NEWSReport No. DC- 2653    ACTION IN DOCKET CASE         September 19, 1994

      FIRST ANNUAL REPORT TO CONGRESS ON CABLE COMPETITION ADOPTED
                             (CS DOCKET 94-48)

     The Commission, in compliance with the provisions of the Cable Television Consumer
Protection and Competition Act of 1992 (the 1992 Cable Act), has adopted its first annual report 
on the status of competition in the market for the delivery of video programming. 

      The Commission found that cable television  continues to dominate the distribution of
multichannel video programming to consumers in most markets. However, competing
distribution technologies have made substantial strides since 1990, the last time the Commission
released a report to Congress on the status of competition in the video programming market. 
Growth in these technologies has resulted in part from successful implementation of provisions
of the 1992 Cable Act that ensure that these competing distributors have access to programming.

     Despite the continued growth of competing technologies, at present, cable systems
continue to have substantial market power in local video distribution markets. Accordingly, the
Commission found that alternative technologies have not yet reached the subscribership levels
necessary for the Commission to find vigorous rivalry in local markets for multichannel video
programming distribution sufficient to ensure cable rates are reasonable.  

     In the Report, the Commission made the following findings:

     Industry Growth.  Between 1990 and the end of 1993, cable industry output (as measured
by subscriber penetration), average channel system capacity, the number of programming
services available, cable industry revenues, expenditures on programming, and capital investment
all increased.  Data currently available for publicly-reporting companies for the first half of
1994, while not comprehensive, suggests that subscribership and capital investment have
increased from 1993 levels.  Of fifteen companies reporting such information, ten, including the
two largest multiple system operators (MSOs), reported increased revenues for the first half of
1994, while five companies reported decreased revenues from 1993 levels.  Data for 1994 for
companies that are not publicly-reporting, including most small cable companies, are currently
unavailable. 

     Cable Market Power.  The market for the distribution of multichannel video
programming remains heavily concentrated at the local level.  For most consumers cable
television is the only provider of multichannel video programming.  Cable systems continue to
have substantial market power at the local distribution level.

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     Horizontal Concentration. Since 1990, there has been a moderate increase in horizontal
concentration of cable MSOs nationwide, and a number of recent proposed mergers would result
in increased "clustering" or regional concentration.

     Competitive Entry. There are presently only a few scattered areas of the country where
the local cable system faces direct competition from a second cable system (overbuilds). 
However, alternative distribution technologies have made substantial strides since the
Commission's 1990 Report to Congress.  In particular: 

          -- DBS  (direct broadcast satellite), merely a vision in 1990, is now operational
and is being rolled-out around the country.  Press reports suggest that initial demand for the
equipment necessary to receive the service has exceeded supply.  

          -- MMDS (multichannel multipoint distribution services) or "wireless" cable
systems are increasing in number and are just now obtaining the financial resources necessary
for growth and expansion.

          -- SMATV (satellite master antenna television) systems are growing in terms of
number of systems and subscribers.
     
          --  In 1992, the Commission adopted its regulatory framework for local exchange
carrier provision of video dialtone (VDT) services.  Since that time, the Commission has
authorized five applications for technical and/or market trials and one application for a
permanent VDT service offering.  Pending applications propose to provide VDT service to over
eight and a half million homes throughout the United States. 

          --  Other possible technological and regulatory advances have been identified that
might allow new forms of broadcast television, low power television, local Multipoint
Distribution Service (LMDS), and electric utilities to enter the  multichannel video programming
market. 

     Vertical Integration.  Vertical integration has continued in the industry at roughly the
same level as in 1990,  with cable MSOs continuing to invest in video programming vendors. 
The need continues for the Commission's program access and program carriage rules to guard
against potential abuses resulting from such investment.  Generally, those rules have been
successful in ensuring the availability of programming. 

     The Report also includes  a discussion of  action to be taken by the Commission in
preparing for future reports.  

     Action by the Commission September 19, 1994, by First Report (FCC 94-235). 
Chairman Hundt, Commissioners Quello, Barrett, Ness and Chong. 

                                                                 - FCC -
     Cable Services Bureau News Media contact: Morgan Broman at (202) 416-0856.
     Cable Services Bureau contact: James Olson and Martin Stern at (202) 416-0856.