The FCC recently released its 14th report on the status of competition in the video marketplace. While the FCC is supposed to do this annually, it tends to be somewhat late - this just-released report is officially the 2010 report (covers 2007-2010).
The expressed conclusion is that the level of competition in the video marketplace is "insufficient to hold down cable prices". This despite finding that cable's market share is declining (to 60%), satellite services growing to 33% of the market, and the rise of competition to 7% market share (in 2010). More recently, there's also been the growth of online video and mobile video systems. And broadcast TV is becoming more of a direct competitor as stations take advantage of the ability to multiplex separate channels within their digital signals. So while video markets across the US are all more competitive from the situation examined in previous reports that concluded that there was sufficient competition, the FCC now finds there is insufficient competition.
Part of the rationale for the change in conclusions may be a shift in what kind of competition is being considered, or a change in the threshold for "sufficient." One change evident in the report is that the FCC now divides the video marketplace into 3 separate pieces - the Broadcast market, the Multichannel Video Programming Distributor (MVPD) market, and the Online Video Distributor (OVD) market. The OVD market was also very narrowly defined as services offering professionally produced content previously shown in theaters or on TV. While there may be value in differentiating the three, basing consideration of competitiveness solely on the number of outlets in each market (separately) is a narrow and problematic perspective. From a consumer perspective, these aren't independent markets - at the very least they are very close substitutes for one another, and should be considered (at least) as interlinked markets. There's a similar issue with the way the report considers the Broadcast market, as their analysis seems based on counting licenses rather than separate programming channels, or the programming itself. Similarly, ignoring the huge gains in volume and use of online video (outside the retransmission of previously aired programming) sets a very narrow and unrealistically defined market.
It would seem that the report is attempting to minimize any measurement of competition by failing to consider all competing alternatives in the video marketplace (and not merely a narrowly defined set of distribution services). It also appears that they approach competition from a political economy perspective (how many owners) rather than a consumer perspective (available choices and options for video consumption). And for a study purporting to look at the forces impacting cable pricing, it completely ignores the single largest contribution to costs (and thus prices) for cable services (as well as other MVPD and OVD services) - the cost of programming. The report does not seem to consider the content side at all (other than, once again, from a political economy perspective of what channels are owned by which distributors).
Finally, while I have yet to closely read the whole report, there doesn't seem to be a clear standard set for what would constitute "sufficient" competition. This allows FCC Commissioner Roger McDowell, to claim that the information presented in the report could as easily "affirmatively conclude that the video programming marketplace is competitive." A second Commissioner, Ajit Pai, also commented that the data in the report shows that the video marketplace is "more competitive than it has ever been."
The conclusion that the market (or markets) are not sufficiently competitive in terms of cable pricing seem to be drawn from a variety of claims made by a few commenters - based on anecdotal claims, or unrealistic comparisons to "ideal" market structures that do not exist (and can not exist in the U.S. due to FCC standards and regulations).
While the basis for the report's conclusions are questionable (and in my view, suspect), there's still a large amount of good descriptive information in the report that is useful, if sadly outdated in age of rapidly evolving media and information markets. It's worth a look, and I'll try to give it a more thorough look and commenting later.
Sources - FCC Releases Video Competition Report, Multichannel News
FCC, 14th Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming
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