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 Federal  Communications  Commission  FCC  05-  13 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  Matter  of 
 Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video 
 Programming 


 )  ) 
 )  ) 
 ) 
 MB  Docket  No.  04-  227 


 ELEVENTH  ANNUAL  REPORT 
 Adopted:  January  14,  2005  Released:  February  4,  2005 
 By  the  Commission:  Chairman  Powell  issuing  a  statement;  Commissioners  Copps  and  Adelstein  concurring  and  issuing  a  joint  statement. 


 TABLE  OF  CONTENTS 
 Paragraph 
 I.  INTRODUCTION  .....................................................................................................................................  1 
 A.  Scope  of  this  Report..................................................................................................................  2  B.  Summary  of  Findings  ..............................................................................................................  4 
 1.  The  Current  State  of  Competition:  2004  ...................................................................  4  2  General  Findings  .........................................................................................................  7 


 II.  COMPETITORS  IN  THE  MARKET  FOR  THE  DELIVERY  OF  VIDEO  PROGRAMMING......  16 
 A.  Cable  Television  Service  .......................................................................................................  16  1.  General  Performance.................................................................................................  17 
 2.  Capital  Acquisition  and  Disposition.........................................................................  33  3.  Provision  of  Advanced  Services...............................................................................  36 
 B.  Direct-  to-  Home  Satellite  Services.........................................................................................  53  1.  Direct  Broadcast  Satellite  .........................................................................................  53 
 2.  Home  Satellite  or  Large  Dish  Service  ......................................................................  64  3.  Satellite-  Based  Advanced  Services  ..........................................................................  66 
 C.  Broadband  Service  Providers  .................................................................................................  70  D.  Broadcast  Television  Service  .................................................................................................  76 
 1.  General  Performance.................................................................................................  76  2.  Digital  Television......................................................................................................  80 
 E.  Wireless  Cable  Systems........................................................................................................  104  F.  Private  Cable  Systems  ..........................................................................................................  108 
 G.  Other  Entrants  .......................................................................................................................  113  1.  Internet  Video..........................................................................................................  113 
 2.  Home  Video  Sales  and  Rentals...............................................................................  120  H.  Local  Exchange  Carriers  .....................................................................................................  124 
 I.  Electric  and  Gas  Utilities  .....................................................................................................  131 
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 III.  MARKET  STRUCTURE  AND  CONDITIONS  AFFECTING  COMPETITION........................  135 
 A.  Horizontal  Issues...................................................................................................................  135  1.  Competitive  Issues  in  the  Market  for  the  Distribution  of  Video  Programming....  136 
 2.  Competitive  Issues  in  the  Market  for  the  Purchase  of  Video  Programming.........  140  B.  Vertical  Integration  and  Other  Programming  Issues  ...........................................................  145 
 1.  Status  of  Vertical  Integration..................................................................................  145  2.  Other  Programming  Issues......................................................................................  153 
 C.  Competitive  Issues  in  Small  and  Rural  Markets..................................................................  186  D.  Technical  Issues  ....................................................................................................................  187 
 1.  Navigation  Devices  .................................................................................................  187  2.  Emerging  Technologies  ..........................................................................................  191 
 3.  Cable  Modems  ........................................................................................................  205 
 IV.  FOREIGN  MARKETS.....................................................................................................................  212 
 V.  ADMINISTRATIVE  MATTERS..............................................................................................................  224 
 APPENDICES  Appendix  A  List  of  Commenters 
 Appendix  B  Horizontal  Issues  Tables  Appendix  C  Vertical  Integration  Tables 


 I.  INTRODUCTION 
 1.  This  is  the  Commissions  eleventh  annual  report  (2004  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  the  market  for  the  delivery  of  video  programming. 
 A.  Scope  of  this  Report 
 2.  We  report  on  trends  in  the  market  and  on  the  factors  that  have  facilitated  or  impeded  changes  in  the  competitive  environment  over  the  past  year.  Further,  we  offer  information  and  analysis  regarding 


 changes  in  the  market  since  the  2003  Report,  and  we  describe  how  those  changes  affect  the  current  state  of  the  market.  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 


 1  The  Commissions  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),  1994  Report,  9  FCC  Rcd  7442  (1994);  1995  Report,  11  FCC  Rcd  2060  (1996);  1996  Report,  12  FCC  Rcd  4358  (1997);  1997  Report,  13 


 FCC  Rcd  1034  (1998);  1998  Report,  13  FCC  Rcd  24284  (1998);  1999  Report,  15  FCC  Rcd  978  (2000);  2000  Report,  16  FCC  Rcd  6005  (2001);  2001  Report,  17  FCC  Rcd  1244  (2002);  2002  Report,  17  FCC  Rcd  26901  (2002); 
 and  2003  Report,  19  FCC  Rcd  1606  (2004).  2 
 Communications  Act  of  1934,    628(  g),  47  U.  S.  C.    548(  g).  3 
 Pub.  L.  No.  102-  385,  106  Stat.  1460  (1992). 
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 Notice  of  Inquiry  (Notice)  in  this  docket.  4  We  do  not  require  data  submissions  nor  do  we  audit  data  provided.  We  report  data  and  other  information  as  submitted  by  the  commenters.  5  We  did  not  receive 
 any  information  on  a  number  of  issues  raised  in  the  Notice  (e.  g.,  information  on  video  delivery  in  foreign  markets,  technical  issues,  cable  horizontal  ownership,  delivery  method  of  programming  networks),  and 
 very  limited  information  on  other  issues  (e.  g.,  ownership  of  nonbroadcast  networks,  private  cable  operators,  locally  and  community-  oriented  programming).  If  we  continue  to  find  that  we  do  not  get  the 
 necessary  data  from  industry  participants,  we  may  pursue  additional  mandatory  data  collection  processes  to  ensure  that  we  have  appropriate  information  to  fulfill  our  statutory  mandate  to  provide  Congress  with  an 
 annual  assessment  of  the  status  of  competition  in  the  video  marketplace. 
 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  MVPDs  discussed  are  direct  broadcast  satellite  (DBS)  services  and  home  satellite  dishes  (HSD),  broadband  service  providers  (BSPs),  broadcast  television 
 service,  wireless  cable  systems  using  frequencies  in  the  multichannel  multipoint  distribution  service  (MMDS),  and  private  cable  operators  (PCOs).  We  also  consider  other  existing  and  potential  distribution 
 technologies  for  video  programming,  including  local  exchange  carriers  (LECs)  and  utilities,  home  video  sales  and  rentals,  and  the  Internet.  In  Section  III  of  this  report,  we  examine  market  structure  and 
 competition.  We  evaluate  horizontal  concentration  in  the  multichannel  video  marketplace,  vertical  integration  between  programming  services  and  distribution  systems,  and  competitive  issues  in  small  and 
 rural  markets.  We  also  address  numerous  technical  issues  regarding  navigation  devices,  emerging  services,  and  cable  modems.  Finally,  we  review  briefly  several  developments  in  foreign  markets. 


 B.  Summary  of  Findings 
 1.  The  Current  State  of  Competition:  2004 
 4.  In  the  2003  Report,  the  Commission  recognized  that  competition  provides  consumers  with  increased  choice,  better  services,  higher  quality,  and  greater  technological  innovation.  The  2003  Report 


 found  that,  overall,  the  level  of  competition  among  video  providers  had  increased  dramatically  since  our  first  Report  in  1994.  Most  notably,  cable  operators  served  almost  100  percent  of  the  nations  MVPD 
 subscribers  a  decade  ago,  but  by  June  2003,  cables  share  of  MVPD  subscribers  declined  to  74  percent.  6  As  of  June  2004,  cable  operators  served  approximately  72  percent  of  all  MVPD  subscribers.  Today, 
 almost  all  consumers  have  the  choice  between  over-  the-  air  broadcast  television,  a  cable  service,  and  at  least  two  DBS  providers.  In  some  areas,  consumers  may  also  choose  between  other  traditional  (e.  g., 
 broadcasting,  cable,  DBS)  and  emerging  (e.  g.,  use  of  digital  broadcast  spectrum,  fiber  to  the  home,  video  over  the  Internet)  delivery  technologies  as  well.  Increased  competition  in  the  market  for  the  delivery  of 
 video  programming  since  our  first  Report  has  led  to  improvements  in  cable  television  services,  including  more  channels  of  video  programming  and  more  service  options,  but  generally  not  lower  prices.  7  In 
 addition,  through  the  use  of  advanced  set-  top  boxes  and  digital  video  recorders,  consumers  are  now  able  to  maintain  more  control  over  what,  when,  and  how  they  receive  information. 


 4  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  19  FCC 
 Rcd  10909  (2004)  (Notice).  Where  possible,  we  requested  data  as  of  June  30,  2004.  5 
 Appendix  A  provides  a  list  of  commenters  and  the  abbreviations  by  which  they  are  identified  herein.  6 
 See  Appendix  B,  Table  B-  1.  We  have  revised  data  for  the  number  of  cable  subscribers  for  June  2003  to  use  a  consistent  source. 


 7  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  Service,  and  Equipment,  MM  Docket  No.  92-  266,  FCC  05-  12  (adopted  Jan.  14,  2005)  (2004  Price  Survey);  See  also  paras.  26-  27  infra. 
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 5.  The  2004  Report  discusses  changes  that  have  occurred  in  the  competitive  environment  over  the  last  year.  Overall,  we  find  that  cable  subscribership  is  remaining  relatively  stable  as  the  MVPD 
 market  grows;  thus,  cables  share  of  the  MVPD  market  is  declining.  In  contrast,  DBS  subscribership  continues  to  increase  at  nearly  double-  digit  rates  of  growth,  and  its  share  of  the  marketplace  is  increasing. 
 The  second  and  fourth  largest  MVPDs  are  both  DBS  operators.  In  addition,  other  delivery  technologies  continue  to  serve  small  numbers  of  subscribers  in  limited  areas.  LECs,  who  have  partnered  with  DBS 
 providers  to  offer  video  service  over  the  last  year,  have  recently  announced  plans  to  enter  the  video  distribution  market  with  fiber  facilities. 


 Market  Share  of  Competing  MVPDs 


 95%  85%  80%  78%  76%  74%  72% 
 3%  12%  16%  19%  21%  23%  25% 


 0% 
 10% 
 20% 
 30% 
 40% 
 50% 
 60% 
 70% 
 80% 
 90% 
 100% 


 June1993  June1998  June2000  June2001  June2002  June2003  June2004 
 Share 


 of 
 the 


 Market 


 %  Cable  %  Satellite  %  Others 


 Sources:  Table  B-  1  infra  ;  2003  Report  ,  Table  B-  1, 
 6.  Based  on  the  information  presented  in  this  Report,  we  find  that  consumers  today  have  viable  choices  in  the  delivery  of  video  programming,  and  they  are  exercising  their  ability  to  switch  among 
 MVPDs.  8  We  do  not  believe  that  the  fact  that  large  numbers  of  consumers  continue  to  subscribe  to  cable  service  indicates  a  lack  of  choice.  Cable  operators  in  response  to  the  growth  of  DBS  have  made  upgrades 
 and  advances  in  their  offerings.  9  The  number  of  cable  subscribers  selecting  digital  tiers  and  advanced  services  not  offered  by  DBS  continues  to  grow.  In  addition,  consumers  are  more  likely  to  consider 
 switching  from  cable  to  DBS  when  they  change  their  residences,  indicating  a  convenience  factor  and  the  cost  of  switching,  rather  than  a  lack  of  choice,  is  an  important  consideration  in  remaining  a  cable 
 subscriber. 


 8  See  also  Time  Warner  Says  Price  Cuts  Possible,  FINANCIAL  TIMES,  Oct.  5,  2004;  Cables  Competition, 
 CABLEFAX  DATABRIEFS,  Sept.  20,  2004;  David  Lieberman,  Study:  Cable  Losing  Steam,  USA  TODAY,  Aug.  24,  2004,  at  1B;  David  Lieberman,  Cable  Companies  Subscriber  Base  Sinks,  While  Satellite  Firms  Soar,  USA  TODAY, 


 Aug.  11,  2004,  at  3B;  Ken  Belson,  Two  Big  Cable  Companies  Report  Losses  Amid  Competition,  NEW  YORK  TIMES,  Aug.  10,  2004,  at  C4;  Peter  Grant,  Cable  Trouble:  Subscriber  Growth  Stalls  as  Satellite  TV  Soars,  WALL  STREET 
 JOURNAL,  Aug.  4,  2004,  at  B1;  Cable  Penetration  Slips,  DBS  Rises,  BROADCASTING  &  CABLE  TV  FAX,  Aug.  5,  2004,  at  2;  Chris  Walsh,  Comcast  Fighting  Back:  Growing  Competition  Spurs  Strategy  of  New  Services,  Innovation, 
 ROCKY  MOUNTAIN  NEWS,  July  1,  2004;  Ronald  Grover  and  Tom  Lowry,  Satellites  Hot  Pursuit  of  Cable,  BUSINESS  WEEK  ONLINE,  May  24,  2004,  at  http://  www.  businessweek.  com/@@  3Be8T4QQU*  TiBhkA/  magazine/  content/ 
 04_  21/  b3884059.  htm  (visited  Jan.  14,  2005).  9 
 See  fn.  299  infra;  U.  S.  General  Accounting  Office,  Issues  Related  to  Competition  and  Subscriber  Rates  in  the  Cable  Television  Industry,  GAO-  04-  8  (Oct.  2003)  at  10  (2003  GAO  Report). 
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 2.  General  Findings 
 7.  Most  MVPD  subscribers  continue  to  receive  their  video  programming  from  a  franchised  cable  operator,  but  cables  market  share  continues  to  decline.  In  June  2003,  73.  6  percent  of  MVPD 


 subscribers  received  their  video  programming  from  a  franchised  cable  operator,  and  by  June  2004,  71.6  percent  of  MVPD  subscribers  received  their  video  programming  from  a  franchised  cable  operator.  At  the 
 same  time,  DBSs  share  increased  from  22.7  percent  of  MVPD  subscribers  in  June  2003,  to  25.1  percent  of  MVPD  subscribers  in  June  2004.  The  number  of  MVPD  subscribers  choosing  all  other  delivery 
 technologies  represented  3.3  percent  of  all  subscribers  in  June  2004,  as  compared  with  3.7  percent  in  June  2003. 


 8.  While  the  number  of  subscribers  to  cable  television  has  increased  slightly  since  the  2003  Report,  the  total  number  of  subscribers  to  MVPD  services  generally  has  increased  at  a  more  rapid  pace. 
 A  total  of  89.8  million  households  subscribed  to  multichannel  video  programming  services  as  of  June  2003,  compared  to  92.3  million  households  subscribing  to  MVPDs  in  June  2004,  an  increase  of  about  2.8 
 percent.  This  subscriber  growth  represents  slightly  less  than  a  one  percentage  point  increase  in  the  percent  of  television  households  subscribing  to  an  MVPD,  from  84.2  percent  as  of  June  2003  to  85.  1 
 percent  as  of  June  2004.  10 
 9.  Last  year  we  reported  a  decline  in  the  number  of  cable  subscribers.  This  year  we  report  that  cable  subscribership  has  increased  only  slightly,  but  now  constitutes  a  smaller  portion  of  the  video 


 programming  market.  As  of  June  2003,  there  were  66.  05  million  cable  subscribers,  representing  73.6  percent  of  all  MVPD  subscribers.  As  of  June  2004,  there  were  66.1  million  cable  subscribers, 
 representing  71.6  percent  of  all  MVPD  subscribers. 
 10.  During  the  same  period,  the  total  number  of  noncable  MVPD  subscribers  grew  from  22.3  million  in  June  2003  to  26.2  million  in  June  2004,  an  increase  of  17.  7  percent.  DBS  subscribership,  in 


 particular,  continues  to  grow  at  double  digit  rates.  Between  June  2003  and  June  2004,  the  number  of  DBS  subscribers  grew  from  about  20.4  million  households  to  about  23.2  million  households.  DBSs 
 continued  growth  is  due  in  part  to  the  continued  increase  in  the  number  of  markets  where  local  broadcast  television  stations  are  distributed  by  DBS  under  the  authority  granted  to  them  by  the  Satellite  Home 
 Viewer  Improvement  Act  of  1999  (SHVIA).  11 
 11.  Over  the  last  year,  subscribership  to  large  dish  satellite  service  (HSD)  continued  to  decline.  In  June  2004,  subscribers  to  HSD  services  represented  only  0.36  percent  of  all  MVPD  subscribers, 


 compared  to  June  2003,  when  0.56  percent  of  all  MVPD  subscribers  received  their  service  via  HSD.  Although  the  participation  of  LECs  has  been  limited  in  recent  years,  several  LECs  have  announced  their 
 intent  to  re-  enter  the  video  distribution  market  in  the  next  several  years  using  fiber  facilities.  The  number  of  subscribers  receiving  their  video  programming  from  a  wireless  (MMDS)  operator  remained  steady 
 over  the  past  year  at  about  0.22  percent  of  MVPD  subscribers,  and  MVPD  subscribers  served  by  private  cable  operators  (PCOs)  has  declined  slightly  over  the  last  year,  from  a  1.3  percent  to  1.2  percent  of  all 
 MVPD  subscribers. 
 12.  Cable  multiple  system  operators  (MSOs)  and  other  MVPDs  continue  to  offer  nonvideo  advanced  services.  Some  cable  operators  continue  to  offer  access  to  the  Internet  through  the  subscribers 


 television  and  a  specially  designed  set-  top  box,  but  the  most  popular  way  to  access  the  Internet  over  cable  is  through  the  use  of  a  cable  modem  and  personal  computer.  As  of  June  2003,  there  were  more  than  13.7 


 10  The  number  of  MVPD  households  reported  here,  and  the  associated  percentages,  may  overstate  actual  values 
 because  a  household  that  subscribes  to  more  than  one  MVPD  (e.  g.,  cable  and  DBS)  is  included  as  a  subscriber  to  both  services.  See  2003  Report,  19  FCC  Rcd  at  1610  n.  8. 


 11  Pub.  L.  No.  106-  113,  113  Stat.  1501,  1501A-  526  to  1501A-  545  (1999). 
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 For  example,  basic  cable  viewership  19  increased,  as  did  premium  service  subscriptions  20  and  subscriptions  to  digital  video  programming.  21  Although  basic  cable  penetration  decreased  in  2003,  homes  passed 
 increased  during  the  same  period.  Channel  capacity  22  also  increased  during  2003  and  the  first  half  of  2004,  as  did  deployment  of  video-  on-  demand,  23  digital  video  recorders,  24  and  high-  definition 
 programming.  25  Deployment  of  nonvideo  advanced  services,  such  as  high-  speed  Internet  access  service  and  telephone  service  also  increased  during  this  period. 


 18.  Cables  Capacity  to  Serve  Television  Households.  A  widely  used  industry  measurement  of  cable  availability  is  the  percentage  of  homes  with  a  television  that  are  passed  by  a  cable  system.  The 
 calculation  of  cable  availability  has  been  a  subject  of  controversy.  26  The  number  of  homes  passed  depends  on  the  data  source  used,  and  the  percentage  of  homes  passed  varies  based  on  the  universe  used 
 for  the  comparison.  27  NCTA  estimates  that  at  the  end  of  2003,  102.9  million  homes  with  a  television  were  passed  by  a  cable  system  and  there  were  108.4  million  homes  with  a  television.  28  Thus,  NCTA 
 estimates  that  at  the  end  of  2003,  95  percent  of  homes  with  a  television  were  passed  by  a  cable  system.  29  NRTC  contends  that  NCTA  estimates  are  flawed  and  overstate  cable  availability.  30  NRTC  maintains  that 
 the  numerator  for  the  NCTAs  95  percent  estimate  includes  all  occupied  households  (not  just  TV  households),  while  the  denominator  is  limited  to  just  TV  households.  31  Our  analysis  of  NCTAs  numbers 


 19  Basic  cable  viewership  is  the  combined  audience  share  of  all  nonbroadcast  networks  on  the  BST  and  CPST  tiers. 
 20  Premium  service  subscriptions  are  the  number  of  premium  services  to  which  homes  are  subscribing  (also  known 
 as  pay  units).  21 
 Digital  video  programming  refers  to  digitally-  compressed  video  channels  offered  on  digital  service  tiers.  Subscribers  to  digital  video  programming  must  also  subscribe  to  basic  cable  service. 


 22  Channel  capacity  is  bandwidth  dedicated  to  video  use.  Video  channel  capacity  can  be  increased  or  decreased  on 
 any  given  system  simply  by  using  more  or  less  bandwidth  for  other  services,  such  as  high-  speed  Internet  access  services  or  cable  telephony. 


 23  Video-  on-  demand  (VOD)  allows  subscribers  to  select  at  any  time  movies  and  other  programming  they  wish  to 
 view  from  a  selection  of  titles  stored  on  a  remote  server.  24 
 Digital  video  recorders  (DVRs)  use  a  hard  disk  drive  to  record  video  programs.  25 
 High-  definition  (HD)  programming  is  a  television  signal  with  greater  detail  and  fidelity  than  provided  by  the  National  Television  Systems  Committee  (NTSC)  system.  The  high-  definition  picture  has  approximately  twice  the 


 visual  resolution  as  NTSC.  High-  definition  programming  also  provides  CD-  quality  audio.  26 
 See  Application  of  EchoStar  Communications  Corporation,  General  Motors  Corporation,  and  Hughes  Electronics  Corporation,  Transferors  and  EchoStar  Communications  Corporation,  Transferee,  17  FCC  Rcd  20559,  20611-  12 


   122-  25  (2002)  (EchoStar-  Hughes  HDO)  (designating  for  hearing  the  issue  of  the  precise  number  of  households  that  are  not  served  by  a  cable  operator,  the  number  served  by  a  low-  capacity  cable  system,  and  the  number  served  by 
 a  high-  capacity  cable  system).  27 
 Homes  passed  data  evaluated  in  the  context  of  our  review  of  the  EchoStar-  DIRECTV  merger  application  indicated  that  the  number  of  homes  not  passed  by  cable  may  vary  from  four  percent  to  21.  28  percent  depending  on 


 the  estimation  methods.  EchoStar-  Hughes  HDO,  17  FCC  Rcd  at  20612    124  and  n.  356.  28 
 NCTA,  Cable  Developments  2004,  at  7;  and  Kagan  World  Media,  Broadband  Cable  Financial  Databook,  Aug.  2004  (Cable  Databook)  at  11. 


 29  NCTA,  Cable  Developments  2004,  at  7.  NCTA  calculated  the  95  percent  figure  as  follows:  102.  9  million/  108.  4 
 million  =  0.949.  30 
 NRTC  Comments  at  6.  31 
 Id. 
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 shows  that  NCTA  actually  used  TV  households  in  both  the  numerator  and  denominator.  32  NRTC  also  argues  that  housing  units,  not  TV  households,  should  be  used  to  determine  the  universe  of  homes  passed 
 by  cable.  33  NRTC  contends  that  the  Census  Bureaus  total  household  estimates  are  more  accurate  than  the  TV  household  estimates  produced  by  Nielsen  Media  Research  and  used  by  NCTA.  34  NRTC  alleges 
 that  NCTAs  count  of  TV  households  must  overstate  the  actual  number  of  TV  households  because  the  count  is  larger  than  the  Census  Bureaus  estimate  of  total  households  in  33  states.  35  NRTC  maintains  that 
 a  full  and  fair  accounting  will  show  that  22.4  million  households  lack  access  to  cable  services.  36 
 19.  For  purposes  of  this  Report,  we  continue  to  use,  as  we  have  in  the  past,  data  derived  from  Kagan  World  Media  (homes  passed  by  cable  systems)  and  Nielsen  Media  Research  (total  TV  households) 


 for  historical  consistency.  We  present  these  data  to  indicate  trends,  rather  than  an  absolute  measure  of  cable  availability.  Kagan  estimates  that  at  the  end  of  2003,  there  were  108.4  million  TV  households,  and 
 106.0  million  occupied  homes  passed  by  cable  systems  (not  all  of  them  with  a  television).  37  Thus,  at  the  end  of  2003,  the  percentage  of  occupied  homes  with  a  television  that  were  passed  by  a  cable  system  must 
 be  less  than  97.8  percent.  38  As  noted  above,  NCTA  estimates  that  at  the  end  of  2003,  95  percent  of  occupied  homes  with  a  television  were  passed  by  a  cable  system. 


 20.  Section  612(  g)  of  the  Communications  Act  provides  that  at  such  time  as  cable  systems  with  36  or  more  activated  channels  are  available  to  70  percent  of  households  within  the  United  States  and  are 
 subscribed  to  by  70  percent  of  those  households,  the  Commission  may  promulgate  any  additional  rules  necessary  to  promote  diversity  of  information  sources.  39  Current  Census  Bureau  data  indicate  that  there 
 are  105,842,000  occupied  housing  units.  40  According  to  Warren  Communications  News  (Warren),  there  are  84,415,707  occupied  homes  passed  by  cable  systems  with  36  or  more  channels  and  58,177,885  of 
 those  households  subscribe  to  cable  systems  with  36  or  more  channels.  41  Thus,  based  on  this  data  source, 


 32  NRTCs  conclusion  is  based  on  data  from  NCTAs  website  which  reports  that  the  95  percent  figure  is  occupied 
 homes  passed  as  a  percentage  of  TV  households,  but  NCTAs  Cable  Developments  2004  publication  reports  that  the  95  percentage  figure  is  occupied  TV  homes  passed  as  a  percentage  of  TV  households.  See  http://  www.  ncta.  com/ 


 Docs/  PageContent.  cfm?  pageID=  86  (visited  Nov.  16,  2004).  33 
 NRTC  Comments  at  6.  34 
 Id.  35 
 Id.  at  6  and  Exhibit  1.  36 
 Id  at  5.  37 
 Cable  Databook  at  11.  Occupied  homes  passed  by  cable  systems  equals  total  cable  homes  passed  times  percent  of  total  housing  units  that  are  occupied  (106.  0  million  =  117.  9  million  x  109.  9  million/  122.  2  million).  Cable  Databook 


 at  11  and  13.  38 
 We  calculate  the  97.  8  percent  figure  as  follows:  106.  0  million/  108.  4  million  =  0.  978.  Since  the  numerator  includes  homes  that  may  not  have  a  television,  the  calculation  overstates  cable  availability. 


 39  47  U.  S.  C.    532(  g). 
 40  U.  S.  Census  Bureau,  The  2003  American  Housing  Survey  (revised  Aug.  16,  2004),  Table  2-  1.  See 
 http://  www.  census.  gov/  hhes/  www/  housing/  ahs/  03dtchrt/  tab2-  1.  html  (visited  Oct.  19,  2004).  Last  year,  according  to  Warren  Communications  News,  there  were  82,  506,  311  homes  passed  by  cable  systems  with  36  or  more  channels 


 and  56,  859,  607  of  those  homes  subscribed  to  cable.  We  compared  those  figures  with  the  Census  Bureaus  data  that  indicated  that  there  were  119,300,000  households  in  the  United  States.  We  have  now  clarified  that  the  Warren  data 
 are  based  on  the  number  of  occupied  households  and,  thus,  the  appropriate  Census  Bureau  figure  is  occupied  households,  not  total  households. 
 41  Warren  Communications  News,  Custom  Report:  From  Television  and  Cable  Factbook  Online  Datasets,  Oct.  19, 
 2004.  Warren  defines  homes  passed  as  the  total  number  of  homes  passed  by  cable  systems  having  the  potential  of  being  served  promptly.  Specifically,  the  homes  passed  have  to  be  occupied  and  are  assumed  to  have  a  television. 
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 cable  systems  with  36  or  more  channels  are  available  to  79.8  percent  (84,415,  707/  105,  842,  000)  of  occupied  households.  Of  the  occupied  homes  passed  by  cable  systems  with  36  or  more  channels,  68.9 
 percent  (58,177,885/  84,415,707)  subscribe  to  these  systems.  42  Warren  reports  that  there  are  66,241,805  cable  subscribers.  Thus  we  conclude  that  there  are  8,063,920  current  subscribers  to  cable  systems  with 
 fewer  than  36  channels.  Although  they  do  not  represent  the  universe  of  cable  systems,  the  sample  data  from  the  2004  Price  Survey  and  the  Annual  Report  of  Cable  Television  Systems  (Form  325)  can  be  used 
 to  estimate  the  second  prong  of  the  70/  70  benchmark;  neither  of  which  indicate  that  the  second  element  of  the  test  has  been  met.  From  the  Price  Survey  sample,  we  estimate  that  the  subscribers  to  systems  with  36 
 or  more  channels  as  a  percent  of  the  homes  passed  by  such  systems  is  58.8  percent.  Based  on  the  Form  325  sample,  we  estimate  that  this  figure  is  54.7  percent. 


 21.  Subscribership.  The  number  of  basic  cable  subscribers  changed  little  from  66.1  million  in  2002  to  66.0  million  in  2003,  as  shown  in  Table  1  below.  The  number  of  basic  cable  subscribers  is 
 projected  to  change  little  in  2004.  Kagan  projects  66.2  million  basic  subscribers  at  year-  end  2004.  43 
 TABLE  1:  Cable  Television  Industry  Growth:  1998  -  June  2004  (in  millions)  44 
 TV  Households  (TH)  45  Homes  Passed  (HP)  46  Basic  Subscribers  (Subs)  47 


 Year  Total  %  Change  Over  Prior  Yr  Total  %  Change  Over  Prior  Yr  Total  %  Change  Over  Prior  Yr 
 HH  Passed  by  Cable 
 (HP/  TH) 
 HHs  Subscribing 
 (Subs/  TH) 
 U.  S.  Penetration 
 (Subs/  HP) 
 1998  99.  4  1.4%  95.  6  1.7%  65.  1  1.4%  96.  2%  65.  5%  68.  1% 


 1999  100.8  1.4%  97.  6  2.1%  65.  9  1.2%  96.  8%  65.  4%  67.  5% 
 2000  102.2  1.4%  98.  9  1.3%  66.  6  1.1%  96.  8%  65.  2%  67.  3% 
 2001  105.4  3.1%  100.6  1.7%  66.  9  0.5%  95.  4%  63.  5%  66.  5% 
 2002  106.7  1.2%  103.4  2.8%  66.  1  -1.  2%  96.  9%  61.  9%  63.  9% 
 2003  108.4  1.6%  106.0  2.5%  66.  0  -0.  2%  97.  8%  60.  9%  62.  3% 
 June  2004  108.4  0.0%  48  107.1  1.0%  66.  1  0.2%  98.  8%  61.  0%  61.  7% 


 42  See  also  Letter  from  Daniel  L.  Brenner,  Senior  Vice  President,  Law  &  Regulatory  Policy,  NCTA,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  Dec.  17,  2004  (providing  estimates  using  Warren,  Nielsen,  and  Kagan  homes  passed  and  subscriber  statistics). 


 43  Cable  Databook  at  11. 
 44  Historical  data  in  this  table  may  differ  from  those  previously  reported  because  some  data  have  been  updated  by 
 Kagan.  See  Cable  Databook  at  8,  11.  45 
 The  2003  and  estimated  June  2004  TV  Household  numbers  are  reported  by  Kagan  World  Media  as  total  U.  S.  TV  households.  The  numbers  are  derived  from  Nielsen  Media  Research  and  Kagan  estimates.  Id.  at  11. 


 46  The  1998  through  2003  homes  passed  numbers  are  reported  by  Kagan  as  residential  cable  homes  passed.  The 
 June  2004  homes  passed  estimate  is  an  average  calculated  from  the  actual  2003  and  the  projected  2004  numbers  for  occupied  cable  homes  passed.  Id.  at  9,  11. 


 47  The  1998  through  2003  basic  subscriber  numbers  are  reported  by  Kagan  as  basic  subscribers.  The  June  2004 
 basic  subscriber  estimate  is  an  average  calculated  from  the  actual  2003  and  the  projected  2004  numbers  for  total  basic  cable  subscribers.  Id.  According  to  NCTA,  there  were  71.  1  million  cable  subscribers  at  the  end  of  April  2004. 


 NCTA  Comments  at  7.  NCTAs  estimate  of  cable  subscribers  is  more  than  the  number  of  basic  subscribers  reported  in  Table  1  above. 
 48  Percentage  change  columns  in  this  row  are  from  December  2003  to  June  2004. 
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 Basic  subscriber  losses  for  the  second  quarter  of  2004  were  larger  than  expected  and  some  companies  have  revised  their  projections  for  2004  from  slight  increases  to  no  growth  in  the  number  of  basic 
 subscribers.  49  For  example,  Comcast  added  140,000  basic  cable  subscribers  in  2003.  50  These  gains  were  followed  by  losses  in  the  first  six  months  of  2004.  51  By  year-  end  2004,  Comcast  expects  net  additions  of 
 less  than  0.5  percent  to  the  number  of  basic  cable  subscribers.  52  For  2003,  Cox  added  57,000  basic  cable  subscribers  (a  0.9  percent  increase).  53  These  gains  were  followed  by  a  loss  of  75,000  basic  cable 
 subscribers  in  the  first  six  months  of  2004.  54  For  the  year  2004,  Cox  expects  basic  cable  subscriber  growth  to  be  just  under  one  percent.  55  For  2003,  Time  Warner  reported  a  0.1  percent  increase  in  the 
 number  of  basic  cable  subscribers.  56  Time  Warner,  however,  reported  a  loss  of  21,000  basic  cable  subscribers  in  the  second  quarter  of  2004.  57  Cablevision  lost  19,  600  basic  cable  subscribers  in  2003  but 
 added  7,800  in  the  first  six  months  of  2004.  58  By  year-  end  2004,  Cablevision  expects  an  increase  of  approximately  0.5  percent  in  the  number  of  basic  video  subscribers.  59  Charter  lost  147,500  basic  cable 
 subscribers  in  2003.  60  Charter  lost  another  67,300  basic  cable  subscribers  in  the  first  six  months  of  2004.  61 


 22.  Cable  penetration  (i.  e.,  subscribers/  homes  passed)  declined  in  2003,  as  the  number  of  subscribers  decreased,  and  the  number  of  homes  passed  increased.  Cable  penetration  is  estimated  to 
 decline  further  in  the  first  half  of  2004.  The  ratio  of  cable  subscribers  to  television  households  also  declined  in  2003,  as  the  number  of  subscribers  decreased,  and  the  number  of  television  households 
 increased.  62 


 49  See  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  Aug.  18,  2004,  at  1-  2. 
 50  Comcast  Corp.,  Comcast  Full  Year  and  Fourth  Quarter  Results  Meet  or  Exceed  All  Operating  and  Financial 
 Targets  Setting  Stage  for  Continued  Growth  in  2004  (press  release),  Feb.  11,  2004.  51 
 Comcast  Corp.,  Comcast  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004.  52 
 Id.  53 
 Cox  Communications  Inc.,  Cox  Communications  Announces  Fourth  Quarter  and  Full-  Year  Financial  Results  for  2003  (press  release),  Feb.  2,  2004. 


 54  Cox  Communications  Inc.,  Cox  Communications  Announces  Second  Quarter  and  Year-  to-  Date  Financial  Results 
 for  2004  (press  release),  July  29,  2004.  55 
 Id.  56 
 Time  Warner  Inc.,  Time  Warner  Reports  Results  for  2003  Full  Year  and  Fourth  Quarter  (press  release),  Jan.  28,  2004. 


 57  Time  Warner  Inc.,  Time  Warner  Inc.  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004. 
 58  Cablevision  Systems  Corp.,  Cablevision  Systems  Corporation  Reports  Fourth  Quarter  and  Full  Year  2003  Results 
 (press  release),  Mar.  2,  2004;  Cablevision  Systems  Corp.,  Cablevision  Systems  Corporation  Reports  Second  Quarter  2004  Results  (press  release),  Aug.  9,  2004. 


 59  Cablevision  Systems  Corp.,  Cablevision  Systems  Corporation  Reports  Fourth  Quarter  and  Full  Year  2003  Results 
 (press  release),  Mar.  2,  2004.  60 
 Charter  Communications  Inc.,  Charter  Reports  Fourth  Quarter  and  Year  2003  Financial  and  Operating  Results  (press  release),  Feb.  19,  2004.  Charter  reports  that  the  number  of  analog  video  subscribers  declined  from  6.  6 


 million  at  year-  end  2002  to  6.4  million  at  year-  end  2003.  Analog  video  subscribers  include  all  subscribers  who  receive  video  services.  Id. 
 61  Charter  Communications  Inc.,  Charter  Communications  Reports  Second  Quarter  2004  Financial  and  Operating 
 Results  (press  release),  Aug.  9,  2004.  62 
 From  the  end  of  2003  to  the  end  of  June  2004,  the  ratio  of  cable  subscribers  to  TV  households  is  calculated  to  increase  slightly  from  60.9  percent  to  61.  0  percent.  This  calculation  is  the  result  of  holding  the  number  of  TV 


 (continued....) 
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 23.  For  the  second  year  in  a  row,  the  number  of  homes  subscribing  to  premium  cable  services  declined  from  35.3  million  in  2002  to  34.8  million  in  2003,  as  shown  in  Table  2  below.  At  the  end  of 
 2003,  approximately  53  percent  of  cables  66.0  million  subscribers  also  subscribed  to  premium  services.  63  The  number  of  premium  services  to  which  homes  are  subscribing  (also  known  as  pay  units)  increased 
 from  to  80.9  million  in  2002  to  83.4  million  in  2003,  but  the  size  of  the  increase  was  smaller  than  the  prior  years  increase.  64  Although  the  cable  industry  sold  more  premium  services,  the  total  revenue 
 received  from  premium  services  declined  1.2  percent  in  2003.  65  Cable  systems  sold  premium  cable  services  to  fewer  homes,  but  the  average  number  of  subscriptions  per  premium  subscriber  increased 
 slightly,  from  an  average  2.3  subscriptions  per  subscriber  in  2002  to  an  average  2.4  subscriptions  per  subscriber  in  2003.  66 


 TABLE  2:  Premium  Cable  Services:  1998  -  2003  (in  millions)  67 
 Premium  Cable  Service  Subscribers  (Pay  HH)  Premium  Cable  Service  Subscriptions  (Pay  Units)  Average  Number  of  Subscriptions 


 Year  Total  %  Change  Over  Prior  Year  Total  %  Change  Over  Prior  Yr  Pay  Units/  Pay  HH 
 1998  32.9  3.5%  58.6  6.0%  1.8 
 1999  34.3  4.3%  60.2  2.7%  1.8 
 2000  35.7  4.1%  66.8  11.0%  1.9 
 2001  36.0  0.8%  75.6  13.2%  2.1 
 2002  35.3  -1.9%  81.1  7.3%  2.3 
 2003  34.8  -1.4%  83.4  2.8%  2.4 


 24.  Channel  Capacity.  Data  from  the  Commissions  2004  Price  Survey  68  provides  figures  on  cable  system  bandwidth  and  the  number  of  analog  and  digital  video  channels  being  delivered  by  surveyed 


 (...  continued  from  previous  page)  households  constant  at  108.  4  million  over  the  entire  2003-  2004  season  and  assuming  that  the  number  of  basic 
 subscribers  will  increase  from  66.  0  million  to  66.  1  million  from  January  2003  to  June  2004.  At  year-  end  2004,  Kagan  projects  66.  2  million  basic  subscribers.  Cable  Databook  at  11.  We  assumed  that  half  of  the  projected  growth 
 would  occur  by  the  end  of  June  2004.  As  such,  we  assumed  that  there  would  be  66.  1  million  basic  subscribers  by  the  end  of  June  2004. 
 63  Cable  Databook  at  9. 
 64  Id.  at  9. 
 65  Id.  at  8. 
 66  Id.  at  9. 
 67  Historical  data  included  in  this  table  may  differ  from  those  previously  reported  because  some  data  have  been 
 updated  by  Kagan.  See  Cable  Databook.  The  1998  through  2003  premium  cable  service  subscribers  (Pay  HH)  numbers  are  reported  by  Kagan  as  pay  subscribers.  Id.  at  9.  The  1998  through  2003  premium  cable  service 


 subscriptions  (Pay  Units)  numbers  are  reported  by  Kagan  as  the  sum  of  premium  units  and  mini-  pay  units  (defined  as  a  service  or  pay  TV  that  programs  less  than  8  hours  per  day).  Premium  units  include  HBO,  Cinemax,  Showtime, 
 Movie  Channel,  Starz,  and  Playboy.  Mini-  pay  units  include  Sundance,  Flix,  and  Encore.  Id.  at  9.  68 
 The  2004  Price  Survey  (Survey)  requested  data  from  cable  operators  pertaining  to  monthly  cable  rates  in  communities  selected  as  part  of  a  random  sample.  We  received  641  Survey  responses.  We  requested  data  as  of 


 January  1,  2004,  and  limited  amounts  of  data  as  of  January  1,  2003  and  January  1,  2002.  In  addition  to  monthly  (continued....) 
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 cable  systems  (see  Table  3).  69  It  shows  that  approximately  85.7  percent  of  the  sampled  cable  systems  (both  competitive  and  noncompetitive  systems)  70  have  facilities  with  bandwidth  of  750  MHz  or  above.  71 
 The  average  bandwidth  of  systems  in  the  Survey  is  approximately  734  MHz.  Cable  system  bandwidth  may  be  allocated  among  video  and  nonvideo  services.  We  calculate  that  the  average  system  in  the  Survey 
 used  513  to  588  MHz  of  bandwidth  to  provide  video  service.  72  Cable  operators  are  choosing  to  provide,  on  average,  approximately  73  analog  video  channels  and  150  digital  video  channels,  with  enough 
 additional  bandwidth  to  provide  high-  definition  television,  video-  on-  demand,  and  Internet  access  services.  From  January  2003  to  January  2004,  the  total  number  of  video  channels  (analog  plus  digital) 
 carried  by  the  average  cable  system  in  the  Survey  increased  from  approximately  210  to  223. 


 (...  continued  from  previous  page)  cable  rates,  the  Survey  sought  information  on  the  number  of  channels  in  order  to  determine  how  much  subscribers 
 pay  on  a  per  channel  basis.  The  Survey  also  gathered  information  at  the  cable  system  level  on  other  factors  that  may  affect  cable  rates  and  competition  in  the  multichannel  video  programming  market,  including:  (1)  number  of  cable 
 subscribers;  (2)  number  of  digital  cable  service  subscribers;  (3)  number  of  cable  Internet  access  subscribers;  (4)  number  of  cable  telephony  subscribers;  (5)  cable  system  capacity  in  MHz;  and  (6)  cable  programming  revenues; 
 (7)  cable  programming  costs;  and  (8)  system  operating  costs.  69 
 Section  623(  k)  of  the  Communications  Act  requires  the  Commission  to  publish  annually  a  statistical  report  on  cable  prices,  or  more  specifically,  average  rates  for  the  delivery  of  the  BST,  the  CPST,  and  equipment.  See  47 


 U.  S.  C.    543(  k).  The  BST  includes  local  television  broadcast  signals  and  public,  educational,  and  governmental  access  channels.  See  47  U.  S.  C.    543(  b)(  7).  The  CPST  includes  any  video  programming  other  than  video 
 programming  carried  on  the  basic  service  tier,  and  video  programming  offered  on  a  per-  channel  or  per  program  basis.  See  47  U.  S.  C.    543(  k)(  2);  see  also  fn.  16  supra.  Equipment  refers  to  a  converter  box,  remote  control,  and 
 other  equipment  necessary  to  access  programming.  See  47  U.  S.  C.    543(  b)(  3).  70 
 The  Survey  enables  the  Commission  to  compare  prices  charged  by  samples  of  two  groups  of  cable  operators:  (1)  operators  that  are  deemed  to  face  effective  competition  (referred  to  as  the  competitive  group)  and  (2)  operators 


 that  do  not  face  effective  competition  (the  noncompetitive  group).  Within  the  noncompetitive  group,  information  was  collected  from  both  regulated  and  unregulated  operators.  Operators  in  the  competitive  group  are  limited  to 
 those  operators  that  have  sought  and  obtained  a  Commission  finding  of  effective  competition.  As  a  result,  within  the  noncompetitive  group,  there  may  be,  and  likely  are,  operators  that  face  competition  but  have  not  filed  a  petition 
 with  the  Commission  seeking  a  finding  of  effective  competition.  Similarly,  there  may  be  operators  within  the  competitive  group  that  may  have  met  the  criteria  for  a  finding  of  effective  competition  at  the  time  the  finding  was 
 made,  but  because  of  changed  circumstances,  may  not  meet  the  statutory  criteria  currently.  71 
 According  to  NCTA,  by  year-  end  2003,  nearly  95  million  homes  were  passed  by  systems  with  750  MHz  or  higher  capacity,  and  more  than  95  million  households  were  passed  by  systems  that  provided  two-  way  services,  such  as 


 cable  modem  service,  interactive  television,  and  IP  telephony.  NCTA  Comments  at  29.  Kagan  reports  that  by  the  end  of  2003  there  were  106  million  occupied  households  passed  by  cable  systems.  Cable  Databook  at  11.  Thus, 
 NCTAs  reported  numbers  for  year-  end  2003  indicate  that  nearly  89.  6  percent  (95  million/  106  million  =  89.  6  percent)  of  these  homes  had  access  to  cable  systems  with  750  MHz  or  higher  and  more  than  89.  6  percent  (95 
 million/  106  million  =  89.  6  percent)  of  these  homes  had  access  to  activated  two-  way  plant.  NCTAs  calculation  for  homes  passed  by  750  MHz  cable  systems  is  slightly  higher  than  the  85.  7  figure  derived  from  the  2004  Price  Survey 
 data.  This  is  likely  due  to  differing  data  and  measurement  methodologies.  72 
 Each  analog  channel  requires  six  MHz  bandwidth,  thus  it  takes  approximately  438  MHz  of  bandwidth  to  deliver  the  73  analog  channels.  Multiple  digital  channels,  however,  can  be  delivered  on  six  MHz  of  bandwidth.  Depending 


 on  the  modulation,  type  of  content,  and  other  factors  that  vary  from  one  cable  operator  to  another  and  one  system  to  another,  a  range  of  six  to  12  digital  channels  can  be  delivered  on  each  six  MHz  of  bandwidth.  The  average  number 
 of  digital  channels  in  the  survey  is  150,  so  it  takes  from  75  to  150  MHz  of  bandwidth  to  deliver  the  150  digital  channels  (150/  12  x  6  MHz  =  75  MHz  to  150/  6  x  6  MHz  =  150  MHz).  Because  cable  operators  are  delivering  high-definition 
 television  (HDTV)  programming,  and  it  takes  more  bandwidth  to  deliver  HDTV  programming,  our  estimate  of  the  bandwidth  used  for  video  programming  may  understate  the  actual  bandwidth  cable  operators  are 
 using  to  provide  video  programming. 
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 TABLE  3:  January  2004  Channel  Capacity  73 
 25.  Viewership.  During  the  2003-  2004  television  season,  the  combined  audience  share  75  of  all  nonbroadcast  networks  76  was  higher  than  the  combined  audience  share  of  all  broadcast  television 
 stations  77  for  both  all  day  viewing  and  prime  time  viewing.  78  For  all  day  viewing,  the  combined  audience  share  of  all  nonbroadcast  networks  was  56,  and  the  combined  audience  share  of  all  broadcast  television 
 stations  was  44.  For  prime  time  viewing,  the  combined  audience  share  of  all  nonbroadcast  networks  was  52,  and  the  combined  audience  share  of  all  broadcast  television  stations  was  48.  According  to  NCTA,  the 
 seven  national  commercial  broadcast  networks  (ABC,  CBS,  NBC,  FOX,  UPN,  WB,  and  PAX)  accounted  for  a  38  share  of  all  day  viewing  in  2003,  and  all  nonbroadcast  networks  accounted  for  a  63  share  of  all 
 day  viewing.  79  According  to  NCTA,  the  2003  2004  television  season  (September  2003  May  2004)  was  the  first  time  that  the  combined  nonbroadcast  networks  share  of  prime  time  viewing  was  greater  than  the 
 combined  national  broadcast  networks  share  of  prime  time  viewing.  80 
 26.  Cable  Rates.  The  Commissions  2004  Price  Survey  81  finds  that  the  average  monthly  cable  rate  increased  by  5.6  percent  for  the  noncompetitive  cable  operators  surveyed  (cable  systems  in 


 communities  without  an  effective  competition  finding)  over  the  twelve  months  ending  January  2004,  and  the  average  price  per  channel  increased  by  1.2  percent.  The  average  monthly  cable  rate  increased  by  3.6 
 percent  for  the  competitive  cable  operators  surveyed  (cable  systems  in  communities  where  effective  competition  was  found  to  be  present)  over  the  twelve  months  ending  January  2004,  and  the  average 


 73  Derived  from  2004  Price  Survey  data. 
 74  In  previous  years,  we  have  reported  the  total  number  of  channels  in  terms  of  the  bandwidth  (specifically,  the 
 estimated  number  of  six  MHz  channels)  needed  to  carry  the  analog  and  digital  channels.  See  fns.  22,  71  supra.  75 
 A  share  is  the  percent  of  all  households  using  television  during  the  time  period  that  are  viewing  the  specified  station(  s)  or  network(  s).  Due  to  simultaneous  multiple  set  viewing,  Nielsen  reports  audience  shares  that  exceed  100 


 percent  when  totaled.  We  have  normalized  audience  shares  to  equal  100  percent.  76 
 Nonbroadcast  network  shares  include  basic  (BST  and  CPST)  networks,  premium  networks,  and  PPV  networks  distributed  by  MVPDs. 


 77  Broadcast  shares  include  network  affiliates,  independent,  and  public  television  stations. 
 78  Prime  time  viewing  is  Monday  through  Saturday,  8  p.  m.-  11  p.  m.,  and  Sunday,  7  p.  m.-  11  p.  m.  Nielsen  Media 
 Research,  Broadcast  Calendar  (TV  Season)  Share  of  Audience  Report,  Prime  time  and  Total  Day,  Sept.  2004.  See  also  NCTA  Comments  at  45  46.  The  most  popular  nonbroadcast  networks  continue  to  receive  a  lower  audience 


 share  for  all  day  viewing  and  prime  time  viewing  than  any  of  the  major  broadcast  television  networks.  Nielsen  Media  Research. 
 79  NCTA  Comments  at  45.  NCTAs  numbers  do  not  include  PBS  and  independent  commercial  broadcast  stations. 
 80  Id.  at  46. 
 81  See  fn.  68  supra. 


 Competitive  Group  Noncompetitive  Group 
 Average  system  capacity  (MHz)  734  734 
 Percent  of  systems  with  capacity  of: 
 212  to  749  MHz  14.  5%  14.  3% 
 At  750  MHz  62.  4%  59.  3% 
 751  to  870  MHz  23.  1%  26.  4% 
 Total  number  of  channels  74  232.4  222.6 
 Total  number  of  analog  channels  74.  7  73.  2 
 Total  number  of  digital  channels  157.7  149.4 
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 monthly  price  per  channel  decreased  by  0.3  percent.  82  Thus,  the  competitive  differential  in  monthly  cable  rates  (the  percentage  difference  between  the  noncompetitive  group  and  the  competitive  group)  was  7.3 
 percent  over  the  twelve  months  ending  January  2004,  and  the  competitive  differential  in  the  price  per  channel  was  11.0  percent.  The  degree  of  difference  varied  by  competitive  subgroup.  The  highest 
 differentials  were  associated  with  wireline  overbuild  competition.  For  communities  in  this  subgroup,  the  average  monthly  cable  rate  and  price  per  channel  were,  respectively,  15.7  percent  lower  and  27.2  percent 
 lower  than  those  averages  for  the  noncompetitive  group. 
 27.  The  Bureau  of  Labor  Statistics  (BLS)  publishes  a  Consumer  Price  Index  (CPI)  that  measures  price  inflation  related  to  all  goods  and  services  for  all  urban  consumers.  By  this  measure, 


 inflation  increased  by  1.1  percent  over  the  12  months  ending  January  2004.  BLS  also  publishes  price  indices  for  many  components  of  the  overall  CPI,  including  a  price  index  for  a  basket  of  cable  services 
 (cable  CPI).  83  The  cable  CPI  increased  by  3.8  percent  over  the  year  ending  January  2004.  Because  it  covers  a  different  mix  of  services,  however,  the  cable  CPI  cannot  be  compared  directly  with  the  results  of 
 the  Commissions  Price  Survey.  84 
 28.  Cable  Industry  Revenue.  Total  revenue  grew  to  $54.3  billion  in  2003,  as  shown  in  Table  4  below.  This  represents  an  11.5  percent  increase  over  2002.  Cable  revenue  is  projected  to  grow  10.8 


 percent  in  2004  to  $60.2  billion.  Much  of  the  increase  in  revenue  comes  from  growth  in  demand  for  advanced  services,  especially  high-  speed  Internet  service  and  digital  cable  services,  and  from  higher  basic 
 cable  rates.  Average  monthly  residential  revenue  per  subscriber  grew  from  $59.87  in  2002  to  $66.22  in  2003  and  is  projected  to  increase  to  $72.60  in  2004.  85  All  revenue  categories  increased,  except  revenue 
 from  premium  tiers,  which  decreased  1.  2  percent  in  2003. 
 29.  Cable  Industry  Cash  Flow.  Cash  flow  (generally  expressed  as  earnings  before  interest,  taxes,  depreciation,  and  amortization,  or  EBITDA)  is  often  used  to  assess  the  financial  position  of  cable 


 firms  and  other  companies  in  capital  intensive  industries.  86  Cash  flow  from  operations  is  the  net  result  of  cash  inflows  from  operations  (revenue)  and  cash  outflows  from  operations  (expenses).  Cash  flow  from 
 operations  indicates  a  firm's  ability  to  meet  its  net  finance  and  investment  obligations  and  thus  does  not  include  non-  cash  charges  to  net  income  such  as  depreciation  and  amortization.  As  Table  4  shows,  cash 


 82  See  2004  Price  Survey  at    9-  11.  The  Survey  found  that  there  is  only  a  slight  difference  in  the  overall  average 
 and  the  average  for  the  noncompetitive  group  because  the  noncompetitive  group  is  much  larger  than  the  competitive  group  -  an  estimated  eight  percent  of  the  total  nationwide)  Id. 


 83  This  index  predominately  reflects  cable  service,  although  it  includes  elements  of  satellite  television  and  radio 
 service.  See  http://  www.  bls.  gov/  cpi/  home.  htm  (visited  Jan.  14,  2005).  84 
 For  example,  the  Cable  CPI  includes  all  cable  television  services,  while  the  monthly  cable  rate  consists  of  basic  service,  expanded  basic,  and  equipment.  Also,  because  the  CPI  measures  change  in  what  consumers  pay  for  a  fixed 


 basket  of  goods  and  services,  BLS  adjusts  the  cable  CPI  to  reflect  estimated  changes  in  cable  services.  See  http://  www.  bls.  gov/  cpi/  home.  htm  (visited  Jan.  14,  2005). 
 85  Cable  Databook  at  4. 
 86  The  cable  industry  has  long  used  a  cash  flow  valuation  model.  Cash  flow  valuation  is  an  effective  tool  for  valuing 
 companies  that  have  negative  net  income  because  they  are  building  out  capital  infrastructure  and  accruing  significant  long-  term  debt  early  in  their  life-  cycle.  The  traditional  measurement  of  cash  flow,  a  measure  of 


 operating  profit,  has  evolved  into  EBITDA,  which  ignores  the  expenses  of  interest,  taxes,  depreciation  and  amortization,  whereas  the  standard  valuation  model,  net  income,  includes  them.  In  the  past  year,  free  cash  flow 
 (FCF)  has  largely  replaced  EBITDA  as  a  critical  valuation  metric  of  choice  among  industry  analysts.  Although  a  standardized  definition  of  FCF  does  not  exist,  FCF  essentially  takes  into  account  the  periodic  interest  that  must  be 
 paid  on  debt.  Some  analysts  more  recently  have  suggested  that  the  cable  industry  should  be  valued  on  the  traditional  net  income  model,  and  not  cash  flow  or  its  various  proxies  (EBITDA  or  FCF)  because  the  industry  has  now  reached 
 a  stage  of  maturation  that  would  justify  use  of  more  traditional  valuation  metrics.  See  2003  Report,  19  FCC  Rcd  at  1627    28  and  n.  72. 
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 flow  from  operations  increased  during  2003.  87  Table  4  also  shows  that  the  average  annual  revenue  for  residential  and  business  subscribers  combined  is  expected  to  grow  from  $824  in  2003  to  $910  in  2004.  88 
 In  addition,  cash  flow  as  a  percentage  of  revenue  (cash  flow  margin)  increased  over  the  same  period.  That  is,  cash  flow  increased  at  a  greater  rate  than  revenue,  indicating  that  revenues  grew  faster  than 
 operating  expenses  during  2003. 
 TABLE  4:  Cable  Industry  Revenue  and  Cash  Flow:  2002    2004  89  2002  2003  02-  03  2004  03-  04 


 Total  Total  %  Change  Est.  Total  %  Change  Basic  Subscribers  (mil.) 
 66.  1  66.  0  -0.  2%  66.  2  0.3% 
 Revenue  Segments  (mil.) 
 Basic  Service  and  CPST  Tiers  $27,690  $29,000  4.7%  $30,336  4.6% 
 Premium  (Pay)  Tiers  $5,963  $5,  891  -1.  2%  $5,  871  -0.  3% 
 VOD/  Pay-  Per-  View  90  $793  $976  23.  1%  $1,  134  16.  2% 
 Local  Advertising  $2,  978  $3,  239  8.8%  $3,  676  13.  5% 
 Home  Shopping  $289  $307  6.2%  $330  7.5% 
 Total  Digital  Tier  $2,  693  $3,  396  26.  1%  $4,  008  18.  0% 
 High-  speed  Internet  $4,  525  $6,  761  49.  4%  $8,  886  31.  4% 
 Digital  Video  Recorder  $4  $36  800.0%  $149  313.9% 
 Circuit  Switch  and  VoIP  $1,  261  $1,  524  20.  9%  $1,  732  13.  6% 
 Installation  91  $426  $443  4.0%  $458  3.4% 
 Miscellaneous  92  $2,  173  $2,  821  29.  8%  $3,  669  30.  1% 
 Total  Revenue  93  (mil.)  $48,795  $54,394  11.  5%  $60,249  10.  8% 
 Revenue  Per  Subscriber  $738.  20  $824.  15  11.  7%  $910.  11  10.  4% 
 Operating  Cash  Flow  (mil.)  $18,201  $20,371  11.  9%  $22,670  11.  3% 
 Cash  Flow  per  Subscriber  $275.  36  $308.  65  18.  9%  $342.  45  11.  0% 
 Cash  Flow/  Total  Revenue  37.  3%  37.  5%  0.5%  37.  6%  0.3% 


 87  Kagan  World  Media  reports  that  it  was  high-  margin,  high-  speed  data  service  that  drove  operating  cash  flow 
 growth  in  2003.  Cable  Databook  at  7.  88 
 Revenue  from  residential  subscribers  is  expected  to  grow  from  $794.  64  ($  66.  22  per  month  x  12  =  $794.  64)  in  2003  to  $871.20  ($  72.  60  x  12  =  $871.  20)  in  2004.  Revenue  from  business  subscribers  is  expected  to  grow  from 


 $991.  32  ($  82.  61  x  12  =  $991.  32)  in  2003  to  $1040.88  ($  86.  74  x  12  =  $1040.  88)  in  2004.  Id.  at  13.  89 
 Pay-  per-  view  and  home  shopping  data  for  2001  come  from  the  2002  Report.  All  other  data  come  from  the  Cable  Databook  at  8-  13  and  154.  Historical  data  included  in  this  table  may  differ  from  those  previously  reported  because 


 some  data  have  been  updated  by  Kagan.  See  Cable  Databook.  90 
 Includes  VOD,  subscription-  video-  on-  demand  (SVOD),  near-  video-  on-  demand  (NVOD),  and  PPV.  91 
 Includes  basic  installation  and  pay  installation.  92 
 Miscellaneous  revenue  includes  revenues  derived  from  high-  definition  television,  interactive  games,  home  networking,  business  services,  and  equipment  charges.  We  note  that  there  is  often  no  additional  cost  for  the 


 standard  definition  version  of  HDTV  channels.  In  many  cases,  MSOs  charge  for  HDTV  channels  that  are  not  offered  in  a  standard  definition  version.  Some  MSOs  do  not  charge  higher  prices  for  an  HD  set-  top  box,  but  most 
 apply  a  professional  installation  fee.  See  Time  Warner  Cable,  http://  www.  timewarnercable.  com/  corporate/  products/  digitalcable/  hdtv.  html  (visited  Jan.  14,  2005);  Cablevision  Systems  Corp.,  http://  www.  io.  tv/  index.  jhtml?  page 
 Type=  hdtv  (visited  Jan.  14,  2005);  Comcast  Corp.,  http://  www.  comcast.  com/  Benefits/  CableDetails/  Slot4PageOne.  asp?  LinkID=  120  (visited  Jan.  14,  2005);  Charter  Communications,  http://  www.  charter.  com/  products/  hdtv/  hdtv.  aspx 
 (visited  Jan.  14,  2005).  93 
 Total  revenue  includes  both  residential  and  business  revenue.  Business  revenue  was  $1,  036  million  for  2002,  $1,  911  million  for  2003,  and  a  projected  $2,  647  million  for  2004. 
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 30.  Programming  Costs.  Cable  operators  combined  program  expenditures  reached  $11.46  billion  in  2003.  94  This  represents  expenditures  for  existing  nonbroadcast  networks  and  expenditures  for 
 new  nonbroadcast  networks.  95  In  addition  to  expenditures  for  national  nonbroadcast  networks,  cable  companies  produced  or  acquired  local  and  regional  programming,  including  cable  news  and  public  affairs 
 networks.  96  Included  in  the  $11.46  billion  in  program  expenditures  are  copyright  fees  of  $129.2  million  in  2003  for  broadcast  signal  carriage  pursuant  to  Section  111  of  the  Copyright  Act.  97 


 31.  Cable  System  Transactions.  The  aggregate  value  of  cable  systems  sold  in  any  year  depends  on  the  number  of  transactions,  the  size  of  the  cable  systems  involved,  and  the  price  paid.  As  shown  in 
 Table  5  below,  there  were  34  cable  transactions  in  2003,  representing  an  aggregate  value  of  $1.52  billion.  98  A  few  transactions  accounted  for  most  of  the  dollar  value.  99  Most  of  the  transactions,  however, 
 involved  small  rural  cable  systems  and  non-  upgraded  cable  systems.  100  For  the  smallest  transaction,  the  price  was  $1,259  per  subscriber.  101  For  the  largest  transaction,  the  price  was  $3,225  per  subscriber.  102 
 The  average  value  per  subscriber  in  2003  was  $2,321.  103  In  the  first  six  months  of  2004,  there  were  nine  cable  system  transactions,  representing  an  aggregate  value  of  $293  million.  According  to  Kagan,  this  is 
 the  smallest  number  of  transactions  since  it  started  tracking  cable  transactions  in  1982.  104  Mergers,  which  involve  the  transfer  and  exchange  of  numerous  systems,  are  not  reflected  in  Table  5. 


 94  NCTA  Comments  at  44.  NCTAs  calculation  of  programming  expenditures  includes  license  fees,  copyright  fees, 
 and  investments  in  local  programming.  95 
 In  2004,  we  have  identified  388  nonbroadcast  networks.  See  para.  145  infra.  According  to  NCTA,  there  were  339  nonbroadcast  networks  by  year-  end  2003,  including  new  networks  such  as  NFL  Network,  Pentagon  Channel,  Si 


 TV,  and  TVOne.  NCTA  Comments  at  45.  96 
 Id.  at  46-  47.  97 
 Copyright  Act,  17  U.  S.  C.    111  et  seq.  Copyright  Office,  Library  of  Congress,  Licensing  Division  Report  of  Receipts,  Oct.  28,  2004.  Copyright  fees  are  due  on  a  specific  date,  but  are  collected  on  a  rolling  basis. 


 98  Cable  Databook  at  175. 
 99  The  two  largest  transactions,  Comcasts  acquisition  of  30,  000  cable  subscribers  from  U.  S.  Coastal  Cable  in  April 
 2004  and  Cebridges  acquisition  of  41,  000  cable  subscribers  from  USA  Media  Group  in  March  2004,  accounted  for  approximately  63  percent  of  the  aggregate  value  of  cable  systems  sold.  Kagan  World  Media,  Cable  TV  Investor: 


 Deals  &  Finance,  July  29,  2004,  at  18.  See  also  Kagan  World  Media,  Cable  TV  Investor:  Deals  and  Finance,  Mar.  31,  2004,  at  12;  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  May  28,  2004,  at  13. 
 100  Cable  Databook  at  175.  See  also  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  Feb.  29,  2004,  at 
 6-  7.  101 
 Cable  Databook  at  175.  102 
 Id.  103 
 Id.  Analysis  of  transactions  over  the  past  five  years  shows  that  smaller  systems  sold  for  an  average  of  $1,  731  per  subscriber  and  larger  systems  sold  for  an  average  of  $4,  466  per  subscriber.  Id. 


 104  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  July  29,  2004,  at  18. 
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 TABLE  5:  System  Transactions:  2001  -  June  2004  105  2001  2002  2003  Jan-  Jun  2004 
 Number  of  Systems  Sold  36  23  34  9  Total  Number  of  Subscribers  Sold  17,  958,  375  607,446  654,759  130,391 
 Average  Number  of  Subscribers  498,844  26,  411  19,  258  14,  488 
 Total  Number  of  Homes  Passed  Sold  31,  657,  221  1,158,765  1,  132,  772  233,147  Average  Number  of  Homes  Passed  per  System  Sold  879,367  50,  381  33,  317  25,  905 


 Total  Dollar  Value  (mil.)  $87,  499  $1,  432  $1,  520  $293  Average  Value  (mil.)  of  System  Sold  $2,  431  $62.3  $44.7  $43.7 
 National  Average  Dollar  Value  Per  Subscriber  $4,  872  $2,  357  $2,  321  $2,  249  Dollar  Value  Per  Home  Passed  $2,  764  $1,  236  $1,  341  $1,  258 
 Cash  Flow  Multiple  19.  3  11.  6  9.  4  10.  5 
 32.  Stock  Prices.  Cable  stock  prices,  as  measured  by  the  Kagan  Cable  MSO  Average,  106  fell  8.2  percent  from  June  2003  to  June  2004,  whereas  the  S&  P  500  rose  16.4  percent,  and  the  NASDAQ  rose 
 25.2  percent.  107  At  the  end  of  June  2004,  cable  stocks  were  trading  at  a  historic  low  of  8.5  times  cash  flow.  108  One  analyst  reported  that  cable  stocks  had  fallen  because  of  investor  worries  regarding 
 competition  from  DBS  and  reports  of  facilities-  based  entry  of  telephone  companies  into  the  video  delivery  market.  109 


 2.  Capital  Acquisition  and  Disposition 
 33.  Industry  Financing.  Table  6  shows  the  amount  of  financing  raised  per  year  by  source.  Cable  companies  reduced  total  debt  in  2003.  Kagan  reports  that  2003  was  the  first  time  net  public  debt 


 was  negative  since  it  began  keeping  records  in  1988.  110  Cable  companies  continued  to  reduce  net  public  debt  in  the  first  half  of  2004. 


 105  Data  for  2003  come  from  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance  Jan.  31,  2004,  at  11.  Data 
 for  January  to  June  2004  come  from  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  July  29,  2004,  at  19.  The  numbers  for  January  to  June  2004  include  all  announced  and  proposed  deals.  Historical  data  included  in  this 


 table  may  differ  from  those  previously  reported  because  some  data  have  been  updated  by  Kagan.  See  Cable  Databook. 
 106  The  Kagan  MSO  Average  includes  the  following  companies  (stock  symbol):  Gannett  (GNCMA),  Washington 
 Post  (WPO),  Comcast  A  (CMCSA),  Comcast  Special  (CMCSK),  Cox  (COX),  Cablevision  (CVC),  Time  Warner  (TWX),  Insight  Communications  (ICCI),  Mediacom  (MCCC),  Charter  Communications  (CHTR),  RCN  Corporation 


 (RCN),  and  Adelphia  (ADELQ).  107 
 Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  July  30,  2003,  at  23;  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  July  29,  2004,  at  23. 


 108  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  July  29,  2004,  at  1. 
 109  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  July  29,  2004,  at  3.  See  also  Peter  Grant,  Coming  to 
 Cable:  Payback  Time,  WALL  STREET  JOURNAL,  July  27,  2004.  110 
 Cable  Databook  at  153. 
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 TABLE  6:  Acquisition  of  Capital:  1998  -  June  2004  ($  in  millions)  111 
 Private  Debt  Net  New  Public  Debt  Private  Equity  (Pvt.  Placement/  VC)  Public  Equity  (Common/  Preferred) 


 Year  Amount  Raised 
 %  of  Total 
 Raised  in  Year  Amount  Raised 
 %  of  Total 
 Raised  in  Year  Amount  Raised 
 %  of  Total 
 Raised  in  Year  Amount  Raised  %  of  Total  Raised  In  Year 
 Total  Capital 
 Raised  In  Year 


 1998  $5,  421  39.  1%  $6,  299  45.  5%  $250  1.8%  $1,  927  13.  9%  $13,897 
 1999  $34,358  51.  9%  $18,610  28.  1%  $5,  385  8.1%  $7,  799  11.  8%  $66,152 
 2000  $7,  255  60.  3%  $4,  288  35.  7%  $101  0.8%  $380  3.2%  $12,024 
 2001  $6,  668  31.  4%  $10,678  50.  2%  $623  2.9%  $3,  282  15.  4%  $21,250 
 2002  $2,  545  25.  2%  $3,  942  39.  0%  $15  0.1%  $3,  608  35.  7%  $10,110 
 2003  $1,  791  -641.  9%  -$  2,240  802.  9%  $116  -41.6%  $54  -19.4%  -$  279 
 Jan-  June  2004  $6,  165  173.3%  -$  2,733  -76.  8%  $125  3.5%  $0  0%  $3,  557 


 34.  Capital  Expenditures/  Capital  Investment.  Over  the  last  decade,  cable  companies  have  invested  heavily  to  rebuild  and  upgrade  cable  systems.  112  These  investments  enable  cable  operators  to 
 offer  more  channels  of  basic  and  digital  cable  services,  premium  movie  services,  pay-  per-  view  programs,  high-  definition  programming,  high-  speed  Internet  access  services,  CD-  quality  music,  cable  telephony, 
 and  more  personalized  programming  options.  113  NCTA  estimated  that  the  rebuilding  and  upgrading  of  cable  systems  to  750  MHZ  or  greater  capacity  with  two-  way  capability  would  be  91  percent  complete  by 
 July  2004.  114  At  year-  end  2003,  nearly  95  million  homes  were  passed  by  cable  systems  with  capacity  of  750  MHz  or  higher  and  two-  way  capability.  115  With  the  rebuilding  and  upgrading  of  cable  systems 
 nearing  completion,  capital  expenditures  for  most  cable  operators  are  being  reduced.  Capital  expenditures  were  $10.3  billion  in  2003  and  are  estimated  to  fall  to  $9.5  billion  in  2004.  116 


 35.  Comcast  reported  capital  expenditures  of  $4.1  billion  in  2003,  with  approximately  $1.4  billion  for  upgrading  cable  systems  and  approximately  $1.6  billion  for  upgrading  customer  premise 
 equipment.  117  Comcast  expects  capital  expenditures  to  reach  $3.3  billion  to  $3.4  billion  in  2004,  an  approximate  $750  million  decline  from  2003.  118  For  the  first  six  months  of  2004,  Comcast  reported  $1.7 


 111  Data  for  2003  come  from  Cable  Databook  at  158.  Data  for  January  to  June  2004  come  from  Kagan  World 
 Media,  Cable  TV  Investor:  Deals  &  Finance,  July  29,  2004,  at  15.  Historical  data  included  in  this  table  may  differ  from  those  previously  reported  because  some  data  have  been  updated  by  Kagan.  See  Cable  Databook. 


 112  Rebuilds  are  significant  improvements  made  to  existing  systems  that  do  not  retain  much  of  the  old  system  plant 
 and  equipment.  Upgrades  are  improvements  to  existing  cable  systems  that  do  not  require  the  replacement  of  the  entire  existing  plant  and  equipment. 


 113  NCTA  Comments  at  30. 
 114  Id.  at  29. 
 115  Id.  at  29. 
 116  Id.  at  29,  and  Cable  Databook  at  4. 
 117  Comcast  Comments  at  23. 
 118  Comcast  Corp.,  Comcast  Full  Year  and  Fourth  Quarter  Results  Meet  or  Exceed  All  Operating  and  Financial 
 Targets  Setting  Stage  for  Continued  Growth  in  2004  (press  release),  Feb.  11,  2004.  Comcast  has  been  upgrading  the  AT&  T  Broadband  systems  acquired  in  2002.  Prior  to  the  acquisition  of  AT&  T  Broadband  in  2002,  over  95  percent 


 of  Comcasts  systems  were  upgraded  to  750  MHz  or  greater.  When  Comcast  acquired  the  AT&  T  Broadband  systems,  only  66  percent  of  those  systems  were  upgraded.  At  year-  end  2003,  93  percent  of  the  acquired  systems 
 were  upgraded.  Id.  See  also  2003  Report,  19  FCC  Rcd  at  1634    38. 
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 billion  in  capital  expenditures.  119  Comcast  expects  to  complete  the  upgrade  of  its  cable  systems  in  2004.  120  By  year-  end  2003,  95  percent  of  Comcasts  cable  systems  were  upgraded  to  deliver  two-  way 
 digital  cable  and  high-  speed  Internet  services.  121  At  the  end  of  the  first  quarter  of  2004,  Comcast  had  upgraded  96  percent  of  its  cable  plant.  122  At  the  end  of  June  2004,  97  percent  of  Comcast  cable  systems 
 were  upgraded  to  provide  advanced  services.  123  Cox  reported  capital  expenditures  of  $1.6  billion  in  2003,  with  $206.4  million  for  upgrading  and  rebuilding  cable  systems  and  $606.3  million  for  customer  premise 
 equipment.  124  Cox  expects  a  slight  decline  in  expenditures  to  $1.4  billion  in  2004.  125  For  the  first  six  months  of  2004,  Cox  reported  capital  expenditures  of  $617.9  million.  126  Time  Warner  reported  cable 
 capital  expenditures  of  $1.6  billion  in  2003,  with  $175  million  for  upgrading  and  rebuilding  cable  systems  and  $715  million  for  customer  premise  equipment.  127  For  the  six  months  ended  June  30,  2004,  Time 
 Warner  reported  $718  million  in  cable  capital  expenditures.  128  Last  year,  Time  Warner  announced  that  it  had  upgraded  virtually  all  of  its  cable  architecture  with  hybrid  fiber-  coax  cable  plant  capable  of 
 supporting  two-  way,  digital  communications.  129  Cablevision  reported  cable  capital  expenditures  of  $715.2  million  in  2003,  with  $139.1  million  for  upgrading  and  rebuilding  cable  systems  and  $448.5 
 million  for  customer  premise  equipment.  130  During  2003,  Cablevision  completed  a  system-  wide  upgrade  of  its  nonbroadcast  network.  131  For  the  first  six  months  of  2004,  Cablevision  reported  cable  capital 
 expenditures  of  $278.0  million.  132  Charter  reported  cable  capital  expenditures  of  $854  million  in  2003,  with  $132  million  for  upgrading  and  rebuilding  cable  systems  and  $380  million  for  customer  premise 
 equipment.  133  For  the  six  months  ended  June  30,  2004,  Charter  reported  $390  million  in  cable  capital  expenditures.  134  This  is  a  48  percent  increase  from  the  first  half  of  2003,  when  cable  capital  expenditures 


 119  Comcast  Corp.,  Comcast  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004.  In  the  second 
 quarter  of  2004,  Comcast  spent  $893  million  in  capital  improvements  compared  with  $1.  0  billion  in  the  second  of  the  prior  year.  Id. 


 120  Comcast  Corp.,  Comcast  Provides  Financial  Outlook  for  2004  (press  release),  Feb.  11,  2004. 
 121  Comcast  Corp.,  Comcast  Full  Year  and  Fourth  Quarter  Results  Meet  or  Exceed  All  Operating  and  Financial 
 Targets  Setting  Stage  for  Continued  Growth  in  2004  (press  release),  Feb.  11,  2004.  122 
 Comcast  Comments  at  24.  123 
 Comcast  Corp.,  Comcast  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004.  124 
 Cox  Communications  Inc.,  Cox  Communications  Announces  Fourth  Quarter  and  Full-  Year  Financial  Results  for  2003  (press  release),  Feb.  2,  2004. 


 125  Id. 
 126  Cox  Communications  Inc.,  Cox  Communications  Announces  Second  Quarter  and  Year-  to-  Date  Financial  Results 
 for  2004  (press  release),  July  29,  2004.  127 
 Time  Warner  Inc.,  Time  Warner  Reports  Results  for  2003  Full  Year  and  Fourth  Quarter  (press  release),  Jan.  28,  2004. 


 128  Time  Warner  Inc.,  Time  Warner  Inc.  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004. 
 129  2003  Report,  19  FCC  Rcd  at  1635    38. 
 130  Cablevision  Systems  Corp.,  Cablevision  Systems  Corporation  Reports  Fourth  Quarter  and  Full  Year  2003 
 Results  (press  release),  Mar.  2,  2004.  131 
 Id.  132 
 Cablevision  Systems  Corp.,  Cablevision  Systems  Corporation  Reports  Second  Quarter  2004  Results  (press  release),  Aug.  9,  2004. 


 133  Charter  Communications  Inc.,  Charter  Reports  Fourth  Quarter  and  Year  2003  Financial  and  Operating  Results 
 (press  release),  Feb.  19,  2004.  134 
 Charter  Communications  Inc.,  Charter  Communications  Reports  Second  Quarter  2004  Financial  and  Operating  Results  (press  release),  Aug.  9,  2004. 
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 totaled  $264  million.  The  increase  resulted  from  increased  purchases  of  customer  premise  equipment,  primarily  for  high-  definition  television  and  digital  video  recorders,  and  increased  expenditures  on 
 scalable  infrastructure  135  related  to  the  deployment  of  advanced  services.  136 
 3.  Advanced  Services 
 36.  In  addition  to  traditional  analog  video  services,  most  cable  operators  offer  subscribers  advanced  video  services,  including  digital  video,  video-  on-  demand,  digital  video  recorders,  and  high-definition 


 television,  and  nonvideo  advanced  services,  including  high-  speed  Internet  access  and  telephony  (circuit-  switched  telephony  and/  or  voice  over  Internet  protocol  telephony).  137  Mid-  sized  and  smaller 
 cable  operators  also  are  deploying  advanced  services.  138  A  December  2002  survey  of  mid-  sized  and  smaller  cable  operators  shows  that  more  than  half  were  providing  digital  cable  and  high-  speed  cable 
 Internet  service,  and  most  of  the  other  half  planned  to  launch  the  services  in  the  near  term.  139  Our  review  of  six  mid-  sized  and  smaller  cable  operators  shows  that  all  offer  digital  cable  service  and  high-  speed 
 Internet  service  but  not  all  offer  video-  on-  demand,  digital  video  recorders,  high-  definition  television,  and  telephone  service. 


 37.  Digital  Video  Services.  Cable  operators  offer  digitally-  compressed  video  channels  to  cable  subscribers.  Digital  compression  technologies  allow  anywhere  from  six  to  12  video  channels  to  be 
 compressed  into  the  capacity  previously  used  to  provide  just  one  standard  six  MHz  analog  channel.  Digital  cable  subscribers  obtain  programming  by  selecting  one  or  more  digital  service  tiers.  Digital  tiers 
 may  include  a  movie  tier,  a  variety  tier,  a  sports  tier,  and  a  non-  English-  language  tier.  Digital  cable 


 135  Scalable  infrastructure  includes  costs,  not  related  to  customer  premise  equipment  or  the  nonbroadcast  network,  to 
 secure  growth  of  new  customers,  revenue  units  and  additional  bandwidth  revenues  or  provide  service  enhancements  (e.  g.,  headend  equipment,  high-  speed  data  access  equipment,  host  digital  terminals,  video  and  telephony  transport, 


 advertising  insertion  equipment,  and  telephone  switches).  136 
 Charter  Communications  Inc.,  Charter  Communications  Reports  Second  Quarter  2004  Financial  and  Operating  Results  (press  release),  Aug.  9,  2004. 


 137  Subscription  data  for  advanced  services  shown  in  this  Report  are  primarily  for  residential  service,  but  may  also 
 include  some  small  business  service.  For  example,  Comcast  offers  a  business  Internet  service  for  teleworkers  called  Comcast  Teleworker,  and  a  business  Internet  service  for  small  to  medium  businesses  called  Comcast  Workplace. 


 Similarly,  Time  Warner  also  offers  a  business  Internet  service  called  Road  Runner  Business  Class  to  small  and  medium-  sized  businesses,  home  offices,  and  telecommuters.  Subscribers  to  these  services  are  included  in  the 
 reported  numbers.  Cable  companies  also  sold  $1.  9  billion  in  services  to  business  in  2003  under  separately-  run  subsidiaries.  For  example,  Cox  Business  Services  offers  high-  speed  Internet  access,  local  and  long  distance 
 telephone,  advanced  voice  and  data  transport;  Cox  Enterprise  Connectivity  Solutions  connects  businesses  to  branch  locations  and  remote  workers;  Charter  Business  offers  high-  speed  Internet  access  services  and  video  services  to 
 small  and  large  businesses;  and  Time  Warners  Road  Runner  Business  Class  offers  high-  speed  Internet  access  to  small  and  mid-  sized  businesses.  Small  operators  also  offer  advanced  services  to  business  customers.  Bresnan,  for 
 example,  provides  high-  speed  Internet  access,  voice  and  data  transport  and  video  to  large  and  small  businesses  under  its  Bresnan  Business  Services  subsidiary;  Susquehanna  Communications  offers  businesses  advanced 
 communications  services,  including  local  and  long  distance  telephone  services,  high-  speed  Internet  access,  and  data  transport  and  video;  and  Sunflower  Broadband  offers  Sunflower  Broadband  Business  Services  providing  high-  speed 
 Internet,  telephone  service,  and  professional  IT  service.  Cable  Databook  at  13;  See  Cox  Communications,  Inc.,  http://  www.  coxbusiness.  com  (visited  Dec.  28,  2004);  Charter  Business,  http://  www.  charter-  business.  com  (visited 
 Dec.  28,  2004);  Time  Warner,  Inc.,  http://  www.  rrbiz.  com/  Road  Runner/  index.  asp?  sid=  1  (visited  Dec.  28,  2004);  Bresnan  Communications,  http://  www.  bresnan.  com/  unst/  products/  business  (visited  Dec.  28,  2004);  Susquehanna 
 Communications,  http://  www.  suscom.  com/  home/  business.  php  (visited  Dec.  28,  2004);  Sunflower  Broadband,  http://  www.  sunflowerbroadband.  com/  business  (visited  Dec.  28,  2004). 
 138  See  ACA  Comments  at  Exhibit  2. 
 139  Id. 
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 subscribers  may  obtain  additional  programming  by  selecting  one  or  more  premium  digital  tiers,  such  as  HBO,  Showtime,  Cinemax,  The  Movie  Channel,  Starz!,  and  international  programming.  140  In  addition, 
 digital  cable  subscribers  may  choose  programming  from  a  high-  definition  digital  tier.  141  In  addition  to  digital  cable,  cable  operators  are  also  deploying  interactive  digital  services,  such  as  single  tuner  or  dual-tuner 
 digital  video  recorders,  and  video-  on-  demand.  142  The  cable  industry  reported  that  the  number  of  digital  cable  subscribers  increased  from  20.  6  million  at  the  end  of  June  2003  to  22.9  million  at  the  end  of 
 March  2004.  143 
 38.  In  2003,  Comcast  ended  the  year  with  nearly  7.7  million  digital  cable  subscribers,  representing  a  penetration  rate  of  nearly  36  percent  of  basic  cable  subscribers.  144  At  the  end  of  June  30, 


 2004,  Comcast  offered  digital  cable  service  to  all  of  its  21.4  million  subscribers  and  had  8.1  million  digital  cable  subscribers,  representing  37.5  percent  of  basic  video  cable  subscribers.  145  Comcast  also 
 offers  a  Spanish-  language  tier  that  includes  ten  digital  TV  networks  and  eight  audio  channels.  146  In  addition  to  premium  movie  channel  tiers,  Comcast  offers  premium  sports  packages  to  its  digital  cable 
 subscribers,  including  NASCAR  IN  CAR,  MLB  Extra  Innings,  Major  League  Soccer  Direct  Kick,  ESPN  GamePlan  (collegiate  sports),  NHL  Center  Ice,  and  NBA  League  Pass.  147  During  2003,  Cox  added 
 82,967  digital  cable  subscribers  and  ended  the  year  with  over  2.1  million  digital  cable  subscribers,  representing  34  percent  of  its  basic  video  subscriber  base.  148  As  of  June  30,  2004,  Cox  digital  cable  was 
 available  to  99  percent  of  its  6.3  million  basic  cable  subscribers,  and  it  had  2.3  million  digital  cable  subscribers,  representing  36  percent  of  basic  cable  subscribers.  149  In  2003,  Time  Warner  added  602,000 
 net  digital  video  subscribers  to  reach  a  total  of  4.3  million  digital  video  subscribers,  representing  40  percent  of  basic  cable  subscribers.  150  By  June  30,  2004,  the  number  of  Time  Warners  digital  video 
 subscribers  had  grown  to  4.6  million,  representing  42  percent  of  basic  video  cable  subscribers.  151  At  year- 


 140  The  premium  digital  tiers  require  subscription  to  the  digital  service.  To  receive  a  digital  premium  channel,  a 
 subscriber  must  subscribe  to  the  premium  channel.  For  example,  to  receive  digital  HBO,  a  subscriber  must  subscribe  to  HBO. 


 141  The  high-  definition  tier  of  programming  requires  subscription  to  the  digital  service  and  a  high-  definition  set-  top 
 box.  Some  high-  definition  programming  is  available  at  no  additional  charge.  For  example,  the  high-  definition  programming  of  the  broadcast  networks  is  often  available  at  no  additional  charge.  In  addition,  high-  definition 


 programming  from  the  premium  channels  is  often  included  with  a  subscription  to  the  premium  movie  channels.  Other  high-  definition  programming  may  require  additional  fees.  For  example,  Discovery  HD  Theater  may  require 
 additional  fees.  142 
 NCTA  Comments  at  34.  These  interactive  services  offered  by  a  cable  company  require  subscription  to  the  digital  service.  The  digital  video  recorder  service  offered  by  cable  operators  also  requires  a  DVR  set-  top  box. 


 143  Id.  at  33-  34;  2003  Report,  19  FCC  Rcd  at  1637    41. 
 144  Comcast  Corp.,  Comcast  Full  Year  and  Fourth  Quarter  Results  Meet  or  Exceed  All  Operating  and  Financial 
 Targets  Setting  Stage  for  Continued  Growth  in  2004  (press  release),  Feb.  11,  2004.  145 
 Comcast  Corp.,  Comcast  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004.  146 
 Comcast  Comments  at  26.  147 
 Id.  at  27.  148 
 Cox  Communications  Inc.,  Cox  Communications  Announces  Fourth  Quarter  and  Full-  Year  Financial  Results  for  2003  (press  release),  Feb.  12,  2004. 


 149  Cox  Communications  Inc.,  Cox  Communications  Announces  Second  Quarter  and  Year-  to-  Date  Financial  Results 
 for  2004  (press  release),  July  29,  2004.  150 
 Time  Warner  Inc.,  Time  Warner  Reports  Results  for  2003  Full  Year  and  Fourth  Quarter  (press  release),  Jan.  28,  2004. 


 151  Time  Warner  Inc.,  Time  Warner  Inc.  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004. 
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 end  2003,  Cablevision  had  905,495  subscribers  to  its  Interactive  Optimum  (iO)  digital  video  service,  representing  a  penetration  rate  of  30.8  percent  of  basic  subscribers.  152  Charter  provided  digital  video 
 service  to  approximately  2.7  million  subscribers  as  of  year-  end  2003,  representing  42  percent  of  basic  video  subscribers.  153  Over  the  six  months  ending  June  2004,  Charter  lost  both  basic  video  subscribers  and 
 digital  video  subscribers.  As  of  June  2004,  Charter  had  approximately  2.6  million  digital  video  subscribers,  representing  43  percent  of  basic  video  subscribers.  154 


 39.  In  2003,  the  Commission  adopted  rules  based  on  an  agreement  between  consumer  electronics  companies  and  cable  operators  that  will  enable  television  sets  to  be  built  with  plug  and  play 
 functionality  for  one-  way  digital  cable  services,  which  include  typical  cable  programming  services  and  premium  channels  like  HBO  and  Showtime.  155  For  these  services,  consumers  will  be  able  to  plug  their 
 cable  directly  into  their  digital  television  set  without  the  need  of  a  set-  top  box.  Consumers,  however,  will  have  to  obtain  a  security  card  (often  called  a  CableCARD),  from  their  local  cable  operator,  to  be  inserted 
 into  the  television  set.  Consumers  still  need  a  set-  top  box  to  receive  two-  way  services  (e.  g.,  video-  on-demand),  and  the  cable  and  consumer  electronics  industries  continue  to  work  on  an  agreement  for  two-way 
 plug  and  play  functionality.  156  Consumer  electronics  manufacturers  have  already  begun  selling  digital  cable  ready  television  sets  with  over-  the-  air  integrated  DTV  tuners  as  well  as  cable  tuners.  157 


 40.  Video-  on-  Demand  (VOD).  VOD  allows  subscribers  to  order  video  programming  from  a  central  server  at  any  time  of  day,  and  to  fast-  forward,  rewind,  and  pause  the  programming.  158  In  most 
 cases,  subscribers  receive  unlimited  viewing  of  a  VOD  program  for  24  hours.  Some  cable  operators  also  offer  subscription  video-  on-  demand  (SVOD)  where  subscribers  pay  a  monthly  fee  for  unlimited  access  to 
 a  library  of  pre-  selected  programming.  Other  cable  operators  offer  near  video-  on-  demand  (NVOD)  which  typically  features  a  schedule  of  popular  movies  and  events  offered  on  a  staggered-  start  basis  (e.  g.,  every 
 15  to  30  minutes).  Cable  companies  view  VOD  as  a  competitive  service  to  DVD/  VHS  rentals.  Most  of  the  major  cable  companies  have  deployed  VOD  services.  159  In  2003,  there  were  12.6  million  digital 


 152  Cablevision  Systems  Corp.,  Cablevision  Systems  Corporation  Reports  Fourth  Quarter  and  Full  Year  2003 
 Results  (press  release),  Mar.  2,  2004.  153 
 Charter  Communications  Inc.,  Charter  Reports  Fourth  Quarter  and  Year  2003  Financial  and  Operating  Results  (press  release),  Feb.  19,  2004. 


 154  Charter  Communications  Inc.,  Charter  Reports  Second  Quarter  2004  Financial  and  Operating  Results  (press 
 release),  Aug.  9,  2004.  155 
 Implementation  of  Section  304  of  the  Telecommunications  Act  of  1996,  Commercial  Availability  of  Navigation  Devices,  Compatibility  Between  Cable  Systems  and  Consumer  Electronics  Equipment,  18  FCC  Rcd  20885  (2003). 


 156  See  para.  187  infra. 
 157  CEA  Comments  at  8.  With  most  cable  systems,  use  of  the  digital  cable  ready  television  set  requires  that  cable 
 subscribers  obtain  a  CableCARD  containing  security  and  other  circuitry  for  particular  local  cable  systems.  As  we  reported  last  year,  the  CableCARD  is  a  removable  security  module  which,  when  inserted  into  an  OpenCable  certified 


 device,  enables  delivery  of  digital  video  programming  and  other  services.  CableCARDs  are  provided  directly  by  the  cable  operator  to  customers  who  request  them.  CableLabs,  at  http://  www.  cablelabs.  com/  news/  glossary.  html#  C  (visited 
 Oct.  5,  2004).  See  para.  187  infra.  158 
 VOD  differs  from  PPV.  PPV  is  pay  television  programming  for  which  cable  subscribers  pay  a  one  time  fee  for  each  program  viewed.  The  programming  is  generally  available  at  pre-  set  times  and  in  some  cases  is  time  shifted 


 across  several  channels  to  increase  the  opportunity  for  viewing.  Once  initiated,  the  program  cannot  be  paused,  rewound  or  fast-  forwarded. 
 159  NCTA  Comments  at  23.  Cablevision,  Charter,  Comcast,  Cox,  Insight,  Mediacom,  and  Time  Warner  offer  VOD 
 service. 
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 subscribers  with  VOD  capability,  10.0  million  digital  subscribers  with  NVOD  capability,  and  8.2  million  homes  with  SVOD  capability.  160 
 41.  Comcasts  ON  DEMAND  service  allows  digital  cable  subscribers  to  choose  from  a  library  of  movie,  sports,  and  news,  and  start  them  at  any  time.  In  addition  to  programming  from  established  content 
 providers,  such  as  Discovery  Networks,  CBS,  BET,  and  MTV,  Comcasts  VOD  service  also  includes  programming  from  new,  and  less  well  known,  content  providers.  161  At  the  end  of  2003,  Comcasts  VOD 
 service  was  available  to  50  percent  of  its  cable  subscribers.  162  Comcast  expects  to  make  ON  DEMAND  available  to  85  percent  of  its  subscribers  by  the  end  of  2004.  163  Coxs  Entertainment  on  Demand  gives 
 subscribers  in  selected  markets  access  to  hundreds  of  movies  and  other  programming  with  full  VCR-  like  functionality.  164  Digital  cable  subscribers  can  access  Entertainment  on  Demand  with  their  existing  Cox 
 cable  box,  which  communicates  with  Coxs  servers  to  stream  and  control  movies.  165  Time  Warner  maintains  that  it  leads  the  industry  in  deploying  VOD  and  SVOD  services.  166  Time  Warner  offers  these 
 services  to  all  of  its  31  cable  operating  divisions.  167  Time  Warner  provides  two  VOD  services:  Movies  on  Demand  allows  Time  Warner  digital  cable  subscribers  to  select  among  hundreds  of  movies,  and 
 Premiums  on  Demand  allows  Time  Warner  digital  cable  subscribers  unlimited  instant  access  to  movies  offered  on  the  premium  movie  channels  (i.  e.,  HBO,  Showtime,  Cinemax,  and  the  Movie  Channel)  for  a 
 monthly  fee.  168  Cablevisions  Interactive  Optimum  (iO)  digital  cable  service  provides  a  VOD  and  SVOD.  169  Cablevisions  SVOD  service  includes  HBO,  Cinemax,  Anime  Network,  Showtime,  Disney 
 Channel,  and  IFC  Uncensored  which  offers  independent  films  and  original  series.  170  Charter  OnDemand  offers  a  near  VOD  service  that  allows  digital  cable  subscribers  to  pause,  rewind,  and  fast-  forward  movies 
 offered  at  multiple  start  times,  rather  than  instant  access.  171 
 42.  Digital  Video  Recorders  (DVRs).  DVR  service  allows  subscribers  to  record  programming  onto  a  hard  drive  located  in  a  set-  top  box,  which  can  then  be  played  back  at  any  time.  DVR  features 


 include  fast-  forward,  pause,  and  the  ability  to  pause  live  television.  Cable  operators  are  integrating  DVR  functionality  into  digital  set-  top  boxes  and  are  expected  to  have  approximately  1.4  million  DVR 


 160  Cable  Databook  at  12. 
 161  Comcast  Comments  at  31. 
 162  Comcast  Corp.,  Comcast  Full  Year  and  Fourth  Quarter  Results  Meet  or  Exceed  All  Operating  and  Financial 
 Targets  Setting  Stage  for  Continued  Growth  in  2004  (press  release),  Feb.  11,  2004.  163 
 Louis  Chunovic,  The  Success  Story  Wall  Street  Ignores,  BROADCASTING  &  CABLE,  Aug.  30,  2004,  at  28.  164 
 For  a  description  of  Entertainment  on  Demand,  see  http://  www.  cox.  com/  digitalcable/  eod/  faq.  asp  (visited  Sept.  10,  2004). 


 165  Id. 
 166  For  an  overview  of  Time  Warner  Cable,  see  http://  www.  timewarner.  com/  companies/  time_  warner_  cable_ 
 index.  adp  (visited  Sept.  10,  2004).  167 
 Id.  Each  of  Time  Warners  cable  operating  divisions  is  a  cluster  of  cable  franchises,  see  http://  www.  timewarner.  com/  companies/  clusters.  adp  (visited  Sept.  10,  2004). 


 168  For  an  overview  of  Time  Warners  VOD  and  SVOD  offerings,  see  http://  www.  timewarnercable.  com/  corporate/ 
 products/  digitalcable/  moviesondemand.  htm  and  http://  www.  timewarnercable.  com/  corporate/  products/  digitalcable/  premiumsondemand.  html  (visited  Sept.  10,  2004). 


 169  For  an  overview  of  Cablevisions  VOD  and  SVOD  services,  see  http://  www.  io.  tv/  index.  jhtml?  pageType=  on_ 
 demand  (visited  Sept.  10,  2004).  170 
 Id.  171 
 For  an  overview  of  Charters  VOD  service,  see  http://  www.  charter.  com/  services/  ondemand/  ondemand.  aspx  (visited  Sept.  10,  2004). 
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 subscribers  by  the  end  of  2004.  172  Most  cable  operators  are  offering  dual  tuner  DVRs  that  allow  a  subscriber  to  record  one  or  more  programs  while  watching  another  program.  173  Comcasts  DVR  service 
 enables  subscribers  to  record  between  30  and  50  hours  of  programming  and  most  of  its  DVRs  include  dual  tuners  that  allow  a  subscriber  to  record  at  least  two  programs  at  once  while  watching  a  third 
 program.  174  At  the  end  of  2003,  Comcasts  DVR  service  was  available  to  10  percent  of  basic  subscribers.  175  By  June  2004,  Comcasts  DVR  service  was  available  to  50  percent  of  its  digital  cable 
 subscribers,  and  by  year-  end  Comcast  expects  DVR  service  to  be  available  to  100  percent  of  its  digital  subscribers.  176  Cox  offers  DVR  service  to  35  percent  of  its  basic  cable  subscribers.  177  Cox  has 
 announced  that  95  percent  of  its  markets  will  have  access  to  DVR  service  by  the  end  of  2004.  178  Coxs  DVR  subscribers  have  dual  tuner  recording  capabilities  and  an  enhanced  interactive  guide.  179  The  dual 
 tuner  software,  which  is  automatically  downloaded  to  the  subscribers  set-  top  box,  allows  subscribers  to  record  two  programs  simultaneously  while  watching  a  previously  recorded  program,  or  watch  a  live 
 program  while  recording  an  additional  program.  180  The  enhanced  DVR  navigation  service  will  allow  subscribers  to  set  preferences  to  store  first-  run  episodes  of  a  favorite  show;  a  favorite  show  on  any 
 channel  where  it  appears;  or  a  favorite  show  only  in  its  prime  time  slot.  181  Viewers  search  for  programs  using  an  on-  screen  keyboard  and  find  programs  by  entering  keywords  such  as  actor,  director  or  subject.  182 
 Comcast  DVR  service  is  generally  $9.95  per  month  in  addition  to  the  cost  of  the  digital  tier  of  service.  183  Coxs  DVR  service  is  available  for  $4.95  per  month,  plus  the  lease  price  of  a  DVR  set-  top  box,  which  is 
 $9.95  per  month.  184  Time  Warner  offers  DVR  service  in  30  of  its  31  divisions  and  had  458,000  subscribers  at  the  end  of  March  2004.  185  Charter  offers  DVR  service  in  a  limited  number  of  its  service 


 172  NCTA  Comments  at  35. 
 173  Television  sets  and  products  with  one-  way  plug-  and-  play  functionality  through  a  CableCARD  currently  are  not 
 able  to  offer  similar  dual-  tuner  DVR  functionality  unless  the  device  is  equipped  to  receive  and  the  subscriber  orders  two  or  more  CableCARDs.  The  Commission  will  monitor  progress  in  making  multistream  CableCARDs  available 


 to  subscribers  as  quickly  as  possible.  See  para.  39  supra,  para.  187  infra.  174 
 Comcast  Comments  at  33.  See  Comcast  Corp.,  http://  www.  comcast.  com  (visited  Jan.  14,  2005).  175 
 Comcast  Corp.,  Comcast  Full  Year  and  Fourth  Quarter  Results  Meet  or  Exceed  All  Operating  and  Financial  Targets  Setting  Stage  for  Continued  Growth  in  2004  (press  release),  Feb.  11,  2004. 


 176  Comcast  Comments  at  33.  Comcasts  DVR  service  is  available  in  Albuquerque,  New  Mexico;  northern  Virginia; 
 Montgomery  County,  Maryland;  selected  systems  in  New  Jersey;  Charleston,  South  Carolina;  and  Panama  City,  Sarasota  and  Fort  Myers/  Naples,  Florida.  NCTA  Comments  at  36. 


 177  Id.  at  35.  Areas  where  Cox  currently  provides  DVR  service  include  Gainesville,  Florida;  Fairfax,  Virginia;  San 
 Diego,  California;  Las  Vegas,  Nevada;  and  Cleveland,  Ohio.  Id.  178 
 Cox  Communications  Inc.,  Cox  Communications  Digital  Video  Recorder  Service  Soon  Available  in  More  Than  95  Percent  of  Markets  (press  release),  July  27,  2004. 


 179  Cox  Communications  Inc.,  Cox  Digital  Video  Recorder  Service  Enhancements  Bring  Customers  a  Superior 
 Viewing  Experience  (press  release),  Sept.  8,  2004.  180 
 The  dual  tuner  software  is  available  in  markets  where  Cox  uses  Motorola  DVRs.  Coxs  current  Motorola  DVR  markets  include  Kansas;  Orange  County,  California;  Middle  America  Cox  (Arkansas,  Kansas,  Louisiana,  and  East 


 Texas);  Omaha,  Nebraska;  Roanoke,  Virginia;  New  England;  Baton  Rouge,  Louisiana;  Hampton  Roads,  Virginia;  Middle  Georgia;  New  Orleans,  Louisiana;  and  Tulsa,  Oklahoma.  Id. 
 181  Id. 
 182  Id. 
 183  See  Comcast  Corp.,  at  http://  www.  comcast.  com/  Support/  Corp1/  FAQ/  FaqDetail_  1824.  html  (visited  Jan.  14, 
 2005).  184 
 Id.  185 
 NCTA  Comments  at  35. 
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 areas.  In  late  2003,  Charter  announced  an  agreement  with  Scientific-  Atlanta  Inc.  to  purchase  digital  set-top  boxes  for  the  initial  rollout  of  DVR  service  in  the  Los  Angeles  area,  the  first  of  Charters  DVR 
 deployments.  186  In  the  spring  of  2004,  Charter  announced  the  commercial  launch  of  a  dual-  tuner  DVR  service  using  a  Motorola  digital  set-  top  box  in  the  Rochester,  Minnesota  market.  187  Insight  offers  DVR 
 service  in  all  its  systems,  and  Cablevision,  Mediacom,  Bright  House,  and  Adelphia  have  announced  plans  for  DVR  deployment  in  2004.  188 


 43.  High-  Definition  Television  (HDTV).  Cable  operators  are  deploying  HDTV  nationwide.  Cable  companies  initiated  HDTV  service  in  early  2003,  and  by  the  end  of  that  year  it  was  available  to 
 approximately  37  million  cable  subscribers.  189  At  the  end  of  June  2004,  HDTV  service  was  available  in  155  markets,  including  99  of  the  top  100  markets,  making  it  the  fastest  rollout  of  any  service  launched  by 
 the  cable  industry.  190  By  late  September  2004,  HDTV  over  cable  was  available  to  subscribers  in  177  markets,  including  all  of  the  top  100  markets,  and  90  million  television  households  were  passed  by  a 
 cable  system  offering  HDTV  programming.  191  HDTV  is  part  of  the  digital  video  service,  requires  an  HD  set-  top  box,  and  typically  includes  a  mix  of  broadcast,  basic  cable,  and  premium  nonbroadcast 
 networks.  192  Fifteen  nonbroadcast  networks  offer  HDTV  programming.  193  These  include  HBO,  Showtime,  Cinemax,  The  Movie  Channel,  Starz!,  and  iN  Demand.  In  addition  to  its  HD  Theater, 
 Discovery  plans  to  produce  Atlas  HD,  a  series  of  30  two-  hour,  HDTV  documentary  specials  on  countries  around  the  world.  194  HDNet  produces  sports,  news,  and  entertainment  24  hours  a  day.  MSG  Network, 
 Comcast  SportsNet,  Fox  Sports  Net  NY,  and  ESPN  also  produce  HDTV  programming.  In  addition  to  the  nonbroadcast  networks,  cable  operators  are  carrying  the  digital  signals  of  454  broadcast  stations.  195  Cox 
 has  agreements  with  the  Public  Broadcasting  Service  and  the  Association  of  Public  Television  Stations  to  carry  digital  signals,  including  the  HDTV  programming,  of  70  PBS  stations.  196  Public  broadcasters  have 
 similar  company-  wide  agreements  with  Time  Warner  and  Insight,  and  market-  specific  agreements  with  Comcast,  Adelphia,  Cablevision,  and  Bright  House.  197 


 44.  Comcast  offers  HDTV  in  54  markets,  including  all  of  the  top  100  designated  market  areas  (DMAs)  served  by  Comcast,  as  well  as  smaller  markets  like  Eugene,  Oregon;  Salisbury,  Maryland;  and 


 186  Charter  Communications  Inc.,  Charter  Communications  Gives  Video  Control  to  California  Customers  (press 
 release),  Dec.  19,  2003.  187 
 Charter  Communications  Inc.,  Charter  Deploys  Motorolas  Broadband  Media  Center  with  Moxi  Service  (press  release),  Apr.  26,  2004. 


 188  NCTA  Comments  at  36. 
 189  Id.  at  31.  The  high-  definition  tier  of  programming  requires  subscription  to  the  digital  service  and  a  high-definition 
 set-  top  box.  To  obtain  the  full  visual  effect  of  HDTV,  a  cable  subscriber  also  needs  an  HDTV  set.  190 
 Id.  191 
 NCTA,  Consumers  in  177  Markets  Across  the  U.  S.    Including  all  of  the  Top  100    Can  Now  Receive  HDTV  Over  Cable  (press  release),  Sept.  27,  2004. 


 192  NCTA  Comments  at  31. 
 193  Id.  at  32. 
 194  Id. 
 195  NCTA,  Cables  HDTV  Deployment  at  http://  www.  ncta.  com/  images/  HDTVkit-  Deploy-  final2.  pdf  (visited  Nov.  4, 
 2004).  Data  as  of  September  15,  2004  include  some  digital  signals  that  may  be  DTV  and  not  HDTV.  See  also  NCTA  Comments  at  32. 


 196  NCTA  Comments  at  31. 
 197  Id.  at  32. 
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 Panama  City,  Florida.  198  At  the  end  of  June  2004,  Comcast  had  approximately  600,000  subscribers  to  its  HDTV  service  and  offered  HDTV  service  to  more  than  91  percent  of  its  basic  cable  subscribers,  up  from 
 84  percent  at  the  end  of  2003.  199  Comcast  charges  a  one-  time  fee  for  HDTV  service  and  an  additional  $5  monthly  charge  for  the  HDTV  set-  top  box.  200  Comcast  offers  as  many  as  14  program  services  in  HDTV, 
 including  the  major  broadcast  networks,  PBS,  ESPN,  iNHD1,  iNHD2,  HBO,  Showtime,  Starz!,  and  Cinemax.  201  Comcast  has  also  entered  an  agreement  with  Discovery  Communications  to  offer  Discovery 
 HD  Theater  in  selected  markets.  202  In  addition,  Comcast  offers  Comcast  SportsNet  in  HDTV  in  some  markets  and  is  working  with  independent  programmers,  such  as  New  England  Sports  Network,  to  create 
 HDTV  programming.  203  Most  of  Time  Warner  Cables  31  divisions  offer  HDTV.  204  To  access  Time  Warner  Cables  HDTV  service,  subscribers  must  subscribe  to  the  digital  service  and  have  an  HDTV 
 television  and  an  HDTV  set-  top  box.  205  All  of  Time  Warners  HDTV  subscribers  receive,  at  no  additional  charge,  HDTV  programming  from  networks  that  have  standard  definition  counterparts, 
 including  ABC,  NBC,  CBS,  FOX,  PBS,  WB,  UPN,  TNT,  Discovery  HD  Theater,  HBO,  and  Showtime.  206  For  an  additional  $6.50  per  month,  Time  Warner  offers  a  second  HDTV  tier  that  includes  ESPN  HD, 
 HDNet,  HDNet  Movies,  iNHD1,  and  iNHD2.  207  In  San  Diego,  14  percent  of  Time  Warners  digital  cable  subscribers  also  subscribe  to  the  HDTV  service,  the  highest  HDTV  penetration  of  any  Time  Warner  cable 
 division.  208  Cablevision  offers  15  HDTV  channels  to  more  than  70,000  HDTV  subscribers.  209  For  iO  subscribers  with  HDTV  television  sets,  Cablevision  offers  HD  set-  top  boxes  at  no  additional  charge  over 
 the  standard  box  rental  fee.  210  Currently,  there  is  no  additional  charge  for  the  HDTV  programming  provided  the  subscriber  subscribes  to  a  programming  package  that  offers  the  standard  definition  version 
 of  each  channel.  211  Cablevisions  HDTV  subscribers  may  view  in  high-  definition  CBS,  PBS,  FOX,  NBC,  MSG  Network,  Fox  Sports  Net  New  York,  Bravo,  HBO,  Showtime,  Cinemax,  Starz!,  The  Movie 
 Channel,  iN  Demands  INHD,  and  the  industrys  first  HDTV  VOD  offering,  featuring  more  than  20  new  release  movies  and  programs  originally  seen  in  IMAX  theaters.  212  Charter  offers  HDTV  service  in  over 
 33  of  its  markets.  213  Charter  offers  the  following  HDTV  channels:  ABC,  CBS,  NBC,  FOX,  Discovery, 
 198  Comcast  Comments  at  28. 
 199  Id.;  Comcast  Corp.,  Comcast  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004;  Comcast 
 Corp.,  Comcast  Full  Year  and  Fourth  Quarter  Results  Meet  or  Exceed  All  Operating  and  Financial  Targets  Setting  Stage  for  Continued  Growth  in  2004  (press  release),  Feb.  11,  2004. 


 200  See  Comcast  Corp.,  at  http://  www/  comcast.  com/  Buyflow/  default.  ashx  (visited  Jan.  10,  2005). 
 201  Comcast  Comments  at  28. 
 202  Id. 
 203  Id.  at  29. 
 204  See,  Time  Warner  Cable,  at  http://  www.  timewarnercable.  com/  CustomerService/  FAQ/  TWCFaqs.  ashx?  faqID=  30 
 &MarketID=  10&  CatID=  58  (visited  Sept.  17,  2004).  205 
 Time  Warner  Inc.,  Time  Warner  Cable  Launches  ESPN  HD  (press  release),  Sept.  14,  2004.  206 
 Id.  207 
 Id.  208 
 Time  Warner  Inc.,  Time  Warner  Cable  San  Diego  Offers  ESPN  in  High-  definition  (press  release),  Sept.  13,  2004.  209 
 Cablevision  Systems  Corp.,  Cablevision  and  ESPN  Reach  Agreement  to  Add  ESPN  HD  to  Cablevisions  Comprehensive  High-  Definition  Programming  Slate  (press  release),  June  7,  2004. 


 210  Id.  A  professional  installation  fee  applies. 
 211  Id. 
 212  Id. 
 213  See  Charter  Communications,  Inc.,  http://  www.  charter.  com/  help/  faqs/  hdtv_  faqs.  aspx  (visited  Sept.  17,  2004). 
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 ESPN,  HDNet,  HDNet  Movies,  HBO  HD  to  HBO  subscribers,  and  Showtime  HD  to  Showtime  subscribers.  214  Charters  HDTV  set-  top  box  costs  $3  more  a  month  than  its  standard  digital  set-  top  box.  215 
 45.  High-  Speed  Internet  Access  Service.  In  2004,  high-  speed  Internet  access  service  is  projected  to  generate  approximately  15.4  percent  of  total  cable  industry  revenue.  216  According  to  one  analyst, 
 cables  high-  speed  Internet  service  is  currently  available  to  over  98  million  homes,  and  by  year-  end  2005,  it  will  be  available  to  more  than  102  million  homes.  217  NCTA  maintains  that  the  numbers  indicate  that 
 the  cable  industry  is  close  to  completing  the  systems  upgrades  necessary  to  offer  high-  speed  Internet  service  and  other  advanced  services  to  every  home  passed  by  cable.  218 


 46.  Cable  provided  high-  speed  Internet  access  service  to  63.2  percent  (16.4  million  subscribers)  of  the  total  26  million  high-  speed  Internet  access  residential  and  small  business  subscribers,  as  of  year-end 
 2003.  219  DSL  accounted  for  34.3  percent.  220  Approximately  2.5  percent  of  high-  speed  Internet  subscribers  use  other  wireline  and  wireless  technologies.  221  From  June  2003  to  June  2004,  the  number  of 
 cable  modem  subscribers  grew  from  13.7  million  to  18.5  million.  222  Over  the  same  period,  the  number  of  DSL  subscribers  increased  from  6.4  million  to  10.8  million.  223 


 47.  Comcasts  high-  speed  Internet  access  service  is  available  to  37.3  million  homes,  or  96.6  percent  of  homes  passed  by  Comcasts  systems.  224  At  year-  end  2003,  Comcast  had  5.3  million 
 subscribers  to  its  high-  speed  Internet  access  service,  representing  a  penetration  rate  225  of  15.2  percent.  226  By  the  end  of  June  2004,  the  number  of  subscribers  to  Comcasts  high-  speed  Internet  access  service  had 


 214  Id. 
 215  Id. 
 216  Cable  Databook  at  4-  5.  See  Table  4,  supra. 
 217  NCTA  Comments  at  38. 
 218  Id.  at  39. 
 219  FCC,  High-  Speed  Services  for  Internet  Access:  Status  as  of  June  30,  2004  (WCB,  rel.  Dec.  22,  2004)  (High-Speed 
 Services  Report)  at  Table  3.  NCTA  estimates  that  cable  operators  have  17.  3  million  subscribers  of  high-speed  Internet  service.  NCTA  Comments  at  30. 


 220  High-  Speed  Services  Report  at  Table  3. 
 221  Id. 
 222  High-  Speed  Services  Report  at  Table  3;  2003  Report,  19  FCC  Rcd  at  1642    53.  Kagan  estimates  that  the 
 number  of  cable  modem  subscribers  grew  from  13.  8  million  in  June  2003  to  18.  6  million  in  June  2004.  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  Aug.  18,  2004,  at  3.  See  paras.  115,  206  infra. 


 223  High-  Speed  Services  Report  at  Table  3;  2003  Report,  19  FCC  Rcd  at  1642    53.  Kagan  estimates  that  the 
 number  of  DSL  subscribers  grew  from  6.5  million  in  June  2003  to  9.8  million  in  June  2004.  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  Aug.  18,  2004,  at  3. 


 224  Comcast  Corp.,  Comcast  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004. 
 225  Although  there  is  no  standard  method  for  reporting  penetration  rates  for  advanced  services,  high-  speed  Internet 
 service  penetration  rates  are  usually  calculated  by  dividing  the  number  of  high-  speed  Internet  subscribers  by  the  number  homes  passed  where  high-  speed  Internet  service  is  available.  This  is  the  method  often  used  when  high-speed 


 Internet  services  are  not  yet  available  to  every  home  passed  by  a  cable  system.  Cablevision,  however,  has  completed  its  system  upgrade  and  makes  high-  speed  Internet  service  available  to  all  homes  passed  by  its  cable 
 systems.  As  such,  Cablevision  calculates  its  penetration  rate  for  high-  speed  Internet  service  by  dividing  the  number  of  high-  speed  Internet  service  subscribers  by  the  number  of  homes  passed  by  its  cable  system. 
 226  Comcast  Corp.,  Comcast  Full  Year  and  Fourth  Quarter  Results  Meet  or  Exceed  All  Operating  and  Financial 
 Targets  Setting  Stage  for  Continued  Growth  in  2004  (press  release),  Feb.  11,  2004. 
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 grown  to  over  6  million,  representing  a  penetration  rate  of  16.1  percent.  227  Comcast  reported  that  the  average  monthly  revenue  per  high-  speed  Internet  subscriber  was  $43.52  in  the  second  quarter  of  2004.  228 
 Cox  ended  2003  with  nearly  2  million  high-  speed  Internet  access  subscribers.  229  At  the  end  of  June  2004,  the  number  of  subscribers  to  Coxs  high-  speed  Internet  subscribers  had  grown  to  2.2  million,  representing 
 a  21.7  percent  penetration  rate.  230  Time  Warner  had  3.2  million  high-  speed  Internet  subscribers  at  year-end  2003,  representing  a  penetration  rate  of  17  percent.  231  The  number  of  Time  Warners  high-  speed 
 Internet  subscribers  had  grown  to  3.5  million  by  the  end  of  June  2004,  representing  a  penetration  rate  of  19  percent.  232  Cablevision  reported  1.1  million  subscribers  for  its  high-  speed  Internet  and  a  penetration 
 rate  of  24  percent  for  year-  end  2003.  233  By  the  end  of  June  2004,  Cablevision  had  1.2  million  high-  speed  Internet  subscribers  and  the  highest  penetration  rate  (26.7  percent)  in  the  cable  industry  for  this  service.  234 
 Charter  had  nearly  1.6  million  high-  speed  Internet  subscribers  at  the  end  of  2003,  representing  a  penetration  rate  of  15  percent.  235  The  number  of  subscribers  to  Charters  high-  speed  Internet  service  had 
 grown  to  more  than  1.7  million,  a  penetration  rate  of  16  percent,  at  the  end  of  June  2004.  236 
 48.  Cable  operators  are  increasing  the  speed  of  their  high-  speed  Internet  services,  237  and  are  beginning  to  offer  high-  speed  Internet  tiers,  increased  storage  capacity,  multiple  e-  mail  accounts,  and 


 home  networking  for  multiple  devices.  238  Comcast  offers  two  high-  speed  options:  4  Mbps  for  $52.95  per  month  and  3  Mbps  for  $42.  95  per  month.  239  Subscribers  select  their  speed  then  choose  between  standard 
 service  (one  connection)  and  Comcast  Home  Networking  (up  to  five  devices),  at  no  additional  monthly  service  cost.  240  In  addition,  Comcast  offers  subscribers  up  to  seven  e-  mail  accounts  with  storage  capacity 
 of  250  MB  for  each  account.  241  In  most  of  its  markets,  Cox  offers  three  high-  speed  Internet  access  tiers:  a  value  package  providing  256  Kbps  downstream  and  upstream  for  $24.95  per  month;  a  preferred  package 
 providing  4  Mbps  downstream  and  512  Kbps  upstream  for  $39.95  per  month;  and  a  premier  package 
 227  Comcast  Corp.,  Comcast  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004. 
 228  Id. 
 229  Cox  Communications  Inc.,  Cox  Communications  Announces  Fourth  Quarter  and  Full-  Year  Financial  Results  for 
 2003  (press  release),  Feb.  12,  2004.  230 
 Cox  Communications  Inc.,  Cox  Communications  Announces  Second  Quarter  and  Year-  to-  Date  Financial  Results  for  2004  (press  release),  July  29,  2004. 


 231  Time  Warner  Inc.,  Time  Warner  Reports  Results  for  2003  Full  Year  and  Fourth  Quarter  (press  release),  Jan.  28, 
 2004.  232 
 Time  Warner  Inc.,  Time  Warner  Inc.  Reports  Second  Quarter  2004  Results  (press  release),  July  28,  2004.  233 
 Cablevision  Systems  Corp.,  Cablevision  Systems  Corporation  Reports  Fourth  Quarter  and  Full  Year  2003  Results  (press  release),  Mar.  2,  2004. 


 234  Cablevision  Systems  Corp.,  Cablevision  Systems  Corporation  Reports  Second  Quarter  2004  Results  (press 
 release),  Aug.  9,  2004.  235 
 Charter  Communications  Inc.,  Charter  Reports  Fourth  Quarter  and  Year  2003  Financial  and  Operating  Results  (press  release),  Feb.  19,  2004. 


 236  Charter  Communications  Inc.,  Charter  Reports  Second  Quarter  2004  Financial  and  Operating  Results  (press 
 release),  Aug.  9,  2004.  237 
 See  NCTA  Comments  at  40-  41.  238 
 See  paras.  195,  210  infra.  239 
 Comcast  Corp.,  Comcast  Adds  New  4Mbps  (  4Meg)  Speed  Option  to  High-  Speed  Internet  Service  Offering  (press  release),  July  27,  2004. 


 240  Id. 
 241  Id. 
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 providing  5  Mbps  downstream  and  768  Kbps  for  $54.  95  per  month.  242  Time  Warners  core  Road  Runner  package  provides  3  Mbps  downstream  and  384  Kbps  upstream  for  $44.95  per  month.  243  Time  Warner  has 
 announced  plans  to  introduce  a  Road  Runner  Premium  high-  speed  Internet  package  providing  6  Mbps  downstream  and  512  Kbps  upstream  for  between  $64.95  and  $84.95  per  month,  depending  on  the  package 
 or  bundle  of  other  services  the  subscriber  takes  from  Time  Warner  Cable.  244  Cablevision  Optimum  Online  high-  speed  Internet  service  provides  3.5  Mbps  downstream  and  1  Mbps  upstream  for  $44.95  per 
 month  and  can  be  purchased  through  the  television  set  using  only  the  remote  control  and  on-  screen  prompts.  245  In  more  than  85  percent  of  Charters  markets,  high-  speed  Internet  subscribers  receive  3  Mbps 
 downstream  and  256  Kbps  upstream  for  $39.99  per  month.  246 
 49.  Most  cable  operators  provide  high-  speed  Internet  service  with  one  proprietary  ISP  specifically  created  and  owned  by  the  cable  operator.  247  For  example,  Cablevision  offers  high-  speed 


 Internet  service  under  the  brand  Optimum  Online,  Charter  offers  the  service  under  the  Charter  High-Speed  brand,  and  Cox  offers  the  service  under  the  Cox  High  Speed  Internet  brand.  Some  cable  operators, 
 however,  permit  their  high-  speed  Internet  service  to  be  used  with  non-  affiliated  ISPs.  For  example,  Time  Warner  Cable  offers  its  subscribers  multiple  ISPs  including  its  own  Road  Runner  Internet  access  service, 
 AOL  for  Broadband,  Earthlink,  Big  Net  and  other  regional  ISPs.  248 
 50.  Telephony  Offered  by  Cable  Operators.  Although  some  cable  companies  have  been  providing  traditional  circuit-  switched  telephony  for  years,  the  cable  industry  is  now  using  digital 


 technology,  the  bandwidth  provided  by  their  fiber/  coaxial  network,  and  the  Internet  to  provide  voice-over-  Internet  protocol  (VoIP)  services.  249  This  is  a  new  product  that  is  not  yet  widely  available,  but  cable 


 242  Cox  Communications  Inc.,  Overnight,  Cox  Turns  up  the  Speed  on  High-  Speed  Internet  Service  (press  release), 
 Aug.  10,  2004.  The  service  is  available  to  nearly  two  million  Cox  high-  speed  Internet  subscribers.  The  service  is  not  yet  available  in  Coxs  Las  Vegas,  Nevada;  Gainesville,  Florida;  and  Middle  America  markets.  Id. 


 243  Time  Warner  Cable,  Time  Warner  Cable  Rolls  Out  Even  Faster  Version  of  Road  Runner  as  New  Option  for 
 Gamers  and  Other  Intensive  Bandwidth  Users  (press  release),  July  26,  2004.  244 
 Time  Warner  announced  that  most  of  Time  Warner  Cables  31  operating  divisions  would  begin  offering  the  Premium  Road  Runner  high-  speed  Internet  service  in  August  2004.  Id. 


 245  Cablevision  Systems  Corp.,  Cablevision  Launches  Groundbreaking  Sales  Channel  for  Optimum  Online  (press 
 release),  June  17,  2004;  and  Cablevision  Systems  Corp.,  http://  www.  cablevision.  com/  index.  jhtml?  pageType=  ool_  product  (visited  Sept.  21,  2004). 


 246  Charter  Communications  Inc.,  Charter  Increases  Internet  Access  Download  Speed  by  50  Percent  (press  release), 
 Apr.  6,  2004.  247 
 See  2001  Report,  17  FCC  Rcd  at  1266-  67    46-  47  and  n.  136;  see  also  Inquiry  Concerning  High-  Speed  Access  to  the  Internet  Over  Cable  and  Other  Facilities,  Internet  Over  Cable  Declaratory  Ruling,  Appropriate  Regulatory 


 Treatment  for  Broadband  Access  to  the  Internet  Over  Cable  Facilities,  Declaratory  Ruling  and  Notice  of  Proposed  Rulemaking,  17  FCC  Rcd  4798  (2002)  (High-  Speed  Access  Declaratory  Ruling  and  NPRM).  In  the  High-  Speed 
 Access  Declaratory  Ruling  and  NPRM,  the  Commission  concluded  that  cable  modem  service,  as  it  is  currently  offered,  is  properly  classified  as  an  interstate  information  service,  not  as  a  cable  service,  and  that  there  is  no  separate 
 offering  of  telecommunications  service.  High-  Speed  Access  Declaratory  Ruling  and  NPRM,  17  FCC  Rcd  at  4802    7.  See  AT&  T  v.  City  of  Portland,  216  F.  3d  871  (9th  Cir.  2000).  See  also  Brand  X  Internet  Services  v.  FCC,  345 
 F.  3d  1120  (9  th  Cir.  2003)  [No.  02-  70518,  Oct.  6,  2003],  cert.  granted,  F.  C.  C.  v.  Brand  X  Internet  Services,  125  S.  Ct.  655  (mem),  73  USLW  3146,  73  USLW  3331,  73  USLW  334  (U.  S.  Dec.  3,  2004)  (NO.  04-  281). 
 248  See  Time  Warner  Cable,  at  http://  www.  timewarnercable.  com/  corporate/  aboutus/  (visited  Sept.  23,  2004). 
 249  A  circuit-  switched  cable  telephony  voice  call  and  an  IP  telephony  voice  call  both  begin  with  special  equipment 
 that  connects  a  household's  twisted  pair  infrastructure  with  the  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  Internet  for  IP  processing.  IP  telephony  processes  voice  telephone  calls  much  (continued....) 
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 companies  and  analysts  consider  VoIP  to  be  a  major  source  of  revenue  in  the  years  ahead.  250  Although  telephone  companies  are  subject  to  a  patchwork  of  state  regulations,  the  Commission  recently  decided 
 that  a  type  of  VoIP  service  offered  by  Vonage  Holding  Corporation,  called  DigitalVoice,  is  not  subject  to  traditional  state  public  utility  regulation.  251  The  Commission  also  stated  that  other  types  of  IP-  enabled 
 services,  such  as  those  offered  by  cable  companies,  that  have  basic  characteristics  similar  to  DigitalVoice  would  not  be  subject  to  traditional  state  public  utility  regulation.  252  One  of  the  unsettled  issues  is  whether 
 VoIP  service  will  be  a  primary  service  with  back-  up  powering  in  case  of  a  power  outage,  or  a  secondary  line  service  without  back-  up  powering.  At  the  end  of  2003,  there  were  2.8  million  subscribers  to  cable 
 telephone  service,  with  2.7  million  subscribers  being  served  by  circuit-  switched  service.  253  At  the  end  of  2004,  Kagan  projects  there  will  be  3.5  million  subscribers  to  cable  telephone  service,  with  3.1  million 
 subscribers  being  served  by  circuit-  switched  service  and  400,  000  being  served  by  VoIP  service.  254 
 51.  In  late  2003,  Time  Warner  announced  partnerships  with  MCI  and  Sprint  for  the  nationwide  deployment  of  Digital  Phone,  Time  Warner  Cables  residential  VoIP  service.  255  Time  Warners  Digital 


 Phone  subscribers  can  connect  to  existing  telephone  jacks  in  the  home,  keep  their  existing  telephone  numbers,  and  retain  their  directory  listings.  256  Digital  Phones  standard  features  include  411  directory 
 assistance,  611  service  calls,  Enhanced  911  service,  operators  assisted  calls,  call  waiting,  caller  ID  and  voice  mail.  257  The  service  includes  unlimited  local,  in-  state  and  domestic  long  distance  calling  starting  at 
 $39.95  per  month.  258  Time  Warner  launched  Digital  Phone  in  February  2003  in  Portland,  Maine.  Currently,  Time  Warner  offers  Digital  Phone  in  20  markets  nationwide  and  plans  to  offer  the  service  in  all 
 of  its  markets  by  the  end  of  2004.  259  Time  Warners  digital  phone  service  does  not  include  back-  up  power  and  will  not  function  during  a  power  outage.  260  Although  Cox  has  more  than  one  million 


 (...  continued  from  previous  page)  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  any  path  that  does  not  resist  transfer.  250 
 For  example,  Dallas  Clement  of  Cox  Communications  says  that  cable  industry  VoIP  revenue  will  exceed  $1  billion  by  2006  and  grow  to  $8  billion  by  2010.  Tania  Pancayk-  Collins,  NAMIC  Notebook,  COMM.  DAILY,  Sept.  21, 


 2004,  at  6.  In  addition,  Merrill  Lynch  estimates  that  the  cable  industrys  share  of  all  phone  lines  will  grow  from  1.  9  percent  in  2003  to  12.  6  percent  in  2008  with  all  of  the  growth  coming  from  VoIP.  Louis  Chunovic,  Dialing  for 
 Dollars,  BROADCASTING  &  CABLE,  Aug.  30,  2004,  at  28.  251 
 Vonage  Holdings  Corporation  Petition  for  Declaratory  Ruling  Concerning  an  Order  of  the  Minnesota  Public  Utilities  Commission,  WC  Docket  No.  03-  211,  FCC  04-  267    1  (rel.  Nov.  12,  2004)  (Vonage  Order). 


 252  Vonage  Order,  FCC  04-  267,  at    46. 
 253  Kagan  World  Media,  Cable  TV  Investor:  Deals  &  Finance,  July  29,  2004,  at  8-  9. 
 254  Id. 
 255  Time  Warner  Cable,  Time  Warner  Cable  Partners  with  MCI  and  Sprint  for  Nationwide  Rollout  of  Digital  Phone 
 (press  release),  Dec.  8,  2003.  256 
 Id.  257 
 Id.  258 
 See  Time  Warner  Cable,  http://  www.  timewarnercable.  com/  corporate/  products/  digitalphone/  landingpagephone.  html  (visited  Sept.  24,  2004). 


 259  Kathryn  Balint,  Time  Warner  Joins  Phone  Fray,  SIGNONSANDIEGO.  COM,  Sept.  23,  2004,  at 
 http://  www.  signonsandiego.  com/  news/  business/  20040923-  9999-  1b23phone.  html  (visited  Sept.  24,  2004).  260 
 See  Time  Warner  Cable  http://  www.  twcnc.  com/  dp/  faq.  cfm#  Can%  20I%  20call%  20911%  20using%  20Digital%  20  Phone%  20Service  (visited  Oct.  25,  2004). 
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 residential  telephone  subscribers  in  13  markets,  261  Cox  has  been  using,  and  plans  to  continue  to  use,  circuit-  switched  technology  for  its  service.  262  In  late  2003,  however,  Cox  used  VoIP  technology  to 
 provide  telephony  service  in  Roanoke,  Virginia,  and  Cox  is  preparing  to  launch  additional  VoIP  markets  in  2004.  263  Cox  provides  back-  up  power  so  that  its  digital  phone  service  continues  to  work  during  a 
 power  outage.  264  Cablevision  Optimum  Voice  service  offers  unlimited  local,  regional,  and  long-  distance  calling  within  the  United  States  and  Canada  for  $34.95  a  month.  265  The  service  includes:  voicemail,  call 
 waiting,  caller  ID,  caller  ID  blocking,  call  return,  three-  way  calling,  call  forwarding,  911  service,  and  direct-  dial  international  calling.  266  Optimum  Voice  has  115,000  subscribers  and  is  available  to  nearly  4.4 
 million  homes.  Optimum  Voice  calls  are  carried  over  Cablevisions  own  network,  not  the  public  Internet,  and  voice  packets  are  prioritized.  267  Cablevision  does  not  provide  back-  up  power  for  its  VoIP  system,  so 
 the  service  will  not  function  during  a  power  outage.  268  Charter  offers  VoIP  service  to  31,000  subscribers  in  Madison  and  Wausau,  Wisconsin,  and  St.  Louis,  Missouri.  269  Charter  plans  to  make  its  telephone 
 service  available  to  one  million  of  its  cable  subscribers  by  the  end  of  2004.  270  Charter  recently  announced  agreements  with  Level  3  Communications,  Sprint  Communications,  and  Accenture  which  will  enable  the 
 company  to  increase  VoIP  deployment  in  each  of  its  markets  in  2005.  271  Charters  VoIP  service  provides  local  and  long-  distance  service  within  the  United  States  and  Canada  and  costs  $39.95  per  month.  272 
 Charter  plans  to  provide  back-  up  power  for  its  VoIP  service.  273  In  2004,  Comcasts  VoIP  service  will  be  tested  in  Philadelphia,  Pennsylvania;  Indianapolis,  Indiana;  and  Springfield,  Massachusetts;  half  its 
 infrastructure  will  be  VoIP-  ready  by  the  end  of  2004;  and  95  percent  of  its  infrastructure  will  be  VoIP- 


 261  Markets  include:  Phoenix  and  Tucson,  Arizona;  Orange  County  and  San  Diego,  California;  Wichita,  Kansas; 
 Omaha,  Nebraska;  Meriden,  Connecticut;  Rhode  Island  (statewide);  New  Orleans,  Louisiana;  Oklahoma  City,  Oklahoma;  and  Hampton  Roads,  Roanoke  and  Northern  Virginia,  Virginia.  Cox  Communications  Inc.,  Cox 


 Communications  Brings  Digital  Telephone  Service  to  Northern  Virginia  (press  release),  April  30,  2004.  262 
 Cox  Communications  Inc.,  Cox  Communications  VoIP  Whitepaper:  Voice  Over  Internet  Protocol:  Ready  for  Prime  Time,  May  2004,  at  3. 


 263  Id.  at  4. 
 264  See  Jeff  Baumgartner,  Dialing  Out,  Powering  Up,  CED,  July  2004,  at  http://  www.  cedmagazine.  com/  ced/  2004/  0 
 704/  07f.  htm  (visited  Oct.  25,  2004).  265 
 Cablevision  Systems  Corp.,  Direct-  Dial  International  Calling  Now  Available  With  Cablevisions  Optimum  Voice  (press  release),  Sept.  13,  2004. 


 266  Id. 
 267  Id. 
 268  David  Pogue,  When  Is  An  Internet  Phone  Company  Not  An  Internet  Phone  Company?  When  Its  A  Cable 
 Company,  NEW  YORK  TIMES,  April  8,  2004.  See  Cablevision  Systems  Corp.,  http://  www.  optimumvoice.  com  /index.  jhtml?  pageType=  ny_  times_  04082004  (visited  Oct.  25,  2004). 


 269  Jerri  Stroud,  Charters  Phone  Service  is  on  Fast  Track,  STLTODAY,  Sept.  1,  2004,  at  http://  www.  stltoday.  com/ 
 stltoday/  business/  stories.  nsf/  Business/  story/  D0284558FD9B775386256F020005CC49?  OpenDocument&  Headline=  MORNING+  BRIEFING  (visited  Sept.  24,  2004). 


 270  Id. 
 271  Charter  Communications  Inc.,  Charter  Taps  Three  Telephony  Partners;  Level  3  Sprint  and  Accenture  to 
 Enhance,  Expedite  Charter  Telephone  (press  release),  Aug.  30,  2004.  272 
 Dan  Hinkel,  Charter  Offers  Internet  Telephone  Capability,  GAZETTEXTRA,  Sept.  15,  2004,  at  http://  www.  gazetteextra.  com/  charter091504.  asp  (visited  Sept.  24,  2004). 


 273  Alan  Breznick,  More  Major  MSOs  Unveil  VoIP  Rollout  Plans,  CABLE  DATACOM  NEWS,  Mar.  2004,  at 
 http://  www.  cabledatacomnews.  com/  sitesearch/  results.  php?  q=  Charter+  Communications+  Power+  Back+  up  (visited  Oct.  25,  2004). 
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 ready  by  the  end  of  2005.  274  Comcast  plans  to  offer  VoIP  service  to  more  than  40  million  households  by  2006.  275  Comcasts  network  has  a  built-  in  emergency  back-  up  power  that  will  provide  telephone  service 
 for  up  to  10  hours.  276 
 52.  Mid-  sized  and  Smaller  Cable  Operators.  In  addition  to  reporting  on  the  advanced  services  provided  by  the  largest  cable  companies,  this  year  we  examined  six  mid-  sized  and  smaller  cable  operators 


 to  identify  the  advanced  services  they  provide.  277  All  provide  high-  speed  Internet  service.  All  provide  digital  video  service  but  not  all  offer  HDTV,  VOD,  and  DVR  service.  Some  provide  telephone  service, 
 but  not  VoIP.  Bresnan  Communications  serves  over  300,000  subscribers  in  Colorado,  Montana,  Wyoming,  and  Utah.  278  Bresnan  Communications  offers  a  full  range  of  advanced  services  that  include 
 digital  video  service,  VOD,  HDTV,  DVR,  high-  speed  Internet  service,  and  circuit-  switched  telephone  service.  279  Service  Electric  Cable  TV  &  Communications  serves  approximately  290,000  subscribers  in 
 Pennsylvania  and  New  Jersey.  280  Service  Electric  offers  digital  video  service,  HDTV,  high-  speed  Internet,  and  circuit-  switched  telephone  service.  281  Service  Electric  does  not  offer  VOD  and  DVR 
 service.  Susquehanna  Communications  serves  over  230,000  subscribers  in  Pennsylvania,  New  York,  Illinois,  Indiana,  Maine,  and  Mississippi.  282  Susquehanna  Communications  offers  digital  video  service, 
 HDTV,  and  will  soon  offer  VOD  and  DVR  service.  283  Susquehanna  Communications  also  offers  high-speed  Internet  service  and  will  soon  offer  digital  telephone  service.  284  Buckeye  CableSystem  serves 
 approximately  149,000  subscribers  in  Ohio,  Michigan,  and  New  York.  285  Buckeye  CableSystem  offers  digital  video  service,  HDTV,  VOD,  and  high-  speed  Internet  service.  286  Buckeye  CableSystem  does  not 
 offer  DVR  or  telephone  service.  US  Cable  Group  serves  145,000  subscribers  in  Minnesota,  Wisconsin,  South  Carolina,  Georgia,  Florida,  Missouri,  Texas,  New  Mexico,  Colorado,  and  New  Jersey.  287  US  Cable 
 Group  offers  digital  video  service,  and  high-  speed  Internet  service.  288  US  Cable  Group  does  not  offer  HDTV,  VOD,  DVR,  or  residential  telephone  service.  Sunflower  Broadband  operates  cable  systems  in 


 274  Comcast  Corp.,  Presentation  to  UBS  32  nd  Annual  Media  Conference,  Dec.  9,  2004,  at  20.  See  also  Wesley 
 Brown,  Internet  Phone  Service  for  Every  Home  Not  Far  Off,  ARKANSAS  NEWS  BUREAU,  June  27,  2004,  at  http://  www.  vonage.  com/  corporate/  press_  news.  php?  PR=  2004_  06_  27_  1  (visited  Sept.  24,  2004). 


 275  Id. 
 276  See  Comcast  Corp.,  http://  www.  comcast.  com/  Support/  Corp1/  FAQ/  FaqDetail_  1719.  html  (visited  Oct.  25,  2004). 
 277  The  six  mid-  sized  and  smaller  cable  companies  include:  Bresnan  Communications,  Service  Electric  Cable  TV  & 
 Communications,  Susquehanna  Communications,  Buckeye  CableSystem,  US  Cable  Group,  and  Sunflower  Broadband.  See  also  Availability  of  Advanced  Telecommunications  Capability  in  the  United  States  (Fourth  706 


 Report),  19  FCC  Rcd  20540,  20570  (2004).  278 
 See  Bresnan  Communications,  at  http://  www.  bresnan.  com/  unst/  about  (visited  Oct.  28,  2004).  279 
 See  Bresnan  Communications,  at  http://  www.  bresnan.  com/  unst/  products/  offers  (visited  Oct.  28,  2004).  280 
 See  Service  Electric  Cable  TV  &  Communications,  at  http://  www.  sectv.  com/  comp.  shtml  (visited  Oct.  27,  2004).  281 
 See  Service  Electric  Cable  TV  &  Communications,  at  http://  www.  sectv.  com/  prod.  shtml  (visited  Oct.  27,  2004).  282 
 See  Susquehanna  Communications,  at  http://  www.  suscom.  com/  about/  pfaltzgraff.  php  (visited  Oct.  28,  2004).  283 
 Id.  284 
 Id.  285 
 NCTA,  Cable  Operators,  Cable  Developments  2004,  at  28.  286 
 See  Erie  County  Cablevision  Inc.,  at  http://  www.  buckeyecablesystem.  com/  erie_  html/  indexpages_  html/  ourc  ompany.  html  (visited  Oct.  28,  2004). 


 287  See  US  Cable  Group,  at  http://  www.  uscablegroup.  com/  operating_  companies.  htm  (visited  Oct.  28,  2004). 
 288  See  US  Cable  Group,  at  http://  www.  uscable.  com  (visited  Oct.  28,  2004). 
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 Kansas  and  offers  digital  video  service,  HDTV,  high-  speed  Internet  service,  and  circuit-  switched  telephone  service.  289  Sunflower  Broadband  does  not  offer  VOD  and  DVR  service. 
 B.  Direct-  to-  Home  Satellite  Services 
 1.  Direct  Broadcast  Satellite 
 53.  DBS  operators  provide  service  to  most  of  the  continental  U.  S.,  and  they  generally  provide  service  to  Alaska  and  Hawaii.  290  While  companies  are  not  required  to  charge  a  direct  fee  for  their  service, 


 in  the  U.  S.  all  the  current  DBS  companies  provide  a  subscription  service  that  is  presently  limited  to  video  and  audio  programming  although  under  the  Commissions  rules  DBS  providers  are  also  allowed  to 
 provide  other  nonconforming  services  as  well.  DBS  service  is  provided  via  satellite  to  small  parabolic  dish  antennas  located  at  the  individual  residences  of  consumers  or  at  business  or  educational 
 organizations.  291  Currently,  four  operators  hold  licenses  to  provide  DBS  service:  EchoStar  (marketed  as  the  DISH  Network),  DIRECTV,  Dominion  Video  Satellite,  Inc.  (marketed  as  Sky  Angel),  292  and 
 Cablevisions  Rainbow  DBS  Company  LLC  (marketed  as  VOOM).  293  On  December  19,  2003,  the  Commission  approved  the  joint  application  of  General  Motors  Corporation,  Hughes  Electronics 
 Corporation  (Hughes)  and  The  News  Corporation  (News  Corp)  to  transfer  control  of  various  Commission  licenses  and  authorizations,  including  its  DBS  authorizations  held  by  Hughes,  to  News  Corp.  294 


 54.  Subscribership.  As  of  June  30,  2004,  approximately  23.16  million  U.  S.  households  subscribed  to  DBS  services.  295  This  represents  an  increase  of  13  percent  over  the  20.4  million  DBS 


 289  See  Sunflower  Broadband,  at  http://  www.  sunflowerbroadband.  com  (visited  Oct.  28,  2004). 
 290  Under  the  geographic  service  rules,  DBS  operators  must  provide  service  to  Alaska  and  Hawaii  unless  they  can 
 demonstrate  that  such  service  is  technically  infeasible.  This  requirement  does  not  apply  to  satellites  operating  at  61.5  W.  L.  See  47  C.  F.  R.    25.  148(  c).  See  also  State  of  Hawaii,  Petition  for  Administrative  Sanctions  of  the  State 


 of  Hawaii,  MB  Docket  No.  03-  82  (filed  Feb.  6,  2003);  MICROCOM,  Request  for  Declaratory  Ruling  on  DBS  Service  to  Hawaii  from  101  Degrees  W.  L.,  MB  Docket  No.  03-  82  (filed  Mar.  19,  2003). 
 291  In  our  rules  we  define  the  Direct  Broadcast  Satellite  Service  as  A  radiocommunication  service  in  which  signals 
 transmitted  or  retransmitted  by  space  stations,  using  frequencies  specified  in    25.202(  a)(  7),  are  intended  for  direct  reception  by  the  general  public.  For  the  purposes  of  this  definition,  the  term  direct  reception  shall  encompass  both 


 individual  reception  and  community  reception.  47  C.  F.  R.  25.201.  292 
 Dominion  holds  licenses  for  eight  channels  at  61.  5  W.  L.  orbital  location.  Under  a  1996  agreement,  Dominion  leased  capacity  on  EchoStars  EchoStar  III  satellite  for  its  eight  licensed  channels,  six  of  which  it  has  sub-  leased  to 


 EchoStar,  which  uses  them  for  Dish  Network  programming,  and  two  of  which  it  uses  to  transmit  its  Sky  Angel  services.  See  Dominion  Video  Satellite,  Inc.,  14  FCC  Rcd  8182  (1999). 
 293  Cablevision  recently  cancelled  its  planned  spin  off  of  its  Rainbow  Media  Enterprises,  which  includes  VOOM  and 
 several  programming  networks.  See  Peter  Grant,  Cablevision  Wont  Spin  Off  Voom,  WALL  STREET  JOURNAL,  Dec.  22,  2004,  at  B10. 


 294  See  General  Motors  Corporation  and  Hughes  Electronics  Corporation,  Transferors,  and  The  News  Corporation 
 Limited,  Transferee,  For  Authority  to  Transfer  Control  (News  Corp  Order),  19  FCC  Rcd  473  (2004),  recon.  pending.  News  Corp  owns  the  Fox  Television  Network;  35  broadcast  television  stations;  news,  sports  and  general 


 entertainment  cable  networks;  movie  and  television  studios;  print  publications;  and  conditional  access  system  provider  NDS.  For  a  complete  listing  of  News  Corps  holdings,  see  News  Corp.,  at  http://  www.  newscorp.  com/ 
 index2.  html  (visited  Jan.  14,  2005).  In  addition,  Liberty  Media  Corporation  holds  a  sizable  interest  in  News  Corp.  See  Geraldine  Fabrikant,  Liberty  Media  Accelerates  Swap  of  News  Corp.  Shares,  NEW  YORK  TIMES,  Dec.  21,  2004, 
 at  C4.  Moreover,  News  Corp.  has  announced  plans  to  launch  a  several  new  channels  in  coming  years  through  DIRECTV.  See  Joe  Flint,  News  Corp.  Plans  Reality  Channel  Aided  by  DirecTV,  WALL  STREET  JOURNAL,  July  14, 
 2004,  at  B2.  295 
 SBCA  Comments  at  5. 
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 subscribers  we  reported  last  year.  296  DBS  comprises  approximately  25  percent  of  all  MVPD  subscribers.  297  Several  reasons  account  for  DBS  continued  subscriber  growth,  including  offers  of  free 
 set-  top  box  equipment,  increased  availability  of  local  broadcast  stations,  and  an  increase  in  niche  programming,  such  as  EchoStars  Armenian,  Urdu,  Tagalog,  and  Portuguese-  language  channels,  and 
 DIRECTVs  CricketTicket  sports  network,  and  Hindi,  Vietnamese,  and  Tamil-  language  channels.  298  One  analyst  states  that  changes  in  the  market  share  of  total  new  subscribers  between  cable  and  DBS  indicates  a 
 change  in  consumer  preference  between  cable  and  DBS  service,  but  one  primarily  confined  to  consumers  in  the  midst  of  switching  their  physical  residence.  299  DBS  operators  continue  to  rank  high  in  customer 
 satisfaction  surveys.  In  its  annual  ranking  of  cable  and  satellite  providers,  J.  D.  Power  and  Associates  found  consumers  ranked  EchoStar  first  and  DIRECTV  second  among  the  largest  13  MVPDs.  300 


 55.  DIRECTV  retains  its  position  as  the  leading  DBS  provider  and  second  largest  MVPD  with  13.04  million  subscribers  as  of  June  2004,  an  increase  of  12.4  percent  from  the  11.6  million  subscribers  as 
 of  June  2003.  301  EchoStar  is  the  second  largest  DBS  operator  and  fourth  largest  MVPD,  with  10.12  million  subscribers  as  of  June  30,  2004,  an  increase  of  15  percent  over  the  8.8  million  subscribers  as  of 
 June  2003.  302  Last  year  we  reported  the  entry  of  DBS  provider  VOOM  in  October  2003,  and,  as  of  June  30,  2004,  VOOM  reported  that  it  had  approximately  25,000  subscribers.  303  Sky  Angel  continues  to 
 provide  20  channels  of  family-  oriented  programming,  but  does  not  publicly  disclose  its  subscriber  numbers  on  an  annualized  basis.  304 


 296  See  2003  Report,  19  FCC  Rcd  at  1650    65. 
 297  See  Table  B-  1  infra. 
 298  See,  e.  g.,  Peter  Grant,  Cable  Trouble:  Subscriber  Growth  Stalls  as  Satellite  TV  Soars,  WALL  STREET  JOURNAL, 
 Aug.  4,  2004;  David  Lieberman,  Cable  Companies  Subscriber  Base  Sinks,  While  Satellite  Firms  Soar,  USA  TODAY,  Aug.  11,  2004,  at  3B;  Douglas  Shapiro  and  W.  Joseph  Fersedi,  What  Changed  in  the  Cable-  DBS  Dynamic 


 in  2Q?,  Banc  of  America  Securities,  Aug.  27,  2004.  In  addition  to  free  equipment  and  local-  into-  local  service  penetration,  Shapiro  posits  that  several  changes  in  how  DIRECTV  conducts  its  business  led  to  astounding  gross 
 subscriber  additions  for  the  provider.  Specifically,  DIRECTV  moved  away  from  selling  its  equipment  in  a  retail  environment  to  direct  sales,  with  many  retailers  selling  a  certificate  and  then  contacting  DIRECTV  directly  to  ship 
 and  install  the  system.  Id.  at  10.  Shapiro  also  believes  that  DIRECTVs  use  of  a  new  security  stream  for  its  programming,  which  has  not  yet  been  hacked,  accounted  for  a  significant  number  of  DIRECTVs  gross  subscriber 
 additions  during  the  second  quarter  of  2004.  Id.  at  11.  299 
 Douglas  Shapiro,  What  Changed  in  the  Cable-  DBS  Dynamic  in  2Q?,  Banc  of  America  Securities,  Aug.  27,  2004,  at  7.  This  analyst  still  perceives  a  high  switching  cost  between  the  two  platforms,  but  one  that  disappears  when  a 


 consumer  moves.  Id.  In  addition,  one  study  found  that  for  basic  cable  services,  consumers  subscribe  to  DBS  as  a  substitute  for  cable  when  facing  large  quality-  adjusted  cable  price  increases.  When  faced  with  small  quality-adjusted 
 cable  price  changes,  switching  costs  deter  customers  from  subscribing  to  DBS  service.  See  Andrew  S.  Wise  and  Kiran  Duwadi,  Competition  Between  Cable  Television  and  Direct  Broadcast  Satellite    Its  More 
 Complicated  Than  You  Think,  Media  Bureau  Staff  Research  Paper,  International  Bureau  Working  Paper,  MB  2005-1,  IB-  3,  January  2005. 
 300  See  J.  D.  Power  &  Associates,  As  Satellite  TV  Penetration  Grows,  Overall  Customer  Satisfaction  Among  Satellite 
 Subscribers  Continues  to  Top  Cable  (press  release),  Aug.  18,  2004.  301 
 DIRECTV  Group,  Inc.,  SEC  Quarterly  Report  Form  10-  Q  Pursuant  to  Section  13  of  15(  d)  of  the  Securities  Act  of  1934  for  the  Quarterly  Period  Ended  June  30,  2004,  at  37. 


 302  EchoStar  Communications  Corp.,  SEC  Quarterly  Report  Form  10-  Q  Pursuant  to  Section  13  of  15(  d)  of  the 
 Securities  Act  of  1934  for  the  Quarterly  Period  Ended  June  30,  2004,  at  24.  303 
 Cablevision  Systems  Corp.,  SEC  Quarterly  Report  Form  10-  Q  Pursuant  to  Section  13  of  15(  d)  of  the  Securities  Act  of  1934  for  the  Quarterly  Period  Ended  June  30,  2004,  at  23. 


 304  In  previous  reports  we  have  estimated  that  Sky  Angel  serves  approximately  one  million  subscribers.  See  2002 
 Report,  17  FCC  Rcd  at  26930    59. 
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 56.  Service  and  Equipment  Pricing.  Both  DIRECTV  and  EchoStar  instituted  price  increases  since  our  last  report.  305  EchoStar  raised  its  prices  on  average  $2  per  month.  306  DIRECTV  instituted  its 
 fourth  price  increase  in  10  years,  with  prices  for  packages  increasing  between  $1  and  $3  per  month.  307  VOOM  has  experimented  with  varying  pricing  strategies  for  its  service.  308 


 57.  Subscribers  to  DBS  service  need  a  satellite  dish  and  a  set-  top  box.  Over  the  last  few  years,  both  major  providers  have  offered  heavily  discounted  or  free  equipment  in  exchange  for  annual  service 
 contracts.  Recently  DIRECTV  and  EchoStar  have  moved  away  from  offering  free  equipment  and  are  instead  promoting  equipment  leasing  on  a  monthly  basis.  309  In  addition,  DBS  operators  are  offering 
 multiple  set-  top  boxes  to  new  customers  for  free  or  at  reduced  cost  in  their  standard  promotions.  310  According  to  DIRECTV,  lowering  the  price  of  its  equipment  is  a  critical  factor  in  its  ability  to  attract  new 


 305  Todd  Wallack,  Satellite  TV  Companies  Raising  Prices  Again,  SFGATE.  COM,  Jan.  29,  2004;  Michael  McCarthy, 
 Satellite,  Cable  Operators  Get  Ready  to  Raise  Rates,  USA  TODAY,  Feb.  10,  2004.  306 
 EchoStar  made  the  following  changes  to  its  packages  and  pricing:  changed  the  name  of  its  Americas  Top  100  package  to  Americas  Top  120  package  to  reflect  increased  number  of  channels  and  raised  its  price  from  $33.  99  per 


 month  to  $34.99  per  month;  changed  the  name  of  its  Americas  Top  150  to  Americas  Top  180  to  reflect  increased  number  of  channels  and  raised  the  price  from  $42.99  to  $44.  99;  and  raised  the  price  of  its  Americas  Everything 
 package  from  $74.99  to  $77.  99  per  month.  EchoStar  changed  the  name  of  its  Americas  Top  50  package  to  Americas  Top  60,  but  maintained  the  price  at  $29.99  per  month.  See  EchoStar  Slates  Rate  Increases  on  Some 
 Packages,  SATELLITE  BUSINESS  NEWS,  Jan.  14,  2004.  See  also  EchoStar  Communications  Corp.,  New  DISH  Network  Package  Eliminates  Equipment  Cost,  Commitment;  Low  Price  Includes  Local  Channels,  Free  Installation 
 (press  release),  Jan.  8,  2004.  EchoStars  last  price  increase  occurred  in  January  2003  when  it  raised  its  average  subscribers  monthly  fees  four  percent.  See  EchoStar  Communications  Corp.,  DISH  Network  Increases  Basic  Rates 
 by  $2;  Average  Customer  to  Receive  Approximate  Four  Percent  Increase  (press  release),  Jan.  9,  2003.  307 
 DIRECTV  raised  the  price  of  its  Total  Choice  package  with  130  channels  from  $33.99  to  $36.99  per  month;  Total  Choice  package  with  local  stations  increased  from  $38.99  to  $39.  99;  Total  Choice  Plus  package  with  150 


 channels  was  raised  from  $37.  99  to  $39.  99;  Total  Choice  Plus  with  local  stations  increased  from  $39.  99  to  $42.99;  Total  Choice  Premier  package  with  210  channels  increased  from  $85.  99  to  $87.99;  and  Total  Choice  Premier  with 
 local  stations  increased  from  $87.  99  to  $90.  99.  DIRECTV  Slates  Price  Increases,  SATELLITE  BUSINESS  NEWS,  Jan.  23,  2004. 
 308  See,  e.  g.,  Voom  Tries  New  Lease  Offer,  Lower  Purchase  Price,  SATELLITE  BUSINESS  NEWS,  Feb.  16,  2004;  Voom 
 Plans  To  Keep  Current  Promotion,  SATELLITE  BUSINESS  NEWS,  May  28,  2004.  Presently,  VOOM  has  two  programming  packages.  VOOM  Package  includes  21  HD  channels  available  only  from  VOOM,  50-  plus  standard 


 definition  channels,  18  digital  music  channels,  three  non-  exclusive  HD  channels,  and  a  SportsPack  with  five  sports-  related  channels  for  $49.90  per  month.  The  second  package  is  Va  Va  VOOM  package,  which  includes 
 everything  offered  in  the  standard  VOOM  Package  plus  HBO,  Cinemax,  Showtime  Unlimited,  and  STARZ!,  marketed  as  PlusPacks  for  $89.  90  per  month.  Subscribers  to  the  VOOM  Package  have  the  option  of  buying 
 individual  PlusPacks  for  $19.90  each  per  month.  See  Voom  Ups  Price  and  Fees;  Rainbow  DBS  Details  Spin-  Off  Plans,  SATELLITE  BUSINESS  NEWS,  Aug.  2,  2004;  Rainbow  DBS  Company  LLC,  at  http://  www.  voom.  com/  index.  jsp 
 (visited  Jan.  14,  2005).  309 
 EchoStar  Increases  Focus  on  Lease  Program,  SATELLITE  BUSINESS  NEWS,  July  12,  2004.  For  example,  EchoStar  ran  a  promotion  in  2004  called  Digital  Home  Advantage,  which  provided  subscribers  with  free  equipment 


 and  installation  for  up  to  four  rooms.  The  customer  paid  a  one-  time  $49  activation  fee,  which  was  credited  on  the  first  monthly  bill,  and  a  fee  of  $5  per  month  per  receiver.  The  second  offer,  called  Free-  For-  All,  required  purchase 
 of  the  set-  top  box  and  satellite  dish  for  $199  for  a  two-  room  installation,  or  $149  for  a  one-  room  installation,  and  then  receiving  20  or  15  monthly  credits  of  $10  per  month,  respectively,  for  the  total  equipment  cost. 
 310  One  analyst  finds  that  the  move  from  offering  two  receivers  free  to  three  or  more  per  subscriber  served  to 
 surmount  cost-  of-  ownership  concerns  for  consumers  deciding  between  DBS  and  cable  service.  Douglas  Shapiro,  What  Changed  in  the  Cable-  DBS  Dynamic  in  2Q?,  Banc  of  America  Securities,  Aug.  27,  2004,  at  9. 
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 subscribers.  311  DIRECTV  and  EchoStar  continue  to  offer  a  wide  range  of  equipment  with  advanced  features,  including  dual-  tuner  DVR  and  HDTV.  312  VOOM  offers  its  equipment  for  sale  and  for  lease.  313 
 58.  Availability  of  Local  Broadcast  Stations.  DBS  providers  continue  to  increase  the  number  of  markets  where  they  deliver  local  broadcast  television  stations  (local-  into-  local  service).  314  As  of 
 December  2004,  local-  into-  local  service  is  offered  by  at  least  one  DBS  operator  in  155  of  210  television  markets  (i.  e.,  designated  market  areas,  or  DMAs),  which  cover  95  percent  of  all  U.  S.  television 
 households.  EchoStar  leads  DBS  providers  in  offering  to  subscribers  a  package  of  local  broadcast  stations  including  commercial  and  non-  commercial  stations  in  150  DMAs  and  Puerto  Rico.  315  DIRECTV 
 offers  local-  into-  local  service  in  130  DMAs.  316  DIRECTV  received  Commission  approval  to  relocate  the  DIRECTV  5  satellite  to  a  Broadcasting  Satellite  Service  orbital  location  assigned  to  Canada  at  72.5  W.  L. 


 311  DIRECTV  Comments  at  9. 
 312  See  e.  g.,  The  DIRECTV  Group,  Inc.,  DIRECTV  Selects  TiVo  For  Next  Generation  Digital  Satellite  Receiver  with 
 DVR  (press  release),  Feb.  21,  2002.  313 
 VOOMs  Base  Offer  monthly  leasing  plan  includes  one  receiver  and  dish  installed  for  $199  and  a  lease  fee  of  $9.50  per  month,  with  the  option  of  adding  five  additional  receivers,  each  $50  installed  and  $14.50  per  month  per 


 receiver.  For  subscribers  signing  an  annual  leasing  contract,  the  cost  is  $49  for  one  receiver,  with  an  option  to  lease  up  to  five  additional  receivers,  for  $50  each  installed  and  $14.50  per  month  per  receiver.  For  those  buying  VOOM 
 equipment,  the  cost  is  $499  for  one  receiver,  and  for  up  to  five  additional  receivers,  the  cost  for  each  is  $299  installed  and  $5.  00  per  month.  For  those  buying  equipment  and  committing  to  an  annual  contract,  the  initial 
 receiver  cost  is  $349,  and  additional  receivers  are  $299  installed  and  $5.00  per  month.  In  addition,  subscribers  taking  the  more  expensive  of  VOOMs  programming  packages  can  receive  a  $50  discount  on  the  price  and 
 installation  cost  of  each  additional  receiver.  VOOM  requires  that  its  equipment  be  installed  by  a  VOOM  certified  installer  and  has  thus  built  the  cost  of  installation  into  its  equipment  prices.  See  Rainbow  DBS  LLC,  at 
 http://  www.  voom.  com/  get_  it/  offers.  jsp  (visited  Jan.  14,  2005).  314 
 As  required  by  the  Satellite  Home  Viewer  Improvement  Act  of  1999  (SHVIA),  the  Commission  established  rules  to  implement  carriage  of  broadcast  signals,  retransmission  consent,  and  program  exclusivity  with  respect  to  satellite 


 carriage  of  broadcast  stations.  SHVIA  provides  DBS  carriers  with  the  opportunity  to  carry  local  stations  in  a  Designated  Market  Area  (DMA)  pursuant  to  a  statutory  copyright  license  similar  to  the  one  provided  cable 
 operators.  If  a  DBS  operator  selects  this  option  in  a  DMA,  however,  it  must  carry  all  the  local  stations  in  the  DMA,  effective  January  1,  2002.  See  Implementation  of  the  Satellite  Home  Viewer  Improvement  Act  1999:  Broadcast 
 Signal  Carriage  Issues,  Retransmission  Consent  Issues,  16  FCC  Rcd  1918  (2000);  Implementation  of  the  Satellite  Home  Viewer  Improvement  Act  of  1999:  Broadcast  Signal  Carriage  Issues,  16  FCC  Rcd  16544  (2001); 
 Implementation  of  the  Satellite  Home  Viewer  Improvement  Act  of  1999:  Retransmission  Consent  Issues:  Good  Faith  Negotiation  and  Exclusivity,  16  FCC  Rcd  15599  (2001). 
 315  EchoStar  Communications  Corp.,  DISH  Network  Satellite  Television  Brings  Local  Channels  to  Clarksburg-Weston, 
 W.  VA  (press  release),  Sept.  23,  2004.  Historically,  EchoStar  required  that  consumers  obtain  a  second  satellite  dish  to  receive  all  local  stations  in  some  markets.  Presently,  according  to  EchoStar,  62  of  its  local-  into-  local 


 markets  require  the  use  of  a  SuperDish  to  receive  all  local  channels  and  some  additional  programming,  such  as  international  channels.  EchoStars  SuperDish  allows  subscribers  to  receive  signals  from  three  orbital  locations.  See 
 EchoStar  Communication  Corp.,  at  http://  www.  dishnetwork.  com/  content/  programming/  locals/  index.  shtml  (visited  Jan.  14,  2005). 
 316  Letter  from  Susan  Eid,  The  DIRECTV  Group,  to  Marlene  H.  Dortch,  Secretary,  FCC,  filed  in  MB  Docket  No. 
 03-  124  (Dec.  22,  2004).  As  a  condition  of  approval  of  News  Corp.  s  acquisition  of  DIRECTV,  it  was  required  to  offer  local  broadcast  television  services  in  an  additional  30  DMAs  beyond  what  had  previously  been  funded, 


 projected,  or  planned.  See  News  Corp.  Order,  19  FCC  Rcd  at  617,  627    334,  369.  See  also  DIRECTV  Group  Inc.,  at  http://  www.  directv.  com/  DTVAPP/  see/  LocalChannels_  markets.  dsp  (visited  Nov.  19,  2004). 
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 and  to  provide  local-  into-  local  service  in  24  markets  in  the  U.  S.  from  that  location.  317  VOOM  does  not  presently  retransmit  local-  into-  local  programming.  318 
 59.  Spectrum  Auctions.  In  2002,  the  Commission  established  the  Multichannel  Video  Distribution  and  Data  Service  (MVDDS)  in  the  12.2-  12.7  GHz  band  (12  GHz  band),  which  is  allocated  to 
 DBS  on  a  primary  basis.  319  MVDDS  consists  of  500  MHz  of  contiguous  spectrum  that  is  licensed  across  214  service  areas.  MVDDS  spectrum  may  be  used  to  facilitate  the  delivery  of  new  video  and  broadband 
 communications  services,  such  as  local  television  programming  and  high-  speed  Internet  access.  320  The  technical  rules  reflect  a  balance  in  which  the  Commission  affords  protection  to  the  DBS  service  and  the 
 non-  geostationary  satellite  orbit  (NGSO)  fixed-  satellite  service  (FSS)  while  allowing  the  entrance  of  MVDDS.  321 


 60.  In  establishing  MVDDS,  the  Commission  concluded  that  another  platform  operator  in  the  MVPD  marketplace  would  provide  significant  public  interest  benefits  through  lower  prices,  improved 
 service  quality,  increased  innovation,  and  increased  service  to  unserved  or  underserved  rural  areas.  322  In  this  connection,  the  Commission  found  that  open  eligibility  for  in-  region  cable  operators  [would]  pose[] 
 a  significant  likelihood  of  substantial  competitive  harm  because  cable  operators  have  a  strong  incentive  to  prevent  entry  by  new  MVPD  providers.  323  Therefore,  cable  operators  and  entities  holding  attributable 
 interests  in  cable  operators  must  divest  any  attributable  interest  within  ninety  days  of  the  grant  of  an  MVDDS  license  whose  geographic  service  area  significantly  overlaps  the  cable  operators  service  area.  324 


 61.  On  January  27,  2004,  the  Commission  completed  the  auction  of  the  214  MVDDS  licenses  (Auction  No.  53),  raising  (in  net  bids)  a  total  of  $118,721,835.  In  this  auction,  ten  winning  bidders  won  a 


 317  See  Application  of  DIRECTV  Enterprises,  LLC,  19  FCC  Rcd  15529  (2004).  See  also  DIRECTV  Reply 
 Comments  at  6.  DIRECTV  states  that  customers  in  these  markets  will  access  all  local  channels  from  72.  5  W.  L.  with  the  addition  of  a  second  18-  inch  satellite  dish,  which  DIRECTV  states  that  it  will  provide  and  install  free  of 


 charge  to  customers  who  agree  to  a  one-  year  programming  commitment.  Id.  318 
 All  of  VOOMs  equipment  packages  include  a  separate  antenna  capable  of  receiving  over-  the-  air  local  digital  broadcast  channels.  The  antenna  will  not  pick  up  analog  local  broadcast  signals.  See  Rainbow  DBS  Company  LLC, 


 at  http://  www.  voom.  com/  see_  it/  local.  jsp  (visited  Jan.  14,  2005).  319 
 Amendment  of  Parts  2  and  25  of  the  Commissions  Rules  to  Permit  Operation  of  NGSO  FSS  Systems  Co-Frequency  with  GSO  and  Terrestrial  Systems  in  the  Ku-  Band  Frequency  Range,  17  FCC  Rcd  9614,  9680  (2002) 


 (MVDDS  Second  R&  O).  320 
 MVDDS  licensees  may  use  the  12.  2  12.7  GHz  band  for  any  digital  fixed  nonbroadcast  service  (broadcast  services  are  intended  for  reception  of  the  general  public  and  not  on  a  subscribership  basis)  including  one-  way  direct-to- 


 home/  office  wireless  service.  See  47  C.  F.  R.    101.1407  (permissible  operations  for  MVDDS).  321 
 See  generally  47  C.  F.  R.  Part  101,  subpart  P.  322 
 MVDDS  Second  R&  O,  17  FCC  Rcd  at  9680    165.  323 
 Id.  324 
 47  C.  F.  R.    101.  1412(  a).  Cable  operator  means  a  company  that  is  franchised  to  provide  cable  service,  as  defined  in  47  C.  F.  R.    76.  1000(  e),  in  all  or  part  of  the  MVDDS  license  area,  id.    101.  1412(  b).  Significant 


 overlap  occurs  when  a  cable  operators  subscribers  in  the  MVDDS  license  area  make  up  35  percent  or  more  of  the  households  in  that  MVDDS  license  area  which  subscribe  to  one  or  more  Multichannel  Video  Program  Distributors 
 (MVPDs),  as  defined  in  47  C.  F.  R.    76.  1000(  e).  See  47  C.  F.  R.    101.1412(  c)  and  (e).  The  winning  bidder  for  the  MVDDS  license  of  the  New  York  service  area  (MVD001),  inter  alia,  requested  and  received  a  270-  day  extension  of 
 the  90-  day  divestiture  deadline,  see  47  C.  F.  R.    101.  1412(  g)(  4),  of  the  Commissions  MVDDS/  cable  cross-ownership  rule.  See  DTV  Norwich,  LLC,  Application  for  Multichannel  Video  Distribution  and  Data  Service 
 License,  MVD001-  New  York,  Request  for  Waiver  of  Section  101.1412(  g)(  4)  of  the  Commissions  Rules,  Order,  File  No.  0001618606-  MVD001,  DA  04-  3044  (rel.  Sept.  23,  2004)  (DTV  Norwich  Waiver  Order). 
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 total  of  192  MVDDS  licenses,  which  the  Commission  issued  later  in  2004.  325  MVDDS  licenses  are  issued  for  a  ten-  year  term  beginning  on  the  date  the  initial  authorization  is  granted.  326  Licensees  must 
 provide  substantial  service  within  five  years  of  the  grant,  which  must  be  documented  at  license  renewal  time.  327  As  of  the  third  quarter  2004,  MVDDS  equipment  is  still  under  development. 


 62.  On  July  19,  2004,  the  Commission  completed  the  auction  of  three  licenses  to  use  the  DBS  service  allocation  in  the  12.  2-  12.7  GHz  band  and  Associated  Feeder  Links  in  the  17.3-  17.8  GHz  band 
 (Auction  No.  52),  raising  (in  net  bids)  a  total  of  $12.2  million.  328  The  licenses  are  for  unassigned  channels  at  orbit  locations  of  175  W.  L.  (32  channels),  166  W.  L.  (32  channels),  and  157  W.  L.  (29 
 channels).  Cablevisions  Rainbow  DBS  Company  LLC  paid  $3.2  million  for  the  license  at  the  175  W.  L.  orbital  location  and  $3.2  million  for  the  license  at  the  166  W.  L.  orbital  location.  329  EchoStar  paid  $5.8 
 million  for  the  license  at  the  157  W.  L.  orbital  location.  330 
 63.  Expanding  Satellite  Fleets  and  Video  Capacity.  In  May  2004,  DIRECTV  successfully  launched  DIRECTV  7S,  a  spot  beam  satellite  designed  to  deliver  local  broadcast  stations  in  their  local 


 markets.  331  In  September  2004,  DIRECTV  announced  it  would  spend  $1  billion  to  launch  four  new  satellites  capable  of  providing  local-  into-  local  service,  national  high-  definition  channels,  and  interactive 
 programming.  332  DIRECTV  announced  that  two  (Ka-  band)  satellites,  Spaceway  1  and  Spaceway  2,  already  under  construction  and  originally  slated  to  support  Spaceways  two-  way  satellite  Internet  service, 
 are  being  converted  to  provide  500  local  HD  channels  as  well  as  broadband  Internet  service.  333  DIRECTV  expects  to  launch  Spaceway  1  and  2  in  early  2005,  and  anticipates  that  they  will  become 


 325  See  Wireless  Telecommunications  Bureau  Grants  Multichannel  Video  Distribution  and  Data  Service  Licenses, 
 Public  Notice,  DA  04-  2331  (rel.  July  27,  2004)  (granting  154  licenses);  Wireless  Telecommunications  Bureau  Grants  Multichannel  Video  Distribution  and  Data  Service  Licenses  to  South.  Com  LLC,  DA  04-  2547,  Public  Notice, 


 (rel.  Aug.  18,  2004)  (granting  37  licenses);  and  DTV  Norwich  Waiver  Order  (granting  license  for  MVD001).  All  of  the  grants  are  subject  to  conditions. 
 326  47  C.  F.  R.    101.  1413(  a). 
 327  47  C.  F.  R.    101.  1413(  b)  and  (c).  The  substantial  service  requirement  is  defined  as  a  service  that  is  sound, 
 favorable,  and  substantially  above  a  level  of  mediocre  service  which  might  minimally  warrant  renewal.  At  the  end  of  five  years  into  the  license  period  and  ten  years  into  the  license  period,  the  Commission  will  consider  factors  such 


 as:  (1)  whether  the  licensees  operations  serve  niche  markets  or  focus  on  serving  populations  outside  of  areas  serviced  by  other  MVDDS  licensees;  (2)  whether  the  licensees  operations  serve  populations  with  limited  access  to 
 telecommunications;  and  (3)  a  demonstration  of  service  to  a  significant  portion  of  the  population  or  land  area  of  the  licensed  area. 
 328  See  Direct  Broadcast  Satellite  Service  Licenses  Auction  Closes,  Public  Notice,  DA  04-  2158  (rel.  July  19,  2004). 
 The  Commission  recently  decided  that  the  eligibility  for  the  fourth  license  originally  slated  for  Auction  No.  52,  which  authorizes  use  of  the  last  two  available  channels  at  the  eastern  DBS  orbit  location    61.  5  W.  L.    should  be 


 restricted.  See  Auction  of  Direct  Broadcast  Satellite  Licenses,  AUC-  03-  52,  FCC  04-  271  (rel.  Dec.  3,  2004).  329 
 Id.  at  Attachment  A.  330 
 Id.  331 
 DIRECTV  Group,  Inc.,  DIRECTV  7S  Successfully  Delivered  on  Sea  Launch  Vehicle  (press  release),  May  5,  2004.  According  to  DIRECTV,  the  satellite  is  designed  to  deliver  local  programming  to  an  additional  42  markets 


 and  to  transmit  local  channels  to  19  existing  local-  into-  local  markets.  Id.  332 
 Paul  Bond,  DIRECTV  Channels  $1  Billion  HD  Plan,  HOLLYWOOD  REPORTER,  Sept.  9,  2004;  Andy  Pasztor,  DIRECTV  Spends  on  Satellites,  WALL  STREET  JOURNAL,  Sept.  9,  2004. 


 333  DIRECTV  Group,  Inc.,  DIRECTV  Announces  Plan  to  Launch  Next  Generation  Satellites  to  Provide  Dramatic 
 Expansion  of  High-  definition  and  Advanced  Programming  Services  (press  release)  (DIRECTV  Release),  Sept.  8,  2004.  See  also  Andy  Pasztor,  DIRECTV  to  Write  Down  Value  of  Internet-  Via-  Satellite  Effort,  WALL  STREET 


 JOURNAL,  Oct.  25,  2004. 
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 operational  by  mid-  2005.  DIRECTV  also  plans  to  launch  two  more  (Ka-  band)  satellites    DIRECTV  10  and  DIRECTV  11    in  2007,  which  will  have  the  capacity  to  carry  1,000  local  HD  channels,  up  to  150 
 national  HD  channels,  and  a  range  of  interactive  and  enhanced  programming.  334  Further  video  capacity  enhancements  will  come  from  a  gradual  migration  to  advanced  transmission  codecs  such  as  MPEG-  4, 
 higher  order  modulations  such  as  8PSK,  and  the  use  of  new  frequency  bands.  335  In  June  2004,  VOOM  leased  16  Ku-  band  transponders  aboard  SES  Americoms  AMC-  6  satellite,  which  VOOM  refers  to  as 
 "Rainbow  2.  336  In  addition,  VOOM  has  contracted  with  Lockheed  Martin  for  the  construction  of  five  Ka-  band  satellites  to  be  operated  at  orbital  locations  of  62  W.  L.,  71  W.  L.,  77  W.  L.,  119  W.  L.  and 
 129  W.  L.  337 
 2.  Home  Satellite  or  Large  Dish  Service 
 64.  The  home  satellite  dish  (HSD)  or  large  dish  segment  of  the  satellite  industry  is  the  original  satellite-  to-  home  service  offered  to  consumers,  and  involves  the  home  reception  of  analog  signals 


 transmitted  by  satellites  operating  generally  in  the  C-  band  frequency.  338  As  of  June  30,  2004,  there  were  335,766  households  receiving  HSD  service,  a  decrease  of  33  percent  from  the  502,191  we  reported  as  of 
 June  2003  last  year.  339  Overall,  HSD  subscribership  is  decreasing  by  12,000  to  20,000  subscribers  per  month.  340  Nevertheless,  several  companies  continue  to  sell  programming  in  packages  or  on  an  a  la  carte 


 334  DIRECTV  Release.  See  also  Letter  from  William  Wiltshire,  Harris,  Wiltshire  &  Grannis  LLP,  to  Marlene  H. 
 Dortch,  Secretary,  FCC,  Attachment  (Digital  Television  Carriage  Issues  for  DBS  Operators)  at  3,  transmitted  by  letter  from  William  Wiltshire  to  Marlene  Dortch,  Secretary,  FCC  (Oct.  12,  2004). 


 335  DIRECTV  Ex  Parte  in  CS  Docket  No.  98-  120  (filed  Oct.  8,  2004). 
 336  SES  Partners  with  VOOM,  Sky  Report,  June  10,  2004.  VOOM  expects  to  use  the  additional  capacity  to  increase 
 its  channel  capacity  from  a  total  of  130  channels  to  over  350  channels;  high  definition  channels  are  expected  to  increase  from  39  to  more  than  70,  and  standard  definition  channels  from  90  to  approximately  280.  See  VOOM  Plans 


 Big  Expansion,  Sky  Report,  Nov.  23,  2004.  VOOM  owns  and  operates  a  high  power  Ku-  band  satellite  at  61.  5  W.  L.  orbital  location. 
 337  VOOM  anticipates  that  in  combination  these  satellites  will  provide  spot  beam  coverage  of  the  entire  Untied 
 States  including  Alaska  and  Hawaii,  increasing  its  channel  capacity  to  more  than  5,  000  high  definition  channels.  The  first  of  these  satellites  is  expected  to  be  launched  in  2008.  See  Rainbow  Media  Enterprises,  VOOM  Satellite 


 Service  to  Dramatically  Increase  Channel  Capacity  (press  release),  Nov.  22,  2004.  338 
 Satellites  in  the  C-  band  frequency  are  primarily  used  to  transmit  programming  to  cable  operators  via  C-  band  receiving  dishes  at  the  cable  operators  central  technical  facility  or  headend.  To  be  authorized  to  receive  one  or 


 more  scrambled  channels,  an  HSD  owner  must  purchase  an  integrated  receiver-  decoder  from  an  equipment  dealer  and  then  pay  a  monthly  or  annual  subscription  fee  to  a  program  packager.  HSD  systems  are  typically  designed  to 
 receive  programming  from  several  different  satellites  at  several  different  orbital  locations.  Most  HSDs  include  motors  that  permit  the  receiving  dishes  to  rotate  and  receive  signals  from  these  many  satellites.  Space 
 considerations  and  zoning  regulations  restrict  many  viewers  ability  to  install  the  large  antenna  needed  for  HSD  reception. 
 339  SBCA  Comments  at  6. 
 340  Frank  Ahrens,  Channels  A  La  Carte;  Big  Dish  Customers,  A  Dying  Breed,  Choose  What  They  Pay  For, 
 WASHINGTON  POST,  Apr.  15,  2004,  at  E1;  C-  Band  Deauthorizations  Slow  Down,  SATELLITE  BUSINESS  NEWS,  July  2,  2004;  C-  Band  Deauthorizations  Drop  Again,  SATELLITE  BUSINESS  NEWS,  Aug.  4,  2004. 
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 basis  to  home  satellite  dish  owners.  341  In  April  2004,  EchoStar  purchased  Superstar/  Netlink  Group,  LLC,  one  of  the  largest  distributors  of  home  satellite  dish  service  and  equipment.  342 
 65.  A  digital  home  satellite  dish  solution  has  been  introduced  called  4DTV,  which  enables  C-band  customers  to  receive  digital  only  satellite  channels  in  addition  to  available  analog  programming.  343 
 4DTV  allows  customers  to  receive  four  types  of  programming:  (1)  free,  unscrambled  analog  channels  and  so-  called  wild  feeds;  (2)  VideoCipher  II  Plus  subscription  services;  (3)  free  DigiCipher  II  services;  and 
 (4)  subscription-  based  DigiCipher  II  channels.  The  4DTV  digital  receiver  retails  for  approximately  $800,  but  that  price  is  often  significantly  discounted  with  the  purchase  of  a  programming  package. 


 3.  Satellite-  Based  Advanced  Services 
 66.  Broadband  Satellite  Services.  344  DIRECTV  offers  high-  speed  Internet  access  to  consumers  via  its  two-  way  DIRECWAY  service,  for  $60  per  month  plus  equipment  costs.  345  DIRECTV  states  that 


 this  service  is  not  competitive  with  terrestrial  high-  speed  Internet  offerings  because  it  costs  almost  twice  as  much  as  available  DSL  and  cable  modem  service.  346  EchoStar  does  not  presently  offer  satellite-  based 
 broadband  Internet  service,  and  states  that  a  successful  rollout  of  satellite  broadband  nationwide  will  require  spectrum  resources  in  excess  of  what  is  now  available  to  it.  347  EchoStar  states  that  it  will  likely 
 offer  a  satellite-  based  broadband  Internet  access  product,  using  its  current  spectrum  capacity,  targeting  selected  areas  beginning  in  early  2005.  348 


 67.  DBS  providers  continued  to  align  themselves  with  local  exchange  carriers  (LECs)  to  offer  DSL  services.  349  Both  EchoStar  and  DIRECTV  co-  market  their  video  services  with  these  telephone 
 341  See,  e.  g.,  National  Programming  Service,  LLC,  at  http://  www.  callnps.  com/  default.  htm  (visited  Jan.  14,  2005); 
 Satellite  Programming  Service,  Inc.,  at  http://  www.  satelliteprogramming.  com/  new/  cgi-  bin/  sps_  home.  asp  (visited  Jan.  14,  2005). 


 342  GemStar-  TV  Guide  International,  Inc.,  GemStar-  TV  Guide  Completes  Previously  Announced  Sale  of  Assets  to 
 EchoStar  (press  release),  Apr.  6,  2004.  Superstar/  Netlink  previously  maintained  a  joint  venture  with  EchoStar  under  which  Superstar  customers  were  given  the  opportunity  to  switch  to  EchoStars  DBS  service.  See  EchoStar 


 Communications  Corp.,  EchoStar  Announces  Exclusive  Marketing  Alliance  with  Superstar/  Netlink  Group  (press  release),  Nov.  2,  1999.  Under  the  terms  of  the  agreement,  in  exchange  for  an  upfront  $10  million  fee,  EchoStar  was 
 given  the  exclusive  opportunity  to  convert  approximately  1.  4  million  existing  and  inactive  C-  band  customers  to  its  DBS  service. 
 343  4DTV  is  Motorolas  proprietary  digital  television  receive-  only  communications  satellite  receiver  box  and  uses 
 the  Motorola  DigiCipher  II,  or  DCII,  standard  of  signal  encryption  and  compression.  4DTV  receivers  are  also  capable  of  receiving  analog  satellite  transmissions.  See  Motorola,  Inc.,  at  http://  www.  4dtv.  com/  (visited  Jan.  14, 


 2005).  VideoCipher  is  the  conditional  access  system  used  by  most  C-  band  receivers  to  decode  subscription  based  and  premium  satellite  TV  channels.  DigiCipher  II,  or  DCII,  is  Motorolas  proprietary  video  distribution  system  that 
 is  used  by  most  digital  satellite  channels.  344 
 See  Fourth  706  Report,  19  FCC  Rcd  at  20562.  345 
 DIRECTV  Comments  at  23.  DIRECTV  is  reported  to  be  in  talks  to  sell  Hughes  Network  Systems,  the  parent  company  of  DIRECWAY.  See  DIRECTV  Group,  Apollo  Near  HNS  Deal,  SATELLITE  BUSINESS  NEWS  FAX  UPDATE, 


 Nov.  19,  2004.  346 
 Id.  347 
 EchoStar  Comments  at  16.  See  also  SES  Comments  at  i-  ii.  348 
 EchoStar  Comments  at  18.  EchoStar  states  that  the  location,  pricing  and  packaging  of  this  service  have  not  been  established. 


 349  See,  e.  g.,  Almar  Latour  and  Peter  Grant,  Bells  Fight  Cable  With  Satellite-  TV  Deals,  WALL  STREET  JOURNAL,  Feb. 
 8,  2004.  One  analyst  believes  that  LEC  and  DBS  alliances  are  not  temporary  but  are  likely  to  be  long-  term  as  the  LECs  ability  to  offer  video  services  over  DSL  and  fiber-  to-  the-  home  present  technical  and  regulatory  issues.  See 


 (continued....) 
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 providers  data  and  voice  services,  at  a  discount  and  usually  on  a  single  bill.  EchoStar  has  agreements  with  SBC,  Sprint,  and  CenturyTel,  in  addition  to  Internet  service  provider  Earthlink.  350  DIRECTV  has 
 agreements  with  SBC,  Verizon,  BellSouth,  and  Cincinnati  Bell.  351 
 68.  Advanced  Services.  DIRECTV  continues  to  offer  satellite  receivers  with  TiVos  dual  tuner  DVR  functionality.  352  In  2005,  DIRECTV  expects  to  introduce  a  second  DVR  system  made  by  another 


 News  Corp.  subsidiary,  NDS  Group.  353  Of  TiVos  1.9  million  total  subscribers,  approximately  1.11  million,  or  60  percent,  are  DIRECTV  customers.  354  DIRECTVs  DVR  receivers  range  in  price  from  $79 
 to  $999.  EchoStar  has  developed  its  own  DVR  system  for  its  satellite  receivers.  It  offers  two  models  with  standard  DVR  functionality,  meaning  VCR-  like  ability  to  control  programming  being  viewed.  It 
 also  offers  what  it  terms  DISH  Player  DVRs,  which,  in  addition  to  supporting  typical  VCR-  like  functionality,  also  support  EchoStars  video-  on-  demand  service.  355  VOOM  does  not  presently  offer  set-top 
 boxes  with  built-  in  DVR  functionality  but  has  announced  its  intention  to  offer  a  set-  top  box  capable  of  recording  both  high-  definition  and  standard  definition  channels.  356 


 (...  continued  from  previous  page)  Scott  Cleland  and  Patrick  Brogan,  Bells  Need  DBS  Long-  Term;  Bells  Face  Big  Regulatory  Obstacles  to  Offer  Video 
 Over  DSL/  Fiber,  Precursor  Group,  Sept.  13,  2004.  350 
 EchoStar  recently  ended  its  relationship  with  Qwest,  the  incumbent  local  exchange  operator  serving  14  states  in  the  upper  Midwest  United  States.  Qwest  had  marketing  relationships  with  EchoStar  and  DIRECTV.  QWEST  has 


 stated  that  it  will  continue  to  offer  bundles  that  include  DBS,  data  services,  and  local  and  long  distance  phone  service.  DIRECTV  has  indicated  it  will  pursue  a  stronger  relationship  with  Qwest  in  the  near  future.  See  EchoStar 
 Ends  Qwest  Expansion  Plans,  SATELLITE  BUSINESS  NEWS,  Sept.  20,  2004.  With  respect  to  SBC,  in  July  2003,  as  part  of  a  strategic  partnership,  SBC  invested  $500  million  in  EchoStar  in  exchange  for  options  to  purchase  3  percent 
 of  EchoStar.  SBC  has  not  yet  exercised  those  options.  See  SkyReport,  SBC,  EchoStar  Devise  New  Relationship,  July  22,  2003;  SBC  Communications,  Inc.,  SBC  Communications,  EchoStar  Forge  Strategic  Partnership,  Will  Offer 
 SBC  DISH  Network  Television  Service  (press  release),  July  21,  2003.  As  of  the  end  of  June  2004,  SBC  reported  that  it  had  121,000  DISH  Network  subscribers,  with  100,  000  added  in  the  second  quarter.  Sky  Report,  DISH  Raises 
 the  Roof  with  Altitude  Deal,  July  23,  2004.  With  respect  to  CenturyTel,  the  agreement  covers  CenturyTels  22  state  telephone  and  data  services  territory,  and  an  investment  by  CenturyTel  in  EchoStar  of  $25  million  in  convertible 
 notes.  EchoStar  Gets  New  Phone  Partner,  SATELLITE  BUSINESS  NEWS,  Aug.  27,  2004.  351 
 DIRECTV  Comments  at  23.  DIRECTV  states  that  consumers  purchasing  these  bundles  are  eligible  for  pricing  discounts,  the  amount  of  which  depends  on  the  amount  of  telecommunications  services  purchased.  Id.  See  also 


 DIRECTV  Group,  Inc.,  Cincinnati  Bell  and  DIRECTV  Form  New  Marketing  Alliance  to  Offer  Consumers  a  Bundled  Suite  of  Services  that  Include  Calling,  Internet  and  Digital  Television  Entertainment  (press  release),  Nov.  8, 
 2004.  352 
 DIRECTV  and  TiVo  established  a  business  relationship  in  October  2000,  and  in  February  2002,  DIRECTV  chose  TiVo  to  integrate  its  Series  2  DVR  platform  into  DIRECTVs  next  generation  receivers.  See  DIRECTV 


 Group,  Inc.,  DIRECTV  Selects  TiVo  For  Next  Generation  Digital  Satellite  Receiver  with  DVR  (press  release),  Feb.  21,  2002.  The  present  agreement  runs  through  2007. 
 353  Stuart  Elliott  and  Ken  Belson,  Stop  Me  If  Youve  Seen  This  One  Before,  NEW  YORK  TIMES,  Aug.  9,  2004. 
 354  TiVo  Readies  for  NDS  Competition,  SATELLITE  BUSINESS  NEWS,  Aug.  27,  2004.  TiVo  states  that  in  the  second 
 quarter  of  2004,  it  added  288,000  new  customers,  of  which  225,000,  or  78  percent,  were  DIRECTV  customers.  355 
 See  EchoStar  Communications  Corp.,  at  http://  www.  dishnetwork.  com/  content/  products/  receivers/  dvr/  index.  Shtml  (visited  Jan.  14,  2005).  The  DISH  Player-  DVR  510  retails  for  $299;  the  DISH  Player-  DVR  921  retails  for 


 $999.  EchoStar  also  offers  on  a  lease-  only  basis  the  DISH  Player-  DVR  522.  The  standard  DVR  receivers  501/  508  retails  for  $299,  and  the  DISH  721  receiver  retails  for  $549. 
 356  Rainbow  DBS  Company  LLC,  at  http://  www.  voom.  com/  see_  it/  future.  jsp  (visited  Jan.  14,  2005).  VOOM  does 
 not  provide  an  expected  date  for  introduction  of  this  equipment. 
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 69.  DIRECTV  continues  to  offer  an  HD  programming  package,  which  includes  ESPN  HD,  Bravo  HD+,  Discovery  HD  Theater,  HD  Net  and  HDNet  Movies.  357  In  July,  DIRECTV  and  NBC  Universal 
 Cable  announced  a  long-  term,  multi-  platform  carriage  agreement,  which  will  allow  the  distribution  of  NBC  network  programming  in  HD  format.  358  EchoStar  offers  an  HD  programming  package  that  consists 
 of  five  HD  nonbroadcast  channels,  including  TNT  HD,  ESPN  HD,  Discovery  HD  Theater,  HDNet,  and  HDNet  Movies,  and  offers  a  distant  CBS  HD  network  feed  to  qualified  subscribers.  359  VOOMs  primary 
 sales  and  marketing  focus  is  HD  programming,  and  VOOM  offers  a  total  of  35  HD  channels,  including  21  HD  channels  only  available  to  VOOM  subscribers  as  well  as  nonexclusive  channels,  such  as  ESPN  HD, 
 Bravo  HD+,  TNT  in  HD,  Discovery  HD  Theater,  and  Fox  Sports  Net  Florida.  360  With  respect  to  VOD,  DBS  operators  do  not  presently  offer  real-  time  on-  demand  programming  because  they  lack  capacity  on 
 their  satellites  to  store  programming  and  provide  feeds  to  individual  subscribers.  DIRECTV  and  EchoStar  use  their  DVR  set-  top  boxes  to  stream  a  limited  number  of  programs  to  the  DVR  ahead  of 
 official  broadcast  date  to  allow  playback  on  demand.  In  addition,  EchoStar  reserves  a  channel  for  its  Dish  Home  service,  through  which  a  customer  can  access  a  number  of  interactive  channels,  such  as 
 news,  weather,  sports,  games,  and  customer  care  features.  EchoStar  downloads  updated  information  on  a  regular  basis  to  the  set-  top  box.  361 


 C.  Broadband  Service  Providers 
 70.  In  our  2001  Report,  we  addressed  a  new  class  of  providers  called  BSPs.  362  We  now  recognize  overbuilders  (municipal,  independent,  and  CLEC  overbuilders  alike)  as  BSPs  because  most,  if 


 not  all,  operate  state-  of-  the-  art  networks  capable  of  providing  bundles  of  services  (i.  e.,  voice,  advanced  video,  and  data  services).  363  As  we  have  noted  previously,  however,  BSPs  continue  to  face  considerable 


 357  DIRECTV  Group,  Inc,  at  http://  www.  directv.  com/  DTVAPP/  imagine/  HDTV_  package.  dsp  (visited  Jan.  14,  2005). 
 The  DIRECTV  HD  Package  costs  $10.99  per  month.  A  customer  requires  an  HD  ready  television  set,  a  DIRECTV  HD  receiver  and  multi-  satellite  dish,  and,  in  order  to  receive  local  HD  broadcasts,  an  off-  air  HD  antenna.  According 


 to  DIRECTVs  website,  a  DIRECTV  HD  receiver  and  multi-  satellite  dish  retail  for  $299.00,  but  requires  a  one  year  commitment  to  any  DIRECTV  Total  Choice  programming  package.  An  HD  television  is  not  included  in  the 
 package.  DIRECTV  also  sells  an  HD  DVR  receiver,  which  retails  for  approximately  $999.  358 
 David  Lieberman,  NBC,  DIRECTV  Reach  Deal  on  Fees,  High-  Definition  Shows,  USA  TODAY,  July  28,  2004;  DIRECTV  Group,  Inc.,  NBC  Universal  Cable  and  DIRECTV  Reach  Long-  Term  Multi-  Platform  Agreement  (press 


 release),  July  28,  2004.  359 
 EchoStar  Comments  at  21.  EchoStar  customers  subscribing  to  HBO  The  Works  and  Showtime  Unlimited  also  receive  HBO  HD  and  Showtime  HD,  respectively,  for  no  additional  cost.  EchoStar  also  offers  one  HD  PPV  event 


 channel.  Id.  360 
 VOOMs  exclusive  HD  programming  includes  HD  News  (24-  hour  news  channel),  six  channels  of  HD  Cinema,  HD  Classic  Movies,  HD  Epic  movies,  HD  Gunslinger  (western  movies),  Divine  HD  (gay  and  lesbian  programming), 


 HD  Monsters  (horror  movies),  Equator  HD  (world  geography),  WorldSport  HD  (world  sporting  events),  Rush  HD  (extreme  action  sports),  Rave  HD  (music  videos),  Ultra  HD  (fashion,  beauty,  and  style  programming),  Auction  HD 
 (auction  news,  previews,  and  live  auctions),  Gallery  HD  (art,  architecture  and  theater  performance),  MOOV  HD  (original  non-  narrative  video  art),  and  Animania  HD  (animation). 
 361  According  to  EchoStar,  the  service  is  provided  free  to  all  of  its  subscribers,  although  subscribers  must  have  a  set-top 
 box  embedded  with  Open  TV  software  to  use  the  feature.  See  EchoStar  Communications  Corp.,  Dish  Network  Launches  New  Interactive  TV  Programs:  Buzztimes  Trivia,  Fantasy  Cup  Auto  Racing  (press  release),  Apr.  12, 


 2004.  See  also  at  http://  www.  dishnetwork.  com/  content/  products/  itv/  index.  shtml  (visited  Jan.  14,  2005).  362 
 We  define  broadband  service  providers  (BSPs)  here  as,  newer  firms  that  are  building  state-  of-  the-  art  facilities-based  networks  to  provide  video,  voice  and  data  services  over  a  single  network.  The  term  BSP  is  not  intended  to 


 imply  anything  with  respect  to  Commission  policy  or  proceedings  that  might  involve  broadband  services.  Usually,  the  services  of  a  BSP  can  be  purchased  separately  as  well  as  in  a  bundle.  2001  Report,  17  FCC  Rcd  at  1296-  97    3. 
 See  also  2002  Report,  17  FCC  Rcd  at  26948-  52    102-  11.  363 
 2003  Report,  19  FCC  Rcd  at  1658-  59    78.  See  also  NATOA  Comments  at  attachments. 
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 challenges,  many  of  which  are  discussed  below.  As  a  result,  competition  to  cable  from  BSPs  is  limited  to  very  few  markets.  364 
 71.  OVS.  In  1996,  Congress  established  the  open  video  system  (OVS)  framework,  one  of  four  statutorily-  recognized  options  for  the  provision  of  video  programming  services  by  LECs.  365  BSPs  are  the 
 only  significant  holders  of  OVS  certifications  or  local  OVS  franchises.  366  Among  BSPs,  however,  those  operating  under  the  OVS  framework  are  in  the  minority.  BSPA  reports  that  approximately  eight  percent 
 of  the  4.2  million  homes  passed  by  its  members,  or  336,000  homes,  are  passed  by  systems  operating  with  an  OVS  certification.  367 


 72.  BSP  Overbuilders.  RCN  Corporation  is  the  nations  largest  broadband  overbuilder  supplying  voice,  video,  and  high-  speed  Internet  access  services  to  residential  subscribers  over  its  own  network  in  the 
 Boston,  New  York,  Chicago,  San  Francisco,  Los  Angeles,  Washington,  D.  C,  and  Philadelphia  and  Lehigh  Valley,  Pennsylvania  markets.  368  Currently,  RCN  is  the  11th  largest  MVPD  with  436,700  subscribers  as 
 of  September  2003.  369  RCN  filed  for  Chapter  11  bankruptcy  in  May  2004  as  part  of  a  consensual  balance  sheet  restructuring.  370  On  December  21,  2004,  RCN  announced  that  it  had  consummated  its 
 reorganization  plan  and  emerged  from  bankruptcy.  371  WideOpenWest  (WOW)  is  the  second  largest  overbuilder.  WOW  is  the  15th  largest  MVPD  and,  as  of  September  2003,  served  288,000  subscribers.  372 
 The  third  largest  BSP  is  Knoxville,  Tennessee-  based  Knology,  which  operates  mainly  in  the  Southeast.  Knology  has  experienced  significant  growth  since  June  2003,  primarily  through  acquisition  of  Verizons 
 overbuild  properties  in  California  and  Florida,  373  although  Knology  later  sold  the  Cerritos,  California 
 364  2003  GAO  Report  at  3-  4. 
 365  47  U.  S.  C.    571(  a)(  3)-(  4);  1996  Report,  12  FCC  Rcd  at  4395-  98    68-  71.  Open  video  systems  are  subject  to 
 reduced  regulation  under  Title  VI.  Among  other  things,  an  open  video  systems  carriage  rates  are  entitled  to  a  presumption  that  they  are  just  and  reasonable  where  one  or  more  unaffiliated  video  programming  providers  occupy 


 channel  capacity  on  the  system  at  least  equal  to  that  of  the  open  video  system  operator  and  its  affiliates.  We  are  not  aware  of  any  OVS  operator  carrying  programming  offered  by  an  unaffiliated  program  packager.  Open  video 
 systems  are  subject  to,  among  others,  the  Commissions  rules  governing  must  carry,  retransmission  consent,  program  access,  sports  exclusivity,  network  nonduplication,  syndicated  exclusivity,  and  public,  educational  and 
 governmental  (PEG)  access  channels.  Id.  When  it  authorized  the  OVS  framework,  Congress  abolished  the  Commissions  video  dialtone  (VDT)  framework  under  which  LECs  previously  had  offered  video  services. 
 366  For  a  complete  list  of  OVS  certifications,  see  Current  Filings  For  Certification  of  Open  Video  Systems,  at 
 http://  www.  fcc.  gov/  mb/  ovs/  csovscer.  html  (visited  Jan.  14,  2005).  367 
 BSPA  Comments  at  6-  7.  BSPA  reports  that  its  members  represent  two-  thirds  of  the  BSP  industry  segment,  so  this  constitutes  a  lower-  bound  estimate  of  homes  passed  by  OVS-  certified.  Id.  at  7.  Comparing  the  list  of  BSPA 


 members  to  OVS  certifications  indicates  that  an  even  higher  percentage  of  OVS  operators  are  represented  by  BSPA.  368 
 RCN  Comments  at  i  and  1.  RCN  agreed  to  buy  out  from  Pepco  Communications  a  50  percent  share  of  its  Washington,  D.  C.  system.  RCN  partnered  with  Pepco  to  launch  in  the  Washington,  D.  C.  market.  See  RCN,  RCN 


 Elects  To  Acquire  Remaining  50%  Stake  Of  Washington,  D.  C.  Operations  (news  release),  Oct.  19,  2004.  369 
 NCTA,  Cable  Developments  2004.  370 
 RCN  Comments  at  4.  See  RCN  Corp.,  at  http://  www.  rcntomorrow.  com  (visited  Jan.  14,  2005)  for  details  about  the  restructuring.  On  October  13,  2004,  RCN  filed  a  letter  describing  its  Plan  of  Reorganization  and  informing  the 


 Commission  that  it  has  filed  or  is  in  the  process  of  filing  applications  with  the  Commission  to  obtain  those  approvals  necessary  to  implement  the  plan.  See  Letter  from  Jean  L.  Kiddoo  and  Edward  S.  Quill,  Jr.,  Counsel  for  RCN 
 Corporation,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Oct.  13,  2004).  See  also  RCN  Corporation,  RCN  Corporation  Announces  Emergence  From  Bankruptcy  (press  release),  Dec.  21,  2004. 
 371  Id. 
 372  NCTA,  Cable  Developments  2004. 
 373  Knology,  Inc.,  Knology  Announces  Agreement  To  Purchase  Broadband  Assets  (press  release),  July  18,  2003. 
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 system.  374  As  of  June  2004,  Knology  was  the  20th  largest  MVPD,  and  had  174,957  video  subscribers,  up  from  132,163  video  subscribers  one  year  earlier.  375  Grande,  which  operates  systems  in  several  cities  in 
 Texas,  experienced  substantial  growth  over  the  past  year,  with  video  connections  increasing  from  49,000  to  78,000,  and  high-  speed  data  increasing  from  23,000  to  47,000,  between  June  2003  and  June  2004.  376 


 73.  Last  year  we  reported  that  many  overbuilders  were  experiencing  financial  difficulties.  These  difficulties  continued  this  year,  and  perhaps  intensified  with  RCNs  bankruptcy.  The  parent  company  of 
 Seren  Innovations,  which  operates  in  Minnesota,  is  now  seeking  to  sell  the  BSP.  377  An  additional  trend  in  the  past  year  is  some  consolidation  among  BSPs.  As  we  reported  above  and  last  year,  Knology  acquired 
 Verizons  overbuild  systems.  Additionally,  Champion,  which  was  formed  when  the  founder  of  WideOpenWest  left  the  company  and  purchased  WideOpenWests  Denver  system,  378  acquired  Altrio, 
 which  serves  more  than  7,000  subscribers  in  Pasadena,  Arcadia,  and  Monrovia,  California.  379  Consolidation  may  help  BSPs  in  financial  difficulty  improve  their  prospects,  although  the  wide  dispersal 
 of  BSP  systems  limits  opportunities  for  clustering  that  have  provided  cost  savings  for  incumbent  cable  operators. 


 74.  Competitive  Responses.  BSPA  and  RCN  highlight  a  2004  General  Accounting  Office  (GAO)  study  that  examined  overbuild  video  systems.  380  The  report  states  that  communities  with 
 overbuild  competition  experience  lower  rates  (an  average  of  23  percent  lower  for  basic  cable)  and  higher  quality  service.  381  The  Commissions  Annual  Survey  of  Cable  Industry  Prices  reported  similar  findings, 
 although  it  found  smaller  price  differentials  (6.4  percent  in  2002)  studying  a  larger  sample  and  looking  at  the  combined  rate  for  the  basic  and  most  popular  CPST.  382  Comcast  notes  that  several  BSPs  have 
 emerged,  or  soon  will  emerge,  from  bankruptcy  with  strengthened  balance  sheets.  383 
 75.  Barriers  to  Competition.  As  in  previous  years,  384  BSPs  continue  to  report  barriers  to  competition  in  the  MVPD  market.  BSPA  states  that  discrimination  in  access  to  and  pricing  of  video 


 programming  and  other  digital  content  constitute  a  threat  to  BSP  entry  and  competition.  385  Comcast 
 374  Knology  Inc.,  Knology  Reports  Second  Quarter  Results  (press  release),  July  27,  2004.  Knology  states  that  it  will 
 use  proceeds  from  the  sale  to  fund  capital  improvements  to  the  Florida  system  acquired  from  Verizon.  375 
 Knology  Inc.,  Knology  Reports  Second  Quarter  Results  (press  release),  July  27,  2004.  For  a  full  list  of  communities  served,  see  Knology,  Inc.,  http://  www.  knology.  com/  services/  cities.  cfm  (visited  Jan.  14,  2005). 


 376  Grande  Communications  Holdings,  Inc.,  Grande  Communications  Holdings,  Inc.  Announces  Results  for  the 
 Second  Quarter  Ending  June  30,  2004  (press  release),  Aug.  12,  2004.  377 
 Xcel  Energy,  Inc.,  Xcel  Energy  To  Market  Subsidiary  Seren  Innovations  (press  release),  Sept.  27,  2004.  378 
 2003  Report,  19  FCC  Rcd  at  1660-  61    81.  379 
 Champion  Broadband,  Altrio  Communications  Sells  Assets  to  Champion  Broadband  (press  release),  Apr.  6,  2004.  380 
 BSPA  Comments  at  7-  9;  RCN  Comments  at  7-  9.  See  also  SBC  Comments  at  2.  381 
 GAO,  Telecommunications:  Wire-  Based  Competition  Benefited  Consumers  in  Selected  Markets,  Feb.  2004  (GAO  2004  Report). 


 382  RCN  Comments  at  8,  citing  FCC,  FCC  Releases  Report  on  2002  Cable  Industry  Prices  (FCC  News  Release), 
 July  8,  2003.  RCN  also  cites  a  report  with  similar  information  by  the  U.  S.  Public  Interest  Research  Group,  The  Failure  of  Cable  Deregulation:  A  Blueprint  for  Creating  a  Competitive,  Pro-  Consumer  Cable  Television 


 Marketplace,  Aug.  2003.  383 
 Comcast  Comments  at  17-  18.  See  also  NCTA  Reply  Comments,  an  attachment  entitled,  Survey  of  Incumbent  Cable  Operators  in  Overbuild  Communities,  for  a  list  of  communities  in  which  overbuilding  has  occurred. 


 384  See,  e.  g.,  2003  Report,  19  FCC  Rcd  at  1662-  63    84. 
 385  BSPA  Comments  at  12-  14  and  Reply  Comments  at  7-  12;  RCN  Comments  at  9-  10.  Comcast,  conversely,  holds 
 that  competition  has  expanded  to  the  point  that  the  Commission  should  review  its  recent  decision  to  extend  the  (continued....) 
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 disputes  these  allegations,  noting  that  exclusive  access  to  content  is  common  in  other  industries,  and  stating  that  competition  would  be  enhanced  by  the  elimination  of  regulations  that  prohibit  exclusive 
 carriage  agreements  between  vertically-  integrated  programmers  and  cable  operators.  386  BSPA  also  claims  that  cable  operators  are  engaging  in  discriminatory  pricing  strategies,  characterized  as  targeted  or 
 predatory  pricing,  and  recommends  that  the  Commission  require  cable  operators  to  disclose  all  rates  and  promotions  offered  to  any  customer  in  a  local  franchise  area.  387  BSPA  also  identifies  exclusive  long-term 
 MDU  access  contracts  as  a  barrier  to  entry.  BSPA  states  that  such  contracts  can  lock  MDU  residents  into  receiving  service  from  an  incumbent  MVPD  provider  with  a  less  modern  network,  and  urges  the 
 Commission  to  revisit  its  2003  decision  concerning  perpetual  and  long  term  agreements  for  MDU  access.  388  Finally,  BSPA  notes  that  difficulties  remain  for  BSPs  and  other  wireline  MVPDs  gaining 
 access  to  utility  poles  at  reasonable  rates.  389 
 D.  Broadcast  Television  Service 
 1.  General  Performance 
 76.  Broadcast  networks  and  local  stations  supply  video  programming  directly  over  the  air  to  consumers.  Consumers  who  do  not  subscribe  to  an  MVPD  service  rely  solely  on  over-  the-  air 


 transmission  of  local  broadcast  television  signals.  Other  households  receive  broadcast  television  programming  over  the  air  on  those  television  receivers  that  they  have  chosen  not  to  connect  to  an  MVPD 
 service.  In  addition,  many  consumers  receive  broadcast  signals  via  their  cable,  DBS,  or  other  MVPD  service. 


 77.  As  we  reported  last  year,  broadcast  television  stations  audience  shares  have  continued  to  fall  as  cable  and  DBS  penetration,  the  number  of  cable  channels,  and  the  number  of  nonbroadcast  networks 
 continue  to  grow.  For  the  2003-  2004  television  season,  broadcast  television  stations  accounted  for  a  combined  average  48  share  of  prime  time  viewing  among  all  television  households,  compared  to  a  49 
 share  in  the  previous  season.  390  Similarly,  broadcast  stations  achieved  a  44  share  of  all-  day  (24-  hour)  viewing  during  the  2003-  2004  season,  down  from  a  45  share  the  previous  season.  In  contrast, 
 nonbroadcast  channels  collective  audience  share  continues  to  grow.  In  the  2003-  2004  television  season,  nonbroadcast  channels  391  accounted  for  a  combined  average  52  share  of  prime  time  viewing  among  all 


 (...  continued  from  previous  page)  program  access  rules  for  another  five  years,  and  either  eliminate  the  prohibition  against  exclusive  contracts  between 
 vertically  integrated  programmers  and  cable  operators,  or  modify  it  so  that  it  cannot  be  invoked  by  any  MVPD  with  more  than  10  million  customers.  Comcast  Comments  at  42. 
 386  Comcast  Reply  Comments  at  17-  20.  See  also  NCTA  Reply  Comments  at  12-  15. 
 387  BSPA  Comments  at  14-  18  and  Reply  Comments  at  7.  See  also  RCN  Comments  at  10.  Comcast  and  NCTA 
 dispute  these  allegations,  and  Comcast  notes  that  aggrieved  parties  are  free  to  seek  remedial  relief  from  the  Department  of  Justice.  Comcast  Reply  Comments  at  20-  23;  NCTA  Reply  Comments  at  10-  12  (specifically 


 responding  to  NATOAs  allegations  of  anticompetitive  practices).  388 
 BSPA  Comments  at  19-  20;  RCN  Comments  at  10.  389 
 BSPA  Comments  at  20-  22;  RCN  Comments  at  10.  390 
 Nielsen  Media  Research,  Broadcast  Calendar  (TV  Season)  Share  of  Audience  Report,  Prime  Time  and  Total  Day,  Sept.,  2004.  Nielsen  reports  audience  shares  that  exceed  100  percent  when  totaled  due  to  simultaneous 


 multiple  set  viewing.  We  have  normalized  audience  shares  to  equal  100  percent.  391 
 Includes  basic  (BST  and  CPST)  networks,  as  well  as  premium  and  PPV  networks,  distributed  by  MVPDs. 
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 television  households,  up  from  the  51  share  in  the  previous  season.  392  For  all  day  viewing,  nonbroadcast  channels  accounted  for  a  56  share  of  all-  day  viewing,  up  from  a  55  share  in  the  previous  season. 
 78.  Since  the  2003  Report,  the  number  of  commercial  and  noncommercial  television  stations  increased  from  1,726  as  of  June  30,  2003,  to  1,747  as  of  June  30,  2004.  393  Total  television  broadcast 
 advertising  revenues  generally  remained  steady,  increasing  from  $42.1  billion  in  2002,  to  $42.4  billion  in  2003.  394  Advertising  revenue  for  the  seven  most  widely  distributed  broadcast  networks  (ABC,  CBS,  Fox, 
 NBC,  PAX,  UPN,  and  WB)  was  estimated  at  $22.8  billion  in  2003,  a  3.6  percent  increase  over  the  $22.0  billion  earned  in  2002.  395  In  contrast,  cable  programming  networks  experienced  a  15.6  percent  increase  in 
 advertising  revenue  in  2003,  earning  $14.0  billion  in  advertising  revenue  compared  to  $12.1  billion  in  2002.  396  In  the  Notice,  we  asked  to  what  extent  broadcasters  receive  additional  revenues  such  as 
 payments  for  retransmission  consent.  397 
 79.  In  the  Notice,  we  asked  to  what  extent  cable  television  and  DBS  retransmission  consent  negotiations  are  providing  broadcasters  with  an  additional  revenue  source,  either  through  direct 


 compensation  or  through  indirect  benefits,  such  as,  for  example,  contracts  for  the  carriage  of  affiliated  programming.  If  the  compensation  is  not  direct,  how  is  it  accounted  for?  398  In  response,  Paxson  states 
 that  for  most  local  broadcasters,  advertising  revenue  remains  the  primary  revenue  source  and  alternative  revenues  sources  are  non-  existent.  399  Other  broadcasters  confirm,  however,  that  through  the 
 retransmission  consent  process,  broadcasters  receive  cash  or  consideration  comparable  to  cash  and  thus  partake  of  the  two  revenue  streams  traditionally  associated  with  the  cable  television  market.  Thus, 
 according  to  a  paper  filed  on  behalf  of  the  Walt  Disney  Company  it  offers  cable  systems  the  right  to  carry  its  owned  station  for  approximately  $0.  70  to  $0.  80  per  subscriber  per  month,  but  that  a  retransmission 
 consent  transaction  may  involve  a  variety  of  currencies.  400  According  to  this  filing:  The  outcome  of  [retransmission  consent]  bargaining  may  result  in  a  complex  agreement.  Cable  operators  often  choose  to 
 provide  alternative  consideration  such  as  carriage  of  nonbroadcast  networks  that  are  affiliated  with  the  broadcaster  in  lieu  of  cash  payment.  Because  the  details  of  each  negotiation  vary  from  one  cable  operator 
 to  another,  and  because  the  specific  details  of  these  agreements  are  generally  confidential,  a  market  price  for  retransmission  consent  rights  is  not  transparent.  401 


 392  We  note  that  individual  broadcast  networks  generally  attract  higher  audience  shares  than  individual  nonbroadcast 
 networks.  For  example,  during  the  2003-  2004  television  season,  six  of  the  seven  broadcast  networks  attained  average  prime  time  audience  shares  greater  than  the  average  prime  time  audience  share  of  the  highest  rated 


 nonbroadcast  networks.  Nielsen  Media  Research.  393 
 Compare  Federal  Communications  Commission,  Broadcast  Station  Totals  as  of  June  30,  2003  (FCC  News  Release),  July  22,  2003,  with  Federal  Communications  Commission,  Broadcast  Station  Totals  as  of  June  30,  2004 


 (FCC  News  Release),  Aug.  20,  2004.  394 
 Television  Bureau  of  Advertising,  2003  TV  Ad  Revenue  Figures,  at  http://  www.  tvb.  org/  rcentral/  adrevenuetrack  /revenue/  2003/  ad_  figures  (visited  Sept.  17,  2004). 


 395  Id. 
 396  Robert  J.  Coen,  U.  S.  Advertising  Volume  2000-  2004,  Universal  McCann,  June  22,  2004. 
 397  See  Notice,  19  FCC  Rcd  at  10927    57. 
 398  Id. 
 399  Paxson  Comments  at  4. 
 400  Disney  Reply  Comments,  Attachment  1,  Exhibit  2,  at  5.  Disney  includes  The  Walt  Disney  Company,  ESPN  (80 
 percent  owned  by  Disney),  Disney  ABC  Cable  Networks  Group  (including  The  Disney  Channel,  ABC  Family,  Toon  Disney  and  SOAPnet),  The  ABC  Television  Network  and  the  ABC-  owned  television  stations. 


 401  Id.  at  3. 
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 2.  Digital  Television 
 80.  Digital  television  (DTV)  could  enhance  the  ability  of  broadcasters  to  compete  in  the  video  marketplace.  402  DTV  allows  broadcasters  to  transmit  a  high-  definition  television  (HDTV)  signal,  several 


 standard  definition  television  (SDTV)  signals  (multicasting),  or  ancillary  services  in  addition  to  video  programming.  403  As  of  September  2004,  all  of  the  40  stations  that  make  up  the  top-  four  network  affiliates 
 in  the  top  ten  television  markets  were  broadcasting  DTV  service.  404  In  television  markets  ranked  11-  30,  79  stations  were  broadcasting  DTV  service.  405  More  than  1,468  stations  are  on  the  air  with  DTV 
 operation.  406  CEA  notes,  however,  that  despite  the  wide  availability  of  DTV  signals,  some  viewers  still  cannot  receive  many  digital  signals,  because  most  stations  are  using  less  power  than  authorized  for  digital 
 service.  407 
 81.  Analysts  estimate  that  as  of  July  2004,  15.99  million  households,  or  14.75  percent  of  U.  S.  households,  rely  exclusively  on  over-  the-  air  television  for  video  programming.  408  As  of  year-  end  2003, 


 there  were  between  7.0  and  8.7  million  households  with  DTV  monitors,  and  by  year-  end  2004,  there  could  be  as  many  as  13  or  14  million.  409  NAB  estimates  that  88.8  percent  of  U.  S.  television  households 
 are  in  markets  that  have  access  to  at  least  five  over-  the-  air  digital  television  signals,  and  71.1  percent  have  access  to  at  least  eight  or  more  digital  television  signals.  410  NCTA  estimates  that  as  of  September  15, 
 2004,  90  million  homes  were  passed  by  a  cable  system  that  offers  programming  in  HD  format,  broadcast  and/  or  nonbroadcast,  and  cable  operators  nationwide  were  carrying  more  than  454  digital  broadcast 
 stations.  411 


 402  2003  Report,  19  FCC  Rcd  at  1670    96. 
 403  Id. 
 404  Summary  of  DTV  Applications  Filed  and  DTV  Build  Out  Status,  at  http://  www.  fcc.  gov/  mb/  video/  files/ 
 dtvonairsum.  html  (visited  Jan.  14.  2005).  Two  stations  in  New  York,  WABC  and  WNBC,  are  not  operating  at  full  power  with  licensed  DTV  facilities,  but  instead  are  broadcasting  with  Special  Temporary  Authority  (STAs)  after 


 their  facilities  were  destroyed  on  September  11,  2001.  STA  File  No.  BMDSTA-  20040419ACL  and  BEDSTA-20040614AHC. 
 405  Summary  of  DTV  Applications  Filed  and  DTV  Build  Out  Status,  at  http://  www.  fcc.  gov/  mb/  video/  files/ 
 dtvonairsum.  html  (visited  Jan.  14,  2005).  406 
 Id.  407 
 CEA  Comments  at  6-  7.  408 
 Nielsen  Media  Research.  In  MB  Docket  No.  04-  210,  commenters  note  that  as  many  as  19  percent,  and  as  few  as  13  percent,  of  U.  S.  households  could  be  relying  solely  on  over-  the-  air  television  for  video  programming.  See 


 NAB/  MSTV  Comments  in  MB  Docket  No.  04-  210  at  Appendix  A  at  7;  CEA  Comments  in  MB  Docket  No.  04-  210  at  2-  3. 
 409  Kagan  World  Media,  Digital  TV,  Media  Trends  2004,  at  104;  Adam  S.  Parker,  Colin  McGranahan,  Dupree, 
 Jonathan  Feldman,  Digital  TVs-  On  Your  Market,  Get  Set,  Go,  Bernstein  Research,  Feb.  6,  2004,  at  21.  DTV  monitors  do  not  necessarily  contain  DTV  tuners.  It  is  estimated  that  less  than  two  million  households  have  DTV 


 sets  with  integrated  tuners.  The  remaining  households  must  purchase  a  DTV  tuner  to  receive  digital  television  over  the  air  or  subscribe  to  an  MVPD  that  provides  digital  signal. 
 410  Telephone  Conversation  with  Brian  Savoie,  Manager  Television  Membership,  NAB  (Nov.  12,  2004).  See  also 
 NAB  Reply  Comments  at  3;  NAB,  NAB  Legislative  Issue  Paper,  Mar.  2004,  at  8.  411 
 NCTA,  Cable's  HDTV  Deployment  at  http://  www.  ncta.  com/  images/  HDTVkit-  Deploy-  final2.  pdf  (visited  Jan.  14,  2005);  see  also  NCTA  Comments  at  31.  This  includes  standard-  definition  and  high-  definition  format  programming. 
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 a.  Programming 
 82.  Programmers  are  also  offering  an  increasing  amount  of  programming  in  high-  definition  (HD)  format.  412  Analysts  estimate  that  ABC,  CBS,  NBC,  and  WB  currently  offer  most  of  their  prime  time 


 programming  in  HD  format,  while  Fox  and  UPN  currently  offer  about  50  percent  of  their  prime  time  programming  in  HD  format.  413  Fox  will  soon  begin  offering  substantial  amounts  of  HD  as  well.  414  From 
 May  30,  2003,  to  June  13,  2003,  921  programs  were  offered  in  HD  format,  as  tracked  daily  by  Titan  TV.  com.  415  An  estimated  87  percent  of  those  HD  programs  were  originated  by  nonbroadcast  networks; 
 802  programs  were  offered  by  nonbroadcast  programmers  HDNet,  DiscoveryHD,  HBO,  DIRECTV  HD  PPV,  and  Showtime  HDTV;  119  programs  were  offered  by  broadcast  networks  CBS,  ABC,  NBC,  PBS, 
 and  WB.  416 
 (i)  Multicasting 
 83.  Multicasting  is  the  process  by  which  multiple  channels  of  standard  definition  television  (SDTV)  programming  are  transmitted  at  the  same  time  over  a  single  frequency.  In  its  comments,  Disney 


 states  that  it  offers  ABC  News  Now,  a  24/  7  news  channel  offered  to  its  local  broadcast  affiliates  for  transmission  over  their  digital  television  signal  as  a  multicast  channel.  417  Launched  in  July  2004,  ABC 
 News  Now  was  developed  to  provide  expanded  coverage  of  the  Presidential  election.  418  ABC  News  Now  is  currently  still  available  and  Disney  has  made  no  final  decision  to  terminate  the  service.  419  All  ten  ABC-owned 
 stations  carry  the  service.  420 
 (ii)  Datacasting  and  Subscription  Services 
 84.  DTV  also  allows  broadcasters  to  use  part  of  their  digital  bandwidth  for  subscription  multichannel  video  programming  services  and  datacasting.  These  services  can  be  provided 


 simultaneously  with  HD  or  SD  DTV  programs  in  the  same  transmission,  and  can  provide  delivery  of  virtually  any  type  of  data,  audio  or  video,  including  text,  graphics,  software,  web  pages,  video-  on-demand, 
 and  niche  programming.  421 


 412  The  Commission  has  established  a  website  to  provide  programming  and  other  information  on  DTV.  See  Whats 
 on  DTV?,  at  http://  www.  dtv.  gov  (visited  Jan.  14,  2005).  See  also  http://  www.  checkhd.  com/  programming/  (visited  Jan.  14,  2005). 


 413  Richard  Bilotti,  Benjamin  Swinburne,  and  Megan  Lynch,  Building  for  HD:  How  Cable  &  Satellite  Stay  Ahead  of 
 the  Bells,  Morgan  Stanley,  July  8,  2004,  at  4.  414 
 NAB  Reply  Comments  at  4.  415 
 Kagan  World  Media,  Digital  TV,  Media  Trends  2004,  at  7,  110,  112.  See  also  http://  www.  titantv.  com  (visited  Jan.  14,  2005);  see  also  http://  www.  checkhd.  com/  programming/  (visited  Jan.  14,  2005). 


 416  Kagan  World  Media,  Digital  TV,  Media  Trends  2004,  at  7,  110,  112.  Some  cable  and  DBS  HD  channels  provide 
 full-  time  24-  hour  HD  service.  CEA  Comments  at  6.  417 
 Disney  Reply  Comments,  Attachment  4,  at  5.  418 
 Id.  419 
 See  ABC  News  Now,  at  http://  abcnews.  go.  com/  Video/  VideoLive  and  http://  www.  real.  com/  partners/  abcnews/  (visited  Jan.  14,  2005). 


 420  Disney  Reply  Comments,  Attachment  4,  at  5. 
 421  See  NAB,  Destination  Digital  TV,  Sept.  2002. 
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 85.  Several  companies  are  using  broadcast  spectrum  for  subscription  video  distribution  via  DTV  streams.  422  U.  S.  Digital  Television,  Inc.  (USDTV)  uses  local  over-  the-  air  DTV  spectrum  to  offer  a  digital 
 subscription  service  of  broadcast  and  nonbroadcast  programming  for  a  monthly  service  fee  of  $19.95.  423  USDTV  is  currently  available  in  Salt  Lake  City,  Las  Vegas,  and  Albuquerque,  with  additional 
 deployments  by  the  end  of  2004.  424  As  of  September  2004,  USDTV  had  more  than  10,000  subscribers.  425  Emmis  Communications  has  announced  an  initiative  to  develop  an  over-  the-  air  multichannel  video 
 programming  service  using  DTV  spectrum  and  is  seeking  participation  by  other  broadcasters  in  this  effort.  426  Disney  uses  digital  spectrum  to  offer  its  data-  cast  movie  service,  MovieBeam,  which  provides  a 
 set-  top  box  installed  with  100  movies  which  are  updated  with  ten  new  selections  weekly  via  datacast.  427  Disney  rents  digital  spectrum  primarily  from  ABC  and  PBS  affiliated  stations  to  transmit  movies 
 weekly.  428 
 86.  iBlast  and  dotcast  are  two  distribution  networks  that  use  the  digital  broadcast  spectrum  of  local  TV  stations  to  distribute  digital  media  content  directly  to  home  computers,  set-  top  boxes,  DVRs, 


 vehicle  entertainment  systems,  game  consoles,  PDAs  and  MP3  players.  429  Such  media  content  includes  video,  games,  music,  and  software.  430 


 b.  DTV  Equipment. 
 87.  The  sale  of  DTV  consumer  electronics  continues  to  accelerate.  During  2003,  more  than  four  million  DTV  sets  and  displays  had  been  shipped  to  retail  outlets,  nearly  double  the  number  that  had  been 


 shipped  in  2002.  431  During  2004,  an  estimated  seven  million  DTV  sets  and  displays  will  be  shipped  to  retail  outlets,  and  during  2005  it  is  expected  that  nearly  11  million  DTV  sets  and  displays  will  be  shipped 
 to  retail  outlets  nationwide.  432  Pursuant  to  the  Commissions  tuner  mandate,  manufacturers  now  offer  more  than  100  models  of  HD-  ready  television  sets  with  DTV  tuners  inside  (integrated  sets).  433  The  tuner 
 mandate  phase-  in  plan  requires  50  percent  of  all  new  DTV  sets  with  screen  sizes  36  inches  and  above  to 


 422  Elisa  Batista,  Datacasting  Refuses  to  Die,  WIRED,  Oct.  7,  2004,  at  http://  www.  wired.  com/  news/  print/  0,1294,  6071 
 6,00.  html  (visited  Jan.  14,  2005);  Multicasting,  Datacasting  Give  Local  Broadcaster  Expanded  News  Coverage,  BROADCAST  ENGINEERING,  Feb.  4,  2004,  at  http://  www.  broadcastengineering.  com/  news/  broadcasting_  multicasting 


 _datacasting_  give/  (visited  Jan.  14,  2005).  423 
 U.  S.  Digital  Television,  Inc.,  USDTV  Company  Information,  at  http://  www.  usdtv.  com/  company_  info.  php  (visited  Jan.  14,  2005). 


 424  U.  S.  Digital  Television,  Inc.,  USDTV  Availability,  at  http://  www.  usdtv.  com/  why_  usdtv-  reception_  maps.  php 
 (visited  Jan.  14,  2005).  425 
 U.  S.  Digital  Television,  Inc.,  USDTV  Surpasses  10,  000  Subscriber  Milestone  (press  release),  Sept.  22,  2004.  426 
 Emmis  Communications,  Television  Broadcasters  Initiative  Unveiled  (press  release),  Apr.  20,  2004,  at  http://  www.  emmis.  com/  press/  home.  aspx?  pn=  2  (visited  Jan.  14,  2005). 


 427  MovieBeam  Entertainment,  at  http://  www.  moviebeam.  com/  flashindex.  jsp  (visited  Jan.  14,  2005). 
 428  Id. 
 429  See  iBlast  Inc.,  What  is  iBlast?,  at  http://  www.  iblast.  com/  what.  php3  (visited  Jan.  14,  2005);  see  also  Dotcast, 
 Inc.,  at  http://  www.  dotcast.  com/  htdocs/  home.  htm  (visited  Jan.  14,  2005).  430 
 Id.  431 
 U.  S.  Consumer  Electronics  Sales  &  Forecasts,  CEA  Market  Research,  June  2004,  at  3;  Washington  Insider  Series:  The  HDTV  Transition,  CEA,  Apr.  2004,  at  1.  Not  all  DTV  sets  and  displays  can  display  HD  format 


 programming.  No  separate  figures  are  available  for  HDTV-  ready  sets.  432 
 U.  S.  Consumer  Electronics  Sales  &  Forecasts,  CEA  Market  Research,  June  2004,  at  3.  433 
 CEA,  DTV  Product  Guide,  HDTV  Summit,  2004. 
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 include  DTV  reception  capability  by  July  1,  2004;  100  percent  of  DTV  sets  13  inches  and  above  must  include  DTV  tuners  by  July  1,  2007.  434 
 88.  In  its  comments,  Paxson  Communications  states  that  the  Commission  may  need  to  revisit  its  tuner  mandate  435  to  enact  more  exacting  specifications  for  the  rule-  compliant  over-  the-  air  DTV  tuners.  436 
 It  indicates  that  the  quality  and  quantity  of  over-  the-  air  DTV  reception  tuners  seriously  threatens  local  broadcasters  ability  to  compete.  437  It  asserts  that  high  quality  over-  the-  air  tuners  must  be  available  in 
 sufficient  numbers  and  at  a  low  enough  price  to  provide  DTV  reception  that  is  equivalent  to  todays  analog  reception.  438  Paxson  indicates  that  its  transition  to  DTV  is  nearly  complete,  but  it  cannot  attract 
 viewers  because  few  consumers  have  purchased  DTV  sets  with  over-  the-  air  tuners.  439 
 c.  DTV  Transition. 
 89.  In  our  2003  Report,  we  noted  several  rulemaking  orders  and  notices  that  the  Commission  adopted  during  2003  towards  accelerating  or  promoting  the  transition  to  DTV.  440  Among  them  were  an 


 inquiry  regarding  rules  for  digital  low  power  television  and  television  translator  stations;  the  Digital  Broadcast  Copy  Protection  rules  (also  known  as  Broadcast  Flag),  including  a  second  Notice;  and  the 
 second  Report  and  Order  on  the  Commercial  Availability  of  Navigation  Devices,  Compatibility  Between  Cable  Systems  and  Consumer  Electronics  Equipment  (also  known  as  the  Plug  and  Play  Rules),  including 
 a  second  Notice  on  navigation  devices  and  compatibility  issues.  441  These  proceedings  were  a  first  step  toward  advancing  the  DTV  transition.  This  year,  we  report  on  the  numerous  Commission  actions  and 
 industry  efforts  aimed  at  accelerating  and  improving  the  DTV  transition. 
 90.  Plug  and  Play.  In  December  2002,  the  cable  and  consumer  electronics  industries  put  forth  an  agreement  for  a  standard  for  integrated,  unidirectional  (i.  e.,  one-  way)  digital  cable  television  receivers 


 and  digital  cable  products.  In  October  2003,  the  Commission  adopted  the  Plug  and  Play  Rules.  442  Since  our  last  Report,  the  cable  and  consumer  electronics  industries,  along  with  other  interested  parties, 
 continue  to  work  on  the  development  of  an  agreement  for  two-  way  plug  and  play  receivers  that  would  eliminate  the  need  for  a  set-  top  box  to  receive  two-  way  advanced  cable  services.  443 


 434  Review  of  the  Commissions  Rules  and  Policies  Affecting  the  Conversion  To  Digital  Television,  17  FCC  Rcd 
 15978,  15995-  96    39-  40  (2002).  435 
 Id.  436 
 Paxson  Comments  at  16-  17;  Digital  Broadcast  Copy  Protection,  18  FCC  Rcd  23550  (2003)  (Broadcast  Flag  Order);  Implementation  of  Section  304  of  the  Telecommunications  Act  of  1996,  Commercial  Availability  of 


 Navigation  Devices,  Compatibility  Between  Cable  Systems  and  Consumer  Electronics  Equipment,  18  FCC  Rcd  20885  (2003)  (Plug  and  Play  Rules)  recon.  pending. 
 437  Paxson  Comments  at  16-  17. 
 438  Id. 
 439  Id.  at  8-  14. 
 440  2003  Report,  19  FCC  Rcd  at  1671-  2    98-  102. 
 441  Id.  at  1671-  2    99-  101.  Plug  and  Play  Rules,  18  FCC  Rcd  20885;  Amendment  of  Parts  73  and  74  of  the 
 Commissions  Rules  to  Establish  Rules  for  Digital  Low  Power  Television,  Television  Translator,  and  Television  Booster  Stations  and  to  Amend  Rules  for  Digital  Class  A  Television  Stations,  18  FCC  Rcd  18365  (2003). 


 442  See  Plug  and  Play  Rules,  18  FCC  Rcd  at  20886-  7    2.  See  also  TiVo  Reply  Comments  at  1-  3;  Gemstar  Reply 
 Comments  at  6;  and  Letters  from  Paul  Glist,  Cole,  Raywid  &  Braverman,  Counsel  for  CableLabs,  to  Marlene  Dortch,  Secretary,  FCC,  July  28,  2004  and  July  29,  2004,  at  11-  13,  18-  22,  24-  27,  29-  30. 


 443  See  SBCA  Comments  at  17.  See  also  para.  39  supra,  para.  187  infra. 
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 91.  Broadcast  Flag.  In  its  August  2004  Broadcast  Flag  Order,  the  Commission  adopted  digital  copy  protection  rules  to  assure  that  DTV  broadcast  content  will  not  be  indiscriminately  redistributed  over 
 the  Internet,  while  protecting  consumers'  ability  to  view  and  record  video  content  in  a  manner  to  which  they  have  become  accustomed.  444  In  a  related  Order,  the  Commission  approved  thirteen  digital  output 
 protection  technologies  and  recording  methods  under  the  evaluative  criteria  established  in  the  Broadcast  Flag  Order,  subject  to  certain  conditions.  445  The  certification  Order  reiterates  that  the  Commissions  goal 
 is  to  prevent  the  indiscriminate  redistribution  over  the  Internet  of  digital  broadcast  television  content,  while  preserving  the  use  and  enjoyment  of  broadcast  content.  446  The  certification  Order  finds  that  each 
 technology,  as  approved,  is  appropriate  for  use  in  DTV  reception  equipment  to  give  effect  to  the  broadcast  flag.  447 


 92.  DTV  Periodic  Review.  Also  in  August  2004,  the  Commission  completed  the  first  part  of  its  Second  Periodic  Review  of  its  rules  and  policies  affecting  the  conversion  to  digital  television.  448  The 
 Report  and  Order  implements  several  steps  necessary  for  continued  progress  in  the  conversion  to  DTV.  449  Among  them  are  channel  election  procedures;  deadlines  for  replication  and  maximization;  requirements 
 that  stations  provide  PSIP  information  to  facilitate  closed  captioning,  V-  chip,  channel  numbering  and  other  functionality;  elimination  of  the  simulcast  requirement  to  permit  the  transmission  of  additional 
 innovative  programming  on  broadcast  digital  channels;  clarification  of  interference  protection  measures  for  broadcasters;  clarification  of  digital  closed  captioning  rules;  and  agreement  to  consider  individual 
 deployments  distributed  transmission  technologies  on  a  case-  by-  case  basis  in  the  interim  to  a  proceeding  on  the  issue.  450  The  Commission  continues  to  work  on  matters  related  to  the  expiration  of  all  broadcast 
 licenses  for  analog  television  service  on  December  31,  2006,  and  the  requirement  in  the  Act  that  the  Commission  reclaim  the  spectrum  unless  certain  conditions  set  forth  in  Section  309(  j)(  14)(  B)  are  met.  451 
 In  order  to  minimize  the  disruption  to  consumers  when  the  switch-  over  to  digital  broadcasting  occurs,  the  Media  Bureau  issued  a  Public  Notice  in  May  2004,  seeking  comment  on  the  number  of  households  that 
 rely  exclusively  on  over-  the-  air  broadcasting  for  their  television  service,  and  on  potential  options  for  minimizing  the  impact  of  the  switch-  over  on  these  and  other  consumers.  452 


 93.  Public  Interest  Obligations.  The  Commission  continues  to  work  on  public  interest  matters  related  to  a  1999  Notice  of  Inquiry  on  public  interest  obligations  in  the  digital  era,  as  well  as  a  2000 
 Notice  of  Proposed  Rulemaking  on  standardized  and  enhanced  disclosure,  both  of  which  were  addressed  in  the  Second  Periodic  Notice.  453 


 444  Broadcast  Flag  Order,  18  FCC  Rcd  23550. 
 445  Digital  Output  Protection  Technology  and  Recording  Method  Certifications,  19  FCC  Rcd  15876  (2004).  See 
 Broadcast  Flag  Order,  18  FCC  Rcd  23550.  446 
 Digital  Output  Protection  Technology  and  Recording  Method  Certifications,  19  FCC  Rcd  15876.  447 
 Id.  448 
 Second  Periodic  Review  of  the  Commissions  Rules  and  Policies  Affecting  the  Conversion  to  Digital  Television,  19  FCC  Rcd  18279  (2004)  (Second  Periodic  Review  Report  and  Order). 


 449  Id. 
 450  Id.  at  18355-  7    174-  178. 
 451  47  U.  S.  C.    309(  j)(  14).  This  issue  will  be  addressed  in  the  second  part  of  the  Second  Periodic  Review.  See 
 Second  Periodic  Review  Report  and  Order,  19  FCC  Rcd  18285-  6  at    6.  452 
 Media  Bureau  Seeks  Comment  on  Over-  The-  Air  Broadcast  Television  Viewers,  19  FCC  Rcd  9468  (2004).  453 
 Public  Interest  Obligations  of  TV  Broadcast  Licensees,  14  FCC  Rcd  21633  (1999)  (Broadcast  Public  Interest  NOI);  Standardized  and  Enhanced  Disclosure  Requirements  for  Television  Broadcast  Licensee  Public  Interest 


 Obligations,  15  FCC  Rcd  19816  (2000)  (DTV  Public  Interest  Form  NPRM). 
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 94.  Childrens  Programming.  In  September  2004,  the  Commission  resolved  a  number  of  issues  regarding  the  obligation  of  television  broadcasters  to  serve  children  in  their  audience.  454  The  Report  and 
 Order  addresses  the  obligation  of  television  broadcast  licensees  to  provide  educational  and  informational  programming  and  to  protect  children  from  excessive  and  inappropriate  commercial  messages.  Although 
 some  of  the  rules  and  policies  adopted  apply  to  both  analog  and  digital  broadcasters,  the  Report  and  Order  focuses  on  the  application  of  childrens  television  obligations  to  DTV  broadcasting.  455 


 95.  Low-  Power  Television  and  Television  Translators.  In  September  2004,  the  Commission  established  rules  to  allow  for  the  digital  conversion  of  low  power  television  (LPTV  Rules)  and  television 
 translator  systems.  456  The  Report  and  Order  adopts  definitions  and  permissible  use  provisions  for  DTV  translator  and  LPTV  stations  to  mirror  the  analog  operation  of  these  stations.  457  The  Report  and  Order 
 furthers  progress  in  the  nationwide  DTV  transition,  as  LPTV  and  translator  stations  deliver  over-  the-  air  television  service  to  millions  of  viewers  in  rural  areas  and  discrete  urban  communities.  458 


 96.  Ancillary  and  Supplementary  Services.  In  2003,  the  Commission  also  released  a  Public  Notice  relating  to  the  requirement  that  each  commercial  and  noncommercial  educational  DTV  broadcast 
 station  licensee  to  annually  report  whether  its  station  provided  ancillary  or  supplementary  services  at  any  time  during  the  twelve-  month  period  preceding  September  30,  2003,  using  Form  317  (Annual  DTV 
 Ancillary/  Supplementary  Services  Report  for  Digital  Televisions  Stations).  459  Form  317  was  created  pursuant  to  the  statutory  guidelines  set  forth  in  Section  336  of  the  Communications  Act,  which  among 
 other  things,  requires  that  the  Commission  ensure  that  licenses  for  advanced  television  services  are  consistent  with  the  public  interest,  convenience  and  necessity;  that  the  Commission  collect  fees  from 
 providers  of  ancillary  or  supplementary  services  to  recover  for  the  public,  a  portion  of  the  value  of  the  public  spectrum  resource  made  available  for  commercial  use.  .  .;  and  to  report  to  Congress  on  the 
 implementation  of  the  program  required  by  Section  336(  e).  460 
 d.  Educational  Efforts 
 97.  In  addition  to  undertaking  rulemaking  actions  to  speed  the  digital  transition,  the  Commission  is  undertaking  a  concerted  consumer  education  effort.  As  of  May  2004,  only  about  37  percent  of  all 


 adults  were  somewhat  or  very  familiar  with  HDTV,  while  about  87  percent  of  all  adults  in  TV  households  were  vaguely  aware  of  HDTV.  461  To  increase  public  awareness,  on  October  4,  2004,  the  Commission 
 announced  a  DTV  consumer  education  initiative.  462  The  campaign  is  designed  to  inform  the  public  about  the  DTV  transition,  and  provide  resources  regarding  the  availability  of  HD  and  other  digital 
 programming,  as  well  as  to  provide  information  on  consumer  equipment  and  retail  outlets.  A  new  FCC 


 454  Childrens  Programming  Obligations  of  Digital  Television  Broadcasters,  19  FCC  Rcd  22943  (2004). 
 455  Id. 
 456  Amendment  of  Parts  73  and  74  of  the  Commissions  Rules  to  Establish  Rules  for  Digital  Low  Power  Television, 
 Television  Translator,  and  Television  Booster  Stations  and  to  Amend  Rules  for  Digital  Class  A  Television  Stations,  19  FCC  Rcd  19331  (2004)  (LPTV  Report  and  Order). 


 457  Id. 
 458  Id. 
 459  Filing  of  FCC  Annual  DTV  Ancillary/  Supplementary  Services  Report,  18  FCC  Rcd  23972  (2003). 
 460  47  U.  S.  C.    336  (a),  (e). 
 461  CTAM,  HDTV:  Consumers  Getting  the  Picture,  CTAM  Pulse,  May/  June  2004,  at  2. 
 462  Chairman  Powell  Announces  Major  DTV  Consumer  Education  Initiative  (FCC  News  Release),  Oct.  4,  2004; 
 Chairman  Powell  to  Kickoff  Consumer  Education  Initiative  on  Transition  to  Digital  (press  release),  Sept.  28,  2004. 
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 Internet  web  portal  was  created  to  serve  as  a  one-  stop  source  of  information  on  the  transition.  463  The  announcement  of  the  web  portal  was  followed  by  a  public  forum  that  discussed  HD  content  that  is  now, 
 or  soon  will  be  available  to  consumers,  and  how  consumers  access  this  content.  464 
 98.  The  Commission  also  announced  a  joint  effort  with  CEA  and  Consumer  Electronics  Retail  Coalition  (CERC)  on  the  creation  and  distribution  of  a  DTV  Tip  Sheet  that  describes  digital  television 


 equipment  and  provides  a  glossary  of  common  DTV  terms.  465  The  tip  sheet  also  explains  that  TV  sets  with  only  analog  tuners  will  need  a  separate  converter  box  in  the  future  to  receive  over-  the-  air  signals 
 after  broadcast  stations  turn  off  their  analog  signals. 
 99.  In  addition  to  its  efforts  with  the  Commission,  CEA  is  working  by  itself  and  with  retailers  and  cable  companies  to  improve  retailer  and  public  knowledge  of  the  transition.  In  its  comments  to  this 


 Report,  CEA  urges  that  more  efforts  throughout  the  industry  are  needed.  466  On  its  websites,  CEA  offers  a  wide  range  of  information  for  consumers,  retailers,  and  industry  participants.  467  CEA  also  publishes 
 numerous  educational  brochures  and  leaflets  for  consumers  and  retailers  alike.  468  Among  the  materials  CEA  offers  are  several  point-  of-  sale  brochures  that  retailers  can  customize  and  distribute  to  consumers;  a 
 two-  sided  reference  sheet  for  sales  persons  to  use  as  a  pocket  guide  when  conversing  with  consumers;  several  direct-  to-  consumer  print  guides  including:  HDTV:  A  Consumers  Guide  to  the  Wonderful  World 
 of  HDTV;  a  TV  Guide  insert  called  TV  Guide  Advetorial,  both  of  which  explain  HDTV  to  consumers;  and  HDTV  Guide,  which  provides  lists  of  DTV  products,  programming  and  cable  carriage  currently 
 available.  469  CEA  also  produces  educational  DVDs  jointly  with  Comcast  for  use  by  retail  outlets  to  educate  employees,  as  well  as  nationally  pre-  packaged  video  and  radio  news  releases  on  the  issue  of 
 DTV,  and  an  online  training  program  for  DTV  retailers.  CEA  also  convenes  conferences  with  local  retailers,  broadcasters  and  cable  executives  to  discuss  the  DTV  transition.  This  program  has  visited  more 
 than  25  television  markets  and  four  major  buying  groups.  470  CEA  is  also  an  exhibitor  at  home  and  trade  shows,  and  conducts  a  Media  Tour  which  visits  75  cities  each  year.  471 


 100.  CERC  and  its  board  member  companies,  Best  Buy,  Circuit  City,  Radio  Shack,  and  Tweeter,  conduct  joint  HDTV  promotions  with  MVPDs  and  the  Discovery  Channel  to  educate  consumers 
 about  DTV.  CERC  and  its  members  also  distribute  materials  directly  to  consumers,  including  advertising  supplements,  educational  brochures,  home  theater  product  catalogs,  and  web  portals.  For  example,  Best 
 Buy  has  issued  information  on  DTV  and  HDTV,  including  a  product  primer  and  product  descriptions.  472  Best  Buy,  Tweeter  and  Circuit  City  all  offer  research  guides  on  their  websites  that  provide  basic 


 463  Digital  Television,  http://  www.  dtv.  gov. 
 464  Chairman  Powell  Announces  Major  DTV  Consumer  Education  Initiative  (FCC  News  Release)  Oct.  4,  2004. 
 465  Id. 
 466  CEA  Comments  at  6. 
 467  Id.  See  CEA,  at  http://  www.  ce.  org/  about_  cea/  cea_  initiatives/  viewInitiativesOverview.  asp?  title  =Transition 
 %20to%  20Digital%  20Television&  name=  269  (visited  Jan.  14,  2005).  468 
 CEA  Comments  at  7.  469 
 See  CEA,  at  http://  www.  ce.  org/  about_  cea/  cea_  initiatives/  viewInitiativesOverview.  asp?  title=  Transition%  20to%  20Digital  %20Television&  name=  269  (visited  Jan.  14,  2005). 


 470  Id. 
 471  Id. 
 472  Best  Buy,  Best  Buy  Simplifies  High-  Definition  For  Consumers  (press  release),  Feb.  5,  2004. 
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 information  on  HDTV,  DTV,  and  the  different  types  of  video  monitors  currently  available  to  consumers.  473 
 101.  NCTA  offers  information  on  its  website  regarding  cable  operator  offerings  of  DTV,  and  an  overview  on  digital  cable  that  explains  the  difference  between  digital  cable  and  HDTV.  474  CTAM,  the 
 cable  industry  marketing  association,  conducts  a  consumer  awareness  study  annually  to  examine  consumer  awareness  and  familiarity  with  HDTV,  products  and  features  of  DTV  sets  and  HDTV  sets, 
 knowledge  of  HDTV  programming,  and  HDTV  programming  preferences.  475  NAB  operates  a  website  called  Digital  Zone,  dedicated  to  providing  consumers  access  to  information  about  the  broadcast  DTV 
 transition.  476  The  site  includes  tips  for  purchase  of  a  digital  set,  diagrams  explaining  the  difference  between  analog  and  digital  television,  information  on  DTV  in  local  markets,  and  information  on 
 legislative  and  regulatory  issues.  In  addition  there  is  a  Frequently  Asked  Questions  section,  and  a  Station  Guide.  NAB  also  publishes  a  newsletter  entitled  Destination  Digital  which  is  available  on  its  website  as 
 well.  477 
 102.  SBCA  indicates  that  the  DBS  industry  is  promoting  HD  through  the  offering  of  HD  receivers  and  HD  TV  set  packages  and  by  offering  special  equipment  packages  to  upgrade  current 


 customers  to  HD.  478  SBCA  says  that  it  has  worked  with  members  of  Congress  to  be  able  to  provide  distant  DTV  signals  to  consumers  in  areas  not  served  by  DTV.  479  It  has  also  worked  with  retailers  to 
 educate  them  on  HDTV  over  DBS,  and  runs  an  advertising  campaign  to  explain  the  benefits  to  consumers  of  HD.  480 


 103.  Individual  companies  are  also  taking  steps  to  educate  the  public.  Comcast  says  it  heavily  promotes  HDTV  through  print  ads,  advertising  availabilities  on  its  own  cable  systems,  and  through  a  joint 
 marketing  campaign  with  CTAM,  the  cable  industrys  marketing  association.  481  Comcast  also  has  a  team  traveling  throughout  the  United  States,  visiting  retail  stores  to  work  with  retailers  at  the  point  of  sale  and 
 place  advertisements  in  the  stores.  482  Sony  and  Cox  recently  conducted  a  joint  demonstration  of  HDTV  at  San  Diegos  baseball  park,  and  Sony  sponsored  the  HD  broadcast  of  the  Olympics.  483  EchoStar  says  it 


 473  Best  Buy,  HDTV  Information  Center,  at  http://  www.  bestbuy.  com/  site/  olspage.  jsp?  id=  pcmcat8400050000 
 &type=  category  (visited  Jan.  14,  2005);  Tweeter  Home  Entertainment  Group,  at  http://  www.  tweeter.  com/  info  /index.  jsp?  categoryId=  1198415&  infoPath=  1139222  (visited  Jan.  14,  2005);  Circuit  City  Stores,  Inc.,  at 


 http://  www.  circuitcity.  com/  rpsm/  cat/-  12867/  edOid/  105585/  rpem/  ccd/  lookLearn.  do  (visited  Jan.  14,  2005).  474 
 NCTA,  http://  www.  ncta.  com/  Docs/  PageContent.  cfm?  pageID=  91;  http://  www.  ncta.  com/  Docs/  PageContent.  cfm?  pageID=  101;  http://  www.  ncta.  com/  Docs/  PageContent.  cfm?  pageID=  104;  http://  www.  ncta.  com/  images/  HDTVkit-Programming- 


 Final3.  pdf  (visited  Jan.  14,  2005).  475 
 CTAM,  HDTV:  Consumers  Getting  the  Picture,  at  http://  www.  ctam.  com/  research/  (visited  Jan.  14,  2005).  476 
 NAB,  http://  www.  digitaltvzone.  com/  hdtv_  programs_  on_  air/  index.  html  (visited  Jan.  14,  2005).  477 
 NAB,  http://  www.  nab.  org/  Newsroom/  Issues/  digitaltv/  DDTV/  ddtv.  asp;  http://  www.  nab.  org/  Newsroom/  Issues/  digitaltv/  default.  asp  (visited  Jan.  14,  2005). 


 478  SBCA  Comments  at  12. 
 479  Id. 
 480  Id. 
 481  Comcast  Corp.,  at  http://  www.  comcast.  com  (visited  Jan.  14,  2005). 
 482  Id. 
 483  Cox  ,  Sony,  and  Padres  Play  Ball,  Show  Biz  Data.  com,  July  6,  2004.  The  Padres  have  installed  250  Sony  HDTV 
 sets  throughout  Petco  Park,  while  Cox  has  bought  dozens  of  additional  Sony  sets  to  give  away  during  Padres  games.  In  addition,  under  an  arrangement  between  Sony  and  Cox,  San  Diego  consumers  who  buy  a  Sony  HDTV  set,  receive 


 (continued....) 
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 uses  mailers,  commercials  on  its  systems,  and  its  website  to  disseminate  information.  It  also  utilizes  an  information  truck  at  major  events,  and  run  seminars  and  workshops  in  retail  locations  to  educate  sales 
 associates.  Sinclair  Broadcast  Group  Inc.  has  developed  a  series  of  public  service  announcements  promoting  HDTV  on  free  television.  484 


 E.  Wireless  Cable  Systems 
 104.  Wireless  cable  systems  use  Multipoint  Distribution  Service  (MDS)  and  Instructional  Television  Fixed  Service  (ITFS)  frequencies  in  the  2  GHz  band  to  transmit  video  programming  and 


 provide  broadband  services  to  residential  subscribers.  485  While  these  services  were  originally  designed  for  the  delivery  of  multichannel  video  programming,  over  the  past  several  years  licensees  have  focused 
 their  operations  instead  on  providing  two-  way  high-  speed  Internet  access  services.  The  number  of  wireless  cable  subscribers  has  declined  steadily  from  a  peak  of  1.2  million  in  1996  to  approximately 
 200,000  as  of  April  2004.  486  Thus,  wireless  cable  systems  provide  video  competition  to  incumbent  cable  operators  only  on  a  limited  basis. 


 105.  In  July  2004,  the  Commission  issued  a  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  (MDS/  ITFS  Order)  making  several  significant  changes  to  the  rules  governing  the 
 MDS  and  ITFS  bands,  in  order  to  provide  greater  flexibility  and  a  more  efficient  band  plan.  487  The  new  band  plan  for  2495-  2690  MHz  eliminates  non-  contiguous  channel  use  by  MDS  and  ITFS  licensees  and 
 creates  distinct  band  segments  for  operations  such  as  video  transmission  and  two-  way  fixed  and  mobile  broadband  applications.  The  MDS/  ITFS  Order  also  renamed  the  MDS  and  ITFS  services  the  Broadband 
 Radio  Service  (BRS)  and  Educational  Broadband  Service  (EBS),  respectively.  In  addition,  the  MDS/  ITFS  Order  modified  the  original  MDS-  ITFS  band  plan  by  adding  four  MHz  of  spectrum  at  2496-  2500  MHz  in 
 order  to  provide  room  for  the  relocation  of  the  MDS  Channels  1  and  2,  currently  located  in  the  2.1  GHz  band.  The  MDS/  ITFS  Order  also  established  simpler  and  more  flexible  rules  for  licensees,  including 
 geographic  area  licensing  and  the  ability  to  deploy  the  technology  of  their  choice.  The  MDS/  ITFS  Order  also  lifted  all  non-  statutory  eligibility  restrictions  on  BRS  licenses,  including  those  applicable  to  cable 
 operators;  however,  cable  operators  are  still  prohibited  from  providing  multichannel  video  programming  distribution  services  using  BRS  licenses.  In  addition,  the  rules  limiting  EBS  licenses  to  qualified 
 educational  institutions  remain  in  effect.  EBS  licensees  may  continue  to  lease  their  spectrum  to  BRS  licensees.  Finally,  the  MDS/  ITFS  Order  established  a  three-  year  plan  for  transitioning  to  the  new  band 
 plan. 
 106.  BRS  and  EBS  licensees  continue  to  focus  their  operations  on  delivering  wireless  broadband  services  rather  than  multichannel  video  service.  Of  the  three  largest  BRS  licensees  -  Nextel, 


 Sprint,  and  BellSouth  -  BellSouth  continues  to  provide  video  programming  in  the  areas  where  it  holds  MMDS/  BRS  and  ITFS/  EBS  licenses.  488  These  three  BRS  licensees  also  have  significant  mobile  wireless 


 (...  continued  from  previous  page)  12  months  of  free  HDTV  programming  from  Cox.  Sony,  in  turn,  has  purchased  ads  on  Cox's  high-  definition 
 channel,  which  carries  104  Padres  games.  Id.  484 
 Sinclair  Launches  HDTV  PSA  Campaign,  BROADCASTING  &  CABLE  TV  FAX,  Aug.  27,  2004,  at  1.  485 
 This  delivery  technology  also  is  known  as  multichannel  multipoint  distribution  service  (MMDS).  486 
 NCTA  Comments  at  7.  487 
 Amendment  of  Parts  1,  21,  73,  and  74  of  the  Commissions  Rules  to  Facilitate  the  Provision  of  Fixed  and  Mobile  Broadband  Access,  Educational  and  Other  Advanced  Services  in  the  2150-  2162  and  2500-  2690  MHz  Bands,  19 


 FCC  Rcd  14165  (2004).  488 
 BellSouth  Comments  at  2.  BellSouth  currently  provides  cable  service  in  14  franchise  areas  in  Alabama,  Florida  and  Georgia.  Comments  of  BellSouth  Corp.  and  BellSouth  Wireless  Cable,  Inc.  in  Amendment  of  Parts  1,  21,  73, 


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 operations  in  the  cellular,  broadband  PCS,  and  Specialized  Mobile  Radio  (SMR)  bands.  Nextel  completed  its  acquisition  of  BRS  licenses  held  by  WorldCom  in  April  2004,  and,  in  January  2004,  filed 
 applications  with  the  FCC  to  acquire  BRS  licenses  held  by  Nucentrix.  489  In  April  2004,  Nextel  began  offering  wireless  broadband  service  in  Raleigh-  Durham,  North  Carolina.  490  While  the  company  is 
 reportedly  using  broadband  PCS  spectrum  for  the  Raleigh  deployment,  Nextel  has  stated  that  it  may  use  its  BRS  licenses  to  deploy  service  to  additional  markets  in  the  future.  491  Finally,  in  June  2004,  a  new 
 wireless  broadband  company,  Clearwire,  announced  plans  to  provide  mobile  broadband  service  in  Jacksonville,  Florida  during  2004  using  equipment  and  spectrum  leased  from  EBS  licensees.  Clearwire 
 plans  to  launch  the  mobile  broadband  service  in  additional  U.  S.  markets  over  the  next  year.  492 
 107.  While  BRS  and  EBS  licensees  continue  to  focus  on  delivering  high-  speed  Internet  access,  Sprint  is  now  offering  two  different  video  services  on  its  mobile  telephones.  For  about  $10  a  month, 


 Sprint  customers  can  receive  either  real-  time  programming  from  a  variety  of  networks  on  MobiTV  or,  specially  produced  short  clips  from  major  networks  on  the  Sprint  TV  service.  493  MobiTV  was  offering 
 news  content,  including  the  first  presidential  debate,  on  three  different  channels,  ABC  News  Now,  C-SPAN  and  C-  SPAN2.  494  These  mobile  telephones  do  not  actually  have  traditional  television  receivers  in 
 them.  The  television  programs  are  streamed  onto  the  phones  via  the  Internet  from  servers  that  first  convert  the  television  signals  into  digital  files.  495  Both  services  display  video  at  six  to  15  frames  per 
 second.  496  Sprint  plans  to  rollout  a  much  faster  mobile  telephone  technology  called  EV-  DO,  which  will  be  as  fast  as  some  wired  home  DSL  connections.  497 


 F.  Private  Cable  Systems 
 108.  Private  cable  operators  (PCOs),  also  known  as  satellite  master  antenna  television  (SMATV)  systems,  are  video  distribution  facilities  that  use  closed  transmission  paths  without  using  any 


 public  right-  of-  way.  498  PCOs  acquire  video  programming  and  distribute  it  via  terrestrial  wiring  in  urban 


 (...  continued  from  previous  page)  and  74  of  the  Commissions  Rules  to  Facilitate  the  Provision  of  Fixed  and  Mobile  Broadband  Access,  Educational 
 and  Other  Advanced  Services  in  the  2150-  2162  and  2500-  2690  MHz  Bands,  19  FCC  Rcd  14165  (2004).  489 
 Applications  to  Assign  Wireless  Licenses  from  WorldCom,  Inc.  (Debtor-  in-  Possession)  to  Nextel  Spectrum  Acquisition  Corp.,  19  FCC  Rcd  6232  (2004);  Nucentrix  Spectrum  Resources,  Inc.  (Debtor-  in-  Possession)  Seeks 


 FCC  Consent  to  the  Assignment  of  Licenses  to  Nextel  Spectrum  Acquisition  Corp.,  19  FCC  Rcd  2893  (2004).  See  also  2003  Report,  19  FCC  Rcd  at  1664    87. 
 490  Nextel  Corp.,  Nextel  Expands  Successful  Broadband  Trial  to  Include  Paying  Customers  and  Larger  Coverage 
 Area  (press  release),  Apr.  14,  2004.  491 
 Wireless,  COMM.  DAILY,  Feb.  9,  2004;  Transcript,  Event  Brief  of  Nextel  Communications  Earnings  Conference  Cal  -  Final,  FD  (FAIR  DISCLOSURE)  WIRE,  July  21,  2004  (quoting  Barry  West,  Executive  Vice  President  and  Chief 


 Technology  Officer,  Nextel  Communications).  492 
 Clearwire  Corp.,  Wireless  Pioneer  Craig  McCaw  Launches  Clearwire;  Broadband  Wireless  Venture  to  Improve  the  Availability  and  Consumer  Satisfaction  of  Residential  Phone  and  Data  Services  (press  release),  June  2,  2004. 


 493  Walter  S.  Mossberg,  Watching  TV  on  Your  Cellphone,  WALL  STREET  JOURNAL,  Sept.  1,  2004,  at  D7. 
 494  Debates  Make  Way  to  VOD,  Cell  Phones,  MULTICHANNEL  NEWS,  Sept.  30,  2004,  at  1. 
 495  Walter  S.  Mossberg,  Watching  TV  on  Your  Cellphone,  WALL  STREET  JOURNAL,  Sept.  1,  2004,  at  D7. 
 496  Video  is  best  viewed  at  24-  30  frames  per  second.  Id. 
 497  Id. 
 498  1996  Act,  sec.  301(  a)(  2),  47  U.  S.  C.    522(  7).  In  addition,  private  cable  and  SMATV  operators:  (a)  do  not  pay 
 franchise  and  Federal  Communications  Commission  subscriber  fees;  (b)  are  not  obligated  to  pass  every  resident  in  a  (continued....) 
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 and  suburban  multiple  dwelling  units  (MDUs),  such  as  apartments  and  condominiums,  and  commercial  multiple  tenant  units  (MTUs),  including  hotels  and  office  buildings.  Traditionally,  PCOs  received 
 nonbroadcast  programming  from  resellers  called  aggregators  using  satellite  master  antenna  systems  atop  the  buildings  they  serve.  PCOs  usually  combine  this  nonbroadcast  video  programming  with  local 
 broadcast  television  signals  that  they  receive  using  master  antennas.  Thus,  the  packages  PCOs  provide  their  subscribers  are  comparable  to  those  of  cable  systems,  and  they  directly  compete  with  franchised 
 cable  operators. 
 109.  Some  PCOs  are  now  partnering  with  DIRECTV  and  EchoStar  to  offer  their  customers  a  hybrid  analog  and  digital  video  product.  499  Recent  reports  indicate  that  MDU  builders  and  owners  want 


 more  control  over  the  design  and  operation  of  their  communities,  and  PCOs  provide  an  approach  to  MDUs  that  franchised  cable  operators  cannot  or  will  not  provide,  including  revenue  sharing.  Franchised 
 cable  operators  do  not  generally  provide  a  bundled  video,  data,  and  voice  service  to  a  specific  MDU  property  because  the  large  cable  operators  tend  to  use  uniform  business  models  to  serve  all  of  their 
 subscribers  across  the  nation,  while  a  PCO  can  almost  always  create  a  service  to  satisfy  MDU  demand.  500 
 110.  Currently,  there  are  approximately  135  members  in  the  Independent  Multi-  Family  Communications  Council  (IMCC),  the  trade  association  that  represents  PCOs  and  MDUs.  501  This  year, 


 the  PCO  industry  has  begun  rebounding  from  a  recent  economic  downturn.  New  capital  is  available  to  PCOs,  and  interest  in  IMCC  has  increased.  502  PCOs  range  in  size  from  large  operators  serving  customers 
 throughout  the  entire  United  States,  to  small  operators  that  serve  MDUs  in  as  few  as  three  communities.  PCOs  currently  serve  1.1  million  customers,  down  100,000  subscribers  from  last  year.  503 


 111.  In  January  2003,  the  Commission  issued  the  Second  Report  and  Order  on  inside  wiring,  which  made  four  revisions  to  its  cable  inside  wiring  rules.  504  The  Order  specified  that:  (1)  wiring  located 
 behind  sheet  rock  is  physically  inaccessible  for  purposes  of  the  home  run  wiring  rules;  (2)  incumbent  providers  must  allow  access  to  their  wiring  before  the  termination  of  services;  (3)  incumbent  operators 
 must  share  space  in  molding  with  competitors;  and  (4)  the  rules  apply  to  all  programming  providers,  including  both  franchised  cable  operators  and  PCOs.  As  a  result  of  this  decision,  wiring  installed  behind 
 sheet  rock  that  runs  from  the  customers  unit  to  the  demarcation  point  is  inside  wiring,  and  is  under  the  customers  control,  instead  of  home  run  wiring  which  is  under  the  providers  control.  The  customer 
 may  use  this  wiring  to  receive  service  from  another  provider.  505  The  rules  governing  the  unit-  by-  unit  disposition  of  inside  wiring  can  be  invoked  when  the  MSO  has  no  legally  enforceable  right  to  maintain 
 the  wiring  dedicated  to  a  particular  subscribers  residence  in  an  MDU.  Under  this  scenario,  a  competing 
 (...  continued  from  previous  page)  given  area;  (c)  are  not  subject  to  rate  regulation;  and  (d)  are  not  subject  to  must  carry  and  local  government  access 
 obligations.  1997  Report,  13  FCC  Rcd  at  1085  n.  296.  499 
 Don  Kent,  USDTV:  Are  They  A  Competitive  Threat  to  Private  Cable  Operators?,  BROADBAND  PROPERTIES,  May  2004,  at  6. 


 500  Rich  Muller,  Outside  the  Box:  Its  Back!  The  MDU  Biz  Returns  To  Satellite,  SKYREPORT,  June  23,  2004,  at  4. 
 501  In  2003,  we  reported  that  IMCC  had  250  members  operating  throughout  the  United  States.  See  2003  Report,  19 
 FCC  Rcd  at  1666    90.  For  a  list  of  members,  see  Independent  Multi-  Family  Communications  Councils  website  at  http://  www.  imcc-  online.  org/  membership  (visited  Aug.  18,  2004). 


 502  Telephone  conversation  with  Bill  Burhop,  Executive  Director,  IMCC,  Oct.  5,  2004. 
 503  NCTA  Comments  at  7. 
 504  Telecommunications  Services  Inside  Wiring,  Customer  Premises  Equipment,  Implementation  of  the  Cable 
 Television  Consumer  Protection  and  Competition  Act  of  1992;  Cable  Home  Wiring,  18  FCC  Rcd  1342  (2003)  (Cable  Home  Wiring). 


 505  Id.  at  1362    52,  53. 
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 video  provider  may  use  the  existing  (home  run)  wiring  to  provide  service  to  subscribers  who  choose  a  competitors  service  over  that  of  the  incumbent  MSO.  506  On  February  17,  2004,  the  D.  C.  Circuit  Court 
 of  Appeals  held  that  the  Commissions  modification  of  the  rules  was  not  supported  by  substantial  evidence  and  the  case  was  remanded.  507  In  response  to  the  courts  decision,  the  Commission  issued  a 
 Further  Notice  of  Proposed  Rulemaking  to  examine  the  issue  raised  by  this  remand.  508 
 112.  There  have  been  several  recent  challenges  to  the  inside  wiring  rules.  In  October  2002,  a  New  York  District  Court  ruled  that  so  long  as  the  incumbent  MSO  retains  at  least  one  subscriber  in  an 


 MDU,  the  owner  may  not  invoke  the  FCCs  unit-  by-  unit  inside  wiring  rule  to  allow  a  competing  PCO  access  to  home  run  wiring  (CSC  Holdings).  509  In  August  2003,  a  Kansas  District  Court  rejected  the  CSC 
 Holdings  decision  in  Time  Warner  Entertainment  Co.,  L.  P.  v.  Everest  Midwest  Licensee,  L.  L.  P.  and  held  that  the  fact  that  the  incumbent  MSO  has  at  least  one  subscriber  in  the  building  does  not  bar  a  competing 
 PCO  from  using  home  run  wiring  dedicated  to  MDU  residents  who  choose  the  PCOs  service.  510  On  August  21,  2003,  in  CoxCom  v.  Picerne  Real  Estate  Group,  the  Rhode  Island  Superior  Court  ruled  that 
 the  fact  that  the  MSO  retains  subscribers  in  the  MDU  does  not  block  the  MDU  owner  from  allowing  a  PCO  to  use  the  existing  wiring  to  serve  other  residents.  511 


 G.  Other  Entrants 
 1.  Internet  Video 
 113.  Over  the  past  year,  video  provided  over  the  Internet  has  grown  and  promises  to  become  an  increasingly  strong  participant  in  the  market  for  the  delivery  of  video  programming.  512  In  addition  to 


 video  provided  over  the  web,  video  is  now  being  provided  to  subscribers  televisions  set  using  Internet  Protocol  (known  as  IPTV). 


 114.  Streaming  Video.  Most  instances  of  video  streamed  over  the  web  (sent  from  the  content  provider  to  the  subscriber  in  real-  time)  however,  are  still  not  of  broadcast  quality.  513  Streaming  video  is 
 506  47  C.  F.  R.    76.804(  a)(  b). 
 507  National  Cable  &  Telecommunications  Association  v.  F.  C.  C.,  89  Fed.  Appx.  743,  2004  WL  335201  (D.  C.  Cir. 
 Feb.  17,  2004)  (NO.  03-  1140).  508 
 See  Telecommunications  Services  Inside  Wiring,  Customer  Premises  Equipment,  19  FCC  Rcd  1498  (2004).  509 
 CSC  Holdings,  Inc.  v.  Westchester  Terrace,  235  F.  Supp.  2d  243  (S.  D.  N.  Y.  2002).  510 
 Time  Warner  Entertainment  Co.,  L.  P.  v.  Everest  Midwest  Licensee,  L.  LC.,  381  F.  3d  1039  (10  th  Cir.  (Kan.),  Aug.  27,  2004)  No.  03-  3005. 


 511  CoxCom,  Inc.  v.  Picerne  Real  Estate  Group,  2003  WL  22048781  (R.  I.  Super.  Aug.  21,  2003)  (NO.  CIV.  A.  PB 
 02-  1537).  512 
 Internet  TV  on  the  Way,  Powell  Says,  BROADCASTING  AND  CABLE,  Sept.  20,  2004,  at  26;  Tom  Wolzien,  Mark  Mackenzie,  Disney,  AOL  Show  Broadband  Video  Progress,  Bernstein  Research,  Mar.  5,  2004.  A  panel  of  streaming 


 media  companies  attending  the  annual  convention  of  the  National  Association  of  Broadcasters  insists  that  streaming  media  is  not  currently  competing  with  over-  the-  air  broadcasters.  New  Technologies,  COMM.  DAILY,  Apr.  23,  2004. 
 Comcast  indicates  in  its  comments  that  the  MVPD  service  delivered  by  video  streaming  provides  consumers  with  additional  options  and,  therefore,  adds  to  competition.  Comcast  Reply  Comments  at  4-  5. 
 513  Video  viewed  on  a  personal  computer,  while  larger  in  size  and  better  in  quality  than  a  few  years  ago,  is  still 
 confined  to  a  relatively  small  portion  of  the  screen,  and  still  offers  a  very  low  quality  picture  as  compared  with  traditional  broadcasting.  Lee  Gomes,  Web  TV  Is  Changing  The  Way  Programming  Is  Watched  and  Sold,  WALL 


 STREET  JOURNAL,  May  10,  2004,  at  B1;  see  also  Net  TV:  Next  Killer  Ap?,  BROADCASTING  AND  CABLE  TV  FAX,  Sept.  16,  2004,  at  3;  Future  Gazing:  IPTV  High  on  Powells  Radar,  CABLEFAX  DAILY,  Sept.  16,  2004,  at  1;  Paul 
 Andrews,  Webs  Video  Progress  is  Slow  Motion,  SEATTLE  TIMES,  July  26,  2004;  John  Borland  and  Jim  Hu,  A  Life-Saving  Technology,  CNET  NEWS.  COM,  July  26,  2004. 
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 currently  most  viable  when  delivered  over  broadband  networks,  but  some  industry  watchers  believe  that  it  will  only  become  a  fully  competitive  consumer  application  if  connection  speeds  significantly  increase 
 over  those  achieved  over  cable  and  DSL  broadband.  514  Today,  some  high-  quality  streaming  applications  are  being  transmitted  over  the  Internet2  network,  which  can  achieve  very  high  speeds  of  transfer.  515 
 Internet2  was  developed  by  a  consortium  of  universities  and  technology  companies  in  1996  to  provide  higher  connection  speeds  and  a  backbone  of  10  Gbps.  516  By  comparison,  most  of  the  public  Internet 
 today  uses  2.5  Gbps  links.  517  Many  technologists  believe  Internet2  has  the  high-  bandwidth,  low-  latency  and  high-  reliability  needed  for  such  applications  as  distance  learning  and  telemedicine  where  high  quality 
 is  necessary.  518  The  commercial  deployment  of  applications  over  Internet2  has  been  slow  because  limitations  remain  in  the  connection  between  the  home  and  the  providers  central  office. 


 115.  Nevertheless,  the  overall  number  of  homes  with  access  to  the  Internet  continues  to  grow,  as  does  the  number  of  Americans  who  access  the  Internet  via  a  high-  speed  broadband  connection  as  well 
 as  those  who  access  streaming  video  content  via  the  Internet.  As  of  June  2004,  there  were  approximately  30  million  high-  speed  Internet  access  subscribers  out  of  a  total  of  about  64  million  residential  Internet 
 subscription  households.  519  In  addition,  as  of  January  2004,  an  average  of  12  percent  of  all  Americans  watched  some  form  of  streaming  video  in  the  past  month  and  approximately  23  percent  of  Americans  had 
 accessed  streaming  IPTV  content  at  least  once  before.  520 
 116.  RealPlayer  continues  to  offer  a  variety  of  streaming  video  products,  including  news  clips  and  music  videos.  521  RealNetworks  has  been  providing  ABCNews  content  to  its  subscribers  since  2002, 


 and  recently  signed  a  deal  with  ABC.  com  to  provide  video  clips  of  ABC  television  shows  to  RealNetworks  SuperPass  subscribers.  522  Comcast  offers  ABC  News.  com  and  childrens  programming 
 content  to  its  high-  speed  Internet  subscribers  for  no  additional  cost.  523  MSN  signed  a  deal  with  CinemaNow  to  provide  movie  information,  reviews  and  trailers  to  its  subscribers.  524  America  Online 
 (AOL)  and  CNN  have  an  agreement  that  provides  AOL  subscribers  with  free  access  to  streaming  service, 


 514  Future  Gazing:  IPTV  High  on  Powells  Radar,  CABLEFAX  DAILY,  Sept.  16,  2004,  at  1;  see  May  Wong,  Internet 
 Video  Headed  for  Homes,  ROCKY  MOUNTAIN  NEWS,  Aug.  30,  2004.  Some  industry  participants  insist  that  Internet  video  will  need  speeds  of  100  Mbps  or  more  to  the  home  before  it  will  impact  consumers.  John  Borland  and  Jim 


 Hu,  A  Life-  Saving  Technology,  CNET  NEWS.  COM,  July  26,  2004.  In  Asia,  connection  speeds  are  such  that  the  web  can  be  used  for  standard,  full-  screen  viewing.  In  Hong  Kong,  in  particular,  web-  television  providers  offer 
 subscribers  a  service  similar  to  cable  and  satellite  television  services.  Lee  Gomes,  Web  TV  Is  Changing  The  Way  Programming  Is  Watched  and  Sold,  WALL  STREET  JOURNAL,  May  10,  2004,  at  B1. 
 515  John  Borland  and  Jim  Hu,  A  Life-  Saving  Technology,  CNET  NEWS.  COM,  July  26,  2004. 
 516  Marguerite  Reardon,  Internet2:  2004  and  Beyond,  CNET  NEWS.  COM,  Aug.  24,  2004. 
 517  Id. 
 518  Id. 
 519  See  High-  Speed  Services  Report  at  Table  3. 
 520  Arbitron,  Inc.,  Internet  and  Multimedia  12:  The  Value  of  Internet  Broadcasting  Advertising,  Sept.  3,  2003,  at  5. 
 521  Comcast  Comments  at  14-  16. 
 522  Jim  Hu,  ABC.  com  to  Air  on  RealNetworks  SuperPass,  CNET  NEWS.  COM,  Aug.  12,  2004;  RealNetworks,  MSN 
 sign  VOD  Deals,  CTAM  SMARTBrief,  Aug.  13,  2004.  523 
 Frank  Aherns,  Comcast  Starts  Disney  Delivery  Via  Internet,  WASHINGTON  POST,  July  21,  2004,  at  E1;  Reuters,  Comcast  and  Disney  in  High-  Speed  Internet  Adventure,  NEW  YORK  TIMES,  July  21,  2004;  Peter  Grant,  Comcast, 


 Disney  Team  Up  on  Internet  Deal,  WALL  STREET  JOURNAL,  July  21,  2004,  at  B1.  524 
 RealNetworks,  MSN  sign  VOD  Deals,  CTAM  SMARTBRIEF,  Aug.  13,  2004. 
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 CNN  NewsPass,  which  provides  access  to  dozens  of  video  clips  and  reports.  525  AOL  also  made  a  deal  with  Warner  Brothers  TV  to  have  the  WBs  new  fall  series  Jack  and  Bobby  premiere  on  the  Internet  to 
 AOLs  broadband  subscribers.  526  In  the  summer  of  2004,  NBC  offered  archived  video  of  the  2004  Olympics,  where  users  were  able  to  sort  through  hours  of  footage  by  sport  and  view  highlights  from  the 
 games,  as  a  complement  to  their  broadcast  of  the  games.  527  Two  major  broadcast  networks,  CBS  and  ABC,  provided  full  coverage  of  both  the  Democratic  and  Republican  political  conventions  over  the 
 Internet.  528  CBS  provided  feeds  of  37  NCAA  basketball  tournament  games  to  be  included  in  AOLs  basic  Internet  service,  and  as  a  stand-  alone  subscription.  529  Similarly,  SportsLine.  com  offered  live  webcasts  of 
 early-  round  NCAA  basketball  tournament  games  for  a  $9.95  subscription  fee;  the  service  allowed  subscribers  to  watch  multiple  games  simultaneously,  though  viewers  are  prevented  from  having  access  to 
 games  broadcast  on  their  local  CBS  affiliate.  530  As  we  have  reported  in  the  past,  Major  League  Baseball  makes  its  video  content  available  on  the  Internet.  531 


 117.  AOL  announced  its  intent  to  provide  closed  captioning  for  select  streaming  media  content.  532  SnapStream  Media  offers  a  product  called  Beyond  TV  3  which  provides  software  and 
 hardware  for  a  personal  computer  that  allows  for  its  use  as  a  DVR.  533  America  Online  updated  its  instant  messaging  software  in  2004  to  include  video  conferencing  on  its  IM  client;  in  an  agreement  with  Apple 
 Computer,  AOL  and  iChat  users  will  be  able  to  video  conference  interoperably.  534 
 118.  Downloadable  Video.  Because  most  Internet  connections  do  not  yet  reliably  support  data  speeds  needed  to  view  broadcast-  quality  video  as  it  is  streamed,  technologists  expect  that  most  near  term 


 use  of  the  web  to  provide  video  will  be  for  downloadable  video.  535  As  we  reported  last  year,  Movielink 


 525  Tom  Wolzien  and  Mark  Mackenzie,  Disney,  AOL  Show  Broadband  Video  Progress,  Bernstein  Research,  Mar.  5, 
 2004.  526 
 Tom  Wolzien  and  Mark  Mackenzie,  Internet  Bypass  Alternative  to  Cables  Content-  Delivery  Bundle,  Bernstein  Research,  Apr.  23,  2004. 


 527  Kendra  Mayfield,  Olympics:  Coming  to  a  PC  Near  You,  WIRED  NEWS,  July  12,  2004. 
 528  Tom  Wolzien,  Michael  Nathanson,  Craig  Moffett,  Mark  Mackenzie,  Drew  Borst,  and  Amelia  Wong,  Weekend 
 Media  Blast  #29:  Networks  Play  Shrewd  Politics  With  Internet  Bypass,  Bernstein  Research,  July  16,  2004.  529 
 Tom  Wolzien  and  Mark  Mackenzie,  Internet  Bypass  Alternative  to  Cables  Content-  Delivery  Bundle,  Bernstein  Research,  Apr.  23,  2004. 


 530  Carl  Bialik,  SportsLine  to  Offer  Webcasts  In  March  Madness  Package,  WALL  STREET  JOURNAL,  Mar.  16,  2004, 
 at  D4.  531 
 See  2003  Report,  19  FCC  Rcd  at  1675  106;  Comcast  Comments  at  14-  16;  Lee  Gomes,  Web  TV  Is  Changing  The  Way  Programming  Is  Watched  and  Sold,  WALL  STREET  JOURNAL,  May  10,  2004  at  B1;  Jim  Hu,  Microsoft,  America 


 Online  to  Play  MLB  Games,  CNET  NEWS.  COM,  Mar.  22,  2004;  Tom  Wolzien  and  Mark  Mackenzie,  Internet  Bypass  Alternative  to  Cables  Content-  Delivery  Bundle,  Bernstein  Research,  Apr.  23,  2004. 
 532  New  Technologies,  COMM.  DAILY,  Oct.  10,  2003,  at  9. 
 533  Walter  S.  Mossberg,  Cheaper  Than  TiVo:  Souping  Up  Your  Computer,  WALL  STREET  JOURNAL,  Apr.  14,  2004. 
 Picture  quality  is  not  considered  to  be  comparable  to  broadcast  quality  video.  534 
 Jim  Hu,  AOL  Links  With  Apple  on  Video  IM,  CNET  NEWS.  COM,  Feb.  5,  2004.  Microsoft  also  announced  a  deal  that  will  allow  users  of  its  corporate  instant-  messaging  software  to  communicate  with  services  from  competitors 


 AOL  Instant  Messenger  and  Yahoo  Messenger.  Daniel  Nasaw,  Microsoft  to  Link  Message  System  With  Yahoo,  AOL,  WALL  STREET  JOURNAL,  July  15,  2004,  at  B5. 
 535  See  John  Markoff,  New  Service  by  TiVo  Will  Build  Bridges  From  Internet  to  TV,  NEW  YORK  TIMES,  June  9, 
 2004. 
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 allows  users  to  download  movies  to  computer  hard  drives  and  store  it  for  as  long  as  30  days,  for  a  fee.  536  In  late  2003,  SBC  joined  Movielink  to  create  a  co-  branded  website  of  video  downloads  for  subscribers  to 
 SBC  Yahoo  DSL.  537  America  Online  teamed  up  with  Movielink  in  January  2004  for  a  promotion  that  offered  its  members  full-  feature  film  downloads  through  Movielink  for  99  cents  each.  538  In  May  2004, 
 Charter  made  an  agreement  with  Movielink  that  offers  movies  to  Charters  broadband  subscribers.  539  Real  Networks  and  Starz  Encore  Group  launched  an  Internet  movie  subscription  service  called  Starz! 
 Ticket  on  Real  Movies,  which  gives  monthly  subscribers  access  to  about  100  movies  available  for  download  onto  their  computer  hard  drives.  540  Similarly,  Disneys  ESPN  offers  a  service  available  for  free 
 through  ESPN.  com  called  ESPNMotion,  which  automatically  downloads  video  using  Microsofts  Media  Player,  including  commercials,  into  the  users  computer,  and  then  advises  the  user  when  the  video  is 
 ready.  541  In  addition,  portable  devices  have  become  available  that  download  content  stored  on  the  personal  computer  and  in  some  cases  record  programs  directly  from  a  television  or  VCR.  542  Among  those 
 offering  the  devices  are  Samsung,  Creative  Labs,  RCA,  Archos  and  Microsoft. 
 119.  Internet  Protocol  Television  (IPTV).  In  addition  to  streaming  and  downloadable  video  provided  over  the  web,  video  also  is  becoming  available  for  download  through  a  high-  speed  Internet 


 connection  directly  to  a  set-  top  box  to  be  viewed  over  the  television,  similar  to  MVPD  video-  on-  demand  services.  543  Some  industry  analysts  call  this  technology  Internet  Bypass  or  client-  based  server 
 players.  544  In  July  2004,  TiVo  introduced  a  new  set  of  Internet-  based  services  that  allows  users  to 
 536  Antitrust  Probe  Clears  Studios  Online  Venture,  LOS  ANGELES  TIMES,  June  4,  2004;  see  also  2003  Report,  19 
 FCC  Rcd  at  1674    106.  Since  our  last  Report,  CinemaNow,  a  similar  service  to  Movielink,  joined  the  online  rental  market.  Rob  Pegoraro,  You  Can  Rent  Movies  Online,  But  Should  You?,  WASHINGTON  POST,  Apr.  4,  2004,  at  F7. 


 537  Stefanie  Olsen,  SBC  Calls  Action  for  Movielink  Rentals,  CNET  NEWS.  COM,  Nov.  24,  2003. 
 538  Comcast  Comments  at  14-  16. 
 539  Media  &  Marketing,  Movielink  Sets  Deal  With  Charter,  WALL  STREET  JOURNAL,  May  24,  2004. 
 540  Allison  Linn,  Online  Movie  Service  To  Debut,  WASHINGTON  POST,  June  14,  2004,  at  A8;  Comcast  Comments  at 
 14-  16.  In  past  Reports,  we  noted  that  to  view  video  over  the  Internet,  the  video  must  be  played  using  a  media  player.  New  Java  technology  now  gives  browsers  the  ability  to  play  videos  directly  on  a  web  page  and  run  from 


 regular  servers,  obviating  the  need  for  a  separate  media  player.  Stefanie  Olsen  and  Mike  Yamamoto,  Microsoft  Just  One  Factor  in  Net  Pioneers  Chaotic  History,  CNET  NEWS.  COM,  Mar.  4,  2004.  See  2003  Report,  19  FCC  Rcd  1674-5 
   106-  107;  see  also  1998  Report,  13  FCC  Rcd  24349-  50    104.  541 
 Tom  Wolzien,  Mark  Mackenzie,  Disney,  AOL  Show  Broadband  Video  Progress,  Bernstein  Research,  Mar.  5,  2004.  Full-  screen  video  is  deemed  VCR-  quality.  Id. 


 542  Michael  Marriott,  Is  Portable  Video  Ready  For  Its  Close-  Up?,  NEW  YORK  TIMES,  Sept.  2,  2004;  David  Colker 
 and  Jon  Healey,  Portable  Video  Player  Sales  in  Slow  Motion,  LOS  ANGELES  TIMES,  Sept.  2,  2004;  Andy  Sullivan,  PluggedIn:  Video  iPods  Bring  Seinfeld  on  Subway,  YAHOO!  NEWS,  Aug.  3,  2004;  John  Gartner,  Movie,  TV  Fans 


 Ogle  Video  To  Go,  WIRED  NEWS,  July  13,  2004;  Richard  Shim,  Will  Consumers  Tune  into  Portable  Video?,  CNET  NEWS.  COM,  July  20,  2004.  Computers  with  TV  tuner  cards  or  home  networks  connecting  their  computer  with  other 
 home  entertainment  devices  can  record  TV  programs  off  the  air  and  then  download  the  programs  to  the  portable  device. 
 543  Comcast  Reply  Comments  at  6.  Mike  Landberg,  Forget  A  La  Carte  Cable  Idea;  The  Future  Is  In  Internet  TV, 
 SAN  JOSE  MERCURY  NEWS,  July  23,  2004;  Future  Gazing:  IPTV  High  on  Powells  Radar,  CABLEFAX  DAILY,  Sept.  16,  2004,  at  1;  Lorenza  Munoz,  Netflix  and  TiVo  Shares  Climb,  LOS  ANGELES  TIMES,  Sept.  8,  2004. 


 544  Tom  Wolzien,  Media:  Shift  to  Client-  Server-  Based  Internet  Bypass  Player  Could  Offset  PVR  Losses,  Bernstein 
 Research,  May  25,  2004.  A  client-  server  player  is  a  system  for  the  streaming,  downloading,  recording  and  playback  of  content  which  may  be  stored  locally  on  the  devices  but  allows  some  central  control  by  the  provider,  such  as 


 content  updates  or  software  updates.  Video  content  can  be  downloaded  or  streamed  to  the  subscriber  through  a  high-  speed  connection  to  the  Internet.  Some  industry  analysts  also  call  this  system  of  client-  server  players,  Internet 
 Bypass  or  IB  Video.  Id. 
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 download  movies  to  the  hard  drives  of  their  TiVo  video  recorders.  545  TiVo  and  Netflix  currently  are  near  an  agreement  that  would  allow  consumers  to  download  movies  from  Netflix.  546  SBC  and  EchoStar  are 
 jointly  developing  their  own  set-  top  box  with  DVR  capabilities  that  will  allow  users  with  broadband  Internet  connections  to  download  movies  for  a  fee.  547  Akimbo  also  plans  to  offer  a  DVR-  like  box  that 
 plugs  into  a  television  set  and  downloads  video  programming  through  a  high-  speed  Internet  connection.  548  Microsoft  also  is  involved  in  the  development  of  Internet  video  and  other  Internet-  enhanced  MVPD 
 services.  549  In  September  2004,  it  unveiled  the  MSN  TV  Internet  receiver  for  accessing  Internet  content  via  the  television,  including  content  from  sites  like  Movielink.  550  In  addition  to  enabling  consumers  to 
 download  content  from  the  Internet,  several  firms,  including  TiVo,  plan  to  introduce  technology  that  will  allow  subscribers  to  send  recorded  television  shows  over  the  Internet  to  as  many  as  nine  playback 
 devices,  provided  all  of  the  devices  share  the  same  TiVo  customer  account.  551 
 2.  Home  Video  Sales  and  Rentals 
 120.  The  sale  and  rental  of  home  video,  including  videocassettes  and  DVDs,  are  considered  part  of  the  video  marketplace  because  they  provide  services  similar  to  the  premium  and  pay-  per-  view 


 offerings  of  MVPDs.  552  As  such,  they  offer  some  level  of  competition  to  broadcast  television,  cable  television  and  DBS  for  the  consumers  time  and  money.  Likewise,  video-  on-  demand  services  provided 
 by  cable,  DBS,  and  Internet  providers  also  have  emerged  as  competitive  services  to  home  video.  553 
 121.  VCR  penetration  is  estimated  at  91  percent  of  TV  households  in  2004.  554  DVDs  also  have  made  a  significant  impact  on  the  home  video  market.  As  of  July  2004,  nearly  100  million  DVD 


 545  Comcast  Comments  at  14-  16.  Mike  Landberg,  Forget  A  La  Carte  Cable  Idea;  The  Future  Is  In  Internet  TV,  SAN 
 JOSE  MERCURY  NEWS,  July  23,  2004.  546 
 Future  Gazing:  IPTV  High  on  Powells  Radar,  CABLEFAX  DAILY,  Sept.  16,  2004,  at  1;  Lorenza  Munoz,  Netflix  and  TiVo  Shares  Climb,  LOS  ANGELES  TIMES,  Sept.  8,  2004;  John  Markoff,  New  Service  by  TiVo  Will  Build  Bridges 


 From  Internet  to  TV,  NEW  YORK  TIMES,  June  9,  2004.  Tom  Wolzien  and  Mark  Mackenzie,  Internet  Bypass  Alternative  to  Cables  Content-  Delivery  Bundle,  Bernstein  Research,  Apr.  23,  2004.  See  paras.  122-  123  infra. 
 547  Almar  Latour,  Andy  Pasztor,  and  Peter  Grant,  SBC,  EchoStar  Plot  Online  Movie  Venture,  WALL  STREET 
 JOURNAL  Aug.  19,  2004,  at  B1;  In  Cahoots,  CableFAX  Daily,  Aug.  20,  2004,  at  2.  SBC  and  EchoStar  have  not  yet  decided  which  movie-  download  service  to  partner  with.  Id. 


 548  Comcast  Comments  at  14-  16.  Mike  Landberg,  Forget  A  La  Carte  Cable  Idea;  The  Future  Is  In  Internet  TV,  SAN 
 JOSE  MERCURY  NEWS,  July  23,  2004.  549 
 Stefanie  Olsen  and  John  Borland,  Microsoft  Video  Tech  Aims  for  Prime  time,  CNET  NEWS.  COM,  July  13,  2004.  550 
 Convergence,  Yet  Again,  BROADCASTING  &  CABLE,  Sept.  20,  2004,  at  10.  551 
 Jube  Shiver  Jr.,  FCC  Approves  TiVo  Technology,  LOS  ANGELES  TIMES,  Aug.  5,  2004;  Jube  Shiver  Jr.,  FCC  Lets  TiVo  Send  Shows  Via  Internet,  CHICAGO  TRIBUNE,  Aug.  5,  2004;  Paul  Davidson,  FCC  Lets  TiVo  Users  Send  Shows 


 Anywhere  They  Go,  USA  TODAY,  at  B3.  TiVo  Inc.  s  TiVo  Guard  is  among  13  technologies  certified  by  the  Commission  to  protect  digitally  transmitted  television  shows  recorded  off  the  air.  TiVo  says  its  system  can 
 electronically  track  subscriber  activity  to  ensure  that  digital  content  is  not  widely  distributed.  Digital  Output  Protection  Technology  and  Recording  Method  Certifications,  19  FCC  Rcd  15876  (2004).  See  Broadcast  Flag 
 Order,  18  FCC  Rcd  23550  (2003).  See  also  para.  91  supra.  The  Commissions  broadcast  flag  anti-  piracy  rules  cover  not  just  television  tuners,  but  also  personal  computers  and  information  technology  products  that  are  used  for 
 off-  air  digital  reception.  See  Broadcast  Flag  Order,  18  FCC  Rcd  23550  (2003).  552 
 See  2003  Report,  19  FCC  Rcd  at  1675    108.  553 
 See  paras.  40-  41,  52,  68-  69,  118-  119  supra.  554 
 Television  Bureau  of  Advertising  citing  Nielsen  Media  Research,  at  http://  www.  tvb.  org/  nav/  build_  frameset.  asp  (visited  Jan.  14,  2005). 
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 players  had  been  sold  and  approximately  70  percent  of  TV  households  have  a  DVD  player.  555  The  average  cost  of  a  DVD  player  is  $120,  a  decline  of  13  percent  from  the  previous  year.  556  More  than 
 30,000  titles  are  available  in  DVD  format  for  rental  or  sale,  with  nearly  30  titles  exceeding  sales  of  over  five  million  copies  in  2003  alone.  557  Home  video  sales  significantly  exceed  movie  ticket  sales,  as 
 households  spent  $22.5  billion  annually  on  purchasing  and  renting  DVDs  and  video  cassettes  compared  with  $9.2  billion  at  movie  theaters.  558  Sales  of  DVDs  and  video  cassettes  accounted  for  about  63  percent 
 and  rentals  accounted  for  37  percent  of  the  $22.5  billion  spent  on  home  video.  559 
 122.  The  influence  of  DVDs  is  growing.  For  example,  Netflix  continues  to  be  the  leading  online  DVD  movie  rental  service  with  just  over  two  million  subscribers  as  of  June  2004,  an  80  percent 


 increase  over  last  June.  560  Other  companies,  however,  have  entered  the  online  movie  rental  business,  such  as  Wal-  Mart,  which  established  a  similar  DVD-  by-  mail  system  in  June  2003.  Blockbuster  Online  will 
 give  subscribers  two  free  rentals  each  month  at  its  stores  as  well  as  access  to  25,000  DVDs  via  the  mail.  561  Other  DVD  mail-  delivery  upstarts  struggle  to  breakout:  DVDBarn  in  Scottsdale,  Arizona;  QwickFliks  in 
 Rancho  Santa  Fe,  California;  and,  DVDOvernight.  com  in  Philadelphia.  562 
 123.  Another  home  video  technology  gaining  popularity  is  the  digital  video  recorder  (DVR).  563  Introduced  in  1999,  this  device  is  capable  of  pausing,  recording  and  rewinding  live  TV  in 


 digital  form  on  an  internal  hard  drive  instead  of  videotape.  564  DVRs  allow  users  watching  recorded  programs  to  fast  forward  through  commercials.  About  two  million  DVRs  have  been  sold  to  date.  565 
 Cable  and  DBS  operators  have  incorporated  DVR  functionality  into  their  set-  top  boxes.  566  For  example,  Comcast  launched  DVR  service  in  its  New  Jersey,  Pennsylvania,  and  Delaware  systems,  offering 
 subscribers  Motorolas  single  tuner.  The  service  is  available  for  $9.95  per  month.  567  Cox  Cable  subscribers  will  have  access  to  DVR  service  in  more  than  95  percent  of  its  markets  by  the  end  of  2004.  568 
 The  largest  DVR  maker,  TiVo,  has  over  one  million  DIRECTV  subscribers  and  about  800,000  stand-alone  customers.  569  TiVos  DVR  is  currently  offered  at  $99  plus  a  monthly  service  fee  of  $12.95,  and  is 


 555  See  CEA  Comments  at  5.  Other  commenters  have  submitted  DVD  penetration  levels  lower  than  70  percent. 
 NCTA  Comments  at  21  project  a  65  percent  DVD  penetration  level  and  Comcast  Comments  at  16  indicates  a  47  percent  penetration  level. 


 556  See  NCTA  Comments  at  21.  Much  of  the  sales  of  pre-  recorded  DVDs  are  a  result  of  the  market  for  ownership  of 
 entire  prior  seasons  of  broadcast  and  cable  programming.  557 
 Id.  558 
 Id.  559 
 Comcast  Comments  at  16.  560 
 Id.  at  17.  Customers  go  online  to  rent  a  movie  and  the  DVD  is  sent  to  the  home  for  viewing  and  then  returned  through  the  mail. 


 561  David  Lieberman,  Blockbuster  to  Bust  into  Rent-  by-  Mail  DVD  Business,  USA  TODAY,  Aug.  11,  2004,  at  B1. 
 562  NCTA  Comments  at  22. 
 563  These  devices  also  are  referred  to  as  personal  video  recorders  (PVRs). 
 564  See  1999  Report,  15  FCC  Rcd  at  1035    119. 
 565  CEA  Comments  at  5. 
 566  See  paras.  42,  52,  62-  69  supra. 
 567  See  DVR,  CABLEFAX  DAILY,  Aug.  24,  2004,  at  1. 
 568  See  Cable,  COMM.  DAILY,  July  28,  2004,  at  6. 
 569  See  Stuart  Elliot  and  Ken  Belson,  Stop  Me  If  Youve  Seen  This  One  Before,  NEW  YORK  TIMES,  Aug.  9,  2004,  at 
 C1. 
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 available  at  retail  chains  and  websites,  such  as  Amazon.  com  and  Target.  com.  570  TiVo  and  NetFlix  subscribers  will  soon  be  able  to  download  digital  movies  from  the  Internet  directly  to  their  TiVo  set-tops. 
 571 


 H.  Local  Exchange  Carriers 
 124.  The  1996  Act  amended  Section  651  of  the  Communications  Act  to  permit  local  telephone  common  carriers  to  provide  video  services  in  their  telephone  service  areas.  The  statute  permitted 


 common  carriers  to:  (1)  provide  video  programming  to  subscribers  through  radio  communications  under  Title  III  of  the  Communications  Act;  572  (2)  provide  transmission  of  video  programming  on  a  common 
 carrier  basis  under  Title  II  of  the  Communications  Act;  573  (3)  provide  video  programming  as  a  cable  system  under  Title  VI  of  the  Communications  Act;  574  or  (4)  provide  video  programming  by  means  of  an 
 open  video  system  ("  OVS").  575 
 125.  Incumbent  LEC  entry  into  the  MVPD  industry  remains  limited,  but  recent  developments  show  new  signs  of  LEC  interest  in  providing  video  services.  576  In  recent  months,  for  example,  several 


 major  LECs  --  Bell  South,  Qwest,  SBC,  and  Verizon  --  have  launched  joint  service  with  DBS  service  providers.  These  services  were  planned  and  announced  last  year.  In  addition,  several  LECs  have  recently 
 reported  plans  to  provide  video  service  via  asymmetric  digital  subscriber  line  (ADSL),  very  high-  speed  digital  subscriber  line  (VDSL),  or  fiber  to  the  home  (FTTH).  577  These  new  developments  may  indicate  an 
 acceleration  of  LEC  entry  into  video  services. 
 126.  Cable  Franchises.  Until  recently,  BellSouth  was  the  only  remaining  large  incumbent  LEC  to  offer  video  service  over  franchised  cable  systems  using  traditional  cable  architecture.  578  It  holds 


 20  cable  franchises  with  the  potential  to  pass  1.4  million  homes  and  provides  cable  service  in  14  of  its  franchise  areas.  579  Verizon  has  announced  that  it  has  received  two  franchises  to  provide  cable  service  in 
 Beaumont,  California,  and  Sachse,  Texas,  and  that  it  plans  to  roll  out  cable  services  in  other  areas  in  2005.  580 


 127.  VDSL,  ADSL,  FTTP,  and  FTTN.  Qwest,  SBC,  and  a  number  of  smaller  incumbent  LECs  are  offering,  or  preparing  to  offer,  MVPD  service  over  existing  telephone  lines  using  very  high- 
 570  Id.  See  also  TiVo,  at  http://  www.  tivo.  com/  0.  0.  asp  (visited  Oct.  27,  2004). 
 571  See  New  Technologies,  COMM.  DAILY,  Sept.  9,  2004,  at  13.  See  para.  119  supra. 
 572  47  U.  S.  C.    571(  a)(  1). 
 573  47  U.  S.  C.    571(  a)(  2). 
 574  47  U.  S.  C.    571(  a)(  3). 
 575  47  U.  S.  C.    571(  a)(  3)-(  4).  See  also  para.  71  supra. 
 576  2003  Report,  19  FCC  Rcd  at  1678    114.  See  also  Letter  from  Stephen  Pastorkovich,  Director  of  Business 
 Development,  OPATSCO,  to  Marlene  H.  Dortch,  Secretary,  FCC,  Nov.  10,  2004,  at  2-  4,  6-  9.  577 
 See  Fourth  706  Report,  19  FCC  Rcd  at  20555-  57.  Some  LECs  are  not  deploying  full  FTTH,  but  instead  are  deploying  fiber-  to-  the  node  (FTTN),  which  provides  fiber  facilities  to  the  neighborhood  node,  and  coaxial  cable 


 from  the  neighborhood  node  to  the  residence.  578 
 BellSouth  Comments  at  1-  2.  579 
 2003  Report,  19  FCC  Rcd  at  1678    116.  See  also  2002  Report,  17  FCC  Rcd  at  26946    96  n.  338.  Subsequently,  Verizon  sold  these  systems  to  Knology,  Inc.,  a  broadband  service  provider.  See  Knology,  Inc.,  Knology  Announces 


 Agreement  To  Purchase  Broadband  Assets  (press  release),  July  18,  2003.  580 
 Almar  Latour,  Showdown  of  the  Giants,  WALL  STREET  JOURNAL,  Nov.  8,  2004,  at  B1;  Franchise  Score,  CABLEFAX  DAILY,  Nov.  10,  2004,  at  3;  Verizon  Franchise,  CABLEFAX  DAILY,  Dec.  10,  2004,  at  2. 
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 speed  digital  subscriber  line  (VDSL)  or  asymmetric  digital  subscriber  line  (ADSL)  technologies.  581  Qwest  offers  video,  high-  speed  Internet  access  and  telephone  service  over  existing  copper  telephone  lines 
 using  VDSL  in  the  Phoenix,  Arizona,  metropolitan  area  and  in  Denver  and  Boulder,  Colorado,  and  over  a  hybrid  fiber-  coaxial  system  in  Omaha,  Nebraska.  582  Small  LECs  also  continue  to  deploy  VDSL  for  the 
 purpose  of  video  service  delivery.  At  least  307  rural  LECs  provide  video  using  coaxial  cable,  hybrid  networks,  DSL,  or  fiber  to  the  premises.  583  Small  LECs  indicate  that  discriminatory  practices,  such  as 
 exclusive  programming  contracts,  higher  prices  for  programming,  and  discriminatory  pricing,  by  incumbent  cable  operators  and  programmers  impede  competition  in  small,  rural  markets.  584 


 128.  In  June  2004,  SBC  announced  plans  to  develop  both  Fiber  to  the  Node  (FTTN)  and  Fiber  to  the  Premises  (FTTP)  IP  networks  to  deliver  video  and  other  services  to  small  business  and  residential 
 customers.  585  SBC  plans  to  deliver  its  video  programming  to  customers  using  a  DSL-  based  service  it  calls  Lightspeed.  586  SBC  will  not  offer  the  service  commercially  until  year-  end  2005,  but  it  is  currently 
 testing  the  service  in  field  trials.  587  SBC  hopes  to  eventually  reach  as  many  as  18  million  homes  nationwide.  588  BellSouth  has  built  a  fiber  network  that  passes  1.1  million  homes  with  the  hopes  of 
 offering  video  services,  and  it  expects  to  add  200,000  more  homes  by  the  end  of  2004.  589  Verizon  is  currently  building  an  FTTP  IP  network,  and  expects  to  pass  one  million  homes  by  the  end  of  2004  and  an 
 additional  two  million  homes  by  the  end  of  2005,  offering  a  variety  of  broadband  services.  590  Verizon  comments  that  it  supports  a  deregulatory  national  broadband  policy,  and  the  Commission  should  adopt 
 open  standards  that  do  not  favor  any  particular  technology.  591  In  this  regard,  Verizon  filed  two  petitions  with  the  Commission  regarding  its  deployment  of  fiber-  to-  the-  premises  (FTTP)  infrastructure.  592  The 
 first  petition  requests  that  the  Commission  either  issue  a  declaratory  ruling  regarding  broadband  service  provided  via  FTTP  or,  alternatively,  waive  its  common  carrier  and  Title  II  rules  for  an  interim  period  in 
 the  same  manner  as  currently  applied  to  cable  modem  services.  593  In  its  second  petition,  Verizon  requests  that,  in  the  absence  of  a  declaratory  ruling,  the  Commission  should  exercise  its  forbearance 


 581  See  Fourth  706  Report,  19  FCC  Rcd  at  20555-  57. 
 582  Qwest  Communications  International,  Inc.,  http://  www.  qwest.  com/  residential/  products/  tvservices/  index.  html, 
 (visited  Sept.  24,  2004).  583 
 OPASTCO  Reply  Comments  at  3.  584 
 Id.  at  4-  6.  585 
 SBC  Communications  Inc.,  SBC  Communications  Announces  Advances  In  Initiative  To  Develop  IP-  Based  Residential  Network  For  Integrated  Video,  Internet,  VoIP  Services  (press  release),  June  22,  2004;  See  also  Fourth 


 706  Report,  19  FCC  Rcd  at  20555-  57.  586 
 Ken  Belson  and  Matt  Richtel,  SBC  to  Start  Project  to  Send  TV  Over  Lines,  NEW  YORK  TIMES,  Nov.  17,  2004,  at  C1;  Matt  Stump,  Lightspeed  Ahead  for  SBC,  MULTICHANNEL  NEWS,  Nov.  11,  2004;  Leslie  Cauley,  SBC  to  Offer 


 Net  TV,  Phone  Service,  USA  TODAY,  Nov.  16,  2004,  at  B1.  587 
 Id.  588 
 Id.  589 
 Ken  Belson,  A  Stodgy  Style,  but  BellSouth  Starts  to  Loosen  Its  Top  Button,  NEW  YORK  TIMES,  Sept.  13,  2004  590 
 Verizon  Communications,  Verizon  Signs  TV  Exec  to  Guide  Video  Projects  (press  release),  Sept.  15,  2004  591 
 Verizon  Comments  at  5-  17.  592 
 See  Pleading  Cycle  Established  for  Comments  on  Verizons  Petition  for  a  Declaratory  Ruling  or,  Alternatively,  Interim  Waiver  and  Verizons  Conditional  Petition  for  Forbearance  Under  47  U.  S.  C.  160(  c)  with  Regard  to 


 Broadband  Services  Provided  via  Fiber  to  the  Premises,  19  FCC  Rcd  12262  (2004).  593 
 Petition  of  the  Verizon  Telephone  Companies  for  Declaratory  Ruling  or,  Alternatively,  for  Interim  Waiver  with  Regard  to  Broadband  Services  Provided  via  Fiber  to  the  Premises  (filed  June  28,  2004). 
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 authority  594  and  provide  interim  regulatory  relief  for  such  services  until  an  appropriate  regulatory  framework  for  broadband  services  has  been  established.  595 
 129.  Joint  Ventures  with  DBS.  In  the  past  year,  several  LECs  have  entered  into  joint  ventures  with  DBS  operators  to  offer  packages  of  video  programming  service.  While  these  agreements  and 
 services  do  not  represent  new,  facilities-  based  competition,  they  may  allow  both  LECs  and  DBS  operators  to  become  more  competitive  with  cable  operators  bundled  offerings.  SBC  claims  that  partnering  with 
 DBS  accounts  for  much  of  the  admittedly  limited  progress  that  LECs  have  made  in  attempting  to  enter  the  video  market.  596 


 130.  BellSouth,  SBC,  Qwest,  and  Verizon  sell  DBS  service  as  part  of  a  telecommunications  package.  In  March  2004,  SBC  and  EchoStar  jointly  launched  a  service  throughout  SBCs  service  area 
 that  they  co-  branded  as  "SBC  DISH  Network,"  with  DISH  prices  starting  at  $29.99  per  month  for  SBC  telephone  customers.  This  service  allows  SBC  customers  to  receive  a  package  of  high-  speed  Internet, 
 local  and  long  distance  telephone,  wireless  telephone,  and  EchoStar  video  service  on  one  bill  with  one  order.  597  As  of  October  2004,  SBC  indicated  that  it  had  226,000  DISH  Network  customers.  598  In  August 
 2004,  BellSouth  and  DIRECTV  launched  a  similar  joint  service  that  allows  Bell  South  customers  to  receive  a  bundle  of  high-  speed  Internet,  local  and  long  distance  telephone,  wireless  telephone,  and 
 DIRECTV  video  service  on  one  bill  with  one  order.  599  As  of  September  2004,  BellSouth  served  over  90,000  DIRECTV  customers.  600  In  January  2004,  Verizon  and  DIRECTV  introduced  a  service  in  Rhode 
 Island  that  packages  DIRECTV  with  Verizon  by  offering  discounts  on  DIRECTV  to  Verizon  customers.  601  In  March  2004,  Verizon  and  DIRECTV  expanded  this  service  to  their  New  England  and 
 New  York  regions,  602  and  in  August  2004  they  expanded  this  service  to  their  Mid-  Atlantic  region.  Verizon  and  DIRECTV  expect  to  have  coordinated  billing  later  this  year.  603  Finally,  Qwest  announced 
 agreements  with  both  DIRECTV  and  EchoStar  to  offer  packaged  services  in  separate  markets.  604  As  of  September  2004,  customers  of  Qwests  Choice  DSL  with  MSN  Premium  service  in  14  states  could 
 receive  a  $5  per  month  discount  on  satellite  television  services  from  their  choice  of  either  DIRECTV  or 
 594  See  47  U.  S.  C.    160(  c)  et  seq. 
 595  Conditional  Petition  of  the  Verizon  Telephone  Companies  for  Forbearance  Under  47  U.  S.  C.  160(  c)  with  Regard 
 to  Broadband  Services  Provided  via  Fiber  to  the  Premises  (filed  June  28,  2004).  596 
 SBC  Comments  at  4.  597 
 SBC  Communications  Inc.  and  EchoStar  Communications  Corporation,  SBC  Communications  Adds  New  'DISH'  To  The  Menu,  Launches  'Quadruple  Play'  Bundle  With  Satellite  TV  (press  release),  Mar.  3,  2004. 


 598  SBC  Communications,  Inc.,  SBC  Communications  Reports  Strong  Third-  Quarter  Results,  Accelerates  DSL 
 Gains  Delivers  Second  Consecutive  Quarter  of  Revenue  Growth  (press  release),  Oct.  21,  2004;  see  also  SBC  Hails  EchoStar  Marketing  Performance,  SATELLITE  BUSINESS  NEWS,  July  23,  2004. 


 599  BellSouth  Corp.  and  DIRECTV,  Inc.,  BellSouth  Launches  DIRECTV  Service  Across  The  Southeast  In  Money 
 Saving  Bundles  (press  release),  Aug.  3,  2004.  600 
 BellSouth  Corp,  BellSouth  Reports  Third  Quarter  Earnings  (press  release),  Sept.  30,  2004.  601 
 Verizon  Communications  and  DIRECTV,  Inc.,  Verizon  Adds  DIRECTV  Programming,  Creating  the  Most  Comprehensive,  Top-  Quality  Service  Bundle  in  the  Market  (press  release),  Jan.  29,  2004. 


 602  Verizon  Communications  and  DIRECTV,  Inc.,  From  Marblehead  to  Tonawanda  to  Orient  Point  --  Verizon  Adds 
 DIRECTV's  Programming  to  Calling  Services,  Internet  Packages  in  New  England  and  New  York  (press  release),  Mar.  8,  2004. 


 603  Verizon  Communications  and  DIRECTV,  Inc.,  Verizon  Invites  Mid-  Atlantic  Customers  to  Cut  the  Cable  and 
 Integrate  Calling,  Internet  and  DIRECTV  Programming  (press  release),  Aug.  5,  2004.  604 
 Qwest  Communications  International,  Inc.,  Qwest  Forges  Agreement  with  EchoStar  to  Offer  Satellite  Services  as  Part  of  Communications  Bundle  (press  release),  July  21,  2003. 
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 DISH  Network  if  they  ordered  these  services  from  Qwest.  605  In  June  2004,  Sprint  announced  that  customers  in  its  local-  telephone  operating  territory  could  receive  a  $5  per  month  discount  from  DISH 
 Network  if  they  also  subscribe  to  Sprint  DSL  and/  or  telephone  services.  606  In  August  2004,  CenturyTel  and  EchoStar  announced  a  strategic  partnership  that  would  allow  CenturyTel  to  package  DISH  Network 
 service  as  part  of  its  telecommunications  offerings  in  exchange  for  a  $25  million  investment  in  EchoStar  by  CenturyTel  in  the  form  of  a  convertible  note.  CenturyTel  expects  to  be  able  to  offer  these  services  as 
 part  of  a  single-  bill,  single-  point-  of-  contact  service  by  the  end  of  the  year.  607 
 I.  Electric  and  Gas  Utilities 
 131.  Electric  and  gas  utilities  possess  certain  assets  that  have  long  made  them  good  candidates  as  entrants  into  the  MVPD  market,  including  access  to  public  rights  of  way,  ownership  and  operation  of 


 various  infrastructures  amenable  to  the  provision  of  network  services,  and  well-  established  relationships  with  customers.  608  Some  utilities  continue  to  move  forward  with  ventures  involving  multichannel  video 
 programming  distribution,  though  their  services  are  still  not  widespread  in  either  the  telecommunications  or  video  distribution  markets.  Utilities  do,  however,  continue  to  provide  competition  in  scattered 
 localities,  most  beneficially  in  rural  areas.  609 
 132.  As  previously  reported,  utilities  provide  voice,  video,  and  data  services  by  overbuilding  incumbent  cable  systems  with  fiber  optic  networks.  Some  utilities  have  built  systems  on  their  own,  but 


 the  most  prominent  utilities  involved  in  the  video  distribution  market  are  engaged  in  joint  ventures  with  other  companies.  610  We  previously  reported  on  Starpower,  a  joint  venture  between  RCN  and  Potomac 
 Electric  and  Power  Company  (PEPCO)  operating  in  the  Washington,  D.  C.,  area.  611  In  December  2004,  the  companies  announced  that  RCN  had  completed  its  previously-  announced  acquisition  of  PEPCOs 
 share  of  the  system.  612  Cinergy  Broadband,  a  Cincinnati-  based  utility,  and  Current  Communications,  have  formed  a  joint  venture  that  aims  to  bring  broadband  over  power  lines  to  20  million  customers. 
 Municipalities,  in  some  cases,  also  provide  voice  video  and  high-  speed  Internet  access  services  in  competition  with  incumbent  cable  operators,  or  when  others  are  unwilling  to  provide  such  services.  613 
 For  example,  municipal  utilities  in  Glasgow,  Kentucky;  Lebanon,  Ohio;  Ashland,  Oregon;  Paragould, 


 605  Qwest  Communications  International,  Inc.,  http://  www.  qwest.  com/  residential/  products/  tvservices/  index.  html 
 (visited  Sept.  24,  2004).  606 
 Sprint  Corp.,  Sprint  Expands  Portfolio  with  DISH  Network  Satellite  TV  Service  (press  release),  June  1,  2004.  607 
 CenturyTel,  Inc.  and  EchoStar  Communications  Corporation,  CenturyTel  and  EchoStar  Sign  Strategic  Partnership  Agreement  to  Offer  CenturyTel  |  DISH  Network  Satellite  TV  Services  (press  release),  Aug.  26,  2004. 


 608  See  1996  Report,  12  FCC  Rcd  at  4410-  11    95-  96. 
 609  See  paras.  72-  73  supra.  See  also  NATOA  Comments  at  attachments. 
 610  See  2003  Report,  19  FCC  Rcd  at  1606    119. 
 611  Id. 
 612  See  RCN,  RCN  Elects  to  Acquire  Remaining  50%  Stake  of  Washington,  D.  C.  Operation  (press  release),  Oct.  19, 
 2004;  RCN,  RCN  Corporation  Announces  Emergence  From  Bankruptcy  (press  release),  Dec.  21,  2004.  See  also  paras.  72-  73  supra. 


 613  See  Glasgow  EPB,  at  http://  www.  glasgow-  ky.  com/  epb/  faq01.  htm  (visited  Jan.  12,  2005);  City  of  Lebanon,  at 
 http://  www.  ci.  lebanon.  oh.  us/  departments/  service.  html  (visited  Jan.  12,  2005);  Ashland  Fiber  Network,  at  http://  www.  ashlandfiber.  net  (visited  Jan.  12,  2005);  City  Light  Water  and  Cable,  at 


 http://  www.  clwc.  com/  profile.  htm  (visited  Jan.  12,  2005);  Grant  County  Public  Utilities  District,  at  http://  www.  gcpud.  org  (visited  Jan.  12,  2005);  Click  Networks,  at  http://  www.  cityoftacoma.  org  (visited  Jan.  12, 
 2005);  Cedar  Falls  Utilities,  at  http://  www.  cfu.  net;  Newnan  Utilities,  at  http://  www.  newnanutilities.  org/;  Hometown  Utilicom,  at  http://  www.  hometownutilicom.  org  (visited  Jan.  12,  2005);  See  also  NATOA  Reply  Comments  at  6. 
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 Arkansas;  Grant  County  and  Tacoma,  Washington;  Cedar  Falls,  Iowa;  Newnan,  Georgia;  and  Kutztown,  Pennsylvania,  all  provide  voice,  video,  and  Internet  access  services  for  their  residents.  614  The  American 
 Public  Power  Association  (APPA),  an  association  of  municipalities,  surveyed  its  members  at  the  end  of  2003,  finding  that  570  public  power  entities  offer  some  kind  of  broadband  services.  Of  those,  109  offered 
 video  service,  76  offered  high-  speed  Internet  access,  and  43  offered  local  telephone  service.  615 
 133.  Broadband  Over  Powerline.  616  Several  utility  companies  have  been  experimenting  with  a  technology  called  broadband-  over-  power-  line  (BPL)  service,  which  uses  power  lines  to  carry  high-speed 


 data  signals  the  last  mile  to  the  home.  617  BPL  uses  fiber  optic  lines  or  another  traditional  medium  to  deliver  data  to  the  power  line.  While  the  primary  objective  of  this  technology  is  to  provide  high-  speed 
 Internet  access  services,  some  companies  have  expressed  plans  to  offer  video  streaming  services,  but  not  traditional  video  services.  618  Four  utilities,  the  City  of  Manassas,  Virginia;  Cinergy  in  Cincinnati,  Ohio; 
 Pennsylvania  Power  &  Light;  and  Central  Virginia  Cooperative,  have  implemented  commercial  BPL  this  year.  619  The  Comcast  Corporation  and  the  National  Cable  and  Telecommunications  Association  have 
 filed  comments  citing  examples  of  growing  sources  of  video  competition  through  BPL.  620  NATOA  has  cited  Cedar  Falls,  Iowa,  as  an  example  where  an  advanced  municipal  communications  system  has 
 stimulated  economic  development.  621 
 134.  On  October  14,  2004,  the  Commission  adopted  a  Report  and  Order  to  encourage  the  development  of  BPL.  622  The  Commission  stated  that  this  new  medium  offers  the  potential  for  the 


 establishment  of  a  significant  new  medium  for  extending  broadband  access  given  that  power  lines  reach  virtually  every  home  and  business. 


 III.  MARKET  STRUCTURE  AND  CONDITIONS  AFFECTING  COMPETITION 
 A.  Horizontal  Issues 
 135.  The  video  programming  market  is  comprised  of  a  downstream  market  for  the  distribution  of  multichannel  video  programming  to  households,  and  an  upstream  market  for  the  purchase  of  video 


 programming  by  MVPDs.  623  In  this  section  we  review  changes  in  the  market  for  the  distribution  of  video  programming,  including  changes  in  the  level  of  competition  in  that  market  between  June  2003  and  June 
 2004.  We  then  review  the  market  for  the  purchase  of  video  programming  by  MVPDs,  and  examine  the 
 614  Officials:  Broadband  Investments  Pay  Off  For  Localities,  TR  DAILY,  Sept.  26,  2003. 
 615  APPA,  Public  Power:  Powering  the  21  st  Century  with  Community  Broadband  Services  (fact  sheet),  May  2004,  at 
 http://  www.  appanet.  org/  files/  PDFs/  TelecomFlyer1204.  pdf?  sn.  ItemNumber=  9965&  tn.  ItemNumber=  10000  (visited  Jan.  14,  2005).  See  also  NATOA  Comments  at  3. 


 616  See  Fourth  706  Report,  19  FCC  Rcd  at  20561-  62. 
 617  Ken  Brown,  The  Webs  New  Outlet,  WALL  STREET  JOURNAL,  Mar.  2,  2004. 
 618  For  example,  Cinergy  Broadband  and  Current  Communications  Group  have  formed  a  joint  venture  that  aims  to 
 bring  broadband  over  power  lines  to  20  million  customers.  This  BPL  initiative  would  include  voice,  data,  and  eventually  video.  See  BROADBAND  DAILY,  Aug.  16,  2004.  See  also  paras.  113-  117  supra. 


 619  In  Broadband  Over  Power  Lines  Gains  Steam,  PCWORLD,  Aug.  23,  2004. 
 620  See  Comcast  Comments  at  18;  NCTA  Comments  at  43. 
 621  NATOA  Comments  at  3. 
 622  Amendment  of  Part  15  Regarding  New  Requirements  and  Measurement  Guidelines  for  Access  Broadband  Over 
 Power  Line  Systems,  Carrier  Current  Systems,  Including  Broadband  Over  Power  Line  Systems,  ET  Docket  Nos.  04-  37,  03-  104,  FCC  04-  245  (rel.  Oct.  28,  2004). 


 623  See,  e.  g.,  2003  Report,  19  FCC  Rcd  at  1681    123. 
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 effects  that  changes  in  concentration  among  MVPDs  at  the  regional  and  national  levels  have  had  on  this  market  in  the  last  year. 
 1.  Competitive  Issues  in  the  Market  for  the  Distribution  of  Video  Programming 
 136.  DBS,  the  major  wireless  MVPD  technology  that  is  available  to  subscribers  nationwide,  saw  its  share  of  MVPD  subscribers  increase  between  June  2003  and  June  2004,  from  22.7  percent  of  the 
 market  to  25.1  percent.  624  Relatively  few  consumers,  however,  have  a  second  wireline  alternative,  such  as  an  overbuild  cable  system.  625  Of  the  33,760  cable  community  units  nationwide,  1,241,  or 
 approximately  3.7  percent,  have  been  certified  by  the  Commission  as  having  effective  competition  626  as  a  result  of  consumers  having  a  choice  of  more  than  one  wireline  MVPD,  or  because  DBS  penetration  was 
 above  15  percent.  627  In  cases  where  incumbent  cable  operators  face  competition  from  a  new  wireline  entrant,  BSPs  report  benefits  to  consumers,  such  as  restraint  in  cable  price  increases  and  increased  access 
 to  advanced  services,  citing  several  studies.  628  A  2003  GAO  study  found  that  where  wire-  based  competition  is  available,  cable  rates  are  lower  by  about  15  percent.  GAO  further  found  that  in  markets 
 where  DBS  companies  provide  local  broadcast  stations,  cable  rates  are  only  slightly  lower,  but  cable  operators  are  more  likely  to  improve  the  quality  of  their  service  in  response  to  DBS  competition.  629 
 NCTA,  on  the  other  hand,  submitted  a  white  paper  concluding  that  the  price  drops  resulting  from  overbuilding  are  not  sustainable.  630  Several  other  MVPD  technologies,  such  as  private  cable  systems  and 
 wireless  cable  systems,  offer  consumers  alternatives  to  incumbent  cable  services,  but  only  in  limited  areas. 


 624  See  Appendix  B,  Table  B-  1.  See  also  NCTA  Comments  at  8.  Previous  year  numbers  in  Table  B-  1  have  been 
 revised  due  to  improved  data  sources.  625 
 See  New  Jersey  Comments  at  8.  626 
 Under  Section  76.  907,  a  cable  operator  (or  other  interested  party)  may  petition  the  Commission  for  a  determination  of  effective  competition  pursuant  to  Commissions  procedural  rules  in  Section  76.  7.  See  47  C.  F.  R.   


 76.  7,  76.  907.  In  its  petition,  a  cable  operator  must  provide  evidence  that  it  meets  one  of  the  statutory  tests  for  the  existence  of  effective  competition.  See  47  U.  S.  C.    543  (l)(  1)(  A)-(  D).  See  also  47  C.  F.  R.    76.  905(  b).  Based  on 
 the  evidence  provided  in  the  petition  and  any  opposition  received,  the  Commission  determines  whether  to  grant  effective  competition  status  within  a  franchise  area.  Where  effective  competition  exists,  a  local  franchising 
 authority  (LFA)  may  not  regulate  basic  service  rates.  See  47  C.  F.  R.    76.  905  (a).  If  an  LFA  believes  that  a  Commission  finding  of  effective  competition  is  no  longer  valid,  it  may  file  a  petition  for  recertification  pursuant  to 
 Section  76.  916  of  the  Commissions  rules.  47  C.  F.  R.    76.  916.  If  the  Commission  grants  the  petition,  the  LFAs  certification  to  regulate  basic  service  tier  rates  will  be  reinstated. 
 627  Of  the  1,241  communities  where  effective  competition  status  was  granted,  936  were  based  on  DBS  competition. 
 We  note  that  there  may  be  more  communities  that  meet  this  test  of  effective  competition;  grants  of  effective  competition  are  made  at  the  request  of  the  provider  to  a  community,  so  the  Commission  does  not  have  information 


 about  communities  in  which  the  provider  has  not  sought  designation  that  effective  competition  exists.  We  note  further  that,  according  to  NCTA,  in  41  states,  DBS  penetration  exceeds  the  15  percent  threshold  that  is  the  first  part  of  one  of 
 four  statutory  tests  for  the  existence  of  effective  competition  in  a  local  market.  The  entire  test  is  that  at  least  two  MVPDs  serve  50  percent  or  more  of  households  and  at  least  15  percent  of  those  households  take  service  other  than 
 from  the  largest  MVPD.  See  47  U.  S.  C.    543(  l)(  1)(  B).  In  most,  if  not  all  areas,  at  least  50  percent  of  households  can  receive  DBS  service. 
 628  See  para.  74  supra. 
 629  See  2003  GAO  Report,  at  3-  4.  See  also  U.  S.  General  Accounting  Office,  Telecommunications:  The  Effect  of 
 Competition  From  Satellite  Providers  on  Cable  Rates,  GAO/  RCED-  00-  164  (July  2000).  630 
 NCTA  Reply  Comments  at  Attachment  A. 
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 137.  The  percentage  of  MVPD  subscribers  served  by  cable  operators  has  dropped  steadily,  both  in  national  percentages,  as  well  as  in  most  local  markets.  631  Most  consumers  may  choose  between 
 over-  the-  air  broadcast,  one  cable  provider,  at  least  two  DBS  providers,  and,  in  limited  cases,  an  overbuilder  or  other  delivery  technology.  632  Nonetheless,  according  to  some  commenters,  certain  barriers 
 to  full  competition  exist,  including:  (a)  cable  operator  exclusive  access  to  programming,  especially  sports  programming;  (b)  anti-  competitive  predatory  pricing;  (c)  limited  access  to  MDUs;  (d)  limited  access  to 
 utility  poles;  and  (e)  consumer  electronics  standards  that  create  a  disparity  among  delivery  technologies.  633  NCTA  and  Comcast  dispute  these  allegations.  634  Comcast  responds  that  competition 
 from  DBS  and  other  sources  constitutes  effective  competition  and  thus  all  regulations  established  pursuant  to  the  1992  Cable  Act  should  be  reviewed  and  removed  as  appropriate.  635 


 138.  Competitive  Developments  in  the  MDU  Market.  Multiple  dwelling  units  (MDUs)  comprise  a  separate  segment  of  the  MVPD  market  because  alternative  video  providers  may  have 
 difficulty  offering  service  in  MDUs  in  competition  with  an  incumbent  provider.  636  Non-  incumbent  MVPD  commenters  raise  a  number  of  issues  that  they  contend  adversely  affect  their  ability  to  serve  the 
 MDU  market.  637 
 139.  Exclusive  contracts  are  those  that  specify  that  video  service  in  an  MDU  will  be  provided  only  by  a  particular  MVPD.  Perpetual  contracts  are  those  which  grant  an  MVPD  the  right  to  provide 


 service  for  an  indefinite  or  very  long  period  of  time,  or  which  have  automatic  renewal  provisions  (sometimes  referred  to  as  evergreen  clauses).  Competitive  entrants  into  the  MVPD  market  have  raised 
 concerns  with  these  kinds  of  contracts  for  the  past  several  years.  As  it  did  last  year,  BSPA  states  that  these  kinds  of  contracts  block  potential  entry  into  MDUs,  and  lock  tenants  and  building  owners  into 
 outdated  networks  and  services.  638  BSPA  alleges  that  incumbent  cable  operators  use  long-  term  contracts  as  an  anticompetitive  weapon,  by  responding  to  impending  competitive  entry  through  negotiating 
 exclusive  contracts  with  MDU  owners.  639  DIRECTV  reiterates  its  comment  from  last  year  that  the  over-the-  air-  reception  devices  (OTARD)  rules  should  be  extended  to  renters  and  owners  who  do  not  have 
 exclusive  use  of  areas  suitable  for  satellite  reception.  640 


 631  See  Appendix  B,  Table  B-  1.  As  of  June  2004,  approximately  72  percent  of  MVPD  subscribers  were  served  by 
 cable  operators.  In  June  2003,  approximately  74  percent  of  MVPD  subscribers  were  served  by  cable  operators.  632 
 Some  sources  indicate,  however,  that  some  percentage  of  households  cannot  receive  one  or  both  DBS  providers  due  to  line  of  sight  issues.  See  2002  Report,  17  FCC  Rcd  at  26952    113  n.  385. 


 633  BSPA  Comments  at  12-  22  and  Reply  Comments  at  7-  12;  RCN  Comments  at  9-  10;  SBCA  Comments  at  16-  19; 
 DIRECTV  Comments  at  9-  11  and  Reply  Comments  at  4-  5;  ACA  Comments  at  3-  6;  EchoStar  Comments  at  10-  13;  Verizon  Comments  at  16-  20  and  Reply  Comments  at  5-  6;  NTCA  Comments  at  3-  4. 


 634  Comcast  Reply  Comments  at  12-  29;  NCTA  Reply  Comments  at  10-  15. 
 635  Comcast  Comments  generally.  NCTA  Comments  at  6-  28. 
 636  The  incumbent  provider  is  not  necessarily  the  incumbent  cable  operators.  Often  private  cable  operators  are 
 incumbents  for  many  MDUs.  637 
 Inside  wiring  is  an  important  issue  for  MVPDs  serving  the  MDU  market.  For  a  discussion  of  inside  wiring,  see  paras.  111-  112  supra. 


 638  BSPA  Comments  at  19.  See  also  Weston  Comments  at  2,  4,  5-  7;  Advocate  Reply  Comments  at  1-  3. 
 639  Id. 
 640  DIRECTV  Comments  at  10.  See  also  SBCA  Comments  at  19  (adding  that  DBS  MDU  penetration  is  much  lower 
 than  DBS  penetration  to  single-  family  homes.  The  OTARD  rules  prohibit  restrictions  that  impair  the  installation,  maintenance  or  use  of  antennas  used  to  receive  video  programming.  The  rule  applies  to  video  antennas  including 


 direct-  to-  home  satellite  dishes  that  are  less  than  one  meter  (39.37")  in  diameter  (or  of  any  size  in  Alaska),  TV  antennas,  and  wireless  cable  antennas.  The  rule  prohibits  most  restrictions  that:  (1)  unreasonably  delay  or  prevent 
 (continued....) 
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 2.  Competitive  Issues  in  the  Market  for  the  Purchase  of  Video  Programming 
 140.  Buyers  in  the  market  for  the  purchase  of  video  programming  are  MVPDs,  including  cable  operators  and  other  video  programming  providers.  The  sellers  are  primarily  nonbroadcast  programming 


 networks.  641  This  market  tends  to  be  regional  or  national  since  programmers  seek  to  reach  a  much  broader  audience  than  could  be  provided  by  a  local  franchise  area.  For  example,  some  programming 
 services  are  intended  for  nationwide  audiences  (e.  g.,  CNN,  USA)  while  others  seek  a  regional  audience  (e.  g.,  New  England  Sports  Channel). 


 a.  The  Regional  Programming  Market 
 141.  Cable  operators  continue  to  pursue  a  regional  strategy  of  clustering  their  systems.  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  other  holdings  scattered  across  the  country.  642  This  strategy  is  accomplished  through  purchases  and  sales  of  cable  systems,  or  by  system 
 swapping  among  MSOs. 
 142.  System  Mergers  and  Acquisitions,  and  Clusters.  Between  July  2003  and  June  2004,  a  total  of  22  transactions  were  announced.  Together  these  transactions  were  valued  at  approximately  $1.4 


 billion  and  affected  616,402  subscribers.  643  At  the  end  of  2003,  there  were  108  clusters  with  approximately  53.6  million  subscribers  compared  to  109  clusters  and  approximately  51  million 
 subscribers  at  the  end  of  2002.  644  In  the  largest  cluster  size  category  (over  500,000  subscribers),  the  number  of  clusters  remained  constant  at  29  between  2002  and  2003.  645 


 b.  The  National  Programming  Market 
 143.  Buyers  of  National  Video  Programming.  Cable  and  DBS  operators  are  the  primary  purchasers  of  multichannel  video  programming  targeted  to  a  national  audience.  646  As  of  June  2004,  cable 


 (...  continued  from  previous  page)  installation,  maintenance  or  use;  (2)  unreasonably  increase  the  cost  of  installation,  maintenance  or  use;  or  (3) 
 preclude  reception  of  an  acceptable  quality  signal.  Effective  January  22,  1999,  the  Commission  amended  the  rule  so  that  it  also  applies  to  rental  property  where  the  renter  has  an  exclusive  use  area,  such  as  a  balcony  or  patio.  See  47 
 C.  F.  R.    1.  400.  641 
 In  this  section,  we  refer  to  programming  that  is  packaged  as  one  or  more  24-  hour  video  programming  network(  s),  rather  than  the  individual  shows  and  series  that  nonbroadcast  networks  and  broadcast  networks  purchase  and 


 package  into  24-  hour  networks.  Purchasing  content  and  packaging  it  into  networks  represent  two  steps  in  the  process  of  delivering  programming  to  consumers  which,  when  combined  with  a  means  of  distribution,  results  in  the 
 programming  choices  consumers  have.  Video  programming  also  is  purchased  from  program  producers  and  suppliers  by  nonbroadcast  networks  as  well  as  broadcast  stations  and  networks,  but  we  do  not  address  that  market 
 here  because  this  report  is  focused  on  the  MVPD  market.  642 
 See  New  Jersey  Comments  at  8.  643 
 Kagan  World  Media,  Cable  System  Sales  Summary,  CABLE  TV  INVESTOR,  Aug.  18,  2004,  at  13;  Jan.  31,  2004,  at  11;  and  Aug.  28,  2003,  at  13. 


 644  See  Appendix  B,  Table  B-  2.  We  note  that  merging  clusters  can  cause  the  total  number  of  clusters  to  drop. 
 645  See  id. 
 646  In  this  context  that  Congress  adopted  Section  613(  f)  of  the  Communications  Act  as  part  of  the  1992  Cable  Act  to 
 address  the  consequences  of  horizontal  concentration  and  vertical  integration  in  the  cable  television  industry.  Section  613(  f)  was  adopted  as  Section  11(  c)  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of 


 1992,  Pub.  L.  No.  102-  385,  106  Stat.  1460,  codified  at  47  U.  S.  C.    533(  f).  In  Time  Warner  Entertainment  Co.  v.  FCC  (240  F.  3d  1126  (D.  C.  Cir.  2001)),  the  United  States  Court  of  Appeals  for  the  D.  C.  Circuit  reversed  and 
 remanded  the  Commissions  rules  implementing  Section  613(  f).  The  Commission  has  an  ongoing  proceeding  to  (continued....) 
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 operators  served  approximately  71.  6  percent  of  MVPD  subscribers.  647  Other  MVPDs,  however,  have  continued  to  increase  their  share  of  the  MVPD  market.  For  example,  the  two  largest  DBS  providers  now 
 serve  25  percent  of  the  total  market.  While  inter-  modal  competition  has  been  growing,  the  market  share  of  the  largest  MVPDs  has  decreased  slightly  since  our  last  report.  648  In  2004,  the  four  MVPDs  with  the 
 largest  subscribership  served  58  percent  of  all  MVPD  subscribers,  649  while  in  2003,  the  top  four  served  59  percent  of  all  subscribers.  650  The  share  of  subscribers  served  by  the  top  ten  MVPDs  also  decreased  from 
 approximately  86  percent  in  2003  to  84  percent  in  2004. 
 144.  To  compare  market  concentration  for  the  purchase  of  programming  over  a  period  of  time,  we  have  traditionally  used  the  Herfindahl-  Hirschman  Index  (HHI).  651  We  recognize  that  the  HHI  is  not 


 an  indicator  of  competition  in  the  market  for  purchase  of  video  programming,  and  that  it  is  not  being  used  in  the  same  way  that  it  would  be  for  purposes  of  antitrust  analysis.  For  purposes  of  this  report, 
 however,  the  HHI  is  a  useful  tool  to  follow  trends  in  the  dispersion  of  MVPD  size  from  year  to  year.  We  use  the  reported  MVPD  subscriber  shares  to  calculate  HHI  figures.  In  March  2004,  the  HHI  for  the 
 national  market  for  the  purchase  of  programming  was  1097.  This  represents  a  marginal  decline  from  the  revised  June  2003  MVPD  HHI  of  1134.  652  This  declining  HHI  reflects  the  fact  that  the  DBS  providers 
 grew  more  quickly  than  the  largest  cable  providers,  thereby  decreasing  the  difference  in  the  market  shares  of  the  largest  providers. 


 (...  continued  from  previous  page)  respond  to  the  ruling  of  the  court.  See  Implementation  of  Section  11  of  the  Cable  Television  Consumer  Protection 
 and  Competition  Act  of  1992,  16  FCC  Rcd  17312  (2001).  647 
 See  Appendix  B,  Table  B-  1.  648 
 See  id.  at,  Tables  B-  3,  B-  4.  The  percentages  reported  in  these  tables  are  derived  from  publicly  available  data  and  are  not  the  result  of  application  of  the  Commissions  attribution  rules.  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  in  terms  of  subscribership  and  may  not  include  subscribers  that  are  affiliated  with  the  entity  either  through  equity,  debt, 
 or  other  such  investments  or  management  duties.  For  example,  Comcast  holds  investments  in  Time  Warner  Cable,  Bresnan  Broadband  Holdings  LLC,  Insight  Midwest  LP,  Texas  Cable  Partnerships,  Kansas  City  Cable  Partners, 
 Parnassos  Communications  LP,  Midcontinent  Communications,  US  Cable  of  Costal  Texas  LP,  and  Century-  TCI  Communications  LP,  all  of  which  were  acquired  in  its  purchase  of  AT&  T,  which  had  previously  obtained  these 
 assets  when  it  purchased  TCI  Communications.  Cox  Communications  holds  an  investment  in  TCA  Cable  TV.  Charter  Communications  holds  investments  in  Renaissance  Media,  Avalon  Cable,  Falcon  Cable  Communications, 
 and  Fanch.  In  addition,  Cablevision  has  investments  in  various  cable  television  subsidiaries  in  New  York,  Connecticut,  and  New  Jersey. 
 649  See  Appendix  B,  Table  B-  4.  In  this  section,  reported  statistics  for  2004  are  based  on  March  data  since  June  data 
 comparable  to  that  used  in  previous  years  were  unavailable.  650 
 Id.  651 
 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  participants  in  the  market.  It  is  a  measure  of  concentration  that  takes  account  of  the 


 distribution  of  the  size  of  firms  in  the  market.  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.  HHI  is  usually  employed  to  examine  concentration  in  markets  in  which  products  are  sold  directly  to  consumers,  not  intermediate  markets  like  the  market  for  cable  programming  networks,  but  a  comparison  of  HHIs 
 from  previous  years  shows  a  general  trend  in  ownership  concentration.  The  HHI  calculation  is  based  on  the  MVPD  shares  of  cable  companies  serving  over  91  percent  of  all  subscribers  and  the  two  largest  DBS  operators.  The 
 addition  of  the  shares  of  other  cable  operators  and  smaller  MVPDs  would  change  the  HHI  only  a  small  fraction.  652 
 In  the  2003  Report,  we  reported  a  2003  HHI  of  1031.  See  19  FCC  Rcd  at  1689-  90,  1721    140,  Appendix  B,  Table  B-  3.  We  have  revised  the  2003  HHI  for  this  Report  due  to  a  revision  of  previous  years  cable  industry  and 


 MVPD  subscribers  to  allow  for  use  of  a  consistent  data  source  in  the  tables  in  Appendix  B. 
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 B.  Vertical  Integration  and  Other  Programming  Issues 
 1.  Status  of  Vertical  Integration 
 145.  Our  examination  of  vertical  integration  in  the  MVPD  industry  focuses  on  ownership  affiliations  between  video  programming  distributors  and  video  programming  suppliers.  These  vertical 


 relationships  may  have  beneficial  effects,  653  or  they  may  deter  competitive  entry  in  the  video  marketplace  and/  or  limit  the  diversity  of  programming.  654  Since  our  last  Report,  the  total  number  of  national  networks 
 has  increased.  In  2004,  we  identified  388  satellite-  delivered  national  programming  networks,  an  increase  of  49  networks  over  the  2003  total  of  339  networks.  Of  the  388,  89  networks  (23  percent)  were 
 vertically-  integrated  with  at  least  one  cable  operator  in  2004.  655  Last  year,  110  networks  were  vertically-integrated  (33  percent)  of  the  339  total.  656 


 146.  Four  of  the  top  six  cable  operators  (i.  e.,  Comcast,  Time  Warner,  Cox,  and  Cablevision)  hold  ownership  interests  in  satellite-  delivered  national  programming  networks.  If  we  count  iN  Demand 
 as  one  network,  one  or  more  of  these  companies  has  an  interest  in  the  54  vertically-  integrated  satellite-delivered  national  programming  networks.  657  Comcast  has  an  ownership  interest  in  ten  national 
 programming  networks;  Time  Warner  has  an  ownership  interest  in  29  national  programming  networks;  Cox  has  an  ownership  interest  in  16  national  programming  networks;  and  Cablevision,  through  its 
 programming  affiliate  Rainbow  Media,  has  an  ownership  interest  in  five  national  programming  networks.  658 


 147.  In  the  Notice,  we  sought  information  regarding  the  ownership  of  national  satellite-delivered  programming  networks  by  media  entities  other  than  cable  operators.  659  We  specifically 
 requested  information  to  identify  programming  networks  owned  by  DBS  or  other  MVPD  operators,  broadcast  networks,  broadcast  stations,  and  newspapers.  660  We  have  identified  103  programming 


 653  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). 


 654  Possible  detrimental  effects  can  include  unfair  methods  of  competition,  discriminatory  conduct,  and  exclusive 
 contracts  that  are  the  result  of  coercive  activity.  See  1995  Report,  11  FCC  Rcd  at  2135    157;  Implementation  of  Section  11(  c)  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992  Vertical  Ownership  Limits, 


 10  FCC  Rcd  7364,  7365    4  (1995).  See  also  Consumers  Union  Reply  Comments  at  1.  655 
 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  2000  Report,  16  FCC  Rcd  at  6079,  n.  579.  See  also  Appendix  C,  Table  C-  1.  656 
 2003  Report,  19  FCC  Rcd  at  1690    141.  The  drop  in  the  percent  of  vertically  integrated  networks  is  explained,  in  part,  by  Liberty  Media  spinning  off  its  ownership  interest  in  Liberty  Media  International,  Inc.  (LMI)  and  no 


 longer  holding  an  interest  in  Cablevision  of  Puerto  Rico.  Liberty  Media  Corporation,  Liberty  Media  Corporation  Completes  Spin  Off  of  Liberty  Media  International,  Inc.  (press  release),  June  7,  2004. 
 657  Traditionally,  the  Commission  has  counted  each  channel  of  several  multiplexed  networks  separately  (e.  g.,  35 
 channels  for  iN  Demand  and  33  channels  for  TVN  Entertainment  Corporation)  for  the  total  number  of  networks  and  for  these  calculations.  See  Appendix  C,  Table  C-  1. 


 658  In  addition,  Advance  Newhouse,  owner  of  the  Bright  House  Networks  cable  systems,  has  ownership  interests  in 
 13  national  nonbroadcast  networks  and  Insight  Communications  owns  one  programming  network,  Source  Suite.  See  Appendix  C,  Table  C-  1. 


 659  Notice,  19  FCC  Rcd  at  10914    15. 
 660  Id.  With  respect  to  newspaper  ownership  of  programming  networks,  we  find  that  the  newspaper  owners  we  have 
 identified  also  are  broadcast  television  station  licensees. 
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 networks  that  do  not  have  cable  ownership  interests,  but  that  are  owned  by  one  or  more  of  these  media  entities.  661  These  networks  represent  27  percent  of  the  388  total  networks  identified,  and  34  percent  of  the 
 299  networks  that  are  not  affiliated  with  a  cable  operator.  Thus,  we  have  identified  196  national  nonbroadcast  networks,  representing  51  percent  of  the  total  of  388  networks,  which  are  not  affiliated  with 
 any  cable  operators,  or  other  media  entities  identified  above.  662 
 148.  There  are  89  national  satellite-  delivered  nonbroadcast  networks,  not  also  owned  by  a  cable  operator,  that  are  owned  by  one  or  more  national  broadcast  networks  (i.  e.,  Fox,  ABC,  CBS,  NBC-Universal, 


 Univision).  663  These  networks  represent  23  percent  of  the  388  total  networks  identified,  and  30  percent  of  the  299  networks  that  are  unaffiliated  with  a  cable  operator.  With  respect  to  national 
 broadcast  network  ownership  of  nonbroadcast  networks,  News  Corporation,  which  holds  a  34  percent  interest  in  DIRECTV,  has  ownership  interests  in  12  national  nonbroadcast  networks,  or  three  percent, 
 through  its  Fox  subsidiary,  which  also  operates  the  Fox  television  network.  664  ABC,  through  its  parent  company  Disney,  has  ownership  interests  in  20  national  networks,  or  five  percent  of  all  national 
 programming  networks,  including  16  in  partnerships  with  other  media  entities.  665  Viacom,  the  parent  company  of  the  CBS  and  UPN  broadcast  networks,  has  ownership  interests  in  39  national  nonbroadcast 
 networks,  or  ten  percent  of  all  national  programming  networks.  666  NBC-  Universal,  through  its  parent  company,  General  Electric,  has  ownership  interests  in  17  nonbroadcast  networks,  or  four  percent  of  all 
 national  programming  networks,  including  five  networks  owned  jointly  with  Disney  and  Hearst  and  one  with  Paxson  Communications.  667  Univision,  a  Spanish  language  network  and  station  licensee,  has 
 ownership  interests  in  eight  networks,  representing  two  percent  of  the  388  total  networks.  668  We  also  have  identified  programming  networks  affiliated  with  broadcast  television  station  licensees.  Hearst,  in 
 joint  ventures  with  Disney  and  NBC-  Universal,  has  ownership  interests  in  14  programming  networks.  669  E.  W.  Scripps  holds  ownership  interests  in  six  national  programming  networks.  The  Trinity  Broadcasting 
 Network  owns  four  programming  networks.  Landmark  Communications  owns  The  Weather  Channel  and  Weatherscan.  The  New  York  Times  has  a  50  percent  interest  in  Discovery  Times  and  an  interest  in 


 661  See  Appendix  C,  Table  C-  3. 
 662  There  are  192  networks  affiliated  with  either  a  cable  operator  or  other  media  entity  (89+  103=  192).  Thus,  there 
 are  196  networks  that  are  unaffiliated  (388-  192=  196).  See  Appendix  C,  Tables  C-  1,  C-  3.  663 
 The  WB  network,  through  its  parent  company  Time  Warner,  has  ownership  interests  in  63  national  nonbroadcast  networks,  or  16.  5  percent  of  the  388  total  networks.  See  Appendix  C,  Table  C-  1.  UPN  (United  Paramount 


 Network)  is  owned  by  Viacom,  also  the  parent  of  CBS.  See  Viacom,  http://  www.  viacom.  com/  business.  tin  (visited  Dec.  16,  2004). 
 664  Fox  Comments  at  Attachment  A;  DIRECTV  Comments  at  Exhibit  E. 
 665  Disney  Reply  Comments  at  1-  3.  Disneys  has  ownership  interests  in  two  networks  with  Comcast  (E! 
 Entertainment  and  Style),  five  networks  with  NBC-  Universal  and  Hearst  (A&  E,  Biography,  History,  History  Channel  in  Espaol,  and  History  International)  and  nine  with  Hearst  (six  ESPN-  branded  networks  and  three 


 Lifetime-  branded  networks).  666 
 Viacom  Comments  at  4-  5.  667 
 NBC-  Universal,  http://  www.  nbcuni.  com/  AboutNBC_  Universal/  Company_  Overview/  overview02.  shtml  (visited  Dec.  16,  2004).  The  networks  jointly  owned  with  Disney  and  Hearst  are  A&  E,  Biography,  History  Channel,  History 


 Channel  in  Espaol,  and  History  International.  668 
 Univision  Communications  Inc.,  http://  www.  univision.  net/  corp/  en/  mp/  jsp  (visited  Dec.  16,  2004);  TuTv,  http://  tutv.  tv/  tutv/  en/  our_  company.  jsp  (visited  Dec.  16,  2004). 


 669  See  fn.  665  supra. 
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 Ovation.  670  The  Tribune  Company,  Paxson  Communications,  and  Daystar  Television  Network  each  have  ownership  interests  in  one  programming  network.  671  DBS  operator  EchoStar  holds  an  interest  in 
 G4techTV,  along  with  Comcast.  In  addition,  Liberty  Media,  which  has  an  ownership  interest  in  News  Corp.,  is  affiliated  with  34  national  programming  networks  (counting  Starz!  Superpack  as  one  network), 
 including  12  networks  it  owns  jointly  with  one  or  more  cable  operators  (i.  e.,  the  Discovery-  branded  networks  with  Cox  and  Advance  Newhouse  and  Court  TV  with  Time  Warner).  672 


 149.  In  2004,  we  found  96  regional  networks,  an  increase  of  12  networks  over  the  84  regional  programming  networks  in  2003.  673  Many,  but  not  all,  are  satellite  delivered.  These  networks  provide 
 programming  of  local  or  regional  interest  and  are  distributed  to  subscribers  of  one  or  more  MVPDs  in  an  area.  A  significant  number  of  regional  networks  offer  local  news  or  sports  programming,  but  some 
 provide  more  general  programming,  such  as  religious  or  ethnic  programming.  Of  the  96  regional  networks,  46  networks,  or  48  percent,  were  vertically-  integrated  with  at  least  one  MSO.  Cablevision  has 
 ownership  interests  in  16,  or  17  percent,  of  the  regional  networks.  Time  Warner  has  ownership  interests  in  12,  or  12.5  percent,  of  the  regional  networks.  Comcast  also  has  ownership  interests  in  12,  or  12.5 
 percent,  of  the  regional  networks.  Cox  also  has  ownership  interests  in  five,  or  five  percent,  of  the  regional  networks.  In  addition,  Charter  and  Adelphia  each  have  ownership  interest  in  one,  or  one  percent,  of  the 
 regional  networks.  Fox,  an  affiliate  of  News  Corporation,  has  ownership  interests  in  22,  or  23  percent  of  the  regional  networks.  674 


 150.  Vertically-  integrated  programming  networks  tend  to  attract  the  largest  number  of  subscribers.  Currently,  seven  of  the  top  20  nonbroadcast  video  programming  networks  (ranked  by 
 subscribership)  are  vertically-  integrated  with  a  cable  operator.  675  Of  the  remaining  13  networks,  one  is  C-  SPAN,  which  is  funded  but  not  directly  owned  or  controlled  by  MVPDs,  and  the  other  12  are  affiliated 
 with  non-  cable  media  entities.  This  figure  represents  a  slight  decrease  from  2003  when  nine  of  the  top  20  networks  were  vertically-  integrated.  676  Additionally,  it  appears  that  there  is  diverse  ownership  of  the 
 most  popular  networks:  10  different  entities  own  all  or  part  of  the  top  20  programming  networks  in  terms  of  subscribership.  677 


 151.  Vertically-  integrate  networks  also  tend  to  be  the  most  highly  rated.  678  Three  of  the  top  15  prime  time  non-  broadcast  video  networks  are  vertically-  integrated  with  a  cable  operator  (Time  Warner 
 owns  100  percent  of  TNT  and  TBS  while  Cox  and  Advance  Newhouse  each  owns  25  percent  of  The 
 670  Discovery  Times  is  a  joint  venture  of  the  New  York  Times  and  Discovery  Communications  (owned  by  Cox, 
 Advance  Newhouse,  and  Liberty  Media).  See  New  York  Times  Company,  http://  www.  nytco.  com/  subsites/  nyttv/  about-  dtc.  html  (visited  Jan.  14,  2005);  Ovation,  http://  www.  ovationtv.  com  (visited  Jan.  14,  2005). 


 671  See  Appendix  C,  Table  C-  3.  See  also  FCC,  Broadcast  Radio  and  Television  Electronic  Filing  System, 
 http://  www.  fcc.  gov/  e-  file/  support_  table.  html  (visited  Jan.  14,  2005);  Daystar  Television  Network,  http://  daystar.  com/  about.  htm  (visited  Jan.  14,  2005). 


 672  See  Appendix  C,  Table  C-  3. 
 673  2003  Report,  19  FCC  Rcd  at  1732-  1734,  Appendix  C,  Table  C-  4. 
 674  Fox  Comments  at  Appendix  A. 
 675  See  Appendix  C,  Table  C-  6. 
 676  See  2003  Report,  19  FCC  Rcd  at  1741,  Appendix  C,  Table  C-  6. 
 677  They  include:  Time  Warner,  Cox,  Disney,  General  Electric  (NBC-  Universal),  Hearst,  Liberty  Media,  Advance 
 Newhouse,  Viacom  Landmark  Communications,  and  C-  SPAN  (National  Cable  Satellite  Corporation).  See  http://  www.  cjr.  org/  tools/  owners  (visited  July  20,  2004). 


 678  See  Consumers  Union  Reply  Comment  at  2  (stating  that  of  the  90  most  popular  networks,  broadcasters  have 
 majority  ownership  of  40  percent  and  cable  operators  have  interests  in  an  additional  20  percent). 
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 Discovery  Channel).  679  The  remaining  12  networks  are  owned  by  other  media  entities.  Disney  has  ownership  interests  in  The  Disney  Channel,  ESPN,  Toon  Disney,  Lifetime,  The  History  Channel,  and 
 A&  E.  Hearst  has  ownership  interests  in  ESPN,  Lifetime,  The  History  Channel,  and  A&  E.  NBC  has  ownership  interests  in  The  History  Channel,  A&  E,  and  USA  Network.  Viacom  has  ownership  interests  in 
 Nickelodeon,  Nick  At  Nite,  and  MTV.  Fox  has  ownership  interests  in  Fox  News  Channel  and  FX. 
 152.  This  year,  we  found  78  programming  services  that  have  been  planned  but  are  not  yet  operational,  an  increase  of  17  over  last  year.  680  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  initiation  of  service.  Moreover,  we  include  in  this  list  programming  networks  that  have 
 been  announced,  but  which  are  in  various  stages  of  development.  681 
 2.  Other  Programming  Issues 
 153.  In  this  section,  we  discuss  a  number  of  programming  issues  apart  from  vertical  integration  and  the  status  of  existing  and  planned  programming  services.  These  issues  include  comments 


 we  received  about  the  effectiveness  of  our  program  access,  program  carriage,  and  channel  occupancy  rules  that  govern  the  relationships  between  cable  operators  and  programming  providers,  and  issues 
 relating  to  the  carriage  of  local  broadcast  stations  pursuant  to  must  carry  and  retransmission  consent.  We  also  address  other  matters  related  to  programming,  including  local  and  regional  channels,  public 
 education  and  governmental  (  PEG)  channels;  compliance  with  the  DBS  public  interest  programming  obligations;  locally-  originated  programming,  childrens,  news  and  community  affairs  programming; 
 programming  in  languages  other  than  English;  packaging  of  programming;  and  access  to  video  programming  by  persons  with  disabilities. 


 a.  Regulatory  Issues 
 154.  Program  Access  and  Carriage  Rules.  The  Commissions  rules  concerning  competitive  access  to  cable  programming  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.  682  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  competing  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  competing  MVPDs.  683  In 


 679  See  Appendix  C,  Table  C-  7. 
 680  See  Appendix  C,  Table  C-  5.  See  also  2003  Report,  19  FCC  Rcd  at  1735,  Appendix  C,  Table  C-  4. 
 681  See  1995  Report,  11  FCC  Rcd  at  Appendix  H,  Tables  3  and  4;  1996  Report,  12  FCC  Rcd  at  Appendix  G,  Tables 
 3  and  4;  2003  Report  19  FCC  Rcd  at  1693    146.  682 
 47  U.  S.  C.    548.  683 
 As  a  condition  of  the  News  Corp.-  Hughes  transaction,  News  Corp.  is  required  to  offer  its  existing  and  future  cable  programming  services  on  a  non-  exclusive  basis  and  on  non-  discriminatory  terms  and  conditions,  for  as  long  as 


 the  Commissions  program  access  rules  are  in  effect.  See  News  Corp  Order,  19  FCC  Rcd  at  523-  4,  525-  6,  531-  2    107-  108,  113-  115,  127.  These  conditions  also  extend  to  any  broadcast  station  that  News  Corp.  owns  or  operates, 
 or  on  whose  behalf  it  negotiates  retransmission  consent.  See  News  Corp  Order,  19  FCC  Rcd  at  572-  575    218-222.  For  MVPDs  with  fewer  than  5000  subscribers,  News  Corp.  is  required  to  either  elect  must-  carry  status  or 
 negotiate  retransmission  consent  for  its  owned  and  operated  stations  without  any  requirements  for  cash  (continued....) 
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 addition,  cable  operators  generally  are  prohibited  from  entering  into  exclusive  distribution  arrangements  with  vertically-  integrated  programming  vendors.  The  Commission  has  concluded  that  the  statutory 
 access  requirements  apply  only  to  satellite-  delivered  programming  and  not  to  terrestrially-  delivered  programming.  684 


 155.  As  in  previous  years,  a  number  of  commenters  address  the  statutory  exemption  for  terrestrially-  delivered  programming  in  the  existing  program  access  rules.  685  Several  commenters  again 
 express  concerns  over  incumbent  cable  operators  ability  to  restrict  competing  MVPDs  access  to  programming  due  to  the  terrestrially-  delivered  exemption  in  the  existing  program  access  rules,  which  puts 
 competing  MVPDs  at  a  competitive  disadvantage.  686  DIRECTV  and  EchoStar  argue  that  the  terrestrial  exemption  continues  to  be  used  by  cable-  affiliated  programmers  to  foreclose  noncable  MVPDs  access  to 
 popular  programming,  such  as  regional  sports  networks.  687  Verizon  also  states  that  the  terrestrial  exemption  in  the  program  access  rules  hampers  effective  competition  in  video  services  because,  without 
 access  to  must  have  networks  that  are  terrestrially  delivered,  new  entrants  are  at  a  serious  disadvantage  when  competing  against  incumbent  cable  companies.  688  Comcast  states  that  neither  DIRECTV  nor 
 EchoStar  have  provided  any  evidence  that  the  terrestrially-  delivered  exemption  has  prevented  them  from  competing  successfully.  689  We  are  not  aware  of  any  comprehensive  source  for  determining  the  delivery 
 mode  for  each  of  the  national  and  regional  networks.  In  light  of  the  entry  of  providers  using  fiber,  this  is  an  issue  of  interest,  and  we  believe  such  information  is  necessary  to  monitor  the  use  of  terrestrial 
 delivery.  690 
 156.  A  number  of  commenters,  including  ACA,  Verizon,  RCN,  and  NATOA  recommend  changes  to  the  program  access  requirements.  691  RCN  and  Verizon  ask  the  Commission  to  inform 


 (...  continued  from  previous  page)  compensation  or  carriage  of  programming  other  than  the  broadcast  signal.  See  News  Corp.  Order,  19  FCC  Rcd  at 
 575    224.  684 
 See  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,  13  FCC  Rcd  15822,  15856-  7    70-  71  (1998).  685 
 We  did  not  receive  comments  on  the  program  carriage  and  channel  occupancy  rules.  686 
 See  e.  g.,  SBCA  Comments  at  18;  Verizon  Comments  at  16-  17;  DIRECTV  Comments  at  18-  19;  EchoStar  Comments  at  11-  12. 


 687  EchoStar  Comments  at  11;  DIRECTV  Reply  Comments  at  4-  5.  EchoStar  cites  the  refusal  of  Comcast  to  make 
 the  Philadelphia  sports  programming  it  controls  available  to  DBS  operators.  It  also  states  that  the  detrimental  effect  of  this  conduct  on  MVPD  competition  is  well  documented  as  evidenced  by  the  below  national  average  market 


 penetration  of  DBS  providers  in  areas  where  such  programming  is  withheld.  Id.  DIRECTV  states  that  C-  SET,  a  sports  network  serving  North  and  South  Carolina,  will  be  carried  exclusively  on  Time  Warner  cable  systems  and 
 will  not  be  made  available  via  satellite  services.  DIRECTV  argues  that  Time  Warner  has  offered  C-  SET  a  premium  to  grant  it  exclusive  rights  to  C-  SET  programming,  otherwise  C-  SET  would  not  forgo  satellite  affiliate 
 fees  and  additional  advertising  revenue.  DIRECTV  believes  the  arrangement  with  C-  SET  is  indicative  of  Time  Warners  market  power  in  the  North  and  South  Carolina  MVPD  market.  See  DIRECTV  Reply  Comments  at  5.  We 
 note  that  C-  SETs  corporate  website  indicates  that  C-  SET  will  only  be  available  on  Time  Warner  cable  systems  in  North  and  South  Carolina,  that  the  company  is  in  negotiations  with  other  cable  operators  for  carriage,  and  that  C-SET 
 will  not  be  available  on  satellite  systems.  See  C-  SET,  at  http://  www.  c-  set.  tv/  faqs.  asp  (visited  Jan.  14,  2005).  688 
 Verizon  Comments  at  16-  17.  689 
 Comcast  Reply  Comments  at  19-  20.  690 
 See  paras.  125,  127-  128  supra.  691 
 See,  e.  g.,  ACA  Comments  at  18-  19;  Verizon  Comments  at  16-  17;  RCN  Comments  at  10;  NATOA  Comments  at  23. 
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 Congress  of  the  need  to  expand  the  program  access  rules  to  include  terrestrially-  delivered  programming.  692  SBCA  also  advocates  expansion  of  the  rules  to  include  such  programming.  693  In 
 addition,  DIRECTV  requests  that  the  Commission  closely  monitor  cable  operators  use  of  the  terrestrial-delivery  exemption  and  be  prepared  to  redress  any  competitive  distortion  in  the  marketplace.  694  RCN 
 states  that  the  Commission  should  strictly  enforce  its  program  access  rules  and,  where  necessary,  make  changes  that  will  ensure  competitors  nondiscriminatory  access  to  critical  programming  under  reasonable 
 rates,  terms,  and  conditions.  695  Comcast  states  that  only  one  program  access  complaint  has  been  filed  in  the  last  four  years,  with  the  Commission  finding  that  complaint  to  be  without  merit,  thus  suggesting  that 
 few  parties  believe  they  have  meritorious  complaints  about  program  access  violations.  696 
 157.  Commenters  also  address  other  matters  related  to  access  to  programming.  For  example,  NATOA  states  that  competitive  operators  face  the  danger  of  being  unable  to  access  essential 


 programming  due  to  clustering  of  cable  systems,  which  increases  an  incumbent  cable  operators  ability  to  secure  exclusive  distribution  of  programming.  697  DIRECTV  also  contends  that  clustering  has  enabled 
 MSOs  to  concentrate  their  subscribers  and  achieve  market  share  levels  throughout  many  of  the  largest  DMAs  that  they  previously  enjoyed  only  in  their  individual  franchise  areas,  thus  becoming  virtually 
 indispensable  to  local  and  regional  programmers  seeking  distribution.  698  BSPA  states  that  fair  access  to  content  means  that  all  competing  distributors  should  have  the  same  access  to  content  as  cable  incumbents 
 at  the  same  prices.  699  BSPA  states  that  BSPs  are  dependent  on  program  suppliers  that  are  either  partially  or  fully  owned  by  the  incumbent  cable  operators  with  which  BSPs  compete  for  customers,  thus  giving 
 these  suppliers  the  incentive  to  discriminate  against  BSPs  and  other  non-  cable  operators  with  respect  to  providing  fair  and  equal  access  to  programming  and  content.  700  BSPA  and  RCN  argue  that  the  ability  to 
 compete  effectively  is  not  limited  to  access  to  video  programming  but  should  extend  to  all  forms  of  content,  in  particular  digital  content.  701 


 692  RCN  Comments  at  9-  10;  Verizon  Comments  at  16-  17. 
 693  SBCA  Comments  at  4. 
 694  DIRECTV  Comments  at  23. 
 695  RCN  Comments  at  9. 
 696  Comcast  Reply  Comments  at  19,  citing  Complaint  by  Everest  Midwest  Licensee,  L.  L.  C.  v.  Kansas  City  Cable 
 Partners,  DA  03-  4077  (Dec.  24,  2003).  On  October  8,  2004,  Rainbow  DBS  Company  LLC,  operating  as  VOOM,  filed  a  program  access  complaint  against  iN  DEMAND,  LLC.  In  its  complaint,  VOOM  accuses  iN  DEMAND  of 


 unfair  competitive  practices  by  a  satellite  cable  programming  vendor  in  which  cable  operators  have  an  attributable  ownership  interest,  the  result  of  which  prevents  VOOM  from  providing  HDTV  programming  to  its  satellite 
 customers  on  commercially  reasonable  terms.  The  complaint  is  under  review.  See  Program  Access  Complaint,  Rainbow  DBS  Company  LLC,  filed  Oct.  8,  2004. 
 697  NATOA  Comments  at  19-  21. 
 698  DIRECTV  Reply  Comments  at  3.  DIRECTV  provides  approximate  market  shares  for  the  dominant  cable 
 operator  in  nine  DMAs:  Philadelphia  (Comcast)    79  percent;  San  Francisco/  Oakland  (Comcast)    78  percent;  Seattle/  Tacoma  (Comcast)    80  percent;  St.  Louis  (Charter)    87  percent;  Raleigh/  Durham  (Time  Warner)    71 


 percent;  Milwaukee  (Time  Warner)    74  percent;  West  Palm  Beach  (Adelphia)    77  percent;  Norfolk/  Portsmouth  (Cox)    80  percent;  and  Las  Vegas  (Cox)    90  percent.  Id. 
 699  BSPA  Comments  at  13. 
 700  Id. 
 701  Id.  at  12-  14.  BSPA  cites  as  an  example  of  digital  content  a  movie  that  can  be  delivered  as  part  of  a  broadcast 
 schedule,  as  a  pay-  per-  view  option,  as  part  of  a  cable  operators  video-  on-  demand  offering,  as  streaming  video  on  the  Internet,  or  as  a  downloadable  file  for  later  viewing  on  a  computer.  See  also  BSPA  Reply  Comments  at  9-  11; 


 RCN  Comments  at  10. 
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 158.  Comcast  states  that  differentiating  program  offerings  is  a  legitimate  competitive  response  and  enhances  competition  among  producers  and  distributors,  and  it  urges  the  Commission  to 
 acknowledge  that  competition  in  the  MVPD  marketplace  would  be  enhanced  by  allowing  the  marketplace  to  operate  freely  without  the  constraints  of  rules  prohibiting  exclusivity.  702  Indeed,  DIRECTV  notes  that 
 it  uses  its  agreement  for  the  NFL  Sunday  Ticket  programming  to  differentiate  its  service  from  incumbent  cable  operators.  703  Comcast  argues  that  the  Commission  should  consider  eliminating  the  prohibition  on 
 exclusive  contracts  for  satellite  cable  or  broadcast  programming  between  vertically  integrated  programming  vendors  and  cable  operators  because  of  the  significant  and  accelerated  growth  of  DBS  and 
 its  use  of  exclusive  programming  to  attract  subscribers.  704 
 159.  Commenters  also  suggest  several  regulatory  changes  they  contend  would  ensure  fair  access  to  programming.  ACA  recommends  that  the  Commission  undertake  regulation  of  programmers 


 distribution  agreements  with  MVPDs  and  prohibit  non-  cost-  based  pricing.  ACA  also  proposes  that  the  Commission  require  programmers  to  report  on  prices,  terms,  and  conditions  of  wholesale  pricing 
 agreements  regularly.  In  turn,  it  states  that  the  Commission  should  report  to  Congress  on  prices,  competition,  and  diversity  in  the  provision  of  wholesale  programming.  705  According  to  EchoStar,  despite 
 the  significant  growth  in  its  subscriber  base,  there  are  still  discrepancies  in  the  terms  and  conditions  under  which  vertically-  integrated  programmers  make  programming  available  to  EchoStar  and  to  cable 
 operators,  but  the  discrepancies  are  not  founded  upon  legitimate  competitive  factors.  706  Explaining  its  concerns,  EchoStar  states  that  the  Commission  should  penalize  discriminatory  tying  of  programming 
 services  and  the  imposition  of  penetration  requirements  by  vertically-  integrated  programmers.  707 
 160.  In  the  Notice,  we  asked  for  comment  on  the  experiences  of  new  networks  and  their  ability  to  successfully  launch.  708  The  America  Channel,  an  independent  programming  network  that  is  currently 


 trying  to  obtain  carriage  on  MVPDs,  describes  reasons  it  believes  account  for  its  inability  to  secure  carriage.  It  states  that  these  reasons  include  the  practice  of  tying  carriage  of  one  network  to  carriage  of 
 several  other  networks;  the  market  power  of  large  cable  operators,  which  lessens  the  incentive  for  these  carriers  to  strive  to  find  new  and  diverse  content;  the  penetration  requirements,  preferential  dispensations 
 from  so-  called  delete  rights  provisions,  709  and  unfavorable  contractual  terms  imposed  by  large  programmers.  710  The  America  Channel  suggests  that  the  Commission  request  periodic  reports  from  cable 
 operators  on  the  criteria  used  to  determine  whether  to  provide  carriage  to  an  independent  programmer,  an  MSO-  owned  network,  and  a  conglomerate-  owned  network,  and  to  submit  semi-  annual  reports  describing 


 702  Comcast  Reply  Comments  at  17-  18. 
 703  DIRECTV  Comments  at  20-  21.  DIRECTV  notes  that  exclusive  programming  arrangements  are  not  per  se 
 disfavored.  In  the  case  of  the  NFL  Sunday  Ticket,  an  unaffiliated  programmer  sells  its  programming  on  an  arms  length  basis,  and  the  MVPD  in  turn  uses  exclusivity  to  differentiate  itself  from  entrenched  competitors. 


 704  Comcast  Comments  at  42  (referring  to  the  Commissions  extension  of  this  prohibition  until  Oct.  5,  2007,  in 
 Sunset  of  Exclusive  Contracts,  17  FCC  Rcd  12124  (2002)).  705 
 ACA  Comments  at  18.  706 
 EchoStar  Comments  at  13.  707 
 Id.  at  8-  9.  708 
 Notice,  19  FCC  Rcd  at  108914-  15    17.  709 
 Delete  rights  refers  to  contractual  rights  maintained  by  an  MSO  to  terminate  all  distribution  of  an  independent  network  at  any  time  for  any  reason.  The  America  Channel  argues  that  all  networks  should  be  subject  to  delete  rights 


 and  not  just  independent  networks.  The  America  Channel  Comments  at  7.  710 
 Id.  at  6-  7.  The  America  Channel  does  not  describe  how  penetration  requirements  hurt  its  ability  to  obtain  carriage,  nor  does  it  detail  what  contractual  terms  cause  it  to  be  disadvantaged  vis-  -  vis  other  nonbroadcast 


 networks. 
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 new  distribution  inquiries  cable  operators  receive  from  independent  networks  and  the  status  of  such  inquiries.  711  It  believes  these  reports  will  allow  the  Commission  to  determine  how  many  independent 
 networks  have  received  carriage  and  to  develop  a  scoreboard  measuring  the  ease  or  difficulty  with  which  independent  programmers  gain  access  to  MSO  platforms.  712  Comcast  disagrees,  stating  that  there 
 is  no  statutory  basis  for  these  proposed  reporting  requirements,  and  notes  that  cable  operators  do  not  routinely  discriminate  in  favor  of  affiliated  networks  and  against  independent  networks.  713 


 161.  Must  Carry  and  Retransmission  Consent.  Under  Sections  614  and  615  of  the  Communications  Act,  cable  operators  must  set  aside  up  to  one  third  of  their  channel  capacity  for  the 
 carriage  of  commercial  television  stations  and  additional  channels  for  noncommercial  stations  depending  on  the  systems  channel  capacity.  714  Pursuant  to  the  SHVIA,  DBS  operators  may  provide  local-  into-  local 
 broadcast  television  service.  715  Unlike  cable  operators,  which  are  required  to  carry  local  television  stations  in  every  market  they  serve,  a  DBS  operator  must  carry  all  stations  in  any  market  where  it  chooses 
 to  carry  any  local  television  station  (  carry-  one,  carry-  all).  716  In  both  the  cable  and  DBS  contexts,  commercial  broadcasters  may  elect  to  be  carried  pursuant  to  must-  carry  status  or  retransmission 
 consent.  717  Where  a  station  elects  must-  carry  it  is  generally  guaranteed  carriage,  but  it  is  prohibited  from  receiving  compensation  for  this  carriage.  718  Under  retransmission  consent,  the  broadcaster  and  cable  or 
 DBS  operator  negotiate  an  agreement  that  may  involve  compensation  in  return  for  permission  to  retransmit  the  broadcast  signal.  The  current  rules  apply  to  the  carriage  of  analog  television  stations  only. 


 162.  Several  commenters  address  the  issue  of  retransmission  consent  agreements  that  require  MVPDs  to  carry  certain  nonbroadcast  networks  in  return  for  the  right  to  carry  local  broadcast  signals  (i.  e., 
 tying).  EchoStar  states  that  its  ability  to  negotiate  for  retransmission  consent  of  local  broadcast  network  affiliates  is  often  hampered  by  tying  requirements  imposed  by  entities  that  control  these  stations  as  well  as 
 nonbroadcast  programming.  719  EchoStar  urges  the  Commission  to  strictly  enforce  the  retransmission  consent  rules  and  to  closely  examine  disputes  involving  MVPDs  that  lack  market  power.  720 


 163.  Fox  disagrees  with  MVPDs  that  complain  about  retransmission  consent  agreements  that  require  carriage  of  nonbroadcast  programming.  Fox  states  that,  in  the  initial  retransmission  consent 
 negotiations,  the  cable  industry  made  clear  that  it  would  not  pay  cash  for  the  carriage  of  broadcast  signals.  Therefore,  many  broadcasters  negotiated  instead  for  cable  systems  to  carry  the  broadcasters  affiliated 
 nonbroadcast  programming.  721  Similarly,  NAB  states  that  cable  systems  and  satellite  carriers  often  choose  the  tying  option  because  such  agreements  provide  substantial  benefits  to  local  stations  at  relatively 
 modest  out-  of-  pocket  costs  to  MVPDs.  722  In  particular,  Fox  asserts,  tying  arrangements  maximize 
 711  Id.  at  1. 
 712  Id. 
 713  Comcast  Reply  Comments  at  27. 
 714  47  U.  S.  C.    534(  b),  535(  b).  See  also  47  C.  F.  R.    76.  56. 
 715  Pub.  L.  No.  106-  113,  113  Stat.  1501,  1501A-  526  to  1501A-  545  (Nov.  29,  1999). 
 716  47  C.  F.  R.    76.66. 
 717  47  C.  F.  R.    76.64. 
 718  47  C.  F.  R.    76.60. 
 719  EchoStar  Comments  at  10. 
 720  Id.  at  10-  11.  EchoStar  does  not  provide  specific  examples  where  the  Commission  has  failed  to  enforce  the 
 retransmission  consent  rules.  721 
 Fox  Comments  in  MB  Docket  No.  04-  207  at  21-  22  (Fox  A  La  Carte  Comments).  722 
 NAB  Reply  Comments  at  12. 
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 consumer,  programmer  and  cable  system  welfare,  and  demonstrate  that  benefits  accrue  when  government  permits  the  marketplace  to  determine  the  most  efficient  and  cost-  effective  way  to  distribute  video 
 programming.  723  Fox  also  contends  that  MVPDs  carriage  of  broadcasters  affiliated  programming  networks  have  led  to  tangible  public  interest  benefits  by  contributing  additional  content  to  the 
 marketplace  and  fostering  an  environment  in  which  new  content  can  emerge  and  thrive.  Fox  indicates  that  broadcasters  continue  to  offer  cable  systems  multiple  options  in  exchange  for  retransmission  consent, 
 maintaining  that  marketplace  negotiations  have  led  to  the  creation  of  a  number  of  vibrant,  diverse,  and  new  nonbroadcast  programming  networks.  724 


 164.  On  December  8,  2004,  the  Satellite  Home  Viewer  Extension  and  Reauthorization  Act  of  2004  (SHVERA)  was  enacted.  725  SHVERA  extended  certain  provisions  of  the  SHVIA,  primarily 
 pertaining  to  the  distant  signal  copyright  license  and  retransmission  consent  negotiations  for  five  years  and  added  some  new  provisions  to  the  law  pertaining  to  the  retransmission  by  DBS  of  distant  broadcast 
 signals.  726  In  particular,  SHVERA:  (1)  extends  and  revises  the  rules  governing  DBS  retransmission  of  distant  analog  broadcast  stations;  (2)  establishes  terms  and  conditions  under  which  DBS  operators  can 
 retransmit  distant  digital  broadcast  signals;  (3)  imposes  on  DBS  and  cable  a  good  faith  retransmission  consent  negotiation  obligation  comparable  to  the  existing  obligation  imposed  on  broadcasters  and  extends 
 until  2010  the  sunset  of  these  reciprocal  good  faith  negotiations  provisions  and  the  ban  on  exclusive  retransmission  consent  agreements;  (4)  gives  satellite  carriers  18  months  to  phase  out  its  practice  of 
 requiring  two  dishes  to  receive  a  full  complement  of  local  broadcast  stations;  and  (5)  allows  satellite  carriers  to  offer  significantly  viewed  stations  out  of  market.  SHVERA  also  subjects  DBS  to  the  same 
 subscriber  privacy  rules  that  currently  apply  to  cable  and  adds  several  new  notice  provisions. 
 165.  In  the  pending  DTV  Must-  Carry  Proceeding,  the  Commission  is  considering  issues  relating  to  the  carriage  of  digital  television  signals.  727  Reiterating  previously  filed  comments,  Paxson 


 argues  that  the  Commission  should  adopt  multicast  must-  carry  rules  that  would  require  cable  operators  to  carry  multiple  streams  of  programming  offered  over  a  single  digital  channel.  728  Cable  and  satellite 
 providers  oppose  mandatory  carriage  of  broadcasters  digital  multicast  streams  of  programming.  Comcast  states  that  channel  capacity  remains  constrained,  and  decisions  regarding  the  carriage  of 
 multicast  programming  should  be  left  to  the  cable  operator,  who  is  capable  of  deciding  which  programming  will  best  serve  its  customers  needs.  729  SBCA  argues  that  multicast  must-  carry  should 
 never  be  forced  upon  DBS  due  to  its  limited  spectrum  resources,  which  could  require  DBS  to  cease  transmission  of  large  amounts  of  local-  into-  local  programming.  730  NAB  disputes  the  DBS  commenters 


 723  Fox  A  La  Carte  Comments  at  22.  We  note  that  as  a  condition  of  its  acquisition  of  DIRECTV,  for  MVPDs  with 
 fewer  than  5000  subscribers,  News  Corp.  is  required  to  either  elect  must-  carry  status  or  negotiate  retransmission  consent  for  its  owned  and  operated  stations  without  any  requirements  for  cash  compensation  or  carriage  of 


 programming  other  than  the  broadcast  signal.  See  News  Corp.  Order,  19  FCC  Rcd  at  575    224.  See  also  fn.  683  supra. 
 724  Id.  at  21-  24. 
 725  Pub.  L.  No.  108-  447,  118  Stat.  2809  (2004).  SHVERA  was  enacted  as  Title  IX  of  the  Consolidated 
 Appropriations  Act,  2005.  726 
 Local-  into-  local  service  is  affected  only  in  that  the  two-  dish  carriage  approach  used  by  EchoStar  in  some  markets  must  be  discontinued  within  18  months,  and  local-  into-  local  service  in  Alaska  and  Hawaii  is  revised  to  phase  in  dual 


 must  carry  over  30  months.  Several  commenters  addressed  issues  relating  to  the  pending  re-  authorization  of  SHVIA  in  this  proceeding.  See,  e.  g.,  SCBA  Comments  at  14;  NAB  Reply  Comments  at  1. 
 727  Carriage  of  Digital  Broadcast  Signals,  16  FCC  Rcd  2598  (2001). 
 728  Paxson  Comments  at  5.  See  also  2003  Report,  19  FCC  Rcd  at  1699    157. 
 729  Comcast  Comments  at  28. 
 730  SBCA  Comments  at  3. 
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 claims  of  capacity  constraints,  stating  that  many  options  exist  for  DBS  operators  to  expand  their  capacity  to  deliver  local  signals,  including  local  digital  and  HD  signals.  731 
 b.  Sports  Programming 
 166.  We  continue  to  monitor  the  availability  of  sports  programming,  which  is  an  important  segment  of  programming  for  all  MVPDs.  732  There  are  38  regional  networks  devoted  to  sports 


 programming,  an  increase  from  the  27  we  identified  last  year.  733  Regional  sports  networks  now  represent  approximately  40  percent  of  the  96  regional  networks.  734  Fox  continues  to  be  the  leader  in  the 
 distribution  of  regional  sports  networks,  owning  or  holding  an  ownership  interest  in  19,  or  50  percent,  of  all  regional  sports  networks.  735  This  year  several  professional  sports  franchises  and  organizations  created 
 regional  sports  and  entertainment  networks.  In  March  2004,  the  parent  company  of  the  NBA  Denver  Nuggets,  NHL  Colorado  Avalanche,  and  other  Denver-  area  professional  and  amateur  sports  teams  created 
 a  regional  television  network  called  Altitude,  which  will  provide  exclusive  sports  coverage  of  those  teams  throughout  the  Rocky  Mountain  States.  736  Prior  to  the  debut  of  this  network,  those  teams  games  were 
 telecast  on  News  Corp.  s  Fox  Sports  Net  Rocky  Mountain,  which  is  available  on  cable  and  DBS  systems.  In  October  2004,  The  New  York  Mets,  Time  Warner  Cable  and  Comcast  announced  the  creation  of  a  new 
 regional  sports  network  providing  coverage  of  Mets  regular-  season  games  throughout  the  New  York  metropolitan  area  beginning  in  2006.  737  On  October  1,  2004,  Comcast  launched  a  new  sports  network 
 featuring  the  games  of  local  Chicago  teams  The  Cubs,  The  White  Sox,  The  Blackhawks  and  The  Bulls.  738 


 731  NAB  Reply  Comments  at  9. 
 732  See  General  Motors  Corporation  and  Hughes  Electronics  Corporation,  Transferors,  and  The  News  Corporation 
 Limited,  Transferee,  For  Authority  to  Transfer  Control,  19  FCC  Rcd  473  (2004).  733 
 2003  Report,  19  FCC  Rcd  at  1700    158.  734 
 See  Appendix  C,  Table  C-  3.  735 
 The  Commission  remains  cognizant  that  Foxs  ownership  of  numerous  regional  sports  programming  networks  may  pose  a  public  harm  when  combined  with  DIRECTVs  nationwide  distribution  platform.  The  Commission 


 imposed  conditions  on  News  Corp.  requiring  it  to  enter  into  arbitration  where  negotiations  fail  to  produce  a  mutually  acceptable  set  of  prices,  terms  and  conditions.  In  addition,  News  Corp.  cannot  offer  any  existing  or  future  regional 
 programming  services  on  an  exclusive  basis  to  any  MVPD  and  shall  make  such  services  available  to  all  MVPDs  on  a  non-  exclusive  basis.  See  News  Corp  Order,  19  FCC  Rcd  at  531-  2,  543,  552-  555,  626,    127,  147-  48,172-  79, 
 366.  736 
 NHL.  com  Network,  KSE  Regional  Sports  Network  Named  Altitude  Sports  &  Entertainment,  Mar.  11,  2004;  Chris  Walsh,  Kroenke  Sports  Network  Signs  First  Deal,  ROCKY  MOUNTAIN  NEWS,  May  13,  2004.  As  of  November  7, 


 2004,  Altitude  had  carriage  agreements  with  Comcast,  DIRECTV,  EchoStar,  Adelphia  Communications  in  Colorado  Springs  and  several  smaller  cable  operators,  for  a  total  of  250,000  subscribers.  See  Jason  Blevins,  Altitude  Takes 
 Shot  at  Comcast  Talks,  DENVER  POST,  Oct.  4,  2004;  DIRECTV  Group,  Inc.,  DIRECTV  and  Altitude  Sports  &  Entertainment  Reach  Multi-  Year  Carriage  Agreement  (press  release),  Oct.  29,  2004;  Comcast  Corp.,  Comcast  Adds 
 Altitude  Sport  &  Entertainment  to  Lineup  (press  release),  Nov.  7,  2004.  737 
 Richard  Sandomir,  Mets  Decide  the  Time  is  Right  for  a  Cable  Network  of  Their  Own,  NEW  YORK  TIMES,  Oct.  13,  2004.  Carriage  on  Time  Warner  Cable  and  Comcast  provides  the  network  with  distribution  to  approximately  3.1 


 million  cable  households.  The  Mets  had  a  television  broadcast  rights  agreement  with  Cablevisions  MSG  Network  and  Fox  Sports  New  York,  but  paid  a  termination  fee  of  $54  million  to  be  released  from  that  agreement.  The  Mets 
 are  reported  to  own  60  percent  of  the  network,  Time  Warner  40  percent,  and  Comcast  will  operate  the  network.  Peter  Grant,  New  York  Mets,  Cable  Operators  Launch  Network,  WALL  STREET  JOURNAL,  Oct.  13,  2004. 
 738  The  network  will  be  available  initially  on  Comcasts  Chicago  system,  which  covers  approximately  1.  5  million 
 homes.  Comcast  stated  its  intention  to  negotiate  carriage  agreements  with  other  cable  and  satellite  providers.  See  Comcast  Corp.,  Comcast  SportsNet  Chicago  to  Launch  October  1,  2004  (press  release),  Dec.  2,  2003.  Comcast 


 shares  ownership  of  the  network  with  the  teams  owners.  Jeremy  Mullman,  Comcast  SportsNet  Expands  Reach,  CHICAGO  BUSINESS,  Oct.  1,  2004.  In  addition  to  SportsNet  Chicago,  Comcast  serves  customers  in  the  Philadelphia 
 (continued....) 
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 It  also  announced  plans  to  launch  similar  networks  in  Detroit  and  in  California.  On  October  16,  2004,  Carolina  Sports  Entertainment  Television  Network  (C-  SET)  launched  on  Time  Warner  cable  systems 
 serving  North  and  South  Carolina.  739  Time  Warner  will  offer  C-  SET  as  a  digital  basic  channel.  740  A  notable  exception  to  the  growth  of  new  regional  networks  is  the  short  life  of  Victory  Sports  One.  In 
 October  2003,  the  owners  of  the  Minnesota  Twins  Major  League  Baseball  team  launched  Victory  Sports  One,  which  would  provide  exclusive  distribution  of  Minnesota  Twins  baseball  games  as  well  as  other 
 local  sports  franchises.  Victory  Sports  One,  which  was  unaffiliated  with  any  distribution  company,  signed  carriage  agreements  with  30  small  cable  operators  serving  Minnesota,  but  it  could  not  reach 
 agreement  with  EchoStar,  DIRECTV,  Charter,  Comcast  and  Time  Warner,  the  largest  MVPDs  operating  in  Minnesota,  and  it  ceased  operations  in  May  2004.  741 


 167.  In  February  2004,  Time  Warner  Cable  of  Kansas  City  and  Kansas  City  broadcaster  KCTV  initiated  an  agreement  whereby  Time  Warner  would  replace  KCTVs  sports  department  with 
 programming  from  its  own  Metro  Sports  Channel.  742  Under  this  arrangement,  Metro  Sports  functions  as  a  separate  cable  channel  on  Time  Warners  systems,  with  a  full  range  of  programming,  and  during  KCTVs 
 regular  evening  newscasts,  Metro  Sports  delivers  a  sports  newscast  originating  from  Metro  Sports  studios.  Time  Warner  has  an  agreement  with  Comcast  to  distribute  Metro  Sports  to  areas  not  served  by  Time 
 Warner  Cable,  but  Time  Warner  has  not  made  the  channel  available  to  DBS  operators.  743 
 168.  This  year,  cable  operators  continue  to  package  sports  networks  into  sports  tiers  or  packages.  744  Comcast  states  that  it  offers  several  optional  sports  packages  to  its  digital  cable  subscribers, 


 including  NASCAR  IN  CAR,  MLB  Extra  Innings,  Major  League  Soccer  Direct  Kick,  ESPN  GamePlan,  NHL  Center  Ice,  and  NBA  League  Pass.  745  Small  cable  operators  state  that  sports  channels  are  the  most 
 costly  services  they  distribute,  with  annual  wholesale  rate  increases  in  excess  of  inflation.  According  to  ACA,  contractual  distribution  restrictions  and  tie-  ins  with  what  it  terms  weaker  channels  increase  the 


 (...  continued  from  previous  page)  region  with  Comcast  SportsNet,  which  reaches  2.9  million  subscribers,  and  in  the  Baltimore/  Washington,  D.  C. 
 region  with  Comcast  SportsNet  Mid-  Atlantic,  which  serves  4.5  million  customers.  In  addition,  Comcast  has  partnered  with  Charter  Communications  to  offer  regional  sports  programming  to  11  million  subscribers  in 
 southeastern  states  on  Comcast/  Charter  Sports  Southeast.  See  Comcast  Comments  at  27.  739 
 Tim  Whitmire,  Bobcats  Launch  New  TV  Network;  C-  SET  Offers  More  Than  NBA  to  Fans  in  the  Carolinas,  SUN-NEWS  (Myrtle  Beach,  South  Carolina),  Oct.  16,  2004.  C-  SET  is  owned  by  Robert  Johnson,  who  owns  the 


 professional  mens  basketball  team  The  Charlotte  Bobcats  and  professional  womens  basketball  team  the  Charlotte  Stings.  The  network  will  operate  24-  hours-  a-  day,  seven  days  a  week  and  feature  these  teams  games  as  well  as 
 regional  college  football  games  and  will  develop  original  programming  See  also,  R.  Thomas  Umstead,  Carolinas  on  Their  Minds,  MULTICHANNEL  NEWS,  Aug.  9,  2004. 
 740  C-  SET,  at  http://  www.  c-  set.  tv/  faqs.  asp,  and  at  http://  www.  c-  set.  com/  about.  htm  (visited  Jan.  14,  2005). 
 According  to  C-  SET,  Time  Warner  has  approximately  600,000  digital  basic  subscribers  in  North  and  South  Carolina. 


 741  Cold  Minnesota  Shoulder  for  Twins  Baseball,  SKYREPORT,  Apr.  26,  2004;  Mike  Reynolds  and  R.  Thomas 
 Umstead,  Twins  Rights  Victory  for  Fox,  MULTICHANNEL  NEWS,  May  17,  2004.  The  teams  owners  signed  a  multi-year  carriage  agreement  with  Fox  Sports  Network.  Id. 


 742  Aaron  Barnhart,  KCTV5  to  Outsource  Its  Sports;  Metro  Sports  Will  Handle  Coverage  on  Telecasts,  KANSAS 
 CITY  STAR,  Nov.  7,  2003.  The  programming  is  delivered  via  a  fiber  optic  line  from  Metro  Sports  studios  to  KCTVs  broadcasting  facility. 


 743  Time  Warner  Cable,  at  http://  www.  kcmetrosports.  com/  info/  faq.  asp  (visited  Jan.  14,  2005). 
 744  See  2003  Report,  19  FCC  Rcd  1706-  7    175-  76. 
 745  Comcast  Comments  at  27. 
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 aggregate  cost  of  sports  channels.  746  DIRECTV  maintains  that  clustering  is  the  reason  that  obtaining  exclusive  arrangements  for  valuable  regional  sports  networks  has  become  an  increasingly  viable  and 
 attractive  proposition  for  cable  operators.  747 
 c.  News  Programming 
 169.  We  requested  comment  on  the  extent  to  which  MVPDs  provide  local  news  and  community  affairs  programming.  748  This  year,  of  the  96  regional  programming  networks  identified,  40, 


 or  42  percent,  are  regional  news  networks.  749  In  July  2004,  Time  Warner  Cable  and  Belo  Corp.,  a  broadcast  station  owner,  dissolved  their  joint  venture  that  operated  24-  hour  cable  news  channels  in 
 Houston  and  San  Antonio,  Texas,  and  Charlotte,  North  Carolina.  750  In  September,  Belo  announced  that  it  was  assessing  whether  to  discontinue  its  Texas  Cable  News  channel,  citing  an  inability  to  obtain  analog 
 carriage  on  Time  Warners  cable  systems  in  Houston,  San  Antonio  and  Austin,  Texas,  or  any  carriage  at  all  from  other  cable  systems  operating  in  Texas,  in  particular  those  owned  by  Cox  Communications.  751 


 d.  Other  Programming 
 170.  PEG  Programming:  Local  franchising  authorities  may  request,  as  part  of  the  franchising  process,  that  operators  devote  a  certain  amount  of  channel  capacity  and  equipment  to  PEG 


 programming.  752  PEG  channels  are  intended  to  provide  community-  specific  information,  such  as  bulletin  boards  for  local  activities,  local  civic  meetings,  and  local  governmental  activities.  There  are 
 approximately  5,000  public,  educational  and  government  access  channels  in  the  United  States,  which  are  divided  among  1,500  access  operations  with  some  cable  systems  providing  as  many  as  twelve  channels 
 for  PEG  programming  and  others  providing  one  channel  for  all  three  purposes.  753  Approximately  85  percent  of  all  PEG  channels  are  not  operated  by  cable  companies,  but  instead  are  operated  by  non-  profit 
 entities,  government  agencies  and  educational  institutions.  754  Comcast  reports  that  it  carries  more  than  2,400  PEG  channels  across  the  country  and  spends  $100  million  in  direct  support  for  PEG  channels.  755 


 171.  DBS  Public  Interest  Programming:  DBS  operators  are  required  to  reserve  four  percent  of  their  channel  capacity  for  noncommercial  programming  of  an  educational  or  informational  nature.  756 
 To  qualify  as  a  public  interest  channel  on  a  DBS  system,  programmers  must  be  organized  for  a  non-commercial,  non-  profit  purpose,  be  a  national  educational  programming  supplier,  and  be  responsible  for 
 50  percent  of  the  direct  costs  incurred  by  the  DBS  operator  in  making  the  channel  available. 


 746  ACA  Comments  at  23. 
 747  DIRECTV  Reply  Comments  at  4. 
 748  See  Notice,  19  FCC  Rcd  10916    21. 
 749  See  Appendix  C,  Table  C-  3. 
 750  Time  Warner  Cable,  Belo  Dissolve  Venture,  ASSOCIATED  PRESS,  July  23,  2004.  The  joint  venture  had  been 
 formed  in  September  2000.  751 
 Belo  Corp.,  Belo  Updates  Investment  Community  on  Operating  Strategy  (press  release),  Sept.  29,  2004.  752 
 47  U.  S.  C.    531.  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). 


 753  NATOA  Comments  at  30. 
 754  Id. 
 755  Comcast  Comments  at  24. 
 756  See  Implementation  of  Section  25  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992, 
 Direct  Broadcast  Satellite  Public  Interest  Obligation,  19  FCC  Rcd  5647  (2004). 
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 Furthermore,  the  programming  offered  by  such  programmers  must  contain  no  advertisements,  be  of  an  educational  or  informative  nature,  and  be  available  on  a  regular  schedule.  757  DIRECTV  provides  12 
 public  interest  channels.  758  EchoStar  provides  21  channels  of  public  interest  programming.  759  To  ensure  that  the  programming  is  commercial-  free  and  educational  or  informational  in  content,  EchoStar  claims 
 that  it  conducts  a  limited  review  of  the  content,  but  given  the  constraints  of  reviewing  hundreds  of  programs  and  the  desire  to  avoid  interfering  with  programmers  rights  to  editorial  control,  EchoStar  does 
 not  undertake  an  in-  depth  review.  760 
 172.  Although  DBS  providers  are  subject  to  the  public  interest  channel  reservation  requirements  discussed  above,  NATOA  asserts  that  they  should  have  additional  access  requirements. 


 NATOA  argues  that  even  though  DBS  can  deliver  local-  into-  local  signals,  in  order  for  public  interest  programmers  to  gain  access  to  DBS,  they  are  required  to  pay  to  be  carried.  NATOA  argues  that  DBS 
 providers  should  be  held  to  the  same  standards  as  cable  operators  and  provide  public  interest  programming  to  the  local  community.  761 


 173.  Non-  English  Programming:  SBCA  states  that  the  DBS  industry  provides  international  and  non-  English  speaking  households  with  programming  offerings  in  other  languages  including  Spanish, 
 Chinese,  Korean,  Urdu,  Arabic,  and  Polish.  762  DBS  operators  have  long  focused  on  international  programming.  EchoStar  added  an  additional  14  Chinese  channels  to  its  Chinese  programming  lineup  to 
 create  the  Great  Wall  TV  Package  featuring  17  total  channels.  763  EchoStar  also  introduced  a  new  Arabic  programming  package  called  Arabic  Elite  Super  Pack,  which  is  offered  on  a  mini-  tier  basis  for  $39.99  per 
 month.  764  This  year,  DIRECTV  introduced  Vietnamese  language  programming  to  its  lineup.  765  Comcast  reports  that  it  reorganized  its  digital  cable  package  targeting  Hispanic  viewers  in  the  United  States, 
 offering  ten  digital  networks  and  eight  audio  channels  that  are  targeted  to  Hispanic  audiences.  Comcast 
 757  See  47  U.  S.  C.    25.  701. 
 758  DIRECTV  Comments  at  Exhibit  H.  DIRECTV  states  that  when  faced  with  a  capacity  constraint,  it  must  choose 
 the  most  qualified  programming,  which  will  make  its  overall  service  offering  as  attractive  and  compelling  for  viewers  as  possible.  DIRECTV  attaches  a  copy  of  its  instructions  to  programmers  applying  for  access  to  its  channel 


 capacity.  See  DIRECTV  Comments  at  Exhibit  I.  759 
 EchoStar  Comments  at  14.  EchoStar  segments  its  programming  into  the  following  categories:  seven  educational,  one  arts,  one  multicultural,  two  news,  three  religious,  one  family,  two  social/  political/  cultural,  one 


 workplace  learning,  one  Spanish  educational,  one  NASA  channel,  and  one  health.  In  terms  of  how  it  selects  its  public  interest  programming,  EchoStar  states  that  a  committee  comprised  of  five  or  six  EchoStar  employees  reviews 
 all  applications  and  make  recommendations,  which  result  in  final  selections  by  senior  management.  Id.  760 
 Id.  at  14-  15.  761 
 NATOA  Comments  at  31-  32.  According  to  NATOA,  the  most  cost  effective  solution  to  accomplish  funding  of  public  interest  programming  by  DBS  operators  is  to  subject  them  to  the  same  regime  cable  operators  are  subject,  by 


 which  local  cable  franchise  authorities  collect  five  percent  of  gross  revenue  receipts  which  are  then  directed  to  funding  public  interest  programming  facilities.  Id.  at  32. 
 762  SBCA  Comments  at  12. 
 763  Programming:  DISH  Grows  Chinese  Programming,  SKY  REPORT,  Oct.  4,  2004.  The  service  costs  $29.  99  per 
 month  and  is  available  as  an  a  la  carte  offering.  The  package  requires  customers  to  use  EchoStars  SuperDISH  system,  which  is  capable  of  processing  medium-  power  Ku-  band  and  high-  power  DBS  signals. 


 764  EchoStar  Adds  International  Channels,  SATELLITE  BUSINESS  NEWS,  Oct.  1,  2004.  The  package  includes  Al 
 Arabiya,  NBN,  New  TV,  Noursat,  Iqraa,  Al  Jazeera,  ART  America  and  MBC.  765 
 International:  DIRECTV  Adds  Vietnamese  Content,  SKYREPORT,  Oct.  7,  2004.  The  channel  is  called  VietnameseDirect  and  is  the  result  of  a  joint  venture  involving  International  Channel  Networks  and  Saigon 


 Broadcasting  Network.  Most  content  is  produced  in  the  United  States  and  consists  of  news,  talk  shows,  sports,  childrens  programs,  cultural,  history,  and  general  entertainment  programs. 
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 adds  that  it  plans  to  introduce  Hispanic  VOD  content.  766  In  addition,  Comcast  offers  five  international  specialty  channels.  767  In  July  2004,  in  a  move  designed  to  counter  DBS  operators  strong  international 
 programming  fare,  Comcast  assumed  ownership  of  The  International  Channel.  768  Other  cable  operators  offering  non-  English  language  programming  include  Time  Warner,  which  offers  programming  in 
 Spanish,  Chinese,  Hindi  and  several  other  South  Asian  languages.  769  Cox  offers  programming  in  Spanish,  Arabic,  Korean,  Vietnamese,  Filipino,  and  other  South  Asian  languages.  770  Cablevision  offers 
 programming  in  Russian,  Chinese,  Korean,  German,  Portuguese,  Indian/  Southeast  Asian,  Japanese,  Italian,  and  Polish  on  certain  systems  in  New  York  City.  771  Additionally,  in  May  2004,  the  History 
 Channel  launched  a  U.  S.  Spanish-  language  version  of  the  History  Channel.  772 
 174.  Locally-  Originated  and  Community-  Oriented  Programming:  We  requested  information  on  the  extent  to  which  locally-  originated  programming  is  delivered  to  consumers  by  broadcasters  and 


 MVPDs,  and  the  factors  affecting  production  of  and  availability  of  locally-  originated  programming.  773  NCTA  states  that  cable  operators  are  active  in  promoting  local  and  regional  programming  ventures  that 
 provide  coverage  of  state  and  local  events.  774  Distribution  includes  dedicated  cable  television  channels,  shared  cable  television  channels,  over-  the-  air  broadcasting,  and  Internet  streaming  and  archived  media, 
 but  public  affairs  and  government  networks  rely  principally  on  cable  distribution.  775  Approximately  20 


 766  Comcast  Comments  at  26.  The  ten  networks  include  Discovery  en  Espanol,  CNN  en  Espanol,  Fox  Sports 
 Espanol,  Toon  Disney  Espanol,  MTV  Espanol,  VH  Uno,  TVE  Internacional,  Cinelatino,  Utilisima,  and  HTV  Musica. 


 767  Comcast  Comments  at  27.  The  channels  include  TV5,  an  international  French  language  channel;  RAI,  an  Italian 
 network;  CTI  Zhong  Tian,  a  24-  hour  Mandarin-  Chinese  channel;  Zee  TV,  an  Indian  satellite  channel;  and  RTN,  a  24-  hour  Russian  language  network.  Comcast  also  reports  that  it  now  provides  WKTV-  Korean  American  Television 


 to  subscribers  served  by  the  MSOs  Maryland  systems.  Id.  at  28.  768 
 Seth  Arenstein,  Q&  A  With  International  Channel  Networks  Steve  Smith;  Comcast  Battles  Satellite  With  Ethnic  Programming,  CABLEWORLD,  Oct.  7,  2004.  Comcast  stated  that  it  would  direct  The  International  Channels 


 programming  at  Asian  demographic  groups.  In  June  2004,  The  International  Channel  also  made  an  investment  in  Television  Korea  24,  which  planned  to  launch  in  Los  Angeles  in  the  fourth  quarter  of  2004.  The  channel  is  a 
 Korean-  language  digital  basic  cable  or  satellite  network  featuring  news,  dramas,  movies,  sports,  business,  health,  music,  childrens  programming,  and  game  shows,  with  selected  shows  subtitled  in  English.  Korean  Channel  to 
 Launch  in  L.  A.,  BROADCASTING  AND  CABLE  TV  FAX,  June  2,  2004.  769 
 See  Time  Warner  Cable,  at  http://  www2.  twcnyc.  com/  index2.  cfm?  c=  dtv/  channel  (visited  Jan.  7,  2005).  770 
 See  Cox  Communications,  at  http://  www.  cox.  com/  fairfax/  digitalcable/  digitalchannellineup.  asp  (visited  Jan.  7,  2005). 


 771  See  Cablevision  Systems  Corp.,  at  http://  www.  io.  tv/  index.  jhtml?  pageType=  international  (visited  Jan.  7,  2005). 
 772  History  Readies  Spanish-  Language  Version,  BROADCASTING  &  CABLE  TV  FAX,  Feb.  24,  2004. 
 773  See  Notice,  19  FCC  Rcd  at  10916    21. 
 774  NCTA  Comments  at  46.  State  public  affairs  networks  in  California,  Michigan,  and  Pennsylvania  are  funded 
 almost  entirely  by  the  cable  television  industry  and  receive  wide  scale  distribution  within  those  states.  The  California  Channel  is  available  in  5.6  million  households,  or  89  percent  of  all  California  cable  households; 


 Pennsylvania  Cable  Network  is  available  in  3  million  homes,  or  85  percent  of  cable  television  households;  and  Michigans  MGTV  reaches  1.  6  million  households,  or  about  75  percent  of  Michigans  cable  television  households. 
 Radio  and  Television  News  Directors  Foundation,  A  Look  at  Regional  News  Channels  and  State  Public  Affairs  Networks  (RTNDF  Study),  Feb.  2004,  at  23. 
 775  RTNDF  Study  at  22.  Some  statewide  networks  share  time  with  local  government  access  cable  channels  that 
 typically  feature  programming  produced  by  city  or  county  government  agencies.  For  example,  in  Detroit,  the  Detroit  Cable  Commission,  a  city-  controlled  agency,  shares  time  on  its  dedicated  cable  channel  with  Michigan 


 Government  Television.  Some  state  networks,  such  as  Florida  Channel,  are  distributed  by  public  broadcast  networks  and  through  access-  channel  arrangements  with  cable  operators.  Washington  States  TVW  uses  the 
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 million  homes  have  access  to  state  public  affairs  television  coverage.  776  Twenty-  five  states  feature  televised  coverage  of  government  activities  and  events,  and  another  ten  or  more  state  channels  are  in 
 development.  777  The  coverage  varies  from  a  few  hours  of  daily  state  House  and  Senate  coverage  during  legislative  sessions  to  professionally  staffed  networks  providing  24-  hour  daily  coverage  of  executive, 
 legislative  and  judicial  activities.  778  Some  state  networks  have  begun  to  broaden  their  programming  beyond  retransmission  of  government  meetings;  for  example,  in  addition  to  state  public  affairs  coverage, 
 the  Pennsylvania  Cable  Network  offers  original  documentary  programming,  book  review  discussions  and  high  school  sports  coverage.  779  In  addition,  Comcast  reports  that  it  distributes  a  regional  news,  sports  and 
 entertainment  channel  -  CN8  -  to  households  in  Delaware,  Maryland,  New  Jersey,  New  England  and  Pennsylvania.  780 


 175.  Childrens  Programming:  Nonbroadcast  networks  are  attracting  a  growing  audience  share  for  their  childrens  programming.  Total  day  viewing  by  children  aged  2-  11  of  advertising-supported 
 nonbroadcast  networks  increased  from  a  28.3  share  in  1993/  1994  to  a  53.6  share  during  the  2003/  2004  television  season.  781  In  June  2004,  Comcast,  the  Public  Broadcasting  System,  and 
 programmers  Sesame  Street  Workshop  and  HIT  Entertainment  were  reported  to  be  in  discussion  to  develop  a  24-  hour,  commercial-  free  nonbroadcast  network  dedicated  to  preschool  aged  children.  782 


 176.  Access  to  Programming  by  Persons  with  Disabilities:  Under  the  Commissions  rules,  video  programming  distributors  are  currently  required  to  provide  at  least  1,350  hours  of  captioned  new 
 nonexempt  programming  on  each  channel  during  each  calendar  quarter.  783  In  addition,  a  video 


 (...  continued  from  previous  page)  Internet  to  distribute  content,  by  placing  digital  recordings  of  hearings  on  its  website.  Some  statewide  networks 
 distribute  programming  via  Internet  archiving,  sometimes  in  conjunction  with  state  universities.  For  example,  Michigan  State  University  stores  unedited  footage  of  state  legislative  debates  and  proceedings  to  be  used  by 
 researchers  and  historians.  Id.  at  24-  25.  776 
 RTNDF  Study  at  17.  According  to  the  report,  in  February  2004,  several  state  public  affairs  networks  incorporated  a  not-  for-  profit  trade  association,  the  National  Association  of  Public  Affairs  Networks,  to  foster  the  advancement  of 


 public  affairs  channels.  For  purposes  of  the  report,  a  state  public  affairs  television  network  is  defined  as  an  organization  that  produces  and  makes  available  to  citizens  ongoing  televised  coverage  of  activities,  events  and 
 proceedings  of  the  state  government,  including  coverage  of  the  legislative,  executive  and/  or  judicial  branches.  Id.  at  18. 
 777  Id. 
 778  For  example,  according  to  the  report,  in  Washington  State,  cameras  are  allowed  within  the  state  Supreme  Court 
 chambers,  and  about  five  percent  of  the  2,200  hours  of  television  produced  annually  by  TVW,  the  states  public  affairs  network,  consists  of  oral  arguments  before  the  court.  That  is  contrasted  with  the  California  Channel,  which 


 has  no  access  to  the  states  Supreme  Court,  and  concentrates  mainly  on  legislative  and  regulatory  agency  hearings  and  activities  in  the  state  capital  to  make  up  its  six-  and-  a-  half  hours  of  daily  programming.  Id.  at  20-  21. 
 779  Id.  at  21. 
 780  Comcast  Comments  at  48. 
 781  NCTA  Comments  at  46. 
 782  Dennis  K.  Berman,  Comcast  Plans  to  Create  24-  Hour  Network    For  Toddlers,  WALL  STREET  JOURNAL,  June  9, 
 2004.  783 
 47  C.  F.  R.    79.  1(  b)(  1)  (phase-  in  schedule  for  programming  new  programming  which  is  defined  as  programming  first  published  or  exhibited  on  or  after  January  1,  1998).  Video  programming  first  published  or 


 exhibited  for  display  on  television  receivers  equipped  for  display  of  digital  transmissions  or  formatted  for  such  transmission  is  defined  as  new  as  of  July  1,  2002.  47  C.  F.  R.    79.  1(  a)(  6)(  ii).  See  Closed  Captioning 
 Requirements  for  Digital  Television  Receivers,  15  FCC  Rcd  16788,  16808-  09    60  (2000)  (Digital  Captioning  Order).  As  of  January  1,  2006,  100  percent  of  all  new,  nonexempt  video  programming  must  be  provided  with 
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 programming  distributor  must  include  captioning  in  30  percent  of  its  pre-  rule  nonexempt  programming  on  each  channel  during  each  calendar  quarter.  784  The  rules  exempt  several  specific  classes  of 
 programming  from  the  closed  captioning  requirements.  785  Video  programming  providers  may  also  petition  the  Commission  for  an  exemption  from  the  closed  captioning  rules  if  the  requirements  would 
 impose  an  undue  burden.  786  The  closed  captioning  rules  specified  in  Section  79.1  are  enforced  through  a  complaint  process,  with  the  complaint  initially  directed  to  the  video  programming  distributor  responsible 
 for  compliance  with  the  rules.  787 
 177.  We  sought  comment  on  many  issues  relating  to  programming  providers  and  consumers  experiences  with  closed  captioning,  including  whether  programming  providers  are  complying  with  the 


 existing  requirements  and  updated  information  on  the  cost  of  captioning.  788  In  response,  we  received  approximately  220  informal  comments  from  consumers  regarding  the  amount  and  quality  of  captioning. 
 The  vast  majority  of  commenters  express  their  appreciation  for  the  existing  captioning  and  their  desire  to  have  all  television  programming  captioned,  including  commercials.  789  Many  commenters  described  how 
 important  captioning  is  for  their  enjoyment  of  television,  for  news  and  other  information,  or  for  learning  for  children  who  are  deaf.  790  While  numerous  commenters  note  that  closed  captioning  has  improved 
 recently,  many  mention,  and  often  complain  about,  the  continuing  problems  with  quality,  accuracy,  placement,  and  missing  or  delayed  captions.  The  accuracy  of  captions  ranges  from  excellent  to 
 undecipherable,  with  many  spelling  errors.  791  Commenters  express  frustration  with  captions  that  fall  behind  the  spoken  words,  or  are  cut  off  when  scenes  switch,  there  are  commercial  breaks,  or  before  the 
 end  of  a  show.  792  Another  concern  is  captions  that  block  a  speakers  face  or  name,  textual  material  or  the  action  in  a  sporting  event.  793  There  is  also  incomplete  or  inaccurate  captioning  information  in  television 
 program  guides  and  listings.  794  Some  commenters  point  out  that  programs  may  be  captioned  on  the  first  showing,  although  not  when  the  program  is  repeated  and  sometimes  episodes  of  a  usually  captioned  series 
 do  not  appear  with  captions.  795  Commenters  are  especially  concerned  that  all  or  part  of  their  local 
 (...  continued  from  previous  page)  captions.  47  C.  F.  R.    79.  1(  b)(  iv).  A  separate  phase-  in  schedule  applies  for  Spanish  programming.  47  C.  F.  R. 
   79.  1(  b)(  3)-(  4).  784 
 47  C.  F.  R.    79.  1(  b)(  2)  (phase-  in  schedule  for  pre-  rule  programming).  See  also  47  C.  F.  R.    79.  1(  a)(  6)  (definition  of  pre-  rule  programming). 


 785  47  C.  F.  R    79.  1(  d). 
 786  47  C.  F.  R    79.  1(  f). 
 787  47  C.  F.  R    79.  1(  g). 
 788  Notice,  19  FCC  Rcd  at  10917    23. 
 789  See,  e.  g.,  Letters  from  Richard  S.  Nealy  (Aug.  23,  2004);  Barbara  and  Bob  Rummel  (June  25,  2004);  Steve 
 Barber  (July  12,  2004).  790 
 See,  e.  g.,  Letters  from  Christopher  Parkes  (July  12,  2004);  Marcia  Breese  (June  25,  2004);  Deborah  Culp  Hook  (July  12,  2004). 


 791  See,  e.  g.,  Letters  from  Barbara  Curtis  (June  23,  2004);  Paul  Hammerschlag  (July  9,  2004);  Carolyn  Wilson  (July 
 15,  2004).  792 
 See,  e.  g.,  Letters  from  Barbara  Curtis  (July  23,  2004);  Clifford  Cleary  (July  12,  2004);  Patricia  Raswant  (July  14,  2004). 


 793  See,  e.  g.,  Letters  from  Liz  Peterson  (July  9,  2004);  Don  Senger  (June  25,  2004);  Jenni  Tiziani  (July  13,  2004). 
 794  See,  e.  g.,  Letters  from  William  D.  Sager  (July  14,  2004);  Karen  Hearn  (July  19,  2004);  Liz  Peterson  (July  9, 
 2004).  795 
 See,  e.  g.,  Letters  from  Nancy  Rosenberg  (June  23,  2004);  Carolyn  Wilson  (July  15,  2004);  Jim  Grennan  (Aug.  23,  2004). 
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 newscasts,  especially  the  weather  reports,  remain  uncaptioned,  yet  they  are  not  sufficiently  visual  to  provide  necessary  information,  and  commenters  ask  that  real-  time  captioning  be  required  for  local  news 
 and  emergency  information.  796 
 178.  TDI  submits  a  previously  filed  Petition  for  Rulemaking  requesting  that  the  Commission  initiate  a  proceeding  to  establish  additional  enforcement  mechanisms  to  better  implement  the  closed 


 captioning  rules.  797  In  its  petition,  TDI  specifically  requests  that  the  Commission:  (1)  create  a  database  with  updated  contact  information  for  video  programming  providers  and  a  captioning  complaint  form;  (2) 
 establish  a  compliance  reporting  requirement  and  undertake  audits  to  ensure  effective  implementation  of  the  captioning  requirements  and  to  improve  accountability;  (3)  revise  its  complaint  rules  to  require 
 responses  to  consumer  complaints  regarding  issues  other  than  the  captioning  benchmarks  (e.  g.,  captioning  quality)  within  30  days;  (4)  establish  fines  or  penalties  for  noncompliance  with  the  captioning  rules;  (5) 
 require  continuous  monitoring  of  captioning  by  video  programming  providers  to  ensure  that  technical  problems  are  remedied  promptly;  (6)  require  video  programming  providers  to  reformat  edited  or 
 compressed  captioning;  (7)  require  that  for  a  program  to  be  captioned  under  the  rules,  it  must  meet  minimum  standards  for  completeness,  accuracy,  readability  and  synchronicity  with  the  audio  portion  of 
 the  program;  and  (8)  adopt  nontechnical  quality  standards  to  ensure  that  video  programming  is  fully  accessible  to  persons  with  hearing  disabilities.  798 


 179.  NAD  supports  TDIs  petition  and  further  addresses  our  request  for  comment  on  whether  the  procedures  for  applying  for  an  exemption  based  on  an  undue  burden  are  sufficient.  799  NAD  argues 
 that  the  procedures  are  not  adequate  because  they  do  not  provide  for  initial  review  of  sufficiency  of  the  petition  for  such  an  exemption  before  it  is  put  out  on  public  notice  for  comments  and  opposition.  800  NAD 
 also  claims  that  a  program  provider  who  files  a  petition  for  exemption,  regardless  of  the  merits,  is  effectively  exempt  from  the  captioning  rules  for  at  least  two  years  while  the  petition  remains  pending 
 before  the  Commission.  801  NAD  recommends  that  the  Commission  adopt  procedures  to  provide  for  preliminary  review  for  sufficiency  and  that  it  reject  those  petitions  that  are  insufficient,  before  posting  a 
 Public  Notice.  It  further  recommends  that  the  Commission  reduce  the  administrative  delay  in  processing  petitions  for  exemption.  802 


 180.  DIRECTV  reports  that  it  passes  along  all  NTSC  closed  captioning.  803  With  respect  to  advanced  digital  closed  captioning,  DIRECTV  states  that  it  is  unaware  of  any  HD  programming  currently 
 being  transmitted  with  native  CEA-  708B  (i.  e.,  digital)  closed  captioning,  but  it  has  tested  its  receivers  using  in-  house  produced  CEA-  708B  closed  captioning,  and  they  have  all  functioned  properly.  804  Fox 


 796  See,  e.  g.,  Letters  from  Lois  Smith  (July  19,  2004);  Richard  S.  Nealy  (Aug.  23,  2004);  Julia  Olson  (July  12,  2004). 
 797  See  Closed  Captioning  of  Video  Programming    Implementation  of  Section  305  of  the  Telecommunications  Act  of 
 1996  Video  Programming  Accessibility,  (filed  July  23,  2004)  (TDI  Petition).  The  Media  Bureau  placed  this  Petition,  RM  No.  11065,  on  public  notice  on  September  2,  2004,  Report  No.  2670,  and  is  reviewing  comments  in  anticipation 


 of  making  recommendations  to  the  Commission.  798 
 TDI  Reply  Comments  at  2-  3.  See  generally  TDI  Petition.  799 
 Notice,  19  FCC  Rcd  at  10917    23.  800 
 NAD  Comments  at  2.  NAD  states  that  a  review  of  the  petitions  filed  in  2004  indicate  that  many  petitioners  fail  to  provide  information  addressing  the  undue  burden  criteria  in  the  rules.  Id.  at  45.  See  also  47  C.  F.  R.    79.  1(  f)(  2). 


 801  NAD  Comments  at  2,  5-  7.  See  also  NAD  Comments,  Exhibits  1-  3  (detailing  the  history  of  undue  burden 
 petitions).  802 
 NAD  Comments  at  7.  803 
 DIRECTV  Comments  at  17.  804 
 Id.  at  17-  18. 
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 provides  information  on  the  costs  of  captioning  its  originally-  produced  broadcast  and  nonbroadcast  programming,  noting  that  it  uses  several  vendors  and  that  costs  vary  widely  depending  on  whether  the 
 programming  is  live  or  on  tape.  805  For  example,  Foxs  regional  sports  networks  spend  between  $105  and  $365  to  caption  a  single  hour  of  programming,  with  the  higher  fee  associated  with  live  sports  events.  For 
 its  National  Geographic  channel,  Fox  indicates  that  it  typically  costs  $165  to  caption  an  hour  of  original  programming.  Fox  further  states  that,  when  it  purchases  programming  from  a  third  party,  the  cost  of 
 captioning  is  included  in  the  overall  cost  of  the  programming. 
 181.  With  respect  to  video  description,  in  August  2000,  the  Commission  adopted  rules  requiring  certain  larger  broadcasters  and  video  programming  distributors  to  include  video  descriptions 


 with  a  small  amount  of  their  programming  to  increase  their  accessibility  to  persons  with  visual  disabilities.  806  On  November  8,  2002,  the  U.  S.  Court  of  Appeals  for  the  D.  C.  Circuit  vacated  the 
 Commissions  video  description  rules,  finding  that  they  exceeded  the  Commissions  authority.  807  In  light  of  this  decision,  video  description  currently  is  provided  by  programmers  on  a  voluntary  basis. 


 182.  In  1996,  we  reported  that,  with  the  exception  of  PBS,  there  were  no  video  described  programs  distributed  by  broadcasters  and  TBS  provided  one  movie  a  week  with  video  description.  808 
 Today,  we  see  some  programming  with  video  description  on  both  broadcast  and  nonbroadcast  networks.  809  Examples  of  prime  time  broadcast  television  programs  that  include  video  description  are: 
 PBS  American  Experience,  Masterpiece  Theatre,  Mystery,  Nature,  and  Nova;  CSI:  Crime  Scene  Investigation,  JAG,  and  some  movies  on  CBS;  NBCs  Law  and  Order  and  some  movies;  The  Bernie  Mac 
 Show,  That  70s  Show,  and  The  Simpsons  on  Fox;  and  some  movies  on  ABC.  In  addition,  broadcasters  distribute  childrens  programming  containing  video  description,  such  as:  Sesame  Street,  Barney  and 
 Friends,  and  Mr.  Rogers  Neighborhood  on  PBS:  and  Reading  Rainbow,  Rugrats,  Blues  Clues  and  Dora  the  Explorer  on  CBS  and  also  on  co-  owned  Nickelodeon;  Scout  Safari,  Kenny  the  Shark,  and  Endurance 
 on  NBC;  and  Foxs  Magic  School  Bus.  Nonbroadcast  networks,  TCM,  TBS,  TNT,  Lifetime  and  USA  offer  movies  with  video  description,  with  TCM  showing  at  least  one  video  described  movie  almost  every 
 day.  In  addition  to  movies,  several  nonbroadcast  networks  include  video  description  when  they  rerun  programs  that  were  previously  shown  on  broadcast  networks.  Examples  of  such  programs  are:  Law  & 
 Order  and  Homicide:  Life  on  the  Street  on  TNT;  JAG  on  USA;  CSI:  Crime  Scene  Investigation  on  Spike;  and  Ripleys  Believe  it  or  Not  on  TBS.  Moreover,  numerous  websites  provide  consumers  with  daily 
 listings  of  the  availability  of  video  described  programming,  some  specific  to  particular  local  markets.  810 


 805  Fox  Comments  at  4-  5. 
 806  Video  descriptions  are  aural  descriptions  of  key  visual  elements  in  a  television  program,  inserted  into  the  natural 
 pauses  in  the  programs  audio  and  distributed  in  the  programs  second  audio  channel.  See  Implementation  of  Video  Description  of  Video  Programming,  15  FCC  Rcd  15230  (2000),  on  recon.,  16  FCC  Rcd  1251  (2001). 


 807  Motion  Picture  Association  of  America  v.  FCC,  309  F.  3d  796  (D.  C.  Cir.  2002). 
 808  See  Closed  Captioning  and  Video  Description  of  Video  Programming,  Implementation  of  Section  305  of  the 
 Telecommunications  Act  of  1996,  Video  Programming  Accessibility,  11  FCC  Rcd  19214,  1926-  61    112-  13,  116  (1996). 


 809  See,  e.  g.,  The  Metropolitan  Washington  Ear,  http://  www.  washear.  org/  dailylogs.  htm  (visited  Jan.  14,  2005); 
 WGBH    Media  Access  Group,  http://  main.  wgbh.  org/  wgbh/  pages/  mag/  services/  description/  ontv/  (visited  Jan.  14,  2005);  and  Turner  Broadcasting,  http://  www.  tnt.  tv/  dvs?  network=  all  (visited  Oct.  28,  2004).  See  also  Letter  from 


 Elizabeth  Goodwin  (July  12,  2004)  (urging  the  widespread  adoption  of  video  description).  810 
 See,  e.  g.,  The  Metropolitan  Washington  Ear,  http://  www.  washear.  org/  dailylogs.  htm  (visited  Jan.  14,  2005);  WGBH,  http://  wgbh.  org/  schedules/  daytv  (visited  Jan.  14,  2005);  and  Arts  Access  (Raleigh,  North  Carolina), 


 http://  www.  artsaccessinc.  org/  AAvideodeodesc.  html  (visited  Oct.  28,  2004). 
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 183.  In  its  comments,  DIRECTV  notes  that  programmers  may  use  the  Secondary  Audio  Programming  (SAP)  channel  for  video  descriptions.  811  DIRECTV  states  that  it  carries  a  SAP  channel  on 
 39  nonbroadcast  channels,  and  on  over  200  broadcast  channels,  but  it  leaves  the  decision  on  how  to  employ  the  SAP  channel  to  the  programmers  themselves,  and  it  does  not  monitor  the  SAP  channels 
 systematically.  812 
 e.  Packaging  of  Programming  Services 
 184.  Generally,  MVPDs  continue  to  offer  packages  or  tiers  of  service  that  include  a  large  number  of  programming  networks.  813  DIRECTV  offers  certain  programming,  such  as  pay  per  view 


 events  and  international  sports  offerings,  on  an  a  la  carte  basis,  and  it  offers  five  mini-  tiers.  814 
 185.  Cable  and  DBS  operators  complain  of  contractual  restrictions  requiring  them  to  include  programming  in  basic  or  expanded  basic  tiers.  815  With  the  proliferation  of  digital  platforms,  many  cable 


 operators  are  choosing  to  locate  new  digital  cable  channels  on  digital  tiers,  in  many  cases  built  around  a  theme,  such  as  sports  or  family  programming.  816  Small  cable  operators  claim  that  large  programmers  are 
 demanding  that  they  distribute  second  tier  channels  to  all  digital  subscribers,  thereby  undermining  the  ability  to  provide  digital  theme-  tiers.  817  EchoStar  describes  as  pervasive  the  practice  of  having  to  carry 
 programming  networks  that  it  would  not  normally  carry  or  carry  programming  on  a  tier  it  would  not  normally  choose,  if  not  for  a  tie-  in  requirement  with  an  essential  broadcast  station  or  nonbroadcast 
 network.  818  EchoStar  states  that  this  practice  prevents  it  from  offering  programming  on  a  la  carte  and  tiered  basis,  requiring  it  to  bundle  must-  have  programming  with  programming  its  consumers  do  not 
 want.  819  Large  programmers  argue  that  bundling  of  programming  services  is  an  economically  efficient  way  to  deliver  video  programming  with  maximum  choice  and  minimum  inconvenience  to  potential 


 811  DIRECTV  Comments  at  18. 
 812  Id. 
 813  See,  e.  g.,  Comcast  Comments  at  Appendix  A,  listing  11  separate  program  packages  and  tiers  on  its  Arlington, 
 Virginia  system.  Comcast  offers  a  Limited  Basic  package  of  32  channels,  an  Expanded  Basic  package  of  45  channels,  five  separate  digital  packages,  Cable  Latino,  an  Hispanic  language  tier,  a  Sports  Tier,  HDTV  Channels 


 Package  of  14  HD  channels,  and  premium  channels  offered  on  a  stand  alone  basis,  although  some  premium  services,  such  as  HBO,  have  multiple  channels  of  programming. 
 814  DIRECTV  Comments  at  13-  14.  The  mini  tiers  consist  of  an  HBO  package,  a  Cinemax  package,  a  Showtime 
 package,  a  STARZ!  package,  and  a  sports  package.  DIRECTV  subscribers  can  purchase  their  first  such  package  for  $12  per  month,  the  second  for  $11  per  month,  the  third  for  $10  month,  the  fourth  for  $8  per  month  and  the  fifth  for 


 $7  per  month.  DIRECTV  states  that  it  has  no  immediate  plans  to  add  further  mini-  tiers.  815 
 See,  e.  g.,  ACA  Comments  at  11;  EchoStar  Comments  at  4-  5;  BSPA  Comments  at  23-  24.  816 
 See,  e.  g.,  R.  Thomas  Umstead,  Diginets  Hit  the  Screen,  MULTICHANNEL  NEWS,  Dec.  8,  2003;  R.  Thomas  Umstead,  CSTV  Continues  Fight  for  Acceptance,  MULTICHANNEL  NEWS,  Apr.  12,  2004;  Crown  Media  Holdings, 


 Inc.,  Crown  Media  Announces  Hallmark  Movie  Channel  (press  release),  Nov.  11,  2003;  For  a  description  of  Cable  Ones  Digital  Value  Pak  and  Digital  Faith  and  Family  Pak  see  Cable  One,  Inc.,  at  http://  www.  cableone.  net/ 
 default.  asp?  logout=  true  (visited  Jan.  14,  2005).  817 
 See,  e.  g.,  ACA  Comments  at  13.  ACA  states  that  some  programmers  are  demanding  migration  of  affiliated  channels  from  digital  tiers  to  analog  expanded  basic,  using  that  as  a  lever  to  broaden  distribution  of  their  affiliated 


 channels  on  the  expanded  basic  tier.  818 
 EchoStar  Comments  at  4-  5.  819 
 Id.  at  5.  According  to  EchoStar,  it  faces  contractual  provisions  requiring  bundling  of  local  stations  with  nonbroadcast  programming,  bundling  of  nonbroadcast  networks,  and  market  penetration  requirements  that  prevent  it 


 from  placing  programming  on  specialty  tiers  or  offering  it  on  an  a  la  carte  basis.  Id.  at  6. 
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 viewers,  because  it  reduces  transaction  costs  to  consumers  as  well  as  MVPDs  and  networks  costs,  particularly  costs  of  equipment  and  marketing.  820 
 C.  Competitive  Issues  in  Small  and  Rural  Markets 
 186.  In  the  Notice,  we  requested  information  and  comment  regarding  issues  specific  to  video  programming  distribution  in  rural  and  smaller  markets.  821  NTCA,  a  trade  association  for  rural 


 telecommunications  providers,  reports  that  a  significant  portion  of  its  members  are  providing  video  service,  but  that  their  efforts  are  hampered  due  to  an  inability  to  receive  terms  similar  to  those  that  large 
 cable  MSOs  receive,  and  due  to  tying  requirements  by  programmers.  822  OPASTCO,  a  trade  association  representing  rural  telephone  companies,  reports  that  half  its  members  operate  small  cable  television 
 companies,  and  others  offer  video  service  via  DSL,  sometimes  overbuilding  neighboring  service  territories.  823  Still  others  provide  video  satellite  services,  or  have  deployed  fiber  to  the  home.  OPASTCO 
 indicates  that  bundling  of  video  services  with  other  advanced  services  increases  penetration  rates  and  thus  spurs  further  investment  in  advanced  services  in  rural  areas.  OPASTCO  also  states,  however,  that  the 
 higher  prices  rural  video  providers  pay  for  programming  and  retransmission  consent  agreements  that  require  carriage  of  additional  channels  on  the  basic  tier,  raise  costs  and  impede  market  entry.  OPASTCO 
 recommends  that  video  providers  have  the  option  of  providing  programming  on  an  la  carte  basis  so  its  members  can  provide  video  in  a  manner  that  matches  the  needs  of  customers.  824  ACA,  which  represents 
 small  cable  operators,  states  that  more  than  half  of  its  members  currently  offer  digital  cable  service,  more  than  half  offer  cable  modem  service,  and  more  are  planning  on  providing  these  services  in  the  next  12 
 months.  825  ACA  also  reports  difficulties  with  high  programming  costs,  programming  tying  arrangements,  and  retransmission  consent  agreements,  recommends  allowing  more  flexibility  for  small  video  providers 
 in  packaging  video  programming,  and  supports  some  legislative  changes  to  the  retransmission  consent  and  program  access  laws  to  address  the  problems  ACA  raises.  826  For  example,  ACA  reports  that  some 
 companies  acquiring  systems  from  major  MSOs  estimate  that  programming  costs  increase  up  to  30  percent,  solely  because  a  smaller  company  acquired  ownership.  827  Citing  a  study  by  the  Carmel  Group, 
 ACA  notes  that  53  percent  of  the  small  cable  operators  surveyed  allocated  between  35  and  49  percent  of  total  expenses  to  programming  costs,  and  20  percent  of  respondents  allocated  more  than  50  percent.  828 


 820  See,  e.  g.,  Fox  Comments  at  2-  4.  See  also  Fox  Comments  Statement  of  Gustavo  Bamberger  at  1-  2,  that  bundling 
 of  programming  products  by  programmers  and  by  MVPDs  generally  reduces  costs  and  is  economically  efficient.  821 
 Notice,  19  FCC  Rcd  10919-  20    30.  822 
 See  NTCA  Comments,  generally.  NTCA  refers  specifically  to  tying  requirements  under  which  a  large  programmer  will  require  carriage  of  less  popular  networks  it  owns  as  a  condition  for  carriage  of  its  most  popular 


 network(  s).  See  paras.  161-  63  supra  for  further  discussion  of  programming  tying  requirements  and  issues  surrounding  retransmission  consent. 
 823  See  also  Fourth  706  Report,  19  FCC  Rcd  at  20570. 
 824  See  OPASTCO  Reply  Comments,  generally. 
 825  ACA  Comments  at  Exhibit  2. 
 826  Id.  at  Exhibit  1.  ACA  does  not  advocate  Commission  intervention  to  enable  operators  to  offer  their  programming 
 on  an  a  la  carte  basis.  827 
 Id.  at  39.  828 
 Id. 
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 D.  Technical  Issues 
 1.  Navigation  Devices 
 187.  As  mentioned  previously,  the  Commissions  Plug  and  Play  Rules  allow  for  television  sets  to  be  built  with  one-  way  plug-  and-  play  functionality  (e.  g.,  premium  channels).  829  Consumers  still  need  a 


 set-  top  box  to  receive  two-  way  services  (e.  g.,  video-  on-  demand),  while  the  cable  and  consumer  electronics  industries  continue  to  work  on  an  agreement  for  two-  way  plug-  and-  play  functionality.  830  Since  our  last 
 Report,  more  than  60  models  of  Digital  Cable  Ready  (DCR)  televisions  by  11  different  manufacturers  are  now  certified  for  retail  sale.  831  As  of  August  2004,  the  top  10  cable  operators  had  deployed  CableCARDs  832 
 to  the  approximately  5,000  subscribers  nationwide  that  have  thus  far  requested  them.  833  The  cable  industry  indicates  that  it  has  begun  to  educate  consumers  about  the  retail  availability  of  CableCARDs  and 
 unidirectional  digital  cable  products  by  working  with  local  retailers  and  training  their  customer  service  representatives,  and  by  providing  consumers  with  educational  material  directly  via  websites,  monthly  bills, 
 brochures,  and  advertisements.  834 
 188.  OpenCable.  In  July  2004,  the  OpenCable  Applications  Platform  (OCAP)  was  approved  by  the  American  National  Standards  Institute  (ANSI)  to  standardize  cable  set-  top  box  software 


 applications.  835  Many  cable  operators  have  begun  to  develop  applications  using  the  OCAP  standard,  which  are  designed  to  run  on  a  variety  of  set-  top  boxes  and  should  facilitate  the  growth  of  interactive 
 television.  836  For  example,  Comcast  and  Time  Warner  have  announced  the  creation  of  OCAP  Development,  LLC,  a  joint  venture  dedicated  to  creating  an  OCAP  middleware  implementation.  The 
 joint  venture  expects  that  its  middleware  will  accelerate  the  development  of  OCAP-  compliant  software  and  help  hasten  the  development  of  various  applications.  837  Also,  Time  Warner  announced  plans  to  strip 
 out  the  existing  interactive  program  guides  (IPG)  from  Scientific-  Atlanta  and  Pioneer  set-  top  boxes,  and 


 829  47  U.  S.  C.    549.  Plug  and  Play  Rules,  18  FCC  Rcd  20885  (2003).  See  Letters  from  Paul  Glist,  Cole,  Raywid  & 
 Braverman,  Counsel  for  CableLabs,  to  Marlene  Dortch,  Secretary,  FCC,  July  28,  2004  and  July  29,  2004,  at  11-  13,  18-  22,  24-  27,  29-  30. 


 830  Plug  and  Play  Rules,  18  FCC  Rcd  20885  (2003). 
 831  CableLabs,  CableLabs  Verifies  Three  DTVs,  More  Than  60  Models  Now  Approved  (press  release),  Aug.  24, 
 2004.  832 
 See  fns.  157,  173  supra.  The  OpenCable  specification  is  designed  to  support  the  retail  sale  of  advanced  digital  set-top  boxes  and  other  devices  such  as  CableCARDs.  See  CableLabs,  at  http://  www.  cablelabs.  com/  news/  glossary.  html#  C 


 (visited  Oct.  5,  2004).  833 
 Letter  from  Neal  M.  Goldberg,  General  Counsel,  NCTA,  to  Marlene  H.  Dortch,  Secretary,  FCC  (Nov.  19,  2004)  (NCTA  Nov.  19  Ex  Parte,  Docket  No.  97-  80),  at  2.  See  also  Letter  from  Neal  M.  Goldberg,  General  Counsel,  NCTA, 


 to  Marlene  H.  Dortch,  Secretary,  Federal  Communications  Commission  (Sept.  30,  2004),  Attachment  (Memorandum)  at  1. 
 834  Letter  from  Neal  M.  Goldberg,  General  Counsel,  NCTA,  to  Marlene  H.  Dortch,  Secretary,  Federal  Communications 
 Commission  (Sept.  30,  2004),  Attachment  (Memorandum)  at  1.  See  also  TiVo  Reply  Comments  generally.  835 
 Society  of  Cable  Telecommunications  Engineers,  SCTE  Standard  on  CableLabs  OCAP  Specification  Achieves  ANSI  Approval  (press  release),  July  1,  2004. 


 836  See  Letters  from  Paul  Glist,  Cole,  Raywid  &  Braverman,  Counsel  for  CableLabs,  to  Marlene  Dortch,  Secretary, 
 FCC,  July  28,  2004  and  July  29,  2004,  at  10-  13,  16-  19,  22,  25-  27,  29-  31.  837 
 Time  Warner  Cable,  Comcast  and  Time  Warner  Cable  Partner  to  Deliver  OCAP  Middleware  (press  release),  Aug.  10,  2004. 
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 replace  them  with  an  OCAP-  based  navigation  system,  which  will  be  able  to  handle  VOD,  subscription  VOD,  and  other  OCAP  applications.  838 
 189.  On  October  21,  2004,  Samsung  Electronics  was  the  first  to  enter  into  agreements  with  CableLabs  allowing  Samsung  to  implement  OCAP  compliant  middleware  on  their  interactive  digital 
 television  sets  and  set-  top  boxes.  This  agreement  is  seen  by  most  in  the  cable  industry  as  a  significant  advance  for  making  interactive  two-  way  cable  products  available  at  retail.  839  On  November  12,  2004, 
 representatives  from  the  cable  and  consumer  electronics  industries  met  with  the  Commission  to  report  on  the  status  of  two-  way  plug-  and-  play  negotiations.  Industry  representatives  said  that  progress  continues  to 
 be  made  at  scheduled  bi-  weekly  meetings,  though  no  target  date  for  completion  was  expressed.  840 
 190.  In  October  2003,  the  Advanced  Television  Systems  Committee  (ATSC)  announced  that  it  had  successfully  coordinated  its  DTV  Application  Software  Environment  (DASE)  specifications  with 


 OCAP  to  create  the  Advanced  Common  Applications  Platform  (ACAP),  which  provides  broadcasters  with  the  same  advantages  that  OCAP  provides  for  cable  operators.  841  In  November  2004,  Starz  Encore 
 Group  LLC  demonstrated  a  satellite  television  feed  paired  with  an  application  designed  to  run  on  OCAP.  The  transmission  was  successful  and  the  results  were  verified  by  CableLabs.  This  was  the  first  out-  of-lab 
 use  of  OCAP,  making  Starz  the  first  programmer  to  embed  OCAP  functionality  within  a  U.  S.  broadcast.  842  News  Corp.  owns  approximately  77  percent  of  NDS  Group  plc,  a  supplier  of  conditional 
 access  systems,  and  approximately  41  percent  of  Gemstar-  TV  Guide  International,  the  leading  provider  of  EPGs  and  IPGs.  843  Gemstar  states  that  improvements  in  software,  coupled  with  the  introduction  of  open 
 cable  platforms,  has  permitted  the  development  of  new  EPGs  and  their  rapid  deployment  by  MVPDs.  844 
 2.  Emerging  Technologies 
 191.  Fiber  to  the  Premises  (FTTP).  845  The  number  of  telephony  and  broadband  operators  deploying  or  testing  fiber-  to-  the-  premises  (FTTP)  networks  continues  to  grow  monthly.  846  The  two  major 


 838  Jeff  Baumgartner,  Time  Warner  Looks  Inside  for  IPG  Guidance,  CED  BROADBAND  DIRECT,  May  19,  2004. 
 839  CableLabs,  Samsung  Electronics  First  to  Sign  CableLabs  Licenses  for  Two-  Way  Digital  Cable  Products  (press 
 release),  Oct.  21,  2004.  840 
 See  NCTA  Nov.  19,  2004  Ex  Parte,  Docket  No.  97-  80.  841 
 Advanced  Television  Systems  Committee,  Inc.,  ATSC  Publishes  New  Interactive  ACAP  Candidate  Standard  (press  release),  Oct.  2,  2003. 


 842  Starz  Encore  Group,  LLC,  Starz  Hosts  First  Satellite  Transmission  Using  OCAP  Platform  (press  release),  Nov.  1, 
 2004.  843 
 NDS  Group  plc,  Annual  Report  Pursuant  to  Section  13  or  15(  d)  of  the  Securities  Exchange  Act  of  1934  for  the  Fiscal  Year  Ended  June  30,  2004,  at  7;  Gemstar-  TV  Guide  International  Inc.,  Quarterly  Report  Pursuant  to  Section 


 13  or  15(  d)  of  the  Securities  Exchange  Act  of  1934  for  the  Quarterly  Period  Ended  September  30,  2004,  at  10.  See  also  News  Corp  Order,  19  FCC  Rcd  at  479,  576    7,  227. 
 844  Gemstar  Reply  Comments  at  6.  Gemstar  reports  that  it  has  arrangements  with  Comcast  and  Time  Warner  that 
 allow  the  cable  operators  to  combine  Gemstar  technology  with  that  of  other  vendors;  it  has  a  non-  exclusive  licensing  agreement  with  its  affiliate,  DIRECTV;  and  a  non-  exclusive  agreement  with  EchoStar  that  allows  it  to  use  Gemstar 


 technology  for  its  EPG.  Id.  at  7-  9.  See  also  News  Corp  Order,  19  FCC  Rcd  576-  81,  284-  5    227-  241,  247-  250.  845 
 See  Fourth  706  Report,  19  FCC  Rcd  20555-  57.  As  of  May  2004,  carriers  have  deployed  FTTH  Technology  to  128  communities  in  32  states.  In  addition,  companies  plan  to  deploy  FTTH  further  in  the  future.  For  example, 


 Verizon  has  accelerated  its  FTTH  deployment  with  the  goal  of  passing  1  million  homes  by  the  end  of  2004.  SBC  has  also  announced  plans  to  implement  a  limited  FTTH  deployment  .  .  .  in  2004,  and  to  implement  FTTH  to 
 approximately  300,  000  premises  in  2005.  Id.  See  also  paras.  127-  128  supra.  846 
 Jeff  Baumgartner,  Sizing  up  the  Fiber  Smorgasbord,  CED  MAGAZINE.  COM,  Oct.  5,  2004. 
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 optical  techniques  employed  over  fiber  networks  are  active  and  passive.  The  passive  technique  operates  over  two  different  types  of  architectures:  Broadband  Passive  Optical  Network  (BPON)  and  Gigabit  PON 
 (GPON).  Standards  are  in  force  for  these  technologies  as  ITU-  T  recommendations  G.  983  and  G.  984,  respectively.  847  Verizon,  Bell  South,  and  SBC  Communications  currently  use  BPON.  Verizon  states  that 
 the  passive  nature  of  BPON  will  provide  huge  savings  on  plant  maintenance  because  the  architecture  does  not  use  electronics  in  the  field  except  at  the  customer  location.  848  Verizon  and  SBC  have  launched 
 multibillion  dollar  efforts  to  roll  out  fiber  lines  that  can  deliver  Internet  service,  voice,  and  video  through  a  single  connection.  849 


 192.  Active  networks,  on  the  other  hand,  use  active  electronic  devices  (e.  g.,  amplifiers,  splitters)  and  the  platform  enables  sending  only  the  channel  the  subscriber  is  watching,  preventing  signal 
 theft  from  rogue  set-  top  boxes.  Makers  of  active  FTTP  architectures  are  entering  into  agreements  primarily  with  smaller  telephone  companies,  municipalities,  and  utilities.  For  example,  the  Utah 
 Telecommunication  Open  Infrastructure  Agency  (UTOPIA)  and  iProvo  are  using  active  FTTP  architecture.  UTOPIA  is  connecting  50,000  premises  in  Salt  Lake  City.  iProvo  is  building  out  a  network 
 that  reaches  27,  000  homes  and  4,100  businesses.  850 
 193.  Distributed  Television  Transmission  (DTx).  A  DTV  distributed  transmission  system  employs  multiple  synchronized  transmitters  spread  around  a  stations  service  area.  Each  transmitter 


 broadcasts  the  stations  DTV  signal  on  the  same  channel,  relying  on  the  performance  of  adaptive  equalizer  circuitry  in  DTV  receivers  to  cancel  or  combine  the  multiple  signals  plus  any  reflected  signals 
 to  produce  a  single  signal.  Such  distributed  transmitters  are  considered  to  be  similar  to  analog  TV  booster  stations,  a  secondary,  low  power  service  used  to  fill  in  gaps  in  the  parent  stations  coverage  area,  but 
 DTV  technology  has  the  potential  to  enable  this  type  of  operation  in  a  much  more  efficient  manner  than  its  analog  predecessor.  851  The  Commission  approved  such  systems  in  principle  and  has  agreed  to  begin  a 
 proceeding  on  the  necessary  rules,  allowing  use  of  the  technology  on  a  case-  by-  case  basis  in  the  interim.  852 


 194.  Digital  Video  Recording  Technologies.  In  August  2004,  the  Commission  approved  13  content  protection  technologies  for  use  with  the  Broadcast  Flag,  of  which,  several  facilitate  new  uses  of 
 digital  television  content.  853  The  Digital  Rights  Management  (DRM)  technologies  allow  consumers  to  securely  share  digital  video  files  within  a  home  network  environment  and  on  portable  media  players.  854 
 One  DRM  technology  also  allows  a  user  to  securely  share  digital  video  files  outside  the  home  with  a 
 847  BPON  uses  ATM  as  a  bearer  protocol  for  transmitting  in  both  directions.  It  originally  supported  155  Mbps  in 
 both  directions,  but  the  latest  version  supports  downstream  rates  of  622  Mbps  and  upstream  of  155  Mbps.  GPON  is  a  new  standard  that  carries  gigabit  rate  streams.  It  is  capable  of  up  to  2.5  Gbps  in  each  direction  and  supports  legacy 


 ATM  infrastructure.  848 
 Id.  849 
 Almar  Latour,  Showdown  of  the  Giants,  WALL  STREET  JOURNAL,  Nov.  8,  2004,  at  B1.  850 
 Id.  851 
 The  Commissions  Spectrum  Policy  Task  Force  has  recommended  that  digital  television  broadcasters  be  permitted  to  operate  single  frequency  low  power  distributed  transmission  systems  within  their  present  service  areas. 


 See  Spectrum  Policy  Task  Force  Report,  ET  Docket  No.  02-  135  (Nov.  2002),  at  64,  http://  www.  fcc.  gov/  sptf/  reports.  html  (visited  Jan.  14,  2005). 
 852  Id.  at  paras.  177-  8.  See  also  para.  92  supra. 
 853  Digital  Output  Protection  Technology  and  Recording  Method  Certifications,  19  FCC  Rcd  15876  (2004).  See  also 
 para.  91  supra.  854 
 The  approved  DRM  technologies  are  TiVoGuard,  Helix  DRM,  Microsoft  Windows  DRM,  and  SmartRight.  Id.  at    19,  46-  60. 
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 limited  number  of  devices  registered  on  the  users  account.  855  Several  other  technologies  allow  users  to  store  digital  video  onto  new  portable  media  formats.  856  In  addition,  high-  definition  DVRs  have  begun  to 
 appear  on  the  market,  which  will  further  facilitate  delivery  of  digital  video  content.  857 
 195.  Home  Networking  and  Wi-  Fi.  858  Several  cable  operators  are  beginning  to  offer  home  networking  services  for  their  subscribers.  Home  networking  allows  cable  operators  to  connect  multiple 


 devices  in  the  consumers  home  (e.  g.,  set-  top  boxes,  television  sets,  personal  computers)  to  a  central  processing  device  (e.  g.,  set-  top  box,  cable  modem).  859  Currently,  the  most  common  application  for  home 
 networking  is  to  connect  multiple  computers  in  the  home  to  cable  modem  services,  but  the  service  can  be  used  to  transmit  video  such  as  downloaded  VOD  movies.  Comcast,  Time  Warner  and  Cox  all  offer  home 
 networking  using  a  wireless  system  based  on  CableLabs  CableHome  specifications,  connecting  as  many  as  five  computers  in  the  home.  860 


 196.  In  addition  to  CableHome  technology,  some  cable  operators  are  reportedly  conducting  trials  of  the  power  industrys  Home  Plug  technology.  861  HomePlug  can  be  used  to  send  data  between 
 cable  modems,  computers  and  other  devices  throughout  the  household  at  speeds  of  up  to  14  Mbps  using  the  electrical  wiring  already  in  the  household.  862 


 197.  Cable  operators  also  are  forming  alliances  with  wireless  hotspot  providers  to  offer  their  subscribers  high-  speed  data  access  via  Wi-  Fi  hotspots.  863  Comcast,  for  example,  offers  to  sign  up  its 
 high-  speed  Internet  access  subscribers  with  Wi-  Fi  enabled  laptops  for  T-  Mobile  subscription  HotSpot  service.  864  Cox  has  joined  Intel  and  Arizona  State  officials  to  offer  a  Wi-  Fi  hotspot  service  known  as 


 855  Id.  at    19. 
 856  MagicGate  Type-  R  allows  storage  on  Minidisc  and  MemoryStick  media.  CPRM  allows  storage  onto  DVD-R/ 
 RW  Secure  CompactFlash,  Microdrive  media,  and  SD  Memory  Cards.  Vidi  allows  storage  onto  DVD+  R/  RW,  D-VHS  allows  storage  on  VHS  cassettes.  Id.  at    24,  36,  30,  41. 


 857  See,  e.  g.,  Motorola,  Inc.,  Motorola:  Never  Miss  a  Play  with  Motorola  HD  DVR,  http://  broadband.  motorola.  com/ 
 getdvr/  (visited  Nov.  11,  2004);  DIRECTV  Group  Inc.,  DIRECTV  HD  DVR,  http://  www.  directv.  com/  DTVAPP/  imagine/  TiVo_  HD.  dsp  (visited  Dec.  3,  2004). 


 858  See  Fourth  706  Report,  19  FCC  Rcd  at  20557-  58. 
 859  CableLabs,  CableHome  Home,  http://  www.  cablelabs.  com/  projects/  cablehome/  (visited  Dec.  3,  2004). 
 860  Alan  Breznick,  Cable  Operators  Explore  HomePlug  for  High-  Speed  Data,  Home  Networks,  CABLE  DATACOM 
 NEWS,  June  2004.  CableLabs  has  been  developing  a  new  home  networking  specification  called  CableHome.  CableLabs  now  has  10  Cable  Home  1.0  certified  products  and  three  CableHome  1.1  certified  products.  See 


 CableLabs,  CableHome  Home,  http://  www.  cablelabs.  com/  projects/  cablehome/  (visited  Dec.  3,  2004).  861 
 Alan  Breznick,  Cable  Operators  Explore  HomePlug  for  High-  Speed  Data,  Home  Networks,  CABLE  DATACOM  NEWS,  June  2004.  See  Letters  from  Paul  Glist,  Cole,  Raywid  &  Braverman,  Counsel  for  CableLabs,  to  Marlene 


 Dortch,  Secretary,  FCC,  July  28,  2004  and  July  29,  2004,  at  9,  25,  32.  862 
 Alan  Breznick,  Cable  Operators  Explore  HomePlug  for  High-  Speed  Data,  Home  Networks,  CABLE  DATACOM  NEWS,  June  2004.  See  paras.  133-  134  supra. 


 863  Wi-  Fi  is  an  interoperability  certification  for  wireless  local  area  network  (LAN)  products  based  on  the  Institute  of 
 Electrical  and  Electronics  Engineers  (IEEE)  802.11  standard.  A  hotspot  is  a  place  where  the  public  can  access  Wi-Fi  service,  either  for  free  or  for  a  fee.  Hotspots  can  be  found  at  coffeeshops,  airport  lounges,  train  stations, 


 convention  centers,  hotels  or  any  other  public  meeting  areas.  Corporations,  campuses,  local  governments  also  are  implementing  hotspots  to  provide  wireless  Internet  access  to  their  visitors  and  guests.  Wi-  Fi  Alliance,  http://  www. 
 wi-  fi.  com/  OpenSection/  glossary.  asp?  TID=  2  (visited  Jan.  14,  2005).  864 
 Alan  Breznick,  MSOs  Explore  Data  Connections  Outside  The  Home,  CABLE  DATACOM  NEWS,  Mar.  2004. 
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 Public  Online  Wireless  Electronic  Resource  (POWER),  which  provides  free  wireless  broadband  service  to  members  of  the  public  in  Arizona.  865 
 198.  Consumer  demand  of  the  home  gateway  along  with  the  evolution  of  IEEE  standards  and  CableLabs  specifications  continues  to  enhance  innovation  in  the  home  networking  segment.  866  Many 
 companies  including  Intel,  Cisco,  D-  Link,  and  Motorola,  have  recently  delivered  products  based  upon  the  newly  revised  IEEE  802.11n,  CableHome  1.1,  and  PacketCable  1.1  standards.  867  These  new  devices 
 provide  connectivity  in  the  home  powerful  enough  for  VoIP  and/  or  Wi-  Fi  hotspots  to  be  supplied  by  Comcast  and  Time  Warner.  868 


 199.  Interactive  Television  (ITV).  As  we  have  reported  previously,  ITV  services  are  services  that  support  subscriber-  initiated  choices  or  actions  that  are  related  to  one  or  more  video  programming 
 streams  (e.  g.,  t-  commerce,  data  enhancements,  interactive  gaming,  VOD,  DVRs,  and  EPGs).  869  Cable  operators,  DBS  operators,  application  developers,  and  technology  manufacturers  continue  to  explore  a 
 variety  of  ITV  services  in  order  to  increase  revenue  and  subscribership,  and  to  reduce  MVPD  churn. 
 200.  CableLabs  continues  to  host  events  in  which  the  developers  of  ITV  services  can  test  products  to  run  over  any  cable  television  system.  Under  the  OpenCable  standard,  applications  written  by 


 independent  content  developers  can  run  successfully  on  OpenCable  compliant  consumer  devices,  and  manufacturers  can  develop  products  that  will  support  all  services  delivered  by  cable  operators.  870  In 
 August  2004,  CableLabs  conducted  an  interoperability  event  in  which  application  developers  demonstrated  a  wide  variety  of  ITV  applications  (e.  g.,  an  airline  travel  reservation  system,  a  medical  advisor 
 application,  t-  commerce  applications,  an  advanced  real-  time  and  local  weather  application),  and  11  different  manufacturers  presented  OpenCable  compliant  hardware  platforms.  871 


 201.  WiMAX.  WiMAX  is  a  developing  wireless  standard  that  is  expected  to  become  a  last  mile  solution  for  cable  operators,  broadband  providers,  and  others.  872  The  technology,  embodied  in  IEEE 
 Standard  802.16,  has  the  potential  to  reach  rural  customers  outside  of  the  range  of  todays  infrastructure  and  can  also  be  implemented  to  provide  an  entire  metropolitan  area  with  high-  speed  Internet  access.  With 
 speeds  up  to  75  Mbps  at  ranges  as  far  as  30  miles,  WiMAX  technology  is  a  crucial  step  towards  a  transition  to  IP  communication  entirely  without  wires.  873 


 865  Id. 
 866  Satish  Gupta,  Design  Challenges  for  Home  Gateway  Devices,  CED  MAGAZINE,  Mar.  2003.  The  home  gateway 
 provides  consumer  benefits  such  as  broadband  Internet  sharing,  VPN,  firewall  security,  voice/  video-  over-  IP  and  home  automation. 


 867  Wi-  Fi  Alliance,  IEEE  802.11n  QA  Final,  http://  www.  wi-  fi.  org  (visited  Nov.  9,  2004). 
 868  Craig  Kuhl,  Does  it  Take  Two  (or  More)  to  Tango?,  CED  MAGAZINE,  Nov.  2004. 
 869  See  2003  Report,  19  FCC  Rcd  at  1712-  5    187-  192.  See  also  Nondiscrimination  in  the  Distribution  of 
 Interactive  Television  Services  Over  Cable,  16  FCC  Rcd  1321  (2001)  (ITV  NOI).  870 
 CableLabs,  Twenty  Four  Firms  Participate  in  CableLabs  OCAP  Interoperability  Event  (press  release),  Aug.  18,  2004. 


 871  Id. 
 872  See  Fourth  706  Report,  19  FCC  Rcd  at  20557.  See  also  Letters  from  Paul  Glist,  Cole,  Raywid  &  Braverman, 
 Counsel  for  CableLabs,  to  Marlene  Dortch,  Secretary,  FCC,  July  28,  2004  and  July  29,  2004,  at  23,  31;  Jeff  Baumgartner,  RF  Magic  Conjures  Up  Comcast  Investment,  CED  MAGAZINE,  Oct.  26,  2004. 


 873  Intel  Corp.,  Broadband  Wireless  Access:  IEEE  802.  16  and  WiMAX  White  Paper,  2003. 
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 202.  Next  Generation  Network  Architecture  LLC  (NGNA).  NGNA  is  an  undertaking  by  Comcast,  Cox,  and  Time  Warner  to  help  the  transition  to  the  all-  digital  network  without  undergoing 
 expensive  rebuilds.  NGNA  released  a  Request  for  Information  (RFI)  early  this  year.  Some  of  the  many  topics  under  analysis  are  advanced  codecs,  such  as  MPEG-  4  and  Windows  Media  9,  solutions  to  migrate 
 to  an  alternative  conditional  access  system  while  still  supporting  the  legacy,  all-  digital  migration  devices  that  can  be  used  to  convert  digital  signals  to  analog  signals  at  or  in  a  subscribers  home  with  as  much 
 transparency  as  possible  and  advanced  codec  transcoders,  which  could  accept  streams  based  on  advanced  codecs  and  convert  them  to  MPEG-  2.  It  is  expected  that  NGNA  initiative  will  be  operated  by  CableLabs 
 in  the  near  future.  874 
 203.  Advanced  Compression  Techniques.  These  techniques  can  increase  the  number  of  video  streams  that  can  be  transmitted  in  a  given  amount  of  spectrum  by  at  least  2:  1  and  commonly  closer  to  3:  1 


 compared  to  the  current  standard  MPEG-  2.  875  Advanced  codecs  such  as  MPEG-  4/  H.  264  and  Microsofts  VC-  1  (formerly  Windows  Media  9/  VC-  9)  have  approximately  the  same  technical  capabilities.  The 
 differences  between  the  two  are  primarily  in  the  licensing  models,  with  MPEG-  4  fees  based  on  actual  usage  of  the  codec,  rather  than  on  a  per-  device  basis.  876  Both  MPEG-  4  and  VC-  1  were  recently  added  to 
 the  HD-  DVD  and  Blu-  Ray  BD-  ROM  high-  definition  disc  specifications  along  with  MPEG-  2.  877  Incorporation  of  advanced  codecs  into  the  ATSC  standard  for  use  in  the  main  DTV  video  stream  is  not 
 likely  in  the  near  future,  as  the  MPEG-  2  decoders  present  in  all  ATSC  tuners  are  not  capable  of  decoding  the  advanced  codecs.  The  ATSC  is,  however,  evaluating  MPEG-  4  and  VC-  1  for  use  in  the  Enhanced-VSB 
 mode.  878  Use  of  advanced  codecs  is  currently  limited  to  IPTV,  VOD  and  services  developed  within  the  last  few  years.  MPEG-  2  users  may  transition  into  MPEG-  4,  first  by  launching  new  services  utilizing 
 advanced  codecs  to  get  the  hardware  on  the  market.  879 
 204.  Cellular  Video.  880  Texas  Instruments  recently  introduced  a  chip  for  mobile  phones  called  Hollywood  that  will  support  high  quality  digital  broadcast  TV  for  the  wireless  industry.  The  chip  will 


 use  the  both  the  Digital  Video  Broadcasting    Handheld  (DVB-  H)  standard  from  Europe  and  the  Integrated  Services  Digital  Broadcasting    Terrestrial  (ISDB-  T)  standard  from  Japan.  The  DVB-  H 
 standard  is  expected  to  be  extended  to  North  America.  Additional  infrastructure  must  be  deployed,  as  these  standards  require  a  dedicated  wireless  network,  881  although  this  requirement  may  be  relaxed  as 
 IBOC  datacasting,  capable  of  carrying  the  video  programming,  becomes  more  prevalent.  882  Crown  Castle  has  deployed  a  single-  frequency  DVB-  H  test  site  in  Pittsburgh,  Pennsylvania,  using  spectrum  in 


 874  Jeff  Baumgartner,  NGNA:  A  Sneak-  Peek  At  Cables  Battle  Plan  For  The  Future,  CED  MAGAZINE,  May  2004. 
 875  Envivio,  Inc.,  About  H.  264,  http://  www.  envivio.  com/  products/  h264.  html  (visited  Nov.  9,  2004). 
 876  Chris  Forrester,  IBC  Agonizes  Over  Standards,  SATMAGAZINE.  COM,  Oct.  20,  2004,  at  19. 
 877  Martyn  Williams,  Blu-  Ray  Disc  to  Support  MPEG-  4,  VC-  1,  PCWORLD,  Sept.  2,  2004. 
 878  Advanced  Television  Systems  Committee,  Inc.,  ATSC  Approves  Enhancements  to  DTV  Standard  (press  release), 
 July  20,  2004.  E-  VSB  adds  additional  forward  error  correction  layers  to  a  portion  of  the  data  stream,  creating  a  more  robust  but  low  payload  capacity  fallback  stream. 


 879  Ina  Fried,  Comcast  Taps  Microsoft  for  Seattle  Set  Tops,  CNET  NEWS.  COM,  Nov.  8,  2004.  For  example, 
 Comcasts  partnership  with  Microsoft  puts  VC-  1  capable  set-  top  boxes  in  subscribers  homes.  880 
 See  also  para.  107  supra.  881 
 Texas  Instruments,  Texas  Instruments  Brings  Live  Digital  TV  to  Your  Cell  Phone  (press  release),  Oct.  21,  2004.  882 
 Junko  Yoshida,  Cell  Phone  Video  Gets  Real,  EE  TIMES,  Sept.  20,  2004. 
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 the  1440-  1790  MHz  band.  883  The  service  will  provide  video  at  24-  30  frames  per  second,  with  the  first  mass  deployments  expected  in  2007.  884 
 3.  Cable  Modems 
 205.  Cable  modems  allow  cable  subscribers  to  access  high-  speed  data  services,  over  hybrid  fiber-  coaxial  (HFC)  cable  plant.  885  Cable  operators  began  offering  high-  speed  data  services  using  cable 


 modems  in  order  to  better  compete  with  other  providers  of  video  programming,  such  as  DBS,  which  has  not  widely  deployed  two-  way  facilities-  based  high-  speed  Internet  access  services.  886  High-  speed  data 
 services  provided  using  cable  modems  now  enable  emerging  video  services  such  as  Internet  video  and  video-  on-  demand.  887 


 206.  Cable  modem  deployment  continues  to  increase,  with  manufacturers  shipping  approximately  2.3  million  cable  modems  in  North  America  during  the  second  quarter  of  2003.  888  Internet 
 access  subscribers  using  cable  modems  also  continues  to  increase.  By  June  2004,  there  were  approximately  18.5  million  cable  modem  subscribers  in  the  United  States.  889 


 207.  DOCSIS.  We  continue  to  report  on  the  progress  of  the  CableLabs  Certified  Cable  Modem  Project  (also  known  as  Data  Over  Cable  Service  Interface  Specification  or  DOCSIS).  890  DOCSIS 
 defines  interface  requirements  for  cable  modems  used  for  high-  speed  data  distribution  over  cable  television  networks.  891  As  a  result  of  this  standard,  DOCSIS  certified  modems  are  compatible  with  and 
 interchangeable  across  similarly  certified  DOCSIS-  equipped  cable  systems.  892  Industry  analysts  note  that  DOCSIS  is  the  foundation  of  essentially  all  of  CableLabs  specification  initiatives. 


 208.  The  first  specification,  DOCSIS  1.0,  allows  cable  operators  to  deliver  high-  speed  Internet  services  on  a  best  effort  basis  simultaneously  over  the  same  plant  as  video  services.  893  To  date, 
 CableLabs  has  certified  241  DOCSIS  1.0  modems.  894  The  next  specification,  DOCSIS  1.1,  was  designed 
 883  Id. 
 884  Texas  Instruments,  Texas  Instruments  Brings  Live  Digital  TV  to  Your  Cell  Phone  (press  release),  Oct.  21,  2004. 
 885  As  described  above,  cable  modem  service  is  primarily  residential  service,  but  may  also  include  some  small 
 business  service.  See  fn.  137  supra.  See  also  Fourth  706  Report,  19  FCC  Rcd  at  20553;  See  also  Letters  from  Paul  Glist,  Cole,  Raywid  &  Braverman,  Counsel  for  CableLabs,  to  Marlene  Dortch,  Secretary,  FCC,  July  28,  2004  and 


 July  29,  2004,  at  5-  6,  15,  17,  25-  27,  32.  886 
 See  paras.  45-  49,  52,  66-  7  supra.  887 
 See  paras.  113-  119  supra.  888 
 Kinetic  Strategies,  Cable  Modem  Market  Stats  &  Projections,  CABLE  DATACOM  NEWS,  Sept.  1,  2004,  at  http://  www.  cabledatacomnews.  com/  cmic/  cmic16c.  html  (visited  Sept.  17,  2004). 


 889  See  High-  Speed  Service  Report  at  Table  3. 
 890  CableLabs,  Cable  Modem/  DOCSIS:  Cable  Modem  Home,  http://  www.  cablemodem.  com  (visited  Sept.  17,  2004). 
 See  Letters  from  Paul  Glist,  Cole,  Raywid  &  Braverman,  Counsel  for  CableLabs,  to  Marlene  Dortch,  Secretary,  FCC,  July  28,  2004  and  July  29,  2004,  at  5-  6,  15,  17,  25-  27,  32.  See  also  Fourth  706  Report,  19  FCC  Rcd  at  20553- 


 54;  Douglas  Shapiro,  CableLabs  Financial  Analyst  Day,  Banc  of  America  Securities,  May  20,  2004,  at  3-  6.  891 
 CableLabs,  Cable  Modem/  DOCSIS:  Cable  Modem  Home,  http://  www.  cablemodem.  com  (visited  Sept.  17,  2004).  892 
 Id.  893 
 Best  effort  is  a  term  for  a  quality  of  service  class  with  no  specified  parameters  and  with  no  assurances  that  the  traffic  will  be  delivered  across  the  network  to  the  target  device.  Newtons  Telecom  Dictionary,  17  th  Edition,  at  88. 


 894  CableLabs,  DOCSIS  Certified  Products,  at  http://  www.  cablemodem.  com/  downloads/  Certified_  Products.  pdf 
 (visited  Sept.  17,  2004). 
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 211.  PacketCable.  PacketCable,  another  CableLabs  project,  is  the  specification  standard  developed  for  delivering  advanced,  real-  time  multimedia  services  over  two-  way  cable  plant.  906 
 PacketCable  uses  IP  technology  to  enable  a  wide  range  of  services,  including  IP  telephony,  multimedia  conferencing,  interactive  gaming,  and  general  multimedia  applications.  907  As  of  August  2004,  11 
 PacketCable-  embedded  multimedia  terminal  adapter  devices  were  certified  by  CableLabs.  908 
 IV.  FOREIGN  MARKETS 
 212.  In  the  Notice,  the  Commission  invited  comment  on  the  status  of  competition  in  foreign  markets  for  the  delivery  of  video  programming  that  would  provide  insights  regarding  the  nature  of 


 competition  in  the  United  States.  909  We  requested  information  regarding  the  differences  between  the  United  States  and  other  markets  with  respect  to  video  programming  distribution  and  advanced  services 
 provision  that  would  be  instructive  as  to  the  efficiency  of  market  structures  and  regulations  within  the  United  States.  Although  none  of  the  commenters  responded  to  our  request  for  data  analysis  or  case 
 studies  of  video  delivery  in  foreign  markets,  we  continue  to  believe  that  insights  may  be  derived  from  examining  such  developments.  In  this  section,  we  report  on  some  interesting  developments  in  foreign 
 markets,  covering  video  over  IP  broadband,  the  digital  television  transition,  and  terrestrial,  cable  and  satellite  competition,  that  we  find  relevant  to  our  examination  of  video  programming  in  the  United  States. 
 In  particular,  we  have  chosen  to  examine  video  provided  via  IP  broadband  (also  known  as  IPTV)  in  Hong  Kong,  Italy,  and  the  United  Kingdom.  We  also  report  on  the  transition  to  digital  television  in  Germany 
 and  the  United  Kingdom,  in  order  to  provide  insight  into  the  relative  efficiency  of  market  structures  and  regulations  within  the  United  States. 


 A.  Video  Over  IP  Broadband 
 213.  As  discussed  above,  a  potential  source  of  new  video  competition  is  video  offered  over  broadband  Internet  service.  910  Connection  speeds  are  needed,  however,  such  that  standard  full-  screen 


 viewing  is  possible.  In  the  densely  populated  Hong  Kong  market,  Now  Broadband  TV,  a  subsidiary  of  PCCW,  the  incumbent  wireline  telecommunications  operator  in  Hong  Kong,  offers  subscribers  a  service 
 similar  to  cable  and  satellite  television  services  using  DSL  connections  on  copper  phone  lines.  911  According  to  company  reports,  this  24-  hour  service  has  62  programming  channels,  distributed  as  true  a  la 


 906  Cable  Labs,  PacketCable  Home,  http://  www.  packetcable.  com  (visited  Sept.  17,  2004).  See  Fourth  706  Report,  19 
 FCC  Rcd  at  20554;  Letters  from  Paul  Glist,  Cole,  Raywid  &  Braverman,  Counsel  for  CableLabs,  to  Marlene  Dortch,  Secretary,  FCC,  July  28,  2004  and  July  29,  2004,  at  7-  8,  25. 


 907  Cable  Labs,  PacketCable  Home,  http://  www.  packetcable.  com  (visited  Sept.  17,  2004). 
 908  CableLabs,  PacketCable  Certified  Products,  at  http://  www.  packetcable.  com/  downloads/  Certified_  Products.  pdf 
 (visited  Sept.  17,  2004);  CableLabs,  PacketCable  Qualified  Products  http://  www.  packetcable.  com/  downloads/  Qualified_  Products.  pdf  (visited  Sept.  17,  2004).  An  embedded  multimedia  terminal  adapter  (E-  MTA)  is  a  device 


 used  to  enable  voice  services  over  a  cable  modem.  909 
 Notice,  19  FCC  Rcd  at  10933    76.  910 
 See  paras.  113-  116  supra.  911 
 See  fn.  514  supra.  See  also  Fourth  706  Report,  19  FCC  Rcd  at  20579-  20582.  In  terms  of  absolute  numbers  of  broadband  subscribers,  the  United  States  leads  the  world.  See  id.  Chart  13. 
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 carte  service  with  subscribers  paying  only  for  the  channels  they  select  to  watch.  912  As  of  October  2004,  the  service  had  370,000  subscribers.  913 
 214.  Another  leader,  outside  of  the  United  States,  in  the  provision  of  video  content  over  a  non-traditional  broadband  system  is  the  FastWeb/  e.  Biscom  system  that  provides  service  in  a  number  of  large 
 Italian  cities,  including  Milan,  Rome,  Genoa,  Turin,  Naples,  and  Bologna.  The  FastWeb/  e.  Biscom  system  provides  voice,  data,  and  over  120  channels  of  video  service  to  residential  and  business  customers 
 over  a  combination  of  fiber-  to-  the-  home  and  DSL  technology.  The  DSL  technology  enables  reception  speeds  of  up  to  4  Mbps.  914  At  the  end  of  June  2004,  the  system  had  approximately  151,000  video 
 subscribers,  up  116  percent  from  the  previous  year.  915  Approximately  43  percent  of  customers  were  directly  connected  to  the  fiber  optic  network,  with  the  remaining  57  percent  connected  via  DSL.  916 


 215.  A  basic  television  subscription  is  10  Euros  per  month  ($  12)  for  mainly  free  channels,  but  there  is  a  menu  of  extra  channels  and  VOD  options.  Many  subscribers  take  the  television  service  as  part 
 of  a  triple  bundle  of  television,  Internet,  video  conferencing  and  telephone,  which  costs  110  Euros  per  month  ($  142).  Without  television  and  video  communication,  the  service  is  85  Euros/  month  ($  110).  New 
 films  on  the  VOD  service  cost  6  Euros  ($  8)  per  24  hours,  older  movies  cost  4  Euros  ($  5)  per  24  hours.  917 
 216.  In  the  United  Kingdom,  several  companies  are  developing  broadband-  based  video  services,  spurred  on  in  part  by  a  reduction  in  the  cost  of  securing  unbundled  local  loop  connections.  918 


 The  first  provider  to  enter  the  UK  market  was  HomeChoice,  which  offers  conventional  TV  channels,  VOD,  BBC  programming,  and  highly  popular  BSkyB  sports  and  movie  channels.  919  HomeChoices 
 network  reaches  approximately  1.25  million  homes  though  73  telephone  exchanges,  but  the  company  is  reported  to  have  only  3,300  subscribers.  920  BT  has  initiated  trials  of  a  digital  set-  top  box  that  allows  users 
 to  download  television  programs  on  pay-  per-  view  basis  over  broadband,  with  a  projected  commercial  deployment  in  summer  2005.  921  Wanadoo  UK,  a  France  Telecom  subsidiary,  plans  to  launch  television 


 912  See  PCCW  Ltd.  Now  Broadband  TV,  http://  www.  nowbroadbandtv.  com/  eng/  (visited  Jan.  14,  2005).  See  also 
 Lee  Gomes,  Web  TV  Is  Changing  The  Way  Programming  Is  Watched  and  Sold,  WALL  STREET  JOURNAL,  May  10,  2004,  at  B1;  Dan  Gillmor,  Future  of  TV  Looks  a  Lot  Like  Broadband,  MERCURY  NEWS,  Dec.  7,  2003. 


 913  PCCW  Ltd,  Now  Broadband  TV  Wins  CASBAA  Chairmans  Award  (press  release),  Oct.  31,  2004. 
 914  Between  1.5  Mbps  and  3.8  Mbps  are  thought  to  be  necessary  for  good  standard  definition  picture  quality. 
 915  E.  Biscom,  Revenues  Rise  77%  in  the  First  Half  of  2004  to  Euro  336.7  Million  (press  release),  Aug.  27,  2004. 
 916  Id. 
 917  See  e.  Biscom,  http://  www.  ebiscom.  it/  index.  php?  sid=  64  (visited  Oct.  10,  2004). 
 918  See  United  Kingdom  Office  of  Communications,  Ofcom  Publishes  Wholesale  Price  Proposals  for  Competitive 
 Broadband  Market  (press  release),  Aug.  26,  2004.  Ofcom  initiated  its  price  review  in  May  2004.  The  final  price  adjustments  are  expected  to  take  place  in  December  2004.  Id.  See  also  United  Kingdom  Office  of 


 Communications,  Review  of  the  Wholesale  Local  Access  Market  Explanatory  Statement  and  Notification,  Aug.  26,  2004,  at  http://  www.  ofcom.  org.  uk/  consult/  condocs/  rwlam/  rwlam/  (visited  Jan.  14,  2005). 
 919  See  United  Kingdom  Office  of  Communications,  The  Communications  Market    October  2004  Quarterly  Update 
 (Ofcom  Report),  at  46.  HomeChoice  offers  approximately  80  channels  of  broadcast  and  on  demand  programming.  The  company  offers  service  packages  priced  according  to  the  download  speed  of  the  service:  512  Kbps  (  27.  50  per 


 month,  or  $51.  00),  1  Mbps  (  35.  00  per  month,  or  $65.00),  or  2  Mbps  (  45.  00  per  month,  or  $83.  00).  See  Video  Networks  Ltd.,  Home  Choice,  http://  www.  homechoice.  co.  uk/  our_  tv_  broadcast.  html  (visited  Dec.  3,  2004). 
 920  Id. 
 921  Graeme  Weardon,  BT  Video  Trials  to  Fuel  Broadband  Speed  Race,  ZDNet  UK,  Sept.  20,  2004.  BT  was  granted 
 a  broadcasting  license  in  March  2002,  giving  it  the  right  to  transmit  television  and  video  in  the  UK.  Id.  The  set-  top  boxes  are  an  enhanced  version  of  BTs  Freeview  set-  top  boxes  which  receive  digital  terrestrial  television  signals. 


 Ofcom  Report  at  46.  See  also  Sean  Byrne,  BT  Trials  a  Video-  On-  Demand  Service  Over  Broadband,  CD  (continued....) 
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 and  VOD  services  on  its  broadband  platform  sometime  in  2005  using  a  wireless  broadband  gateway  platform.  922  Finally,  Ofcom,  the  UK  communications  regulator,  has  proposed  to  create  a  new  Public 
 Service  Publisher,  which  would  distribute  public  interest  programming,  of  the  type  presently  required  of  the  BBC,  in  a  digital  format  through  broadband  networks,  networked  DVRs,  and  mobile  networks.  923 


 217.  Other  incipient  DSL-  based  video  service  offerings  have  been  started  in  such  places  a  Taipei,  Taiwan;  Monaco;  Saskatchewan,  Canada;  Stavanger,  Norway;  and  Canberra,  Australia.  924 
 Notwithstanding  these  efforts,  video  over  DSL  faces  a  number  of  serious  obstacles,  including  lack  of  technical  standards,  entrenched  competition  from  cable,  satellite,  and  digital  terrestrial  television,  925  the 
 lack  of  a  well  developed  business  model,  and  difficulties  in  obtaining  rights  to  distribute  programming  because  of  intellectual  property  and  digital  copyright  issues.  926 


 B.  Digital  Television  Transition  in  Foreign  Markets 
 218.  Several  European  countries  are  switching  from  analog  to  digital  transmission.  927  There  are  operational  platforms  in  the  United  Kingdom,  Sweden,  Spain,  Finland,  Netherlands,  and  Italy. 


 France,  Switzerland,  Austria  and  Norway  are  expected  to  initiate  digital  television  transitions  beginning  in  2005.  928  Generally,  European  regulatory  authorities  plan  to  switch  off  analog  broadcast  transmissions 
 between  2006  and  2012.  929  For  an  overview  of  overall  foreign  markets  transition  to  digital  platforms,  including  terrestrial,  cable  and  satellite,  see  Table  7. 


 219.  In  our  last  Report  we  noted  the  successful  completion  of  the  digital  television  broadcasting  transition  in  the  Berlin-  Brandenburg  television  market  in  Germany.  This  experience  was  the 
 subject  of  a  subsequent  report  issued  by  the  General  Accountability  Office  (formerly  the  General  Accounting  Office).  930  Over  the  course  of  the  last  year,  further  geographic  islands  of  analog  terrestrial 


 (...  continued  from  previous  page)  FREAKS.  COM,  Sept.  21,  2004;  John  Delaney,  TV  and  Video  Over  Broadband:  BT  May  be  Setting  the  Bar  Too  High, 
 Ovum  Research,  Sept.  1,  2004.  922 
 Ofcom  Report  at  46.  See  also  Wanadoo,  Wanadoo  Launches  LiveBox  (press  release),  July  19,  2004.  923 
 United  Kingdom  Office  of  Communications,  Hypothetical  Tender  Document  for  a  Public  Service  Publisher,  Nov.  3,  2004,  at  http://  www.  ofcom.  org.  uk/  consultations/  current/  psp/  psp.  pdf?  a=  87101  (visited  Dec.  3,  2004). 


 924  See,  e.  g.,  Point  TopicLtd.,  Video-  on-  Demand,  at  http://  www.  point-  topic.  com/  content/  bmm/  profiles/  video+  on 
 +demand.  htm;  Kevin  Fitchard,  Canadian  Telcos  Pave  Road  to  Telco  TV,  TELEPHONY,  Oct.  11,  2004.  925 
 Generally,  throughout  Europe,  the  term  terrestrial  is  used  to  refer  to  over-  the-  air  analog  and  digital  broadcasting.  For  example,  to  describe  new  digital  broadcasting,  most  European  countries  refer  to  digital  terrestrial 


 television,  or  DTT,  whereas  in  the  United  States  we  use  the  term  digital  television  or  DTV.  926 
 Vince  Vittore,  Video  Over  DSL:  Loud  But  Not  Clear,  TELEPHONY,  Mar.  8,  2004;  Research  and  Markets,  Tough  Challenges  Ahead  for  Europes  Video-  Over  Broadband  Providers,  June  2004,  at  http://  www.  researchandmarkets. 


 com/  reports/  219736/  (visited  Dec.  4,  2004);  Amber  Chung,  Video  Offerings  the  Next  Star  Attraction  for  ISPs,  TAIPEI  TIMES,  June  24,  2004,  at  10;  European  Video-  Over-  Broadband  Arrives,  Profits  Lag  Behind,  ELECTRONIC  NEWS, 
 Aug.  6,  2004.  927 
 See,  e.  g.,  Eric  Pfanner,  Will  Digital  TV  Hit  Jackpot  in  Europe?  Stay  Tuned,  INTERNATIONAL  HERALD  TRIBUNE,  Nov.  1,  2004. 


 928  Alexander  Shulzycki,  DTT  in  Europe:  Overview  and  Assessment,  Presentation  to  DigiTAG  Seminar,  Oct.  2004, 
 at  http://  www.  digitag.  org/  lateupdate/  globupdate.  htm(  visited  Jan.  14,  2005)  (Shulzycki  Presentation).  929 
 Id.  at  3.  See  also  Teething  Troubles  for  DTT  in  Europe,  European  Broadcasting  Union,  DIFFUSION,  2004,  at  http://  www.  ebu.  ch/  en/  union/  publications/  diffusion/  index.  php  (visited  Dec.  3,  2004). 


 930  U.  S.  General  Accounting  Office,  German  DTV  Transition  Differs  From  US  Transition  in  Many  Respects,  But 
 Certain  Key  Challenges  are  Similar,  GAO-  04-  926T  (July  2004). 
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 television  have  completed  the  transition  process  in  Germany.  This  experience,  and  the  apparent  ease  with  which  the  population  accepted  it,  has  triggered  a  search  for  lessons  that  might  be  transferred  to  the  United 
 States. 
 220.  At  the  outset,  it  is  obvious  that  there  are  significant  differences  in  market  and  regulatory  conditions  that  suggest  that  the  German  transition  cannot  be  immediately  or  entirely  replicated  within  the 


 U.  S.  First,  the  German  market  does  not  distribute  high-  definition  programming  content,  and  thus  the  digital  conversion  results  in  more  programming  becoming  available  rather  than  higher  quality  versions  of 
 the  same  programming.  Second,  satellite  service,  beyond  the  initial  cost  of  the  reception  equipment,  is  essentially  free  of  direct  charges  for  a  significant  quantity  of  programming  and  thus  is  for  many  a  ready 
 substitute  for  terrestrial  service.  Third,  digital  to  analog  conversion  equipment  (set-  top-  boxes)  could  be  made  readily  available  in  Germany  at  a  reasonably  low  cost  due  to  the  absence  of  any  need  to  convert  HD 
 service  content  and  the  existing  market  for  very  similar  devices  elsewhere  in  Europe  (e.  g.,  U.  K.).  And  fourth,  providers  of  terrestrial  broadcast  content  do  not  have  their  own  distribution  facilities  (either 
 terrestrial  transmitters,  cable  or  satellite)  and  must,  subject  to  governmental  carriage  regulations,  arrange  for  each  mode  of  distribution.  931 


 221.  Notwithstanding  these  critical  differences,  the  ability  of  the  German  DTV  transition  to  move  forward  may  share  with  the  U.  S.  the  fact  that  members  of  the  public  already  receiving  either  cable 
 or  satellite  service  could  continue  to  receive  either  analog  or  digital  service  after  the  transition  without  significant  disruption.  Prior  to  the  Berlin-  Brandenberg  transition,  members  of  the  public  in  the  area  each 
 received  a  letter  from  the  local  media  authority  responsible  for  the  transition  that  included  the  following  language: 


 Therefore,  most  important  for  everyone  is:  Those  affected  by  the  change  are  only  households  that  receive  their  television  programming  using  an  antenna,  roof-  top  antennas  or  room  antennas. 
 Households  that  exclusively  receive  television  via  cable  or  satellite  (also  via  secondary  or  tertiary  devices)  are  not  affected.  932 


 222.  In  the  United  Kingdom,  digital  television  penetration  was  estimated  to  have  reached  over  55  percent  of  households  by  the  end  of  June  2004,  thus  making  the  UK  the  most  highly  penetrated  digital 
 television  market  in  the  world.  933  The  principal  driver  of  digital  television  penetration  is  Freeview,  a  free  service  allowing  the  reception  of  30  digital  broadcast  channels,  which  accounts  for  close  to  four  million 
 of  the  total  13.7  million  digital  households.  934  Nevertheless,  the  UK  government  has  determined  that  market  forces  alone  would  not  be  sufficient  to  compel  consumers  to  switch  to  digital  service  and  thus 


 931  For  a  detailed  discussion  of  Berlins  experience,  see  Berlin  Media  Authority,  Berlin  Goes  Digital:  The 
 Switchover  of  Terrestrial  Television  from  Analogue  to  Digital  Transmission  in  Berlin-  Brandenburg    Experiences  and  Perspectives,  at  http://  www.  mabb.  de/  bilder/  Projektbericht_  engl.  pdf  (visited  Jan.  14,  2005).  See  also  Oliver 


 Werner,  Alfred  Riedel  and  Stefan  Wirts,  Switchover    the  German  Approach,  EBU  TECHNICAL  REVIEW,  Oct.  2004;  Ed  Wilson,  Digital  Terrestrial  Television  Rollout  in  Europe:  Case  Study    Germany,  Presentation  to  DigiTAG 
 Seminar,  Oct.  2004,  at  http://  www.  digitag.  org/  lateupdate/  globupdate.  htm  (visited  Jan.  14,  2005).  932 
 Letter  to  television  viewers  from  Dr.  Hans  Hege,  Director  for  the  Media  Institute  Berlin-  Brandenberg.  933 
 Ofcom  Report  at  45.  934 
 Alan  Jay,  55%  of  UK  Households  Receive  Digital  Television,  DIGITAL  SPY,  Sept.  17,  2004,  at  http://  www.  digitalspy.  co.  uk/  article/  ds15789.  html  (visited  Jan.  14,  2005).  The  remaining  digital  households  are  cable  and 


 satellite  subscribers.  Freeview  requires  a  set-  top  box  that  connects  to  existing  televisions  and  analog  antennas,  and  which  retails  for  approximately  60  ($  111),  but  there  is  no  subscription  fee  once  installed.  See  Freeview,  at 
 http://  www.  freeview.  co.  uk/  (visited  Jan.  14,  2005). 
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 instituted  a  formal  process  towards  that  end,  expected  sometime  in  2012.  935  In  March  2004,  Finland  adopted  an  analog  to  digital  transition  plan  whereby  all  television  broadcast  transmissions  would  convert 
 to  digital  by  August  2007.  936  The  transition  is  being  conducted  on  a  geographic  basis,  with  major  cities  converting  first  and,  by  the  end  of  2004,  approximately  94  percent  of  the  Finnish  population  will  live 
 within  range  of  the  digital  broadcast  network.  937  Following  a  failed  attempt  to  launch  a  pay  model  for  digital  television,  Spain  has  launched  a  new  effort  to  transition  to  digital  using  the  Freeview  model 
 presently  finding  success  in  the  UK.  In  July  2004,  free  digital  television  service  was  launched  in  the  Maresme  region  near  Barcelona,  covering  approximately  170,000  homes  and  delivering  four  digital 
 channels  and  an  interactive  channel.  938  Sweden  launched  digital  terrestrial  television  in  1999,  and  it  is  available  to  90  percent  of  the  4.2  million  Swedish  households,  but  penetration  stands  at  approximately 
 300,000  television  households.  939  In  March  2004,  Sweden  adopted  legislation  establishing  a  February  2008  deadline  for  its  analog  to  digital  transition.  940 


 935  See  United  Kingdom  Office  of  Communications,  Driving  Digital  Switchover:  A  Report  to  the  Secretary  of  State, 
 Apr.  5,  2004.  Switch  overs  are  expected  to  take  place  on  a  regional  basis  and  will  begin  in  2007.  The  bulk  of  switchovers  are  expected  between  2008  and  2011.  See  Richard  Lindsay-  Davies,  Director  of  Public  Affairs  of  DTG 


 UK,  Presentation  to  the  DigiTAG  Seminar,  October  2004.  936 
 See  Digitv.  fi,  Parliamentary  Working  Group:  Finland  Will  Switch  Over  to  Digital  Television  in  2007  (press  release),  Dec.  8,  2003. 


 937  For  detailed  information  on  the  roll-  out  of  the  digital  broadcast  network,  see  Digitv.  fi,  Digital  TV  Coverage  Area, 
 at  http://  www.  digitv.  fi/  sivu.  asp?  path=  9;  4710  (visited  Jan.  14,  2005).  Finland  has  approximately  2.  4  million  television  households.  See  Digitv.  fi,  Introduction  to  Digital  Finish  Digital  Terrestrial  Television,  Sept.  2004,  at 


 http://  www.  digitv.  fi/  binary.  asp?  page=  4644&  file=  attachments\  2004\  9\  1134146118891\  Digitv%  20stationary.  pdf  (visited  Jan.  14,  2005). 
 938  Shulzycki  Presentation  at  8. 
 939  Id.  at  6  and  11. 
 940  Per  Mellberg,  Swedish  DTT  Roll-  Out,  Presentation  to  DigiTAG  Seminar,  October  2004,  at  http://  www.  digitag. 
 org/  lateupdate/  globupdate.  htm  (visited  Jan.  14,  2005).  See  also  Christina  Jutterstrom,  Lisa  Soderberg,  Christina  Bjork,  Digital  in  Sweden,  DIFFUSION,  2004,  at  http://  www.  ebu.  ch/  en/  union/  publications/  diffusion/  index.  php  (visited 


 Jan.  14,  2005). 
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 Table  7:  Digital  TV  Households  by  Platform  in  Selected  Countries  in  2003  941 
 Country  Total  TV  HHs  Total  Digital  TV  HH  Cable  Digital  TV  HH  Satellite  Digital  TV  HH  Over-  the-  Air  Digital  TV  HH 


 (mil.)  (mil.)  Percent  (mil.)  Percent  (mil.)  Percent  (mil.)  Percent 
 Australia  942  7.8  0.41  5.25%  -  -  -  Austria  3.2  0.55  17.  1%  0.05  1.6%  0.5  15.  5%  0  0.0% 


 Belgium  4.2  0.18  4.3%  0.16  3.8%  0.02  0.5%  0  0.0%  Canada  943  11.  1  4.11  37.  02%  2.12  19.  1%  1.99  17.  8%  No  data  <0.1% 
 Denmark  2.3  0.35  15.  5%  0.08  3.5%  0.27  11.  9%  0  0.0%  Finland  2.3  0.21  9.2%  0.02  0.9%  0.1  4.4%  0.09  3.9% 
 France  24.  4  4.62  18.  9%  0.92  3.8%  3.7  15.  2%  0  0.0%  Germany  36.  6  5.16  14.  1%  1.63  4.5%  3.15  8.6%  0.38  1.0% 
 Greece  3  0.25  8.4%  0  0.0%  0.25  8.4%  0  0.0%  Ireland  1.3  0.46  35.  1%  0.1  7.6%  0.36  27.  4%  0  0.0% 
 Italy  20.  9  2.85  13.  6%  0  0.0%  2.85  13.  6%  0  0.0%  Japan  944  48.  5  12.  17  25.  1%  4.0  8.24%  6.2  12.  8%  No  data  No  data 
 Luxembourg  0.2  0.01  5.3%  0  1.0%  0.01  4.2%  0  0.0%  Netherlands  7.1  0.69  9.7%  0.11  1.6%  0.55  7.8%  0.03  0.4% 
 Portugal  3.1  0.51  16.  2%  0.02  0.6%  0.49  15.  6%  0  0.0%  Spain  12.  6  2.38  18.  9%  0.15  1.2%  2.06  16.  4%  0.17  1.3% 
 Sweden  4.5  1.25  28.  0%  0.17  3.8%  0.88  19.  7%  0.2  4.5%  U.  K.  24.  4  13.  14  53.  8%  2.29  9.4%  8.04  32.  9%  2.81  11.  5% 
 U.  S.  945  106.6  41.  75  40.  0%  21.  5  20.  2%  20.  25  19.  0%  0.85  0.8% 
 C.  Terrestrial,  Cable,  and  Satellite  Competition 
 223.  In  contrast  to  the  United  States,  the  majority  of  European  households  continue  to  receive  television  by  terrestrial  means,  with  46  percent  receiving  television  via  terrestrial  means  only,  32  percent 


 receiving  it  via  cable  only,  and  13  percent  receiving  it  via  satellite  only.  Greece  has  the  highest  terrestrial  penetration  rate,  with  94  percent,  followed  by  Spain  at  83  percent,  and  Italy  at  78  percent.  In  terms  of 
 cable  penetration,  Netherlands  maintains  the  highest  penetration,  at  93  percent  of  households,  followed  by  Belgium  at  90  percent  and  Luxemburg  at  70  percent.  Greece  has  no  cable  penetration.  Germany 
 maintains  the  highest  satellite  penetration  of  households,  reaching  38  percent,  followed  by  Austria  at  33  percent  and  the  United  Kingdom  at  19  percent.  Finally,  seven  percent  of  EU  households  overall  receive 
 programming  by  some  combination  of  terrestrial,  cable  and  satellite. 


 941  Unless  otherwise  noted,  data  is  from  Commission  of  the  European  Communities,  Ninth  Report  on  the 
 Implementation  of  the  Telecommunications  Regulatory  Package,  Nov.  19,  2003,  Technical  Annex  1,  at  100.  942 
 Data  for  Australia  is  from  Digital  Broadasting  Australia  Newsletter,  Sept.-  Oct.  2004,  at  http://  www.  dba.  org.  au/  newsletter/  ib-  sepoct04-  full. 


 943  Data  for  Canada  is  from  the  CRTC  Broadcasting  Monitoring  Report,  Dec.  2003  (digital  cable  TV  includes  MDS 
 subscribers);  total  TV  households  from  ITU  statistics.  944 
 Data  for  Japan  is  from  Digiworld  2003:  The  European  Way  to  Think  the  Digital  World  (2004),  at  114.  945 
 Total  television  household  and  cable  household  data  for  the  United  States  is  from  NCTA  2003  Year-  end  Industry  Overview,  at  6.  Satellite  household  data  is  from  2003  Report,  19  FCC  Rcd  at  1718.  Over  the  air  digital  households 


 data  is  based  on  the  Consumer  Electronics  Association  estimate  for  the  number  of  DTV  recievers  sold  to  date. 
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 Table  8.  Television  and  Means  of  Reception    2003  -  2004  946  Percent  of 
 Terrestrial  Only  HH  Percent  of  Cable  Only  HH  Percent  of  Satellite  Only  HH  Percent  of  HH  with  Two  or  More  Percent  of  HH  with  None  at  all 


 2003  2004  2003  2004  2003  2004  2003  2004  2003  2004  EU  Average  47  46  32  32  12  13  7  7  2  2 
 Austria  19  14  34  37  32  33  11  13  2  1  Belgium  2  3  92  90  2  2  1  2  2  3 
 Denmark  19  16  66  68  3  6  10  9  2  2  Finland  52  46  30  42  9  3  4  2  4  5 
 France  72  65  10  11  9  12  6  8  3  4  Germany  7  5  56  53  32  38  4  2  1  2 
 Greece  94  94  0  0  2  2  4  3  1  1  Ireland  36  33  42  43  12  15  8  6  1  3 
 Italy  80  78  3  4  5  6  9  8  2  2  Luxembourg  5  6  69  70  16  15  8  9  1  1 
 Netherlands  3  2  90  93  3  3  3  2  1  1  Portugal  62  65  31  28  5  5  2  2  0  0 
 Spain  81  83  7  6  6  2  6  8  0  0  Sweden  27  25  47  51  9  11  13  10  3  2 
 U.  K.  52  49  14  13  17  19  16  16  1  2 


 V.  ADMINISTRATIVE  MATTERS 
 224.  This  2004  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). 


 225.  It  is  ORDERED  that  the  Office  of  Legislative  Affairs  shall  send  copies  of  the  2004  Report  to  the  appropriate  committees  and  subcommittees  of  the  United  States  House  of  Representatives 
 and  the  United  States  Senate. 
 226.  It  is  FURTHER  ORDERED  that  the  proceeding  in  MB  Docket  No.  04-  227  IS  TERMINATED. 


 946  Data  is  from  Ispos,  Telecoms  Services  Indicators,  Report  Produced  for  the  European  Commission,  DG 
 Information  Society  2004. 
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 227.  Accessible  Formats.  To  request  materials  in  accessible  formats  for  people  with  disabilities  (Braille,  large  print,  electronic  files,  audio  format),  send  an  e-  mail  to  fcc504@  fcc.  gov  or  call 
 the  Consumer  &  Governmental  Affairs  Bureau  at  202-  418-  0530  (voice),  202-  418-  0432  (TTY). 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 Marlene  H.  Dortch  Secretary 
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 APPENDIX  A 
 LIST  OF  COMMENTERS 
 Initial  Comments 
 The  America  Channel  American  Cable  Association  (ACA) 


 BellSouth  Corporation  (BellSouth)  Broadband  Service  Providers  Association  (BSPA) 
 City  of  Weston,  Florida  and  the  Town  Foundation,  Inc.  (Weston)  Comcast  Corporation  (Comcast) 
 Consumer  Electronics  Association  (CEA)  The  DIRECTV  Group,  Inc.  (DIRECTV) 
 EchoStar  Satellite  L.  L.  C.  (EchoStar)  Fox  Cable  Networks  Group  (Fox) 
 National  Association  of  Telecommunications  Officers  and  Advisors  and  the  Alliance  for  Community  Media  (NATOA) 
 National  Association  of  the  Deaf  (NAD)  National  Cable  &  Telecommunications  Association  (NCTA) 
 National  Rural  Telecommunications  Cooperative  (NRTC)  National  Telecommunications  Cooperative  Association  (NTCA) 
 New  Jersey  Board  of  Public  Utilities  (New  Jersey)  Paxson  Communications  Corporation  (Paxson) 
 RCN  Corporation  (RCN)  Satellite  Broadcasting  and  Communications  Association  (SBCA) 
 SBC  Communications,  Inc.  (SBC)  SES  Americom,  Inc.  (SES) 
 The  Verizon  Telephone  Companies  (Verizon) 


 Reply  Comments 
 Advocate  Communications,  Inc.  d/  b/  a  Advanced  Communication  (Advocate)  The  America  Channel 


 Broadband  Service  Providers  Association  (BSPA)  Comcast  Corporation  (Comcast) 
 Consumers  Union  The  DIRECTV  Group,  Inc.  (DIRECTV) 
 EchoStar  Satellite  L.  L.  C.  (EchoStar)  Gemstar-  TV  Guide  International,  Inc.  (Gemstar) 
 National  Association  of  Broadcasters  (NAB)  National  Association  of  Telecommunications  Officers  and  Advisors  and  the  Alliance  for  Community 
 Media  (NATOA)  National  Cable  &  Telecommunications  Association  (NCTA) 
 Organization  for  the  Promotion  and  Advancement  of  Small  Telecommunications  Companies  (OPASTCO) 
 Paxson  Communications  Corporation  (Paxson)  Telecommunications  for  the  Deaf,  Inc.  (TDI) 
 TiVo  Inc.  The  Verizon  Telephone  Companies  (Verizon) 
 Viacom  The  Walt  Disney  Company  (Disney) 
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 APPENDIX  B 
 TABLE  B-  1 
 Assessment  of  Competing  Technologies  (i) 
 Technology  Used  June  00  June  01  June  02  June  03  June  04 


 (1)  TV  Households  Percent  Change  100,  801,720  1.41%  102,  184,810  1.37%  105,  444,330  3.19%  106,  641,910  1.14%  108,  410,160  1.66% 
 (2)  MVPD  Households  (ii)  Percent  Change 
 Percent  of  TV  Households 
 82,  973,  717  4.38% 
 82.  31% 
 86,  062,  074  3.72% 
 84.  22% 
 87,  562,  641  1.74% 
 83.  04% 
 89,  772,  191  2.52% 
 84.  18% 
 92,  295,  766  2.81% 
 85.  14% 
 (3)  Cable  Subscribers  Percent  Change 
 Percent  of  MVPD  Total 
 66,  250,  000  1.51% 
 79.  84% 
 66,  732,  000  0.73% 
 77.  54% 
 66,  472,  000  -0.  39% 
 75.  91% 
 66,  050,  000  (i)  -0.  63% 
 73.  58% 
 66,  100,  000  0.08% 
 71.  62% 
 (4)  MMDS  Subscribers  Percent  Change 
 Percent  of  MVPD  Total 
 700,000  -14.74% 
 0.84% 
 700,000  0.0% 
 0.81% 
 490,000  -30.00% 
 0.56% 
 200,000  -59.18% 
 0.22% 
 200,000  0.00% 
 0.22% 
 (5)  SMATV  Subscribers  Percent  Change 
 Percent  of  MVPD  Total 
 1,500,000  3.45% 
 1.81% 
 1,500,000  0.0% 
 1.74% 
 1,600,000  6.67% 
 1.83% 
 1,200,000  -25.00% 
 1.34% 
 1,100,000  -8.  33% 
 1.19% 
 (6)  HSD  Subscribers  Percent  Change 
 Percent  of  MVPD  Total 
 1,476,717  -17.20% 
 1.78% 
 1,000,074  -32.28% 
 1.16% 
 700,641  -29.94% 
 0.80% 
 502,191  -28.32% 
 0.56% 
 335,766  -33.14% 
 0.36% 
 (7)  DBS  Subscribers  Percent  Change 
 Percent  of  MVPD  Total 
 12,  987,  000  28.  86% 
 15.  65% 
 16,  070,  000  23.  74% 
 18.  67% 
 18,  240,  000  13.  50% 
 20.  83% 
 20,  360,  000  11.  62% 
 22.  68% 
 23,  160,  000  13.  75% 
 25.  09% 
 (8)  OVS  Subscribers  (iii)  Percent  Change 
 Percent  of  MVPD  Total 
 60,  000  0.00% 
 0.07% 
 60,  000  0.00% 
 0.07% 
 60,  000  0.00% 
 0.07%  (9)  BSP  Subscribers  (iv) 
 Percent  Change  Percent  of  MVPD  Total  1,460,000  N/  A  1.63%  1,400,000  -4.  11%  1.52% 


 Notes:  (i)  Some  numbers  have  been  rounded,  and  we  have  revised  a  number  of  the  household  and  subscriber  numbers 
 based  on  improved  data  sources  and  to  make  consistent  our  use  of  data  sources.  In  particular,  we  revised  the  2003  Cable  Subscriber  number  downward  in  order  to  allow  consistent  use  of  a  source  throughout  the 
 series.  (ii)  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.  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.  (iii)  Beginning  in  2003,  we  combined  OVS  subscribers  with  BSP  subscribers.  We  are  no  longer  therefore, 
 reporting  a  separate  number  for  OVS  subscribers.  (iv)  This  number  includes  some,  if  not  all,  OVS  subscribers,  and  may  double  count  some  cable  subscribers  from 
 newer  cable  overbuild  systems.  We  started  reporting  this  number  last  year  and  thus  we  do  not  have 
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 subscribers  for  years  previous  to  2003.  Obviously,  the  number  did  not  increase  from  nothing,  or  60,  000  (the  OVS  subscribers)  to  1.4  million  in  one  year,  but  we  lacked  data  to  estimate  the  number  previous  to 
 2003. 
 Sources: 
 (1)  Television  households:  All  years,  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:  All  years,  Kagan  Research,  LLC,  Kagans  10-  Pay  TV  Subscriber  History,  Broadband  Cable  Financial  Databook  2004,  July  2004,  at  9. 
 (4)  MMDS  subscribers:  2000  from  NCTA  Comments  for  the  2000  Report  at  9;  2001  from  NCTA  Comments  for  the  2001  Report  at  7;  2002  from  NCTA  Comments  for  the  2002  Report  at  12;  2003  from  NCTA  Comments  for 
 the  2003  Report  at  8;  2004  from  NCTA  Comments  at  7,  fn.  12. 
 (5)  SMATV  subscribers:  2000  subscribers  from  NCTA  Comments  for  the  2000  Report  at  9;  2001  subscribers  from  NCTA  Comments  for  the  2001  Report  at  9;  2002  subscribers  from  NCTA  Comments  for  the  2002  Report  at  12; 
 2003  subscribers  from  NCTA  Comments  for  the  2003  Report  at  8;  2004  subscribers  from  NCTA  Comments  at  7,  fn.  12. 


 (6)  HSD  subscribers:  2000  from  SkyReport.  com  at  http://  www.  skyreport.  com/  dth_  us.  htm;  2001  from  SBCA  Comments  for  the  2001  Report,  Table  1  at  4;  2002  from  SkyReport.  com  at 
 http://  www.  skyreport.  com/  dth_  us.  htm;  2003  from  SBCA  Comments  for  the  2003  Report  at  4;  2004  from  para.  64  supra. 


 (7)  DBS  subscribers:  2000  from  SkyReport.  com  at  http://  www.  skyreport.  com/  dth_  us.  htm;  2001  from  SBCA  Comments  for  the  2001  Report,  Table  1  at  4;  2002  from  SkyReport.  com  at 
 http://  www.  skyreport.  com/  dth_  us.  htm;  2003  from  SBCA  Comments  for  the  2003  Report  at  4;  2004  from  paras.  54-  55  supra. 


 (8)  BSP  subscribers:  2003  subscribers  from  NCTA  Comments  for  the  2003  Report  at  8;  2004  Subscribers  from  BSPA  Comments  at  6  and  FCC  estimates. 
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 TABLE  B-  2 
 Number  and  Subscriber  Size  of  Major  Cable  System  Clusters  (Cumulative  Figures) 


 2000  2001  2002  2003  Range  of  Clustered 
 Subscribers  (thousands)  Clusters  Subscribers  (millions)  Clusters  Subscribers  (millions)  Clusters  Subscribers  (millions)  Clusters  Subscribers(  (millions) 
 100-  199  26  3.6  30  4.3  31  4.5  34  4.9 
 200-  299  13  3.2  17  4.2  18  4.4  18  4.4 
 300-  399  22  7.4  18  6.1  21  7.1  17  5.7 
 400-  499  13  5.9  10  4.4  10  4.4  10  4.4 
 >500  34  34.  3  32  33.  3  29  31.  0  29  34.  3 
 Total  108  54.  4  107  52.  3  109  51.  3  1088  53.  6 


 Sources: 
 2000  from  Kagan  World  Media,  Major  Cable  TV  Systems/  Clusters,  Broadband  Cable  Financial  Databook  2001  at  36;  2001  from  Kagan  World  Media,  Major  Cable  TV  Systems/  Clusters,  Broadband  Cable 
 Financial  Databook  2002  at  38;  2002  from  Kagan  World  Media,  Major  Cable  TV  Systems/  Clusters,  Broadband  Cable  Financial  Databook  2003,  at  39;  and  2003  from  Kagan  Research,  LLC,  Major  Cable  TV 
 Systems/  Clusters,  Broadband  Cable  Financial  Databook  2004,  at  39-  40. 
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 TABLE  B-  3 
 2004  Concentration  in  the  National  Market  for  Purchase  of  Video  Programming  (1) 
 Rank  Company  Percent  of  Subscribers  (2) 
 1  Comcast  23.37 
 2  DirecTV  12.10 
 3  Time  Warner  11.87 
 4  EchoStar  10.63 
 Top  4  57.97 
 5  Cox  6.92 
 6  Charter  6.73 
 7  Adelphia  5.88 
 8  Cablevision  3.19 
 Top  8  80.69 
 9  Bright  House  2.37 
 10  Mediacom  1.66 
 Top  10  84.72 
 Top  25  90.41 
 Top  50  92.32 
 HHI  1097  (3) 


 Notes:  (1)  MSO  subscriber  totals  as  of  March  2004,  and  reported  in  Top  Cable  System  Operators  as  of  March 
 2004,  Kagan  World  Media,  Cable  TV  Investor,  July  29,  2004,  at  16-  17.  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  the  companys  10-  Q  filings. 


 (2)  The  total  number  of  MVPD  subscribers  used  to  calculate  the  HHI  is  92,295,766  from  Table  B-  1.  This  figure  is  for  June  2004,  whereas  individual  company  subscriber  total  come  from  March.  As  a 
 result,  1097  probably  is  slightly  higher  than  the  HHI  in  March. 
 (3)  The  HHI  is  calculated  on  the  basis  of  market  shares  for  the  top  65  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. 
 (4)  Due  to  a  revision  of  cable  and  MVPD  subscribers  for  2003,  the  market  shares  of  some  of  the  top  providers,  particularly  DirecTV  and  EchoStar,  may  have  appeared  to  have  shrunk,  when,  in  fact,  they 
 grew  since  last  year. 
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 TABLE  B-  4 
 Concentration  in  the  National  Market  for  the  Purchase  of  Video  Programming  2001-  2004* 


 Percent  of  MVPD  Subscribers  Market  Share  2001  2002  2003  2004 
 Top  Share  16.44  14.75  23.80  23.37 
 Top  2  30.79  29.04  36.72  35.47 
 Top  3  42.11  41.03  48.90  47.34 
 Top  4  51.64  50.48  58.71  57.97 
 Top  10  84.29  84.44  85.94  84.72 
 Top  25  89.70  90.26  91.72  90.41 
 Top  50  91.38  92.05  93.65  92.32 
 HHI  905  884  1134  1097 


 *  --  Reported  statistics  for  2001-  2003  are  based  on  June  data.  For  2004,  March  data  were  used  since  June  data  are  unavailable. 
 Sources: 
 Data  for  2001  through  2002  were  taken  from  Reports,  2001-  2002.  Data  for  2003  have  been  revised  to  use  consistent  data  sources.  Data  for  2004  are  from  Table  B-  3. 
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 APPENDIX  C 
 TABLE  C-  1 
 National  Video  Programming  Services  Affiliated  With  One  or  More  Cable  MSO 


 Programming  Service  Launch  Date  MSO  Ownership  (%) 
 Action  Max  Aug-  80  Time  Warner  (100) 
 American  Movie  Classics  (AMC)  Oct-  84  Cablevision  (60) 
 Animal  Planet  Oct-  96  Cox  (25),  Advance  Newhouse  (25) 
 @Max  May-  01  Time  Warner  (100) 
 Boomerang  Time  Warner  (100) 
 Cartoon  Network  Oct-  92  Time  Warner  (100) 
 Cinemax  Jun-  98  Time  Warner  (100) 
 CNN  Jun-  80  Time  Warner  (100) 
 CNN  En  Espaol  Mar-  97  Time  Warner  (100) 
 CNN  Headline  News  Jan-  82  Time  Warner  (100) 
 CNN  International  Jan-  95  Time  Warner  (100) 
 Court  TV  Jul-  91  Time  Warner  (50) 
 Discovery  Channel  Jun-  85  Cox  (25),  Advance  Newhouse  (25) 
 Discovery  En  Espaol  Oct-  98  Cox  (25),  Advance  Newhouse  (25) 
 Discovery  Health  Channel  Jul-  98  Cox  (25),  Advance  Newhouse  (25) 
 Discovery  HD  Theatre  Jun-  02  Cox  (25),  Advance  Newhouse  (25) 


 Discovery  Home  Channel  Oct-  96  Cox  (25),  Advance  Newhouse  (25) 
 Discovery  Kids  Channel  Oct-  96  Cox  (25),  Advance  Newhouse  (25) 
 Discovery  Times  Oct-  96  Cox  (12.  5),  Advance  Newhouse  (12.5) 


 Discovery  Wings:  The  Aviation  and  Adventure  Network  Jul-  98  Cox  (25),  Advance  Newhouse  (25) 
 E!  Entertainment  Jun-  90  Comcast  (60.5) 
 5StarMax  May-  02  Time  Warner  (100) 
 FITTV  Jan-  04  Cox  (25),  Advance  Newhouse  (25) 
 Fuse  Jul-  94  Cablevision  (60) 
 Fuse  On  Demand  Jun-  03  Cablevision  (60) 
 G4techTV  Jun-  02  Comcast  (83.5) 
 Golf  Channel  Jan-  95  Comcast  (99.85) 
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 Programming  Service  Launch  Date  MSO  Ownership  (%) 
 HBO  (Home  Box  Office)  Nov-  72  Time  Warner  (100) 
 HBO  2  Oct-  98  Time  Warner  (100) 
 HBO  Comedy  May-  99  Time  Warner  (100) 
 HBO  Family  Oct-  98  Time  Warner  (100) 
 HBO  Latino  Nov-  00  Time  Warner  (100) 
 HBO  Signature  Oct-  98  Time  Warner  (100) 
 HBO  Zone  May-  99  Time  Warner  (100) 
 iN  Demand  35  multiplexed  channels  Nov-  85  Comcast  (54.1),  Time  Warner  (30.3),  Cox  (15.6) 


 iN  Demand  HD1  Sep-  03  Comcast  (54.1),  Time  Warner  (30.3),  Cox  (15.6) 
 iN  Demand  HD2  Sep-  03  Comcast  (54.1),  Time  Warner  (30.3),  Cox  (15.6) 
 Independent  Film  Channel  Sep-  94  Cablevision  (60) 
 International  Channel  Jul-  90  Comcast  (100) 
 MoreMAX  Jun-  98  Time  Warner  (100) 
 Outdoor  Life  Network  Jul-  95  Comcast  (100) 
 OuterMax  May-  01  Time  Warner  (100) 
 Ovation:  The  Arts  Network  Apr-  96  Time  Warner  (5.1) 
 Science  Channel  Oct-  96  Cox  (25),  Advance  Newhouse  (25) 
 Source  Suite  Nov-  93  Insight  Communications  (100) 
 Style  Oct-  98  Comcast  (60.5) 
 TBS  Dec-  76  Time  Warner  (100) 
 TLC  (The  Learning  Channel)  Nov-  80  Cox  (25),  Advance  Newhouse  (25) 
 Thriller  Max  Jun-  98  Time  Warner  (100) 
 TNT  (Turner  Network  Television)  Oct-  88  Time  Warner  (100) 
 Travel  Channel  Feb-  87  Cox  (25),  Advance  Newhouse  (25) 
 TCM  (Turner  Classic  Movies)  Apr-  94  Time  Warner  (100) 
 TV  One  Jan-  04  Comcast  (38.8) 
 WE  Jan-  97  Cablevision  (60) 
 WMAX  May-  01  Time  Warner  (100) 
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 Sources: 
 NCTA,  Directory  of  Program  Services,  Cable  Developments  2004,  at  43-  206.  COLUMBIA  JOURNALISM  REVIEW,  http://  www.  cjr.  org/  tools/  owners/  timewarner.  asp  (visited  July  20,  2004). 
 American  Cable  Association  Comments  at  10,  12.  Comcast  Comments  at  24-  28;  Reply  Comments  at  11. 
 Time  Warner  Co.,  http://  www.  timewarner.  com  (visited  Sept.  14,  2004).  Cartoon  Network,  http://  www.  schedule.  cartoonnetwork.  com  (visited  Sept.  20,  2004). 
 Liberty  Media  Corporation,  Liberty  Media  and  Comcast  Complete  Exchange  of  Liberty  Shares  for  Programming  Assets  and  Approximately  $545  Million  (press  release),  July  28,  2004. 
 Comcast,  Comcast  Agrees  to  Purchase  TechTV  (press  release),  March  25,  2004.  New  York  Times,  http://  www.  nytco.  com/  subsites/  nyttv/  about-  dtc.  html  (visited  Dec.  16,  2004). 
 Cable,  COMM.  DAILY,  July  26,  2004,  at  6.  Discovery  Communications,  THE  WASHINGTON  POST,  Nov.  15,  2004,  at  E2. 
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 TABLE  C-  2 
 National  Video  Programming  Services  Not  Affiliated  With  a  Cable  MSO 


 Programming  Service  Launch  Date 
 A&  E  (Arts  &  Entertainment)  Feb-  84 
 ABC  Family  Apr-  77 
 ACNTV  (Americas  Collectibles  Network)  Oct-  93 
 AIT  (African  Independent  Television)  2003 
 America's  Store  Sep-  86 
 ANA  Television  Network  Dec-  91 
 Anime  Network  Dec-  02 
 AYM  Sports  Nov-  03 
 Bandamax  May-  03 
 ART  (Arab  Radio  &  Television)  1999 
 BBC  America  Mar-  98 
 BET  (Black  Entertainment  Television)  Jan-  80 
 BET  Gospel  Jul-  02 
 BET  Hip  Hop  Jul-  02 
 BET  Jazz:  The  Jazz  Channel  Jan-  96 
 Biography  Channel  Nov-  98 


 Black  Family  Channel  (formerly  MBC  Network)  Nov-  99 
 Black  STARZ!  Feb-  97 
 Bloomberg  Television  Jan-  95 
 B  Mania  Nov-  00 
 Boston  Kids  &  Family  TV  Oct-  03 
 Bravo  Dec-  80 
 Bridges  TV  Nov-  04 
 Buzztime  Entertainment  1984 
 Canal  24  Horas  Jun-  99 
 CCTV-  4  (China  Central  Television)  1995 
 Celtic  Vision  1995 
 Channel  One  Russian  Worldwide  Network  2003 
 Chronicle  DTV  Jan-  03 
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 Programming  Service  Launch  Date 
 Church  Channel  Jan-  02 
 Cine  Latino  Jun-  94 
 Classic  Arts  Showcase  May-  94 
 CMT  (Country  Music  Television)  Mar-  83 
 CNBC  Jul-  89 
 CNBC  World  Apr-  89 
 CNC  Columbia  May-  99 
 College  Entertainment  Network  Jan-  97 
 Comedy  Central  Apr-  91 
 Crime  Channel  Jul-  96 
 C-  SPAN*  Mar-  79 
 C-  SPAN2*  Jun-  86 
 C-  SPAN3*  Sep-  97 
 CSTV  (College  Sports  Television)  Apr-  03 
 CTI  Zhon  Tian  Channel  (formerly  Power  TV  Zhon  Tian  Channel)  1995 
 Daystar  Television  Network  Dec-  98 
 De  Pelicula  May-  03 
 De  Pelicula  Classico  May-  03 
 Deep  Dish  TV  Jan-  86 
 Destiny  Channel  Dec-  98 
 Disney  Channel  Apr-  83 
 DIY  (Do-  It-  Yourself  Network)  Dec-  94 
 Dream  Network  Dec-  94 
 Ecology  Communications  Nov-  94 
 Encore  Apr-  91 
 Encore  HD  Mar-  04 
 Encore  Action  Sep-  94 
 Encore  Love  Stories  Jul-  94 
 Encore  Mystery  Jul-  94 
 Encore  True  Stories  Sep-  94 
 Encore  WAM!  Americas  Youth  Network  Sep-  94 
 Encore  Westerns  Jul-  94 
 ESPN  Sep-  79 
 ESPN  Classic  May-  95 
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 Programming  Service  Launch  Date 
 ESPN  Deportes  Jan-  04 
 ESPN2  Oct-  93 
 ESPN  HD  Mar-  03 
 ESPNEWS  Nov-  96 
 EWTN:  Global  Catholic  Network  Aug-  81 
 Familyland  Television  Network  Nov-  99 
 Family  Net  May-  00 
 Filipino  Channel  (ABS-  CBN)  Feb-  98 
 Fine  Living  Mar-  02 
 Flix  Aug-  92 
 Food  Network  Nov-  93 
 Fox  Movie  Channel  Nov-  94 
 Fox  News  Channel  Oct-  96 
 Fox  Sports  Digital  Nets  Nov-  96 
 Fox  Sports  World  Nov-  97 
 Fox  Sports  en  Espaol  Nov-  96 
 FX  Jun-  94 
 Fuel  Jul-  03 
 FSTV  (Free  Speech  TV)  Jun-  95 
 Galavision  Oct-  79 
 GSN  (Game  Show  Network)  Dec-  94 
 German  TV  Apr-  02 
 Gol  TV  Mar-  03 
 Golden  Eagle  Broadcasting  Nov-  98 
 Goodlife  Television  Network  Feb-  85 


 Grandes  Documentales  1996 
 Great  American  Country  Dec-  95 
 Hallmark  Channel  Sep-  98 
 Hallmark  Movie  Channel  Jan-  04 
 HDNET  Sep-  01 
 HDNET  Movies  Jan-  03 
 Health  TV  Channel  Apr-  03 
 Here!  TV  Oct-  04 
 History  Channel  Jan-  95 
 History  Channel  en  Espaol  May-  04 
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 Programming  Service  Launch  Date 
 History  International  Nov-  98 
 Home  &  Garden  Television  (HGTV)  Dec-  94 
 Home  Shopping  Network  Jul-  85 
 Horse  Racing  TV  Dec-  02 
 Hot  Net  Mar-  99 
 Hot  Zone  Mar-  99 
 HTV  Aug-  95 
 Hustler  TV  Apr-  04 
 Imaginasian  TV  Aug-  04 
 Infinito  2003 
 Inspirational  Life  Television  (I-  LIFETV)  Jun-  98 
 Inspirational  Network  (INSP)  Apr-  90 
 JCTV  Nov-  02 
 Jewelry  Television  by  ACN  Oct-  93 
 La  Familia  Network  May-  02 
 LATV  Dec-  03 
 Liberty  Channel  Sep-  01 
 Lifetime  Movie  Network  Jul-  98 
 Lifetime  Real  Women  Aug-  01 
 Lifetime  Television  Feb-  84 
 Locomotion  Channel  Nov-  96 


 MAVTV-  Mavrick  Entertainment  Network  Oct-  04 
 MBC  America  (MUNHWA  Broadcasting  Corporation)  2002 
 Meadow  Racing  Network  Nov-  84 
 MoviePlex  Oct-  94 
 MSNBC  Jul-  96 
 MTV  Espaol  Aug-  98 
 MTV  Hits  May-  02 
 MTV  Jams  May-  02 
 MTV:  Music  Television  Aug-  81 
 MTV  2  Dec-  98 
 Mun  Oct-  01 
 Music  First  Unknown 
 My  Pet  TV  Sep-  96 
 NASA  Television  Jul-  91 
 National  Geographic  Channel  Jan-  01 
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 Programming  Service  Launch  Date 
 National  Iranian  Television  (NITV)  2003 
 National  Jewish  Television  May-  81 
 NBA  TV  Nov-  99 
 Newsworld  International  Sep-  94 
 NFL  Network  Nov-  03 
 NFL  On  Demand  Nov-  03 
 Nick  2  May-  98 
 Nickelodeon  Gas-  Games  &  Sports  Network  Mar-  99 
 Nickelodeon/  Nick  at  Nite  Apr-  79 
 Nicktoons  Jan-  99 
 Noahs  World  International  May-  03 
 Noggin/  The  N  Feb-  99 
 Oasis  TV  Sep-  97 
 Outdoor  Channel  Apr-  93 
 Oxygen  Media  Feb-  00 
 Pax  TV  Aug-  98 
 Pentagon  Channel  May-  04 
 Playboy  TV  Networks  Nov-  82 
 Pleasure  Jun-  99 
 Praise  Television  Dec-  96 
 PIN  (Product  Information  Network)  Apr-  94 
 Puma  TV  1997 
 QTV  (Q  Television  Network)  Jul-  04 
 QVC  Nov-  86 
 RAI  International  1999 
 Rang-  A-  Rang  2003 
 Ritmoson  Latino  May-  03 
 Russian  Television  Network  of  America  (RTN)  Aug-  00 
 Rx  Channel  May  -03 
 Saigon  Broadcasting  Network  Feb-  02 
 Sci-  Fi  Channel  Sep-  92 
 SCOLA  Aug-  87 
 Shop  at  Home  Jun-  86 
 Shop  NBC  Oct-  91 
 Short  TV  Jan-  99 
 Showtime  Jul-  76 
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 Programming  Service  Launch  Date 
 Showtime  Beyond  Sep-  99 
 Showtime  PPV  (formerly  Showtime  Event  Television,  SET)  1979 
 Showtime  Extreme  1998 
 Showtime  Family  Zone  Mar-  01 
 Showtime  Next  Mar-  01 
 Showtime  Showcase  Jul-  01 
 Showtime  Too  2001 
 Showtime  Women  Mar-  01 
 SiTV  Feb-  04 
 Skyview  World  Media  1992 
 S  |  Networks  May-  03 
 Sorpressa  Mar-  03 
 SoapNet  Jan-  00 
 Speed  Channel  Jan-  96 
 Spice  1  May-  89 
 Spice  2  Unknown 
 Spike  TV  Mar-  83 
 Sportsman  Channel  Apr-  03 
 Starz!  Mar-  94 
 Starz!  Cinema  May-  99 
 Starz!  Family  May-  99 
 Starz!  HD  Dec-  03 
 Starz!  Kids  Mar-  94 
 Starz!  On  Demand  May-  01 
 Starz!  Super  Pack  (13  movie  channels)  May-  99 
 Starz!  Theater  Mar-  96 
 Sun  TV  Aug-  96 
 Sundance  Channel  Feb-  96 
 Sur  Aug-  91 
 TBN  (Trinity  Broadcasting  Network)  May-  73 
 TBN  Enlace  USA  May-  02 
 Telefe  Internacional  Apr-  90 
 Telefutura  Jan-  02 
 Telehit  May-  03 
 Telemundo  Jan-  87 
 Telemundo  Internacional  Mar-  00 
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 Programming  Service  Launch  Date 
 The  Erotic  Network  (TeN)  Sep-  98 
 TeN  on  Demand  Mar-  99 
 TeN  BLOX  Jan-  03 
 TeN  Blue  Jan-  03 
 TeN  Clips  May-  00 
 Tennis  Channel  May-  03 
 Tenxsty  Feb-  98 
 TFN  (The  Football  Network)  Sep-  03 
 TMC  (The  Movie  Channel)  Dec-  79 
 TMC  HD  Dec-  03 
 TMC  XTRA  1997 
 True  Blue  Feb-  98 
 Toon  Disney  Apr-  98 
 Totally  Broadway  TV  Jun-  02 
 Totally  Hollywood  TV  Jun-  02 
 TR!  O  Sep-  94 
 TV  5    USA  Inc.  Jan-  98 
 TV  Asia  Jul-  91 
 TVG  Network  Sep-  04 
 TV  Games  Network  Jul-  94 
 TV  Japan  Jul-  91 
 TVN  Entertainment  Corporation  (33  digital  pay-  per-  view  channels)  Feb-  98 
 TVN  Direct  Jan-  96 
 TV  Guide  Channel  Jan-  88 
 TV  Guide  Interactive  Oct-  96 
 TV  Internacional  2003 
 TV  Land  Apr-  96 
 TV  Polonia  2003 
 UBC  (Urban  Broadcasting  Company)  Apr-  03 
 Univision  Sep-  96 
 Utilisima  Satelitel  Mar-  96 
 USA  Network  Apr-  80 
 VH1  (Music  First)  Jan-  85 
 VH1  (Classic)  May-  00 
 VH1  Soul  Aug-  98 
 VH1  Country  Aug-  98 
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 Programming  Service  Launch  Date 
 VH1  Megahits  May-  02 
 VH  Uno  Nov-  99 
 Video  Rola  Jan-  01 
 Vivid  TV  Mar-  99 
 VTV:  Varsity  Television  Jan-  03 
 VTV  On  Demand  Jan-  03 
 Weather  Channel  May-  82 
 Weatherscan  Oct-  99 
 WGN  Nov-  78 
 Wisdom  Television  Jul-  97 
 Word  Network  Feb-  00 
 Worship  Network  Sep-  92 
 ZEE  TV  1999 


 Note: 
 *  The  National  Cable  Satellite  Corporation  (C-  SPAN)  derives  97  percent  of  its  revenues  from  affiliate  fees  (i.  e.,  subscriber  fees  from  MVPDs).  The  remaining  three  percent  is  provided  by  various  investments. 
 Affiliates  have  no  ownership  or  program  control  interests  in  C-  SPAN. 
 Sources: 
 NCTA,  Directory  of  Cable  Networks,  Cable  Developments  2004,  at  43-  206.  COLUMBIA  JOURNALISM  REVIEW,  http://  www.  cjr.  org/  tools/  owners/  timewarner.  asp  (visited  July  20,  2004). 
 American  Cable  Association  at  10,  12.  Disney  Comments  at  2,  3. 
 DIRECTV  Comments,  Exhibit  E.  Fox  Comments,  Attachment  A. 
 Viacom  Comments  at  4-  5.  NBC  Universal,  http://  www.  nbcuni.  com/  AboutNBC_  Universal/  Company_  Overview/  overview02.  shtml 
 (visited  Dec.  16,  2004).  Univision  Communications  Inc.,  http://  www.  univision.  net/  corp/  en/  mp.  jsp  (visited  Dec.  16,  2004). 
 TuTv,  http://  tutv.  tv/  tutv/  en/  our_  company.  jsp  (visited  Dec.  16,  2004).  Liberty  Media  Corporation,  Liberty  Media  Corporation  Completes  Spin  Off  of  Liberty 
 MediaInternational,  Inc.  (press  release),  June  7,  2004.  Hustler  TV,  http://  hustlertv.  com  (visited  Sept.  27,  2004) 
 Imaginasian  TV,  http://  www.  iatv/  press.  php  (visited  Sept.  27,  2004)  Cable,  COMM.  DAILY,  Oct.  7,  2004,  at  14. 
 Cable,  COMM.  DAILY,  Nov.  18,  2004,  at  13. 
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 TABLE  C-  3 
 National  Video  Programming  Services  Affiliated  With  a  Media  Entity* 


 Programming  Service  Ownership 
 A&  E  (Arts  &  Entertainment)  Disney,  NBC-  Universal,  Hearst 
 ABC  Family  Disney 
 ACNTV  (Americas  Collectibles  Network) 
 Action  Max  Time  Warner 
 AIT  (African  Independent  Television) 
 American  Movie  Classics  (AMC)  Cablevision 
 America's  Store 
 ANA  Television  Network 
 Animal  Planet  Cox,  Advance  Newhouse,  Liberty  Media 


 Anime  Network 
 @Max  Time  Warner 
 AYM  Sports 
 ART  (Arab  Radio  &  Television) 
 Bandamax  Univision 
 BBC  America  Viacom 
 BET  (Black  Entertainment  Television)  Viacom 
 BET  Gospel  Viacom 
 BET  Hip  Hop  Viacom 
 BET  Jazz:  The  Jazz  Channel  Viacom 
 Biography  Channel  Disney,  NBC-  Universal,  Hearst 


 Black  Family  Channel  (formerly  MBC  Network) 
 Black  STARZ!  Liberty  Media 
 Bloomberg  Television 
 B  Mania 
 Boomerang  Time  Warner 
 Boston  Kids  &  Family  TV 
 Bravo  NBC-  Universal 
 Bridges  TV 
 Buzztime  Entertainment 
 Canal  24  Horas 
 Cartoon  Network  Time  Warner 
131
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 Programming  Service  Ownership 
 CCTV-  4  (China  Central  Television) 
 Celtic  Vision 
 Channel  One  Russian  Worldwide  Network 
 Chronicle  DTV 
 Church  Channel  Trinity  Broadcasting  Network 
 Cine  Latino 
 Cinemax  Time  Warner 
 Classic  Arts  Showcase 
 CMT  (Country  Music  Television)  Viacom 
 CNBC  NBC-  Universal 
 CNBC  World  NBC-  Universal 
 CNC  Columbia 
 CNN  Time  Warner 
 CNN  En  Espaol  Time  Warner 
 CNN  Headline  News  Time  Warner 
 CNN  International  Time  Warner 
 College  Entertainment  Network 
 Comedy  Central  Viacom 
 Court  TV  Time  Warner,  Liberty  Media 
 Crime  Channel 
 C-  SPAN** 
 C-  SPAN2** 
 C-  SPAN3** 
 CSTV  (College  Sports  Television) 
 CTI  Zhon  Tian  Channel  (formerly  Power  TV  Zhon  Tian  Channel) 


 Daystar  Television  Network  Daystar  Television 
 De  Pelicula  Univision 
 De  Pelicula  Classico  Univision 
 Deep  Dish  TV 
 Destiny  Channel 
 Discovery  Channel  Cox,  Advance  Newhouse,  Liberty  Media 


 Discovery  En  Espaol  Cox,  Advance  Newhouse,  Liberty  Media 
 Discovery  Health  Channel  Cox,  Advance  Newhouse,  Liberty  Media 
132
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 Programming  Service  Ownership 
 Discovery  HD  Theater  Cox,  Advance  Newhouse,  Liberty  Media 


 Discovery  Home  Channel  Cox,  Advance  Newhouse,  Liberty  Media 
 Discovery  Kids  Cox,  Advance  Newhouse,  Liberty  Media 
 Discovery  Times  Cox,  Advance  Newhouse,  Liberty  Media,  New  York  Times 
 Discovery  Wings:  The  Aviation  and  Adventure  Channel  Cox,  Advance  Newhouse,  Liberty  Media 
 Disney  Channel  Disney 
 DIY  (Do-  It-  Yourself  Network)  E.  W.  Scripps 
 Dream  Network 
 E!  Entertainment  Comcast,  Disney 
 Ecology  Communications 
 Encore  Liberty  Media 
 Encore  HD  Liberty  Media 
 Encore  Action  Liberty  Media 
 Encore  Love  Stories  Liberty  Media 
 Encore  Mystery  Liberty  Media 
 Encore  True  Stories  Liberty  Media 
 Encore  WAM!  Americas  Youth  Network  Liberty  Media 
 Encore  Westerns  Liberty  Media 
 ESPN  Disney,  Hearst 
 ESPN  Classic  Disney,  Hearst 
 ESPN  Deportes  Disney,  Hearst 
 ESPN2  Disney,  Hearst 
 ESPN  HD  Disney,  Hearst 
 ESPNEWS  Disney,  Hearst 
 EWTN:  Global  Catholic  Network 
 Familyland  Television  Network 
 Family  Net 
 Filipino  Channel  (ABS-  CBN) 
 Fine  Living  E.  W.  Scripps 
 5StarMax  Time  Warner 
 FITTV  Cox,  Advance  Newhouse 
 Flix  Viacom 
 Food  Network  E.  W.  Scripps 
133
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 Programming  Service  Ownership 
 Fox  Movie  Channel  Fox 
 Fox  News  Channel  Fox 
 Fox  Sports  Digital  Nets  Fox 
 Fox  Sports  World  Fox 
 Fox  Sports  en  Espaol  Fox 
 FX  Fox 
 Fuel  Fox 
 FSTV  (Free  Speech  TV) 
 Fuse  Cablevision 
 Fuse  On  Demand  Cablevision 
 G4techTV  Comcast,  EchoStar 
 Galavision  Univision 
 GSN  (Game  Show  Network)  Liberty  Media 
 German  TV 
 Gol  TV 
 Golden  Eagle  Broadcasting 
 Golf  Channel  Comcast 
 Goodlife  Television  Network 


 Grandes  Documentales 
 Great  American  Country  E.  W.  Scripps 
 Hallmark  Channel  Liberty  Media 
 Hallmark  Movie  Channel  Liberty  Media 
 HBO  (Home  Box  Office  Time  Warner 
 HBO  2  Time  Warner 
 HBO  Comedy  Time  Warner 
 HBO  Family  Time  Warner 
 HBO  Latino  Time  Warner 
 HBO  Signature  Time  Warner 
 HBO  Zone  Time  Warner 
 HDNET 
 HDNET  Movies 
 Health  TV  Channel 
 Here!  TV 
 History  Channel  Disney,  NBC-  Universal,  Hearst 


 History  Channel  en  Espaol  Disney,  NBC-  Universal  Hearst 
134
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 Programming  Service  Ownership 
 History  International  Disney,  NBC-  Universal,  Hearst 
 Home  &  Garden  Television  (HGTV)  E.  W.  Scripps 
 Home  Shopping  Network 
 Horse  Racing  TV 
 Hot  Net 
 Hot  Zone 
 HTV 
 Hustler  TV 
 Imaginasian  TV 
 iN  Demand  (35  multiplexed  channels)  Comcast,  Time  Warner,  Cox 
 iN  Demand  HD1  Comcast,  Time  Warner,  Cox 
 iN  Demand  HD2  Comcast,  Time  Warner,  Cox 
 Independent  Film  Channel  Cablevision 
 Infinito 
 Inspirational  Life  Television  (I-  LIFETV) 
 Inspirational  Network  (INSP) 
 International  Channel  Comcast 
 JCTV  Trinity  Broadcasting  Network 
 Jewelry  Television  by  ACN 
 La  Familia  Network 
 LATV 
 Liberty  Channel 
 Lifetime  Movie  Network  Disney,  Hearst 
 Lifetime  Real  Women  Disney,  Hearst 
 Lifetime  Television  Disney,  Hearst 
 Locomotion  Channel 
 MAVTV-  Mavrick  Entertainment  Network 


 MBC  America  (MUNHWA  Broadcasting  Corporation) 


 Meadow  Racing  Network 
 MoreMAX  Time  Warner 
 MoviePlex  Liberty  Media 
 MSNBC  NBC-  Universal 
 MTV  Espaol  Viacom 
 MTV  Hits  Viacom 
135
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 Programming  Service  Ownership 
 MTV  Jams  Viacom 
 MTV:  Music  Television  Viacom 
 MTV  2  Viacom 
 Mun  NBC-  Universal 
 Music  First 
 My  Pet  TV 
 NASA  Television 
 National  Geographic  Channel  Fox 
 National  Iranian  Television  (NITV) 
 National  Jewish  Television 
 NBA  TV 
 Newsworld  International 
 NFL  Network 
 NFL  On  Demand 
 Nick  2  Viacom 
 Nickelodeon  Gas-  Games  &  Sports  Network  Viacom 
 Nickelodeon/  Nick  at  Nite  Viacom 
 Nicktoons  Viacom 
 Noahs  World  International 
 Noggin/  The  N  Viacom 
 Oasis  TV 
 Outdoor  Channel 
 Outdoor  Life  Network  Comcast 
 OuterMax  Time  Warner 
 Ovation:  The  Arts  Network  Time  Warner,  New  York  Times 


 Oxygen  Media 
 Pax  TV  NBC-  Universal,  Paxson  Communications 


 Pentagon  Channel 
 Playboy  TV  Networks 
 Pleasure 
 Praise  Television 
 PIN  (Product  Information  Network) 
 Puma  TV 
 QTV  (Q  Television  Network) 
136
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 Programming  Service  Ownership 
 QVC  Liberty  Media 
 RAI  International 
 Rang-  A-  Rang 
 Ritmoson  Latino  Univision 
 Russian  Television  Network  of  America  (RTN) 
 Rx  Channel 
 Saigon  Broadcasting  Network 
 Science  Channel  Cox,  Advance  Newhouse 
 Sci-  Fi  Channel  NBC-  Universal 
 SCOLA 
 Shop  at  Home  E.  W.  Scripps 
 Shop  NBC  NBC-  Universal 
 Short  TV 
 Showtime  Viacom 
 Showtime  Beyond  Viacom 
 Showtime  PPV  (formerly  Showtime  Event  Television,  SET)  Viacom 


 Showtime  Extreme  Viacom 
 Showtime  Family  Zone  Viacom 
 Showtime  Next  Viacom 
 Showtime  Showcase  Viacom 
 Showtime  Too  Viacom 
 Showtime  Women  Viacom 
 SiTV 
 Skyview  World  Media 
 S  |  Networks 
 Sorpressa 
 SoapNet  Disney 
 Source  Suite  Insight  Communications 
 Speed  Channel  Fox 
 Spice  1 
 Spice  2 
 Spike  TV  Viacom 
 Sportsman  Channel 
 Starz!  Liberty  Media 
 Starz!  Cinema  Liberty  Media 
 Starz!  Family  Liberty  Media 
137
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 Programming  Service  Ownership 
 Starz!  HD  Liberty  Media 
 Starz!  Kids  Liberty  Media 
 Starz!  On  Demand  Liberty  Media 
 Starz!  Super  Pack  (13  movie  channels)  Liberty  Media 
 Starz!  Theater  Liberty  Media 
 Style  Comcast,  Disney 
 Sun  TV 
 Sundance  Channel  Viacom 
 Sur 
 TBN  (Trinity  Broadcasting  Network)  Trinity  Broadcasting  Network 
 TBN  Enlace  USA  Trinity  Broadcasting  Network 
 TBS  Time  Warner 
 Telefe  Internacional 
 Telefutura  Univision 
 Telehit  Univision 
 Telemundo  NBC-  Universal 
 Telemundo  Internacional  NBC-  Universal 
 The  Erotic  Network  (TeN) 
 TeN  on  Demand 
 TeN  BLOX 
 TeN  Blue 
 TeN  Clips 
 Tennis  Channel 
 Tenxsty 
 TFN  (The  Football  Network) 
 TLC  (The  Learning  Channel)  Cox,  Advance  Newhouse  Liberty  Media 


 Thriller  Max  Time  Warner 
 TMC  (The  Movie  Channel)  Viacom 
 TMC  HD  Viacom 
 TMC  XTRA  Viacom 
 TNT  (Turner  Network  Television)  Time  Warner 
 True  Blue 
 Toon  Disney  Disney 
 Totally  Broadway  TV 
 Totally  Hollywood  TV 
138
 Federal  Communications  Commission  FCC  05-  13 
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 Programming  Service  Ownership 
 Travel  Channel  Cox,  Advance  Newhouse  Liberty  Media 


 TCM  (Turner  Classic  Movies)  Time  Warner 
 TR!  O  NBC-  Universal 
 TV  5    USA  Inc. 
 TV  Asia 
 TVG  Network 
 TV  Games  Network  Fox 
 TV  Japan 
 TVN  Entertainment  Corporation  (33  digital  pay-  per-view  channels) 


 TVN  Direct 
 TV  Guide  Channel  Fox 
 TV  Guide  Interactive  Fox 
 TV  Internacional 
 TV  Land  Viacom 
 TV  One  Comcast 
 TV  Polonia 
 UBC  (Urban  Broadcasting  Company) 
 Univision  Univision 
 Utilisima  Satelitel 
 USA  Network  NBC-  Universal 
 VH1  (Music  First)  Viacom 
 VH1  (Classic)  Viacom 
 VH1  Soul  Viacom 
 VH1  Country  Viacom 
139
 Federal  Communications  Commission  FCC  05-  13 
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 Programming  Service  Ownership 
 VH1  Megahits 
 VH  Uno 
 Video  Rola 
 Vivid  TV 
 VTV:  Varsity  Television 
 VTV  On  Demand 
 WE  Cablevision 
 Weather  Channel  Landmark  Communications 
 Weatherscan  Landmark  Communications 
 WGN  Tribune  Company 
 Wisdom  Television 
 WMAX  Time  Warner 
 Word  Network 
 Worship  Network 
 ZEE  TV 


 Note: 
 *  Media  entity  is  defined  as  a  cable  operator,  broadcast  network,  or  broadcast  television  station  licensee.  Liberty  Media  programming  interests  are  also  listed  due  to  its  ownership  in  News  Corp.  (Fox). 
 **  The  National  Cable  Satellite  Corporation  (C-  SPAN)  derives  97  percent  of  its  revenues  from  affiliate  fees  (i.  e.,  subscriber  fees  from  MVPDs).  The  remaining  three  percent  is  provided  by  various  investments. 
 Affiliates  have  no  ownership  or  program  control  interests  in  C-  SPAN. 
 Sources: 
 See  Sources  Tables  C-  1  and  C-  2.  FCC,  Broadcast  Radio  and  Television  Electronic  Filing  System,  http://  svartifoss2.  fcc.  gov/  cgi-  bin/ 
 ws.  exe/  prod/  cdbs/  pubacc/  prod/  cdbs_  pa.  htm.  Paxson  Communications,  http://  www.  pax.  tv/  about/  (visited  Dec.  16,  2004). 
 Daystar  Television  Network,  http://  www.  daystar.  com/  about.  htm  (visited  Dec.  16,  2004). 
140
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 TABLE  C-  4 
 Regional  Video  Programming  Services 
 Programming  Services  Launch  Date  MSO  Ownership  (%) 
 Altitude  Sports  &  Entertainment  Sep-  04 
 Arabic  Channel  Apr-  91 
 Arizona  News  Channel  Nov-  96  Cox  (50) 
 Bay  News  9  Sep-  97  Time  Warner  (100) 
 Bay  TV  1994 
 Bravesvision  (Atlanta)  Jul-  03  Comcast  (100) 
 California  Channel  Feb-  91 
 Capital  News  9-  Albany  New  York  Time  Warner  (100) 
 Central  Florida  News  13  (CFN  13)  Oct-  97  Time  Warner  (50) 
 ChicagoLand  Television  News  (CLTV)  Jan-  93 
 Carolinas  Sports  Entertainment  Television  Oct-  04 
 CN8    The  Comcast  Network  Oct-  97  Comcast  (100) 
 Comcast  Local  (Detroit)  Aug-  04  Comcast  (100) 
 Comcast  SportsNet  (Philadelphia)  Oct-  97  Comcast  (78.34) 
 Comcast  SportsNet  Chicago  Oct-  04  Comcast  (30) 
 Comcast  SportsNet  Mid  Atlantic  Apr-  84  Comcast  (100) 
 Comcast  SportsNet  West  Nov-  04  Comcast  (100) 
 Comcast  /  Charter  Sports  Southeast  (CSS)  Apr-  84  Comcast  (69.1),  Charter  (23) 
 County  Television  Network  San  Diego  Jul-  96 
 Cowboys  TV  (Dallas)  Sep-  04  Comcast  (100) 
 Cox  Sports  Television  Oct-  02  Cox  (100) 
 Ecumenical  Television  Channel  1983 
 Empire  Sports  Network  Dec-  90  Adelphia  (67) 
 Falconvision  (Atlanta)  Sep-  04  Comcast  (100) 
 Florida's  News  Channel  Sep-  98 
 Fox  Sports  Net  Arizona  Sep-  96 
 Fox  Sports  Net  Bay  Area  Apr-  90  Cablevision  (60) 
 Fox  Sports  Net  Chicago  Jan-  84  Cablevision  (60) 
 Fox  Sports  Net  Detroit  Sep-  97 
 Fox  Sports  Net  Florida  1989  Cablevision  (60) 
 Fox  Sports  Net  Midwest  Sep-  97 
 Fox  Sports  Net  New  England  Jan-  88  Cablevision  (30) 
 Fox  Sports  Net  New  York  1989  Cablevision  (60) 
141
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 Programming  Services  Launch  Date  MSO  Ownership  (%) 
 Fox  Sports  Net  North  Mar-  89 
 Fox  Sports  Net  Northwest  Nov-  88 
 Fox  Sports  Net  Ohio  Feb-  89  Cablevision  (60) 
 Fox  Sports  Net  Pittsburgh  Apr-  86 
 Fox  Sports  Net  Rocky  Mountain  Nov-  88 
 Fox  Sports  Net  South  Aug-  90 
 Fox  Sports  Net  Southwest  Jan-  83 
 Fox  Sports  Net  West  Oct-  85 
 Fox  Sports  Net  West  2  Jan-  97 
 Game  Bank  Nov-  95 
 Gwinnet  News  &  Entertainment  Television  May-  97 
 Hip  Hop  Network  Jan-  97 
 International  Television  Broadcasting  (ITV)  Apr-  86 
 Las  Vegas  One  News  Apr-  98 
 Local  News  on  Cable  (LNC)    Hampton  Feb-  97 
 Madison  Square  Garden  Network  (MSG)  Oct-  69  Cablevision  (60) 
 MediaOne  News  Dec-  95 
 MetroSports    Kansas  City,  Mo.  Feb-  04  Time  Warner  (100) 
 Metro  Stories  Aug-  98  Cablevision  (60) 
 Metro  Traffic  and  Weather  Aug-  98  Cablevision  (60) 
 Metro  TV  Aug-  98  Cablevision  (60) 
 Michigan  Government  Television  Jul-  96 
 Neighborhood  News  12  Unknown  Cablevision  (75) 
 New  England  Cable  News  (NECN)  Mar-  92  Comcast  (50) 
 New  England  Sports  Network  (NESN)  Mar-  84 
 New  York  1  News  (NY1  News)  Sep-  92  Time  Warner  (100) 
 NY  1  Noticias  Jun-  03  Time  Warner  (100) 
 News  10  Now    Syracuse,  N.  Y.  Nov-  03  Time  Warner  (100) 
 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  Bronx  Jun-  97  Cablevision  (75) 
 News  12  Westchester  Nov-  95  Cablevision  (75) 
 News  8  Austin  Sep-  99  Time  Warner  (100) 
 News  Channel  5+  Sept-  96 
142
 Federal  Communications  Commission  FCC  05-  13 
 143 
 Programming  Services  Launch  Date  MSO  Ownership  (%) 
 News  14  Carolina  (Charlotte)  Mar-  02  Time  Warner  (100) 
 News  14  Carolina  (Raleigh)  Mar-  02  Time  Warner  (100) 
 News  Now  53  Jun-  97  Cox  (50) 
 News  on  One  Oct-  97  Cox  (50) 
 News  Watch  15  (New  Orleans)  Oct-  99 
 News  Channel  8  Oct-  91 
 NGTV  (National  Greek  Television  Dec-  87 
 Nippon  Golden  Network  Jan-  82 
 North  West  Cable  News  (NWCN)  Dec-  95 
 Ohio  News  Network  (ONN)  May-  97 
 Orange  County  Newschannel  (OCN) 
 PASS  Sports  (Pro-  Am  Sports  System)  Apr-  84 
 Pennsylvania  Cable  Network  (PCN)  Sep-  79 
 Pittsburgh  Cable  News  Channel  (PCNC)  Jan-  94  Comcast  (30) 
 Rarities  Exchange  Dec-  98 
 Regional  News  Network  (RNN)  Dec-  95 
 Rhode  Island  News  Channel  Sep-  98  Cox  (50) 
 R  News    Rochester,  N.  Y.  Jul-  95  Time  Warner  (100) 
 San  Diegos  News  Channel  15  Jan-  97 
 Six  News  Now  Jul-  95 
 Soundtrack  Channel  (STC)  Mar-  02 
 Sunshine  Network  Mar-  88 
 Texas  Cable  News  Jan-  99 
 Tri-  State  Media  News  (TSM  News)  Apr-  99 
 Turner  South  (STC)  Oct-  99  Time  Warner  (100) 
 TV33  Dec-  95 
 Washington  Korean  TV  (WKTV)  1985 
 Yankee  Entertainment  Sports  Network  (YES)  Mar-  02 


 Sources: 
 NCTA,  Regional  Cable  Networks,  Cable  Developments  2004,  at  207-  242.  Comcast  Comments  at  28. 
 Fox  Comments,  Attachment  A.  Mass  Media  Notes,  COMM.  DAILY,  Feb.  3,  2004,  at  10. 
 Stormy  Weather,  CABLEFAX  DAILY,  Oct.  15,  2004,  at  2.  http://  www.  cjr.  org/  tools.  owners  (visited  July  20,  2004) 
 http://  www.  freep.  com/  money/  business  (visited  Oct.  29,  2004) 
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 TABLE  C-  5 
 Planned  Programming  Services 
 Programming  Service  Planned  Launch  Date,  If  Announced 
 Africast  Television  Network  2004 
 America  Channel  2004 
 American  David  Sep-  05 
 America  National  Network  Mar-  05 
 AMCs  American  Pop  TBA 
 Anti-  Aging  Network  3Q05 
 Asia  Channel  2004 
 Auto  Channel  Sep-  05 
 BET  World  Music  Beat  TBA 
 Bingo  TV  TBA 
 Black  Belt  TV/  The  Martial  Arts  Network  2004 
 Black  Education  Network  2004 
 Black  Entertainment  Network  TBA 
 Blue  Highways  TV  2005 
 Boating  Channel  TBA 
 BOB:  Brief  Original  Broadcasts  2004 
 Booknet  TBA 
 Box  TV  May-  05 
 California  Channel  2005 
 Casino  &  Gaming  Television  2004 
 Classified  Channel  TV  2004 
 Collectors  Channel  TBA 
 CSN  (Cable  Science  Network)  TBA 
 Destiny  Channel  2004 
 Documentary  Channel  3Q05 
 Edge  TV  2005 
 Election  Channel  2004 
 Employment  Channel  1Q06 
 ESPNU  2005 
 ESPN2  HD  Jan-  05 
 Fad  TV  (Fashion  &  Design  Television)  2004 
 Fifth  Avenue  Channel  TBA 
144
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 Programming  Service  Planned  Launch  Date,  If  Announced 
 Film  Festival  Channel  2004 
 Florida  Channel  2004 
 Fox  Enhanced  TV  TBA 
 Gambling  Channel  2004 
 GETV  Program  Network  2004 
 Global  Village  Network  TBA 
 Government  Channel  TBA 
 Home  Improvement  Channel  2004 
 Honey  Vision  2004 
 Ice  Channel  4Q05 
 Imagination  Channel  2005 
 Investment  TV  TBA 
 JTV  (Jewish  TV)  1Q05 
 Las  Vegas  Channel  2005 
 Local  News  Network  TBA 
 Local  News  TV  2005 
 Local  Sports  TV  2005 
 Logo  Feb-  05 
 Major  League  Baseball  2005 
 Moore  TV  Network  TBA 
 Mountain  West  TV  4Q06 
 Moviewatch  2Q05 
 Native  American  Nations  Program  Network  2004 
 New  York  Channel  2005 
 New  York  Mets  2006 
 Orb  TV  TBA 
 Outdoor  Channel  2  2005 
 Premiere  Horse  Network  TBA 
 Puppy  Channel  4Q05 
 RadioTV  Network  4Q05 
 Real  Estate  Channel  2004 
 Real  Estate  Network  (TREN)  TBA 
 Reality  Central  2004 
 Scream  Channel  2005 
145
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 Programming  Service  Planned  Launch  Date,  If  Announced 
 SCTV  (Stand-  Up  Comedy  Television)  1Q05 
 Senior  Citizens  Television  Network  2004 
 Simulation  Channel  2005 
 Sundance  Documentary  Channel  TBA 
 Theater  Channel  TBA 
 Tickets  On  Demand  (The  Ticket  Channel)  2005 
 Tourist  Channel  2005 
 U.  S.  Military  Television  Network  2004 
 Vegas  Channel  2005 
 Voy  Network  TBA 
 Wine  Network  TV  2004 
 World  Cinema  TBA 


 Sources: 
 NCTA,  Planned  Services,  Cable  Developments  2004,  at  247-  274.  An  Unfunny  Thing  Happened  on  the  Way  to  New  Orleans,  CABLEFAX  DAILY,  May  3,  2004  at  2-  3. 
 Cable,  COMM.  DAILY,  Aug.  11,  2004,  at  9;  Aug.  23,  2004,  at  7,  Sept.  14,  2004,  at  11.  ESPN  to  Launch  College  Net,  BROADCASTING  &  CABLE  TV  FAX,  Sept.  8,  2003,  at  3. 
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 TABLE  C-  6 
 Top  20  Programming  Services  by  Subscribership 
 Rank  Programming  Network  Number  of  Subscribers  (Millions)*  Ownership  Interest  in  Network 
 1  Discovery  Channel  88.6  Cox,  Advance  Newhouse,  Liberty  Media 
 2  ESPN  88.4  Disney,  Hearst 
 3  CNN  88.2  Time  Warner 
 3  TNT  88.2  Time  Warner 
 4  TBS  88.1  Time  Warner 
 4  USA  Network  88.1  NBC  Universal 
 7  Nickelodeon  87.9  Viacom 
 8  C-  SPAN  87.8  National  Cable  Satellite  Corporation** 


 9  A&  E  87.7  Disney,  Hearst,  NBC-Universal 
 10  Lifetime  Television  87.5  Disney,  Hearst 
 10  The  Weather  Channel  87.5  Landmark 
 12  Spike  TV  87.2  Viacom 
 13  TLC  87.0  Cox,  Advance  Newhouse,  Liberty  Media 


 14  ABC  Family  Channel  86.8  Disney 
 14  ESPN2  86.8  Disney,  Hearst 
 16  MTV  86.7  Viacom 
 17  CNN  Headline  News  86.5  Time  Warner 
 18  VH1  86.3  Viacom 
 19  CNBC  86.2  NBC  Universal 
 20  The  History  Channel  85.8  Disney,  Hearst,  NBC  Universal 


 Note: 
 *  -  In  addition  to  cable  systems,  other  MVPDs  such  as  DBS  (direct  broadcast  satellite)  systems,  wireless  cable  (or  MMDS)  systems,  PCOs  (private  cable  operators  or  SMATV)  services,  and 
 HSD  (home  satellite  dish)  program  providers  may  distribute  these  signals.  Subscriber  figures  may  include  these  non-  cable  services. 
 **  -  The  National  Cable  Satellite  Corporation  (C-  SPAN)  derives  97  percent  of  its  revenues  from  affiliate  fees  (i.  e.,  subscriber  fees  from  MVPDs).  The  remaining  three  percent  is  provided  by 
 various  investments. 
 Sources: 
 NCTA,  Top  20  Cable  Networks,  Cable  Developments  2004,  at  39-  40.  Disney  Reply  Comments  at  2;  Fox  Comments,  Attachment  A;  Viacom  Comments  at  4,  5. 
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 TABLE  C-  7 
 Top  15  Programming  Services  by  Prime  Time  Rating 
 Rank  Programming  Service  Ownership  Interest  in  Network 
 1  TNT  Time  Warner 
 2  Nickelodeon  Viacom 
 3  USA  Network  NBC  Universal 
 4  Nick  At  Nite  Viacom 
 5  Disney  Disney 
 6  ESPN  Disney,  Hearst 
 7  Toon  Disney  Disney 
 8  Lifetime  Disney,  Hearst 
 9  Fox  News  Channel  Fox 
 10  TBS  Time  Warner 
 11  MTV  Viacom 
 12  FX  Fox 
 13  History  Channel  Disney,  Hearst,  NBC  Universal 
 14  Discovery  Channel  Cox,  Advance  Newhouse,  Liberty  Media 
 15  A&  E  Disney,  Hearst,  NBC  Universal 


 Sources: 
 Kagan  World  Media,  Day  Part  Ratings  Averages,  Prime  Time  (May),  CABLE  PROGRAM  INVESTOR,  July  16,  2004,  at  6. 
 Disney  Reply  Comments  at  2.  Fox  Comments,  Attachment  A. 
 Viacom  Comments  at  4,  5. 
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 SEPARATE  STATEMENT  OF  CHAIRMAN  MICHAEL  K.  POWELL 
 Re:  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming 
 As  evidenced  by  this  years  Report,  at  the  forefront  of  the  digital  migration  taking  root  in  every  sector  of  the  communications  landscape  and  bringing  vast  benefits  to  Americans  across  the  country, 
 stands  the  television  industry.  Whether  one  focuses  on  distribution  or  programming,  todays  video  marketplace  is  the  most  competitive  and  diverse  in  our  nations  history.  The  good  news  for  the  viewing 
 public  does  not,  however,  end  here.  The  continued  proliferation  of  emerging  broadband  digital  platforms  and  services  promise  a  future  of  more  competition,  diversity,  localism  and  personalization  in  the  video 
 marketplace. 
 The  past  decade  has  brought  great  change  to  the  video  distribution  marketplace.  A  blip  on  the  radar  screen  ten  years  ago,  direct  broadcast  satellite  (DBS)  now  serves  one  in  four  pay  television 
 subscribers.  Almost  every  household  in  the  country  can  enjoy  video  programming  from  a  multitude  of  providers  including  over-  the-  air  local  broadcasters,  one  cable  operator  (and  in  several  communities  a 
 cable  over-  builder)  and  at  least  two  DBS  providers. 
 The  analog  systems  of  yesteryear  are  giving  way  to  digital  platforms,  as  over  1,400  broadcast  stations  are  broadcasting  in  digital,  and  almost  all  cable  systems  and  DBS  providers  deliver  some  or  all 
 video  programming  digitally.  The  digital  migration  in  the  video  distribution  market  is  also  bringing  new  players  into  the  market.  The  major  incumbent  local  exchange  carriers  have  announced  plans  to  offer 
 video  service  over  new,  fiber-  based  distribution  platforms.  Broadcasters  such  as  Emmis  and  USDTV  are  leveraging  their  digital  assets  to  offer  low-  cost  pay-  television  services  to  several  communities  across  the 
 country.  Continuing  advances  in  broadband  Internet  speeds  and  compression  technologies  are  allowing  thousands  of  channels  to  emerge  on  the  Internet,  offering  streaming  video  to  millions  of  PCs  at  both  home 
 and  work.  Finally,  this  next  year  promises  to  bring  more  video  to  mobile  devices,  offering  the  public  the  ability  to  get  their  news,  information  and  entertainment  anywhere,  anytime. 


 The  power  of  digital  video  services  and  technologies  to  enhance  consumers  ability  to  enjoy  and  participate  in  the  video  marketplace  is  greater  than  ever  and  only  increasing.  Personal  video  recorders 
 continue  to  flood  the  marketplace,  making  the  viewer,  not  the  executive,  the  programmer.  This  year  promises  advances  in  long-  awaited  interactive  television  services,  giving  the  public  more  control  over 
 their  viewing  experiences.  Even  more  important,  individuals  are  using  video  and  the  Internet  to  be  active  programmers  some  creating  their  own  documentaries  or  entertainment  programs  and  finding 
 distribution  on  the  Internet.  Most  exciting  in  this  area  may  be  the  proliferation  of  Vblogs  the  evolution  of  web  logs  is  now  going  video. 


 We  stand  at  a  remarkable  time  in  the  development  of  the  video  marketplace.  A  time  at  which  we  can  say  with  great  confidence  that  the  monopolies  of  the  past  have  given  way  to  the  most  competitive 
 video  marketplace  at  any  point  in  history;  yet  continuing  developments  in  the  video  marketplace  will  ensure  that  today  is  also  the  least  competitive  the  marketplace  will  ever  be.  A  bevy  of  new  platforms, 
 services,  devices  and  programming  options  promise  infinite  new  choices  for  Americans  in  the  days,  months  and  years  to  come. 
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 JOINT  STATEMENT  OF  COMMISSIONERS  MICHAEL  J.  COPPS  AND  JONATHAN  S.  ADELSTEIN 
 CONCURRING 
 Re:  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  Service  and 
 Equipment 
 Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming 
 In  Sections  623(  k)  and  628(  g),  Congress  charged  the  Commission  with  reporting  annually  on  cable  rates  and  on  the  status  of  competition  in  the  market  for  the  delivery  of  video  programming.  As  the 
 governments  expert  agency,  Congress  expected  the  Commission  to  gather  comprehensive  data  and  subject  it  to  in-  depth  analysis  in  these  reports.  Unfortunately,  in  these  reports,  the  Commission  gathers 
 less  than  adequate  data  and  conducts  less  analysis  than  it  did  even  a  few  years  ago.  At  a  time  of  significant  increases  in  rates  year  after  year,  Congress  and  consumers  deserve  a  better  effort  from  the 
 FCC. 
 We  took  issue  with  our  Report  on  cable  rates  last  year  because  we  believed  the  analysis  was  insufficient.  At  that  time,  the  Commission  recognized  the  reports  shortcomings,  noting  that  in  several 
 previous  surveys,  we  included  an  econometric  analysis  of  the  survey  results.  The  Commission  further  stated  its  plan  to  resume  the  econometric  analysis  in  subsequent  reports.  Yet,  this  year,  the 
 Commission  again  fails  to  conduct  this  analysis  which  in  the  past  has  provided  information  on  specific  factors  that  influence  rate  increases  and  the  extent  of  that  influence.  Moreover,  the  Commission  once 
 again  did  not  audit  any  of  its  results,  notwithstanding  problems  with  our  methodology  disclosed  in  a  recent  report  from  the  General  Accounting  Office. 


 We  remain  concerned  that  this  years  competition  report  continues  to  serve  mainly  as  a  recitation  of  the  record  rather  than  providing  an  in-  depth  analysis  of  the  status  of  competition.  As  with  last  years 
 version,  this  report  fails  to  examine  adequately  the  circumstances  that  distinguish  those  places  where  competition  is  occurring  and  those  where  it  is  not,  and  to  evaluate  barriers  to  greater  competition.  And  it 
 fails  to  consider  sufficiently  many  of  the  important  issues  raised  in  the  Notice,  such  as  the  impact  of  increasing  vertical  and  horizontal  consolidation  of  our  media.  In  sum,  the  report  seldom  delves  beneath 
 the  surface. 
 In  part,  the  fault  lies  with  the  limited  data  we  received  in  response  to  our  notices.  But  it  is  also  incumbent  on  the  Commission  to  undertake  a  pro-  active  and  comprehensive  information-  gathering  effort 
 and  then  to  commit  the  resources  necessary  to  analyze  the  data. 
 We  recognize  that  there  have  been  some  positive  steps  in  these  reports  in  response  to  previous  criticisms.  For  example,  we  are  pleased  that  we  have  at  long  last  begun  to  analyze  what  is  happening  in 
 other  countries.  In  addition,  we  are  also  pleased  that  we  have  added  a  separate  section  that  focuses  specifically  on  video  program  distribution  in  rural  areas.  In  future  years,  we  would  like  to  see  us  build  on 
 the  discussions  here. 
 Finally,  notwithstanding  the  concerns  we  have  expressed  with  our  reports,  none  of  our  comments  should  take  away  from  the  large  investments  that  have  been  made  by  those  that  deliver  video 
 programming.  Nor  do  our  concerns  with  the  reports  diminish  the  benefits  American  consumers  receive  as  new  services  are  deployed.  These  investments  and  services  come  not  only  from  existing  participants  in 
 the  market  but  also  from  telephone  companies  and  others  that  are  expanding  their  efforts  to  deliver  video  programming.  But  these  reports  serve  as  the  factual  foundation  for  many  Commission  decisions  as  well 
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 as  providing  Congress  with  statutorily-  mandated  information  that  can  inform  the  national  policy  debate.  We  have  an  obligation  to  do  more  to  gather  accurate  and  complete  data  as  well  as  provide  the  information 
 and  analysis  that  Congress  required. 
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