Latest Video Competition Report Sees Cable Rate Hikes, Set-Top Innovation

The average monthly cost of basic cable service was $23.79 at the end of 2014, a 2.3 percent increase over the preceding 12 months, and the average monthly cost of expanded basic was $69.03, up 2.7 percent over the same time frame. Meanwhile, monthly video average revenue per unit for some of the biggest multichannel video programming distributors went up about 1 percent to 6.5 percent between 2014 and 2015. Those are among the findings in the FCC Media Bureau's 18th annual Video Competition Report posted Tuesday in docket 16-247.

The average monthly costs for basic don't account for the fact most video is sold in a bundle with broadband, letting cable ISPs take profit in the bundle or in either piece, Consumer Federation of America Research Director Mark Cooper told us. The distribution costs of both are usually attributed to cable, so when rates go up, that can get blamed on programmers, Cooper said.

The rate hikes are higher than inflation and typically don't include equipment rental fees, which can vary notably between customers and between MVPDs, Public Knowledge Senior Staff Attorney John Bergmayer emailed. "Years of greater-than-inflation price increases add up."

The report contains a number of "fairly conclusory statements" that sometimes are inconsistent with Chairman Tom Wheeler's views, such as seeing innovation in the set-top box market despite cable's "exclusive control of it," Phoenix Center Chief Economist George Ford emailed. In a section on the consumer premises equipment market, the document said that "Despite a lack of competition from consumer-owned devices that can connect directly to the MVPD network and access MVPD video programming, MVPDs are introducing innovative services on the devices that they lease." Wheeler's unlock/ditch the box plan was derailed toward the end of his chairmanship (see 1610180052).

The agency said overall MVPD subscriber numbers slipped -- from 100.5 million at the end of 2014 to 99.4 million at the end of 2015 -- but rate hikes seem to have kept MVPD revenue from slipping. The rate hikes haven't kept pace with programming costs -- up 8.1 percent in 2015 and expected to be up again at a similar pace in 2016 -- and those programming cost increases are being called the chief cause of declining MVPD video margins, the agency said.

AT&T's buy of DirecTV hit MVPD competition. The FCC said 17.9 percent of homes at the end of 2015 had access to four competing MVPDs, down from 38.1 percent in 2014, due to that deal. Wednesday, Cable One said it's buying NewWave Communications (see 1701180012). The number of cable systems nationwide has declined, with 4,413 in the U.S. as of June 8 vs. 4,562 in the 17th annual study and 4,833 in the 16th one. The number of full-power TV stations has remained relatively stable, said the report, with 1,387 at the end of 2015 vs. 1,390 at the end of 2014. It said at the end of 2015, 1,496 full-power TV stations were broadcasting in HD.

The report said TV penetration was about 96 percent for 2014 and 2015, and the number of U.S. TV households grew from about 115.8 million to about 116.4 million. The percent of broadcast-only households that don't subscribe to an MVPD has grown to about 11 percent of all U.S. TV households or 12.4 million households in November 2015, up from 10 percent or 11.4 million households in 2014, the report said.

AT&T's DirecTV and Dish Network's Sling TV are the biggest changes in the state of video market competition with their online offering of live-linear programming, the bureau report said.

The report was released on delegated authority. Commissioners Ajit Pai and Mike O'Rielly protested when the 17th annual report also was released on delegated authority (see 1605060068).

The report helps ensure the bureau keeps up with its knowledge of the sector, and is a font of information for those following it, Ford said: "Where else will you find data on CableCARD deployments?" As of June, 560,000 CableCARDs were deployed for use in retail devices among the top 10 cable operators, down from 617,000 the year before.