000, at 8. *See also* Glen
    Dickson, *CBS Boosts Prime Time HDTV*, Broadcasting & Cable, Aug.
    28, 2000, at 68.

[^361]: Jerry Ascieto, *HDTV Around the Dial*, ElectronicNew*s*, May 15,
    2000, located at
    http://www.electronicnews.com/issue/Registeredissues/2000/05152000/z54f-3.asp
    (visited Dec. 1, 2000).

[^362]: *Id.*

[^363]: KaganBROADBAND, *Broadcasters: Backatcha, Cable & DSL*, Mar. 23,
    2000, at 1. The consortia are named the "Broadcaster's Digital
    Cooperative" and "iBLAST."

[^364]: *See* National Cable Television Association, *CEA and NCTA Reach
    Agreement Enabling Compatibility Between Cable Television Systems
    And Digital Televisions* (press release), Feb. 23, 2000.

[^365]: *See* Federal Communications Commission, *FCC Adopts Rules For
    Labeling Of DTV Receivers*, FCC News Release (Sept. 14, 2000).

[^366]: *Id.*

[^367]: On September 14, 2000, the Commission determined that some
    measure of anti-copying encryption technology located within a host
    navigation device is consistent with the Commission\'s navigation
    devices rules, but that determination of whether particular
    implementations of copyright protection are consistent with these
    rules is best resolved in a narrow declaratory ruling. *See
    Implementation of Section 304 of the Telecommunications Act of 1996
    Commercial Availability of Navigation Devices*, 15 FCC Rcd 18199
    (2000).

[^368]: *See Carriage of the Transmissions of Digital Television
    Broadcast Stations*, CS Docket No. 98-120, Notice of Proposed Rule
    Making, 13 FCC Rcd 15092 (1998).

[^369]: *1999 Report*, 15 FCC Rcd at 1029 ¶ 108.

[^370]: Federal Communications Commission, *FCC Denies Sinclair Petition
    For Rulemaking On COFDM Standard*, FCC News Release (Oct. 24, 2000).
    Separately, in a July 24, 2000, letter, Chairman Kennard urged the
    broadcast industry not to switch DTV transmission standards, because
    such a switch, "...at this late date could lead to lengthy and
    unacceptable delays in the DTV transition process and could
    undermine the service replication and interference goals on which
    the DTV transition is based." *See* Letter from William E. Kennard,
    Chairman, FCC, to Edward O. Fritts, President and CEO, National
    Association of Broadcasters, July 24, 2000. The Commission invited
    comment on the current status of the DTV broadcasting standard in a
    biennial review of the DTV transition, including information on any
    additional studies conducted regarding NTSC replication using the
    8-VSB standard. It specifically asked for comments on progress being
    made to improve indoor DTV reception under this standard, and
    manufacturers\' efforts to implement DTV design or chip
    improvements. *See Review of the Commission\'s Rules and Policies
    Affecting The Conversion To Digital Television*, MM Docket No.
    00-39, Notice of Proposed Rule Making, 15 FCC Rcd 5257 (2000).

[^371]: Comm. Daily, *ATSC Forms Task Force To Study RF System
    Performance*, Mar. 22, 2000, at 1-2.

[^372]: Fox Comments at 2.

[^373]: *Id.*

[^374]: Paxson Comments at 5-6.

[^375]: *Id.* at 9-10.

[^376]: *Id.* at 9.

[^377]: *Id.* at 10.

[^378]: Fewer than 50,000 viewers have purchased receivers necessary to
    watch over-the-air DTV broadcasts. Bill McConnell, The Cable
    Standard, Broadcasting & Cable, Sept. 4, 2000, at 52.

[^379]: Internet video is also known as "streaming video," because data
    are "streamed" over the Internet to provide continuous motion video.

[^380]: Nielsen Net Ratings, Inc., *Internet Access Tops 56 Percent in
    U.S., According to Nielsen/NetRatings* (press release), Dec. 18,
    2000.

[^381]: *Streaming Media Use Grows to New High According to Nielsen-Net
    Ratings*, Cyber Atlas, Dec. 12, 2000, at
    www/cyberatlas.internet.com/big_picture/demographics/article/0,1323,5931_533211,00.html.

[^382]: Some investment analysts remain skeptical of streaming video,
    arguing that the quality of streaming media, especially in the
    prevalent 56 kbps modem connections, is not of sufficient quality to
    maintain consumer interest for long periods of time. One analyst
    notes that consumers would need at least 128 kbps, if not 200 kbps,
    to get quality streaming media. Even then, another analyst notes
    that the technical limitations of IP to deliver video must be
    addressed and the public network must be upgraded to avoid
    bottlenecks. In addition, consumer access to broadband connections
    is still limited, and in some parts of the United States, broadband
    access is nonexistent. Antone Ginsalves, *Streaming Media Appeals To
    Wall Street*, [TechWeb Finance]{.smallcaps}, June 2, 2000, at
    http://www.techweb.com/printableArticle?doc_id=INV20000602S000; *see
    also* Paul Kagan Assocs., Inc., *On2.com Launches TV Programming on
    Net*, Kagan Broadband, Jan. 19, 2000, at 2.

[^383]: *Second Inquiry Concerning the Deployment of Advanced
    Telecommunications Capability Pursuant to Section 706 of the
    Telecommunications Act of 1996*, CC Docket No. 98-146, Second
    Report, FCC 00-290 (rel. Aug. 21, 2000) at Appendices D-1 to D-4.

[^384]: 47 C.F.R. § 532; *see Petition Seeking Declaratory Ruling that
    Internet Service Providers are Entitled to Commercial Leased Access
    to Cable Facilities Under Section 612 of the Communications Act of
    1934, as Amended,* Public Notice ("*IVI Petition*"), 14 FCC Rcd 9101
    (1999).

[^385]: *Id*. *See also Internet Ventures, Inc., Internet On-Ramp, Inc.,
    Petition for Declaratory Ruling that Internet Service Providers are
    Entitled to Leased Access to Cable Facilities Under Section 612 of
    the Communications Act,* File No. CSR-5407-L, Memorandum Opinion and
    Order ("*IVI Order*"), 15 FCC Rcd 3247, 3250 ¶ 6 (2000).

[^386]: *IVI Order*, 15 FCC Rcd at 3253 ¶ 12.

[^387]: *Id.* at 3254 ¶ 13.

[^388]: *Id.* "Admittedly we might face a different set of issues if
    IVI, or another ISP, proposed to utilize leased access capacity for
    the provision of a service comprised wholly of video programming
    available via the Internet." *Id.*

[^389]: Anna Wilde Mathews*, Movie Studios Sue Web Site Offering TV-show
    Replays,* [The Wall Street Journal on MSNBC,]{.smallcaps} at
    http://www.msnbc.com/news/421507.asp; Borland, *Hollywood Cracks
    Down on Web VCR Site*, CNET News.com, June 15, 2000, at
    http://news.cnet.com/news/0-1004-202-2086951.html*.*

[^390]: Anna Wilde Mathews*, Movie Studios Sue Web Site Offering TV-show
    Replays,* [The Wall Street Journal on MSNBC,]{.smallcaps} at
    http://www.msnbc.com/news/421507.asp.

[^391]: *Id.*

[^392]: *JumpTV Planning to Stream U.S. TV Stations, But Only Into
    Canada*, Comm Daily, Sept. 26, 2000, at 2.

[^393]: *New Media*, Comm. Daily, Oct. 27, 2000, at 8.

[^394]: http://www.icast.com; http://www.tvontheweb.com; http://
    www.breaktv.com; http://www.feedroom./com; http://www.fastv.com.

[^395]: RealNetworks, Inc., *RealNetworks Widens Lead in Media Player
    Usage* (press release), July 17, 2000; *see also*
    http://www.realnetworks.com.

[^396]: Karen Brown, *Streaming Kings*, Cable World, June 12, 2000, at
    14; *see also*
    http://www.microsoft.com/windows/windowsmedia/en/default.asp; *see
    also* http://www.apple.com/quicktime/.

[^397]: New Media, Comm Daily, Aug. 3, 2000, at 9.

[^398]: *Television.com Plugs In Partners*, [Adweek Online]{.smallcaps},
    June 23, 2000, at www.adweek.com/daily/June/iq/iq062000-46.asp.

[^399]: iBeam Broadcasting Corp., *Form 10-Q for the Quarter-ended June
    30, 2000*, Overview at 12; *see also* Matt Stump, *iBeam's Streaming
    Strategy*, Cable World, Feb. 21, 2000, at 24.

[^400]: S*ee* http://www.lariat.com;
    http://internet.arbitron.com/webcast_index.htm.

[^401]: *1999 Report,* 15 FCC Rcd at 1031 ¶ 112; *see also*
    http://www.mediachannel.com/info.htm; http://www.channelseek.com.

[^402]: Programming available for rent or purchase in the various home
    video formats now include theatrically-released movies,
    direct-to-video titles, certain movies originally shown on premium
    channels, documentaries, and concerts. Viacom Inc., SEC Form
    10-K405, March 31, 1999. For example, in 1999, 2,677 titles were
    released in DVD format, 41 percent of these were theatrical films,
    16 percent were direct to video titles, and 43 percent were special
    interest, music, foreign language, or other type of title. Video
    Software Dealers Association, *An Annual Report on the Home Video
    Market 2000* ("VSDA Report") at 10.

[^403]: *See, e.g., Competition, Rate Deregulation and the Commission's
    Policies Relating to the Provision of Cable Television Service*, MM
    Docket No. 89-600, Report, 5 FCC Rcd 4962, 5019-20 ¶¶ 109-110
    (1990); *1995 Report*, 11 FCC Rcd at 2118-9 ¶ 121; *1998 Report*, 13
    FCC Rcd at 24350 ¶ 106. *See also* *1997 Report*, 13 FCC Rcd at
    1096-7 ¶¶ 103-4 (premium and pay-per-view cable services are not
    regulated because they are competitive with the home video sales and
    rental market).

[^404]: Viacom Inc., SEC Form 10-K405, March 24, 2000 ("Viacom 10-K");
    Hollywood Entertainment Corp., SEC Form 10-K; March 30, 2000
    ("Hollywood Entertainment 10-K"); Blockbuster Inc., SEC Form
    10-K405, March 24, 2000 ("Blockbuster 10-K"). In August 2000,
    Blockbuster began selling DirecTV equipment and programming packages
    and it plans to test a video-on-demand service for movies and video
    games next year. *Satellite Business News Fax Update*, August 25,
    2000; *New Media*, Communications Daily, Oct. 27, 2000, at 8; Martha
    McNeil Hamilton, *Blockbuster Branches Out*, Washington Post,
    Sept.19, 2000, at E1.

[^405]: VSDA Report at 23-25; Hollywood Entertainment 10-K; Viacom 10-K;
    Blockbuster 10-K.

[^406]: Blockbuster 10-K and Hollywood Entertainment 10-K *citing* Paul
    Kagan Associates statistics. *See also* VSDA Report at 9.

[^407]: VSDA Report at 3, 15. In 1998, the average DVD player sold for
    \$428 and in 1999 the average price was \$298.

[^408]: Tom Shales, *Shall we Dance? With DVD, Indeed*, Washington Post,
    June 2, 1999, at C1.

[^409]: VSDA Report at 5.

[^410]: *Id*. at 5, 7-8. This increase is primarily attributable to an
    increase in prices charged since the number of total transactions
    fell slightly in 1999.

[^411]: VSDA Report at 8.

[^412]: *Id*. at 11.

[^413]: *Id*. at 12. Videos also can be borrowed from public libraries.

[^414]: VSDA Report at 17; Blockbuster 10-K.

[^415]: VSDA Report at 4, 12

[^416]: Hollywood Entertainment 10-K *citing* Video Store Magazine and
    Paul Kagan.

[^417]: *1999 Report*, 15 FCC Rcd at 1033-4 ¶ 117. *See also* Hollywood
    Entertainment 10-K; Blockbuster 10-K (new stores carry about 4,500
    titles).

[^418]: VSDA Report at 13. *See also* Hollywood Entertainment 10-K.

[^419]: *1998 Report*, 13 FCC Rcd at 24350-1 ¶ 106. *See also* VSDA
    Report at 14; Hollywood Entertainment 10-K; Viacom 10-K.

[^420]: VSDA Report at 3-4, 16. Blockbuster is experimenting with a
    video reservation system in Denver and Austin. *See*
    http://www.blockbuster.com. Alternatively, for a monthly fee,
    Netflix allows consumers to rent videos from its Internet site with
    the videos sent to the consumer and returned to the company through
    the mail. *See* http://www.netflix.com.

[^421]: For example, Hollywood Entertainment acquired Reel.com in order
    to electronically deliver entertainment products directly to homes.
    Hollywood Entertainment 10-K. Best Buy and Blockbuster also have
    Internet sites for purchasing video programming; *see*
    http://www.bestbuy.com and http://www.blockbuster.com, respectively.
    Express.com is limited to the sales of DVDs. *See*
    http://www.express.com.

[^422]: VSDA Report at 20. Amazon.com led all online retailers with \$64
    million in VHS and DVD sales in 1999, followed by Express.com with
    \$60 million, and Hollywood Entertainment's Reel.com with \$40
    million in sales. *Id*.

[^423]: Blockbuster 10-K (in conjunction with AOL, Blockbuster is
    developing broadband content and delivery and considering
    video-on-demand, near video-on-demand, subscription video-on-demand,
    and games-on-demand).

[^424]: *1999 Report*, 15 FCC Rcd at 1035 ¶ 119.

[^425]: TiVo Inc., SEC Form 10-K405, March 30, 2000 ("TiVo 10-K");
    ReplayTV Inc., SEC Form S-1/A, May 1, 2000 ("ReplayTV S-1/a").

[^426]: VSDA Report at 24.

[^427]: *See* Mike Musgrove, *ReplayTV to Cut Staff, Exit Retail
    Business*, Washington Post, Nov. 29, 2000, at E4.

[^428]: Jim Forkan, *PVRs Are Stirring Advertising Unrest*, Multichannel
    News, April 10, 2000; Glen Dickson, *Forrester Foresees "Smart TV"*,
    Broadcasting & Cable, July 17, 2000, at 10. Michael Lewis, *Boom
    Box*, New York Times Magazine, August 13, 2000, at 40. ReplayTV
    indicates that it had shipped only 9,000 units through March 31,
    2000, when its PVRs became available in retail stores as well as
    through a toll-free number and the Internet. ReplayTV S-1/A.

[^429]: TiVo 10-K; ReplayTV S-1/A. *See also* Peter J. Brown, *PVRs:
    Content Control*, Broadcasting & Cable, July 10, 2000, at 38.

[^430]: *TiVo, Replay Launch Cable-PVR Trials*, Television Digest,
    August 14, 2000. For example, ReplayTV has agreements with Time
    Warner and Comcast and TiVo has agreements with Cox and Comcast.
    *See also* Glen Dickson, *ReplayTV Tackles Cable with Charter,
    Motorola*, Broadcasting & Cable, Oct. 9, 2000, at 48.

[^431]: Glen Dickson, *Ads With a Personal Touch*, Broadcasting & Cable,
    Sept. 4, 2000, at 34; Glen Dickson, *TiVo Enters Ad Arena*,
    Broadcasting & Cable, Sept. 25, 2000, at 45.

[^432]: Glen Dickson, *ReplayTV Tackles Cable with Charter, Motorola*,
    Broadcasting & Cable, Oct. 9, 2000, at 48; John M. Higgins,
    *Sprucing up for a Sale*, Broadcasting & Cable, Oct. 16, 2000, at
    32. DirecTV plans to create a video on demand service using this
    technology. Mark Seavy, *DirecTV Enters VoD, Though Not Necessarily
    with Movie Content*, Communications Daily, Oct. 30, 2000, at 3-4.

[^433]: http://www.dishnetwork.com/content/products/dplayer/compaison/index.shtml.
    WebTV Personal TV service is an additional option offered with
    EchoStar's DISHPlayer service. *See also*
    http://www.webtv.com/products/index.html; Walt Mossberg, *A Better,
    Cheaper Way To Bring Your TV Set Into the Digital* Age, The Wall
    Street Journal, March 23, 2000, at B1.

[^434]: ReplayTV, *ReplayTV Inc. Announces Strategic Direction for
    Future* (press release), Nov. 27, 2000,
    http://www.replaytv.com/news/pressrelease33.htm. *See also* Mike
    Musgrove, *ReplayTV to Cut Staff, Exit Retail Business*, Washington
    Post, Nov. 29, 2000, at E4.

[^435]: 47 U.S.C. § 571(a)(1).

[^436]: 47 U.S.C. § 571(a)(2).

[^437]: 47 U.S.C. § 571(a)(3).

[^438]: 47 U.S.C. § 571(a)(3)-(4).

[^439]: *1999 Report*, 15 FCC Rcd at 1036 ¶ 121.

[^440]: *See* ¶ 129 *infra*.

[^441]: RCN recently announced, however, that it was not going to launch
    or seek new franchises or open video certifications in response to
    tighter capital markets. It will instead concentrate on building out
    and increasing penetration in existing systems. RCN, *RCN Outlines
    2001 Plans for Growing Its Local Broadband Business* (press
    release), Dec. 21, 2000.

[^442]: *1998 Report,* 13 FCC Rcd at 24354 ¶ 112.

[^443]: As reported previously, BellSouth also serves New Orleans,
    Atlanta, and Orlando, Florida, with digital MMDS systems. BellSouth
    further reports that it offers analog MMDS service in Ft. Myers and
    Lakeland, Florida, and Louisville, Kentucky. BellSouth Comments at
    2. *See also 1999 Report*, 15 FCC Rcd at 1036 ¶ 122.

[^444]: BellSouth Comments at 2.

[^445]: *See* Letter from Karen B. Possner, Vice President -- Strategic
    Policy, BellSouth Corp., to William Johnson, Deputy Bureau Chief,
    Cable Services Bureau, FCC, Dec. 19, 2000. *See also* BellSouth
    Corp., *BellSouth Updates Plans for Restructuring its Video
    Entertainment Service* (press release), Dec. 19, 2000.

[^446]: *1998 Report*, 13 FCC Rcd at 24534 ¶ 112.

[^447]: Verizon Communications, *Bell Atlantic and GTE Complete Their
    Merger and Become Verizon Communications* (press release), June 30,
    2000.

[^448]: *See* Comm. Daily, *MSOs and Overbuilders Weigh Buying SBC,
    Verizon Cable Units*, Aug. 3, 2000, at 2. *See also* TR Daily,
    *Verizon Trying to Unload GTE Cable TV Assets*, July 3, 2000.

[^449]: *1999 Report*, 15 FCC Rcd at 1036-37 ¶ 123.

[^450]: Comm. Daily, *SBC Considering Sale of Ameritech Cable Systems*,
    Mar. 9, 2000, at 4. *See also* Comm. Daily, *MSOs and Overbuilders
    Weigh Buying SBC, Verizon Cable Units*, Aug. 3, 2000, at 2.

[^451]: *Id*.

[^452]: *1999 Report*, 15 FCC Rcd at 1037 ¶ 124. The active franchises
    are located in: Vestavia Hills, Alabama; St. John's County, Dade
    County, and Pembroke Pines, Florida; Counties of Cherokee, Dekalb,
    and Gwinnett and Cities of Chamblee, Duluth, Lawrenceville, and
    Woodstock, Georgia; and Daniel Island, South Carolina. BellSouth
    Comments at 2. BellSouth has indicated that its plans to shut down
    its MMDS systems will not affect its cable franchises. *See* Letter
    from Karen B. Possner, Vice President -- Strategic Policy, BellSouth
    Corp., to William Johnson, Deputy Bureau Chief, Cable Services
    Bureau, FCC, Dec. 19, 2000. *See also* BellSouth Corp., *BellSouth
    Updates Plans for Restructuring its Video Entertainment Service*
    (press release), Dec. 19, 2000.

[^453]: BellSouth Comments at 2.

[^454]: *1998 Report*, 13 FCC Rcd at 24355 ¶ 114.

[^455]: *See* fn. 448 *supra*.

[^456]: SNET Corp, http://www.snet.com/americast/amermain.htm. *See
    also* TR Daily, *SNET Exiting Connecticut Cable TV Market*, Aug. 11,
    2000.

[^457]: State of Connecticut, Department of Public Utility Control,
    *Application of SNET Personal Vision, Inc., To Modify Its Franchise
    Agreement*, Docket No. 99-04-02, Aug. 25, 1999.

[^458]: State of Connecticut, Department of Public Utility Control,
    *Application of of Southern New England Telecommunications
    Corporation's and SNET Personal Vision, Inc.'s Notice of Intent to
    Exit the Community Antenna Television Business and Request to
    Relinquish SNET Personal Vision, Inc.'s Certificate of Public
    Convenience*, Docket No. 00-08-14, Aug. 11, 2000. SNET told its
    video customers that it will offer them DBS service, or help them
    switch to another cable television service. TR Daily, *SNET Exiting
    Connecticut Cable TV Market*, Aug. 11, 2000. Connecticut Broadband,
    a subsidiary of Connecticut Telephone & Communications Systems,
    reportedly has offered to purchase SNET's cable network. Comm.
    Daily, *Mass Media*, Sept. 22, 2000, at 8.

[^459]: KaganBROADBAND, *Qwest Merger May Be VDSL Downfall*, July 5,
    2000, at 1.

[^460]: Qwest Communications International Inc*., Qwest Communications
    Completes Merger With U S West, Creating \$85 Billion Broadband
    Internet Communications Competitor* (press release), June 30, 2000.

[^461]: KaganBROADBAND, *Qwest Takes Wait-and-See on VDSL*, Sept. 8,
    2000, at 1.

[^462]: ^?^ MFS has withdrawn its two certifications for New York City
    and Boston because it does not plan to operate open video systems in
    those areas. Bell Atlantic, in Dover Township, New Jersey, shut down
    its system in favor of its distribution agreement with DirecTV. For
    a complete listing of approved, pending, and denied applications for
    OVS certification, *see* http://www.fcc.gov/csb/csovscer.html.

[^463]: As indicated above, however, RCN recently announced that it was
    not going to launch or seek new franchises or open video
    certifications in response to tighter capital markets. It will
    instead concentrate on building out and increasing penetration in
    existing systems. RCN, *RCN Outlines 2001 Plans for Growing Its
    Local Broadband Business* (press release), Dec. 21, 2000.

[^464]: RCN Comments at 4.

[^465]: *Id.*

[^466]: *Id.* at 5. *See also* American Broadband Comments at 2-3 and n.
    2 (stating the opposite, that American Broadband prefers to seek
    cable franchises).

[^467]: RCN Comments at 4.

[^468]: *Id.* at 3.

[^469]: *Id.* at 3-4.

[^470]: *Id.*

[^471]: *1998 Report*, 13 FCC Rcd at 24331-2 ¶ 74.

[^472]: BellSouth Corp., *BellSouth Announces Major Home Entertainment
    Initiative, Building an Even Bigger Bundle of Services* (press
    release), May 9, 2000. *See also* Comm. Daily, *Bellsouth To Provide
    Own Satellite TV Service*, May 10, 2000, at 1.

[^473]: *See* Letter from Karen B. Possner, Vice President -- Strategic
    Policy, BellSouth Corp., to William Johnson, Deputy Bureau Chief,
    Cable Services Bureau, FCC, Dec. 19, 2000.

[^474]: RCN Comments at 11-12. *See also* BellSouth Comments at 3-7
    (discussing the difficulty encountered by entrants obtaining
    programming, difficulty that is increasing with increasing
    concentration in the cable industry). *See* ¶ 90 *supra* for a more
    complete discussion of BellSouth's comments in this area.

[^475]: RCN Comments at 12-24; American Broadband Comments at 9-10.

[^476]: RCN Comments at 23.

[^477]: *Id.* at 24-26.

[^478]: *Id.* at 30-31. *See also* BellSouth Comments at 7-9; American
    Broadband Comments at 7-8.

[^479]: *Id.* at 31-32.

[^480]: *Id.* at 32-33.

[^481]: *See e.g.*, *1999 Report*, 15 FCC Rcd at 1042 ¶ 136.

[^482]: *See, e.g., 1998 Report*, 13 FCC Rcd at 24360 ¶¶ 120-121.

[^483]: *See* ¶¶ 126-128 *supra*.

[^484]: *1999 Report*, 15 FCC Rcd at 1042 ¶ 137.

[^485]: NCTA Comments at 23. NCTA also reports that, in July, Seren
    applied for franchises in 13 additional suburban St. Cloud
    communities.

[^486]: *Id*. As reported last year, Seren holds a franchise in Concord,
    California, and has applied for franchises in Danville, Pleasant
    Hill, Clayton, and unincorporated areas of Contra Costa County,
    California.

[^487]: NCTA Comments at 23.

[^488]: *Id.* at 22-23.

[^489]: *Id.*

[^490]: *Id.* at 23.

[^491]: Comm. Daily, *Mass Media*, Oct. 5, 2000, at 11.

[^492]: *1996 Report*, 12 FCC Rcd at 4419 ¶ 118; *1997 Report*, 13 FCC
    Rcd at 1121 ¶ 156.

[^493]: *Id*.

[^494]: *Id*.

[^495]: *1994 Report,* 9 FCC Rcd at ¶¶ 228-245. RCN Comments at 11-33.

[^496]: The number of communities in which a cable operator faces
    competition is determined by the number of communities that have
    been certified by the Commission as having effective competition on
    the basis of the head-to-head or LEC competition tests. If a cable
    operator facing competition from another provider chooses not to
    file a petition for a determination of effective competition, the
    community served by the cable operator is not included in the count.
    In addition, if a petition has been filed and is pending, that
    community also is not included in the count.

[^497]: *See* ¶¶ 235-238 *infra*.

[^498]: *See* ¶ 122 *supra*. Similarly GTE and SNET are also considering
    whether to sell their overbuild cable systems. *See* ¶ 124 *supra*.
    S*ee* *also* American Broadband Comments at 3.

[^499]: RCN Reply Comments at Appendix A.

[^500]: NCTA Comments at 6-15.

[^501]: *See* ¶¶ 68-71 *supra*.

[^502]: Townhouses and mobile home communities, nursing homes,
    hospitals, and hotels may also represent consumer segments in some
    markets.

[^503]: Jason Marcheck, *MDUs: Broadband's Wealth of Opportunity,*
    Private & Wireless Broadband, December 2000, at 16.

[^504]: *Top 20 MDU Companies and the Services They Are Planning to Buy
    in 2000 and Beyond*, Private Cable & Wireless Cable, December 1999,
    at 12.

[^505]: *Id*.

[^506]: *10 Largest Private Cable Operators/Multiple System Operators*,
    Private Cable & Wireless Cable, December 1999, at 4. Although RCN,
    the largest OVS operator, has converted a number of its open video
    systems to traditional cable systems.

[^507]: Jimmy Schaeffler, *DBS Providers Zero in on the Multihousing
    Market*, Private Cable & Wireless Cable, August 1999, at 22.

[^508]: Jimmy Schaeffler, *Is DBS Creating a Second Class of Americans?*
    Private & Wireless Broadband, November 2000, at 30.

[^509]: *Id*.

[^510]: CableDay, July 20, 1999, at 1.

[^511]: Joel Schofield, *WSNet Launches Nation's Third Digital Satellite
    Video Service,* Private & Wireless Broadband, May 2000, at 12.

[^512]: Larry Kessler, *Winning the Battle and the War: What Does It
    Take?* Private & Wireless Broadband, July 2000, at 10.

[^513]: *Id.*

[^514]: RCN also serves single family residences.

[^515]: *Id*.

[^516]: DirecTV Comments at 18-19; RCN Comments at 29; 1999 RCN Comments
    at 15-17.

[^517]: *Id*.

[^518]: Facsimile from ICTA, October 13, 1999, at 2.

[^519]: DirecTV Comments at 19.

[^520]: ICTA, *ex parte* filing, *Telecommunications Services, Inside
    Wiring, Customer Premises Equipment,* CS 95-184 and *Implementation
    of the Cable Television Consumer Protection and Competition Act of
    1992, Cable Home Wiring,* MM 92-260, June 6, 2000.

[^521]: RCN Comments at 30.

[^522]: *Telecommunications Services Inside Wiring, Customer Premises
    Equipment, Implementation of the Consumer Protection and Competition
    Act of 1992: Cable Home Wiring*, CS Docket 95-184 and MM Docket No.
    92-260, Report and Order and Second Further Notice of Proposed
    Rulemaking (*"Inside Wiring Order"*), 13 FCC Rcd 3659 (1998).

[^523]: *Promotion of Competitive Networks in Local Telecommunications
    Markets, Wireless Communications Association International, Inc.
    Petition for Rulemaking to Amend Section 1.4000 of the Commission's
    Rules to Preempt Restrictions on Subscriber Premises Reception or
    Transmission Antennas Designed to Provide Fixed Wireless Service,
    Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996, Review of Sections 68.104 and 68.213
    of the Commission's Rules Concerning Connection of Simple Inside
    Wiring to the Telephone Network,* WT Docket No. 99-217, CC Docket
    No. 96-98, CC Docket No. 88-57, First Report and Order and Further
    Notice of Proposed Rulemaking in WT Docket No. 99-217, Fifth Report
    and Order and Memorandum Opinion and Order in CC Docket No. 96-98,
    and Fourth Report and Order and Memorandum Opinion and Order in CC
    Docket No. 88-57. FCC 00-366 (rel. October 25, 2000).

[^524]: DirecTV Comments at 19.

[^525]: *Restrictions on Over-the-Air Reception Devices: Television
    Broadcast, Multichannel Multipoint Distribution and Direct Broadcast
    Satellite Services*, CS Docket No. 96-83, Second Report and Order,
    13 FCC Rcd 23874 (1998); *see also Restrictions on Over-the-Air
    Reception Devices: Television Broadcast, Multichannel Multipoint
    Distribution and Direct Broadcast Satellite Services*, CS Docket No.
    96-83, Order on Reconsideration, 14 FCC Rcd 19924 (1999).

[^526]: DirecTV Comments at 19.

[^527]: *1998 Report*, 13 FCC Rcd at 24362 ¶ 125.

[^528]: AT&T Comments at 6-10; Comcast Comments at 21-29.

[^529]: United States General Accounting Office Report to the
    Subcommittee on Antitrust, Business Rights, and Competition,
    Committee on the Judiciary, U.S. Senate; *Telecommunications: The
    Changing Status of Competition to Cable Television*;
    GAO/RCED-99-158, July 1999.

[^530]: AT&T Comments at 6-10; Comcast Comments at 21-29.

[^531]: *Id*. *Implementation of Section 3 of the Cable Television
    Consumer Protection and Competition Act of 1992,* *Statistical
    Report on Average Rates for Basic Service, Cable Programming
    Services, and Equipment*, MM Docket No. 92-266, Report on Cable
    Industry Prices (*"1999 Price Survey Report"*), 15 FCC Rcd 10927,
    10943 ¶ 39 (2000).

[^532]: AT&T Comments at 13-16; AT&T Reply Comments at 2.

[^533]: AT&T Comments at Appendix B. More specifically, AT&T regressed
    weighted monthly rates on low penetration, LEC, municipal,
    overbuild, MSO, log of reciprocal of the average total channels, and
    cluster variables. All but the log of the reciprocal of average
    total channels variable were dummy variables. The estimated
    coefficient of the cluster variable in the AT&T regression equation
    was --0.035 with a standard error of .0006 indicating that, holding
    all other variables constant, clustering had a negative effect on
    average monthly rates.

[^534]: AT&T Comments at Appendix D. The estimated coefficient for the
    cluster variable had a negative sign but was not statistically
    significantly different from zero.

[^535]: S*ee* *Implementation of Sections of the Cable Television
    Consumer Protection and Competition Act of 1992: Rate Regulation,*
    MM Docket No. 92-266, Second Order on Reconsideration, Fourth Report
    and Order, and Fifth Notice of Proposed Rulemaking, 9 FCC Rcd 4119,
    4278 Appendix C (1994). *Implementation of Section 3 of the Cable
    Television Consumer Protection and Competition Act of 1992,
    Statistical Report on Average Rates for Basic Service, Cable
    Programming Services, and Equipment*, MM Docket No. 92-266, Report
    on Cable Industry Prices, 14 FCC Rcd 8331 (1999).

[^536]: S*ee* *1999 Price Survey Report*, 15 FCC Rcd at 10959,
    Attachment D-1, for regression results showing the effects on
    average monthly rates of clustering, competitive status, median
    household income, and number of channels. Estimated regression
    coefficients for the clustering variable from both the Price Survey
    and the estimated modified regression equation were .026. More
    specifically, the modified regression equation had the following
    coefficients: Log of Average Monthly Rate = 3.516 + .034 low
    penetration - .025 overbuild - .339 municipal - .170 LEC + .020
    MSO - 13.4 reciprocal of average total channels - .455 reciprocal of
    system subscribers + .017 log of median household income + .026
    cluster. Since our modified regression equation included subscribers
    as an independent variable, it may have introduced a simultaneous
    relationship between average monthly rate and number of subscribers.
    For example, the number of subscribers in a system is affected by
    the average monthly rate charged which in turn is affected by the
    number of subscribers in the system. To handle this simultaneity
    problem, we replaced household subscribers (quantity demanded) in
    the modified equation with number of households passed (quantity
    supplied) which generally is not directly affected by average
    monthly rates. The estimates that resulted from this approach were
    similar to the coefficients found in the modified equation presented
    above. More specifically, the regression equation using a households
    passed variable yielded the following relationship: log of average
    monthly rate = 3.527 + .032 low penetration - .023 overbuild - .283
    municipal - .174 LEC + .016 MSO - 13.1 reciprocal of average total
    channels + .016 log of median household income - 2.939 reciprocal of
    system household passed + .027 cluster. The fact that the
    coefficients from both regression equations are similar indicates
    that no significant simultaneity exists in our re-estimated
    regression equation. If a simultaneity were found, it would also be
    possible to solve this problem by using a simultaneous equation
    estimation technique. It should be noted, however, that AT&T's
    modified regression equation used the number of subscribers as an
    independent variable and, as a result, the regression coefficients
    from that equation may be subject to a simultaneous equation bias.

[^537]: For other studies with similar findings, s*ee*, George Ford and
    John Jackson, *Horizontal Concentration and Vertical Integration in
    the Cable Television Industry,* Review of Industrial Organization,
    12: 501-518, 1997; Tasneem Chipty, *Horizontal Integration for
    Bargaining Power: Evidence from the Cable Television Industry,*
    Journal of Economics & Management Strategy, Volume 4, Number 2,
    375-397, Summer 1995.

[^538]: BellSouth Comments at 4-5; EchoStar Comments at 7-8; RCN
    Comments at 22-23; RCN Reply Comments at 3; WCA Comments at 6-7;
    DirecTV Comments at 9.

[^539]: BellSouth Comments at 5.

[^540]: *Id*. at 15-16; EchoStar Comments at 8; RCN Comments at 17.

[^541]: Appendix C, Table C-5.

[^542]: Comm. Daily, *Mass Media*, April 4, 1999, at 8.

[^543]: David Liberman, *Cable Deals Follow Trend Towards
    Regionalization*, USA Today, May 27, 1999, at B1.

[^544]: Paul Kagan Assocs., Inc., *Overbuilders Follow Consolidation
    Trend*, Cable TV Investor, December 23, 1998, at 8.

[^545]: Paul Kagan Assocs., Inc., *Cable System Sales Summary*, Cable TV
    Investor, August 11, 2000, at 9; March 3, 1999, at 8; and September
    10, 1999, at 12.

[^546]: *See* Appendix C, Table. C-2.

[^547]: *Applications for Consent to the Transfer of Control of Licenses
    and Section 214 Authorizations from MediaOne Group, Inc.,
    Transferor, to AT&T Corp., Transferee,* CS Docket No. 99-251,
    Memorandum Opinion and Order, 15 FCC Rcd at 9816 (2000).

[^548]: Paul Kagan Assocs., Inc., *Another Original Leaves Cable*, Cable
    TV Investor, June 19, 2000, at 8.

[^549]: 47 U.S.C. §§ 214, 310(d).

[^550]: *1997 Report*, 13 FCC Rcd at 1118-19 ¶ 147.

[^551]: Paul Kagan Assocs., Inc., *Cablevision Completes Last Sale*,
    Cable TV Investor, April 2000, at 7.

[^552]: *See* F.M. Scherer, *Industrial Market Structure and Economic
    Performance*, Rand McNally College Publishing Company, 1980, at 56.

[^553]: BellSouth Comment at 6; EchoStar Comments at 7; American
    Broadband Comments at 10.

[^554]: BellSouth Comments at 6.

[^555]: EchoStar Comments at 7.

[^556]: *Implementation of Section 11(c) of the Cable Television
    Consumer Protection and Competition Act of 1992: Horizontal
    Ownership Limits*, MM Docket No 92-264, Third Report and Order
    ("*Horizontal Ownership Limits Order"*), 14 FCC Rcd at 19098, 19102
    ¶ 9 (1999).

[^557]: 47 U.S.C. § 533(f)(l)(A).

[^558]: The Commission's horizontal ownership rules and the statutes
    were challenged in two different forums. In *Daniels Cablevision,
    Inc. v. United States*, the U.S. District Court for the District of
    Columbia held that Section 613(f)(1)(a) violates the First
    Amendment. Time Warner challenged the horizontal ownership rules in
    the District Court of Columbia. In August 1996, the District of
    Columbia Circuit consolidated the appeals of Daniels with Time
    Warner. *See Daniels Cablevision, Inc. v. United States*, 835
    F.Supp. 1, 10 (D.D.C. 1993), *aff'd in part; Time Warner
    Entertainment Co. L.P. v. FCC*, 93 F.3d 957 (D.C. Cir. 1996).

[^559]: *Horizontal Ownership Limits Order,* 14 FCC Rcd at 19103 ¶ 11.

[^560]: *Horizontal Ownership Limits Order,* 14 FCC Rcd at 19101 ¶ 5.

[^561]: 211 F.3d 1313 (D.C. Cir. 2000).

[^562]: *Horizontal Ownership Limits Order,* 14 FCC Rcd at 19111 ¶ 29.

[^563]: *Id*. a[t]{.underline} 19119 ¶ 53.

[^564]: *Id*.

[^565]: *See* App. C, Table C-1.

[^566]: DirecTV is the third largest MVPD with 8.7 million subscribers;
    EchoStar is the eighth largest MVPD with 4.3 million subscribers.
    *See* App. C, Table C-3.

[^567]: It should be noted that these percentages are derived from
    publicly available data and are not the result of application of the
    Commission's attribution rules. For Commission's attribution rules,
    s*ee Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992, Implementation of Cable Act Reform
    Provisions of the Telecommunications Act of 1996: Review of the
    Commission's Attribution Rules*, Report and Order, CS Docket Nos.
    98-82, 96-85 (*"Attribution Order"*), 14 FCC Rcd 19014 (1999).

[^568]: *1998 Report*, 13 FCC Rcd at 24422 Appendix C, Table C-3.

[^569]: *See* App. C, Tables C-3 and C-4.

[^570]: *1998 Report*, 13 FCC Rcd at 24363 n. 562. The HHI is a measure
    of concentration that is calculated by summing the squared market
    shares of the sellers in the market. It is a measure of
    concentration that takes account of the entire firm size
    distribution. The HHI varies with the number of firms in the market
    and degree of inequality among firm size. Generally, the HHI
    increases when there are fewer and unequal sized firms in the
    market. If the firms in the market are similar in size or if there
    is only one firm, the HHI has no advantage over other measures of
    concentration such as four-firm or eight-firm concentration ratio.
    Thus, in local video distribution markets where the incumbent cable
    operator is the only MVPD, the HHI is of limited use. However, in
    the market for the purchase of video programming, where both cable
    and non-cable MVPDs compete, the HHI is sensitive to differences in
    firm size.

[^571]: Since MVPDs purchase programming on a "per subscriber" basis,
    the total license fee paid for a program is based, in part, on the
    total number of subscribers served by the MVPD. As the
    subscribership increases, so does the total license fee paid by the
    MVPD.

[^572]: The United States Department of Justice and Federal Trade
    Commission consider markets with HHI below 1000 as "unconcentrated;"
    markets with an HHI between 1000 and 1800 as "moderately
    concentrated;" and markets with HHI above 1800 as "highly
    concentrated." *See 1998 Report*, 13 FCC Rcd at 24363 n. 562.

[^573]: *1998 Report*, 13 FCC Rcd at 24422, App. C, Table C-3.

[^574]: *See* App. C, Table C-3.

[^575]: By squaring market shares, the HHI weighs the values for large
    companies more heavily than small companies. Also, the HHI increases
    with increasing inequality among any given number of companies.
    *See* F.M. Scherer, *Industrial Market Structure and Economic
    Performance*, Rand McNally College Publishing Company, 1980, at 58.

[^576]: The data set forth in this section generally identify vertical
    ownership relationships by reference to the ownership attribution
    standards associated with the Commission's horizontal and vertical
    (channel occupancy) rules in effect when the *1999* *Notice of
    Inquiry* was released. *See Annual Assessment of the Status of
    Competition in the Market for the Delivery of Video Programming,* CS
    Docket No. 99-230, Notice of Inquiry, 14 FCC Rcd 9617 (1999). On
    October 8, 1999, the Commission revised its horizontal ownership
    rules in two separate Report and Orders. *See Horizontal Ownership
    Limits Order* and *Attribution Order*. *See also* *Implementation of
    Section 11(c) of the Cable Television Consumer Protection and
    Competition Act of 1992: Horizontal Ownership Limits*, MM Docket No.
    l 92-264, Order on Reconsideration, 15 FCC Rcd at 1167, 1169 ¶ 8.
    *See also 1999 Report*, 15 FCC Rcd at 1056 ¶ 176.

[^577]: Beneficial effects can include efficiencies in the production,
    distribution, and marketing of video programming, and providing
    incentives to expand channel capacity and create new programming by
    lowering the risks associated with program production ventures.
    *See, e.g.,* H.R. Rep. No. 862, 102nd Cong., 2d Sess. 56 at 41-43
    (1992).

[^578]: *See 1995 Report*, 11 FCC Rcd at 2135 ¶ 158; *Implementation of
    Section 11(c) of the Cable Television Consumer Protection and
    Competition Act of 1992 Vertical Ownership Limits,* MM Docket
    92-264, Memorandum Opinion and Order on Reconsideration of the
    Second Report and Order ("*Vertical Ownership Limits"*), 10 FCC Rcd
    7364, 7365 ¶ 4 (1995).

[^579]: We count each unique programming service of a multiplexed
    package separately. We do not, however, count services that are not
    unique, as in a multiplexed programming service that is merely time
    shifted. *See 1998 Report*, 13 FCC Rcd at 24376, n. 661. *See also
    1999 Report*, 15 FCC Rcd at 1056 n. 631*.*

[^580]: The top five MSOs are Time Warner Cable, AT&T Broadband &
    Internet Services, Comcast Cable Communications, Cox Communications,
    and Cablevision Systems. *See* App. D, Tbl. D-5.

[^581]: AT&T announced that it plans to convert its Liberty shares into
    a new publicly traded stock in the spring of 2001. AT&T will have no
    stake in Liberty after the spin-off. *See,* Geraldine Fabrikant,
    *AT&T Plans Spinoff to Cut Cable Holdings,* New York Times, November
    16, 2000, at C1.

[^582]: App. D, Table D-6.

[^583]: The 11 companies are: ABC/Disney, General Electric, News Corp,
    Time Warner, Viacom, Discovery, Rainbow Media, Liberty Media, USA
    Networks, E.W. Scripps, and Comcast. As of May 4, 2000, Viacom
    completed its merger with CBS Corporation**.** *See* Viacom
    *Integrates Paramount and CBS Television Station Groups, Reporting
    to CBS Television President and CEO Leslie Moonves* (press release),
    May 24, 2000**.**

[^584]: C-SPAN, C-SPAN2, WGN, and The Weather Channel are the four
    unaffiliated programming networks among the top 50 programming
    networks. Cable affiliates provide 95 percent of the funding for,
    but have no ownership or program control interests in C-SPAN and
    C-SPAN2. DBS licensees provide the other 5 percent of funding, and
    also have no ownership or program control interests. None of the 11
    companies listed in footnote 583 *supra* have any ownership interest
    in WGN or The Weather Channel. *See* Paul Kagan Assocs., *Network
    Census: September 30,* Cable Program Investor, Dec. 17, 1999, at 8.

[^585]: App. D, Table D-7.

[^586]: *See 1999 Report*, 15 FCC Rcd at 1112 App. D, Table D-4 . *Also
    see* App. D, Table D-4.

[^587]: *See*, Linda Moss, *With Shelf Space Tight, Nets Angle for
    Slots*, Multichannel News, November 15, 1999, at 3. *Also See*,
    Monica Hogan, *Emerging Networks Face Fight for Carriage*,
    Multichannel News, July 10, 2000, at 80.

[^588]: Compare Table D-4 *infra* with *1999 Report*, 15 FCC Rcd at 1112
    Appendix D, Table D-4**,** *1998 Report,* 13 FCC Rcd at 24442,
    Appendix D, Table D-4, and *1997 Report,* 13 FCC Rcd at 1222-25 App.
    F, Tbls. F-3 and F-4.

[^589]: *See* section 628(c)(5) of the Communications Act, 47 U.S.C.
    §548(c)(5).

[^590]: 47 C.F.R. §§ 76.1000-76.1003. *See also* 47 U.S.C. § 536(a)(2);
    47 U.S.C. § 548(a)(2).

[^591]: *See* section 19 of the 1992 Cable Act, Development of
    Competition and Diversity in Video Programming Distribution. *See
    also* 47 U.S.C. § 548.

[^592]: While the program access rules do prohibit vertically integrated
    satellite programming distributors, including DBS, from
    discriminating in the prices or terms and conditions of sale of
    satellite-delivered programming to cable operators and other MVPDs,
    currently none of the DBS licensees are vertically integrated. *See*
    DirecTV Comments at 12.

[^593]: *See* section 628(c)(5) of the Communications Act, 47 U.S.C §
    548 (c)(5).

[^594]: DirecTV Comments at 9; DirecTV Reply Comments at 1-3. *See also*
    American Broadband Comments at 9-10; BellSouth Comments at 7-8; RCN
    Comments at 30-32; and WCA Comments at 3-4.

[^595]: NCTA Comments at 29.

[^596]: *Id*. at 29-30.

[^597]: RCN Comments at 2, 11; DirecTV Comments at 15; WCA Comments at
    5.

[^598]: *See* EchoStar Comments at 3; WCA Comments at 4-8; RCN Comments
    at 12.

[^599]: NCTA Comments at 29-32

[^600]: *Id*. at 29.

[^601]: *Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992, Petition for Rulemaking of Ameritech New
    Media, Inc. Regarding Development of Competition and Diversity in
    Video Programming Distribution and Carriage*, CS Docket No. 97-248,
    RM No. 9097, Report and Order (\"*Program* *Access Order*\'\'), 13
    FCC Rcd 15822, 15856-7 ¶¶ 70-71 (1998).

[^602]: *Program Access Order*, 13 FCC Rcd at 15856-7 ¶ 71.

[^603]: *Id*.

[^604]: RCN Comments at 16; DirecTV Comments at 15; WCN Comments at 8.

[^605]: EchoStar Comments at 7-8. *See* 47 U.S.C. § 548(b) and 47 C.F.R.
    §76.1001 (unfair practices generally).

[^606]: RCN Comments at 17.

[^607]: *See* App D, Table D-3.

[^608]: RCN Comments at 14-17.

[^609]: *See* ¶¶ 178-182 *supra* for a more detailed description of
    program access.

[^610]: DirecTV Comments at 14

[^611]: *Id*. *See also* *Application for Review of Orders of the Cable
    Services Bureau Denying Program Access Complaints*, CSR 5122-P and
    CSR 5244-P, Memorandum Opinion and Order, FCC 00-404, (rel. November
    20, 2000). This Order consolidates several proceedings involving
    Comcast, DirecTV, and EchoStar. In separate proceedings, DirecTV and
    EchoStar filed program access complaints alleging that Comcast
    violated sections 628(b) and (c) of the Communications Act and the
    Commission\'s regulations by engaging in discrimination and unfair
    practices and exercising undue influence over the distribution of
    satellite cable programming. The Cable Services Bureau denied the
    complaints. Subsequently, DirecTV and EchoStar each requested
    Commission review and reversal of the Cable Bureau\'s decision. The
    Commission consolidated the proceedings and denied the applications
    for review.

[^612]: *See* www.comcast.com/investor_relations/annual_reports99/. *See
    also* RCN Comments at 18-21.

[^613]: EchoStar Comments at 9.

[^614]: RCN Comments at 22-23.

[^615]: *1999 Report*, 15 FCC Rcd at 1060 ¶ 186**.** *See also* R.
    Thomas Umstead, *Consolidation Blues*, Cablevision, June 28, 1999,
    at 39.

[^616]: Kim McAvoy*, Batting Clean‑Up*., Broadcasting & Cable, March 27,
    2000, at 36.

[^617]: *Id*.

[^618]: *Id*. at 32.

[^619]: Cablevision Systems, the sixth largest MSO, owns news networks,
    including MSG Metro Traffic and Weather in New York and the News 12
    group of regional news services in Connecticut, New Jersey, and
    Westchester County, New York. Time Warner, AT&T, and Adelphia, all
    among the top ten cable MSOs, each own or have ownership interests
    in regional or local news programming networks, often in partnership
    with newspaper or publishing companies.

[^620]: Deborah D. McAdams, *Cable News Nets Go Small*, Broadcasting &
    Cable, September 27, 1999, at 42.

[^621]: Steve Sullivan, *NECN Comes into Its Own*, Broadcasting & Cable,
    May 8, 2000, at 52.

[^622]: Communications Act, § 611, 47 U.S.C. § 531.

[^623]: Local franchise authorities are allowed to establish procedures
    under which the cable operator may utilize unused PEG channel
    capacity for other services. 47 U.S.C. § 531(d)(1). *See also*
    www.alliancecm.org/about/info.htm.

[^624]: NCTA Comments at 32. *See* 47 U.S.C.§532(c)(4).

[^625]: NCTA Comments at 33. *See also* Report of the Committee on
    Energy and Commerce, H.R. Rep. 98-934, 98^th^ Cong., 2d Sess. 54
    (1984).

[^626]: AT&T Reply Comments at 2.

[^627]: Paxson Comments at 23.

[^628]: For a discussion of tiering, generally, *see Implementation of
    Section 3 of the Cable Television Consumer Protection and
    Competition Act of 1992: Buy through Prohibition*, MM Docket No.
    92-262, Report and Order, 8 FCC Rcd 2274 (1993).

[^629]: *See* statement of Senator Inouye, S.Rep. No. 102, 102d Cong.,
    2d Sess. 77 (1992).

[^630]: Addressability is the ability of a cable operator to control
    electronically, from a remote centralized location, the selection of
    services received by individual customers.

[^631]: *1999 Report*, 15 FCC Rcd at 1065 ¶ 200. *See also* Price Colman
    and John M. Higgins, *Icy After the Sunset*, Broadcasting & Cable,
    March 22, 1999, at 38.

[^632]: Don West, 2000 *Millennavision*, Broadcasting & Cable, January
    3, 2000, at 38.

[^633]: *Implementation of Video Description of Video Programming,* MM
    Docket No. 99-339, Report and Order ("*Video Description Order*"),
    15 FCC Rcd 15230 (2000).

[^634]: *Notice*, 15 FCC Rcd at 13573 ¶ 36.

[^635]: *Video Description Order*, 15 FCC Rcd at 15235-6 ¶¶ 12-14.

[^636]: *See* DVS on TV at
    http://main.wgbh.org/wgbh/access/dvs/dvstv.html.

[^637]: *Id*.

[^638]: Glen Dickson, *Weather Channel Gets New Voice.(Enhancing Local
    Weather Coverage With Audio Segments,* Broadcasting & Cable,
    December 6, 1999, at 74.

[^639]: John M. Higgins, *What Networks Fear*, Broadcasting & Cable,
    September 25, 2000, at 10.

[^640]: EchoStar filed an antitrust suit in U.S. District Court, Denver,
    and counterclaim action against Gemstar. EchoStar alleged that
    Gemstar\'s licensing practices violated various federal and state
    antitrust laws on unfair competition. *EchoStar Accuses Gemstar Of
    Antitrust Violations,* Satellite Week, December 11, 2000. Gemstar
    International Group Ltd. has for many years been the major provider
    of EPGs to VCR, television, and set-top box manufacturers. In
    October 1999, Gemstar accepted an offer to merge with its former
    rival, TV Guide. *See 1998 Report*, 13 FCC Rcd at 24385 ¶¶ 182-3 for
    a full description of Gemstar's technology. *See also* *Son of
    Merger of Equals: Gemstar*, TV Guide Make Love, Not War, CableFAX
    Daily, October 5, 1999.

[^641]: *See Implementation of Section 304 of the Telecommunications Act
    of 1996, Commercial Availability of Navigation Devices*, CS Docket
    No. 97-80, Report and Order, 13 FCC Rcd 14775, 14820 ¶ 116 (1998).

[^642]: *See* http://www.ce.org/newsroom, *CEA and NCTA Reach Agreement
    Enabling Compatibility Between Cable Television Systems and Digital
    Televisions* (press release), February 23, 2000. This information is
    generally referred to as \"PSIP\" (Program and System Information
    Protocol) information. The February 22, 2000, agreement outlined a
    series of steps that the industries need to take in order to ensure
    provision of this information to DTV receivers.

[^643]: The agreement did not propose Commission action with respect to
    PSIP and the parties to the agreement do not seek Commission
    intervention.

[^644]: Inflation, channel additions, system upgrades, and equipment
    costs were also said to account for a large portion of rate
    increases. *See Implementation of Section 3 of the Cable Television
    Consumer Protection and Competition Act of 1992, Statistical Report
    on Average Rates for Basic Service, Cable Programming Services, and
    Equipment*, MM Docket No. 92-266, Report on Cable Industry Prices
    ("*1999 Price Survey Report*"), 15 FCC Rcd 10927, 10940-41 ¶¶ 31-32
    (2000).

[^645]: Deborah D. McAdams, *18-34;* *MTV, Discovery, E!, USA, TBS,
    Lifetime And FX Lead The Way To Youthful Demo,* Broadcasting &
    Cable, October 9, 2000, at 50.

[^646]: Steve McClellan; John M Higgins, *Disney Triumphant,*
    Broadcasting & Cable, May 8, 2000, at 8. *See also* Kathy Haley*,
    Blazing a Trail*, Cablevision, September 13, 1999, at 6A.

[^647]: The published "top of the rate card" license fee is often
    discounted. For example, the Fox Family channel has a rate card fee
    of \$0.26 per subscriber per month. This rate is discounted, on
    average, approximately 40 percent to \$0.16 per subscriber per month
    for many operators. *See* *Fox Family Economics*, Cable Program
    Investor, July 17, 2000, at 2. *See also* *Cable Network Affiliate
    License Fees: Top of the Rate Card*, Cable Program Investor, June
    16, 1999, at 10-11.

[^648]: *See 1999 Report*, 15 FCC Rcd at 1066-7 ¶¶ 206-208. *See also*
    ¶¶ 40-44, 101-104 *supra*.

[^649]: *1999 Report*, 15 FCC Rcd at 1067 ¶ 209.

[^650]: CableFAX Daily, Nov. 14, 2000, at 2.

[^651]: Ken Kerschbaumer, *Fulfilling the Promise*, Broadcasting &
    Cable, July 10, 2000, at 22-34 ("Kerschbaumer").

[^652]: *See* ¶ 54 *supra*.

[^653]: Among the companies providing operating systems on set-top boxes
    are Microsoft, OpenTV, and PowerTV. Companies that offer service
    options include Intertainer, Diva, ICTA, Wink, and RespondTV.
    Kerschbaumer at 22.

[^654]: The principal VOD service technology providers are Concurrent
    Computer, Diva, and SeaChange. Kerschbaumer at 23.

[^655]: *See* Kerschbaumer at 24-32.

[^656]: Kerschbaumer at 23-24.

[^657]: *EchoStar, Opentv Agree to Deliver Wink's Enhanced Broadcasting
    and "T-Commerce" Nationwide to Dish Network Satellite TV Viewers*
    (press release), June 26, 2000,
    http://www.wink.coom/contents/PressReleases/962039114/content.shtml.

[^658]: ITV Report, *DirecTV to Use Microsoft's Ultimate TV Platform in
    a New RCA DirecTV System*, June 12, 2000,
    http://www.itvreport.com/news/0600/061200microsoftdirectv.htm; ITV
    Reports, *DirecTV Previews New Interactive Channels*, Oct. 23, 2000,
    http://itvreport.com/news/1000/102300directv.htm; *Microsoft,
    DirecTV and Thomson Multimedia Join forces to make Television More
    Personal and Interactive* (press release), June 12, 2000,
    http://www.webtv.com/companuy/pres/direct_thompson.html.

[^659]: ITV Report, *ABC's Enhanced TV Telecasts Attract Record Number
    of Viewers*, Sept. 13, 2000,
    http://www.itvreport.com/news/0900/091300abcetv.htm;
    http://heavy.etv.go.com/etvHome/mil/site/what.html.

[^660]: ITV Report, *NBC to Create Interactive Programming for Teens*,
    Oct. 12, 2000, http://itvreport.com/news/1000/101200opentv.htm.

[^661]: *CBS Television and Microsoft WebTV Networks to Deliver Broad
    Slate of Interactive Television Programming* (press release), Sept.
    7, 2000, http://www.webtv.com/company/press/CBS.html; ITV Report,
    *CBS and Microsoft Form Enhanced TV Programming Alliance*, Sept. 7,
    2000, http://www.itvreport.com/news/0900/090700cbs.htm.

[^662]: *Wink Empowers Fox Prime Time Entertainment Schedule with
    Interactive Television Enhancements* (press release), Oct. 18, 2000;
    http://www.wink.com/content/PressReleases/971887924/content.shtml.;
    ITV Report, *Fox Prepares to Launch Wink-enhanced Broadcasting*,
    Oct. 19, 2000, http://www.itvreport.com/news/1000/101900winkfox.htm.

[^663]: 47 U.S.C. § 549.

[^664]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Navigation Devices*, CS Docket No.
    97-80, Report and Order, 13 FCC Rcd 14775 (1998) ("*Navigation
    Report and Order*"). On August 14, 2000, the Commission adopted a
    *Memorandum Opinion and Order*, which granted waivers of the July 1,
    2000, compliance date for several cable operators that utilize
    hybrid navigation devices. The Commission established a revised
    compliance date for each of the individual systems involved, with no
    waiver granted beyond December 31, 2001. *Charter Communications,
    Inc., AT&T Broadband, L.L.C., Insight Communications Company, L.P.,
    Cox Communications, Inc., GCI Cable Inc., Cablevision Systems Corp.,
    Adelphia Communications Corp., MediaCom Communications Corp.,
    CableAmerica Corp., Time Warner Cable, Petition for Waiver of the
    Requirement To Provide Point of Deployment Modules Contained in
    Section 76.1204 of the Commissions Rules*, CSR Nos. 5545-Z, 5548-Z,
    5558-Z, 5561-Z, 5564-Z, 5566-Z, 5567-Z, 5569-Z, 5570-Z, 5572-Z,
    Memorandum Opinion and Order, 15 FCC Rcd 15075 (2000).

[^665]: 47 C.F.R. § 76.1204. *See also Implementation of Section 304 of
    the Telecommunications Act of 1996, Commercial Availability of
    Navigation Devices*, CS Docket No. 97-80, Order on Reconsideration,
    14 FCC Rcd 7596 (1999).

[^666]: The POD requirement is intended to permit portability among
    set-top boxes, which will increase the market base and facilitate
    volume production and market costs. *Navigation Report and Order*,
    13 FCC Rcd at 14793-4 ¶ 49.

[^667]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Navigation Devices*, CS Docket No.
    97-80, Further Notice of Proposed Rule Making and Declaratory
    Ruling, 15 FCC Rcd 18199 (2000).

[^668]: Letter from Richard R. Green, Ph.D., President and Chief
    Executive Officer, CableLabs, to Magalie R. Salas, Secretary, FCC,
    October 18, 2000. CableLabs stated it would submit another status
    report in 30 days and the final agreement as soon as it was
    released. On November 17, 2000, CableLabs reported that it was in
    the process of resolving a few remaining issues regarding copyright
    protection and committed to submit the final PHI license agreement
    to the Commission by December 15, 2000. *See* Letter from Richard R.
    Green, Ph.D., President and Chief Executive Officer, CableLabs, to
    Magalie R. Salas, Secretary, FCC, November 17, 2000.

[^669]: *See* Letter from Richard R. Green, Ph.D., President and Chief
    Executive Officer, CableLabs, to Magalie R. Salas, Secretary, FCC,
    December 15, 2000.

[^670]: http://www.opencable.com. CableLabs also tests and certifies the
    interoperability of OpenCable devices. *See also* *1999 Report*, 15
    FCC Rcd at 1068-9 ¶ 211.

[^671]: *Navigation Report and Order*, 13 FCC Rcd at 14808-9, 14827-8 ¶¶
    81, 139.

[^672]: *Implementation of Section 304 of the Telecommunications Act of
    1996, Commercial Availability of Navigation Devices*, CS Docket No.
    97-80, Status Report, filed July 7, 2000 ("July Status Report") at
    1, 4-5. *See also* CableLabs, *CableLabs Completes OpenCable Test
    Wave; Digital Security Modules Now Available* (press release), June
    29, 2000,
    http://www.cablelabs.com/news_room/PR/oo_pr_oc_pod_62900.html.

[^673]: July Status Report at 6-9. The cable industry notes that
    retailers argue that they have not placed orders for digital set-top
    boxes for reasons ranging from dissatisfaction with the
    specifications to a desire to wait for the development of more
    profitable integrated DTV sets. *Id.* at 11-13.

[^674]: *Id*. at 9.

[^675]: *Id*. at 13-19.

[^676]: Response of the Consumer Electronics Retailers Coalition to the
    July 7, 2000, Cable Industry Status Report, filed in CS Docket No.
    97-80, Aug. 2, 2000. CERC contends that the OpenCable specification
    does not support features that are required to allow products to be
    competitive with MSO provided products. Specifically, CERC argues
    that to be useful to consumers as purchases, (1) the devise itself
    should offer one-button interactivity in the selection of on-demand
    programming or other services, just as MSO provided devices do today
    and (2) the product must access, perform, interact with and
    otherwise support all functions provided on any OpenCable MSO
    system.

[^677]: *See* ¶¶ 47-50 *supra*.

[^678]: *1999 Report*, 15 FCC Rcd at 1069 ¶ 212. *See also*
    http://www.cablemodem.com; http://cablemodem.com/certification.html.

[^679]: CableLabs, *CableLabs Certifies More Modems* (press release),
    October 20, 2000,
    http://www.cablelabs.com/news_room/PR/00_pr_cw15_more_modems_102000.html.

[^680]: *Id*. *See also* Fred Dawson, *3Com's PC Cable Modem Could Be
    Retail Pioneer*, Multichannel News, May 17, 1999, at 55.

[^681]: http://www.cabledatacomnews.com/cmic/cmic2.html.

[^682]: Monica Hogan, *MSOs Tread Carefully Into Retail World*,
    Multichannel News, May 1, 2000, at 116.

[^683]: http://www.cabledatacomnews.com/cmic/cmic2.html.

[^684]: *See* http://www.packetcable.com. *See also* *1999 Report*, 15
    FCC Rcd at 1070 ¶ 214.

[^685]: CableLabs, *PacketCable Ends Round 2 Testing, Releases Draft
    Compliance Test Plans* (press release), July 21, 2000,
    http://www.cablelabs.com/news_room/PR/00_pr_pc_testing_72100.html.

[^686]: 47 C.F.R. § 76.905(b).

[^687]: *MediaOne Petition for Determination of Effective Competition in
    Atlanta, Georgia and Nearby Communities,* CSR 5413-E ("*MediaOne
    Petition*"), July 8, 1999, at 1-2.

[^688]: Jarred Schanke, *BellSouth, MediaOne May Vie for Cable Viewers,*
    Marietta Daily Journal, February 20,1999, at B1.

[^689]: Michael E. Kanell, *BellSouth Plugs into Wireless TV*, The
    Atlanta Constitution, at A1.

[^690]: *MediaOne Petition* at Exhibit 13.

[^691]: *Id.* at Exhibit 13.

[^692]: On June 15, 2000, AT&T and MediaOne Group announced completion
    of their merger. At that time, MediaOne became integrated with AT&T
    broadband. AT&T, *AT&T Closes MediaOne Merger* (press release), June
    15, 2000.

[^693]: *MediaOne Petition at 14.*

[^694]: Matt Kempner, *Competition in Cable TV a Good Show for
    Subscribers*, The Atlanta Journal Courier, November 28, 1997, at 12.

[^695]: *MediaOne Petition* at Exhibit 18.

[^696]: *Id.* at 1.

[^697]: *MediaOne Petition for Determination of Effective Competition in
    Atlanta, Georgia and Nearby Communities,* CSR 5415-E, Memorandum
    Opinion and Order ("*MediaOne Order*"), 15 FCC Rcd 13287, 13290 ¶ 7
    (2000).

[^698]: *Id.* at 13288 ¶ 5.

[^699]: *Time Warner Petition for Determination of Effective Competition
    in Lexington and Davidson County, North Carolina* ("*Lexington
    Petition*")*,* CSR 5218-E, February 18, 1988, at Exhibit B.

[^700]: *Id.* at Exhibits D and G**.**

[^701]: *Id.* at Exhibit K**.**

[^702]: Craig Allen, *Time Warner Sues Lexcom*, Lexington Dispatch,
    October 11, 1997, at A-1.

[^703]: *Lexington Petition* at 7.

[^704]: *Id.* at 11**.**

[^705]: *Consumers Benefit When Competition Occurs*, The Dispatch ,
    November 11, 1999, at 1 and 2.

[^706]: Vikki Broughton Hodges, *Lexcom Cable Offers New Features,
    Discount*, The Dispatch, July 3, 2000, at 1 and 2.

[^707]: Vikki Broughton Hodges, *Time Warner Launches Cable Modem
    Service*, The Dispatch, October 6, 2000, at 1-3.

[^708]: *See Lexington Petition.*

[^709]: *Time Warner Petition for Determination of Effective Competition
    in Lexington and Davidson County, North Carolina*, CSR 5218-E,
    Memorandum Opinion and Order ("*Lexington Order*"), 15 FCC Rcd
    12705, 12707 ¶ 7 (2000).

[^710]: *Id.* at 12706 ¶ 5.

[^711]: *Time Warner Petition for Determination of Effective Competition
    in Wapakoneta, Ohio,* CSR 5405-E ("*Wapakoneta Petition*"), May 24,
    1999, at Exhibits A and B.

[^712]: *Id.* at Exhibit C.

[^713]: *Time Warner Petition for Determination of Effective Competition
    in Wapakoneta, Ohio*, CSR 5405-E, Memorandum Opinion and Order
    ("*Wapakoneta Order*"), 15 FCC Rcd 8152, 8153 ¶ 4 (2000).

[^714]: *Wapakoneta Petition* at 6**.**

[^715]: *Id.* at Exhibit C.

[^716]: Ronald Lederman, *Oxley Praises Local Cable Competition*, The
    Lima News, April 9, 1999, at B1.

[^717]: *Id*.

[^718]: *Wapakoneta Petition* at 6.

[^719]: *Id.* at 1.

[^720]: *Wapakoneta Order*, 15 FCC Rcd at 8153 ¶ 5.

[^721]: *Time Warner Petition for Change in Regulatory Status* ("*Orange
    County Petition*"), September 3, 1998, at 2**.**

[^722]: *Id.* at Exhibit A**.**

[^723]: *Id.* at Exhibit A.

[^724]: *Id.* at Exhibit E**.**

[^725]: *Id.* at 8.

[^726]: *Id.* at Exhibit D.

[^727]: *Id.* at 1**.**

[^728]: *Time Warner Petition for Determination of Effective Competition
    in Orange County, Florida*, Memorandum Opinion and Order ("*Orange
    County Order*"), 15 FCC Rcd 8852, 8855 ¶ 8 (2000).

[^729]: *Id.* at 8854 ¶ 7.

[^730]: *TCI Petition for Revocation of Certification for the City of
    Laurens, Iowa to Regulate Basic Cable Service and Equipment Rates*.
    ("*TCI Petition*")**,** March 22, 1999, at 3.

[^731]: *Id.* at 3.

[^732]: Gregory A. Moberly**,** *Laurens' Cable TV System On Its Way**,
    ***Fort Dodge, Iowa Messenger, November 25, 1998**.**

[^733]: *TCI Petition* at Exhibit F.

[^734]: Gregory A. Moberly**,** *Laurens' Residents can Choose Between
    Two Cable Companies***,** Iowa Messenger, January 16, 1999, at B1.

[^735]: *TCI Petition* at 6**.**

[^736]: *Id.* at 5.

[^737]: *Id.* at Exhibit G.

[^738]: *Id.* at 1 and 2**.**

[^739]: *TCI Petition for Revocation of Certification for the City of
    Laurens, Iowa to Regulate Basic Cable Service and Equipment Rates*,
    Memorandum Opinion and Order ("*TCI Order*"), 15 FCC Rcd 8803, 8805
    ¶ 9 (2000).

[^740]: *See* ¶ 122 *supra*.

[^741]: *Id.*

[^742]: ^1^ I note that, while I am gratified that the Commission has
    responded to my prior statements on this issue by changing the title
    of the report to refer to a unitary "market," the underlying
    analytical approach of the report has not changed.