Calling Americans "voracious consumers of media services," the Federal Communications Commission says the average household watched television last year for over 8 hours a day. The average individual tuned in for 4.5 hours a day.

These are the highest levels of viewing since the Nielsen Media Research company first began measuring TV consumption patterns in the 1950s, according to the FCC's Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, issued on February 10th.

"On average," the report concludes, "we spend close to 30 percent of our day engaged in some activity involving media, with television viewing the dominant media activity."

The FCC study also finds that cable subscription dropped by about 2 percent last year, down to 69.4 percent of the multichannel video program distribution (MVPD) market. This continues a general trend that began in 2001, when cable enjoyed a 77 percent national share. More Americans subscribe to satellite TV, which nows enjoys almost 28 percent market share, up 10 percent since 2001.

The report mentions the efforts of phone companies like AT&T and Verizon to get into MVPD, but offers no statistics on their success so far. On the same day that the FCC issued its study, the Commission held an open meeting at Keller, Texas, where Verizon has recently rolled out their Fiber Optic Service (FiOS) broadcast system for consumers in the region (see lasarletter, February 11, 2006). Broadband Service Providers (BSPs) provide video service to about 1.4 million subscribers, about 1.5 percent of all MVPD customers, according to the FCC.

Over 15 million Americans still do not subscribe to any commercial video distribution system and rely on free over-the-air TV, the Annual Assessment concludes; they represent 14 percent of U.S. households with at least one television set. The number of TV households in the U.S. increased by over a million from June 2004 to June 2005.

Points of dispute

The Communications Act requires the FCC to produce an annual report to Congress on the state of video competition. Telecom companies and their representatives file statements with the Commission in an attempt to influence the final report. This year's process was no exception.

Among the questions which the FCC's statisticians must answer is whether the cable industry has passed the "70/70" test. When 70 percent of U.S. households can access and do subscribe to cable systems with 36 or more active channels, the Communications Act permits the FCC to make new rules in the interest of "diversity in information sources."

On December 15, 2005, the National Cable and Telecommunications Association (NCTA) filed a notice with the FCC arguing that it had not reached 70/70 market saturation yet. NCTA reps said that 70 percent of U.S. households can access cable, but 70 percent do not subscribe.

"In fact," NCTA pointed out, "over the past year, as cable's share of the multi-channel subscriber universe has further declined, the cable industry is farther away from reaching the [Communications Act] threshold."

This FCC Annual Assessment arrived at no conclusion on how close the cable industry has come to meeting that threshold, and even asked for additional public comment on ways to measure the cable industry's progress. In his statement approving the report, one Commissioner noted that the Assessment's data comes entirely from the private sector, rather than from the Commission's own efforts.

The FCC study also disclosed that despite the drop in cable market share, cable providers have generally not lowered their subscription prices. Instead, the report argues, many cable companies have expanded service rather than cut monthly rates.

But on December 1st, 2005 a consortium of cable firms filed a statement contending that while cable prices have risen in inflation-adjusted terms, the number of channels available to subscribers has grown. Therefore, "on a per channel basis, the real price has remained relatively constant," concluded a dispatch filed by their legal representative at Mintz Levin attorneys in Washington, D.C.

Time-Warner Cable (TWC) services filed a notice in early October sharply disputing the FCC's findings on cable rates, charging that the Commission does not take into consideration discounts "that are commonly offered to consumers." The Commission should make clear, TWC concluded, "that any analysis that focuses solely on published 'rate card' prices is fundamentally flawed."

In late November Verizon submitted comments declaring the wireless phone company "on schedule" to provide fiber optic video services to 15 states by 2005 and three million households and businesses by 2006.

In approving the report, Commissioner Jonathan Adelstein (D) pointed to "areas of serious concern" in video competition, despite the larger presence of satellite services. The top four MPVD providers increased their total share of the market by five percent this year, he observed, up to 63 percent of all subscribers. Vertical integration is becoming increasingly common, as news and sports providers merge with cable service companies.

"Several commenters," Adelstein noted, "particularly small and rural cable operators and LECs, have raised concerns about securing access to programming at competitive, nondiscriminatory terms and rates."