VIDEO 

MARKETPLACE

Competition Is 

Evolving, and 

Government 

Reporting Should Be 

Reevaluated

Report to the Acting Chairwoman of 

the Federal Communications 

Commission

June 2013

GAO-13-576

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-576, a report to the 

Acting Chairwoman of the Federal 

Communications Commission

June 2013

VIDEO MARKETPLACE

Competition Is Evolving, and Government Reporting 

Should Be Reevaluated

Why GAO Did This Study

Video provided through subscription 

video services, such as cable and 

satellite television, is a central source 

of news and entertainment for the 

majority of U.S. households. 

Technological advances have ushered 

in a wave of new products and 

services, bringing online distribution of 

video to consumers. Federal laws and 

regulations have sought to foster 

competition in the video programming 

and distribution marketplace, but many 

such laws were adopted prior to the 

emergence of these advances.

Among other things, GAO examined 

(1) how competition has changed since 

2005; (2) the increased choices that 

consumers have in acquiring video 

programming and content; and (3) 

stakeholders’ views on how the 

government’s regulations, reports, and 

other activities have kept pace with 

changes in the industry. GAO reviewed 

relevant literature and reports; 

interviewed agency officials, industry 

stakeholders, and experts; and 

analyzed prices and service offerings 

in 20 randomly sampled zip codes (the 

prices and services offerings reflect 

conditions in the 20 zip codes and are 

not generalizable to all zip codes). 

What GAO Recommends

FCC should study the advantages and 

disadvantages of different reporting 

frequencies for its cable industry price 

and video competition reports and 

transmit the results of its analysis to 

Congress. FCC said that the 

Commission strives to use its

resources efficiently to meet the 

agency’s mission and its 

Congressional requirements, and the 

Commission is reviewing GAO’s

recommendation.

What GAO Found

Since GAO reported on competition in 2005, competition among video content 

producers is little changed, while competition among distributors has increased. 

According to data cited by the Federal Communications Commission (FCC), 

seven companies’ broadcast and cable networks accounted for about 95 percent 

of all television viewing hours in the United States. Further, ownership of 

broadcast and cable networks changed little from 2005 through 2012. 

Alternatively, the introduction of video service provided by telephone companies, 

such as Verizon’s FiOS service, has brought additional competition to video 

distribution. At year-end 2010, roughly 1 in 3 households could choose among 4 

or more subscription video distributors: typically a cable company, 2 satellite 

companies, and a telephone company. With technological advances, companies 

are increasingly distributing video online. Online video distributors (OVD) are 

developing a variety of business models, including free and subscription-based 

services. However, online viewing and revenues represent a small portion of 

overall media viewing hours and revenue. 

Consumers continue to acquire programming and content through packages, but 

OVDs are delivering new choices. All the video distributors that GAO analyzed 

required consumers to purchase a package of channels often through the basic, 

expanded basic, and premium tiers. According to FCC data, in 2011, the average 

price for expanded basic service was $57.46, and had increased over 33 percent 

since 2005, exceeding the 15 percent increase in the Consumer Price Index. 

OVDs and other companies allow consumers to select content on a program or 

episode basis. However, these services typically do not include the most recent 

television programs and movies, thereby limiting their value for some consumers. 

Stakeholders generally noted that laws and regulations have not kept pace with 

changes in the video industry, and FCC has not consistently reported on 

competition. Some legislation governing the media industry was adopted over 20 

years ago, before telephone companies entered the marketplace and the 

commercialization of the Internet facilitated new OVD services. A majority of 

stakeholders with whom GAO spoke stated that some provisions should be 

revisited. FCC is required to annually report to Congress on cable industry prices 

and competition in the video marketplace. However, since 1992, FCC has not 

published the cable industry price report 4 times—in 2004, 2006, 2007, and 

2010—and has not published the video competition report 4 times—in 2007, 

2008, 2010, and 2011. According to FCC officials, a variety of administrative 

factors contributed to the missed reports, and the reports are time consuming to 

prepare. The reports also impose burdens on some industry participants. 

Less frequent reporting on cable industry prices and competition in the video 

marketplace could allow for continued measurement of industry performance 

while reducing the burden on FCC and industry participants. GAO found little 

change in the reported findings from year-to-year in FCC’s video competition 

report. FCC’s 2009 cable industry price and 2012 video competition reports

followed missed reports, and these reports included data covering multiple years; 

these reports could serve as a model for issuing such reports less frequently.

Since these reports are statutorily required, Congress, with input from FCC, 

would need to determine any new reporting frequency. 

View GAO-13-576. For more information, 

contact Mark Goldstein at (202) 512-2834 or 

goldsteinm@gao.gov.
Page i GAO-13-576 Video Competition

Letter 1 

Background 2

Competition among Content Producers Is Little Changed, while 

Competition among Distributors Has Increased 6

Consumers Continue to Acquire Programming and Content 

through Packages, but Online Video Providers Are Delivering 

New Choices 12

Although Technology Will Likely Continue to Spur New Services 

and Products, a Variety of Factors May Hinder Future 

Competition in the Video Marketplace 17

Stakeholders Generally Noted That Laws and Regulations Have 

Not Kept Pace with Changes, and FCC Has Not Consistently 

Reported on Competition 25

Conclusions 32

Recommendation for Executive Action 33

Agency Comments 33

Appendix I Objectives, Scope, and Methodology 35

Appendix II Comments from Federal Communications Commission 38

Appendix III GAO Contact and Staff Acknowledgments 39

Table

Table 1: Cable Rates—2005 through 2011 16

Figures

Figure 1: Television Programming in Broadcast and Traditional 

Subscription Video Service 4

Figure 2: Multichannel Video Programming Distributors’ 

Subscriber Market Share in 2005 and 2010 10

Contents 
Page ii GAO-13-576 Video Competition

Abbreviations 

CPST cable programming service tier

DBS direct broadcast satellite 

DOJ Department of Justice

FCC Federal Communications Commission

FTC Federal Trade Commission

IP Internet protocol 

MFN most-favored nation

MVPD multichannel video programming distributor

NCTA National Cable and Telecommunications Association

OVD online video distributor

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-13-576 Video Competition

441 G St. N.W.

Washington, DC 20548

June 25, 2013

The Honorable Mignon Clyburn

Acting Chairwoman

Federal Communications Commission

Dear Chairwoman Clyburn:

Video provided through cable and satellite television services is a central 

source of entertainment, news, and other information for most American 

households. Today, over 100-million U.S. households subscribe to and 

rely on these television services, viewing on average more than 140 

hours of content every month. Federal laws and regulations, including the 

Cable Television Consumer Protection and Competition Act of 1992 and

the Telecommunications Act of 1996, sought to foster competition in the 

video programming and distribution marketplace. These laws and 

regulations were essential to the emergence and growth of direct 

broadcast satellite (DBS) television service in the late 1990s and early 

2000s, which saw DBS companies gain market share at the expense of 

traditional cable companies. More recently, competition from new 

entrants—most prominently traditional telephone companies—has 

increased in some areas of the country. In addition, advances in 

digitalization and Internet infrastructure have ushered in a wave of new 

products and services, bringing online distribution of video through 

services such as Netflix and YouTube to consumers. Some consumer 

advocates, industry stakeholders, and policymakers have expressed 

concern that laws and regulations, first adopted in the 1990s, are no 

longer adequate to address changing competition in the emerging digital 

environment. And despite the myriad of technological and other changes, 

the rates paid by consumers for subscription video services continue to 

increase at a faster pace than the general rate of inflation.

We examined (1) how competition has changed since 2005; (2) the 

increased choices that consumers have in acquiring video programming 

and content; (3) the factors that can spur or hinder competition; and (4) 

stakeholders’ views on how the federal government’s regulations, reports, 

and other activities have kept pace with changes in the industry.

To address these questions, we reviewed relevant literature and reports 

published since 2005. In particular, we conducted a literature search and 

reviewed relevant articles on competition, technology, and economics in 

the video programming and distribution marketplace, including academic 

 
 

Page 2 GAO-13-576 Video Competition

journals and studies. We also reviewed relevant reports prepared by the 

Federal Communications Commission (FCC), the Department of Justice 

(DOJ), and the Federal Trade Commission (FTC). To identify the prices 

for cable service, we gathered data from FCC’s Cable Industry Price 

reports for the years 2005 through 2012, which represent the most recent 

available data. We reviewed FCC documentation and information 

provided by FCC staff to assess the reliability of the cable price data and 

determined that FCC’s data were sufficiently reliable for the purposes of 

our report. We conducted interviews with FCC and DOJ, industry 

associations and participants, and experts; we selected industry 

associations and participants to ensure a diversity of participants, 

including content companies, broadcast and cable networks, multichannel 

video programming distributors (MVPD)—cable, satellite, and telephone 

companies—and online video distributors (OVD). We reviewed relevant 

laws, regulations, and FCC proceedings, including Notices of Inquiry, 

Proposed Rulemakings, and Reports and Orders. To determine the level 

of competition, available packages and pricing, and other program 

options, we conducted an analysis of MVPD services in 20 randomly 

sampled zip codes across the United States; these zip codes represented 

dense, urban areas as well as sparsely populated rural areas. For each 

zip code, we identified the MVPDs providing service and collected 

information from the MVPDs on their services and prices. Our results 

reflect the competition, packages, and pricing in the 20 zip codes and are 

not generalizable to all zip codes. For more details on our scope and 

methodology, see appendix I.

We conducted this performance audit from July 2012 to June 2013 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

Various entities and groups develop and distribute video content. Content 

producers, such as Sony Pictures Entertainment and CBS Television 

Studios, sell the right to use their content to a variety of users, such as 

broadcast networks, cable networks, and local television stations. The 

financial compensation received by content producers for the use of their

Background 

Video Programming and 

Distribution 
 

Page 3 GAO-13-576 Video Competition

copyright-protected content is a licensing fee or royalty. Broadcast and 

cable networks produce and aggregate programming from other content 

producers for distribution to the public. Broadcast networks consist mainly 

of four major networks (ABC, CBS, FOX, and NBC), and several smaller 

networks, such as the CW Television Network, MyNetworkTV, and ION 

Television. Content is produced by the major networks’ affiliated 

production companies, which can include movie and television studios, 

and independent producers. Cable networks aggregate programming 

from content producers and some also produce programming, which can 

include niche programming—that is, programming that targets specific 

demographics. For instance, Lifetime Television offers programming that 

specifically targets women, while MTV offers programming that targets 

the 18-to-34 age group.

Video content is distributed to households by local television stations, 

cable and satellite companies, and most recently, OVDs.1 Each of the 

four major broadcast networks owns and operates some local television 

stations; other stations may be independently owned but affiliated with 

one of the major networks or, as is the case with noncommercial 

educational television, unaffiliated with any major network.2

 

1

FCC described an OVD as any entity that offers video content by means of the Internet 

or another Internet Protocol-based transmission path provided by a person or entity other 

than the OVD. See, Annual Assessment of the Status of Competition in the Market for the 

Delivery of Video Programming, MB Docket No. 07-269, Fourteenth Report, 27 FCC Rcd. 

8610, 8612 (2012).

FCC licenses 

local television stations, which have the right to transmit a video 

broadcast signal on a specific radio frequency in a particular area and at 

a particular strength. Local television stations that are affiliated with a 

broadcast network negotiate licensing agreements with their network for 

the right to air network-furnished content, including prime time shows, 

afternoon soap operas, and national news programs. MVPDs obtain a 

variety of programming from both local stations and cable networks. Time 

Warner Cable, DISH Network, and Verizon are examples of cable, 

satellite, and telephone MVPDs, respectively, that license and distribute 

content to subscribers. Figure 1 illustrates how television programming is 

distributed through broadcast and traditional subscription video service.

2

Affiliated stations are stations not owned by a major broadcast network, but carry 

broadcast network programming and network-inserted advertisements during specific time 

periods.
 

Page 4 GAO-13-576 Video Competition

Figure 1: Television Programming in Broadcast and Traditional Subscription Video 

Service

Consumers can watch movies and television programs through 

computers, set top boxes, game consoles, and of course televisions.

Some may also have the option of using tablets, smartphones, and other 

mobile devices to view content via the Internet, either through a MVPD 

service or an OVD, such as Netflix. Typically, the general public views 

television programming through broadcast or subscription video service.

Local television stations provide free over-the-air programming to the 

public. In contrast, consumers pay fees to providers of subscription video 

services, including cable companies, satellite providers, or telephone 

companies. According to the National Cable and Telecommunications 

Association (NCTA), the trade association for cable companies, in 2012, 

over 85 percent of U.S. households had a MVPD subscription, with the 

remainder accessing television through an antenna.

Industry participants receive revenue from a variety of sources.

Companies that create programming receive the majority of their revenue 

from license fees. Broadcast networks receive the majority of their 

revenue from advertising. Cable networks receive revenue from both 

monthly subscriber fees, paid by MVPDs, and advertising. MVPDs—

which own, operate, and maintain their cable and satellite networks—

receive the majority of their revenues from monthly subscription fees paid 
 

Page 5 GAO-13-576 Video Competition

by consumers, supplemented with advertising. Many MVPDs also provide 

broadband Internet and telephone services over their networks or in 

partnership with other companies.

FCC is an independent federal agency that regulates segments of the 

video marketplace. Among other things, FCC licenses local television 

stations, reviews certain proposed mergers of media companies, issues 

the cable industry price and video competition reports, conducts 

proceedings on media-related issues, and proposes, conducts, and 

implements rulemakings to encourage competition, localism, and videoprogramming diversity and to protect public safety and consumer 

welfare.3 FCC derives its statutory authority from the Communications Act 

of 1934,4

• The Cable Communications Policy Act of 1984 sought to establish a 

national policy concerning cable service; franchise procedures and 

standards; and guidelines for federal, state, and local authorities to 

regulate cable service; among other things.

as amended by the following laws, among others:

5 The 1984 Act imposed 

some limitations on franchising authorities’ regulation of cable rates;6

in particular, the 1984 Act restricted regulation to only basic cable 

service for cable systems not subject to effective competition as 

defined by FCC.7

• The Cable Television Consumer Protection and Competition Act of 

1992 prohibited franchising authorities from awarding exclusive (or 

monopoly) franchises and required FCC to establish regulations 

 

3

The Department of Justice and Federal Trade Commission also review certain proposed 

mergers and investigate other potential antitrust violations. 15 U.S.C. §§ 1, 2, 18, 45 and 

1311-14.

4

Pub. L. No. 416, ch. 652, 48 Stat. 1064 (1934).

5

Pub. L. No. 98-549, 98 Stat. 2780 (1984).

6

Most wire-based MVPDs, such as cable companies, obtain a franchise to operate under 

agreed-upon terms and conditions from a local franchising authority, such as a township, 

county, or state. During cable’s early years, franchising authorities regulated many 

aspects of cable television service, including subscriber rates. 

7

Cable companies offer basic cable and expanded basic services. Basic cable service 

generally includes local broadcast stations, education channels, and some cable 

networks. Expanded basic service includes all channels in basic cable service plus other 

cable networks like ESPN and Disney.

Federal Laws, Regulations, 

and Responsibilities
 

Page 6 GAO-13-576 Video Competition

ensuring reasonable rates for both the basic cable service and the 

cable programming service tier (CPST), commonly referred to as 

expanded basic, for cable systems not subject to effective competition 

as defined by the Act; Congress passed the 1992 Act in response to 

increasing rates.8

• The Telecommunications Act of 1996 phased out regulation of rates 

for the CPST and included provisions that allowed for the growth of 

telephone companies in the video distribution marketplace.

In addition, the 1992 Act required cable companies 

to carry all local television stations that requested carriage—known as 

must carry—or negotiate with television stations seeking 

compensation—known as retransmission consent. Cable companies 

that also produced content were required to provide their content to 

unaffiliated MVPDs at nondiscriminatory rates—known as program 

access. 

9 For 

example, the 1996 Act eliminated the restriction on telephone 

companies providing video service directly to subscribers in areas 

where they provided telephone service.

Several large media and entertainment companies continue to produce 

much of the content watched by consumers. According to a 2012 report 

cited by FCC, seven companies’ broadcast and cable networks

accounted for about 95 percent of all television viewing hours in the 

United States. These seven companies hold some combination of 

 

8

Pub. L. No. 102-385, § 2, 106 Stat. 1460 (1992).

9

Pub. L. No. 104-104, 110 Stat. 86 (1996).

Competition among 

Content Producers Is 

Little Changed, while 

Competition among 

Distributors Has 

Increased 

Several Large Media and 

Entertainment Companies 

Produce Much of the 

Content Viewed In the 

United States
 

Page 7 GAO-13-576 Video Competition

television and movie production studios, broadcast networks, and cable 

networks. The seven companies and some of their holdings include:

• CBS: CBS (broadcast network), CBS Television Studios, Showtime;

• Discovery Communications: Discovery Channel, TLC, A&E, Animal

Planet;

• Disney: ABC (broadcast network), ESPN, Disney Channel, Walt 

Disney Studios;

• NBCUniversal: NBC (broadcast network), Universal Pictures, USA 

Network, Telemundo Television Studios, The Weather Channel;

• News Corporation: FOX (broadcast network), FOX News Channel, 

20th Century Fox, 20th Century Fox Television;

• Time Warner: The CW Network (broadcast network), CNN, HBO, 

TBS, Warner Brothers Studios; and

• Viacom: MTV, Comedy Central, Nickelodeon, Paramount Pictures.

We previously reported that the major broadcast networks (ABC, CBS, 

FOX, and NBC) and their affiliated studios produced from 76 to 86 

percent of prime-time programming hours in 2002, 2005, 2008, and 2009, 

with the remaining hours coming from independent producers.10

The concentration of content production among a handful of large media 

and entertainment companies has changed little in recent years. We 

compared the ownership of major broadcast and cable networks from 

2005 through 2012, and found little change in the pattern of ownership 

FCC 

similarly reported that the production studios of major media and 

entertainment companies, which also hold broadcast and cable networks, 

often create and license television programs and movies. This pattern 

does not hold for all companies. For example, Discovery Communications 

does not own a major television or movie studio and Sony Corporation, 

another large media and entertainment company, operates a television 

and movie studio, but does not operate a broadcast or cable network.

 

10GAO, Media Programming: Factors Influencing the Availability of Independent 

Programming in Television and Programming Decisions in Radio, GAO-10-369 

(Washington, D.C.: Mar. 17, 2010). 
 

Page 8 GAO-13-576 Video Competition

and concentration of production. For example, of the top 20 cable 

networks by subscribership in 2005, more than half experienced no 

change in ownership from 2005 through 2012. However, some ownership 

change did occur during this period. In 2005, the former Viacom split into 

two companies—CBS and Viacom.11 In 2009, the Time Warner Cable 

distribution business was spun off from the Time Warner Inc. content 

business. Lastly, Comcast, the largest distribution company in the United 

States, merged with NBCUniversal;12 this transaction added 

NBCUniversal’s content and networks to Comcast’s existing, more limited 

media holdings, which include the Golf Channel and E! Entertainment.

Since 2005, the introduction of telephone-based video service has 

brought additional MVPD competition to some areas. Traditional 

telephone companies AT&T and Verizon—through their respective Uverse and FiOS products—have led this change, introducing video 

services in various areas across the country and competing with cable 

and satellite companies.13 Verizon first introduced its FiOS TV service in 

2005 and as of year-end 2012, reported having 4.7 million subscribers 

with service available to 17.6 million households. As of year-end 2012, 

AT&T’s U-verse service had 4.5 million subscribers with service available 

to more than 24.5 million households. In addition to AT&T and Verizon, 

other competition has emerged in a limited number of areas. For 

example, Google introduced Google Fiber in the Kansas City metropolitan 

area. Like cable companies, AT&T, and Verizon, Google Fiber includes 

broadband Internet and television service.14

 

11The Executive Chairman of the Board for Viacom and CBS remains the same individual. 

Google Fiber is a pilot 

12Comcast acquired control of NBCUniversal in a $13 billion transaction. In January 2011, 

Comcast and NBCUniversal’s parent General Electric (GE) entered into a joint venture in 

which Comcast held a 51 percent share of the company. FCC and DOJ approved the 

merger on January 18, 2011, subject to a range of conditions intended to protect 

competition. In March 2013, Comcast completed its acquisition of the remaining 49 

percent stake in NBCUniversal held by GE. This transaction represented a form of vertical 

integration, where the principally downstream distributor (Comcast) acquired control of a 

company with significant upstream content development and aggregation holdings 

(NBCUniversal). 

13AT&T and Verizon provide many of the same cable channels that cable and satellite 

MVPDs provide. 

14Google reports that its television service includes 20 local stations and 152 cable 

channels. 

Since 2005, Some Local 

Markets Have Gained 

Access to Additional 

MVPD Service
 

Page 9 GAO-13-576 Video Competition

project, and it is unknown to what extent Google will expand its 

deployment to other cities; although, in April 2013, Google announced 

that it would introduce Google Fiber in Austin, Texas, and Provo, Utah. In 

addition, we have previously reported that the Universal Service Fund 

managed by FCC, which provides subsidies to telephone companies that 

serve rural and other remote areas with high costs, enables some 

companies to upgrade their telephone networks, including upgrading to 

fiber optic cable and extending it closer to their customers.15

With the new entry in some areas, roughly 1 in 3 households had access 

to at least 4 MVPDs at year-end 2010.

The 

upgraded networks enable these companies to provide video and 

broadband service in some rural and remote areas.

16 As a result, the nationwide 

market shares have shifted among MVPDs since 2005 (see fig. 2). In 

particular, cable companies have seen their nationwide market share 

drop, continuing a longer-term decline. For example, NCTA estimated 

that cable companies’ share of MVPD subscribers has dropped from 98 

percent in 1992 to 57 percent in 2012. Satellite services have continued 

to grow, although more slowly in recent years. Financial analysts and 

other experts report that satellite companies could face increasing 

competitive challenges from cable and telephone companies going 

forward. In particular, as consumers increasingly purchase a bundle of 

video, broadband Internet, and telephone services, satellite’s slower 

Internet service could dissuade consumers from purchasing satellite 

service.17

 

15GAO, Telecommunications: FCC Has Reformed the High-Cost Program, but Oversight 

and Management Could be Improved, 

For example, DirecTV reported that various telephone and 

broadband companies also sell its service as part of a bundle with their 

voice and data services, and these companies could focus less effort and 

resources selling DirecTV’s service or decline to sell it at all as they 

GAO-12-738 (Washington, D.C.: July 25, 2012) and 

Telecommunications: FCC Needs to Improve Performance Management and Strengthen 

Oversight of the High-Cost Program, GAO-08-633 (Washington, D.C.: June 13 2008).

16Two of these MVPD choices are satellite providers (DirecTV and Dish Network), which 

offer national video services to consumers and local television stations in many markets. 

For purposes of its analysis, FCC assumed that satellite was available to all households. 

27 FCC Rcd. 8610, 8626 (2012).

17We discuss the MVPDs’ bundled services more fully in the next section.
 

Page 10 GAO-13-576 Video Competition

deploy networks with the capability of providing video, voice, and data 

services.18

Figure 2: Multichannel Video Programming Distributors’ Subscriber Market Share in 2005 and 2010

Note: For 2005, FCC did not include a category for telephone.

Although more households have access to at least 4 MVPDs than in the 

past, roughly 2 in 3 households still had access to 3 or fewer MVPDs at 

year-end 2010, 2 of which were the satellite providers. While the entry of 

telephone companies into the video marketplace offers some households 

more options, representatives from AT&T and Verizon were uncertain 

about the scope of future expansion. AT&T announced that the company 

will expand its U-verse service to be available to 33 million households—

an increase from 24.5 million—but the company may also discontinue 

service to other areas simultaneously. Verizon officials reported that the 

company has no current plans to expand FiOS beyond its goal of making 

service available to 18 million households. In addition, according to FCC, 

at year-end 2010, about 1.5 percent of households had access to just 2 

MVPDs, which are the two major satellite companies. In our analysis of 

 

18DIRECTV, Form 10-K (Annual Report), filed Feb. 21, 2013.
 

Page 11 GAO-13-576 Video Competition

MVPD service in 20 zip codes, one zip code—encompassing Limon, 

Colorado—was not served by a cable company and relied solely on 

satellite service.

Technological advances increasingly enable distribution of video online.

Internet speeds have increased as companies deploy new, high-speed 

technologies, such as fiber optic cable, to the neighborhood or the 

residence. These new technologies enable many U.S. households to 

stream video—that is, access and view video content via online sources.

Watching video online generally requires an Internet connection with a 

speed of .7 to 4 megabits per second, depending on the quality of the 

video;19 for example, high-definition video requires higher Internet speeds 

than standard definition video. In August 2012, FCC reported that over 40 

percent of U.S. households had adopted broadband speeds of at least 3 

megabits per second.20

A variety of business models supporting online video have emerged; 

some online video is available free, while other content is available with 

payment.21

 

19Megabits per second refers to how fast information can either be uploaded to or 

downloaded from the Internet. Higher speeds enable consumers to receive information 

much faster and thus enable certain applications to be used and content to be accessed 

that might not be possible with a slower connection, such as viewing video content.

Online sites such as YouTube aggregate user-created and 

other content and make this content available to viewers free with an 

Internet connection. Increasingly, professional content is appearing on 

YouTube. For example, ABC News has segments from ABC World News 

and Good Morning America available on YouTube. Other services, such 

as Netflix and Amazon Prime Instant Video, entail one-time or monthly 

rental fees to access content, including television programs and movies.

Still other models exist, where content owners sell their content directly to 

consumers. In particular, Hulu—a joint venture that includes News 

Corporation, NBCUniversal, and Disney—offers a free advertisersupported service and a monthly subscription service with fewer 

commercials and access on a wide variety of devices.

20Eighth Broadband Progress Report, GN Docket No. 11-121, Eighth Report, 27 FCC 12-

90 (2012). The data in this report are from 2011, and the percent of households with 

broadband service may have increased since that time.

21Online sites with content available for free, as well as those sites that require payment, 

may also have advertising present. 

Online Video Products 

Have Emerged as a New 

Form of Video Distribution
 

Page 12 GAO-13-576 Video Competition

While the Internet has emerged as a new source for viewing video, online 

viewing and revenues represents a small portion of overall media activity, 

particularly as compared to traditional television. In September 2012, 

Nielsen reported that 162 million Americans watched online video, 

consuming on average nearly 7 hours of content over that month.22 In 

contrast, Americans watch over 34 hours of live television per week.

Additionally, several financial analysts and experts whom we interviewed 

described Internet advertising as still in its infancy, with viewership and 

advertising still developing and companies exploring successful business 

models. For example, FCC, citing data from Investor’s Business Daily, 

reported that in 2009 advertisers spent $908 million on U.S. online video 

advertising compared to $68.9 billion spent on U.S. television advertising 

during that same period.

In general, MVPDs provide video content by packaging together a large 

number of channels in different programming tiers—often the basic, 

expanded basic, and premium tiers. In our analysis of MVPD services in 

20 zip codes in 2013, all MVPDs reported requiring consumers to 

purchase tiered packages of channels. We found that the basic tier of 

these MVPDs consisted of a minimum of 13 channels, with local 

broadcast and informational channels sometimes dominating this tier; the 

price of the basic tier ranged from $9.95 to $40 per month.23

 

22Nielsen collects and reports on media information, including television program ratings.

The 

23These and other tier prices are the rates charged to new customers. Higher rates may 

apply after a set period of time. 

Consumers Continue 

to Acquire 

Programming and 

Content through 

Packages, but Online 

Video Providers Are 

Delivering New 

Choices 

MVPDs Generally Provide 

Large Packages of 

Channels 
 

Page 13 GAO-13-576 Video Competition

expanded basic tier usually included the channels in the basic tier and 

additional cable networks, such as ESPN, Nickelodeon, USA Network, 

MTV, and A&E. Higher end, premium tiers usually included more than 

100 channels and the monthly subscription price for this tier ranged from 

$53 to $200.49. In all 20 zip codes we analyzed, the MVPD included 

HBO, Showtime, and Cinemax in its premium tier. Because subscribers 

must receive all of the channels offered on a tier that they choose to 

purchase, they have little choice regarding the individual channels that 

they receive. À la carte service—where consumers purchase content on a 

channel-by-channel basis—is generally not provided by MVPDs. None of 

the MVPDs we interviewed, or any MVPDs included in our analysis of 20 

zip codes, provided à la carte service; the only exceptions were premium 

channels and pay-per view services, which were often available on a 

stand-alone basis.24

Contractual and economic factors lead MVPDs to package channels into 

tiers rather than providing à la carte service. Contractually, content 

companies generally seek to have their networks carried on the largest 

tier, typically the expanded basic tier. These companies have an 

economic incentive to pursue this strategy; content providers typically 

receive both a monthly fee for each customer that subscribes to the tier 

on which their network appears and advertising revenues, which are 

based in part on the number of potential viewers (e.g., subscribers) to the 

tier on which their network appears. Content companies and others 

reported that they might need to charge more for certain content under an 

à la carte system because of potential revenue losses and that the price 

of a single channel could be significantly higher with an à la carte system 

compared to the current tiered system. Consumer groups expressed 

concerns that à la carte service could diminish diversity and local aspects 

of existing programming if lower demand networks cease operation 

because of a lack of subscribers. Some experts with whom we spoke also 

questioned whether consumers would necessarily be better off with à la 

carte pricing of channels, given the potential for reduced quantity and 

quality, and higher prices for individual channels. 

For example, HBO was available for an additional 

$6.00 to $26.95 per month in the 20 zip codes we analyzed.

 

24To acquire a premium or pay-per-view service, the consumer must still purchase a 

lower-level tier.
 

Page 14 GAO-13-576 Video Competition

Some MVPDs are providing increased service options to consumers. For 

example, some MVPDs are making content available through TV 

Everywhere services. These services allow MVPD subscribers to view 

some content on mobile devices, typically smartphones or tablet 

computers, and from various locations within and, depending on the 

service, outside the residence. Some MVPDs charge for these additional 

features as a stand-alone service or include them as part of a digital 

package, and some require that the customer subscribe to both the 

company’s MVPD and broadband services. In addition, some MVPDs are 

bundling telephone, Internet, and video services. These bundles have a 

higher aggregate price, but the consumer’s total cost can be less than if 

the consumer purchased these services separately. For example, one 

MVPD included in our zip code analysis provided a tier of channels for 

$39.95, Internet service for $39.95 per month, and telephone service for 

$34.95 per month. Alternately, a consumer could receive these three 

services in a bundle for a monthly price of $84.95, a savings of $29.90.

Such bundling appears to be widespread; of the 20 zip codes in our 

analysis, consumers in all 20 had access to one or more bundles. FCC 

reported that as the number of video subscribers has fallen, cable 

companies have prospered by increasing sales of other services, such as 

phone and Internet access, to their remaining customers.25

OVDs and related companies provide consumers with increased flexibility 

in selecting content. Services like Hulu and Netflix allow consumers to 

select content based on a program, or even an episode basis. Some 

experts and consumer groups with whom we spoke said that these new 

online options constituted a programmatic à la carte, rendering debates 

over whether or not consumers should have the ability to purchase 

specific channels less relevant. OVDs’ libraries are limited, however, and 

OVDs do not have the rights to display certain television programs and 

movies. To maximize the return on investment from producing video 

content, where costs can be quite high, content owners generally 

distribute content through a series of outlets over time, through a process 

known as windowing. Content is distributed in the most lucrative outlets 

first, and depending on the type of content, the windowing process can 

take months or years to fully play out. Distribution of content through an 

OVD is often last in the series of outlets, as content providers first 

 

2527 FCC Rcd. 8610 (2012).

New Entrants Are 

Providing Increased 

Choices 
 

Page 15 GAO-13-576 Video Competition

distribute television programs through broadcast or cable networks and 

feature films through movie theatres. Because of this, OVDs typically are 

not able to obtain first run television programs and movies; for example, a 

television program may have to finish its entire season before a single 

episode becomes available online. Thus, although the same content is 

available in earlier windows through other outlets, windowing can limit the 

value of OVDs’ services for some consumers. As such, most of the 

industry representatives and experts with whom we spoke stated that, at 

this time, OVD services are generally seen as a complement to MVPD 

services, rather than a substitute.

Nonetheless, some content companies are providing content directly to 

consumers online. Sports leagues are one such example. Major League 

Baseball provides its MLB.TV service, where subscribers can watch 

baseball games live online or at a later time, as well as recaps and other 

baseball news. The National Basketball Association provides a League 

Pass service where subscribers can watch some games live, have 

access to live game statistics, and review an archive of content for the 

season. In addition, other content aggregators, like cable networks, have 

made content available online. For example, AMC has an online service 

where viewers can watch shows such as Mad Men. In another example, 

HBO has an online version of its network, HBOGO, where viewers can 

watch all of the movies and other content on this premium network.26

Consumers incur costs to acquire these online video services. First, a 

consumer must purchase a broadband Internet connection to view video 

content online. The price for Internet services provided by MVPDs in the 

zip codes we analyzed ranged from $19.99 to $69.99 per month.

Much of this and other online content can also be accessed through 

electronic portable devices. Indeed, some of the aforementioned sport 

content services provide mobile options for subscribers.

27

 

26Authentication of existing subscription to cable and premium networks is required to 

access this content online. 

Once 

connected, some online content is available at no charge on sites such as 

YouTube. Other content is available on a pay-per-view or rental basis.

For example, Amazon’s Prime Instant Video service includes a rental 

27These prices are for a basic Internet connection; some MVPDs provide higher-speed 

options for a higher price. These prices also do not include satellite companies, which do 

not provide a stand-alone Internet service. 
 

Page 16 GAO-13-576 Video Competition

option where a consumer can pay a set amount (usually $1.99 to $4.99) 

to view a movie in a 30-day window. Services like Netflix are subscriptionbased with recurring, monthly fees for continued access to their content 

library.28

Despite entrants providing new choices, the price of MVPD video service 

continues to increase. In its most recent annual report on cable rates, 

FCC reported that over the course of 2010, cable rates rose 5.4 

percent.

Content viewed directly from content companies also generally 

requires a monthly or yearly fee. For example, the price for Major League 

Baseball’s MLB.TV services is $94.99 for a year or $19.99 per month.

29

Table 1: Cable Rates—2005 through 2011

From 2005 through 2011, cable rates rose more than 33.5

percent for both basic and expanded service tiers (see table 1). This 

increase outpaced inflation captured in the Consumer Price Index, which 

rose 15.5 percent over the same period. Besides cable service, other 

MVPDs’ prices have increased faster than inflation. For example, in 

January 2013, Dish Network raised the price for its services between 7 to 

20 percent; this included a price increase of $5 for its basic service 

package—from $24.99 to $29.99 per month. DirecTV also increased its 

prices in February 2013, raising its average price by 4.5 percent.

Year

Basic 

service price

Expanded basic 

service price

Consumer 

price index

2005 $14.30 $43.04 126.90

2006 $14.59 $45.26 131.90

2007 $15.33 $47.27 134.70

2008 $16.11 $49.65 140.40

2009 $17.65 $52.37 140.50

2010 $17.93 $54.44 144.20

2011 $19.33 $57.46 146.50

Percentage 

Increase 35.2% 33.5% 15.5%

Source: GAO analysis of FCC Report on Cable Industry Prices, August 13, 2012.

 

28The price of Netflix’s online subscription service is $7.99. 

29This reflects the average rate for expanded basic service, the most popular tier among 

consumers, from a sample of cable and telephone companies. This does not include 

MVPD operators of wireless systems, satellite companies, or AT&T U-verse. 

Prices for Traditional 

MVPD Services Continue 

to Increase
 

Page 17 GAO-13-576 Video Competition

Representatives from MVPDs and content companies, consumer groups, 

and other stakeholders identified a variety of causes for continued rate 

increases. MVPD and content companies cited the cost of content 

production as one factor. The cost of acquiring “must have” content—

content that is very much in demand by consumers, such as live sports—

has become increasingly expensive. Sport leagues, such as the National 

Football League and Major League Baseball, are seeking higher fees 

from broadcast and cable networks to carry their sporting events. For 

example, in its latest contract with ESPN, Major League Baseball will 

receive approximately $5.6 billion for the years 2014 through 2021; this 

represents a 100 percent increase above the previous agreement.

Broadcast and cable networks may in turn pass along these higher prices 

to MVPDs, which ultimately contribute to higher consumer prices for 

MVPD service. Infrastructure investment costs, such as cable companies 

continuing to roll out broadband Internet service to new communities and 

locations, may also play a role. For example, NCTA reported that the 

cable industry’s capital expenditures for 2011 were $12.9 billion.

Advances in digital technologies and increased Internet capacity could 

help lower the cost to develop and distribute some video content. Some 

high-quality digital video cameras and editing equipment can be 

purchased for less than a thousand dollars, enabling individuals and small 

startups to create content at relatively low cost. As a result, individuals 

and startups can produce web series of low-budget programs and 

develop dedicated online channels to carry content. In addition, 

crowdfunding—the practice of funding a project or venture by raising 

small amounts of money from a large number of people, often online—

provides a mechanism for startups to acquire the financial resources to 

develop content. Furthermore, technological advances can lower the 

Although Technology 

Will Likely Continue 

to Spur New Services 

and Products, a 

Variety of Factors 

May Hinder Future 

Competition in the 

Video Marketplace

Technological Advances 

and Increased Spectrum 

for Wireless Services 

Could Spur New Services, 

Products, and Competition
 

Page 18 GAO-13-576 Video Competition

costs to distribute content through online platforms like YouTube, which 

provides free content posting. OVDs can distribute content online at 

relatively lower costs than traditional MVPDs, which own physical 

networks and tend to distribute more costly professionally produced 

movies, sports, and television programs. For example, whereas OVDs 

have limited distribution costs as consumers pay subscription fees to 

access the Internet and online video, traditional MVPDs built, operate, 

and maintain the networks through which Internet bandwidth and online 

video is provided.

Increased spectrum for wireless broadband could facilitate greater 

distribution and viewing of video content wirelessly. According to industry 

stakeholders and experts with whom we spoke, today’s terrestrial 

wireless networks are unable to support widespread, large-scale viewing 

of video content; these networks’ capacities are much less than existing 

wired and satellite networks deployed by cable, telephone, and satellite 

companies. However, increased spectrum for wireless broadband, 

combined with compression technologies that allow more efficient use of 

spectrum, could allow for additional viewing of video content wirelessly.

According to FCC, the Commission’s 2008 auction of spectrum licenses 

resulted in some mobile wireless service providers beginning to offer 

mobile broadband services for laptop computers, tablets, smartphones, 

and other mobile devices. FCC is planning another spectrum auction for 

wireless services in 2014. According to industry stakeholders and experts 

with whom we spoke, more spectrum for wireless services could spur 

additional competition, with more companies entering the marketplace to 

provide online video services accessible via smartphones and tablets.

However, as we have previously reported, most spectrum has already 

been allocated and assigned to other users, including federal agencies 

such as the Department of Defense, and reallocating spectrum from other 

uses can be time-consuming, costly, and contentious.30

 

30GAO, Spectrum Management: Incentives, Opportunities, and Testing Needed to 

Enhance Spectrum Sharing, GAO-13-7 (Washington, D.C.: Nov. 14, 2012). 
 

Page 19 GAO-13-576 Video Competition

The high costs to license professionally produced content could hinder 

the competiveness of entrants and small distributors. Some professionally 

produced and time-sensitive programming, like sports and popular prime 

time shows, are highly valued by many viewers. As the supply of those 

who are involved in the production of such popular programming—well 

regarded athletes, writers, actors, and directors—is limited, their talents 

command premium compensation, often in the millions of dollars. While 

large MVPDs that have subscription and advertising revenues can pay 

the license fees for this content, smaller MVPDs and new OVDs that are 

not as established in the marketplace may not be able or willing to do so.

In addition, OVDs told us that competition could be hindered by the fact 

that content providers will license their content to them, but only on similar 

contractual prices and terms that they offer to traditional MVPDs. In 

particular, OVDs told us that licensing contracts have “most-favored 

nation” (MFN) clauses that guarantee a customer will receive prices and 

terms that are at least as favorable as those provided to other customers 

of the same seller. Because of MFN clauses, OVDs assert that content 

providers will not enter into agreements with OVDs that are different from 

agreements that they have with MVPDs. As a result, OVDs said that MFN 

clauses inhibit their ability to compete, as they cannot offer consumers 

different programming choices and prices than MVPDs, thus making it 

difficult to attract customers. DOJ and the Federal Trade Commission 

(FTC), which investigate certain proposed mergers and potential antitrust 

violations, jointly sponsored a workshop in September 2012 on MFN 

clauses and their benefits and risks to competition.31

 

31See Department of Justice, Federal Trade Commission to Hold Workshop on MostFavored Nation Clauses (Aug. 17, 2012), accessed June 5, 2013, at 

According to DOJ’s 

press release announcing the workshop, MFN clauses, though at times 

employed for benign purposes, can under certain circumstances present 

competitive concerns. DOJ noted that MFN clauses might, especially 

when used by a dominant buyer of intermediate goods, raise other 

buyers’ costs or foreclose would-be competitors from accessing the 

market. While high prices and contracting terms could hinder entry, some 

http://www.justice.gov/atr/public/press_releases/2012/286144.htm. Although no panel 

focused specifically on the use of MFNs in the video marketplace, the panelists’ 

discussion of MFNs in general may be illuminating with respect to the video industry as 

well. 

A Variety of Factors May 

Hinder Future Competition

Availability and Licensing of 

Professionally Produced 

Content
 

Page 20 GAO-13-576 Video Competition

larger OVDs with subscription services have taken steps to overcome 

these challenges. For example, Netflix signed a multiyear billion-dollar 

agreement with Disney Corporation to license its content beginning in 

2016. In addition, some OVDs have begun producing their own original 

content. For example, Netflix created its first original series, House of 

Cards, which debuted on February 1, 2013, and Amazon currently has 12 

pilots in development that will be available on its Prime Instant Video 

service.

Based on our discussions with an array of industry stakeholders and 

experts, the prospect of any new wire-based providers entering the video 

market appears unlikely. As previously discussed, the two telephone 

providers that expanded their service offerings to compete with incumbent 

cable companies—AT&T and Verizon—appear to be curtailing further 

expansion of their video and broadband Internet services. Both 

companies made very large investments to upgrade their networks—an 

expected $23 billion in the case of Verizon and billions of dollars, 

according to AT&T—to provide new video and broadband services, 

despite the fact that the companies were established telephone 

companies with existing telecommunications infrastructure in place. The 

high costs to provide these services create a substantial barrier to entry.32

The costs involved in entering the video distribution market fall into 

several categories including: (1) physical infrastructure, (2) regulatory 

authorizations, (3) securing access to broadcast and cable programming, 

and (4) marketing.

In particular, not only are the overall costs of entry into the video 

distribution market high, but many of these costs are fixed, meaning that 

much of the infrastructure needs to be in place before the provider can 

initiate service. High fixed costs can render entry difficult because an 

established company with a large customer base will generally enjoy a 

significant cost advantage over a new entrant.

Physical infrastructure for providing video. Providing wire-based video 

service requires an extensive physical network. The provider needs to be 

 

32In addition to wire-based providers, the entry of a satellite company appears unlikely. 

Deploying a network of satellites and ground stations is costly, and there are a limited 

number of available slots in orbit to locate a satellite. See, GAO, Telecommunications: 

Competition, Capacity, and Costs in the Fixed Satellite Services Industry, GAO-11-777 

(Washington, D.C.: Sept. 7, 2011).

Entry into the Traditional 

MVPD Market
 

Page 21 GAO-13-576 Video Competition

able to capture video signals from various sources—broadcast 

transmitters, fiber optic cable, satellites—each source requiring specific 

communications infrastructure. Once captured at the provider’s facilities, 

video signals are transported to households. Transmission requires a 

wired network from the provider’s facility travelling across highways and 

byways, into neighborhoods, and ultimately linked to every subscribing 

household. Installation of such a network is expensive: the provider 

generally needs to dig trenches along roads and into neighborhoods in 

order to install equipment and wire. This fairly extensive and expensive 

network of communications reception and transmission equipment needs 

to be in place before any service can be provided, so much of the video 

capture infrastructure, trench digging, and wire installation costs are fixed.

Regulatory authorizations and coordination with private party facilities 

owners. A new provider must work with local jurisdictions to obtain 

authorizations to undertake various activities. Cable providers are 

required to obtain a franchise authorization for each jurisdiction they 

serve. Franchise areas vary in size, but they typically cover a town or 

relatively small jurisdiction, so gaining franchise authorization to enter any 

significant geographic area can be time-consuming.33 In addition, to 

deploy cable for the network, a provider requires access to public rightsof-way. The governmental entities that grant franchises and access to 

rights-of ways vary by state, which again may mean that an entrant needs 

to obtain a grant to access rights-of-ways from multiple jurisdictions.34

 

33Like traditional cable companies, Verizon chose to secure franchises from the relevant 

jurisdictions where it introduced FiOS service. In contrast, AT&T asserted that its U-verse 

service is not subject to local franchise regulation as a traditional cable television service, 

but is generally authorized by statewide franchises.

Once the grant is received, a video provider must work with either the 

local telephone or utility companies to undertake the necessary 

installation work, because these companies generally are the owners of 

the poles or conduits over or through which wires are deployed along the 

rights-of-way. As with the physical installation, obtaining regulatory 

authorizations and coordinating installations generally needs to take place 

before the provider can begin to service customers.

34According to FCC, historically states vested franchise authority primarily in either county 

or municipal governments; however, approximately 20 states now have statewide video 

franchising. 
 

Page 22 GAO-13-576 Video Competition

Acquisition of Programming. A new provider in the video market needs to 

secure access to a large portfolio of broadcast and cable networks to 

compete for customers. The cost of the programming itself is paid 

monthly based on the number of subscribers the provider serves, and 

according to providers with whom we spoke, prices for programming are 

high and continue to increase. Several of the providers and experts with 

whom we spoke also told us that networks generally offer significant 

discounts based on the number of subscribers a provider has. Thus, a 

substantial disadvantage that an entrant has relative to a large provider is 

that it will likely have higher programming costs, making entry 

challenging.

Marketing. A new entrant needs to make the public aware of the new 

services it is offering and attempt to convince potential customers to buy 

its services. This can pose many challenges for an entrant. As mentioned 

earlier, over 85 percent of households already subscribe to a video 

service, so most potential customers are already buying a service. Thus, 

most customers need to be persuaded to switch their provider.

Additionally, many households buy a bundle of services from their 

provider—video, broadband Internet, and sometimes telephone—and the 

inconvenience of switching over several services to a new provider is 

greater than it might be for a stand-alone service. Such challenges that 

an entrant would face to gain subscribers can also act as a barrier to 

entry.

While OVDs present a new and exciting venue through which consumers 

can enjoy video services, we found that OVDs do not yet offer a package 

of programming that is substantial enough to induce households to drop 

their subscription to a traditional video service in favor of an OVD’s 

services. OVD providers have a variety of business models, but 

fundamentally, they are dependent on two established industries—

developers of video content and providers of broadband Internet 

access—and this dependence could hinder any significant maturation of 

the OVD business model.

Content. OVDs purchase content from the same content providers as do 

traditional MVPDs, and content providers and MVPDs have long-standing 

and lucrative business relationships. As discussed above, high-valued 

content, such as professionally produced movies and television 

programs, is costly to produce. Therefore, even if some OVDs are 

successful in developing some independent content, they will remain 

largely dependent on traditional sources of content. Content providers 

enjoy a stable and secure business model distributing programs on 

Online Entry and Business 

Practices of Established 

Industry Sectors
 

Page 23 GAO-13-576 Video Competition

MVPD systems. In particular, content providers benefit from MVPDs 

packaging many channels because it ensures that most households 

purchase a large set of channels.35 Similarly, MVPDs benefit from their 

purchase of high-quality content, which most households value enough to 

induce them to purchase a large tier of MVPD programming.36

At the same time, content providers are also interested in selling their 

programs to OVDs. In particular, representatives of several such 

companies, as well as experts, said that through these new outlets, 

content providers are able to monetize their products in new ways. For 

example, OVDs can distribute content separate from the bundles of 

content offered by broadcast and cable networks, which may have a 

unique commercial appeal and attract new consumers to content 

providers’ programs. However, content providers are also wary about the 

extent to which they contract for OVD distribution of their programs. If 

OVD offerings become attractive enough that households begin to drop 

MVPD subscriptions and rely solely on online viewing, revenues earned 

through traditional subscription service will decline, affecting both content 

providers and MVPDs. The issue is the extent to which this happens: the 

impact of a small number of households doing so may not be of concern 

to content providers, but if a substantial number of households choose to 

“cut the cord,” revenues of both the content providers and the MVPDs 

could be reduced enough to be worrisome for these companies. Thus, 

while content providers are interested in providing some content to OVDs, 

their incentive to do so is somewhat constrained by the potential effect on 

subscriptions to traditional MVPDs. Some stakeholders with whom we 

spoke stated that the critical challenge for the OVD business model is 

access to quality content and that as long as content providers do not see 

Thus, 

there is a symbiotic benefit in the business relationship between the 

content producers and MVPDs.

 

35A consumer will purchase a large package of channels, even if the consumer only 

watches a few channels, if the consumer’s willingness to pay for those channels is at least 

equal to the price of the entire package. 

36In February 2013, Cablevision, the ninth largest MVPD based on subscribers, filed an 

antitrust suit against Viacom. In a statement, Cablevision said that Viacom effectively 

forces Cablevision’s customers to pay for and receive little-watched channels in order to 

get the channels they actually want. See, Cablevision Systems Corporation, et al. v. 

Viacom International Inc, et al., U.S. District Court, Southern District of New York, 13-

1278.
 

Page 24 GAO-13-576 Video Competition

OVDs as a viable outlet for the highest quality content, the growth of the 

OVD business model will be limited.

Broadband. Most households with broadband purchase that service from 

either a cable or a telephone company.37 Thus, the companies that 

provide a large portion of the broadband access in the country are the 

same companies that OVDs are attempting to compete against in the 

video marketplace. Users who view video provided by OVDs are often 

large consumers of broadband bandwidth, and heavy use may place 

stress on the broadband infrastructure. Some MVPDs have created 

pricing structures for bandwidth that, in one manner or another, extract 

higher fees from heavy users. OVDs and other experts have expressed 

concern that, because MVPD providers are also competitors of OVDs in 

the video market, MVPDs may have an incentive to charge for bandwidth 

in such a way as to raise the costs to consumers for using OVD service.

Some of the industry groups and experts with whom we spoke stated that 

some form of usage-based pricing was probably inevitable and 

reasonable based on the costs of maintaining the infrastructure, but that 

they would be concerned if such pricing was used in any way that could 

stall the growth of the nascent OVD market. For example, they would be 

concerned if there were any differential treatment of broadband use for 

accessing the content of the MVPD versus that of OVD providers.

 

37The primary companies providing broadband service are cable and telephone 

companies. Cable companies provide broadband service using their fiber-coaxial network. 

Telephone companies provide broadband service using either fiber optic cable or digital 

subscriber line (DSL) technology, although DSL is generally slower than fiber-coaxial or 

fiber optic technology. Satellite companies can also provide broadband service, but like 

DSL, it is generally slower than fiber-coaxial and fiber optic technologies. 
 

Page 25 GAO-13-576 Video Competition

The 1992 Act was written over 20 years ago, and for a variety of reasons, 

the majority of stakeholders with whom we spoke stated that some 

provisions of the laws and associated regulations do not reflect the 

current marketplace. Stakeholders told us that there have been significant 

changes in competition in the video marketplace since 1992. For 

example, cable companies were often the only choice of a video 

distributor for most consumers in 1992. Since then, satellite and 

telephone companies have entered the marketplace, and consumers 

have more choices in selecting a video distributor. In addition, the 1992 

Act was written before the commercialization of the Internet and other 

technological advances, such as tablets and smartphones, which allow 

for online video and wireless distribution. As previously discussed, online 

video viewing is a small portion of overall viewership. However, experts 

with whom we spoke said that the trend is for growth of online video with 

the expansion of WiFi and 4G infrastructure and the greater use of tablets 

and smartphones. Furthermore, since 1992, MVPDs have digitalized their 

systems and the number of channels carried on these systems has risen 

dramatically, an increase that has led to more content being developed 

and more content options available for consumers. Due to these 

marketplace changes, the majority of stakeholders we interviewed stated 

that some provisions in the 1992 Act should be revisited; however, other 

stakeholders disagreed, stating that given the quickly developing, 

dynamic, and technology-oriented nature of the industry, it is difficult for 

laws to keep up with changes. These stakeholders noted that, as was the 

case in 1992, it is hard to predict what the marketplace will be like in the 

future and therefore difficult to envision appropriate laws and regulations.

Most of the stakeholders who told us that some provisions of the 1992 Act 

should be revisited had varying opinions, which were often based on their 

position in the marketplace. In general, stakeholders identified three 

Stakeholders 

Generally Noted That 

Laws and Regulations 

Have Not Kept Pace 

with Changes, and 

FCC Has Not 

Consistently Reported 

on Competition

The Majority of 

Stakeholders Noted that 

Some Laws and 

Regulations Are Out of 

Date, but Little Agreement 

Exists on Potential 

Changes
 

Page 26 GAO-13-576 Video Competition

issues related to the 1992 Act that they believe should be addressed: (1) 

retransmission consent, (2) program access, and (3) the definition of 

MVPD and OVD. In addition, stakeholders also had varying opinions on 

FCC’s Open Internet regulation.

Retransmission Consent. One of the concerns expressed by stakeholders 

and experts with whom we spoke was the manner in which 

retransmission consent is functioning in the market today. Policies to 

support localism have long been a focus of communications laws related 

to television broadcasting. In 1992, Congress took action to help ensure 

that the local benefits of over-the-air broadcast television stations were 

protected as more households began to migrate to pay video services 

over cable systems. The 1992 Act thus set forth a paradigm under which 

commercial, local television stations38 can choose to be carried by cable 

companies under a must carry status—meaning that cable companies in 

their market are obliged to carry the station’s signal—or can elect to 

negotiate for carriage under retransmission consent.

39

During roughly the first decade after the 1992 Act was passed, 

negotiations for retransmission consent usually did not result in cash 

payments from cable companies to local television stations, but rather, 

The purpose 

behind the dual policies of must carry and retransmission consent was, in 

part, to support the development of local news, emergency weather 

information, and other local public interest content. While a must carry 

station does not receive any compensation for the carriage of its signal, a 

station electing retransmission consent can negotiate with cable 

companies for compensation in return for the cable company’s right to 

carry the station’s signal. Thus, must carry provisions were designed to 

ensure that all local commercial stations would be carried by cable 

companies, which may not have occurred for some stations that do not 

have a significant commercial appeal. At the same time, retransmission 

consent was designed to ensure that stations choosing this status had the 

ability to bargain for compensation for the value of their local television 

signal.

 

38Noncommercial television broadcast stations, mostly public television stations, have 

must carry rights but do not have the option of electing retransmission consent.

39Satellite companies may choose to carry local broadcast stations. In television markets 

where they do so, all local broadcast stations are entitled carriage (“carry one, carry all”) 

and commercial stations may elect whether they want to be carried under similar must 

carry and retransmission consent provisions as are applied to cable systems. 
 

Page 27 GAO-13-576 Video Competition

resulted in other forms of negotiated compensation, such as carriage of 

fledgling cable networks owned by broadcast networks. But over the last 

several years, negotiated cash fees for retransmission have increased 

significantly, as we reported in 2011.40 Stakeholders with whom we 

spoke—specifically cable and DBS companies, as well as industry 

experts—told us that the rapid rise in retransmission fees is of concern 

because these fees put upward pressure on subscriber rates, and the 

negotiation over fees have become increasingly contentious, leading to 

more “blackouts” during which local television signals are pulled from a 

particular MVPD’s channel lineup.41

Others with whom we spoke—from broadcast networks and an 

associated trade association—told us that retransmission consent 

remains an important foundation for developing programming. They noted 

that without this form of compensation, broadcasters would not be able to 

continue to provide high quality programming and emergency local 

Moreover, some of those concerned 

about increasing retransmission fees noted that while the concept 

underlying retransmission consent was to support local television 

stations, they believe that a portion of the financial compensation paid 

through retransmission fees is, in fact, not going to local television 

stations. Instead, critics told us that a good portion of retransmission fees 

are flowing to the broadcast networks that own or have affiliation 

agreements with the local stations and that ultimately a portion of these 

fees flow to the copyright holders of high-valued content purchased by 

broadcasters, such as sports leagues and studios producing popular 

dramatic TV series.

 

40GAO, Statutory Copyright Licensing: Implications of a Phaseout on Access to Television 

Programming and Consumer Prices Are Unclear, GAO-12-75 (Washington, D.C.: Nov. 23, 

2011).

41Aereo has developed a business model that may challenge the functioning of 

retransmission in the marketplace. The company has begun providing local broadcast 

stations to subscribers of its service by capturing broadcast signals at its facilities with an 

antenna dedicated to each of its subscribers and then transmitting that signal via an 

Internet Protocol (IP) network to its subscribers’ residences. This has allowed Aereo to 

develop a unique video product that bypasses the retransmission consent fees that are 

paid by cable and DBS companies for providing broadcast signals to their subscribers. 

However, broadcast networks view Aereo’s activities as violating copyright law, and the 

issue is currently in litigation. In April 2013, the U.S. Court of Appeals for the Second 

Circuit upheld a lower court’s denial of WNET’s motion for a preliminary injunction, finding 

that Aereo was unlikely to be liable for copyright infringement. WNET v. Aereo, Inc., 712 

F.3d 676 (2nd Cir. 2013). On April 15, 2013, the plaintiffs filed a petition for 

reconsideration en banc, that is, by the full membership of the court. 
 

Page 28 GAO-13-576 Video Competition

information. These stakeholders also said that broadcast stations have 

the right to control their television signal and that any attempt to alter this 

long-standing policy would be harmful to the television broadcasting 

system that was developed decades ago.

Program Access Rules. The 1992 Act gave FCC the authority to establish 

program access rules that require cable companies that produce content 

to make that content available to other unaffiliated MVPDs. Cable 

companies say these rules are no longer needed because they do not 

have monopoly power and that other MVPDs have access to content.

Cable companies also note that it is their First Amendment right to 

determine to whom they license their content. However, OVDs, consumer 

groups, and experts state that the program access rules need to be 

continued and extended to include OVDs, whom they say have difficulty 

accessing content. As noted earlier, limited access to high-valued 

programming is one of the factors that stakeholders told us could hinder 

competition. Stakeholders told us that the program access rules allowed 

satellite and telephone companies to compete and grow and that new 

entrants, such as OVDs, should have the same protections. In October 

2012, FCC declined to extend the exclusive contract prohibition, originally 

enacted as part of the program access statutory provisions, beyond its 

scheduled sunset date. FCC stated that a preemptive prohibition on 

exclusive contracts was no longer necessary because a case-by-case 

process under the program access rules would remain in place after the 

prohibition expired to assess the impact of individual exclusive 

contracts.42 FCC has received program access complaints, including one 

from an OVD—Sky Angel—in March 2010.43

 

42In the Matter of Revision of the Commission's Program Access Rules. 27 FCC Rcd 

12605 (2012). 

Sky Angel also filed lawsuits 

against Discovery Communications and the National Cable Satellite 

Corporation, the owner of cable channel C-SPAN, to access 

programming from these two companies.

43See Sky Angel U.S., LLC v. Discovery Communications LLC, et al., Program Access 

Complaint, MB Docket No. 12-80, File No. CSR-8605-P (Mar. 24, 2010) (“Sky Angel 

Complaint”); Sky Angel U.S., LLC v. Discovery Communications LLC, et al., Emergency 

Petition for Temporary Standstill, MB Docket No. 12-80, File No. CSR-8605-P (Mar. 24, 

2010) (“Sky Angel Petition”); see also Sky Angel U.S., LLC v. Discovery Communications 

LLC, et al., Renewed Petition for Temporary Standstill, MB Docket No. 12-80, File No. 

CSR-8605-P (May 27, 2011).
 

Page 29 GAO-13-576 Video Competition

Definition of MVPD. As defined in the Communications Act, an MVPD is, 

among others, a cable operator or satellite provider that makes available 

for purchase multiple channels of video programming.44 Experts with 

whom we spoke said that OVDs generally have not been regarded as 

MVPDs because OVDs are not facilities-based, in that they do not own 

the Internet bandwidth through which their content is distributed. FCC 

staff has determined that Sky Angel—an OVD that offers channels but is 

not facilities-based—failed to demonstrate that it is a MVPD entitled to 

seek relief under the program access rules. However, FCC has not 

conclusively decided the issue. Since OVDs may or may not be MVPDs, 

it is unclear if OVDs have the same rights to program access and 

obligations, such as must carry. While some OVDs like Sky Angel want to 

be classified as an MVPD so that they can have program access rights, 

other OVDs do not, saying that their business model differs from that of a

MVPD and that therefore they should not be treated as one. Experts 

noted that complicating the distinction between OVDs and MVPDs is that 

some MVPDs also provide content online and on demand. Experts with 

whom we spoke said that defining OVDs as MVPDs could have negative 

implications on competition in that it could discourage companies that do 

not wish to be subject to MVPD regulations from entering. In response to 

Sky Angel’s program access complaint, FCC initiated a proceeding in 

March 2012 requesting comments from industry stakeholders on the 

definition of MVPD and channel.45

Open Internet. The growing use of the Internet since the 1992 Act has 

raised concerns among some industry stakeholders about the 

management of broadband networks. In particular, the literature we 

reviewed, as well as OVDs and consumer groups with whom we spoke, 

reported concerns that some companies providing broadband service that 

are affiliated with MVPDs could favor their own content. According to the 

literature and stakeholders, MVPD-affiliated broadband providers might 

have an incentive to limit access to their programming or block or slow 

consumers’ access to their competitors’ websites, thereby giving 

competitive advantage to their content and restraining the growth of 

rivals. As we previously mentioned, limited access to content is a factor 

 

44See 47 U.S.C. § 522 (13).

45Media Bureau Seeks Comment on Interpretation of the Terms “Multichannel Video 

Programming Distributor” and “Channel” as Raised in Pending Program Access Complaint 

Proceeding, 27 FCC Rcd. 3079 (2012).
 

Page 30 GAO-13-576 Video Competition

that could hinder competition in the video marketplace. In December 

2010, FCC issued its Open Internet Order, which provides that (1) fixed 

and mobile broadband providers must disclose the network management 

practices, performance characteristics, and terms and conditions of their 

broadband services; (2) fixed broadband providers may not block lawful 

content, applications, services, or non-harmful devices; mobile broadband 

providers may not block lawful websites or block applications that 

compete with their voice or video telephony services; and (3) fixed 

broadband providers may not unreasonably discriminate in transmitting 

lawful network traffic.46 MVPD-affiliated broadband providers told us that 

they should be able to manage their networks as they built, operate, and 

maintain the networks and that Open Internet rules could make it more 

difficult for them to recoup their investments. Verizon, which provides both 

broadband and video services, appealed FCC’s Open Internet Order in 

the U.S. Court of Appeals for the District of Columbia Circuit. Several 

parties, including the National Association of State Utility Consumer 

Advocates intervened in that appeal and argued, among other things, that 

the Commission has authority to adopt the Open Internet rules to protect 

against cable operators and their affiliates discriminating against their 

video programming competitors. Panelists at a January 2013 forum on 

cable and broadband law noted that any consideration of potential 

legislative and regulatory changes affecting the video marketplace should 

wait until the District of Columbia Circuit Court rules on FCC’s order since 

the outcome could dictate how the online video marketplace evolves.

FCC is required by statute to report annually to Congress on both cable 

industry prices and competition in the video marketplace, but has not met 

this requirement every year. The 1992 Act established requirements for 

the purpose of increasing competition and diversity in MVPD distribution47

and required FCC to report annually on the average rates that cable 

companies charge for cable service and equipment48 and the status of 

competition in the video marketplace49

 

46Federal Communications Commission, In the Matter of Preserving the Open Internet, 

Broadband Industry Practices, Report and Order, 25 FCC Rcd. 17905 (2010).

to measure progress toward these 

4747 U.S.C. § 521(5) and (6).

4847 U.S.C. § 543(k).

4947 U.S.C. § 548(g).

FCC Has Not Consistently 

Published Statutorily 

Required Reports
 

Page 31 GAO-13-576 Video Competition

goals. Since the 1992 Act, FCC has published the annual cable industry 

price report 13 times, but did not publish the report in 2004, 2006, 2007, 

and 2010. In the 2009 report, FCC included data from 2006 and 2007, in 

addition to the 2008 data that it would have normally reported. FCC has 

submitted 14 video competition reports to Congress, but did not release 

the report in four years—2007, 2008, 2010, and 2011. The most recent 

report, published in July 2012, covered 4 years of information.

FCC officials cited several factors that contributed to the missed reports, 

and legislation introduced in the 112th Congress would have reduced the 

frequency of the reports. FCC officials told us that the reports were 

generally prepared on time, but the delays in the release of the reports 

were due to a variety of administrative factors. In 2010, FCC initiated a 

comprehensive review of the way in which it uses data, including data 

used for its video competition report; ultimately, FCC altered the analytic 

framework of the video competition report to be consistent with its other 

competition reports.50 According to FCC officials, this review and change 

contributed to the Commission missing the 2010 and 2011 video 

competition reports. In addition, FCC officials told us that the reports are 

time consuming to prepare because of the amount of industry data the 

Commission reviews. While data and comments used for the video 

competition report are submitted by industry participants on a voluntary 

basis, the cable industry price reports impose a burden on some industry 

participants.51 In particular, FCC estimated that the public reporting 

burden for the information collection required for the cable industry price 

report was 6 hours per response, including the time for reviewing 

instructions, searching existing data sources, gathering and entering the 

data needed, and completing and reviewing the questionnaire.52

 

50In particular, FCC adopted a framework consistent with its recent wireless and satellite 

competition reports.

Some 

stakeholders told us that FCC reports are valuable, although the majority 

of stakeholders that we interviewed had no opinion on them. In our review 

51According to FCC officials, the video competition report does not impose a burden on 

industry participants because the Commission solicits information through a Notice of 

Inquiry, and industry participants voluntarily submit comments. However, industry 

participants that choose to prepare and submit comments do incur costs, reflecting staff 

time, attorney fees, or both. 

52See Office of Management and Budget, Office of Information and Regulatory Affairs, 

ICR Reference No: 201005-3060-016, Annual Cable Price Survey and Supplemental 

Questions, FCC Form 333, Conclusion Date: 08/04/2010.
 

Page 32 GAO-13-576 Video Competition

of the video competition reports, we saw little change in the reported 

findings from year to year; therefore, less frequent reporting could allow 

for continued measurement of industry performance while reducing the 

burden on FCC and industry participants. In the past, both Congress and 

the executive branch have expressed concern about reporting 

requirements; the basic concern has been that some requirements result 

in reports that may be unnecessarily burdensome to produce or, in some 

instances, not very useful. A bill that the House of Representatives 

passed during the 112th Congress, would have required FCC to 

consolidate eight currently separate congressionally mandated reports, 

including the video competition reports, and issue a single report 

biennially; the legislation would have eliminated the cable industry price 

report.53 FCC officials expressed no opinion between an annual or 

biennial reporting requirement and said that the Commission prepares the 

reports as directed by Congress; the Commission has not communicated 

an opinion on this issue to Congress.

The video marketplace consists of a complex set of interrelated and 

competing industries operating under a variety of related laws and 

regulations. In particular, communications and copyright law dictate how 

content providers, aggregators, and distributors operate in this 

marketplace. Competition has expanded in some segments of the video 

marketplace, most notably, the emergence of telephone companies 

providing video distribution services. In addition, technology in this arena 

is changing and has facilitated the formation of entirely new businesses 

and products, such as online video distribution, which have the potential 

to alter existing business models. It is too soon to tell what the outcomes 

of these technological and market changes will be, or whether 

anticompetitive behavior would necessitate any federal action. A lack of 

consensus, influenced by vested economic interests among industry 

officials, consumer groups, and experts reinforces that while federal laws 

and regulations may in some ways be outdated, it is not yet clear how 

they should be updated to reflect 21st century technologies and market 

conditions. FCC’s cable industry price and video competition reports 

provide useful information. However, these reports may not be needed on 

an annual basis, especially given demand on FCC staff’s time for other 

 

53Federal Communications Commission Consolidated Reporting Act of 2012, H.R. 3310, 

112th Cong. (2012). 

Conclusions 
 

Page 33 GAO-13-576 Video Competition

monitoring and regulatory duties. FCC’s 2009 cable industry price and 

2011 video competition reports covered several years of data and could 

serve as models for issuing such reports on a less frequent basis. Since 

these annual reports are statutorily required, Congress, with input from 

FCC, would determine any new reporting frequency.

To ensure that the Commission’s cable industry price and video 

competition reports provide timely and useful information, while 

minimizing the reporting burden and meeting statutory deadlines, we 

recommend that the Chairman of the Federal Communications 

Commission study the advantages and disadvantages of different 

reporting frequencies, including annual and biennial reporting, and 

transmit the results of its analysis to Congress.

We provided a draft of this report to the Federal Communications 

Commission and the Department of Justice for review and comment. FCC 

provided written comments, which are reprinted in Appendix II of this 

report. In its letter, FCC said that the Commission strives to use its 

resources efficiently to meet the agency’s mission and its Congressional 

requirements, and the Commission is reviewing our recommendation.

DOJ provided technical comments that we incorporated as appropriate.

We are sending copies of this report to the Attorney General and 

appropriate congressional committees. In addition, the report will be 

available at no charge on the GAO website at http://www.gao.gov. 

Recommendation for 

Executive Action

Agency Comments
 

Page 34 GAO-13-576 Video Competition

If you or your staff have any questions concerning this report, please 

contact me on (202) 512-2834 or goldsteinm@gao.gov. Contact points for 

our offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix III. 

Sincerely yours,

Mark L. Goldstein

Director, Physical Infrastructure Issues
Appendix I: Objectives, Scope, and 

Methodology

Page 35 GAO-13-576 Video Competition

The objectives of this report were to examine (1) how competition has 

changed since 2005; (2) the increased choices that consumers have in 

acquiring video programming and content; (3) the factors that can spur or 

hinder competition; and (4) stakeholders’ views on how the federal 

government’s regulations, reports, and other activities have kept pace 

with changes in the industry.

To assess how competition has changed since 2005, we first conducted a 

literature search and reviewed media articles, academic studies, industry 

reports, and prior GAO reports on the structure, economics, and 

technological factors affecting the development and distribution of video 

content. We also reviewed relevant reports prepared by the Federal 

Communications Commission (FCC), the Department of Justice (DOJ), 

and the Federal Trade Commission (FTC). We verified information from 

the literature review through interviews with FCC and DOJ officials, 

industry participants, trade associations, consumer groups, industry 

analysts, and other experts. We selected industry participants to include 

producers, aggregators, and distributors of content, such as broadcast 

and cable networks, multichannel video programming distributors 

(MVPD)—cable, satellite, and telephone companies—and online video 

distributors (OVDs).

To assess what increased choices consumers have in acquiring video 

programming and content, we conducted an analysis of MVPD services in 

20 randomly sampled zip codes across the United States. To ensure a 

representative sample, we used the Rural/Urban Commuting Area zip 

code file that includes all U.S. zip codes. We then sorted the zip code file 

into four census regions—Northeast, South, Midwest, and West—and 

within these regions, made five urban and rural classifications—urban, 

suburban, large town, small town, or isolated rural. This process resulted 

in 20 different segments—5 classifications for each of the 4 census 

regions. We then randomly sorted each of the 20 segments, a process 

that resulted in the identification of 20 zip codes. We identified the 

community names associated with the 20 zip codes using the United 

States Postal Service online zip code locator; we used FCC’s cable 

franchise information to identify the MVPDs that served the communities. 

We contacted these MVPDs and asked them for publicly available 

information on their services and prices. The information requested and 

collected included channel lineups by package name, monthly rate for 

each package, broadband packages (whether provided stand-alone or 

combined with video services), available broadband speeds, available 

online video offerings, available out-of-household viewing options, and 

available DVR options. We had a 100 percent response rate to the survey 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 36 GAO-13-576 Video Competition

as all 20 communities provided information. We then analyzed the data to 

compare packages offered, prices, level of competition, among other 

factors. Our results reflect the competition, packages, and pricing in the 

20 zip codes and are not generalizable to all zip codes. To identify the 

prices for traditional MVPD services, we gathered data from FCC’s 

reports on cable industry prices for the years 2005 through 2012, which 

represent the most recent available data. These cable rates were for 

basic and expanded basic tiers. We reviewed FCC documentation and 

information provided by FCC staff to assess the reliability of the cable 

price data and determined that FCC’s data were sufficiently reliable for 

the purposes of our report. We conducted interviews with content 

producers, MVPDs, consumer groups, and experts to collect information 

on reasons for the rise in cable rates.

To assess the factors that can spur or hinder competition in the video 

marketplace, we conducted a literature search and reviewed relevant 

articles and prior GAO reports, as discussed previously. Through a review 

of DOJ’s website, we examined DOJ’s activities in the video marketplace, 

including any investigations of potential relevant antitrust violations and 

the agency’s review of the Comcast/NBCU proposed merger; we verified 

our research with DOJ. We also conducted interviews with industry 

participants, trade associations, consumer groups, industry analysts, and 

other experts for their views on factors that have increased or hindered 

competition. Our ability to understand some specific aspects of the 

industry was limited because certain information and data are generally 

not made publicly available. In particular, details of the contracts between 

content providers and MVPDs—such as retransmission fees, per 

subscriber fees for cable networks, and other requirements (such as tier 

placement) surrounding the carriage of broadcast and cable channels—

are generally covered under nondisclosure agreements. Similarly, 

information on the negotiations for the purchase of programming by 

OVDs is generally not publicly available. Other areas with limited publicly 

available data and information include the extent to which retransmission 

fees are retained by local broadcast stations or flow to broadcast 

networks and copyright holders, the extent to which the access of content 

through OVD providers congests broadband providers’ networks, and the 

cost of producing high-valued content, such as sports and popular TV 

dramas. As such, for some issues discussed in this report, our 

information is largely based on the statements and opinions of industry 

participants that we cannot independently corroborate.

To assess stakeholders’ views on how the federal government’s 

regulations, reports, and other activities have kept pace with changes in 
Appendix I: Objectives, Scope, and 

Methodology

Page 37 GAO-13-576 Video Competition

the industry, we analyzed the FCC Media Bureau’s activities since 2005 

to determine competitive issues that the Commission has or is 

addressing. To do this, we reviewed the Media Bureau’s website, which 

lists its activities. We also analyzed DOJ’s investigative activities in the 

video marketplace through its website. We verified information collected 

from our reviews with FCC and DOJ. As part of this review, we reviewed 

the relevant laws, regulations, and FCC proceedings including Notices of 

Inquiry, Notices of Proposed Rulemakings, and Reports and Orders. We 

also conducted interviews with industry participants, trade associations, 

consumer groups, industry analysts, and other experts for their views on 

how federal regulations, reports, and activities are keeping pace with the 

industry. We prepared a summary analysis of all interviews that we 

conducted to determine the four major issues that interviewees said that 

Congress or the federal government should address. To determine FCC’s 

consistency in publishing its cable industry price and video competition 

reports, we analyzed all reports since they were first published. In this 

analysis, we looked at when the reports were completed and submitted 

for Commission approval and when the Commission approved and 

published the reports. We also interviewed FCC on why the reports were 

not published annually.

We conducted this performance audit from July 2012 to June 2013 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Comments from Federal 

Communications Commission

Page 38 GAO-13-576 Video Competition

Appendix II: Comments from Federal 

Communications Commission 
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 39 GAO-13-576 Video Competition

Mark Goldstein, (202) 512-2834 or goldsteinm@gao.gov. 

Other key contributors to this report were Mike Clements (Assistant 

Director), Amy Abramowitz, Matt Cail, Dave Hooper, Delwen Jones, 

Maureen Luna-Long, Josh Ormond, and Andrew Stavisky.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(543306)
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