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FCC Adopts 15th Report On Video Competition

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Released: July 22, 2013

Federal Communications Commission

FCC 13-99

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Annual Assessment of the Status of Competition in
)
MB Docket No. 12-203
the Market for the Delivery of Video Programming
)

FIFTEENTH REPORT

Adopted: July 19, 2013

Released: July 22, 2013

By the Commission: Acting Chairwoman Clyburn and Commissioners Rosenworcel and Pai issuing
separate statements.

TABLE OF CONTENTS

Heading
Paragraph #
I. EXECUTIVE SUMMARY.................................................................................................................... 1
II. INTRODUCTION................................................................................................................................ 12
A. Scope of the Report........................................................................................................................ 12
B. Analytic Framework ...................................................................................................................... 14
C. Data Sources .................................................................................................................................. 15
III. PROVIDERS OF DELIVERED VIDEO PROGRAMMING.............................................................. 17
A. Multichannel Video Programming Distributors ............................................................................ 17
1. Introduction ............................................................................................................................. 17
2. MVPD Structure...................................................................................................................... 21
a. Cable, DBS, Telephone, and Other Providers .................................................................. 22
b. Horizontal Concentration.................................................................................................. 34
c. Vertical Integration ........................................................................................................... 38
d. Entry Conditions............................................................................................................... 40
(i) Regulatory Conditions Influencing Entry .................................................................. 41
(ii) Market Conditions Influencing Entry......................................................................... 68
e. Recent Entry and Exit ....................................................................................................... 74
3. MVPD Conduct....................................................................................................................... 79
a. Price Rivalry ..................................................................................................................... 80
b. Non-Price Rivalry............................................................................................................. 84
c. Business Models and Competitive Strategies of Select MVPDs...................................... 95
(i) Cable MVPD Business Models and Competitive Strategies...................................... 96
(ii) DBS MVPD Business Models and Competitive Strategies ..................................... 110
(iii) Telephone MVPD Business Models and Competitive Strategies ............................ 118
4. MVPD Performance.............................................................................................................. 125
a. Video Programming Pricing ........................................................................................... 126
b. Video Subscribers and Penetration ................................................................................. 128
c. Revenue .......................................................................................................................... 136
d. Investment....................................................................................................................... 141
e. Profitability ..................................................................................................................... 142

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B. Broadcast Television Stations...................................................................................................... 145
1. Introduction ........................................................................................................................... 145
2. Broadcast Television Industry Structure ............................................................................... 148
a. Horizontal Concentration................................................................................................ 155
b. Vertical Integration ......................................................................................................... 161
c. Entry and Exit Conditions............................................................................................... 166
(i) Regulatory Conditions.............................................................................................. 167
(ii) Non-regulatory Conditions....................................................................................... 171
(iii) Recent Entry and Exit............................................................................................... 174
3. Broadcast Television Industry Conduct ................................................................................ 176
a. Price Rivalry ................................................................................................................... 177
b. Non-Price Rivalry........................................................................................................... 182
4. Broadcast Television Industry Performance ......................................................................... 193
a. Audiences........................................................................................................................ 197
b. Revenue .......................................................................................................................... 201
c. Profitability ..................................................................................................................... 214
d. Investment and Innovation.............................................................................................. 217
C. Online Video Distributors............................................................................................................ 219
1. Introduction ........................................................................................................................... 219
2. OVD Structure....................................................................................................................... 223
a. Horizontal Concentration and Vertical Integration......................................................... 243
b. Conditions Affecting Entry and Exit .............................................................................. 245
(i) Regulatory Conditions.............................................................................................. 246
(ii) Non-regulatory Conditions....................................................................................... 251
c. Recent Entry and Exit ..................................................................................................... 263
3. OVD Conduct........................................................................................................................ 269
a. Business Models and Competitive Strategies of Select OVDs....................................... 270
b. Non-Price Rivalry........................................................................................................... 276
4. OVD Performance................................................................................................................. 292
a. OVD Viewership and Subscribership............................................................................. 293
b. Revenue .......................................................................................................................... 297
c. Investment....................................................................................................................... 303
d. Profitability ..................................................................................................................... 309
5. Consumer Behavior............................................................................................................... 310
IV. COMPARISON OF COMPETITION: RURAL VERSUS URBAN AREAS.................................. 320
A. MVPDs ........................................................................................................................................ 322
B. Broadcast Television Stations...................................................................................................... 327
C. OVDs ........................................................................................................................................... 328
V. KEY INDUSTRY INPUTS................................................................................................................ 329
A. Content Creation and Aggregation of Video Programming ........................................................ 329
1. Overview ............................................................................................................................... 329
2. Distribution Strategies........................................................................................................... 348
B. Consumer Premises Equipment ................................................................................................... 354
1. CPE Used to Access MVPD Services................................................................................... 356
a. Leased CPE..................................................................................................................... 356
b. CableCARDs and Section 629 of the Communications Act........................................... 360
c. CableCARD Successors ................................................................................................. 365
2. CPE Used to Access OVD Services...................................................................................... 366
3. Handheld and Mobile Video Devices.................................................................................... 368
a. Mobile IP Devices .......................................................................................................... 368
b. Specialty Mobile Devices ............................................................................................... 369
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VI. PROCEDURAL MATTERS.............................................................................................................. 372
APPENDIX A List of Commenters
APPENDIX B National Video Programming Services
APPENDIX C Regional Video Programming Services
APPENDIX D Regional Sports Networks

I.

EXECUTIVE SUMMARY

1.
This is the fifteenth report ("15th Report" or "Report") of the Federal Communications
Commission to the United States Congress on the status of competition in the market for the delivery of
video programming as required by Section 628(g) of the Communications Act of 1934, as amended (the
"Act").1 In this Report, we focus on developments in the video marketplace in 2011 and 2012. As
described below, the most significant trends since the last report include the continuing development, and
consumer usage, of time and location shifted viewing of video programming, the expansion of digital and
high definition programming, and the progress of the online video industry.
2.
Herein, we categorize entities into one of three strategic groups multichannel video
programming distributors ("MVPDs"),2 broadcast television stations,3 and online video distributors

1 47 U.S.C. 548(g).
2 For purposes of this Report, MVPDs are companies that offer multiple channels of video programming to
consumers for a subscription fee. The term "MVPD" is defined more fully below in Sec. III.A.1.
3 We consider broadcast television stations separately for the 15th Report, as we have done in previous reports.
Although broadcasters have transitioned to digital transmission and have the capability to offer additional linear
channels, they still offer far fewer programs than are available from MVPDs and do not provide a subscription
service. The Commission has previously held that broadcast television alone is not sufficiently substitutable with
the services provided by MVPDs to constrain attempted MVPD price increases, and hence declined to broaden the
MVPD product market. Accordingly, we treat broadcasters as part of a separate group. See 47 U.S.C. 521(1);
S. REP. NO. 102-92, at 8-12 (1991). See also General Motors Corporation and Hughes Electronics Corporation,
Transferors, and The News Corporation Limited, Transferee for Authority to Transfer Control
, MB Docket No. 03-
124, Memorandum Opinion and Order, 19 FCC Rcd 473, 509, 75 (2004) (citing Competition, Rate Deregulation,
and the Commission's Policies Relating to the Provision of Cable Television Services
, MM Docket No. 89-600,
Report, 5 FCC Rcd 4962, 5003, 69 (1990)); Application of EchoStar Communications Corporation, General
Motors Corporation, and Hughes Electronics Corporation (Transferors) and EchoStar Communications
Corporation (Transferee)
, CS Docket No. 01-348, Hearing Designation Order, 17 FCC Rcd 20559, 20607-09,
109-115 (2002) ("EchoStar-DIRECTV HDO").
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("OVDs").4 For each of these categories we examine industry structure, conduct, and performance.5 The
following is an overview of our findings.
3.
MVPDs. Between year-end 2010 and June 2012, the number of subscribers to MVPD
service grew from 100.8 million to 101.0 million households. Over that period, however, cable MVPDs
lost market share, falling from 59.3 percent of all MVPD video subscribers at the end of 2010 to 57.4
percent at the end of 2011, and 55.7 percent at the end of June 2012. During this period, DBS MVPDs
and telephone MVPDs gained both video subscribers and market share. DBS MVPDs had 33.4 million
video subscribers, accounting for 33.1 percent of all MVPD subscribers in 2010, increasing to 33.9
million, representing 33.6 percent in 2011, and 34 million, representing an estimated 33.6 percent at the
end of June 2012. Telephone MVPDs had approximately 6.9 million video subscribers, representing 6.9
percent of all MVPD subscribers in 2010, increasing to 8.5 million, representing for 8.4 percent in 2011.
At the end of June 2012, AT&T's U-verse and Verizon's FiOS services combined had 8.6 million video
subscribers.6
4.
MVPDs continue to expand their "TV Everywhere" offerings, which allow subscribers of
certain MVPD services to access video programming on stationary and mobile Internet-connected devices
including televisions, computers, tablets and smartphones.7 Consumer usage of TV Everywhere
continues to increase. SNL Kagan estimates that 5.1 percent of MVPD subscribers qualifying for TV
Everywhere access viewed programming through this service in September 2012.
5.
In addition, to free up bandwidth for additional services (e.g., more digital channels, more
HD channels, more video-on-demand ("VOD") programming, and faster Internet speeds), some cable
MVPDs are transitioning analog channels to all digital. At the end of 2012, the all-digital transition had
reached slightly more than half of the collective footprints of the top eight cable MVPDs. Cable operators
are also deploying switched digital video ("SDV"), freeing up bandwidth by transmitting only the digital

4 An "OVD" is any entity that offers video content by means of the Internet or other Internet Protocol (IP)-based
transmission path provided by a person or entity other than the OVD. An OVD does not include an MVPD inside
its MVPD footprint or an MVPD to the extent it is offering online video content as a component of an MVPD
subscription to customers whose homes are inside its MVPD footprint. See Applications of Comcast Corporation,
General Electric Company and NBC Universal, Inc. for Consent to Assign Licenses and Transfer Control of
Licensees
, MB Docket No. 10-56, Memorandum Opinion and Order, 26 FCC Rcd 4238, 4357, App. A (2011)
("Comcast-NBCU Order"). Consumers need a broadband connection to receive video content from OVDs. The
issue of whether a certain type of OVD also qualifies as an MVPD under the Act and our regulations has been raised
in pending program access complaint proceedings. See, e.g., VDC Corp. v. Turner Network Sales, Inc., et al.,
Program Access Complaint (Jan. 18, 2007); and Sky Angel U.S., LLC v. Discovery Communications LLC, et al.,
Program Access Complaint, MB Docket No. 12-80, CSR-8605-P (Mar. 24, 2010). Nothing in this Report should be
read to state or imply our determination on that issue. The Media Bureau though is currently seeking comment on
the interpretation of the terms "MVPD" and "channel." See Media Bureau Seeks Comment On Interpretation of the
Terms "Multichannel Video Programming Distributor" and "Channel" as Raised in Pending Program Access
Complaint Proceeding
, MB Docket No. 12-83, Public Notice, 27 FCC Rcd 3079 (MB 2012).
5 We present information and data using the same analytical framework that was used for the Fourteenth Report
("14th Report"). 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 (2012).
6 We do not have reliable June 2012 data for the number of video subscribers for the remaining telephone MVPDs.
However, NCTA estimated that telephone MVPDs accounted for 9.1 percent of MVPD subscribers at the end of
June 2012.
7 "TV Everywhere" refers to an MVPD initiative, which allows subscribers of certain services to access video
programming on a variety of fixed and mobile Internet-connected devices. MVPDs market their TV Everywhere
initiatives under various brand names (e.g., Verizon's FlexView). See infra, n. 22 & 102.
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channels that are actually being watched within a given group of homes at any given time, rather than all
digital channels to all subscribers all the time. At the end of 2012, SDV served approximately 43 percent
of digital cable subscribers of the top eight cable MVPDs.
6.
Broadcast Television Stations. Since the last report, full-power television stations have
continued to take advantage of digital broadcasting technology to offer improved service to the public. In
addition to high definition ("HD") content, broadcasters are using multicasting to bring more
programming to consumers by expanding the availability of established networks and adding new startup
digital networks (including networks targeting minorities and programming targeting niche audiences)
and Spanish language offerings. As of the end of 2011, 1,501 (82.2 percent) of full-power stations were
broadcasting in HD, up from 1,036 stations in 2010.
7.
Patterns of consumer behavior noted in the last report, including increases in the number
of households with HD television sets, penetration of digital video recorders (DVRs), and increased
availability of broadband and mobile devices, have continued. As of 2012, 85.3 million U.S. television
households, or 74.4 percent of such households, have sets capable of displaying and/or receiving digital
signals, including HD television signals, up from 75.5 million, or 65.1 percent of television households, in
2011. In 2012, 50.3 million television households had DVRs, representing 43.8 percent of all such
households, an increase from the 46.3 million households, or 40.4 percent of all television households,
reported in 2011. In addition, broadcasters are using a variety of mechanisms to respond to consumers'
desire to watch video on a time-shifted basis either on television sets or on other screens, including
mobile DTV, VOD, and online video distribution.
8.
Since the last report, the number of households relying exclusively on over-the-air
broadcast service has remained steady at approximately 11.1 million households, although the percentage
of all households they represent increased slightly from 9.6 percent in 2011 to 9.7 percent in 2012.
Broadcast station revenues appear to have rebounded somewhat in 2012, in part due to increased political
advertising, following a decline in 2011, with broadcasters relying chiefly on advertising sales, and,
increasingly, retransmission consent fees from MVPDs. Industry revenues fell to $21.31 billion in 2011
from the $22.22 billion in 2010, but were projected to rise to $24.70 billion in 2012.
9.
OVDs. While the OVD industry is still evolving, a few trends emerged during the period
covered by this Report. OVDs continue to expand the amount of video content available to consumers
through original programming and new licensing agreements with traditional content creators. A few
MVPDs now offer OVD services to non-subscribers. Some OVDs have invested in their own servers,
content delivery networks, and other infrastructure to facilitate the delivery of video programming.
Several technology companies, notably Amazon, Apple, Google, and Microsoft, are delivering end-to-end
solutions of Internet infrastructure, software, devices, and video programming.
10.
Viewing of OVDs' video programming on television sets is becoming increasingly
prevalent. SNL Kagan estimated that there were 26.6 million Internet-connected television households
(i.e., accessed via an Internet-enabled game console, OVD set-top box, television set, or Blu-ray player),
representing 22.8 percent of all television households, at the end of 2011, and estimated that by the end of
2012, the number would grow to 41.6 million, or 35.4 percent of television households.
11.
OVDs account for an increasing portion of Internet traffic during peak hours. During the
first half of 2012, most major cable multiple system operators ("MSOs") formalized bandwidth caps or
usage-based/metered pricing. Several telephone company MVPDs also are implementing bandwidth caps
and usage fees.
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II.

INTRODUCTION

A.

Scope of the Report

12.
Section 19 of the Cable Television Consumer Protection and Competition Act of 1992
("1992 Cable Act")8 amended the Communications Act and established regulations for the purpose of
increasing competition and diversity in multichannel video programming distribution, increasing the
availability of satellite delivered programming, and spurring the development of communications
technologies.9 To measure progress toward these goals, Congress required the Commission to report
annually on "the status of competition in the market for the delivery of video programming."10
13.
The framework of this Report allows the Commission to present information concerning
competition in the video programming market in a uniform manner and consistent with the structure of
recent wireless and satellite competition reports.11

B.

Analytic Framework

14.
We first categorize entities that deliver video programming into one of three strategic
groups:12 MVPDs, broadcast television stations, and OVDs. Second, we examine industry structure,
conduct, and performance, considering factors such as:

8 1992 Cable Act, Pub. L. No. 102-385, 19, 106 Stat 1460, 1494 (1992) ("The purpose of this section is to promote
the public interest, convenience, and necessity by increasing competition and diversity in the multichannel video
programming market, to increase the availability of satellite cable programming and satellite broadcast
programming to persons in rural and other areas not currently able to receive such programming, and to spur the
development of communications technologies.").
9 Video programming is defined as: "Programming provided by, or generally considered comparable to
programming provided by, a television broadcast station that is distributed and is exhibited for residential use."
47 U.S.C. 522(20); 47 C.F.R. 79.1(a)(1).
10 See Section 628(g) of the Communications Act of 1934, as amended, 47 U.S.C. 548(g). The Commission's
previous reports appear at: Implementation of Section 19 of the 1992 Cable Act and Annual Assessment of the Status
of Competition in the Market for the Delivery of Video Programming,
9 FCC Rcd 7442 (1994) ("First Report"); 11
FCC Rcd 2060 (1995) ("Second Report"); 12 FCC Rcd 4358 (1997) ("Third Report"); 13 FCC Rcd 1034 (1998)
("Fourth Report"); 13 FCC Rcd 24284 (1998) ("Fifth Report"); 15 FCC Rcd 978 (2000) ("Sixth Report"); 16 FCC
Rcd 6005 (2001) ("Seventh Report"); 17 FCC Rcd 1244 (2002) ("Eighth Report"); 17 FCC Rcd 26901 (2002)
("Ninth Report"); 19 FCC Rcd 1606 (2004) ("Tenth Report"); 20 FCC Rcd 2755 (2005) ("11th Report"); 21 FCC Rcd
2503 (2006) ("12th Report"); 24 FCC Rcd 542 (2009) ("13th Report"); 27 FCC Rcd 8610 (2012) ("14th Report").
11 See Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993 and Annual Report and
Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile
Services
, WT Docket No. 09-66, Fourteenth Report, 25 FCC Rcd 11407 (2010) ("14th Mobile Wireless Report");
Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993 and Annual Report and
Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile
Services
, WT Docket No. 10-133, Fifteenth Report, 26 FCC Rcd 9664 (2011) ("15th Mobile Wireless Report");
Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993 and Annual Report and
Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile
Services
, WT Docket No. 11-186, Sixteen Report, 28 FCC Rcd 3700 (2013) ("16th Mobile Wireless Report"); Third
Report and Analysis of Competitive Market Conditions with Respect to Domestic and International Satellite
Communications Services, Report and Analysis of Competitive Market Conditions with Respect to Domestic and
International Satellite Communications Services
, IB Docket Nos. 09-16 and 10-99, 26 FCC Rcd 17284 (2011)
("Third Satellite Competition Report").
12 We assign entities that deliver video content to one of three groups based on the "strategic group" concept used in
strategic management that groups companies within an industry that have similar business models or similar
combinations of strategies. See Michael E. Porter, COMPETITIVE STRATEGY: TECHNIQUES FOR ANALYZING
(continued....)
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Structure: The number and size of firms in each group, horizontal and vertical
integration, merger and acquisition activity, and conditions affecting entry and the ability to compete.

Conduct: The business models and competitive strategies used by firms that directly
compete as video programming distributors, including product differentiation, advertising and marketing,
and pricing.

Performance: The improvements in the quantity, quality, and delivery methods of
programming to subscribers, subscriber and penetration rates, financial indicators (e.g., revenue and
profitability), and investment and innovation activities.
Third, we look upstream and downstream to examine the influence of industry inputs and consumer
behavior on the delivery of video programming. In particular, we discuss two key industry inputs: video
content creators and aggregators and consumer premises equipment.13 We also compare video
programming competition in rural and urban areas for each of the three strategic groups.

C.

Data Sources

15.
The information and data presented in this Report are based, in part, on comments we
received from interested parties in response to the notice of inquiry in this proceeding.14 In addition, we
also rely on a variety of publicly available sources of industry information and data including: Securities
and Exchange Commission filings; data from trade association and government entities; data from
securities analysts and other research companies and consultants; company news releases and websites;
newspaper and periodical articles; scholarly publications; vendor product releases; white papers; and
various public Commission filings, decisions, reports, and data.
16.
As we have done for previous video competition reports, we requested data as of June 30
in order to monitor trends on an annual basis.15 Therefore, to the extent possible, we report information
and data as of June 30, 2011, and June 30, 2012. Because a significant amount of data is reported on a
calendar year basis though, we provide year-end data when June 30 information is not readily available.
In addition, to the extent we find more recent Commission decisions and industry developments relevant,
we include this information.
(Continued from previous page)
INDUSTRIES AND COMPETITORS 129-155 (Free Press) (1980) ("Porter"). The three groups also may be said to
represent the historical development of delivered video where consumers initially had access to over-the-air
broadcast television, then a growing number of MVPDs, and most recently the Internet. Our placement of delivered
video providers into one of three groups is an organizational convenience to facilitate discussion. In addition, we
recognize that the structure-conduct-performance paradigm implies a one-way chain of causation when in reality
there may be interrelationships among these factors (e.g., conduct sometimes influences structure).
13 As described more fully below in Section V.A., content creators are firms that produce video programming and
content aggregators are entities that assemble packages of video programming for distribution.
14 See Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, MB
Docket No. 12-203, Notice of Inquiry, 27 FCC Rcd 8581 (2012) ("Notice"). Appendix A contains a list of
commenters.
15 See Notice, 27 FCC Rcd at 8585-86, 10.
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III.

PROVIDERS OF DELIVERED VIDEO PROGRAMMING

A.

Multichannel Video Programming Distributors

1.

Introduction

17.
As discussed above, for purposes of this Report we have categorized entities that deliver
video programming into one of three groups.16 We focus in this section on the MVPD group. As defined
by statute, an MVPD is an entity that makes available for purchase multiple channels of video
programming.17 Thus, the MVPD group includes cable operators,18 DBS operators, and telephone
companies that offer multiple channels of video programming. For purposes of this Report, we also
include in the MVPD group other entities that sell multiple channels of video programming to consumers,
including home satellite dish service providers ("HSD"), open video systems ("OVS"), electric and gas
utilities, wireless cable systems,19 private cable operators ("PCO"),20 commercial mobile radio services
("CMRS"), and other wireless providers. Inclusion of an entity in the MVPD group is based on the
similarity of the video service provided to the consumer, not on the technology used (e.g., coaxial cable,
fiber, spectrum) or the identity of the parent company (e.g., cable operator, telephone company), or any
regulatory classification (e.g., cable service, open video system). In most cases, the entities we include in
the MVPD group represent themselves publicly, in reports to their shareholders and press releases to the
news media, as retailers of video packages that include a large number of channels. At the end of June
2012, the MVPD group was primarily comprised of 38 cable MVPDs with over 20,000 basic video
subscribers each and over 1,000 cable MVPDs with less than 20,000 basic video subscribers each, two
DBS MVPDs (DIRECTV and DISH Network), two large telephone company MVPDs (AT&T and
Verizon) and numerous smaller telephone company MVPDs.21
18.
In this Report, we discuss a broad range of video programming services offered by
MVPDs. Today, the major MVPDs offer hundreds of linear television channels, which are streams of
programming that offer video programs on a specific channel at a specific time of day. Many MVPDs
also offer thousands of non-linear VOD programs, including pay-per-view ("PPV") programs, which
allow consumers to select and watch video programs whenever they request them. Although MVPDs
have traditionally delivered video programming to television sets, some MVPDs are moving beyond the
television and delivering video programming to computer screens, tablets, and smartphones. The
expansion of MVPD's delivered video programming from television to other stationary and mobile

16 See supra, 2 & n. 4.
17 Specifically, Section 602(13) of the Act defines MVPD as "a person such as, but not limited to, a cable operator, a
multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive-only satellite
program distributor, who makes available for purchase, by subscribers or customers, multiple channels of video
programming." 47 U.S.C 522(13). This Report does not address the extent to which wireless providers of video
programming other than direct broadcast satellite service ("DBS"), wireless cable system operators, home satellite
dishes, and private cable operators should be classified as MVPDs under the Act. As previously noted, the Media
Bureau is currently seeking comment on the interpretation of the terms "MVPD" and "channel." See supra, n. 4.
18 Large and medium-size cable companies that serve many homes in multiple geographic areas by operating
multiple cable systems are often referred to as multiple system operators ("MSOs").
19 Wireless cable systems use the Broadband Radio Service ("BRS") and Educational Broadband Service ("EBS") to
transmit video programming to subscribers.
20 Private cable operators were formerly known as satellite master antenna ("SMATV") systems. PCOs use a
satellite master antenna to distribute video programming throughout a property (e.g., an apartment building, hotel,
hospital, or commercial property with multiple tenants) from a single satellite feed.
21 SNL Kagan, http://www.snl.com/interactivex/TopCableMSOs.aspx (visited Sept. 19, 2012).
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devices generally known as TV Everywhere22 represents a new opportunity for MVPDs that may
affect their business models and competitive strategies.23
19.
MVPDs typically offer services other than delivered video services using the same
network infrastructure or through cooperative arrangements with other companies, such as high-speed
Internet access service and telephone service. Although the focus of this Report is delivered video
services, these non-video services are important to the business strategies of some MVPDs and may shift
the focus of competition from standalone delivered video services to bundles of video, Internet access,
and telephone services.
20.
When available, this Report uses information and data provided directly by the cable,
DBS, and telephone MVPDs as reported to the Commission and/or a company's shareholders. For
privately held companies we primarily rely on data from SNL Kagan.24 On the other hand, with respect
to some other types of MVPDs, including HSD, OVS, and PCO, there is little or no publicly or
commercially available data. Comments filed for this Report provide limited data on those entities.
Considering that the combined market share of these other types of MVPDs represents less than one
percent of MVPD subscribers, their relevance to competition in the market for the delivery of video
programming is limited.25 Thus, we do not believe that a lack of data regarding these types of MVPDs
will significantly hinder our analysis of competition in the market for delivered video services.
2.

MVPD Structure

21.
We begin our analysis of video competition with an examination of the MVPD industry
structure. In this section of the Report, we describe the structure of companies offering video service via
cable, DBS, telephone, and other means that comprise the MVPD group. We then examine horizontal
concentration and vertical integration in the market. Next, we describe conditions affecting market entry
during the relevant period, including an overview of existing regulations and market conditions that might
influence entry decisions. Finally, we describe recent entry and exit in the market.
a.

Cable, DBS, Telephone, and Other Providers

22.
The major MVPDs now offer hundreds of television channels as well as thousands of
video programs through VOD services. Many of these channels and programs are offered in HD. The
major MVPDs offer delivered video programming as a standalone service or in combination with Internet
access and telephone services. Cable MVPDs typically offer video, Internet access, and telephone

22 See supra, n. 7. TV Everywhere is an authentication system whereby certain movies and television shows are
accessible online via a variety of display devices including personal computer, mobile, and television but only if
you can prove (or "authenticate") that you have a subscription to an MVPD. See definition of TV Everywhere, The
Interactive TV Institute, http://www.itvdictionary.com/definitions/tv_everywhere_initiative_definition.html (visited
Jan. 31, 2013).
23 Different MVPDs use different terms to market video services to other stationary and mobile devices. In this
Report, we use the term "TV Everywhere" as a generic term for these video services.
24 The following companies were privately held cable MVPDs at the end of June 2012: Cox Communications Inc.,
Bright House Networks, LLC, Cequel Communications Holdings I, LLC d/b/a Suddenlink Communications
("Suddenlink"), Mediacom Communications Corp., and Wide Open West Networks, LLC d/b/a WOW!. At the end
of June 2012, these companies represented five of the ten largest cable MVPDs. SNL Kagan,
http://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2011Q2&sortcol=subscribersbasic&sortorder=desc
(visited Sept. 19, 2012). Mediacom Communications became a privately held company on March 4, 2011. Media
Communications Corp., Mediacom Communications and Rocco B. Commisso Complete Going-Private Transaction
(press release), March 4, 2011.
25 See SNL Kagan, Cable TV Investor: Deals & Finance, Sept. 30, 2011, at 2-3.
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services using their own facilities. DBS MVPDs offer video services using their own facilities and
typically enter into cooperative arrangements with other entities to offer Internet access and telephone
services.26 Telephone MVPDs offer video, Internet access, and telephone services using their own
facilities where they have upgraded systems. Where they have not upgraded systems, telephone MVPDs
usually offer video through cooperative arrangements with DBS MVPDs.
23.
Cable MVPDs. Historically, cable companies rarely competed with one another in the
same geographic area. In some locations, cable operators built cable systems where cable MVPDs had
already provided video service, but this was the exception, not the rule.27 The introduction of DBS
MVPDs with national footprints in the 1990s changed the competitive landscape and increased
competition in the market for the delivery of video programming. In geographic areas that did not have
access to cable MVPDs, the DBS companies competed with one another. In geographic areas with access
to cable MVPDs, the DBS companies competed with one another and with the incumbent cable MVPDs.
The level of competition increased again with the entry of Verizon in 2005 and AT&T in 2006, two large
facilities-based telephone MVPDs that began offering video service in geographic areas already served by
incumbent cable MVPDs.28 Today, a small number of geographic areas have as many as five MVPDs
(i.e., two cable MVPDs, two DBS MVPDs, and a telephone MVPD) directly competing with one another
in the delivery of video programming. At the other end of the spectrum, some geographic areas (e.g.,
rural areas) have only two MVPDs (i.e., the two DBS MVPDs) directly competing with one another.
24.
According to the NCTA, there were 1,141 cable companies at the end of June 2012.29
Depending upon the number of homes and the size of the geographic area served, cable operators use one
or more cable systems to provide video service. A cable system is a physical system integrated to a
principal headend. Currently there are 5,127 cable systems.30 Large cable MVPDs that serve millions of

26 For example, DIRECTV has cooperative arrangements with Verizon, AT&T, CenturyLink, Cincinnati Bell, and
Windstream to offer a combination of video, Internet access, and telephone services. DIRECTV,
http://www.directv.com/DTVAPP/content/packages/internet (visited Sept. 19, 2012). In 2012, DISH Network
announced that it was expanding the availability of Internet access via satellite through cooperative arrangements
with Hughes and ViaSat. Although DISH Network will sell, install, bill, and support its satellite Internet access
service called dishNet, the Internet access service will be provided through the satellites and facilities of two satellite
Internet access companies, ViaSat and Hughes. (Hughes is a wholly-owned subsidiary of EchoStar and Charles
Ergen is the majority shareholder of both companies.) DISH Network, DISH Launches dishNET Broadband,
Bringing High-Speed Internet to Rural Americans with Slow or No Access
(press release), Sept. 27, 2012. See also
Daniel Cooper, DISH Network Launches Nationwide Satellite Broadband Service with ViaSat, Hughes, Call it
dishNet
, Sept. 27, 2012, http://www.engadget.com/2012/09/27/dish-network-dishnet/ (visited Feb. 21, 2013).
27 The exceptions include approximately 135 community-owned cable MVPDs, which provide facilities-based
competition to incumbent cable MVPDs. In some cases, these cable overbuilders have been the first to introduce
advanced telecommunications services. NATOA Reply Comments at 1-2.
28 AT&T U-verse service launched commercially in San Antonio, TX on June 26, 2006. AT&T, AT&T U-verse
Timeline
, http://www.att.com/Common/merger/files/pdf/U-verse%20Timeline41907.pdf (visited Sept. 19, 2012).
Verizon FiOS service launched in September 2005. Mari Sibley, Timeline: The Evolution of FiOS TV,
MediaExperiences2Go, http://connectedhome2go.com/2010/08/19/timeline-the-evolution-of-fios-tv (visited Sept.
19, 2012). See also Verizon Comments at 3.
29 NCTA, Industry Data, Number of Cable Operating Companies (June 2012), http://www.ncta.com/Statistics.aspx
(visited Sept. 28, 2012).
30 The number of active, registered cable systems comes from the Commission's Cable Operations and Licensing
System (COALS) database on Sept. 20, 2012. This number includes cable systems operated by Verizon.
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homes in multiple geographic areas operate many cable systems.31 These large cable MVPDs often
cluster cable systems together using some of the same infrastructure to provide cable service to a larger
geographic area (e.g., metropolitan area). Small cable MVPDs that serve few homes in one geographic
area often operate only one cable system.
25.
The geographic reach of cable MVPDs varies from company to company. No cable
operator provides nationwide coverage or statewide coverage. There are always geographic areas or
populations within a state not served by the cable operator. The largest MVPD, Comcast, offers video
programming in parts of 39 states and the District of Columbia.32 Some cable MVPDs focus their
provision of video programming on a regional basis. For example, Mediacom focuses on serving the
smaller cities, with a significant concentration in the Midwestern and Southeastern regions of the United
States.33 BendBroadband serves 12 communities in Central Oregon. Most cable MVPDs are smaller
companies offering video programming to a few communities or a single town.34
26.
Consistent with the information contained in the 14th Report,35 the five largest cable
MVPDs at the end of 2012 were Comcast, Time Warner Cable, Cox Communications, Charter
Communications, and Cablevision Systems.36 At the end of 2010, the five largest cable MVPDs
accounted for approximately 80.1 percent of all cable MVPD subscribers.37 At the end of June 2012,
these companies accounted for approximately 81.7 percent of all cable MVPD subscribers.38 The ten
largest cable MVPDs at the end of 2010 included the top five and Bright House Networks, Suddenlink
Communications, Mediacom, Insight Communications, and Cable One.39 There were two changes to this
list in the 18 months between the end of 2010 and the end of June 2012. Insight Communications was
acquired by Time Warner Cable, resulting in Wide Open West moving into the top ten.40 At the end of

31 For additional discussion of clustering, see Revision of the Commission's Program Access Rules, MB Docket Nos.
12-68, 07-18, 05-192, 07-29, Report and Order in MB Docket Nos. 12-68, 07-18, 05-192, Further Notice of
Proposed Rulemaking in MB Docket No. 12-68, Order on Reconsideration in MB Docket No. 07-29, 27 FCC Rcd
12605, 12817, 18-19 (2012).
32 Comcast Corp., SEC Form 10-K for the Year Ended December 31, 2011, at 1 ("Comcast 2011 Form 10-K").
33 Mediacom Communications Corp., Mediacom Broadband LLC and Mediacom LLC Report Results for Fourth
Quarter and Full Year 2011
(press release), March 9, 2012, http://phx.corporate-
ir.net/phoenix.zhtml?c=98270&p=irol-newsArticle&ID=1671224&highlight= (visited Sept. 19, 2012).
34 For additional information regarding the characteristics of small and medium-sized cable MVPDs, see American
Cable Association, http://www.americancable.org/about_us (visited Sept. 19, 2012).
35 See 14th Report, 27 FCC Rcd at 8621, 30.
36 SNL Kagan,
http://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2012Q2&sortcol=subscribersbasic&sortorder=desc
(visited Sept. 19, 2012); SNL Kagan, Broadband Cable Financial Databook, 2011 Edition, at 25.
37 At the end of 2010, there were approximately 59.8 million basic cable subscribers and the top five cable MVPDs
accounted for approximately 47.9 million subscribers. SNL Kagan, Broadband Cable Financial Databook, 2011
Edition, at 12 & 25.
38 At the end of June 2012, there were approximately 57.3 million basic cable subscribers and the top five cable
MVPDs accounted for approximately 46.8 million subscribers. SNL Kagan,
http://www.snl.com/interactivex/CableMSOOperatingMetrics.aspx?Defaults=5 (visited Sept. 19, 2012).
39 SNL Kagan, Broadband Cable Financial Databook, 2007 Edition, at 20.
40 SNL Kagan,
http://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2012Q2&sortcol=subscribersbasic&sortorder=desc
(visited Sept. 20, 2012). Insight Communications was a privately held company purchased by Time Warner Cable
(continued....)
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2012, the ten largest cable MVPDs accounted for approximately 90.4 percent of all cable MVPD
subscribers,41 an increase from 89.1 percent of all cable MVPD subscribers reported at the end of 2010.42
The combined shares of all cable MVPDs accounted for approximately 57.4 percent of MVPD
subscribers at the end of 2011,43 down from 59.3 percent at the end of 2010.44
27.
DBS MVPDs. The two DBS MVPDs, DIRECTV and DISH Network, offer video service
to most of the land area and population of the United States.45 DIRECTV is the second largest MVPD in
the United States with approximately 19.9 million subscribers at the end of June 2012.46 DISH Network
is the third largest MVPD with approximately 14.1 million subscribers at the end of June 2012.47 The
combined shares of the two DBS MVPDs accounted for approximately 33.6 percent of MVPD
subscribers at the end of 2011,48 up from 33.1 percent at the end of 2010.49
28.
Telephone MVPDs. The two largest telephone MVPDs, AT&T and Verizon, have
constructed systems for delivering video services in some of the areas where they offer traditional
landline telephone services. Verizon FiOS has registered with the Commission as a cable system whereas
AT&T U-verse has not. The geographic footprints for Verizon FiOS and AT&T U-verse do not overlap.
It is almost always the case, however, that the geographic footprints for AT&T U-verse and Verizon FiOS
overlap areas already served by incumbent cable MVPDs. Verizon FiOS is the seventh largest MVPD
(Continued from previous page)
on February 29, 2012. See Applications Filed for the Transfer of Control of Insight Communications Company, Inc.
to Time Warner Cable Inc.
, WC Docket No. 11-148, Memorandum Opinion and Order, 27 FCC Rcd 497 (IB, WCB,
WTB 2012). See also Time Warner Cable, Inc., Time Warner Cable Completes Acquisition of Insight
Communications
(press release), Feb. 29, 2012.
41 At the end of June 2012, there were approximately 57.3 million basic cable subscribers and the top ten cable
MVPDs accounted for approximately 51.8 million subscribers. SNL Kagan,
http://www.snl.com/interactivex/CableMSOOperatingMetrics.aspx?Defaults=5 and
http://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2012Q2&sortcol=subscribersbasic&sortorder=desc
(visited Sept. 20, 2012).
42 At the end of 2010, there were approximately 59.8 million basic cable subscribers and the top ten cable MVPDs
accounted for approximately 53.3 million subscribers. SNL Kagan, Broadband Cable Financial Databook, 2011
Edition, at 12 & 25.
43 At the end of 2011, there were approximately 101.0 million MVPD subscribers and cable MVPDs accounted for
approximately 58.0 million subscribers. SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Sept. 20, 2012).
44 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 30, 2012).
45 We recognize that some homes are not able to receive DBS signals and DBS does not provide coverage to some
land areas in Alaska.
46 DIRECTV, DIRECTV Announces Second Quarter 2012 Results (press release), Aug. 2, 2012.
47 DISH Network, DISH Network Announces Second Quarter 2012 Financial Results (press release), Aug. 8, 2012.
48 At the end of 2011, there were approximately 100.1 million MVPD subscribers and DBS MVPDs accounted for
approximately 33.4 million subscribers. SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 30, 2012).
49 Id.
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with approximately 4.5 million subscribers at the end of June 2012.50 AT&T U-verse is the ninth largest
MVPD with approximately 4.1 million subscribers at the end of June 2012.51
29.
The remaining telephone MVPDs are small by comparison to AT&T and Verizon. In
2012, Consolidated Communications, with 35,834 video subscribers, acquired SureWest
Communications, with 66,700 video subscribers.52 CenturyLink has 94,000 video subscribers and
Cincinnati Bell has 46,400 video subscribers.53 Similar to the largest telephone MVPDs, some smaller
telephone MVPDs register with the Commission as cable systems while others do not. For example,
Cincinnati Bell has registered with the Commission while CenturyLink has not.
30.
Little data exists regarding other telephone MVPDs. A survey conducted by the National
Telecommunications Cooperative Association, ("NTCA") shows that approximately 417 members served
as MVPDs in 2010 and this increased to 447 in 2011.54 NTCA estimates that the number of members
offering MVPD service using legacy coaxial cable technology declined from 252 in 2010 to 210 in 2011.
The number of members using cooperative arrangements with DBS MVPDs to provide video service also
declined, from 66 in 2010 to 35 in 2011. In contrast, the number of members using Internet Protocol
Television ("IPTV") technology to provide video service increased from 159 in 2010 to 202 in 2011.55
We estimate that the combined shares of all telephone MVPDs accounted for approximately 8.4 percent
of MVPD subscribers at the end of 2011,56 compared to 6.9 percent at the end of 2010.57
31.
Other MVPDs. We received few comments, and there is little or no publically available
data for HSD, OVS, electric and gas utilities, wireless cable systems, PCO, CMRS and other wireless
providers. With the exception of CMRS,58 most of these other types of MVPDs serve few subscribers

50 Verizon, Investor Quarterly Second Quarter 2012, July 19, 2012, at 14,
http://www22.verizon.com/idc/groups/public/documents/adacct/2012_q2_quarterly_bulletin.pdf (visited Sept. 20,
2012).
51 AT&T, Investor Briefing Second Quarter 2012, July 24, 2012, at 8,
http://www.att.com/Investor/Earnings/2q12/ib_final_2q12.pdf (visited Sept. 20, 2012).
52 Consolidated Communications Holdings, Inc., Consolidated Communications Completes Acquisition of SureWest
Communications
(press release), July 2, 2012. Consolidated Communications, Consolidated Communications
Reports Second Quarter 2012 Results
(press release), Aug. 2, 1012. SureWest, SureWest Reports First Quarter
2012 Results
(press release), May 2, 2012.
53 CenturyLink, CenturyLink Reports Second Quarter 2012 Earnings (press release), Aug. 8. 2012. Cincinnati Bell,
Cincinnati Bell Reports Second Quarter 2012 Results (press release), Aug. 8, 2012.
54 The Associations Comments at 2. These are not all facilities-based MVPDs but include members that have
cooperative arrangements with DBS MVPDs to provide video service.
55 Id. The Associations explain that the IPTV network used for MVPD service is also used for broadband services.
Thus, factors that impede the provision of video services in rural areas also impede the provision of broadband
services. Id. at 3.
56 At the end of 2011, there were approximately 101.0 million MVPD subscribers and telephone MVPDs accounted
for approximately 8.5 million subscribers. SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 30, 2012).
57 Id.
58 We do not discuss CMRS in this Report because all aspects of CMRS and the larger mobile wireless industry are
covered in the 16th Mobile Wireless Report. Here we simply note that subscribers to a mobile wireless data plan
may receive delivered video programming for viewing on some mobile wireless devices.
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and their subscriber base is declining.59 Data for September 2012 suggest that these other types of
MVPDs collectively account for approximately 0.6 percent of all MVPD subscribers.60 PCOs account for
the overwhelming bulk of the alternative MVPD subscribers, with approximately 650,000 subscribers.61
The HSD, or large dish, segment of the satellite industry is the original satellite-to-home service offered
to consumers. Although SNL Kagan data show no reported HSD subscribers, a company called
Skyvision offers HSD service during limited hours of each day.62
32.
We have previously noted that OVS activity has been limited.63 However, Media 3 Corp.
recently applied for certification as an OVS in Manhattan.64 Although some entities have filed for
certifications to operate OVS systems, we suspect that most OVS subscribers are included in cable
MVPD subscriber data and we have no way to count them separately. Although there may be some
companies still offering wireless cable service, SNL Kagan data show that there are not any subscribers.65
Because the alternative MVPDs account for such a small and shrinking share of the market for the
delivery of video programming, and because data for these alternative MVPDs are not available, we focus
our MVPD discussion on cable, DBS, and telephone MVPDs.
33.
Table 1 shows estimates of the number of homes passed by cable, DBS, and telephone
MVPDs for year-end 2010, end of June 2011, year-end 2011, and end of June 2012. Some data necessary
to meaningfully compare cable, DBS, and telephone MVPDs are available only on an end-of-year basis.
Specifically, reliable data regarding the number of homes in the United States and the number of homes
passed by all cable MVPDs are available only on an end-of-year basis and not on an end-of-June basis.
Nonetheless, Table 1 provides the end-of-June data that are available. Cable MVPDs have built out and
to a large extent upgraded their systems.66 At the end of 2010, cable MVPD service was available to
128.8 million homes (97.6 percent of the 132.0 million U.S. homes). At the end of 2011, cable MVPD
service was available to 130.7 million homes (98.6 percent of the 132.5 million U.S. homes). We assume
that DBS MVPDs are available to all homes, but recognize that this slightly overstates the actual

59 SNL Kagan states, "We do not see a viable future for alternative multichannel providers. MMDS and wireless
cable providers ... represent a negligible 0.6% of the total multichannel universe. Our 10-year outlook calls for
further declines in customer and market share for those providers." SNL Kagan, Cable TV Investor: Deals &
Finance
, Sept. 27, 2012, at 3.
60 Id. In September 2011, these MVPDs collectively accounted for approximately 0.7 percent of all MVPD
subscribers. See 14th Report, 27 FCC Rcd at 8623, 35.
61 SNL Kagan, Cable TV Investor: Deals & Finance, Sept. 27, 2012, at 2.
62 Id. at 2; and Skyvision, http://www.skyvision.com/ and http://skyvision.com/programming/index.html (visited
Sept. 25, 2012).
63 13th Report, 24 FCC Rcd at 607, 135.
64 See Media Three Corporation, Inc. Files an Application for Open Video System Certification, Public Notice, DA
12-1362 (Aug. 21, 2012). See also Josh Wein, CLEC Plans IPTV Service, Triple Play in Manhattan,
COMMUNICATIONS DAILY, Aug. 22, 2012, at 9-10.
65 See 14th Report, 27 FCC Rcd at 8624, 36.
66 The upgrading of cable systems often includes increasing bandwidth capacity to provide additional channels,
more HD channels, and faster Internet service. In addition, in their upgrades, cable MVPDs have included the use of
data over cable service interface specifications ("DOCSIS"), which is a standard interface for cable modems that
handle incoming and outgoing data signals between cable MVPDs and computers or television sets. See
SearchNetworking, http://searchnetworking.techtarget.com/definition/DOCSIS (visited Sept. 25, 2012).
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availability of DBS.67 At the end of 2010, facilities-based telephone MVPD service was available to 42.9
million homes (32.5 percent). At the end of 2011, telephone MVPD service had become available to 46.8
million homes (35.3 percent).68

67 We recognize that physical features (e.g., tall buildings, cliffs, trees) can prevent some homes from receiving DBS
signals.
68 Our estimates for homes passed by telephone MVPDs include only data from AT&T and Verizon. As such, we
underestimate the number of homes passed by all telephone MVPDs.
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Table 1: Homes Passed by MVPDs (in millions)

End of Year
End of June
End of Year
End of June
2010
2011
2011
2012

Cable

69
128.8

N/A

130.7

N/A

Comcast
51.9
52.2
52.5
52.8
Time Warner
27.5
27.6
27.9
29.4
Cox
9.9
10.1
10.1
10.2
Charter
11.8
11.8
12.0
12.0
Cablevision
5.5
5.6
5.6
5.6

DBS

70
132.0

N/A

132.5

N/A

DIRECTV
132.0
N/A
132.5
N/A
DISH Network
132.0
N/A
132.5

N/A

Telephone

71
42.9
45.1
46.8
47.3
AT&T U-verse72
27.3
29.0
30.3
30.373
Verizon FiOS74
15.6
16.1
16.5
17.0

69 Cable industry homes passed excludes overlap from overbuilders (defined as companies that build additional
cable systems "over" one that already exists and offer customers a competitive alternative). Data for the cable
industry homes passed come from SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2012 (visited
Sept. 26, 2012). Data for the five largest cable companies come from SNL Kagan, U.S. Cable Subscriber
Highlights
,
http://www.snl.com/interactivex/CableMSOOperatingMetrics.aspx?OpMetric=CableHPAggr&Form_Name=UserIn
puts&Defaults=0 (visited Sept. 26, 2012).
70 For simplification, we assume that DBS is available to every housing unit. Data for the number of housing units
come from SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Sept. 26, 2012). A housing unit is a house, an apartment, a mobile home or trailer, a group of rooms, or a single
room that is occupied, or, if vacant, is intended for occupancy as separate living quarters. Both occupied and vacant
housing units are included in the housing unit inventory, except recreational vehicles, boats, vans, tents, railroad
cars, etc. are included only if occupied as a usual place of residence. Vacant mobile homes are included if intended
for occupancy on site. Vacant mobile homes on dealer sales lots, at the factory, or in storage yards are excluded
from the housing unit inventory.
71 For telephone, we simply add the estimates for AT&T U-verse and Verizon FiOS. We do not have reliable
estimates for the number of homes passed by other telephone companies offering their own facilities-based video
services. As such, we underestimate the number of homes passed by telephone MVPDs.
72 AT&T, 2010 Annual Report, at 42; AT&T, AT&T Reports Strong Wireless Gains, Record Mobile Broadband
Sales and Continued Strength in U-Verse and Strategic Business Services in Second-Quarter Results
(press release),
July 21, 2011; AT&T, 2011 Annual Report, at 41 (where AT&T noted that it had reached its deployment goal of 30
million living units and that during 2012, the company would continue efforts to increase sales to this base).
73 AT&T did not report the number of homes passed by U-verse at the end of June 2012. We note that at the end of
2011, AT&T stated that it had reached its deployment goal of 30 million living units and that, during 2012, the
company would continue efforts to increase sales to this base. As such, we estimate that the number for end of June
2012 is the same as the number reported by AT&T for the end of 2011. See AT&T, 2011 Annual Report, at 41.
74 Verizon, 2010 Annual Report, at 15; Verizon, Investor Quarterly Second Quarter 2011, July 22, 1011, at 6;
Verizon, Investor Quarterly Fourth Quarter 2011, Jan. 24, 2012, at 6; Verizon, Investor Quarterly Second Quarter
2012
, July 19, 2012, at 6. See also Verizon Comments at 4.
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b.

Horizontal Concentration

34.
High market concentration may suggest the potential for competitive concerns.
However, an analysis of other factors, such as entry conditions and the degree of price and non-price
rivalry, may evidence robust competition, even in a highly concentrated market. The Commission does
not collect data for cable, DBS, and telephone MVPDs on a uniform geographic basis and, therefore,
cannot compare the availability of one type of MVPD with another in a particular geographic area.75
Instead, we estimate here the number of homes on a nationwide basis that have access to two, three, or
four MVPDs.
35.
Consumers can only choose among the MVPD alternatives available in the areas where
they live. However, determining which MVPDs offer video service in which geographic areas is difficult
as a result of the wide variation in the geographic footprints of MVPDs and the lack of available data that
would allow comparison of the geographic coverage of one type of MVPD with another type of MVPD.76
As a general rule, the geographic footprint of a cable MVPD rarely overlaps the geographic footprint of
another cable MVPD.77 As such, cable MVPDs rarely compete with one another for the same video
subscriber. The situation is similar for telephone MVPDs.78 The geographic footprint of one telephone
MVPD rarely overlaps the geographic footprint of another telephone MVPD, so telephone MVPDs rarely
compete with one another for the same video subscriber. In contrast, the geographic footprints of both
DBS MVPDs are national and they almost always compete with one another for the same video
subscriber. We also assume that a cable MVPD or a telephone MVPD almost always competes with both
DBS MVPDs for the same subscriber. Finally, we assume that the two largest telephone MVPDs offer
video service in geographic areas already served by incumbent cable companies and, therefore, almost
always compete with a cable MVPD for the same subscriber.79 We have little data on additional
telephone MVPDs and other types of MVPDs, and we have no means of determining the geographic
footprints of these entities and, therefore, no means of determining whether they do or do not compete

75 See 14th Report, 27 FCC Rcd at 8618-19, 24.
76 The Commission's Mobile Wireless Report collects data on a census block basis and the Commission's
Broadband Report collects data on a census block basis. For video services, however, we do not collect data on a
census block basis. 16th Mobile Wireless Report, 2; Inquiry Concerning the Deployment of Advanced
Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to
Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, Amended by the
Broadband Data Improvement Act
, GN Docket No. 11-121, Eighth Broadband Progress Report and Order on
Reconsideration, 27 FCC Rcd 10342, 10363-64, 28 (2012).
77 A large cable MVPD will operate many cable systems of varying sizes. The geographic configuration of a cable
system is determined by its physical system, which consists of a cable system technically integrated to a principal
headend. The Commission collects cable system data in its Annual Report of Cable Television Systems (FCC Form
325). Only a limited number of cable systems provide data to the Commission. All cable systems with more than
20,000 subscribers are subject to the reporting requirement. The Commission also collects information on a random
sample of cable systems with between 5,000 and 20,000 subscribers and a random sample of cable systems with
fewer than 5,000 subscribers.
78 There are exceptions to this rule and in some areas companies, such as RCN, have overbuilt incumbent cable
systems. See 13th Report, 24 FCC Rcd at 591-93, 100-103.
79 Verizon states that "In every area where FiOS TV is available, Verizon faces competition from an incumbent
cable operator that offers a bundle of video, broadband, and voice services as well as the two national direct
broadcast satellite ("DBS") providers." Verizon Comments at 4.
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with incumbent cable systems.80 We do not include these other MVPDs in our estimates and recognize
that their absence may marginally understate access to MVPDs.81
36.
Using our assumptions and the data from Table 1 above, we estimate MVPD
concentration nationwide specifically, the number of homes that have access to two, three, or four
MVPDs. Our estimates are shown in Table 2.
In 2010,
o
There were 132 million homes in the United States and we assume that all of them had
access to at least the two DBS MVPDs.
o
Approximately 128.8 million homes had access to at least three MVPDs (i.e., a cable
MVPD and two DBS MVPDs, but not a telephone MVPD).
o
Approximately 42.9 million homes had access to at least four MVPDs (i.e., a cable
MVPD, two DBS MVPDs, and a telephone MVPD).82
In 2011,
o
There were 132.5 million homes in the United States and we assume that all of them had
had access to at least the two DBS MVPDs only.
o
Approximately 130.7 million homes had access to at least three MVPDs (i.e., a cable
MVPD and two DBS MVPDs, but not a telephone MVPD).
o
Approximately 46.8 million homes had access to at least four MVPDs (i.e., a cable
MVPD, two DBS MVPDs, and a telephone MVPD).83
These estimates are only approximations due to the limits of available data, but they highlight the fact that
with the entry of large telephone MVPDs into the market for video services, almost 47 million homes
have access to four MVPDs. This represents a continuing increase in competition in the market for the
delivery of video programming.84 Specifically, the most recent data show that over 35 percent of U.S.
homes have access to at least four MVPDs.

80 We do not have reliable data on homes passed by Consolidated Communications, CenturyLink, Cincinnati Bell
and other telephone MVPDs.
81 In addition, there are geographic areas where the presence of a cable overbuilder provides some households with
access to five MVPDs.
82 We assume that homes that have access to one of the two largest telephone MVPDs also have access to a cable
MVPD and the DBS MVPDs. Thus, our estimate is simply the number of homes that have access to telephone
MVPDs (42.9 million).
83 We assume that homes that have access to one of the two largest telephone MVPDs also have access to a cable
MVPD and the DBS MVPDs. Thus, our estimate is simply the number of homes that have access to telephone
MVPDs (46.8 million).
84 See 14th Report, 27 FCC Rcd at 8627, 40. From 2006 to 2010, the percent of U.S. homes with access to four
MVPDs grew from 4.7 percent to 32.8 percent. In the 14th Report, the data from SNL Kagan showed that there were
130.8 million U.S. homes in 2010. Revised data from SNL Kagan show that there were 132.0 million U.S. homes in
2010. Thus, we now estimate that the percent of U.S. homes with access to four MVPDs grew from 4.7 percent in
2006 to 32.5 percent in 2010.
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Table 2: Access to Multiple MVPDs

Percent of

Homes

Percent of

Homes

Homes

2010

Homes 2010

2011
2011
Access to at Least 132 million
100%
132.5 million
100%
Two MVPDs
Access to at Least 128.8 million
97.5%
130.7 million
98.6%
Three MVPDs
Access to at Least 42.9 million
32.5%
46.8 million
35.3%
Four MVPDs
37.
We cannot calculate a Herfindahl-Hirschman Index ("HHI"), the traditional metric for
measuring horizontal concentration, because we do not have geographic data for all MVPDs on any
common geographic basis.85 We, however, can state with some degree of confidence that in geographic
areas where homes have access to four MVPDs, the HHI is over 2500.86 Likewise, in geographic areas
where homes have access to three MVPDs, the HHI is over 3333, and in geographic areas where homes
have access to two MVPDs, the HHI is over 5000. Although these HHI may appear high, the entry of
DBS in the 1990s and the more recent entry of telephone MVPDs have resulted in an ongoing reduction
in MVPD market concentration. Stated differently, since the Commission's first report on the status of

85 The HHI is calculated by summing the squares of the individual market shares of all the participants. For
example, a market consisting of four firms with market shares of 30 percent, 30 percent, 20 percent and 20 percent
has an HHI of 2600 (30 + 30 + 20 + 20 = 2600). The HHI ranges from 10,000 (in the case of a pure monopoly)
to a number approaching zero (in the case of an atomistic market). Lack of information about small firms is not
critical to the calculation because such firms do not affect the HHI significantly. See Horizontal Merger Guidelines,
U.S. Department of Justice and the Federal Trade Commission, August 19, 2010,
http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf, at 5.3 ("Horizontal Merger Guidelines").
The Commission has applied an HHI screen in its analysis of transactions involving MVPDs. See, e.g., EchoStar-
DIRECTV HDO
, 17 FCC Rcd at 20614-16, 133-39 (2002). See also Applications for Consent to the Assignment
and/or Transfer of Control of Licenses Adelphia Communications Corporation, (and subsidiaries, debtors-in-
possession), Assignors, to Time Warner Cable Inc. (subsidiaries), Assignees; Adelphia Communications
Corporation, (and subsidiaries, debtors-in-possession), Assignors and Transferors, to Comcast Corporation
(subsidiaries), Assignees and Transferees; Comcast Corporation, Transferor, to Time Warner Inc., Transferee;
Time Warner Inc., Transferor, to Comcast Corporation, Transferee
, MB Docket No. 05-192, Memorandum Opinion
and Order, 21 FCC Rcd 8203, 8239-43, 75-83 (2006) ("2006 Adelphia, Comcast, Time Warner Cable MO&O").
In addition, in some past reports, we have estimated a national MVPD HHI for purposes of analyzing concentration
in the market for the purchase of video programming. See, e.g., 13th Report, 24 FCC Rcd at 627-28, 179; id. at
689, Table B-4. In the market for the purchase of video programming, our economic concern was one of
monopsony power where few or large buyers could drive down the prices received by the owners of video
programming. In this Report, and our 14th Report, our focus is the market for the delivery of video programming
and our economic concern is one of monopoly power where few sellers of MVPD video services could drive up the
prices paid by subscribers.
86 For a given number of firms, the value of the HHI increases as the inequality in subscriber shares increases. For
example, if four firms are identified as participants in the relevant markets and each firm accounts for 25 percent of
total sales, the value of HHI would be 2500 (252 x 4). If there are still only four firms but the top firm has a 40
percent subscriber share while each of the remaining three firms has 20 percent, the value of HHI increases from
2500 to 2800 (402 + (202x 3)).
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competition in the market for the delivery of video programming in 1995, almost no subscriber has fewer
MVPD choices and most subscribers have more MVPD choices.
c.

Vertical Integration

38.
Our examination of vertical integration in the MVPD industry focuses on common
ownership of entities that deliver video programming and entities that supply video programming.
Vertical relationships may have beneficial effects,87 or they may deter competitive entry in the video
marketplace or limit the diversity of video programming.88 In 1992, Congress enacted various provisions
related to vertical integration between cable operators and programming networks (e.g., program access,
channel occupancy limit).89 In 1992, a large number of the most popular cable programming networks
were owned by cable operators. Congress was concerned that cable operators had the ability and
incentive to thwart the competitive development of additional programming networks by refusing to carry
unaffiliated networks, by insisting on an ownership stake in return for carriage, or by withholding their
most popular programming networks from competing MVPDs.90
39.
In the last report, we reviewed vertical integration in early 2012 and identified 127
national networks (49 of these were HD networks) affiliated with the top five cable MVPDs.91 At that
time, Comcast had ownership interests in 78 national networks (30 were HD).92 Comcast's sale of its
shares in 17 A&E television networks to non-MVPDs was the most significant change in the number of
cable MVPD-affiliated national networks since the 14th Report.93 We now find that there are 99 national
networks (47 of these HD networks) affiliated with the top five cable MVPDs. As of early 2013. we
report that Comcast has ownership interests in 50 national networks (23 are HD), Time Warner Cable has
ownership interests in four national networks (two are HD), Cox has ownership interests in six national
networks (three are HD), Cablevision has ownership interests in ten national networks (five are HD), and
Bright House has ownership interests in 29 national networks (14 are HD). In addition, we identified 62
national networks that were affiliated with a DBS MVPD (25 were HD).94 A summary of MVPD

87 Beneficial effects can include efficiencies in the production, distribution, and marketing of video programming, as
well as the incentive to expand channel capacity and create new programming by lowering the risks associated with
program production ventures. See, e.g., H.R. REP. NO. 862, 102nd Congress, 2d Sess. (1992), at 41-43.
88 Possible detrimental effects can include unfair methods of competition, discriminatory conduct, and exclusive
contracts that are the result of coercive activity. See Second Report, 11 FCC Rcd at 2135, 157; Implementation of
Section 11(c) of the Cable Television Consumer Protection and Competition Act of 1992 Vertical Ownership Limits
,
MB Docket No. 92-264, 10 FCC Rcd 7364, 7365, 4 (1995).
89 See 47 U.S.C. 533, 548.
90 See 47 U.S.C 521(5).
91 For a list of the national networks owned by each of the top five cable MVPDs, see Appendix B, Table B-1.
92 As noted in the last report, in 2011, Comcast consummated a joint venture with General Electric involving NBCU
which increased the number of networks it owned. See 14th Report, 27 FCC Rcd at 8629-30, 45. On March 19,
2013, Comcast completed its acquisition of the 49 percent common equity stake in NBCU held by GE. See
Comcast, SEC Form 8-K, Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
filed Mar. 19, 2013.
93 Comcast Comments at 14. According to Comcast, cable MVPDs now hold ownership interests in only four of the
top 20 networks. Id.
94 For a list of the national networks owned by DBS MVPDs, see Appendix B, Table B-1. Most of these networks
we list as affiliated with Liberty Media. On February 21, 2008, the Commission approved the transfer of license and
authorization that resulted in Liberty Media Corporation ("Liberty") acquiring a de facto controlling interest in
(continued....)
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ownership of programming networks is included in Appendix B, Table B-1; Appendix C, Table C-1; and
Appendix D of this Report.
d.

Entry Conditions

40.
MVPD entry decisions are determined primarily by entry conditions and expected
profitability.95 Entry conditions are important in understanding the degree to which incumbent firms may
or may not possess market power.96 Entry occurs in the context of underlying market and regulatory
conditions that directly influence the total number of firms that can compete successfully in a market.
Such conditions are relevant for determining if, and when, actual entry will occur. Both market
conditions and regulatory conditions are important for facilitating competition in the marketplace.
Because the Commission oversees the regulatory conditions potentially affecting entry, we discuss these
first.97 We then discuss some of the market ("non-regulatory") conditions potentially affecting entry.
(i)

Regulatory Conditions Influencing Entry

41.
Franchising and Licensing. MVPDs must obtain the proper regulatory authority before
providing video services. Section 621(a)(1) of the Act gives local governments the authority to control
the entry of cable operators into their respective markets through franchise agreements; but it prevents
them from granting an exclusive franchise or from unreasonably refusing to award competitive
franchises.98 Each state determines which political jurisdiction (e.g., state, county, city, or town) has the
authority to grant local franchises for cable service. In 2007, the Commission adopted rules under its
Section 621(a)(1) authority eliminating unreasonable entry barriers placed on competitive franchises by
local franchising authorities ("LFAs") and encouraging investment in broadband facilities.99 As of
December 2012, 21 states have streamlined the franchising process further by adopting laws that place
(Continued from previous page)
DIRECTV. On November 19, 2009, Liberty through a series of transactions transferred its interest in DIRECTV,
three RSNs and GSN to a wholly owned subsidiary called DIRECTV Group, Inc.
95 High economic profits encourage entry to the market; low economic profits discourage entry; and prolonged
negative economic profits induce exit from the market. See Hal R. Varian, INTERMEDIATE MICROECONOMICS: A
MODERN APPROACH 394-95, 503 (W. W. Norton and Company) (1999) ("Intermediate Microeconomics"); Dennis
W. Carlton & Jeffrey M. Perloff, MODERN INDUSTRIAL ORGANIZATION 61-76 (Addison, Wesley, Longman, Inc.) (4th
ed. 2005).
96 Market power for a seller is the ability profitably to maintain prices above competitive levels for a significant
period of time. Sellers with market power also may lessen competition on dimensions other than price, such as
product quality, service, or innovation. For a discussion of market power, see Horizontal Merger Guidelines, supra,
n.85.
97 The regulatory process, itself, may hinder entry if the process is characterized by unnecessary delay. One
example of a regulatory delay would be the time a cable franchising authority may take to make a decision regarding
an application. Economists argue that some operating licenses and other legal restrictions that serve to limit access
to the market are barriers to entry, i.e., they create positive economic profits for incumbents that are not bid away by
new entry. See Jean Tirole, THE THEORY OF INDUSTRIAL ORGANIZATION 305 (MIT Press) (1988). See also
Intermediate Microeconomics
at 395.
98 47 U.S.C. 522(10), 541(a)(1).
99 Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended by the Cable
Television Consumer Protection and Competition Act of 1992
, MB Docket No. 05-311, Report and Order and
Further Notice of Proposed Rulemaking, 22 FCC Rcd 5101 (2007), aff'd sub nom. Alliance for Community Media v.
FCC
, 529 F.3d 763 (6th Cir. 2008). See also Implementation of Section 621(a)(1) of the Cable Communications
Policy Act of 1984 as amended by the Cable Television Consumer Protection and Competition Act of 1992
, MB
Docket No. 05-311, Second Report and Order, 22 FCC Rcd 19633 (2007).
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franchising authority with the state instead of local governments.100 Cable operators also typically need
licenses or authorizations from the Commission for facilities to deliver their programming to
consumers.101
42.
In contrast, satellite carriers must obtain Commission authority prior to operating
satellites and earth stations to deliver video services.102 Similarly, LECs that provide video services
through the OVS framework must secure certification from the Commission before initiating service.103
In addition, wireless cable systems and other wireless providers that use spectrum to transmit video
programming must comply with the Commission's spectrum licensing policies as well as the appropriate
interference and technical rules.104 The Commission also has the authority to review any business
arrangements involving the transfer and control of its licenses or authorizations.105
43.
Effective Competition. Section 623(a) of the Act exempts cable operators subject to
effective competition from basic cable service rate regulation.106 LFAs are permitted therefore to regulate
cable operators' basic cable service rates until the Commission has granted a petition for effective
competition.107 A cable operator is subject to effective competition in a local community when one of

100 The states that have adopted statewide video franchising laws are: California, Connecticut, Florida, Georgia,
Illinois, Indiana, Idaho, Iowa, Kansas, Louisiana, Michigan, Missouri, Nevada, New Jersey, North Carolina, Ohio,
South Carolina, Tennessee, Texas, Virginia, and Wisconsin. See State of Idaho Legislature, House Bill 539,
http://legislature.idaho.gov/legislation/2012/H0539.htm (visited Nov. 1, 2012); 14th Report, 27 FCC Rcd at 8631,
47 n.111. See also ACT Comments at 6. CenturyLink advocates for the adoption of statewide video franchise
laws for those states interested in attracting competitive video services in their local communities. CenturyLink
Comments at 3. In 2012, the United States Court of Appeals for the Fifth Circuit found that the provisions in
Texas's video franchising law barring the state's incumbent cable operators from obtaining a state franchise until the
expiration of their municipal licenses violated the First Amendment. See Time Warner Cable, Inc. v. Paul Hudson,
667 F.3d 630 (5th Cir. 2012).
101 For example, many cable operators hold licenses under Part 78 of the Commission's rules for Cable Television
Relay Service ("CARS") stations, which enable them to distribute programming to microwave hubs where it is
impossible and too expensive to run cables and cover live events. See Amendment of Part 101 of the Commission's
Rules to Facilitate the Use of Microwave for Wireless Backhaul and Other Uses and to Provide Additional
Flexibility to Broadcast Auxiliary Service and Operational Fixed Microwave Licenses
, WT Docket No. 10-153,
Report and Order, Further Notice of Proposed Rulemaking, and Memorandum Opinion and Order, 26 FCC Rcd
11614, 11620, 10 (2011). See also Revisions to Broadcast Auxiliary Service Rules in Part 74 and Conforming
Technical Rules for Broadcast Auxiliary Service, Cable Television Relay Service and Fixed Services in Parts 74, 78
and 101 of the Commission's Rules
, ET Docket No. 01-75, Report and Order, 17 FCC Rcd 22979, 22980, n.1
(2002).
102 47 C.F.R. 25.102(a).
103 47 U.S.C. 573(a)(1); 47 C.F.R. 76.1502. It is left to the discretion of the LFA whether to require an OVS
operator to negotiate a franchise for the service area or to impose no franchise obligation on the OVS operator. See
City of Dallas Texas v. FCC
, 165 F.3d 341 (5th Cir. 1999).
104 See 16th Mobile Wireless Report, 75.
105 47 U.S.C. 310(d).
106 47 U.S.C. 543(a)(2).
107 47 U.S.C. 543(a)(2)(A); 47 C.F.R. 76.905(a), 76.907. LFAs must obtain certification from the Commission
prior to regulating the basic service tier. 47 U.S.C. 543(a)(3)-(4); 47 C.F.R. 76.910. The basic level of cable
service for cable operators subject to rate regulation includes: (1) all commercial and noncommercial local
broadcast stations entitled to carriage under the Act's must-carry provisions; (2) any public, educational, and
governmental access channels the LFA requires; and (3) any other local broadcast station provided to any
subscriber. 47 U.S.C. 543(b)(7)(A).
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four conditions is met: (1) fewer than 30 percent of the households subscribe to the operator's cable
programming service; (2) the operator and at least one other MVPD provide comparable services to at
least 50 percent of the households in the community and at least 15 percent of the community's
households subscribe to an MVPD that is not the largest in the area; (3) a municipality offers MVPD
service to at least 50 percent of its households; or (4) an LEC or its affiliate, or an entity using the
facilities of an LEC or its affiliate, offers a comparable MVPD service by means other than DBS to an
area that an unaffiliated cable operator also serves.108
44.
Program Access. New MVPD entrants cannot successfully compete in the video
marketplace without access to programming. Sections 628(b) and 628(c)(1) of the Act give the
Commission broad authority to prevent cable operators from engaging in unfair acts that have the purpose
or effect of significantly hindering or preventing an MVPD from providing satellite-delivered
programming to consumers.109 Section 628(c)(2) of the Act ensures that competitive MVPDs obtain
access to satellite programming affiliated with a cable operator by establishing the minimum requirements
for the Commission's program access regulations.110 In accordance with these statutory directives, the
Commission's program access rules prevent a cable operator with an attributable interest in a satellite-
delivered programming vendor from improperly influencing the vendor in the sale or delivery of its
programming to a competing MVPD. In addition, a cable-affiliated satellite-programming vendor may
not discriminate in the price, terms, and conditions of sale for its programming among competing
MVPDs.111 MVPDs may allege violations of the program access rules by initiating an adjudicatory
proceeding with the Commission through the filing of a program access complaint.112 In 2010, the
Commission adopted rules preventing cable operators from engaging in unfair acts with respect to
terrestrially delivered cable-affiliated programming pursuant to Section 628(b).113 In 2011, the
Commission found that MSG and Cablevision violated both Section 628(b) and the Commission's rules
when they denied AT&T and Verizon access to the terrestrially delivered HD version of the MSG and
MSG+ networks.114

108 47 C.F.R. 76.905(b).
109 47 U.S.C. 548(b), (c)(1).
110 47 U.S.C. 548(c)(2).
111 47 C.F.R. 76.1001-02. See also Revision of the Commission's Program Access Rules, MB Docket No. 12-68,
Report and Order, in MB Docket Nos. 12-68, 07-18, 05-192, Further Notice of Proposed Rulemaking, MB Docket
No. 12-68, Order on Reconsideration in MB Docket No. 07-29, 27 FCC Rcd 12605 (2012) ("2012 Program Access
Order
"); Review of the Commission's Program Access Rules and Examination of Programming Tying
Arrangements
, MB Docket No. 07-198, First Report and Order, 25 FCC Rcd 746 (2010) ("2010 Program Access
Order
"), aff'd in part and vacated in part sub nom. Cablevision Systems Corp. et al. v. FCC, 649 F.3d 695 (D.C.
Cir. 2011). The Commission's program access rules also apply to common carriers and their affiliates. 47 C.F.R.
76.1004.
112 47 C.F.R. 76.1003. See also 47 U.S.C. 548(d); 2012 Program Access Order, 27 FCC Rcd at 12640-48,
52-64; 2010 Program Access Order, 25 FCC Rcd at 777-87, 46-57.
113 Review of the Commission's Program Access Rules and Examination of Programming Tying Arrangements, MB
Docket No. 07-198, First Report and Order, 25 FCC Rcd 746, 777-78, 46 (2010) ("2010 Program Access Order").
The United States Court of Appeals for the District of Columbia ("D.C. Circuit") upheld substantially all of this
order. Cablevision Systems Corp. et al. v. FCC, 649 F.3d 695, 699 (D.C. Cir. 2011).
114 Verizon Tel. Cos. et al., Order, 26 FCC Rcd 13145 (MB 2011) (concluding that withholding the MSG HD and
MSG+ HD Regional Sports Networks from Verizon is an "unfair act" that has the "effect" of "significantly
hindering" Verizon from providing satellite cable programming and satellite broadcast programming to subscribers
and consumers in New York and Buffalo), aff'd Verizon Tel. Cos. et al., Memorandum Opinion and Order, 26 FCC
(continued....)
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45.
Pursuant to Section 628(c)(2)(D), the Commission, prior to October 5, 2012, banned any
cable operator from entering into an exclusive programming agreement with any cable-affiliated satellite-
programming vendor in areas served by a cable operator. 115 Although that prohibition was originally
scheduled by statute to expire on October 5, 2002, the Commission, pursuant to the terms of Section
628(c)(5), extended the ban on two separate occasions for five years each.116 The Commission declined
to extend the prohibition beyond its scheduled October 5, 2012 sunset date, finding a preemptive
prohibition was no longer necessary to preserve and protect competition and diversity in the distribution
of video programming in light of the fact that a case-by-case approach remained in place to evaluate the
impact of individual exclusive contracts.117
46.
Several commenters express concern about access to programming. Generally, competitive
MVPDs indicate that without access to programming content at reasonable rates, they are unable to offer
an economically viable alternative to the service from cable providers.118 Also, Cox urges the
Commission to investigate volume discounts and establish presumptive limits on the size of such
discounts.119 Further, the Writers Guild of America, West ("WGAW") asks the Commission to enact la
carte requirements as a means to facilitate competition.120 On the other hand, several content providers
encourage the Commission to avoid any actions that limit the ability of programming vendors to package
or otherwise structure their distribution agreements. These providers contend that they must maintain
flexibility in configuring their distribution agreements given the array of options now available to access
video content.121 To promote competition in the MVPD marketplace, Comcast urges the Commission to
examine the need for regulations applicable solely to cable providers, such as the program access rules,
and generally "revisit regulations adopted some twenty years ago when the only MVPD available to most
Americans was the local cable operator."122
47.
Program Carriage. MVPDs must obtain carriage agreements with video programming
vendors in order to provide a competitive video service. Section 616 of the Act directs the Commission
to regulate the program carriage agreements and related practices between cable operators or other
(Continued from previous page)
Rcd 15849 (2011). See also AT&T Servs. Inc. et al., Order, 26 FCC Rcd 13206 (MB 2011) (reaching the same
conclusion with respect to AT&T in the State of Connecticut), aff'd AT&T Servs. Inc. et al., Memorandum Opinion
and Order, 26 FCC Rcd 15871 (2011).
115 47 U.S.C. 548(c)(2)(D); 2012 Program Access Order, 27 FCC Rcd at 12607-08, 1.
116 47 U.S.C. 548(c)(5).
117 Id. at 12608-10, 2-4.
118 See AT&T Comments at 2; DIRECTV Comments at 18-19; CenturyLink Comments at 3; Google Reply at 5.
Small and rural MVPDs also report facing difficulties in obtaining access to video content under competitive prices
and terms. These concerns are raised in Section IV of this Report. Several commenters also advocated for
extending the exclusive contract prohibition. See Verizon Comments at 13-16; AT&T Comments at 2-3;
CenturyLink Comments at 5-7.
119 Cox Comments at 5-7. Cox also asked the Commission to examine its currents rules surrounding buying groups.
Id. at 7-8. The Commission has initiated a proceeding that seeks comment on modifications to the program access
rules surrounding buying groups. See 2012 Program Access Order, 27 FCC Rcd at 12658-68, 82-100.
120 WGAW Comments at 16-17.
121 Content Interests Reply at 2.
122 Comcast Comments at 3, 32-33.
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MVPDs and video programming vendors.123 The Commission's rules prohibit cable operators or other
MVPDs from requiring a financial interest in a video programming vendor or obtaining exclusive rights
to programming as conditions for carriage.124 MVPDs also are prevented from discriminating against
video programming vendors on the basis of affiliation in the selection, terms, or conditions of carriage if
the effect of such conduct is to unreasonably restrain the ability of an unaffiliated video programming
vendor to compete fairly.125 An aggrieved MVPD or video programming vendor may file a complaint for
alleged violations.126
48.
The Commission released an order in 2011 streamlining the program carriage complaint
process.127 In particular, this order codified the requirements for establishing a prima facie program
carriage violation; established deadlines for action by the Media Bureau and Administrative Law Judges
in response to a complaint; extended the deadline for a defendant to respond to a complaint; and
implemented a process for the Media Bureau to consider requests seeking a temporary standstill of an
existing programming contract pending the resolution of a complaint.128 The Commission also issued a
Notice of Proposed Rulemaking requesting comment on additional proposed revisions to the procedural
and substantive program carriage rules to assist in the resolution of carriage disputes.129

123 47 U.S.C. 536. Congress enacted Section 616 after determining that some cable operators required non-
affiliated programmers to give them exclusive rights to their programming or provide them with a financial interest
in it as a condition for carriage. See 14th Report, 27 FCC Rcd at 8634, 53 n.132.
124 47 C.F.R. 76.1301(a)-(b).
125 47 C.F.R. 76.1301(c).
126 47 C.F.R. 76.1302(a). In July 2012, the Commission affirmed an ALJ's conclusion that Comcast violated
Section 616 of the Act and Section 76.1301(c) of its rules by discriminating against the Tennis Channel on the basis
of affiliation. The Commission ordered Comcast to carry the Tennis Channel on the same distribution tier as its
affiliated networks, the Golf Channel and Versus (now the NBC Sports Network). Tennis Channel, Inc.,
Complainant v. Comcast Cable Communications, Defendant
, MB Docket No. 10-204, Memorandum Opinion and
Order, 27 FCC Rcd 8508, 8519, 8543, 27, 92 (2012). Comcast appealed the Commission's decision to the D.C.
Circuit. On May 28, 2013, the D.C. Circuit overturned the Commission's decision on evidentiary grounds, finding
that the record evidence did not establish that affiliation had played a role in the level of carriage that Comcast had
provided Tennis Channel. See Comcast Cable Communications, LLC v. FCC, No. 12-1337 (D.C. Cir. May 28,
2013). In addition, in October 2011, the Game Show Network ("GSN") filed a program carriage complaint against
Cablevision alleging that the cable operator violated the anti-discrimination provision of the program carriage rules
when it repositioned GSN from the expanded basic tier to a sports tier. GSN argues that this move separates it from
its primarily female audience and is advantageous for WE tv and Wedding Central, two networks affiliated with
Cablevision. Game Show Network v. Cablevision Systems Corp., Program Carriage Complaint, CSR-8529-P (filed
Oct. 12, 2011). The Media Bureau issued a Hearing Designation Order for the complaint in May 2012. Game Show
Network v. Cablevision Systems Corp.
, MB Docket No. 12-122, Hearing Designation Order and Notice of
Opportunity for Hearing for Forfeiture, 27 FCC Rcd 5113 (MB 2012). In response to a joint request from GSN and
Cablevision, the hearing is being held in indefinite abeyance. See Game Show Network v. Cablevision Systems
Corp.
, MB Docket No. 12-122, Order, FCC 13M-12 (rel. June 25, 2013).
127 Revision of the Commission's Program Carriage Rules; Leased Commercial Access; Development of
Competition and Diversity in Video Programming Distribution and Carriage
, MB Docket No. 11-131, MB Docket
No. 07-42, Second Report and Order and Notice of Proposed Rulemaking, 26 FCC Rcd 11494 (2011) ("2011
Program Carriage Order and NPRM
"). This order is currently on appeal in the Second Circuit. See Time Warner
Cable Inc. v. FCC
, No. 11-4138 (2d Cir.).
128 2011 Program Carriage Order and NPRM, 26 FCC Rcd at 11495-96, 11500-01, 2, 8.
129 Id. at 11496-97, 11521-22, 3, 37.
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49.
In its comments, Verizon states that expanding the program carriage rules to newer video
providers that compete with incumbent cable operators would hinder them from offering a competitive
service. Verizon explains that a budding alliance has developed between such competitive video
providers and independent programmers as competitive video providers have the incentive to assemble
attractive programming packages that provide consumers with the diversity of content they desire.
Verizon argues, therefore, that any new rules must recognize that competitive providers, like Verizon,
have no reason to discriminate in favor of vertically-integrated cable operators and must be exempt from
program carriage complaint proceedings.130 In its comments, Public Knowledge encourages the
Commission to enforce its program carriage policies in a more expeditious manner.131
50.
Retransmission Consent and Must Carry. The ability of MVPDs to access local broadcast
programming impacts their entry into the video services marketplace.132 In 1992, Congress enacted
Sections 325, 614, and 615 of the Act to facilitate cable operators' carriage of local broadcast television
stations133 and subsequently adopted a similar carriage regime for DBS providers in 1999.134 Pursuant to
Section 325 of the Act, MVPDs may not retransmit a local broadcaster's signal without the station's
express permission.135 Cable operators are required to carry local television stations in every market they
serve unless a station elects retransmission consent. DBS operators need not carry any local television
signals. But where a DBS operator chooses to carry any such station, it must carry all stations in that
market ("carry one, carry all") except for those stations electing retransmission consent.136 Under this
regime, broadcasters maintain control over their signals. And commercial broadcasters electing
retransmission consent may request compensation from MVPDs for the carriage of their signals.137
51.
In local television markets, as defined by The Nielsen Company's ("Nielsen's") designated
market areas ("DMAs"),138 every three years commercial television stations must select between the right

130 Verizon Comments at 25-27.
131 Public Knowledge Comments at 14.
132 For a complete description of the retransmission consent and must-carry provisions, see In-State Broadcast
Programming: Report to Congress Pursuant to Section 304 of the Satellite Television Extension and Localism Act
of 2010
, MB Docket No. 10-238, Report, 26 FCC Rcd 11919 (MB 2011) ("STELA Report"); Retransmission
Consent and Exclusivity Rules: Report to Congress Pursuant to Section 208 of the Satellite Home Viewer Extension
and Reauthorization Act of 2004
, MB Docket No. 05-28 (Sept. 8, 2005),
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-260936A1.doc ("SHVERA Report").
133 47 U.S.C. 325(b), 534, 535.
134 The Satellite Home Viewer Improvement Act of 1999, Pub. L. No. 106-113, 113 Stat. 1501, 1501A-526 to
1501A-545 (1999) ("SHVIA").
135 47 U.S.C. 325(b).
136 47 C.F.R. 338(a)(1); 47 C.F.R. 76.66.
137 See STELA Report, 26 FCC Rcd at 11922-23, 7.
138 A DMA is a Nielsen-defined television market consisting of a unique group of counties. The United States is
divided into 210 DMA markets. Nielsen identifies television markets by placing each U.S. county (except for
certain counties in Alaska) in a market based on measured viewing patterns and by MVPD distribution. Typically,
each U.S. county is assigned to the one market whose stations receive the preponderance of the audience in that
county. Yet in a few cases where a county is large and viewing patterns differ significantly between parts of the
county, a portion of the county is assigned to one television market and another portion of the county is assigned to
another market. Several counties in Alaska, however, are not assigned to any DMA. See STELA Report, 26 FCC
Rcd at 11921, 5 & n.10.
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to grant retransmission consent or the right to mandatory carriage.139 If a station selects retransmission
consent, the broadcaster and MVPD negotiate a carriage agreement; the carriage agreement may include
monetary or other types of compensation in return for the right to carry the broadcast signal.140 Where a
station selects must carry, it is generally entitled to carriage but it is prohibited from receiving
compensation.141 Qualified local noncommercial educational ("NCE") stations have a right to mandatory
carriage within the same market, but do not have retransmission consent rights.142 Cable operators also
are permitted to negotiate for retransmission consent with any other broadcast station they seek to carry
irrespective of the station's television market.143
52.
The Commission issued a Notice of Proposed Rulemaking in 2011 seeking comment on
several proposed revisions to the retransmission consent regime.144 Among other things, the Commission
sought comment on modifying the good faith negotiation standards to include additional negotiation
violations, revising the "totality of the circumstances" standard used to determine whether actions in the
negotiation process are undertaken in good faith, and altering the consumer notice requirements for
retransmission consent disputes.145
53.
Several MVPDs urge the Commission to reform the regulatory framework for
retransmission consent. They argue that retransmission consent negotiations between broadcasters and
video providers occur in a marketplace that is skewed towards broadcasters. These commenters claim
that the current regime effectively grants monopoly status to local broadcasters, which especially harms
new video providers. They also allege that consumers are harmed in the process because MVPDs either
must agree to rising retransmission consent fees or face service disruptions when broadcasters withhold
their programming when the terms and conditions they demand are not met.146 Commenters propose
several modifications to the Commission's retransmission consent regime to address these concerns,
including amending the good faith standards and defining the term "competitive marketplace
considerations" as used in Section 325(b)(3)(C) of the Act.147 Specifically, some MVPDs have raised
concern that the practice of unaffiliated broadcast stations jointly negotiating retransmission consent
agreements has a negative impact on competition in local markets and allows broadcasters to secure
higher retransmission fees from MVPDs.148

139 47 U.S.C. 325(b)(3)(B); 47 C.F.R. 76.56(b), 76.64.
140 47 U.S.C. 325(b)(3)(C); 47 C.F.R. 76.64. See also STELA Report, 26 FCC Rcd at 11923, 8.
141 47 U.S.C. 614(b)(1); 47 C.F.R. 76.60.
142 47 U.S.C. 325(b)(2)(A).
143 47 U.S.C. 325(b); 47 C.F.R. 76.64. These carriage arrangements might be limited though by other
contractual restrictions, such as network affiliation arrangements, or by the Commission's network non-duplication
and syndicated exclusivity rules. See infra, 55. See also STELA Report, 26 FCC Rcd at 11923, n. 22.
144 Amendment of the Commission's Rules Related to Retransmission Consent, MB Docket No. 10-71, Notice of
Proposed Rulemaking, 26 FCC Rcd 2718, 2719, 1 (2011) ("Retransmission Consent NPRM").
145 Id. at 2729-38, 20-37.
146 See, e.g., Verizon Comments at 16-18; DIRECTV Comments at 18-19; CenturyLink Comments at 4-5; AT&T
Comments at 1-4; Public Knowledge Comments at 14. We address the retransmission concerns of small and rural
carriers in Section IV.
147 CenturyLink Comments at 5; DIRECTV Comments at 19; Verizon Comments at 18.
148 See ACA Comments at 11-15; CenturyLink Comments at 5; DIRECTV Comments at 18-19; OPASTCO/NCTA
Comments at 11-12.
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54.
NAB and broadcast station licensees urge the Commission to refrain from altering the
existing retransmission consent rules.149 They argue that broadcasters cannot afford to offer locally
oriented programming, including news, without the revenue from retransmission consent fees.150 NAB
explains that broadcasters must increasingly rely on non-advertising revenue to support local news
budgets because consumers are using a combination of media platforms to obtain information and
entertainment.151 The ABC Affiliates also note that without retransmission consent fees, broadcasters
would not be able to purchase popular network programming and sports programming, which aids them
in competing with cable and satellite networks as well as OVDs.152 NAB comments that joint
negotiations by broadcasters help level the playing field for broadcasters negotiating with MVPDs,
reducing transaction costs, and generate efficiencies.153 NAB also states that stations involved in joint
arrangements are less likely to be involved in carriage negotiations that result in carriage interruptions.154
55.
Exclusivity Rules. MVPDs must abide by the Commission's rules protecting the exclusive
distribution rights of local broadcast stations.155 For cable operators, the Commission's network non-
duplication rules permit a local broadcast station to request the blackout of duplicated programming in the
local station's zone of protection when carried on another station imported by the operator.156 Similarly,
the Commission's syndicated exclusivity rules give a local broadcaster the right to black out its exclusive
syndicated programming when that programming is carried on another station imported by a cable
operator within its zone of protection.157 The Commission's sports blackout rule protects a sports team's
or sports league's distribution rights to a live sporting event occurring in a local market. The rule
prevents a cable operator from providing the live sporting event on a distant signal in a market where the
game is blacked out on the local broadcast station.158 As mandated by Congress, the Commission's
network non-duplication, syndicated exclusivity, and sports blackout rules apply to satellite carriers.159

149 NAB Reply at 3; ABC Affiliates Reply at 5-6, 10. See also, e.g., CBS Television Network Affiliates Association
Comments, MB Docket No. 10-71 (filed May 27, 2011) ("CBS Affiliates 10-71 Comments"); Sinclair Broadcast
Group, Inc. Comments, MB Docket No. 10-71 (filed May 27, 2011) ("Sinclair 10-71 Comments"); Belo Corp.
Comments, MB Docket No. 10-71 (filed May 27, 2011) ("Belo 10-71 Comments").
150 NAB Comments at 24-25; ABC Affiliates Reply at 9-10. See also e.g., CBS Affiliates 10-71 Comments at 1;
Sinclair 10-71 Comments at 14; Belo 10-71 Comments at 6; CBS Corporation Comments, MB Docket 10-71 at 11
(filed May 27, 2011) ("CBS Corp. 10-71 Comments").
151 NAB Comments at 24-25.
152 ABC Affiliates Reply at 2-3.
153 See NAB Reply at 4-6.
154 Id.
155 For a more detailed description of these rules, see generally SHVERA Report, supra, n.132.
156 47 C.F.R. 76.92. For purposes of this rule, a broadcast station's zone of protection is 35 miles (55 miles in
smaller markets). 47 C.F.R. 73.685(m).
157 47 C.F.R. 76.101. For purposes of this rule, a broadcast station has a 35-mile geographic zone of protection.
47 C.F.R. 73.685(m).
158 47 C.F.R. 76.111.
159 47 U.S.C. 339(b); 47 C.F.R. 76.122-23, 76.127. In 1999, Congress directed the Commission to extend the
network non-duplication and syndicated exclusivity rules to satellite carriers, but only with respect to the
retransmission of nationally distributed superstations. It also required the Commission to extend the sports blackout
rules to the carriage of nationally distributed superstations and network stations. See SHVIA, Pub. L. No. 106-113,
113 Stat. 1501A-534.
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56.
The Commission has sought comment on the elimination of the network non-duplication
and syndicated exclusivity rules as they apply to cable160 and on a Petition for Rulemaking requesting the
Commission to eliminate the sports blackout rule.161 Some MVPDs encourage the Commission to
eliminate its network non-duplication and syndicated exclusivity rules as part of a broader effort to reform
the Commission's retransmission consent process.162 NAB and broadcast station licensees, on the other
hand, ask the Commission to refrain from repealing the exclusivity rules.163 In particular, NAB argues
that the exclusivity rules promote localism by preserving the revenue base of local stations, allowing for
their continued production of local news and investment in entertainment programming.164
57.
Ownership Limits. Section 613(f) of the Act requires the Commission to establish
reasonable limits on the number of subscribers a cable operator may serve nationwide ("horizontal" limit)
and the number of channels a cable operator may dedicate to its affiliated programming networks
("vertical" limit).165 Although the Commission adopted rules placing limitations on the horizontal and
vertical ownership of cable operators,166 the D.C. Circuit has repeatedly struck them down.167
58.
Public Interest Programming. Local franchising authorities may, pursuant to Sections
611 and 621 of the Act, require cable operators to provide both channel capacity and certain types of
financial support to public, educational, and governmental ("PEG") channels.168 Cable operators also are

160 See Retransmission Consent NPRM, 26 FCC Rcd at 2740-43, 42-45.
161 See Commission Seeks Comment on Petition for Rulemaking Seeking Elimination of the Sports Blackout Rule,
MB Docket No. 12-3, Public Notice, 27 FCC Rcd 260 (MB 2012).
162 See, e.g., Verizon Comments at 17; CenturyLink Comments at 5; AT&T Comments at 4. See also DIRECTV
Comments at 19 (advocating for the Commission to allow the "temporary importation of distant signals" when
impasses occur in retransmission consent negotiations).
163 See, e.g., NAB Reply at 2; CBS Affiliates 10-71 Comments at 2-3; Belo 10-71 Comments at 2, 29-30; Gilmore
Comments, MB Docket No. 10-71 at 16 (filed May 27, 2011); Joint Comments of Barrington Broadcasting Group,
LLC, Bonten Media Group, LLC, Dispatch Broadcast Group, Gannett Co., Inc., Newport Television, LLC, Post-
Newsweek Stations, Inc., and Raycom Media, Inc., MB Docket No. 10-71 at 3-4 (filed May 27, 2011).
164 NAB Reply at 2-3.
165 47 U.S.C. 533(f).
166 See Implementation of Sections 11 and 13 of the Cable Television Consumer Protection and Competition Act of
1992 Horizontal and Vertical Ownership Limits
, MM Docket No. 92-264, Second Report and Order, 8 FCC Rcd
8565, 8567, 3-4 (1993). See also 47 C.F.R. 76.503(a), 76.504(a)-(b).
167 See Time Warner Entm't Co. v. FCC, 240 F.3d 1126, 1136, 1139 (D.C. Cir. 2001). The Commission's third
attempt in 2008 to implement a horizontal limit preventing an individual cable operator from serving more than 30
percent of MVPD subscribers nationwide was struck down by the D.C. Circuit. See Comcast Corp. v. FCC, 579
F.3d 1, 10 (D.C. Cir. 2009).
168 47 U.S.C. 531(a)-(b), 541(a)(4)(B). Comcast is subject to heightened PEG requirements after its merger
(transaction) involving NBCU. The Commission reaffirmed the importance of PEG programming in its Comcast-
NBCU Order
and imposed requirements on Comcast to protect the public interest as well as preserve diversity and
localism in the video services marketplace. Comcast-NBCU Order, 26 FCC Rcd at 4326, 213. The conditions
prohibit Comcast from migrating PEG channels to a digital tier until all channels are converted to a digital format.
They require carriage of all PEG channels on Comcast's digital starter tier. Comcast may not change the method by
which it delivers PEG channels if the change would result in the material degradation of signal quality or impair
viewer reception of PEG channels. Id. at 4326-27, 4376-77, 214 & App. A, XIV. Comcast further agreed to
develop a platform for hosting PEG content On Demand and On Demand Online within three years of closing the
transaction. Id. at 4327, 4376-77, 215 & App. A, XIV.
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obligated to carry any PEG channels on their basic service tier.169 Some state video franchising laws,
however, have removed or reduced the PEG requirements typically found in local franchising agreements;
this has led to a decline in PEG funding and support.170
59.
Several commenters indicate the importance of PEG programming to local communities.
For instance, American Community Television ("ACT") and the Alliance for Community Media
("ACM") explain that PEG channels fill a local information void due to media consolidation and the loss
of local media outlets.171 According to commenters, PEG programming may include city/county council
meetings, school board meetings, second language courses, vocational training and employment
preparation, as well as high school and college events.172 ACM states that in recent years, community
media has expanded production and distribution services to non-commercial and low power radio,
Internet streaming, podcasts, social media, and mobile applications. ACM's alliance members also offer
youth media and digital literacy training.173 ACT notes that in comparison to local broadcast stations that
produce approximately 1,500 hours of programming per year, government access produces 1,250 hours
per year, educational access produces 1,500 hours per year, and public access produces 2,000 hours per
year.174 ACT clarifies that there is no one source quantifying the number of PEG channels in existence in
the United States today; it estimates as many as 5,000 channels and 2,500 access operations.175
60.
Some commenters also raise concerns surrounding the service and delivery treatment of
PEG channels. For instance, commenters note that PEG programing is not described in many MVPDs'
electronic programming guides.176 The City of Boston suggests this discrepancy is a result of the
negotiated "nationwide/systemwide" agreements between cable operators and publishers of programming
guides that make it impossible for the guides to include specific PEG programming details.177
Montgomery County, Maryland urges the Commission to consider adopting a rule requiring MVPDs to
provide equal treatment to PEG channels and commercial channels in their programming guides.178 In
addition, commenters indicate that some MVPDs do not provide PEG programming in HD despite the
ability of community media centers to supply them with HD signals. They assert this can result in signal
degradation.179 The City of Boston notes that cable operators should provide PEG channels with the

169 47 U.S.C. 543(b)(7)(A)(ii); 47 C.F.R. 76.901(a).
170 See 14th Report, 27 FCC Rcd at 8639, 63. See also ACT Comments at 6-7.
171 ACT Comments at 1; ACM Comments at 2.
172 See, e.g., ACT Comments at 2-4; ACM Comments at 2; City of Boston Comments at 5; Montgomery County
Reply at 9-12.
173 ACM Comments at 1-5. See also e.g., City of Boston Comments at 7-8; Montgomery County Reply at 12-13.
174 ACT Comments at 5. See also ACM Comments at 2 (identifying that community media centers on average
provide more than 1,100 original hours of programming to the communities they serve); Montgomery County Reply
at 9.
175 ACT Comments at 5.
176 See, e.g., City of Boston Comments at 5-6; Montgomery County Reply at 48-49; Community Media Center of
Marin at 3; Wisconsin Community Media Comments at 6.
177 City of Boston Comments at 6.
178 Montgomery County Comments at 49.
179 See, e.g., City of Boston Comments at 8-9; Community Media Center of Marin Comments at 3; Chicago Access
Corporation Comments at 2-3; Lowell Telecommunications Corporation Reply at 2.
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bandwidth capacity to transport HD signals especially if the bandwidth is available to other content
offered on the basic service tier, such as that of local broadcasters.180
61.
Finally, some commenters urge the Commission to act on an ACM et al. petition
regarding AT&T's treatment of PEG programming.181 In particular, ACM and the City of Boston argue
that the Commission must act to preserve community media and prevent discriminatory practices that
exclusively target PEG channels.182 In response, AT&T explains that it has repeatedly refuted claims that
its U-verse Channel 99 is inaccessible or otherwise inferior and demonstrated the benefits of providing
the entire PEG programming in a given DMA.183 AT&T also states that it has demonstrated the benefits
of its PEG offering, including its ability to provide all PEG programming within a DMA to every
subscriber in in that DMA a service not offered by cable companies.
62.
With respect to DBS MVPDs, in 1992, Congress established a public interest
programming requirement for DBS operators. The statute requires DBS operators to dedicate between
four and seven percent of their capacity to public interest programming.184 The Commission's rules
implementing the statute require DBS operators to reserve four percent of their channel capacity to
qualified programmers providing "noncommercial programming of an educational or informational
nature."185 DIRECTV reports carrying several channels of public interest programming.186 DISH
Network reports providing 19 channels of public interest programming.187

180 City of Boston Comments at 8-9.
181 See Petition for Declaratory Ruling that AT&T's Method of Delivering Public, Educational and Government
Access Channels over its U-verse System is Contrary to the Communications Act of 1934, as amended, and
Applicable Commission Rules
, MB Docket No. 09-13, Petition of ACM et al. (filed Jan. 30, 2009); Petition for
Declaratory Ruling on Requirements for a Basic Service Tier and for PEG Channel Capacity Under Sections
543(b)(7), 531(a) and the Commission's Ancillary Jurisdiction Under Title I
, MB Docket No. 09-13, Petition of the
City of Lansing, MI (filed Jan. 27, 2009). See also Entities File Petitions for Declaratory Ruling Regarding Public,
Educational, and Governmental Programming
, MB Docket 09-13, Public Notice, 24 FCC Rcd 1340 (MB 2009).
182 ACM Comments at 5-6; ACM Reply at 2; City of Boston Reply at 5. See also 14th Report, 27 FCC Rcd at 8639-
40, 66-67.
183 AT&T Reply at 3.
184 47 U.S.C. 335(b)(1)(A). Qualified DBS providers may alter dedicated capacity to between 3.5 and 7 percent if
they provide state public affairs networks to their subscribers in at least 15 states. 47 U.S.C. 335(b)(1)(B).
185 47 C.F.R. 25.701(f). In order to qualify, programmers need to be: (1) organized for a noncommercial,
nonprofit purpose; (2) a national educational programming supplier; and (3) responsible for 50 percent of the direct
costs the DBS provider occurs in making the programming available. See id. See also 14th Report, 27 FCC Rcd at
8640, 68 n.190.
186 Among others, DIRECTV offers the following channels: World Harvest Television, C-SPAN 2, Daystar, Trinity
Broadcasting Network, the WORD Network, BYU TV, LINK TV, NASA TV, TCT, Once Mexico, EWTN, HITN,
NRB, MHz, V-Me, CTN, Gem Net, Hope Channel, JLTV, Enlace, Golden Eagle Broadcasting, Free Speech TV,
GOD TV, BabyFirstTV, and numerous local PBS channels. DIRECTV Comments at 12-13.
187 DISH Network carries the following public interest programming channels: 3ABN, Alma Vision, Baby First,
Brigham Young University, C-SPAN, Christian Television Network, Classic Arts Showcase, Enlace, EWTN, Free
Speech TV, HITN, Impact Network, Kids & Teens Television, KBS World, KCET Community Television, NASA
Channel, Pentagon Channel, Trinity Broadcasting Network, and V-Me. DISH Network provided updated
information to Media Bureau staff on Feb. 22, 2013.
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63.
Leased Access. Section 612 of the Act requires cable operators to designate a portion of
their channel capacity for commercial use by unaffiliated parties.188 The requirement is intended to
provide competition and diversity in the video programming marketplace.189 The Commission regulates
the prices, terms, and conditions for access to these channels and reviews petitions for relief from
aggrieved parties.190
64.
Access to Multiple Dwelling Units. The Commission's rules prevent cable operators
from enforcing or entering into exclusive contracts for video service delivery with multiple dwelling units
("MDUs") and other centrally managed residential real estate developments.191 The Commission
determined that this type of exclusivity was a barrier to broadband deployment and entry into the MVPD
marketplace, as well as an unfair act under Section 628(b).192
65.
Inside Wiring. Section 624(i) of the Act provides the Commission with the authority to
enact rules concerning the disposition of inside wiring after a cable subscriber terminates service.193 The
Commission's rules initially only provided subscribers with the opportunity to purchase the wiring inside
their homes after the termination of cable service and before the removal of such wiring.194 The
Commission later adopted rules that: (1) provide for the sale or transfer of "home run" wiring in an
MDU; (2) gave competitive MVPDs access to molding in an MDU containing the incumbent provider's
wiring for installation purposes; or (3) gave subscribers access to existing inside wiring prior to

188 47 U.S.C. 532(b).
189 47 U.S.C. 532(a).
190 47 C.F.R. 76.970-78. In 2008, the Commission released a Report and Order modifying the leased access
rules. See Leased Commercial Access, MB Docket No. 07-42, Report and Order and Further Notice of Proposed
Rulemaking, 23 FCC Rcd 2909 (2008). The Report and Order was stayed by the U.S. Court of Appeals for the
Sixth Circuit. See Order, United Church of Christ Office of Communications, Inc. v. FCC, No. 08-3245 (6th Cir.
2008). The order included rule changes requiring approval by the Office of Management and Budget that was
denied on July 9, 2008. No further action has been taken by the Commission to date and the rule changes remain in
abeyance.
191 47 C.F.R. 76.2000. The rule applies to cable operators, common carriers, and OVS. Id. See also Lansdowne
on the Potomac Homeowners Ass'n, Inc. v. OpenBand at Lansdowne, LLC
, 713 F.3d 187, 207-08 (4th Cir. 2013)
(affirming the district court's judgment that OpenBand violated the Commission's rule banning cable operators from
entering into exclusive agreements with MDUs); Exclusive Service Contracts for Provision of Video Services in
Multiple Dwelling Units and Other Real Estate Developments
, MB Docket No. 07-51, Report and Order and Further
Notice of Proposed Rulemaking, 22 FCC Rcd 20235, 20235-36, 20238, 20251, 1-2, 7, 30 (2007) ("MDU Order
and FNPRM
"), aff'd sub nom. Nat'l Cable & Television Ass'n v. FCC, 567 F.3d 659 (2009). The Commission has
determined though that MVPDs are permitted to use bulk billing arrangements those arrangements in which one
MVPD offers video service to every resident of an MVPD at a substantial discount than what each individual
resident would pay if he or she contracted with the MVPD individually. Exclusive Service Contracts for Provision
of Video Services in Multiple Dwelling Units and Other Real Estate Developments
, MB Docket No. 07-51, Second
Report and Order, 25 FCC Rcd 2460, 2463-71, 10-28 (2010). The Commission has also determined that MVPDs
are allowed to enter exclusive marketing agreements with MDU owners. Id. at 2471-73, 29-37.
192 See MDU Order and FNPRM, 22 FCC Rcd at 20248-49, 26-27. The pending Further Notice of Proposed
Rulemaking seeks comment on extending the MDU exclusivity ban to DBS providers, PCOs, and other MVPDs not
subject to Section 628. See id. at 20264, 61-62.
193 47 U.S.C. 544(i).
194 47 C.F.R. 76.801-02. See also Implementation of the Cable Television Consumer Protection and Competition
Act of 1992: Cable Home Wiring
, MM Docket No. 92-260, Report and Order, 8 FCC Rcd 1435 (1993).
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terminating service in order to avoid service interruptions.195 The Commission classifies inside wiring
behind sheet rock as physically inaccessible due to the significant cost and physical damage that might
occur in accessing such wiring; this facilitates the transfer of ownership for that wiring when an
incumbent provider ceases service.196
66.
Over-the-Air Reception Devices. Pursuant to the Act, the Commission has adopted a rule
preempting restrictions that impair viewers from receiving video services using over-the-air reception
devices ("OTARD").197 The rule prohibits restrictions impairing the installation, maintenance, or use of
antennas to receive video programming on property within the exclusive use or control of the antenna
user.198 Specifically, the rule bars restrictions that: (1) unreasonably delay or prevent installation,
maintenance, or use; (2) unreasonably increase the cost of installation, maintenance, or use; and (3)
preclude reception or transmission of an acceptable quality signal.199
67.
DIRECTV indicates in its comments that three major municipalities in the last year
Philadelphia, Chicago, and Boston have enacted ordinances restricting the placement of satellite dishes.
DIRECTV argues that none of the ordinances are permissible under the Commission's OTARD rule, and
therefore asks the Commission to find these three ordinances in violation of that rule.200 The City of
Philadelphia disputes DIRECTV's characterization of its ordinance; it contends that the ordinance is

195 47 C.F.R. 76.804-06. See also Telecommunications Services Inside Wiring; Implementation of the Cable
Television Consumer Protection and Competition Act of 1992: Cable Home Wiring
; CS Docket No. 95-184; MM
Docket No. 92-260, Report and Order and Second Further Notice of Proposed Rulemaking, 13 FCC Rcd 3659
(1997). "Home run" wiring is the wiring which runs from just outside an MDU resident's unit back to that point
where the provider's wiring becomes devoted to that resident. 47 C.F.R. 76.800(d).
196 See Telecommunications Services Inside Wiring Customer Premises Equipment; Implementation of the Cable
Television Consumer Protection and Competition Act of 1992: Cable Home Wiring; Clarification of the
Commission's Rules and Policies Regarding Unbundled Access to Incumbent Local Exchange Carriers' Inside Wire
Subloop
, CS Docket No. 95-184, MM Docket No. 92-260, WC Docket No. 01-338, Report and Order and
Declaratory Ruling, 22 FCC Rcd 10640, 10646-61, 12-47 (2007), aff'd sub nom. Nat'l Cable & Television Ass'n
v. FCC
, No. 07-1356, 2008 WL 4808911 (D.C. Cir. Oct. 23, 2008).
197 47 U.S.C. 303 note. See also Telecommunications Act of 1996, Pub. L. No. 104-04, 207, 110 Stat. 56, 114
(1996) ("1996 Act").
198 47 C.F.R. 1.4000(a)(1). The rule applies to direct broadcast satellite antennas that are one meter or less in
diameter, or any size in Alaska; antennas that are one meter or less in diameter or diagonal measurement and are
designed to receive or transmit either video programming services through multipoint distribution services,
including multichannel multipoint distribution services, instructional television fixed services, and local multipoint
distribution services, or fixed wireless signals other than via satellite; and antennas designed to receive television
broadcast signals. 47 C.F.R. 1.4000(a)(1)(i)-(iii). The antenna user also must have a direct or indirect ownership
interest, or leasehold interest, in the property. 47 C.F.R. 1.4000(a)(1). DIRECTV points out the OTARD rules
protect Alaskan customers' right to larger receiver antenna sizes, but the rules do not cover Hawaiian customers,
who are unable to receive reliable service due to the smaller dish sizes. It argues that the OTARD rules should be
adjusted to include Hawaiian subscribers. DIRECTV Comments at 14.
199 47 C.F.R. 1.4000(a)(3)(i)-(iii).
200 DIRECTV Comments at 19-21. The Media Bureau is currently reviewing a petition for rulemaking filed by
DIRECTV and DISH Network requesting the Commission to amend its OTARD rule. See Media Bureau Seeks
Comment on Petition for Rulemaking Requesting the Commission to Amend the Over-The-Air Reception Devices
Rule to Clarify the Extent to Which Local Governments Can Regulate Non-Exclusive Areas
, MB Docket No. 12-121,
Public Notice, 27 FCC Rcd 5074 (MB 2012). DIRECTV and DISH Network have also petitioned the Commission
for a declaratory ruling on the legitimacy of the Philadelphia ordinance. See Media Bureau Seeks Comment on
Petition for Declaratory Ruling That An Ordinance of the City of Philadelphia, Pennsylvania is Preempted By The
Commission's Over-The-Air Reception Device Rule
, CSR-8541-O, Public Notice, 26 FCC Rcd 16074 (MB 2011).
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consistent with the Commission's OTARD rule and should be upheld.201 The City of Boston also contests
DIRECTV's claim that it is attempting to deter the use of satellite dishes in the city, stating that it will
defend its ordinance in any Commission proceeding.202
(ii)

Market Conditions Influencing Entry

68.
A number of market conditions, in addition to regulatory conditions, may also influence
if, and when, entry occurs. Economies of scale, industry profit margins, capital requirements, first-mover
advantages and the reaction of competitors to new entrants all affect a firm's ability and incentive to enter
into a market. Economies of scale appear to produce cost advantages, especially with respect to the cost
of acquiring programming and consumer premise equipment,203 and thus may play a major role in
profitability and the willingness to enter the MVPD industry. If current industry profit margins are high,
this could entice entry by a firm with economies of scale, while lower profit margins may indicate an
already highly competitive market with efficiently operating competitors, which would likely deter
entry.204 Capital requirements, especially large fixed costs, may also influence if and when MVPD entry
takes place. The expected reaction from existing competitors, especially in terms of price competition,
also influences entry.205 Each of these elements is discussed in turn below.
69.
Economies of Scale. The term "economies of scale" refers to the situation where there is
a decline in unit costs as the total number of units produced per period increases. Economies of scale may
deter entry if new MVPDs must enter the market at a large scale in order to obtain cost advantages similar
to those enjoyed by incumbent MVPDs.206 According to SNL Kagan, economies of scale have grown
increasingly significant to maintain or grow margins as cable MVPDs have been challenged by basic-
subscriber losses and programming cost increases.207 SNL Kagan contends that compared to the smaller
and mid-sized MSOs, Comcast, Time Warner Cable, and Charter can better leverage their scale in
programming cost negotiations.208 Statements from MVPDs suggest that scale economies affect the cost
of acquiring programming and customer premises equipment, such as set-top boxes. For example,
Comcast stressed the importance of achieving scale in both content and distribution in its transaction with
NBC-Universal.209 And Time Warner Cable announced annual cost efficiencies of approximately $100
million through programming expense savings and other cost reductions in its transaction with Insight
Communications.210 DIRECTV states that it believes that its large subscriber base creates an opportunity
to obtain programming and make equipment purchases on favorable terms.211

201 City of Philadelphia Reply at 2-6.
202 City of Boston Reply at 6-7.
203 For a discussion of market-based conditions that influence entry, see Porter at 7-17.
204 See, e.g., Horizontal Merger Guidelines, 9.2 ("Entry is more likely if it is profitable....").
205 Porter at 17-23.
206 Id. at 7-9.
207 Michelle Ow, Historical Benchmarks: Cable Margins by Segment, 2007 Q1'12, SNL Kagan, Cable TV
Investor: Deals & Finance
, July 31, 2012, at 12-13.
208 Id.
209 Comcast, 2010 Annual Review, Letter to Shareholders,
http://www.comcast.com/2010annualreview/?SCRedirect=true#/ceoletter (visited Sept. 28, 2012).
210 Time Warner Cable, Time Warner Cable to Acquire Insight Communications (press release), Aug. 15, 2011.
211 DIRECTV, SEC Form 10-K for the Year Ended December 31, 2011, at 3 ("DIRECTV 2011 Form 10-K").
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70.
Mid-size and smaller MVPDs assert that they are at a competitive disadvantage. Cox
Communications, with 4.7 million subscribers is the fifth largest MVPD, but serves less than 40 percent
as many subscribers as the fourth largest MVPD.212 According to Cox, the top four MVPDs far exceed
all others in terms of their bargaining power with programmers and this represents one of the most
significant competitive threats that mid-sized MVPDs face.213 The American Cable Association ("ACA")
also emphasizes the importance of scale by calling attention to the higher prices paid for video
programming by small cable operators that lack scale economies.214
71.
Capital Requirements. The need to invest large financial resources in order to compete
may also influence MVPD entry, especially in a mature market where most customers wanting MVPD
service already subscribe to an MVPD. Large fixed costs and an entrant's recognition that most of its
subscribers would need to switch from an incumbent MVPDs may delay the entrance of a new MVPD.
Disincentives to enter may increase if current profit margins are low, which would suggest that the
recovery of capital investment is risky or would be delayed. For example, Charter notes that constructing
a competing cable system involves a capital intensive process with a high degree of risk.215
72.
First Mover Advantages. First mover advantages that benefit incumbent providers may
represent another condition influencing entry.216 Years of advertising and customer relationships may
provide incumbents with a degree of brand identification and customer loyalty.217 Entrants must often
spend heavily to win customers from incumbents, which often results in start-up losses. 218 Given the
maturity of the MVPD market, new MVPDs recognize that they must win customers from incumbents.219
If it costs more to induce a subscriber to switch than it costs the incumbent to win the customer initially,
this constitutes a first-mover advantage that deters entry. According to Charter, to be successful, a
competitor's overbuild would need to be able to serve customers in the overbuilt area with equal or better
service quality than that offered by the incumbent provider, on a more cost-effective basis than Charter
can provide.220
73.
Reaction from Existing Competitors. A potential entrant's expectations regarding the
reaction from incumbent MVPDs may influence entry. For instance, the possibility of "predatory

212 Cox Comments at 1.
213 Id. at 1-2.
214 ACA Comments at 9-10.
215 Charter, SEC Form 10-K for the Year Ended December 31, 2011, at 11 ("Charter 2011 Form 10-K").
216 For a discussion of first-mover advantages, see David Montgomery & Marvin Lieberman, First-Mover
Advantages
, STRATEGIC MANAGEMENT JOURNAL, Summer 1988, at 41-58.
217 Porter at 9. See also DIRECTV 2011 Form 10-K at 3 (DIRECTV believes that the strength of its brand name is
an important factor in its ability to attract new subscribers and retain existing subscribers).
218 Id.
219 DISH Network explained that "as the pay-TV industry matures, we and our competitors increasingly must seek
to attract a greater proportion of new subscribers from each other's existing subscriber bases rather than from first-
time purchasers of pay-TV services." DISH Network, SEC Form 10-K for the Year Ended December 31, 2011, at
19 ("DISH Network 2011 Form 10-K").
220 Charter 2011 Form 10-K at 11.
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pricing," where an incumbent lowers price in an effort to discourage entry or drive an entrant from the
market before it can establish itself, may inhibit market entry.221
e.

Recent Entry and Exit

74.
There are different types of MVPD entry, and each has a potentially different impact on
competition in the market for the delivery of video programming. Meaningful entry that substantially
increases competition requires bringing new capacity, upgraded capacity, or efficiencies into the market
with a desire to gain market share.222 Since 2005, the entry and extension of video delivery systems by
AT&T, Verizon, and CenturyLink may have had the most significant impact on competition. In addition
to constructing high-capacity, fiber-based, all-digital systems, these three telephone MVPDs compete in
areas already served by cable MVPDs. In the 18 months between the end of 2010 and end of June 2012,
AT&T and Verizon slowed expansion of their video delivery systems. According to SNL Kagan, AT&T
completed its planned build-out of its U-verse network, although the company recently announced plans
to extend its service area.223 Verizon neared completion of its FiOS network, and CenturyLink continued
to take a "cautious approach" to the build-out of its Prism network.224 Another type of entry, the
acquisition of an existing video delivery system, may strengthen competition, even when it does not
change the number of competitors, to the extent that the acquisition provides efficiencies and other
benefits, including increased capital investments to upgrade the system. An example of this type of entry
is the acquisition of cable systems in Virginia, West Virginia, and western Maryland by Shentel, which
was followed by system upgrades to provide digital television, HD channels, and VOD and DVR
services.225
75.
In 2011, cable MVPD transactions involved 1.0 million subscribers and the total value of
the transactions was $3.8 billion.226 This represents a decline from 2010, which involved 1.6 million
subscribers with a total value of $5.4 billion.227 Acquisitions by Time Warner Cable, which included the
$3.0 billion acquisition of Insight Communications, accounted for $3.3 billion, about 86 percent of the
total value of transactions in 2011.228 This contrasts with 2010, where transactions among smaller rural
cable systems made up the majority of the transactions.229 The average value per home passed and the
average value per subscriber was $1,637 and $3,757 respectively in 2011.230 This compares with an

221 For a discussion of predatory pricing, see, Patrick Bolton, Joseph F. Brodley & Michael H. Riordan, Predatory
Pricing: Strategic Theory and Legal Policy
, 88 GEO. L.J. 2239 (2000),
http://www0.gsb.columbia.edu/faculty/pbolton/PDFS/BBRPrincetonDP.pdf (visited Nov 16, 2012).
222 Porter at 7.
223 See infra, 141, n.522.
224 Mari Rondeli, Telcom Video Paradox Points to Higher Subs Penetrations, Limits on Footprint Expansion,
Multichannel Market Trends, SNL KAGAN, June 20, 2012,
http://www.snl.com/interactivex/article.aspx?id=15117039&KPLT=6 (visited Oct. 2, 2012).
225 Shentel, SEC Form 10-K for the Period Ending December 31, 2011, at 7 ("Shentel 2011 Form 10-K").
226 SNL Kagan, Cable TV Investor: Deals & Finance, Dec. 30, 2011, at 1. According to SNL, the pursuit of
economies of scale, combined with the continued availability of capital, drove mergers and acquisitions in 2011. Id.
227 SNL Kagan, Broadband Cable Financial Databook, 2011 Edition, at 91.
228 SNL Kagan, Cable TV Investor: Deals & Finance, Dec. 30, 2011, at 2.
229 SNL Kagan, Broadband Cable Financial Databook, 2011 Edition, at 91.
230 SNL Kagan, Cable TV Investor: Deals & Finance, Dec. 30, 2011, at 1.
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average value per home passed and an average value per subscriber of $1,540 and $3,447 respectively in
2010.231
76.
In the first six months of 2012, cable MVPD transactions involved 206,000 subscribers
with a total value of $1.07 billion.232 This was dominated by a private equity group's sale of its 90
percent stake in Wave Broadband for $950 million to another private equity group.233 The average value
per home passed and the average value per subscriber was $1,447 and $5,186 respectively in the first half
of 2012.234
77.
Two transactions involving 1.5 million subscribers and valued at $7.94 billion were
announced in July 2012.235 Private equity groups are buying Suddenlink Communications from other
private equity groups for $6.6 billion.236 The average value per home passed and the average value per
subscriber for the Suddenlink transaction is $2,184 and $5,263 respectively.237 In addition, Canada-based
Cogeco is acquiring Atlantic Broadband Group LLC for $1.36 billion.238 The average value per home
passed and the average value per subscriber for the Atlantic Broadband transaction is $2,644 and $5,357
respectively.239 In February 2013, Charter Communications' $1.6 billion acquisition of Cablevision's
Bresnan Broadband Holdings, LLC ("Optimum West"), which serves 366,000 subscribers was
announced.240 This transaction, which was completed on July 1, 2013, has an average value per home
passed of $2,462 and an average value per subscriber of $5,345.241
78.
ACA notes that the number of cable systems has declined over the past five years.242
While acknowledging that the reduction is due, in part, to eliminating headends and interconnecting with
other cable systems, ACA maintains that some of the reduction is due to cable system closures (i.e., some
cable systems are not sold to new owners, they are simply shut down and video service to the area served

231 SNL Kagan, Broadband Cable Financial Databook, 2011 Edition, at 91.
232 SNL Kagan, Cable TV Investor: Deals & Finance, June 29, 2012, at 1. SNL Kagan explains that its estimated
value of transactions does not include WideOpenWest Networks LLC's $1.43 billion acquisition of Knology Inc.,
because the transaction involves primarily overbuilder subscribers. Including the overbuilder deal would boost the
total value of transactions for the first half of 2012 to $2.5 billion. Id.
233 Id.
234 Id.
235 SNL Kagan, Cable TV Investor: Deals & Finance, July 31, 2012, at 13-14.
236 Id. at 13.
237 Id. at 14.
238 Id. at 13.
239 Id. at 14.
240 Charter Communications, Inc., Charter to Acquire Optimum West from Cablevision (press release), Feb. 7, 2013.
See also Applications Filed for the Transfer of Control of Bresnan Broadband Holdings, LLC to Charter
Communications Inc.
, MB Docket No. 13-77, Public Notice, 28 FCC Rcd 3026 (MB 2013).
241 SNL Kagan, Cable TV Investor: Deals & Finance, Feb. 28, 2013, at 8. See Applications Granted for the
Transfer of Control of Bresnan Broadband Holdings, LLC to Charter Communications, Inc.
, MB Docket No. 13-77,
Public Notice, 28 FCC Rcd 7031 (MB 2013). See also Charter Communications, Inc., Charter Completes its
Acquisition of Optimum West from Cablevision
(press release), July 1, 2013.
242 ACA Comments at 5. ACA says that "between 2005 and 2011, the total number of cable systems has decreased
by more than 26%, shrinking from 7,208 to 5,312." Based on the Commission's COALS database, we estimate that
there were 7,798 cable systems in 2005 compared to the 5,127 we report for 2012. See supra, 24.
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by the cable system is terminated).243 ACA contends that over the past five years nearly 800 cable
systems serving over 35,000 subscribers have closed mostly in small and rural communities, leaving
those communities without any wireline MVPD service.244 ACA believes that the primary causes of
cable system closures in small and rural communities are increasing programming costs and pole
attachment fees.245
3.

MVPD Conduct

79.
The second element of our analysis of MVPD competition is an examination of the
conduct of MVPDs. In particular, we consider the business models and competitive strategies that
MVPDs have adopted to attract and retain subscribers and generate profits. In this section of the Report,
we discuss MVPD competition in terms of both price and non-price rivalry. We then provide an
overview of the current business models and competitive strategies of a sample of MVPDs.
a.

Price Rivalry

80.
Pricing represents one component of every MVPD's competitive strategy. Some MVPDs
market themselves as offering "premium" services while others market themselves as providing "value"
services. Over time, MVPDs have altered their pricing in response to changes in the competitive
landscape. Going forward, SNL Kagan anticipates greater experimentation with various programming
packages and pricing schemes.246 In addition, some cable operators are highlighting or separately listing
the costs of RSNs on subscribers' bill.247
81.
Today, the largest and most mid-sized MVPDs offer one or more high-end pricing plans
that include hundreds of channels and a complement of HD, DVR, VOD services, and some mix of
premium channels. In addition, these MVPDs offer one or more mid-priced video service plans that
include fewer channels and a smaller complement of video services. MVPDs offer, but are less likely to
market, lower-priced video service plans with fewer channels and few, if any, additional video services.248
An MVPD may charge different prices in the different cities and towns it serves. These differences may
reflect system upgrades or differences in the number of channels or advanced video services offered from
one city to the next. They also may reflect differences in the number of competitors or differences in the
competitive strategies competitors use in different locations.

243 Id. at 5.
244 Id. at 5-7. Although the FCC collects data that enable us to estimate the number of active and inactive cable
systems, we do not collect information on the reasons cable systems become inactive. In addition, our data do not
identify whether households previously served by a now inactive cable system are currently being served by another
cable system.
245 Id. at 8. In February 2013, the D.C. Court of Appeals upheld the Commission's 2011 Pole Attachment Order, in
which the Commission reformulated the rate ceiling that pole-owning utilities can charge telecommunication
carriers requesting to make pole attachments as well as clarified the rates cable operators must pay for their
commingled services. See American Electric Power Service Corp. v. FCC, No. 11-1146 (D.C. Cir. Feb. 26, 2013);
see also Implementation of Section 224 of the Act, WC Docket No. 07-245, Report and Order and Order on
Reconsideration, 26 FCC Rcd 5240, 5295-5327, 126-98 (2011) ("2011 Pole Attachment Order").
246 SNL Kagan, Cable TV Investor: Deals and Finance, Sept. 27, 2012, at 2.
247 See infra, 347.
248 Marketing includes the information prominently displayed on the MVPD's website. Our review of the websites
of a number of MVPDs suggests that it is often much easier to find the higher-priced video service plans than it is to
find the lowest price video service plan offered by the MVPD.
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82.
Discounts for New Subscribers. One of the most common pricing strategies among
MVPDs takes the form of reduced introductory or promotional prices for new subscribers. Typically,
these new subscriber discounts are for a limited time (e.g., six months or a year) and often include
additional video services (e.g., premium channels) or bundles of video, Internet access, and telephone
service. At the end of the introductory period, promotional materials usually indicate that prices will rise
to the "normal" price. For example,249 DIRECTV offers five video packages ranging from $29.99 per
month to $89.99 per month for 12 months after rebate with a 24-month agreement.250 According to
DIRECTV, the prices for these video packages are available only to new customers and represent a
savings of $35-$40 per month in the first year and $20 per month in the second year.251 A promotion by
Verizon offers FiOS TV Prime HD, Internet (15/5 Mbps), and telephone for $84.99 per month for one
year, without a contract.252 According to Verizon, the offer is available only to new customers who
subscribe online to a FiOS Triple Play bundle.253 Charter offers new customers triple bundles ranging
from $89.97 to $129.97 per month for 12 months.254 The price increases $20 per month during the second
year.255 MVPD advertisements typically note that prices at the end of the promotional period rise to the
"standard" rates. For example, Charter's promotional details state, "standard rates apply after 2 years."256
83.
Prices for Existing Subscribers. Some existing subscribers may be paying less than list
prices by negotiating discounts with their current MVPD, although MVPDs do not advertise such
discounts for existing subscribers.257 In this regard, DISH Network has communicated to its shareholders
that the company has offered free programming and/or promotional pricing for limited periods for
existing customers in exchange for a contractual commitment.258
b.

Non-Price Rivalry

84.
Central to every MVPD business model are decisions about where to offer services and
which technology to use to deliver video programming. Each specific technology has its own set of
advantages and disadvantages. Moreover, technologies change over time and the competitive advantages
of one technology may fade as new technologies are introduced. Originally, coaxial cable defined the
MVPD market. When DIRECTV and DISH Network began offering MVPD service in the 1990s, the

249 The examples included here are snapshots of recent offerings and may not reflect current service offerings and
prices available to new subscribers.
250 DIRECTV, http://www.directv.com/DTVAPP/new_customer/base_packages.jsp?footernavtype=-1 (visited Oct.
4, 2012).
251 Id.
252 Verizon, http://www22.verizon.com/home/aboutfios/ (visited Oct. 4, 2012).
253 Id.
254 Charter, https://connect.charter.com/landing/pages/DLP_Shell.aspx?id=12A (visited Oct. 4, 2012).
255 Charter, http://charter.com/footer/footerPage.jsp?tag=DISCLAIM_GLOBALOFFER (visited Oct. 4, 2012).
256 Id.
257 Brianna Golodryga, Maureen White, and Alice Gomstyn, Cut Your Bills With Just a Phone Call, ABC NEWS,
Jan. 23, 2009, http://abcnews.go.com/Business/Economy/story?id=6715239&page=1 (visited Nov. 29, 2012);
Lauren A. E. Schuker, Customers Say to Cable Firms, `Let's Make a Deal,' WALL ST. J., Dec. 29, 2011,
http://online.wsj.com/article/SB10001424052970203479104577124494272500550.html?mod=WSJ_hp_mostpop_re
ad (visited Nov. 29, 2012).
258 DISH Network 2011 Form 10-K at 5. Data on DISH Network's free programming or promotional prices for
existing customers is not available.
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digital DBS systems provided significantly greater channel capacity compared to existing analog cable
systems. Cable MVPDs upgraded their cable systems in response to DBS's technology advantage. These
upgrades included incorporating more optic fiber into coaxial networks and transitioning from analog to
digital technology. In addition, some telephone companies offer MVPD service using digital fiber-to-the-
node and/or digital fiber-to-the-home systems.259
85.
The different technologies used by MVPDs also affect the quality of bundled services,
which DBS operators argue are increasingly important to competition in the market for the delivery of
video programming.260 DIRECTV explains that its one-way system does not provide telephone or
Internet access service, so it has entered into cooperative arrangements with local exchange carriers in
certain markets to provide bundles (i.e., video programming from DIRECTV and telephone and Internet
access using digital subscriber line ("DSL") technology from the local exchange carriers).261 DIRECTV
explains that the Internet service provided over DSL does not offer the broadband capability available
through a fiber-based system (such as FiOS) or a DOCSIS 3.0 cable modem service.262 Because DSL
service is decreasingly viewed as an equivalent broadband service, DIRECTV maintains that DBS
operators increasingly find themselves at a competitive disadvantage.263 In 2012, DISH Network entered
into cooperative arrangements with ViaSat and Hughes to provide Internet service using two-way satellite
technology with speeds up to 10 Mbps.264
86.
To attract new subscribers and retain existing subscribers, MVPDs use various
competitive strategies, including, as described below, freeing up bandwidth for additional services,
delivering video to computers, tablets, and mobile devices, and differentiating their services from those of
competitors.
87.
Many cable MVPDs have transitioned or are in the process of transitioning their analog
channels to all digital to free up bandwidth for additional services (e.g., more digital channels, more HD
channels, more VOD programming, and faster Internet speeds).265 The transition requires deployment of

259 According to SNL Kagan, 298 telephone companies are deploying fiber-to-the-home to support facilities-based
video. Mari Rondeli, Telco video footprint for ILECs and CenturyLink to Double by 2016, Multichannel Market
Trends, SNL KAGAN, July 19, 2012, http://www.snl.com/Cache/snlpdf_48556f64-5ca0-4227-b77b-
7c6d3be1ad29.pdf (visited Jan. 28, 2013).
260 DIRECTV Comments at 1-2.
261 Id. at 4, 13, and 15-17. DIRECTV discusses the risk factors associated with competing in the MVPD industry
against cable and telephone MVPDs and other land-based systems that have the ability to offer video, Internet
access, telephone, and other two-way services. DIRECTV, SEC Form 10-K for the Year Ended December 31, 2012
at 20-21. The DIRECTV and DISH Network cooperative arrangements are typically with telephone and broadband
companies that do not offer video services in the same geographic area. For example, DIRECTV typically has
cooperative arrangements with Verizon to provide Internet access and telephone service where Verizon offers DSL
and not in areas where Verizon offers FiOS TV. Verizon, http://www22.verizon.com/home/directv/#packages
(visited Oct. 4, 2012).
262 DIRECTV Comments at 14-17.
263 Id. at 16-17.
264 DISH Network, DISH Launches dishNET Broadband, Bringing High-Speed Internet to Rural Americans with
Slow or No Access
(press release), Sept. 27, 2012.
265 One analog video program requires an entire 6 MHz channel. By converting analog signals to digital video
signals, the MVPD can carry 10 to 12 standard definition programs on a 6 MHz channel or two or three HD
programs on a 6 MHz channel. Ian Olgeirson, Cable's All-Digital Transition Marches on Without Universal
Support
, Multichannel Market Trends, SNL KAGAN, Dec. 14, 2011,
http://www.snl.com/interactivex/article.aspx?id=13843856&KPLT=6 (visited Oct. 10, 2012).
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additional set-top boxes and digital terminal adapters.266 At the end of 2012, the all-digital transition had
reached slightly more than half of the collective footprints of the top eight cable MVPDs.267 Among the
largest cable MVPDs, Comcast and Cablevision have moved aggressively to transition to all-digital.268
Other large cable MVPDs, such as Charter, Cox, Bright House, and Time Warner Cable, are moving
more slowly.269
88.
Cable MVPDs continue to transition from analog to all-digital systems. Using data from
FCC Form 325 for years 2009, 2010, 2011, and 2012, Tables 3 and 4 show the growth in the number of
all-digital cable systems for all cable systems with over 20,000 subscribers and for a sample of cable
systems with 5,000 to 20,000 subscribers, respectively. 270 We define an all-digital cable system as a
system that has no analog channels. Most cable systems with more than 20,000 subscribers remain
hybrid systems (i.e., they have both digital channels and analog channels). Hybrid systems, however, are
removing analog channels and replacing them with digital channels (i.e., they are becoming more
digital).271 No cable systems with more than 20,000 subscribers remain all analog.

266 Subscribers with analog televisions use a digital terminal adapter to convert digital signals to analog signals.
267 Ian Olgeirson, Cable's All-Digital Migration Makes Modest Gains in 2012, Multichannel Market Trends, SNL
KAGAN, Dec. 17, 2012, http://www.snl.com/interactivex/article.aspx?id=16632971&KPLT=6 (visited May 15,
2013).
268 Id.
269 Id.
270 We also collect FCC Form 325 data from a sample of cable systems with under 5,000 subscribers systems. Due
to data limitations, cable systems with less than 5,000 subscribers are not included in the charts. See also supra,
n.77.
271 Ian Olgeirion, Cable's All-Digital Migration Makes Modest Gains in 2012, Multichannel Market Trends, SNL
KAGAN, Dec. 17, 2012, http://www.snl.com/interactivex/article.aspx?id=16632971&KPLT=6 (visited May 15,
2013).
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Table 3: All Digital Cable Systems With More than 20,000 Subscribers

Total Systems

More than 20K

All Digital

Filing Year

Annual Growth %

Filed

Subs

Systems

2009
1074
596
18
2010
982
570
24
33%
2011
1062
576
50
108%
2012
1023
557
151
202%

Table 4: All-Digital Cable Systems With Between 5,000 and 20,000 Subscribers

Total Systems

All Digital

Filing Year

5K - 20K Subs

Annual Growth %

Filed

Systems

2009
1074
242
8
2010
982
252
15
88%
2011
1062
326
28
87%
2012
1023
282
63
125%
89.
Some cable operators are implementing another competitive strategy for reclaiming
bandwidth through the deployment of switched digital video ("SDV"). SDV frees up bandwidth because
it transmits only those digital channels that are being watched within a given group of homes at any given
time, rather than transmitting all digital channels to all subscribers at the same time. At the end of 2012,
approximately 43 percent of digital cable subscribers of the top eight cable MVPDs were served using
SDV.272 SNL Kagan explains that the choice between transitioning to all-digital systems and using SDV
is not mutually exclusive. Both transitioning to all-digital systems and employing SDV free up
bandwidth, and there is a broad expectation that cable MVPDs will need to do both to meet their long-
term bandwidth needs.273 Cablevision moved aggressively in the transition to all-digital systems and the
deployment of SDV. Comcast moved aggressively in the transition to all-digital systems but has been
slow to deploy SDV.274 Charter, Cox, Bright House, and Time Warner Cable have moved slowly in the
transition to all-digital systems, but all have moved aggressively to deploy SDV.275
90.
Another competitive strategy for freeing up bandwidth involves the migration to
managed IP video. The cable industry's initial efforts were directed at migrating VOD content to IP, but
the migration to IP is now targeted at moving some linear video content from MPEG/QAM to IP.276

272 Ian Olgeirson, Switched Digital Deployments Gain Depth, Little Breadth in 2012, Multichannel Market Trends,
SNL KAGAN, Dec. 20, 2012, http://www.snl.com/interactivex/article.aspx?id=16659391&KPLT=6 (visited May 15,
2013).
273 Id.
274 Id.
275 Id.
276 Ian Olgeirson, Cable's Managed IP Video Poised for Progress in 2013, Multichannel Market Trends, SNL
KAGAN, Dec. 21, 2012, http://www.snl.com/interactivex/article.aspx?id=16669807&KPLT=6 (visited June 25,
2013).
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Recent reports suggest that the cable industry's upcoming transition from the DOCSIS 3.0
telecommunications standard to the DOCSIS 3.1 telecommunications standard may facilitate migration to
an all IP network.277
91.
Another competitive strategy for attracting and retaining subscribers is the "TV
Everywhere" initiative, which allows consumers to access both linear and VOD programs on a variety of
in-home and mobile Internet-connected devices. To restrict access to TV Everywhere content, MVPDs
use an authentication process that requires a subscriber to select his or her MVPD service provider, then
provide a user ID and password. First introduced in 2010, SNL Kagan explains that TV Everywhere has
struggled to gain traction with consumers due to limited awareness of the product and the difficulty some
subscribers experience with the authentication process.278 Other impediments to the adoption of TV
Everywhere include licensing issues between MVPDs and programmers over content, limitations on
which devices may receive programs, and restrictions on which programs customers may access outside
their homes.279 Adoption of TV Everywhere increased when the 2012 Olympic Games were streamed
live and made available on demand online.280 SLN Kagan estimates 5.1 percent of MVPD subscribers
qualifying for TV Everywhere access viewed TV Everywhere videos in September 2012.281
92.
Cable companies also are incorporating WiFi hotspots to add value to their subscribers.282
A collaboration among Bright House Networks, Cox Communications, Cablevision's Optimum, Time
Warner Cable, and Comcast's Xfinity allows each company's Internet subscribers to access more than
150,000 WiFi hotspots.283 This means that Cablevision subscribers from New York can access Time
Warner Cable WiFi networks in Los Angeles, and vice versa.
93.
MVPDs continue to compete through attempts to differentiate their services from their
competitors' services. Some MVPDs differentiate their services by highlighting bundles of video,
Internet access, and telephone services while other MVPDs focus on video packages. The major cable
and telephone MVPDs focus their marketing on bundles.284 Their emphasis usually is that bundles offer
better prices for consumers, relative to individual service offerings. In contrast, the two DBS MVPDs

277 Brian Santo and Mike Robuck, DOCSIS 3.1 Takes Center Stage at Cable-Tec Expo, CED, Nov. 21, 2012,
http://www.cedmagazine.com/articles/2012/11/docsis-31-takes-center-stage-at-cable-tec-expo (visited Mar. 18,
2013).
278 Perkin di Grazia, Networks Have Their Own Plans for TV Everywhere, Economics of Internet Media, SNL
KAGAN, Sept. 27, 2012, http://www.snl.com/interactivex/article.aspx?id=15887619&KPLT=6 (visited Oct. 11,
2012).
279 Id.
280 Id.
281 Tony Lenoir, TV Everywhere Viewers Only 5.1% of Eligible Subscribers, Cable TV Investor: Deals & Finance,
SNL KAGAN, Oct. 30, 2012, at 14-16.
282 Robert Palmer, Cable's Extinct, WiFi's the Future, The Motley Fool, July 17, 2013,
http://beta.fool.com/robertnpalmer/2013/07/17/citywide-wi-fi-sposts/40304/ (visited July 17, 2013).
283 See http://www.cablewifi.com/ (visited July 17, 2013). See also Marguerite Reardon, Cable Companies Expand
Free Wi-Fi, CNET News, May 21, 2012, http://news.cnet.com/8301-1023_3-57438006-93/cable-companies-expand-
free-wi-fi/ (visited July 17, 2013).
284 See, e.g., Comcast, http://wwwb.comcast.com/ (visited Mar. 13, 2013); Time Warner Cable,
http://www.timewarnercable.com/en/residential-home.html (visited Mar. 13, 2013); Charter, http://charter.com/
(visited Mar. 13, 2013); Cablevision, http://www.cablevision.com/ (visited Mar. 13, 1013); AT&T,
http://www.att.com/shop/u-verse.html#fbid=1dQ9_R-dnE4 (visited Mar. 13, 2013); and Verizon,
http://www22.verizon.com/home/aboutFiOS/ (visited Mar. 13, 2013).
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focus their marketing on video services, in part, because the satellite technology they use for delivering
video programming limits their ability to provide non-video (i.e., Internet access and telephone)
services.285 To differentiate its service, DIRECTV offers the NFL Sunday Ticket, which is available only
on DIRECTV.286 And DISH Network differentiates its service by claiming it offers the lowest all-digital
package prices nationwide.287 Some MVPDs claim to offer more channels than competitors or more
channels of a specific type. Verizon claims that FiOS TV offers more children's, sports, and premium
movie channels than cable.288
94.
Some MVPDs differentiate their service by claiming they offer superior quality. Verizon
claims that FiOS TV customers rate FiOS picture quality higher than cable and satellite customers rate
their own.289 Some MVPDs claim to offer better DVR or VOD service. DISH Network claims that its
Hopper DVR, which can record up to six channels at once and automatically skip commercials, is the
most advanced DVR available.290 Comcast claims to offer the world's largest collection of VOD
television shows and movies.291 Some MVPDs attempt to differentiate their services through better
customer service. For example, Charter's new ALL IN Customer Guarantee assures customers that the
company will deliver what it says it will, backed with financial commitments.292 DIRECTV explains that
customer service and top rankings in customer satisfaction studies are important elements in minimizing
subscriber cancelation and attracting new subscribers.293
c.

Business Models and Competitive Strategies of Select MVPDs

95.
The MVPD group is comprised of 1,141 cable MVPDs, two DBS MVPDs, two large
telephone MVPDs and many smaller telephone MVPDs.294 Although each MVPD has its own business
model and competitive strategy, as suggested above, there are some similarities within types of MVPDs.
Below, we provide an overview of the business models and competitive strategies focusing on three large
cable MVPDs (Comcast, Time Warner, and Charter) and a few selected mid-sized and smaller cable
MVPDs (Cable ONE, Midcontinent Communications, Shentel, Inter Mountain Cable, and Rainbow
Communications). We also provide an overview of the business models and competitive strategies of the
two DBS MVPDs (DIRECTV and DISH Network). Finally, we provide an overview of the business
models and competitive strategies of five telephone MVPDs (i.e., AT&T, Verizon, CenturyLink,
Consolidated Communications, and Cincinnati Bell).

285 See, e.g., DIRECTV, http://www.directv.com/ (visited Mar. 13, 2013); and DISH Network,
http://www.dish.com/ (visited Mar. 13, 2013).
286 DIRECTV, http://www.directv.com/DTVAPP/ (visited Oct. 10, 2012).
287 DISH Network, http://www.dish.com/why-dish/ (visited Oct. 10, 2012).
288 Verizon, http://www22.verizon.com/home/fiostv/ (visited Oct. 10, 2012).
289 Verizon, http://www22.verizon.com/home/aboutfios/ (visited Oct. 10, 2012).
290 DISH Network, http://www.dish.com/technology/hopper/ (visited Oct. 11, 2012). See infra, 115, n.380. See
also infra
, 357.
291 Comcast, http://www.comcast.com/Corporate/Learn/DigitalCable/digitalcable.html (visited Oct. 11, 2012).
292 Charter, Charter Backs Up Commitment to a Better Experience with New Customer Guarantee (press release),
Mar. 12, 2012.
293 DIRECTV 2011 Form 10-K at 3. See also DIRECTV 9/10/12 Comments at 7-8 (where DIRECTV says that
excellent programming and innovative products alone are not sufficient to compete in the MVPD market. Excellent
customer service is an integral part).
294 See supra, 17, 24.
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(i)

Cable MVPD Business Models and Competitive Strategies

96.
Large Incumbent Cable MVPDs. In this category, we focus primarily on the business
models and competitive strategies of three of the largest cable MVPDs: Comcast, Time Warner Cable,
and Charter. Comcast is the largest cable MVPD and the largest MVPD, with 22.1 million video
subscribers clustered in the mid-Atlantic, Chicago, Denver, and Northern California.295 Comcast is a
vertically integrated MVPD with ownership interests in numerous networks. Comcast has interests in
national networks including E!, Golf Channel, Versus, Style, G4, Bravo, Chiller, CNBC, MSNBC,
Oxygen, Sleuth, SyFy, and The Weather Channel.296 Comcast also has interests in numerous regional
sports networks ("RSNs").297 In addition Comcast has ownership interests in the NBC network and its
owned and operated ("O&O") NBC affiliated local television stations, the Telemundo network and its
O&O Telemundo affiliated local television stations, and Universal Pictures.298
97.
Time Warner Cable is the second largest cable MVPD and the fourth largest MVPD, with
12.5 million video subscribers clustered in five geographic areas New York State (including New York
City), the Carolinas, Ohio, Southern California (including Los Angeles), and Texas.299 Time Warner
Cable has ownership interests in national networks including MLB, MLS Direct Kick, NBA League Pass,
NHL Center Ice, and Team HD, and numerous regional news networks and RSNs.300
98.
Charter is the fourth largest cable MVPD, with 4.3 million video subscribers clustered in
the far West, Northeast, Southeast, Michigan, Wisconsin, and Minnesota. Charter also has ownership
interests in an RSN.301 Several years ago, the company experienced net losses and entered bankruptcy. It
emerged from protection under Chapter 11 of the Bankruptcy Code in November 2009.302
99.
Technology. Comcast, Time Warner Cable, and Charter all use hybrid fiber optic and
coaxial cable networks that provide two-way transmissions.303 The Comcast and Time Warner Cable
systems provide at least 750 MHz capacity. The Charter systems provide at least 550 MHz capacity. As
noted above, Comcast has moved aggressively to transition its cable systems to all-digital systems but has
not deployed SDV.304 Comcast recently introduced a cloud-enabled platform known as X1, intended to

295 At the end of June 2012, Comcast passed 52.8 million homes but subscribership had declined to 22.1 million.
Comcast 9/10/12 Comments at 4.
296 For a list of Comcast's national programming interests, see Appendix B, Table B-1.
297 For a list of Comcast's regional programming interests, see Appendix C, Table C-1.
298 Comcast 2011 Form 10-K at 1.
299 Time Warner Cable, SEC Form 10-K for the Year Ended December 31, 2011, at 1 ("Time Warner Cable 2011
Form 10-K").
300 For a list of Time Warner Cable's programming interests, see Appendix B, Table B-1 and Appendix C, Table C-
1.
301 Comcast/Charter Sports Southeast and Comcast/Charter Sports Southeast HD.
302 Charter 2011 Form 10-K at 1.
303 For a summary of the technology used by Comcast, Time Warner Cable, and Charter, see Comcast 2011 Form
10-K at 5-6; Time Warner Cable 2011 Form 10-K at 7-8; Charter 2011 Form 10-K at 7-8.
304 Ian Olgeirson, Cable's All-Digital Transition Marches on Without Universal Support, Multichannel Market
Trends, SNL KAGAN, Dec. 14, 2011, http://www.snl.com/interactivex/article.aspx?id=13843856&KPLT=6 (visited
Oct. 10, 2012); and Ian Olgeirson, Switched Digital Footprint Growth Slowed by Divided MSO Priorities,
Multichannel Market Trends, SNL KAGAN, Dec. 19, 2011,
(continued....)
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enable Comcast to add new features and functions without having to swap out a subscriber's set-top
receiver.305 It also introduced XfinityTV on Xbox 360, which is Comcast's first nationwide deployment
of an IP-based cable service.306 Time Warner Cable has transitioned only its New York and Los Angeles
cable systems to all-digital systems but has deployed SDV in all of its service areas.307 Time Warner
Cable also offers a simulcast of its tradition linear lineups in IP.308 Charter has signaled its intent to
transition its systems to all digital but actual deployments are not expected until 2013.309
100.
Programming Packages. Like most cable MVPDs, Comcast, Time Warner Cable, and
Charter offer various tiers of residential video programming. Pursuant to statutory requirements, all video
subscribers receive the basic service tier, which provides 15 to 40 channels consisting of local broadcast
stations, PEG channels, and a few additional non-broadcast channels.310 At the top end, these three cable
MVPDs offer digital video service with access to hundreds of channels.311 The digital video service
includes all the channels offered on the basic tier (15-40 channels), the expanded basic tier (40-60
channels), one or more digital packages, and the option to add specialty digital packages of genre-based
programming.312 Specialty channel packages often include a sports package, a movie package, and a
family package. Digital video subscribers may also purchase premium channels, such as HBO,
Showtime, Starz, and Cinemax, which generally offer, without commercial interruption, movies, original
programming, live and taped sporting events, concerts, and other special features. These three cable
MVPDs offer channels and packages that appeal to different audiences.313 For example, Time Warner
Cable offers El Paquetazo, with English and Spanish-language channels designed to appeal to Hispanics,
and Time Warner Cable TV Essentials, which targets budget-conscious customers.314
101.
HD, VOD, and DVR Services. Comcast, Time Warner Cable, and Charter offer over 100
HD channels.315 These usually include the major broadcast networks, leading national cable networks,
(Continued from previous page)
http://www.snl.com/interactivex/article.aspx?id=13887707&KPLT=6 (visited Oct. 10, 2012). See also Comcast
Comments at 3-4.
305 Comcast 9/10/12 Comments at 5-6.
306 Id. at 7.
307 Ian Olgeirson, Cable's All-Digital Transition Marches on Without Universal Support, Multichannel Market
Trends, SNL KAGAN, Dec. 14, 2011, http://www.snl.com/interactivex/article.aspx?id=13843856&KPLT=6 (visited
Oct. 10, 2012).
308 Ian Olgeirson, Cable's Managed IP Video Poised for Progress in 2013, Multichannel Market Trends, SNL
KAGAN, Dec. 21, 2012, http://www.snl.com/interactivex/article.aspx?id=16669807&KPLT=6 (visited Mar. 27,
2013).
309 Ian Olgeirson, Cable's All-Digital Migration Makes Modest Gains in 2012, Multichannel Market Trends, SNL
KAGAN, Dec. 17, 2012, http://www.snl.com/interactivex/article.aspx?id=16632971&KPLT=6 (visited Mar. 27,
2013).
310 47 U.S.C. 543(b)(7).
311 Comcast offers over 300 channels and Time Warner Cable offers over 400 channels. Comcast 2011 Form 10-K
at 3; Time Warner Cable 2011 Form 10-K at 2.
312 The basic digital tier usually includes 30 to 40 music channels.
313 For a description of Comcast's program offerings to Hispanic and other audiences, see Comcast 9/10/12
Comments at 11-13.
314 Time Warner Cable 2011 Form 10-K at 3.
315 For example, Time Warner Cable offers over 140 HD channels. Id.
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premium channels, and RSNs. HD channels are generally provided at no additional charge. Additional
charges generally apply only for packages of HD channels that do not have standard-definition
counterparts. In addition to standard definition and HD channels, these three cable MVPDs offer
thousands of standard definition and HD programs through their VOD services.316 Many VOD programs
are offered to digital video subscribers at no additional charge. In addition, digital video customers who
subscribe to premium channels have access to the premium network's VOD content without additional
fees. VOD service also offers a selection of movies and special events on a pay-per-view basis. The
DVR service offered by these three cable MVPDs for an additional monthly fee allows digital video
subscribers to select, record, and store programs on their set-top boxes, as well as pause and rewind "live"
television. Time Warner Cable and Charter also offer whole-home or multi-room DVR service, which
allows a program recorded on a DVR to be watched on any connected television in a subscriber's
home.317 Time Warner Cable also offers Start Over, which enables digital video subscribers using a Time
Warner Cable-provided set-top box to restart select "in progress" programs directly from the relevant
channel and Look Back, which extends the window for viewing a program to 72 hours after it has
aired.318 All three cable MVPDs offer the ability to view television listings and to program DVRs online
using a computer, smartphone, or tablet.
102.
TV Everywhere. Comcast, Time Warner Cable, and Charter offer subscribers the ability
to view video content online using Internet connected devices (e.g., computers, smartphones, and
tablets).319 For example, in February 2012, Comcast launched Xfinity Streampix, a new service that
enables Comcast's cable subscribers to watch movies and television programs as a VOD service on their
televisions, and as streaming video on an authenticated basis on Internet connected devices.320 Most of
the video content available online is VOD content. Recently, however, these three cable MVPDs began
streaming live video content. For example, Comcast, in 2012, began streaming certain live television
programming in some of its markets.321 Most of the streaming live video content delivered to mobile
devices is currently restricted to viewing while in the home.322 Time Warner Cable, for example, enables
video subscribers to watch live cable channels on mobile devices on their premises.323 Currently, most of
the live video content available to mobile devices outside the home is dominated by sports, such as ESPN,
Speed2, and the Big Ten Network.324

316 For example, Comcast's VOD service provides digital video customers with more than 30,000 programming
choices, with 6,000 in HD. Comcast 2011 Form 10-K at 3.
317 This service is generally referred to as whole home DVR service.
318 Time Warner Cable 2011 Form 10-K at 3.
319 Comcast, http://wwwb.comcast.com/Corporate/Learn/DigitalCable/digitalcable.html (visited Oct. 23, 2012);
Time Warner Cable, http://www.timewarnercable.com/en/residential-home/tv/features/twc-tv.html (visited Oct. 23,
2012); Charter, http://www.myaccount.charter.com/customers/support.aspx?menuitem=2 (visited Oct. 23, 2012).
320 Comcast Comments at 8-9.
321 Comcast 2011 Form 10-K at 4; and Comcast Comments at 8-11.
322 In 2012, Comcast began offering the AnyPlay device in select markets, which allows subscribers to stream linear
programming on iPad and Android-based tablets in and around the home using a WiFi connection. Comcast
Comments at 7.
323 Time Warner Cable 2011 Form 10-K at 3; and Time Warner Cable,
http://www.timewarnercable.com/en/residential-home/tv/features/twc-tv.html (visited Oct. 23, 2012).
324 Id. and Charter 2011 Form 10-K at 6.
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103.
Bundling. Like most cable MVPDs, Comcast, Time Warner Cable, and Charter sell
video services separately, but promote bundled packages of video, Internet access, and telephone services
provided over their own two-way cable systems.325 Cable MVPDs promote bundling as a way for
subscribers to save money, relative to purchasing these services separately. More recently, Comcast and
Time Warner Cable have begun offering bundles that include mobile wireless services through
cooperative arrangements with Verizon Wireless.326 To promote these quadruple bundles, Comcast and
Time Warner Cable have recently offered gift cards, rather than price discounts for the services.327 In
May, 2012, SNL Kagan reported that Comcast and Time Warner Cable offered the quadruple bundle (i.e.,
video, Internet access, wireline telephone, and mobile wireless) in 15 markets, but none of these markets
overlapped with those served by Verizon FiOS.328
104.
Small and Midsized Incumbent Cable MVPDs. In this category, we consider five cable
MVPDs: Cable ONE, Midcontinent Communications, Shentel, Inter Mountain Cable, and Rainbow
Communications. All five small and mid-sized cable MVPDs described in this section have upgraded or
are in the process of upgrading their cable systems. One MVPD is transitioning to an all-digital system,
and another is using FTTH in one of its cable systems. Although small and midsized cable MVPDs may
sometimes offer fewer total channels, fewer HD channels and VOD offerings, less advanced DVRs, and
less TV Everywhere, relative to the offerings of the largest MVPDs, some may also offer lower prices,
relative to the largest MVPDs.
105.
Cable ONE is a subsidiary of the Washington Post Company and the ninth largest cable
MVPD with 612,729 video subscribers, representing about 44 percent of the 1.4 million homes it passes
in 19 Midwestern, Western, and Southern states.329 Cable ONE offers an Economy video package with
up to 20 channels for $20 per month, a Standard video package with up to 100 channels for $33 per
month, and a Digital Value package with 40 additional channels for an additional $10 per month.330

325 At the end of June 2012, almost 40 percent of Comcast video subscribers purchased the triple-play bundle.
Comcast Comments at 17.
326 Comcast, http://www.comcast.com/wireless (visited Oct. 23, 2012). See also
http://www.dslreports.com/shownews/Cox-Time-Warner-Cable-Expand-Verizon-Wireless-Partnership-
121744?nocomment=1 (visited Oct. 23, 2012). In August 2012, the Commission approved Verizon Wireless's
purchase of spectrum from several cable companies. As part of the spectrum transfer, Verizon Wireless entered into
commercial agreements with the respective cable companies that, among other things, permitted the cross-selling of
services. While the Commission found the commercial agreements as originally drafted to be contrary to the public
interest, the Commission and the DOJ Antitrust Division negotiated a Consent Decree with the parties that preserves
the agreements without harming consumers or competition. See Applications of Cellco Partnership d/b/a Verizon
Wireless and SpectrumCo LLC and Cox TMI, LLC for Consent to Assign AWS-1 Licenses
, WT Docket No. 12-4,
Memorandum Opinion and Order and Declaratory Ruling, 27 FCC Rcd 10698, 10700, 10750-53, 6, 139, 143-44
(2012).
327 Id.
328 Michelle Ow, Verizon Wireless Partnerships Bring Quad-Play to 15 Markets, Cable TV Investor: Deals &
Finance, SNL KAGAN, May 31, 2012, at 9-10.
329 The Washington Post Company, SEC Form 10-K for the Period Ending December 31, 2011, at 13; and SNL
Kagan, Top Cable MSOs,
http://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2012Q2&sortcol=subscribersbasic&sortorder=desc
(visited Nov. 14, 2012).
330 Cable ONE, https://www.cableone.net/FYH/Pages/cabletvservices.aspx (visited Nov. 14, 2012).
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Cable ONE offers HD service, but its VOD service is limited to pay-per-view; its DVR service is not
whole-home; and it does not offer TV Everywhere.331
106.
Midcontinent Communications is the 15th largest cable MVPD with 229,359 video
subscribers in 340 communities throughout South Dakota, North Dakota, and Minnesota.332 In late 2010,
Midcontinent began converting its cable systems from analog to digital.333 In 2011, the company reported
that many of its cable systems had been converted to all digital cable.334 In 2011, Midcontinent
completed acquisition of 113 Minnesota and Wisconsin cable franchises from U.S. Cable, which added
approximately 86,000 homes and 33,000 subscribers to Midcontinent's cable systems.335 Midcontinent
offers hundreds of channels, HD, and TV Everywhere service.336 The VOD service offers free
programming from more than 40 networks but the DVR is not whole home.337 Midcontinent offers its
own MidcoSN sports network, which provides live game coverage from high schools and colleges in
South Dakota, North Dakota, and Minnesota.338
107.
Shentel is the 27th largest cable MVPD with 62,737 video subscribers. Shentel is a
diversified telecommunications holding company with three segments (wireless, wireline, and cable)
operating in the Southeastern United States.339 In the past four years Shentel has expanded its cable
MVPD service beyond its home base in Shenandoah County, Virginia, through a series of cable
acquisitions.340 The company now owns cable systems in West Virginia, Southern and Southwestern
Virginia, and Western Maryland.341 Shentel has been upgrading the acquired cable systems and
completed all but one system at the end of 2012.342 The final cable system to be upgraded is McDowell
County, West Virginia. Shentel states that "due to the extremely poor condition of the existing facilities,
we are constructing a completely new Fiber-to-the-Home broadband network."343 Shentel offers an

331 Id.
332 Midcontinent, http://www.midcocomm.com/aboutmidcontinent/ (visited Nov. 14, 2012); and SNL Kagan, Top
Cable MSOs
,
http://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2012Q2&sortcol=subscribersbasic&sortorder=desc
(visited Nov. 14, 2012).
333 Midcontinent, Next Generation Internet Service Doubles Speeds for Midcontinent Customers (press release),
July 14, 2011. See also Midcontinent, http://www.midcocomm.com/pressroom/videolibrary/?video=All-Digital-
Cable---The-More-youre-looking-for!--_50 (visited Mar. 18, 2013).
334 Midcontinent, http://www.midcocomm.com/_files/files/ADC_Schedule.pdf (visited Mar. 18, 2013). The
company reports that it is upgrading Basic Cable channels 23-99 to a digital signal.
335 Midcontinent, Midcontinent Communications Purchases Systems from US Cable (press release), Oct. 3, 2011.
336 Midcontinent, http://www.midcocomm.com/video/; and http://www.midcocomm.com/video/tveverywhere/
(visited Nov. 14, 2012).
337 Midcontinent, http://www.midcocomm.com/video/ondemand/; and
http://www.midcocomm.com/video/equipment/ (visited Nov. 14, 2012).
338 Midcontinent, http://www.midcocomm.com/video/featuresoptions/ (visited Nov. 14, 2012).
339 Shentel 2011 Form 10-K at 5.
340 Id. at 7.
341 Id.
342 Shentel, 2012 Annual Report, at 5.
343 Id. See also Shentel, Shentel Brings Faster Internet, Clearer TV and Home Phone Service to McDowell County
(press release), Sept. 7, 2012.
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Economy package with 20 channels for $25.95 per month, an Essentials package with approximately 68
channels for $55.95 per month, and a Digital Essentials package with an additional 64 digital channels for
$68.95 per month.344 There is an additional fee of $11.95 per month for HD channels; VOD service is
limited to pay-per-view; the DVR is not whole home; and there is no offering of TV Everywhere.345
108.
Inter Mountain Cable is the 40th largest cable MVPD with 18,519 video subscribers in
Virginia, West Virginia, and Kentucky.346 In addition to a basic package with 13 channels for $22.95 per
month, and an expanded basic package with an additional 57 channels for $64.95 per month, Inter
Mountain offers digital service in some of its markets.347 The digital package includes approximately 80
standard-definition digital channels for an additional $14.95 per month.348 There is an additional fee of
$8.95 per month for 44 HD channels; VOD is limited to pay-per-view; the DVR is not whole-home; and
there is no offering of TV Everywhere.349
109.
Rainbow Communications is the 53rd largest cable MVPD with 5,759 video subscribers
in Northeast Kansas.350 Rainbow has been a telecommunications company since 1952 and entered the
MVPD market in 2005 with the purchase of Carson Communications.351 Rainbow offers five different
video packages, but not all packages are available in all of the communities it serves. The Basic package
includes 16 channels for $26 per month; a Bronze package includes 64 channels for $46.50 per month; a
Silver package includes 130 channels for $61.50 per month; a Gold package includes 175 channels for
$106.50 per month; and a Platinum package includes 200 channels for $116.50 per month.352 Rainbow
offers approximately 40 HD channels.353 VOD is limited to pay-per-view; the DVR is not whole home;
and there is no offering of TV Everywhere.354

344 Shentel, https://www.shentel.com/montgomery-county/shop/tv (visited Nov. 14, 2012).
345 Shentel, https://www.shentel.com/montgomery-county/shop/tv/hd%20package;
https://www.shentel.com/montgomery-county/shop/tv/hddvr%20package; and
https://www.shentel.com/montgomery-county/shop/tv/digital%20essentials (visited Nov. 14, 2012).
346 Inter Mountain Cable, http://imctv.com/index.html (visited Nov. 14, 2012); and SNL Kagan, Top Cable MSOs,
http://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2012Q2&sortcol=subscribersbasic&sortorder=desc
(visited Nov. 14, 2012).
347 Inter Mountain Cable, http://imctv.com/digital_tv.html; and http://imctv.com/digital_tv/digital_tv_pricing.html
(visited Nov. 14, 2012).
348 Inter Mountain Cable, http://imctv.com/digital_tv/digital_tv_pricing.html (visited Nov. 14, 2012).
349 Inter Mountain Cable, http://imctv.com/digital_tv/digital_tv_pricing.html;
http://imctv.com/digital_tv/high_definition.html; http://imctv.com/video_on_demand.html, and
http://imctv.com/digital_tv/dvr.html (visited Nov. 14, 2012).
350 Rainbow, http://www.rainbowtel.net/about/index.php (visited Nov. 14, 2012); SNL Kagan, Top Cable MSOs,
http://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2012Q2&sortcol=subscribersbasic&sortorder=desc
(visited Nov. 14, 2012).
351 Rainbow, http://www.rainbowtel.net/about/history.php (visited Nov. 14, 2012).
352 Rainbow, http://www.rainbowtel.net/services/television/index.php (visited Nov. 14, 2012).
353 Rainbow, http://www.rainbowtel.net/services/television/hdtv.php (visited Nov. 14, 2012).
354 Rainbow, http://www.rainbowtel.net/services/television/payPerView.php;
http://www.rainbowtel.net/services/television/dvr.php (visited Nov. 14, 2012).
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(ii)

DBS MVPD Business Models and Competitive Strategies

110.
DIRECTV is the second largest MVPD, with approximately 19.9 million subscribers in
the United States.355 The company is organized into two operating segments: DIRECTV U.S. and
DIRECTV Latin America.356 Since November 2009, DIRECTV has had ownership interests in three
RSNs, and a 60 percent interest in Game Show Network, a cable television network dedicated to game-
related programming and Internet interactive game playing.357
111.
DISH Network is the third largest MVPD, with approximately 14.1 million
subscribers.358 The company does not have significant ownership interests in programming networks. In
2011, DISH Network acquired Blockbuster, Inc. and now offers movies online through the
blockbuster.com website and the BLOCKBUSTER On Demand service.359
112.
Technology. DIRECTV and DISH Network use geostationary satellites to deliver all-
digital video programming to subscribers with small satellite dish antenna connected to one or more set-
top receivers.360 In contrast to upgraded cable systems, which have larger bandwidth and use two-way
technology, DBS systems have less bandwidth and use one-way technology. To deliver two-way video
services like VOD, DIRECTV and DISH Network subscribers must also subscribe to a broadband
service.361 Although DBS systems have the disadvantage of using one-way technology, they have the
advantage of providing a nationwide footprint.362 As such, DBS systems provide service to areas with
low population density and can add subscribers anywhere in the United States with minimal incremental
infrastructure cost.363
113.
Programming Packages. DIRECTV and DISH Network offer all-digital English
language, Spanish language, and International packages ranging from an 18 video channel East Asian
package to a 295 video and music channel package.364 Differences in packages are based, in part, on the

355 DIRECTV, DIRECTV Announces Second Quarter 2012 Results (press release), Aug. 2, 2012.
356 In this Report, we focus only on the DIRECTV U.S. segment.
357 DIRECTV 2011 Form 10-K at 2.
358 DISH Network, DISH Network Announces Second Quarter 2012 Financial Results (press release), Aug. 8, 2012.
359 DISH Network 2011 Form 10-K at 5.
360 DIRECTV uses 12 geosynchronous satellites, including eleven owned satellites and one leased satellite.
DIRECTV 2011 Form 10-K at 7. DISH Network uses 13 satellites, including six owned satellites and seven leased
satellites. DISH Network 2011 Form 10-K at 7.
361 DIRECTV says that its VOD content requires an HD DVR connected to a broadband service and a DIRECTV
CINEMA Connection kit. DIRECTV, http://www.directv.com/technology/on_demand?footernavtype=-
1&lpos=header#learnmore (visited Oct. 23, 2012). DISH Network says that its VOD content requires an HD DVR
connected to broadband. DISH Network, http://www.dish.com/entertainment/vod/ (visited Oct. 23, 2012).
362 In addition to the contiguous 48 states, DIRECTV states that it provides the same programming packages for the
same prices to customers in Alaska and Hawaii. DIRECTV Comments at 14. DISH Network also appears to offer
similar programming packages to the contiguous 48 states and Alaska and Hawaii. See SatelliteSales.com,
http://www.satellitesales.com/ak-fairbanks-dish-network.html; D&M Satellite Solutions,
http://www.dishtvhawaii.com/ (visited Nov. 9, 2012). Subscribers in Alaska and Hawaii require slightly larger (1.2
meter) receiving antennas than subscribers in the lower 48 states. DIRECTV Comments at 14.
363 DIRECTV 2011 Form 10-K at 4.
364 DIRECTV, http://www.directv.com/DTVAPP/new_customer/base_packages.jsp,
http://www.directv.com/DTVAPP/new_customer/base_packages.jsp?language=SPANISH,
http://www.directv.com/DTVAPP/content/packages/international?footernavtype=-1&lpos=header; and DISH
(continued....)
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number of premium channels and regional sports channels included.365 DIRECTV provides local
broadcast channels to approximately 99 percent of U.S. households and DISH Network provides local
broadcast channels to all households.366 DIRECTV has exclusive rights through 2014 to offer the NFL
Sunday Ticket package, which allows subscribers to view the largest selection of National Football
League ("NFL") games, including rights to provide related broadband, HD, VOD, interactive and mobile
services.367 DISH Network promotes its programming packages as providing a better "price-to-value"
relationship than those available from other MVPDs by offering the lowest everyday prices after
introductory promotions expire.368
114.
HD, VOD, and DVR Services. DIRECTV reports that it provides one of the most
extensive HD offerings with over 170 national HD channels, and DISH Network indicates that it offers
more HD channels than most MVPDs.369 DIRECTV provides local broadcast channels in HD to 96
percent of U.S. households, and DISH Network provides local broadcast channels in HD to 97 percent of
U.S. households.370 Both DBS MVPDs offer VOD service but deliver most or all VOD content over
broadband, which requires DBS subscribers to also subscribe to a broadband service provided by a
separate entity. DIRECTV offers over 10,000 television shows and movies on demand.371 DIRECTV
provides some VOD by "pushing" movies from its satellites to the subscriber's DVR.372 Most VOD,
however, is delivered by connecting the subscriber's HD DVR to a broadband service using a DIRECTV
CINEMA Connection Kit.373 Subscribers access DISH Network's VOD content by connecting their HD
DVRs to broadband service.374 Some of DISH Network's HD DVRs are IP-compatible and can be
connected directly to broadband service, without the need for additional equipment.375
115.
In 2011, DIRECTV introduced the "Home Media Center," a whole-home HD DVR
service with a terabyte hard drive, which can record five programs simultaneously.376 In 2012, DIRECTV
added remote viewing capability to its Home Media Center, which allows subscribers to view and control
(Continued from previous page)
Network, http://www.dish.com/entertainment/packages/ (visited Oct. 24, 2012). See also DIRECTV Comments at
10-12.
365 Id.
366 DIRECTV offers local television service in 194 of Nielsen's 210 designated market areas ("DMAs"). DIRECTV
2011 Form 10-K at 2. See also DIRECTV Comments at 10. DISH Network offers local television service in all 210
DMAs. DISH Network 2011 Form 10-K at 2.
367 DIRECTV 2011 Form 10-K at 2-3.
368 DISH Network 2011 Form 10-K at 1-2.
369 DIRECTV 2011 Form 10-K at 2. DISH Network 2011 Form 10-K at 1.
370 DIRECTV 2011 Form 10-K at 2. DISH Network 2011 Form 10-K at 2. DIRECTV provides local television
service in HD in 183 markets. DIRECTV 9/10/12 Comments at 10.
371 DIRECTV, http://www.directv.com/technology/on_demand?footernavtype=-1&lpos=header (visited Oct. 24,
2012).
372 DIRECTV 2011 Form 10-K at 2.
373 DIRECTV, http://www.directv.com/technology/on_demand?footernavtype=-1&lpos=header (visited Oct. 24,
2012).
374 DISH Network, http://www.dish.com/entertainment/vod/ (visited Oct. 24, 2012).
375 DISH Network 2011 Form 10-K at 2.
376 DIRECTV 2011 Form 10-K at 5. See also DIRECTV Comments at 6.
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content from the Home Media Center to other rooms in the house.377 The remote viewing capability also
allows subscribers to watch live or recorded programs on televisions and other devices with a consistent
user interface across devices.378 Recently, DIRECTV introduced Genie, which DIRECTV claims is the
most advanced HD DVR to date, with three times more HD recording capacity than cable.379 DISH
Network asserts that to maintain and enhance its competitiveness over the long term, it recently
introduced the Hopper, a whole-home HD DVR receiver, which can record up to six programs and allows
customers to automatically skip commercials in primetime television on ABC, CBS, FOX, and NBC.380
116.
TV Everywhere. DIRECTV's TV Everywhere service offers a large amount of VOD
content to stationary and mobile devices in the home and outside the home.381 This service also allows
subscribers to watch live programming on some mobile devices in their home.382 Live programming to
mobile devices outside the home is limited but includes NFL Sunday Ticket To Go.383 To provide TV
Everywhere, DISH Network uses online access and Slingbox "placeshifting" technology.384
DISHOnline.com gives DISH subscribers the ability to watch television programs, movies, and clips
online.385 DISH Remote Access, which uses a Sling Adapter, provides the same live channels and shows
received at home and can be accessed on smartphones and tablets anywhere where there is Internet
access.386 DISH Network also owns and offers Blockbuster@Home, which gives DISH subscribers
access to more than 100,000 DVD movies, television shows, and games by mail with unlimited in-store
exchanges, streaming access on their television to more than 10,000 movies and television shows, and
online access on their computer to more than 25,000 movies and television shows.387

377 Id.
378 Id.
379 DIRECTV, http://www.directv.com/technology/genie (visited Oct. 24, 2012).
380 DISH Network 2011 Form 10-K at 1; DISH Network, http://www.dish.com/technology/hopper/ (visited Oct. 24,
2012). See Dish Network L.L.C., Hopper Whole-Home HD DVR System Now Available From Dish (press
release), Mar. 15, 2012, http://about.dish.com/press-release/products-and-services/hopper-whole-home-hd-dvr-
system-now-available-dish (visited Nov. 26, 2012). Several broadcast networks have filed suit alleging that Dish's
Hopper technology infringes on their copyrights and breaches their contracts with Dish. Don Jeffrey, Dish Tells
Judge Ad-Free TV Suits Should Be in New York
, BLOOMBERG, July 3, 2012, at
http://www.businessweek.com/news/2012-07-02/dish-tells-judge-tv-ad-skipping-case-should-be-heard-in-new-york
(visited Nov. 26, 2012). While the case is still pending, a California court recently denied the broadcasters a
preliminary injunction against the Hopper. John Eggerton, Court Denies Fox Injunction Against Dish's Hopper,
MULTICHANNEL NEWS, Nov. 8, 2012, at http://www.multichannel.com/distribution/court-denies-fox-injunction-
against-dishs-hopper/140179 (visited Nov. 26, 2012).
381 DIRECTV, http://www.directv.com/entertainment/?lpos=header; and
http://www.directv.com/technology/directv_everywhere (visited Oct. 24, 2012). See also DIRECTV Comments at
5-6.
382 DIRECTV 2011 Form 10-K at 5.
383 Id.; and DIRECTV, http://www.directv.com/technology/mobile_apps?footernavtype=-1&lpos=header (visited
Oct. 25, 2012).
384 DISH Network 2011 Form 10-K at 1.
385 Id. at 2.
386 DISH Network, http://www.dish.com/technology/tv-everywhere/ (visited Oct. 25, 2012).
387 DISH Network 2011 Form 10-K at 2.
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117.
Bundles. To provide bundles of video, Internet access, and phone services, DIRECTV
and DISH Network have entered into cooperative arrangements with other entities that provide two-way
Internet access and telephone services. Most of these cooperative arrangements use DSL technology to
provide Internet access and telephone service is provided over the traditional landlines. DIRECTV states
that it has agreements with most of the major telephone companies nationwide to offer bundles that
include the DIRECTV service.388 In 2011, DIRECTV began implementing an ordering tool to streamline
the process of offering bundles.389 DIRECTV contends that it is important to continue working closely
with broadband providers to further streamline the bundle process and offer broadband services with
higher speeds.390 Similarly, DISH Network partners with certain telecommunications companies to
bundle DISH programming with broadband and telephone services.391 In 2012, DISH Network
announced dishNET, which allows subscribers to bundle DISH's video programming with Internet access
service provided over satellites through cooperative arrangements with ViaSat and Hughes Network
Systems.392 DISH states that the bundle is ideal for rural residents who are not served by wireline
broadband.393 The dishNET Internet access service will provide up to 10 Mbps download and 1 Mbps
upload speeds.394
(iii)

Telephone MVPD Business Models and Competitive
Strategies

118.
Verizon and AT&T are large telecommunications holding companies operating both
wireless and wireline networks. The FiOS and U-verse video services offered by Verizon and AT&T,
respectively, are part of their Wireline segments, which also offer traditional landline voice and data
services to consumers and businesses in the United States and in international markets.395 Verizon and
AT&T are relatively new to the market for the delivery of video programming. Verizon began offering
its own, facilities-based FiOS video service in 2005. At the end of 2011, Verizon FiOS passed 16.5
million homes and is now the sixth largest MVPD.396 Verizon set a target to pass 18.0 million homes
with its FiOS network.397 AT&T began offering its own, facilities-based U-verse video service in late

388 DIRECTV 2011 Form 10-K at 4-5.
389 Id.
390 Id.
391 DISH Network 2011 Form 10-K at 3.
392 DISH Network, http://www.dish.com/entertainment/internet-phone/ (visited Oct. 25, 2012). See also DISH
Network, DISH Launches dishNET Broadband, Bringing High-Speed Internet to Rural Americans with Slow or No
Access
(press release), Sept. 27, 2012; and Todd Spangler, DISH Pushes Rural Broadband with DishNET Bundles,
Sept. 27, 2012, MULTICHANNEL NEWS, http://www.multichannel.com/news-article/dish-pushes-rural-broadband-
dishnet-bundles/139476 (visited Oct. 25, 2012).
393 DISH Network, DISH Launches dishNET Broadband, Bringing High-Speed Internet to Rural Americans with
Slow or No Access
(press release), Sept. 27, 2012.
394 Id.
395 Verizon, SEC Form 10-K for the Year Ended December 31, 2011, at 36 &56; AT&T, SEC Form 10-K for the
Year Ended December 31, 2011
, at 31, 33, & 37-38 ("AT&T 2011 Form 10-K").
396 Verizon, 2011 Annual Report, at 3.
397 In an interview with UBS analyst John Hodulik, Lowell McAdam, Verizon President & CEO, stated, "With FiOS
we are about 16 million POPs at this point and we want to get to about 18 million." See VZ-Verizon at UBS Global
Media and Communications Conference
, Final Transcript, THOMSON STREETEVENTS, Dec. 7, 2011,
http://www22.verizon.com/idc/groups/public/documents/adacct/event_1012_trans.pdf (visited Oct. 26, 2012).
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2006. At the end of 2011, AT&T U-verse passed approximately 30.3 million homes and is now the
eighth largest MVPD.398 Neither Verizon nor AT&T has ownership interests in video programming
networks.
119.
Technology. Verizon FiOS uses an all-digital fiber-to-the-premises network.399 Verizon
uses QAM technology to deliver linear video programming and IP technology to deliver VOD and other
advanced features.400 Although AT&T U-verse uses fiber-to-the-home technology for new homes, it uses
fiber-to-the-node technology for existing homes, which includes fiber-optic cable to the node and copper
wire from the node to the home.401
120.
Programming Packages. Verizon FiOS TV offers three television plans with 210 to 385
all-digital channels.402 AT&T U-verse TV offers a basic package with local channels only, a family
package with 130 channels, and additional packages with up to 430 channels.403 Both Verizon FiOS and
AT&T U-verse offer additional premium movie, sports, and international channel packages.404
121.
HD, VOD, and DVR Services. Verizon offers over 145 HD channels and over 40,000
VOD titles each month.405 AT&T U-verse offers 170 HD channels and an extensive library of VOD
programming.406 Verizon offers a Multi-Room HD DVR that can store up to 80 hours of standard-
definition programming, and AT&T offers a Total Home HD DVR that can record up to four programs
simultaneously and store up to 233 hours of standard-definition programming or 65 hours of HD
programming.407
122.
TV Everywhere. In late 2010, Verizon FiOS also began offering FlexView, which
enables subscribers to stream over 40,000 VOD titles to Windows computers, iPads, and iPhone and

398 AT&T 2011 Form 10-K at 41.
399 Verizon, http://about.verizon.com/index.php/about/innovative-solutions/fios (visited Oct. 26, 2012). See also
http://computer.howstuffworks.com/fios1.htm (visited Oct. 26, 2012).
400 Other advanced features include Verizon Widgets, which allow subscribers to access interactive and information
services on their television sets, such as localized traffic and weather, Pandora Internet radio, YouTube, Twitter, and
Facebook. Verizon Comments at 9-10.
401 AT&T, http://www.att.com/Common/about_us/files/pdf/HowUverseIsDelivered_2-22.pdf (visited Oct. 26,
2012). A node is a communications control unit in a video system that interconnects traditional coaxial cable and
fiber-optics. It is the place where an optical signal is converted to a radio frequency (RF) signal, or vice versa. See
also
http://www.uverseusers.com/index.php?option=com_openwiki&Itemid=36&id=faq (visited Oct. 26, 2012); and
Mari Rondeli, Telco Video Paradox Points to Higher Subs Penetrations, Limits on Footprint Expansion,
Multichannel Market Trends, SNL KAGAN, June 20, 2011,
http://www.snl.com/interactivex/article.aspx?id=15117039&KPLT=6 (visited Oct. 26, 2012).
402 Verizon, http://www22.verizon.com/home/fiostv/#plans (visited Oct. 26, 2012).
403 AT&T, http://www.att.com/shop/tv.html#fbid=_WrtX1cTd1k (visited Oct. 26, 2012).
404 Verizon, http://www22.verizon.com/home/fiostv/#plans (visited Oct. 26, 2012); AT&T, http://www.att.com/u-
verse/explore/tv-landing.jsp (visited Oct. 26, 2012). See also Verizon Comments at 6-8.
405 Verizon, http://www22.verizon.com/home/fiostv/ (visited Oct. 26, 2012). See also Verizon Comments at 6.
406 AT&T, http://www.att.com/u-verse/explore/tv-landing.jsp (visited Oct. 26, 2012).
407 Verizon, http://www22.verizon.com/home/fiosTV/#equipment (visited Oct. 26, 2012); AT&T,
http://www.att.com/u-verse/explore/tv-landing.jsp (visited Oct. 26, 2012). Verizon says that it was the first video
provider to offer multi-room DVR service. Verizon Comments at 10.
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Android smartphones.408 More recently, Verizon launched the My FiOS mobile application, which
allows subscribers to watch movies on the go.409 AT&T offers some VOD content to smartphones.410
123.
Bundling. Although FiOS TV and U-verse TV can be purchased on a stand-alone basis,
both Verizon and AT&T typically market video services in a bundle that includes video, Internet access,
and telephone service.411 Although both Verizon and AT&T offer mobile wireless services, their
marketing for video bundles has rarely included their own wireless services.412
124.
Other Telephone MVPDs. CenturyLink, Consolidated Communications, and Cincinnati
Bell also provide facilities-based MVPD systems. CenturyLink refers to itself as a large
telecommunications provider with a smaller, but growing video distribution operation.413 CenturyLink
uses a fiber-optic network and IP technology to deliver Prism TV to over 94,000 subscribers in eight
markets, and plans to expand to other markets.414 Prism TV offers hundreds of channels, and HD, VOD,
and DVR services. Using the same network, CenturyLink offers bundles of video, Internet access, and
telephone services. CenturyLink explains that Prism TV is generally offered in markets where customers
also have access to an incumbent cable system.415 Consolidated Communications, which recently merged
with SureWest Communications, offers video service to approximately 520,000 homes in Illinois, Texas,
Pennsylvania, California, Kansas, and Missouri.416 At the end of September 2012, Consolidated
Communications had 105,202 video subscribers (approximately 20 percent of homes passed).417
Consolidated's video services range from limited basic service to digital television packages with
hundreds of channels, HD, VOD, and DVR services.418 Cincinnati Bell uses a fiber-based network to
deliver video, Internet access, and telephone service to 169,000 homes in Greater Cincinnati and
Dayton.419 Cincinnati Bell reports a strong demand for Fioptics TV, which had 46,400 subscribers at the
end of June 2012, up 38 percent from a year earlier.420
4.

MVPD Performance

125.
The structural and behavioral characteristics of a competitive market are desirable not as
ends in themselves, but rather as a means of bringing tangible benefits to consumers, such as lower prices,
higher quality, and greater choice of video services. To determine if the market for the delivery of video

408 Verizon, http://www22.verizon.com/home/fiostv/ (visited Oct. 26, 2012). See also Verizon Comments at 10-11.
409 Verizon Comments at 11.
410 AT&T, http://www.att.com/u-verse/explore/tv-landing.jsp (visited Oct. 26, 2012).
411 Verizon, http://www22.verizon.com/home/aboutfios/ (visited Oct. 26, 2012); AT&T, http://www.att.com/shop/u-
verse.html#fbid=iy_jkV0w7a5 (visited Oct. 26, 2012).
412 See Verizon, http://www22.verizon.com/home/bundles/fios/ (visited Oct. 26, 2012); AT&T,
http://www.att.com/u-verse/shop/index.jsp#fbid=Gatke1wS-MB (visited Oct. 26, 2012).
413 CenturyLink 9/10/12 Comments at 1.
414 Id. at 1-2. CenturyLink's video-delivery technology is similar to that used by AT&T U-verse.
415 Id. at 2.
416 Consolidated Communications, SEC Form 10-Q for the Period Ending September 30, 2012, at 22.
417 Id.
418 Id. at 25.
419 Cincinnati Bell, SEC Form 10-Q for the Period Ending June 30, 2012, at 28.
420 Id.
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programming is producing these kinds of positive outcomes, we look at video prices and provide current
prices for a sample of video packages offered by some MVPDs. We also examine competition in the
market for the delivery of video programming from an investor perspective, including how the various
types of MVPDs are performing relative to one another. As such, we report on video subscribers and
penetration, revenue, investment, and profitability.
a.

Video Programming Pricing

126.
Section 623(k) of the Act, as amended by the Cable Television Consumer Protection and
Competition Act of 1992 ("Cable Act"),421 requires the Commission to publish annually a statistical
report on the average rates that cable operators422 charge for "basic cable service, other cable
programming," and cable equipment.423 The Cable Act also requires the Commission to compare the
rates of cable operators subject to effective competition, as identified through specific adjudications, with
those of cable operators without an adjudicated finding of effective competition.424 Table 5 uses data
from the Commission's most recent report on cable industry prices to show prices for basic service,

421 Section 623(k) was adopted as Section 3(k) of the Cable Act, Pub. L. No. 102-385, 106 Stat. 1460, codified at 47
U.S.C. 543(k).
422 See Implementation of Section 3 of the Cable Television Consumer Protection and Competition Act of 1992,
Statistical Report on Average Rates for Basic Service, Cable Programming Service, and Equipment
, MM Docket
No. 92-266, Report on Cable Industry Prices, DA 13-1319 (rel. MB June 7, 2013) ("2013 Cable Price Report"). All
averages in the Cable Price Report are weighted averages where the weight given to an individual cable operator
depends on the number of subscribers to the operator in the reporting community. For the purpose of the report, a
cable operator (or operator) refers to an entity that operates a wireline system and is a multichannel video
programming distributor (MVPD) that makes available for purchase, by subscribers or customers, multiple channels
of video programming. See 47 C.F.R. 76.905(d). In the report, the term cable operator includes operators of
traditional coaxial and fiber wireline cable systems, municipalities, and telephone companies, including Verizon
FiOS. It does not include MVPD operators of wireless systems, direct broadcast satellite (DBS), or AT&T U-verse,
because these operators are not associated with any FCC Community Unit Identifiers (CUID). The Commission
assigns a CUID code to each registered operator for each community that operator serves. See 47 C.F.R. 76.1801.
423 The Cable Act requires operators to offer an entry-level basic service, which must include, at a minimum, all
commercial and noncommercial local broadcast stations entitled to carriage under the must-carry provisions of the
Communications Act of 1934, 47 U.S.C. 534-35. Basic service must also offer any other local broadcast station
provided to any subscriber, as well as public, educational, and governmental access channels that the local franchise
authority (LFA) may require the operator to carry. See 47 U.S.C. 543(b)(7). The term "cable programming
service" refers to a tier of video channels for which the operator charges a separate rate, other than the basic service
channels and channels for which per-channel or per-program charges apply. See 47 U.S.C. 543(k)(l)(2). Cable
equipment refers to a converter box and other customer premises equipment used for accessing cable services. See
47 U.S.C. 543(b)(3).
424 See 47 U.S.C. 543(k)(1) (cross-referencing 47 U.S.C. 543(a)(2)). Under the Cable Act, if the Commission
grants a finding of effective competition to an operator and the community it serves, that operator is not subject to
regulation of its basic service price. Such a finding requires the operator to meet one of four tests: (1) fewer than 30
percent of households subscribe to the operator's cable programming service (low penetration test); (2) the operator
and at least one other MVPD offer comparable service to at least 50 percent of households and at least 15 percent of
households subscribe to such service other than from the largest MVPD (50/15 test); (3) a municipality offers
MVPD service to at least 50 percent of households (municipal test); or (4) a local exchange carrier (LEC) or its
affiliate, or an entity using the facilities of the LEC or its affiliate, offers MVPD service by means other than DBS
service in an area that an unaffiliated MVPD also serves (LEC test). See 47 C.F.R. 76.905(b). The LFA may not
regulate the operator's rate for basic cable service if the operator is deemed subject to effective competition, unless
the LFA seeks and the Commission grants recertification. See 47 U.S.C. 543(a)(2); and 47 C.F.R. 76.916(a).
As required by statute, the Commission does not take into consideration those communities that have not been
formally adjudged as being subject to effective competition. See 47 U.S.C. 543(k)(1).
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expanded basic service, and the next most popular service (plus equipment) for the years 2011 and
2012.425 Table 5 shows that prices for basic service, expanded basic service, and the next most popular
service (plus equipment) increased over the period 2011 to 2012.426

Table 5: Average Monthly Prices

Price Per
Year
Basic
Expanded
Next Most Popular Price Per
Channel
Service
Basic Service
Service &
Channel
Expanded
Price
Price
Equipment Price
Basic Service
Basic
Service
2011
$19.36
$58.83
$71.47
$0.622
$0.507
2012
$20.55
$61.63
$74.57
$0.631
$0.506
Annual
6.2%
4.8%
4.3%
1.5%
-0.4%
Change
127.
Table 6 provides examples of prominently displayed video packages from MVPD
websites. Table 6 does not show all of the video packages offered by the MVPDs. Table 6 shows the
name of the video package, the advertised price, and the number of channels.427 The advertised video
packages are often promotional prices for new customers. At the end of the promotional time period, the
price for services rises to the "normal" price. It is important to note that some of the video packages
shown in Table 6 include advanced video services (e.g., DVR service), some include equipment (e.g., an
HD/DVR set-top receiver), and some include premium channels (e.g., HBO). Even where the number of
channels is similar, each package contains a different mix of channels.428 Many services and features that
affect the value of a video package are not shown in Table 6. Therefore, at best, this information provides
only a starting point for comparing video packages since there is no standard video package for making
direct price comparisons. For these reasons, Table 6 contains only a sample of advertised prices for
prominently displayed video package offerings.

425 See 2013 Cable Price Report, Table 1, Attachment 2 & Attachment 4. For additional information regarding
cable industry prices, see 2013 Cable Price Report generally.
426 The next most popular service package generally includes all the programming channels included in the
expanded basic service package and at least seven additional cable network channels. 2013 Cable Price Report at
11.
427 When MVPDs advertise the number of channels, they usually include both video channels and music channels.
The video channels in Table 6 include those found on the basic and expanded basic service and a range of digital
channels.
428 For example, some MVPDs include all of the premium movie channels in their most expensive advertised video
package while other MVPDs include fewer premium movie channels in their most expensive advertised video
package.
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Table 6: Examples of MVPD Video Package Prices

Cable

Comcast429
Digital Starter
Digital Preferred
Digital Premier
$29.95
$39.99
$84.99
(45 channels)
(160 channels)
(200 channels)
Time Warner
Broadcast Basic
Digital TV
Cable430
TV with Int'l
$49.99
Package $33.99
(200 channels)
(20 channels)
Cox
Economy TV
Advanced TV
Advanced TV
Advanced TV
Communications431 $34.99
$65.99
Preferred
Premier
(100 channels)
(280 channels)
$70.99
$78.49
(340 channels)
(380 channels)

DBS

DIRECTV432
Entertainment Choice
Choice Ultimate
Premier
$29.99
$34.99
$44.99
$80.99
(140 channels)
(150 channels)
(225 channels)
(285 channels)
DISH Network433
Smart Pack America's
America's
America's
$19.99
Top 120
Top 200
Top 250
(55 channels)
$24.99
$34.99
$39.99
(190 channels)
(235 channels)
(290 channels)

Telephone

AT&T U-verse434
U-Family
U200
U300
U450
$57.00
$72.00
$87.00
$119.00
(130 channels)
(270 channels)
(360 channels)
(430 channels)
Verizon FiOS435
Prime HD
Extreme HD
Ultimate HD
$64.99
$74.99
$89.99
(210 channels)
(290 channels)
(385 channels)

429 Comcast, http://wwwb.comcast.com/Corporate/Learn/DigitalCable/digitalcable.html (visited Oct. 30, 2012).
430 Time Warner Cable, http://www.timewarnercable.com/en/residential-home/tv/plans.html (visited Oct. 30, 2012).
431 Cox Communications, http://ww2.cox.com/residential/northernvirginia/tv/cox-advanced-tv.cox (visited Oct. 30,
2012).
432 DIRECTV, http://www.directv.com/DTVAPP/new_customer/base_packages.jsp (visited Oct. 30, 2012).
433 DISH Network, http://www.dish.com/entertainment/packages/ (visited Oct. 30, 2012).
434 AT&T, http://www.att.com/u-verse/explore/tv-landing.jsp (visited Oct. 30, 2012).
435 Verizon, http://www22.verizon.com/home/fiostv/#plans (visited Oct. 30, 2012).
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b.

Video Subscribers and Penetration

128.
Video Subscribers. Table 7 shows the number of video subscribers for cable, DBS, and
telephone MVPDs for year-end 2010, end of June 2011, year-end 2011, and end of June 2012. Some data
necessary to meaningful compare cable, DBS, and telephone MVPDs are available only on an end of year
basis. Specifically, reliable data regarding the number of telephone MVPD subscribers and, therefore, the
total number of MVPD subscribers are available only on an end of year basis and not on an end of June
basis. Nonetheless, Table 7 provides the end of June data that are available.
129.
Between 2010 and 2011, the number of subscribers to MVPD service grew from 100.8
million in 2010 to 101.0 million in 2011, a net increase of approximately 200,000 subscribers.436 Over
that period, however, cable MVPDs lost video subscribers and market share. At the end of 2010, cable
MVPDs had 59.8 million video subscribers (59.3 percent of the 100.8 million MVPD video
subscribers).437 By year-end 2011, the number of cable MVPD subscribers had declined to 58.0 million
(57.4 percent of the MVPD subscribers), a loss of approximately 1.8 million subscribers.438 During the
first six months of 2012, the number of cable MVPD subscribers declined to 57.3 million. NCTA
estimates that cable MVPDs accounted for 55.7 percent of MVPD subscribers at the end of June 2012.439
130.
Table 7 shows that DBS MVPDs and telephone MVPDs gained video subscribers and
market share during the period 2010 to 2011. In 2010, DBS MVPDs had 33.4 million video subscribers
(33.1 percent of the 100.8 million MVPD subscribers).440 By 2011, the number of DBS MVPD video
subscribers increased to 33.9 million (33.6 percent of the 101.0 million MVPD subscribers), a gain of
approximately 500,000 subscribers.441 In the first six months of 2012, the number of DBS MVPD
subscribers had increased to 34.0 million. NCTA estimates that DBS MVPDs accounted for 33.6 percent
of MVPD subscribers at the end of June 2012.442 In 2010, telephone MVPDs had approximately 6.9
million video subscribers (6.9 percent).443 In 2011, the number of telephone MVPD video subscribers
had increased to 8.5 million (8.4 percent of MVPD video subscribers), a gain of 1.6 million subscribers.444
In the first six months of 2012, the combined number of AT&T and Verizon video subscribers had
increased to 8.6 million. Although we do not have reliable June 2012 data for the number of video

436 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 30, 2012).
437 Id.
438 Id.
439 NCTA Comments at 3.
440 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 30, 2012).
441 Id.
442 NCTA Comments at 3.
443 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 30, 2012).
444 Id.
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subscribers for the remaining telephone MVPDs, NCTA estimates that telephone MVPDs accounted for
9.1 percent of MVPD subscribers at the end of June 2012.445

Table 7: MVPD Video Subscribers (in millions)

Year
End of Year
End of June
End of Year
End of June
2010
2011
2011
2012

MVPD Total

446
100.8

N/A

101.0

N/A

Cable

447
59.8
58.9
58.0
57.3
Comcast
22.8
22.5
22.3
22.1
Time Warner Cable
12.4
12.2
12.1
12.5
Cox
4.9
4.8
4.8
4.7
Charter
4.5
4.4
4.3
4.3
Cablevision
3.3
3.3
3.3
3.3
All Other Cable448
11.9
11.6
11.3
10.5

DBS

449
33.4
33.5
33.9
34.0
DIRECTV450
19.2
19.4
19.9
19.9
DISH Network451
14.1
14.1
14.0
14.1

445 NCTA Comments at 3.
446 Table 7 does not include subscribers to PCO, HSD, OVS, and wireless cable MVPDs, which collectively had
fewer than one million subscribers between 2010 and 2011. In addition, the number of video subscribers for
individual companies in Table 7 is rounded to the nearest 100,000. Because some types of MVPDs are not included
and because of rounding, the sum of the individual entries does not equal the MVPD totals.
447 Cable MVPD total and individual cable MVPD data come from SNL Kagan, U.S. Cable Subscriber Highlights,
Basic Subscribers
, http://www.snl.com/interactivex/CableMSOOperatingMetrics.aspx?Defaults=0 (visited Oct. 30,
2012).
448 All other cable subscribers are estimated by subtracting the subscribers of the five largest cable MVPDs from
total cable subscribers.
449 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 30, 2012). Because the number of video subscribers for DIRECTV and DISH Network are rounded to the
nearest 100,000, the sum of the individual entries may not equal the DBS totals SNL Kagan reported for end of year
2010 and 2011.
450 DIRECTV subscriber numbers come from DIRECTV 2011 Form 10-K at 41; DIRECTV, DIRECTV Announces
Second Quarter 2012 Results
(press release), Aug. 2, 2012. See also DIRECTV Comments at 8.
451 DISH Network subscriber numbers come from DISH Network 2011 Form 10-K at 47; DISH Network, SEC
Form 10-Q for the Period Ending June 30, 2012
, at 53.
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Table

7: MVPD Video Subscribers (in millions) (continued)
Year
End of Year
End of June
End of Year
End of June
2010
2011
2011
2012

Telephone

452
6.9

N/A

8.5

N/A

AT&T U-verse453
3.0
3.4
3.8
4.1
Verizon FiOS454
3.5
3.8
4.2
4.5
All Other Telephone455
0.4
N/A
0.5
N/A
131.
SNL Kagan estimates that at the end of 2011, there were 132 million housing units, with
117 million occupied housing units, and 101 million MVPD subscribers.456 In a mature industry, with
most householders already purchasing MVPD services, SNL Kagan argues that subscription gains for
individual MVPDs can only be achieved at the expense of other MVPDs.457 Similarly, DISH Network
told its shareholders: "We and our competitors increasingly must seek to attract a greater proportion of
new subscribers from each other's existing subscriber bases rather than from first-time purchasers of pay-
TV services."458
132.
From 2010 to 2011, an increasing number of consumers streamed an increasing amount
of video content directly from the Internet to computers, television sets, tablets, and smartphones.459
Although some consumers may consider online video to be a substitute for MVPD video, other
consumers may consider online video to be a complement to MVPD video. According to Nielsen, during
the first quarter of 2012, Americans watched each week on average 34 hours and 7 minutes of traditional
television, two hours and 40 minutes of time-shifted television, 40 minutes of Internet video, and 10
minutes of smart phone video.460 Although consumers are watching more video online, the concerns of
MVPD executives regarding the threat of online video to traditional MVPD business models have
diminished.461 In addition, Netflix, the largest online video subscription service, argues that it is a

452 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 30, 2012).
453 AT&T, 2011 Annual Report, at 38; AT&T, Investor Briefing: 2nd Quarter 2012, July 24, 2012, at 8.
454 Verizon, 2011 Annual Report, at 36; Verizon, Investor Quarterly, Second Quarter 2012, July 19, 2012, at 14. At
the end of June 2012, the number of FiOS TV subscribers had increased to 4.5 million. See also Verizon Comments
at 4.
455 All other telephone MVPD subscribers are estimated by subtracting AT&T U-verse and Verizon FiOS video
subscribers from the total telephone MVPD subscribers estimated by SNL Kagan.
456 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 31, 2012).
457 Maria Rondeli, SNL Kagan Multichannel Projections: Telco TV Gains Market Share, Cable TV Investor: Deals
& Finance, SNL KAGAN, Sept. 27, 2012, at 1.
458 DISH Network 2011 Form 10-K at 19.
459 We discuss online video distributors in Sec. III.C.
460 Nielsen, The Cross-Platform Report, Quarter 1, 2012, at 6.
461 See Ian Olgeirson and Michelle Ow, Operators, Programmers Enjoy Fortification of TV Everywhere, Bolster
Usage-Based Billing Defenses
, Cable TV Investor: Deals & Finance, SNL KAGAN, May 31, 2012, at 1-4.
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complement, not a substitute, for MVPD service, implying that its service does not lead to cord-cutting by
most of its subscribers.462 Netflix explains that it does not offer live news or sports programming and that
the overwhelming majority of its subscribers continue to subscribe to an MVPD.463 According to SNL
Kagan, while MVPDs will have to remain mindful of the nimbleness and consumer appeal of OVDs,
online video is no longer considered a fundamental threat to the MVPD business model.464 SNL Kagan
also advises MVPDs that the substitution to online video, particularly among young adults, should not be
dismissed.465
133.
Video Penetration. Because a large part of all MVPD video delivery systems represents
fixed costs (costs that do not vary with the number of subscribers), higher levels of video penetration (the
number of video subscribers divided by the number of homes passed by the MVPD) typically translate
into lower costs per subscriber and increased profit.466 Comparing the video penetration of one type of
MVPD with the video penetration of another type of MVPD can be problematic, however, because the
different types of MVPDs have different fixed costs.467 For instance, the fixed costs of offering cable
MVPD service to every home in the United States are much higher than the fixed costs of offering DBS
MVPD service to every home in the United States.468 As such, a DBS MVPD may be on solid financial
footing with lower video penetration, relative to a cable MVPD with higher video penetration.
Regardless of technology, however, every MVPD seeks to increase levels of video penetration.
134.
Table 8 shows video penetration for cable, DBS, and telephone MVPDs for year-end
2010, end of June 2011, year-end 2011, and end of June 2012. Because data regarding the number of
U.S. homes and the number of homes passed by cable MVPDs are available only on an end of year basis,
some end of June estimates are omitted from Table 8. Table 8 shows that video penetration for cable
MVPDs decreased from 46.5 percent of homes passed by cable in 2010 to 44.4 percent in 2011. Table 8
also shows that video penetration declined consistently for five of the largest cable MVPDs from end of
year 2010 to end of June 2012. This is consistent with our finding that cable MVPDs lost subscribers
over the same period. In contrast, DBS MVPD video penetration increased from 25.3 percent of all
homes in 2010 to 25.5 percent in 2011. While telephone MVPDs extended their MVPD systems, video
penetration (based on data from AT&T U-verse and Verizon FiOS) increased consistently from 15.2
percent at the end of 2010 to 18.2 percent at the end of June 2012.

462 Netflix Comments at 6-7.
463 Id.
464 See Robin Flynn, What to Watch For (and Not Worry About) in 2012, Cable TV Investor: Deals & Finance, SNL
KAGAN, Jan. 31, 2012, at 3.
465 See Tony Lenoir, Factors Impacting Cable Churn in 2011-2012, Cable TV Investor: Deals & Finance, SNL
KAGAN, Oct. 30, 2012, at 10.
466 Harold L. Vogel, ENTERTAINMENT INDUSTRY ECONOMICS 339-43 (Cambridge University Press) (8th ed. 2011)
("Vogel").
467 Id. at 344-46.
468 DIRECTV explains that its satellite-based service provides many advantages over ground-based cable television
services including the ability to distribute video programming to millions of recipients nationwide with minimal
incremental infrastructure cost per additional subscriber. Satellites also provide comprehensive coverage to areas
with low population density. DIRECTV 2011 Form 10-K at 4.
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Table 8: MVPD Video Penetration

Year
End of Year
End of June
End of Year
End of June
2010
2011
2011
2012

Cable

469
46.5%

N/A

44.4%

N/A

Comcast
43.9%
43.1%
42.5%
41.9%
Time Warner
45.2%
44.4%
43.2%
42.5%
Cable
Cox
49.5%
47.9%
47.0%
45.6%
Charter
38.4%
37.3%
36.1%
35.6%
Cablevision
59.9%
59.1%
58.2%
58.0%

DBS

470
25.3%

N/A

25.6%

N/A

DIRECTV
14.5%
N/A
15.0%
N/A
DISH Network
10.7%
N/A
10.6%
N/A

Telephone

471
15.2%
16.0%
17.1%
18.2%
AT&T U-verse
11.0%
11.7%
12.5%
13.5%472
Verizon FiOS
22.4%
23.6%
25.5%
26.5%
135.
Digital Video, Internet Access, and Telephone Subscription and Penetration. Although
the number of video subscribers to cable MVPDs has declined, reports indicate that the remaining cable
customers added subscriptions to digital video, Internet access, and telephone services. Specifically, the
number of cable customers who subscribe to digital video service grew from 44.7 million in 2010 to 46.0

469 Total cable MVPD and individual cable MVPD data come from SNL Kagan, U.S. Cable Subscriber Highlights,
http://www.snl.com/interactivex/CableMSOOperatingMetrics.aspx?OpMetric=PenetrationBasicBest&Form_Name=
UserInputs&Defaults=0 (visited Oct. 31, 2012).
470 Estimates are derived by dividing all DBS MVPD subscribers by the number of homes in the United States. SNL
Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 31, 2012). DIRECTV and DISH Network video penetration estimates are derived by dividing the company's
subscribers (as reported in their annual reports) by the number of homes in the United States. Because we have
rounded estimates to the nearest 100,000, the sum of the individual company estimates may differ slightly from the
total DBS MVPD estimate.
471 We do not have data on the number of homes passed by all telephone MVPDs, so we do not estimate total
telephone MVPD video penetration. Our estimates for telephone MVPD video penetration are based only on data
from AT&T and Verizon. Our estimates are derived by summing AT&T and Verizon MVPD subscribers and
dividing by the number of AT&T U-verse and Verizon FiOS homes passed. Because Verizon and AT&T do not
offer MVPD service in the same geographic area, video penetration is a weighted average of the video penetration of
these two telephone MVPDs. Verizon and AT&T estimates are derived by dividing a company's MVPD
subscribers by the number of homes passed by the company's MVPD system (as reported in their annual and
quarterly financial reports).
472 We estimate AT&T's video penetration for June 2012 by assuming that the number of homes passed at end of
June 2012 was the same as the number reported by AT&T for the end of 2011. See supra, n.56.
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million in 2011, and digital video penetration rose from 74.8 percent to 79.4 percent (i.e., the number of
digital video subscribers divided by the number of basic cable subscribers).473 In addition, the number of
cable Internet access subscribers grew from 44.4 million in 2010 to 47.3 million in 2011, increasing
Internet penetration (i.e., the number of Internet subscribers divided by the number of cable homes
passed) from 36.0 percent to 37.2 percent.474 In addition, the number of telephone subscribers grew from
23.5 million in 2010 to 24.7 million in 2011, with telephone penetration (i.e., the number of telephone
subscribers divided by the number of occupied homes passed) increasing from 20.5 percent to 21.3
percent.475
c.

Revenue

136.
The varied business models of the different types of MVPDs complicate any discussion
of revenue. For example, cable and telephone MVPDs, which have two-way systems, offer video,
Internet access, and telephone services and earn revenue from each of these services. In contrast, DBS
MVPDs, which have one-way systems, earn almost all of their revenue from delivered video services. A
discussion of revenue is further complicated by the fact that AT&T and Verizon operate wireless
networks and traditional landline networks and offer telecommunication services in international markets.
We also note that Comcast owns cable networks and broadcast networks, broadcast television stations,
movie studios, and theme parks. Because this Report is focused on the delivery of video programming,
we report those revenues that are directly related to video. In addition, we report revenues for bundles
that include delivered video services. Thus, we exclude revenue from international operations, mobile
wireless services, cable and broadcast networks, theme parks, etc.
137.
Table 9 shows MVPD revenue for video services and bundles that include delivered
video services for year-end 2010 and year-end 2011, and also for year to date June 2011 and year to date
June 2012. Because data regarding total cable MVPD revenue and telephone MVPD revenue for video
services are available only on an end of year basis, some year to date June estimates are omitted from
Table 9. Table 9 shows that MVPD revenue for the delivered video services and bundles that include
delivered video services offered over cable systems increased from $93.8 billion in 2010 to $97.9 billion
in 2011. Revenue for DBS MVPDs increased from $32.9 billion in 2010 to 35.9 billion in 2011. Table 9
shows revenue for the delivered video services and bundles that include delivered video services offered
over AT&T U-verse and Verizon FiOS networks. AT&T U-verse revenue grew from $4.3 billion in 2010
to $6.7 billion in 2011 and Verizon FiOS revenue grew from $6.9 billion in 2010 to $8.3 billion in 2011.

473 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 31, 2012).
474 Id.
475 Id.
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Table 9: MVPD Revenue (in billions)

Year
End of Year
End of Year
Year to Date Year to Date
2010
2011
June 2011
June 2012

Cable

476
$93.8
$97.9

N/A

N/A

Comcast477
$35.4
$37.2
$18.4
$19.5
Time Warner
$18.9
$19.7
$8.6
$9.1
Cable478
Charter479
$7.1
$7.2
$3.6
$3.7

DBS

480
$32.9
$35.9
$17.2
$18.3
DIRECTV481
$20.3
$21.9
$10.4
$11.1
DISH
$12.6
$14.0
$6.8
$7.2
Network482

Telephone

483
$11.2
$15.0

N/A

N/A

AT&T484
$4.3
$6.7
N/A
N/A
Verizon485
$6.9
$8.3
N/A
N/A

476 Estimates for total revenue for all cable MVPDs come from SNL Kagan, U.S. Multichannel Industry
Benchmarks
,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Oct. 31, 2012). This estimate may include revenue that are not directly related to video and bundles that include
video. Therefore, this estimate may overstate the revenue that is the focus of this Report.
477 End of year data come from Comcast 2011 Form 10-K at 50; year to date June data come from Comcast,
Comcast Reports 2nd Quarter 2012 Results (press release), Aug. 1, 2012.
478 End of year data come from Time Warner Cable 2011 Form 10-K at 44; year to date June data come from Time
Warner Cable, Time Warner Cable Reports 2012 Second-Quarter Results (press release), Aug. 2, 2012.
479 End of year data come from Charter 2011 Form 10-K at 33; year to date June data come from Charter, Charter
Second Quarter 2012 Results Focus on Strategic Initiatives to Drive Growth
(press release), Aug. 7, 2012.
480 Revenue for DBS is the sum of revenue for DIRECTV and DISH Network.
481 End of year data come from DIRECTV 2011 Form 10-K at 35; year to date June data come from DIRECTV,
DIRECTV Announces Second Quarter 2012 Results (press release), Aug. 2, 2012. Table 9 shows revenue for
DIRECTV U.S.
482 End of year data come from DISH Network 2011 Form 10-K at 55; year to date June data come from DISH
Network, SEC Form 10-Q filed for the Period Ending June 30, 2012, at 2.
483 The estimates shown are the sum of revenue for AT&T U-verse and Verizon FiOS and do not include other
telephone companies that offer MVPD service. As such, the estimates understate revenue for telephone MVPDs.
484 Mari Rondeli, RBOCs Grab Video but Cede HSD, Cable TV Investor: Deals & Finance, SNL KAGAN, Jan. 31,
2012, at 11-13.
485 Id.
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138.
Table 10 shows MVPD revenue from video services for year-end 2010 and year-end
2011, and also for end of June 2011 and end of June 2012. Because some data are available only on an
end of year basis, some end of June estimates are omitted from Table 10. Cable MVPD video revenue
increased from $64.8 billion in 2010 to $66.6 billion in 2011. Although the number of basic cable MVPD
subscribers decreased from 2010 to 2011, the remaining subscribers purchased an increasing number of
subscriptions to advanced video services (e.g., digital programming packages, DVR, and VOD services).
For example, the number of cable MVPD digital subscribers increased from 44.7 million in 2010 to 46.0
million in 2011, and the number DVR subscribers increased from 18.1 million in 2010 to 19.6 million in
2011.486 DBS MVPD video revenue increased from $32.9 billion in 2010 to $35.9 billion in 2011. Video
revenue for all telephone MVPDs increased from $5.9 billion in 2010 to $8.0 billion in 2011.487

486 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Nov. 1, 2012).
487 AT&T and Verizon do not report video revenue separately to their shareholders, although SNL Kagan makes
estimates of thee video revenues, which we report in Table 10.
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Table 10: Video Revenue (in billions)

Year
End of Year
End of Year
Year to Date
Year to Date
2010
2011
June 2011
June 2012

Cable

488
$64.8
$66.6

N/A

N/A

Comcast489
$19.4
$19.6
$9.8
$10.0
Time Warner
$10.6
$10.6
$5.3
$5.5
Cable490
Charter491
$3.7
$3.6
$1.8
$1.8

DBS

492
$32.9
$35.9
$17.2
$18.3
DIRECTV493
$20.3
$21.9
$10.4
$11.1
DISH
$12.6
$14.0
$6.8
$7.2
Network494

Telephone

495
$5.9
$8.0

N/A

N/A

139.
Average Revenue Per Unit. Average revenue per unit ("ARPU") is a performance metric
that estimates the value of an average MVPD subscriber by dividing revenue from delivered video
services and bundles that include delivered video services by the number of subscribers. All MVPDs do

488 SNL Kagan, U.S. Multichannel Industry Benchmarks,
http://www.snl.com/interactivex/MultichannelIndustryBenchmarks.aspx?startYear=2010&endYear=2011 (visited
Nov. 1, 2012). Cable video revenue is derived by subtracting revenue from Internet access and phone service from
total revenue. Because some cable MVPDs derive revenue from sources not directly related to delivered video and
bundles that include delivered video, our estimate may overstate cable MVPD video revenue.
489 End of year data come from Comcast 2011 Form 10-K at 50; year to date June data come from Comcast,
Comcast Reports 2nd Quarter 2012 Results (press release), Aug. 1, 2012.
490 End of year data come from Time Warner Cable 2011 Form 10-K at 45; year to date June data come from Time
Warner Cable, Time Warner Cable Reports 2012 Second-Quarter Results (press release), Aug. 2, 2012.
491 End of year data come from Charter 2011 Form 10-K at 43 year to date June data come from Charter, Charter
Second Quarter 2012 Results Focus on Strategic Initiatives to Drive Growth
(press release), Aug. 7, 2012.
492 DBS MVPD video revenue is the sum of DIRECTV U.S. and DISH Network video revenue. Because DBS is a
one-way system and DBS revenues from cooperative arrangements for the provision of Internet access and
telephone services is small, the video revenue estimates shown in Table 10 are the same as the revenue estimates
shown in Table 9.
493 End of year data come from DIRECTV 2011 Form 10-K at 35; year to date June data come from DIRECTV,
DIRECTV Announces Second Quarter 2012 Results (press release), Aug. 2, 2012. Table 8 shows revenue for
DIRECTV U.S.
494 End of year data come from DISH Network 2011 Form 10-K at 55; year to date June data come from DISH
Network, SEC Form 10-Q filed for the Period Ending June 30, 2012, at 2.
495 Mari Rondeli, Telco TV Providers to Grab larger Share of Multichannel Revenue Pie, Cable TV Investor; Deals
& Finance, SNL KAGAN, June 30, 2011, at 12-14; and Mari Rondeli, Telco TV Revenues Driven by Customer
Growth
, Cable TV Investor: Deals & Finance, SNL KAGAN, June 29, 2012, at 18-19.
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not measure ARPU uniformly.496 As such, ARPU may more accurately reflect a trend within a company
than provide comparisons across companies. In addition, MVPDs experience seasonal variation, so it
may be more appropriate to look at trends in ARPU from winter to winter, rather than winter to summer.
Table 11 shows that APRU has increased from the fourth quarter 2010 to the fourth quarter 2011 and
from the second quarter 2011 to the second quarter 2012 for Comcast, Time Warner Cable, Charter,
DIRECTV, and DISH Network.497 Monthly ARPU for Verizon FiOS and AT&T U-verse increased from
the fourth quarter 2010 to the fourth quarter 2011. From the second quarter 2011 to the second quarter
2012, monthly ARPU increased for Verizon FiOS but remained flat for AT&T U-verse.

496 DISH Network states: "We are not aware of any uniform standards for calculating ARPU and believe
presentations of ARPU may not be calculated consistently by other companies in the same or similar businesses."
DISH Network 2011 Form 10-K at 54.
497 Whereas revenue for ARPU estimates for cable and telephone MVPDs come from a mix of video, Internet
access, and telephone services; revenue for ARPU estimates for DBS MVPDs come almost exclusively from video
services.
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Table 11: Monthly ARPU

Year
Fourth
Fourth
Second
Second
Quarter 2010
Quarter 2011
Quarter 2011
Quarter 2012

Cable

Comcast498
$131.98
$141.31
$137.58
$148.57
Time Warner
$110.36
$115.01
$113.64
$117.41
Cable499
Charter500
$104.09
$106.28
$104.39
$106.00

DBS

DIRECTV501
$96.64
$101.38
$90.58
$94.40
DISH
$73.32
$76.93
$78.06
$78.11
Network502

Telephone

AT&T503
$160
$170
$170
$170
Verizon504
$146
$148
$146
$149

498 Comcast, http://www.cmcsk.com/earningdetails.cfm?QYear=2012&QQuarter=2 (visited Nov. 28, 2012).
499 Time Warner Cable,
http://ir.timewarnercable.com/files/doc_financials/Quarterly/2012/TWC_Trending_Schedules_Q2_2012_FINAL.pd
f (visited Nov. 28. 2012).
500 Charter, Charter Announces Fourth Quarter and Full Year 2011 Results (press release), Feb. 27, 2012; Charter,
Charter Second Quarter 2012 Results Focus on Strategic Initiatives to Drive Growth (press release), Aug. 4, 2012.
501 We report ARPU data for DIRECTV's U.S. Segment. DIRECTV, DIRECTV Announces Fourth Quarter and
Full Year 2011 Results
(press release), Feb. 16, 2012; DIRECTV, DIRECTV Announces Second Quarter 2012
Results (press release), Aug. 2, 2012.
502 DISH Network 2011 Form 10-K, at 47; DISH Network, SEC Form 10-Q for the Period Ending June 30, 2012, at
53. The estimates for fourth quarter 2010 and 2011 are actually year-end estimates based on 12 months of data,
whereas the data for second quarter 2011 and 2012 are quarterly estimates based on three months of data.
503 Data is reported for triple-bundle AT&T U-verse subscribers only. Thus, the estimates for AT&T in Table 9
overstate the monthly ARPU for all U-verse subscribers. AT&T, AT&T Reports Record 2.8 Million Wireless Net
Adds, Strong U-verse Sales, Continued Revenue Gains in the Fourth Quarter
(press release), Jan. 27, 2011; AT&T,
Best Ever Mobile Broadband Sales and Strong Cash Flows Highlight AT&T's Fourth-Quarter Results (press
release), Jan. 26, 2012; AT&T, AT&T Reports Strong Wireless Gains, Record Mobile Broadband Sales and
Continued Strength in U-verse and Strategic Business Services in Second-Quarter Results
(press release), July 21,
2011; and AT&T, AT&T Reports 10 Percent Earnings Growth, Strong Revenue and Margin Gains and Best-Ever
Wireless Margins and Churn in Second-Quarter Results
(press release), July 24, 2012.
504 Verizon, Investor Quarterly: Fourth Quarter 2010, Jan. 25, 2011, at 6; Verizon, Investor Quarterly: Fourth
Quarter 2011
, Jan. 24, 2012, at 3; Verizon, Investor Quarterly: Second Quarter 2011, July 22, 2011, at 6; Verizon,
Investor Quarterly: Second Quarter 2012, July 19, 2012, at 6.
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140.
Table 12 shows monthly ARPU for video services alone. Monthly video ARPU for cable
increased from the fourth quarter of 2010 to the fourth quarter of 2011 and from the second quarter of
2011 to the second quarter of 2012. Because DBS MVPDs earn almost all of their operating revenue
from subscription video services, we estimate monthly ARPU for video services to be the same as
monthly ARPU for all services. Although AT&T and Verizon do not report monthly video ARPU for U-
verse and FiOS, SNL Kagan estimates that it increased for all telephone MVPDs from $82.02 in 2010 to
$86.37 in 2011.505

Table 12: Monthly ARPU for Video Services

Year
Fourth
Fourth
Second
Second
Quarter 2010
Quarter 2011
Quarter 2011
Quarter 2012

Cable

506
Comcast
$74.23
$77.09
$76.63
$80.40
Time Warner
$70.96
$73.53
$73.54
$75.29
Cable
Charter
$70.39
$72.17
$71.24
$73.51

DBS

DIRECTV507
$96.64
$101.38
$90.58
$94.40
DISH
$73.32
$76.93
$78.06
$78.11
Network508
d.

Investment

141.
Cable MVPD capital expenditures were $12.9 billion in 2010 and remained unchanged in
2011.509 Consumer premise equipment, which is the largest category of cable MVPD capital expenditure,
declined from $6.2 billion in 2010 to $5.5 billion in 2011.510 Comcast reported that capital expenditures
in its cable segment declined from $4.9 billion in 2010 to $4.8 billion in 2011, and remained unchanged

505 Mari Rondeli, Telco TV Providers to Grab Larger Share of Multichannel Revenue Pie, Cable TV Investor: Deals
& Finance, SNL KAGAN, June 30, 2011, at 12-14; and Mari Rondeli, Telco TV Revenues Driven By Customer
Growth
, Cable TV Investor: Deals & Finance, SNL KAGAN, June 29, 2012, at 18-19.
506 Individual company data for cable MVPDs come from Cable MSO Margin Analysis by Product Historical
Benchmarks
, Cable TV Investor: Deals & Finance, SNL KAGAN, Sept. 27, 2012, at 11-12.
507 We report ARPU data for DIRECTV's U.S. Segment. DIRECTV, DIRECTV Announces Fourth Quarter and
Full Year 2011 Results
(press release), Feb. 16, 2012; DIRECTV, DIRECTV Announces Second Quarter 2012
Results (press release), Aug. 2, 2012.
508 DISH Network 2011 Form 10-K, at 47; DISH Network, SEC Form 10-Q for the Period Ending June 30, 2012, at
53. The estimates for fourth quarter 2010 and 2011 are actually year-end estimates based on 12 months of data,
whereas the data for second quarter 2011 and 2012 are quarterly estimates based on three months of data.
509 Mari Rondeli, MSOs Generated $8B in Surplus Funds in 2011, Cable TV Investor: Deals & Finance, SNL
KAGAN, Aug. 30, 2012, at 11. See also NCTA Comments at 4.
510 Id.
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for the first six months of 2012 ($2.2 billion) relative to the first six months of 2011 ($2.2 billion).511
Capital expenditures for Time Warner Cable were $2.9 billion in 2010 and remained unchanged for
2011.512 Time Warner Cable also reported that capital expenditures were unchanged for the first six
months of 2012 ($1.4 billion) relative to the first six months of 2011 ($1.4 billion).513 Charter reported
that capital expenditures increased from $1.2 billion in 2010 to $1.3 billion in 2011.514 Charter also
reported that capital expenditures increased for the first six months of 2012 ($0.8 billion) relative to the
first six months of 2011 ($0.7 billion).515 DIRECTV reported that capital expenditures increased from
$1.6 billion in 2010 to $1.7 billion in 2011.516 DIRECTV reported that the company had placed orders for
three satellites.517 One of these satellites was placed into service and the other two are expected to go into
service in 2014.518 DIRECTV reported that capital expenditures were unchanged for the first six months
of 2012 ($0.7 billion) relative to the first six months of 2011 ($0.7 billion).519 DISH Network explained
that it entered an agreement to lease all of the capacity on EchoStar XVI, which was initially expected to
launch in late 2012 but was postponed due to rocket failure.520 At the end of 2011, AT&T reported that it
reached its U-verse deployment goal of 30 million homes passed and planned to increase sales to this
base.521 On November 7, 2012, however, AT&T announced plans to expand U-verse TV for a total
potential U-verse market of 33 million customer locations.522 The expansion is expected to be complete
by year-end 2015. Verizon reported at the end of 2011, that it was still expanding the number of homes
passed by FiOS.523 SNL Kagan explains that expansion of FiOS is tied mostly to build out requirements
in existing markets.524 According to SNL Kagan, AT&T's, Verizon's, and CenturyLink's aggregate

511 Comcast 2011 Form 10-K at 64. Comcast, Comcast Reports 2nd Quarter 2012 Results (press release), Aug. 1,
2012.
512 Time Warner Cable 2011 Form 10-K at 60.
513 Time Warner Cable, Time Warner Cable Reports 2012 Second-Quarter Results (press release), Aug. 2, 2012.
514 Charter 2011 Form 10-K at 53.
515 Charter, Charter Second Quarter 2012 Results Focus on Strategic Initiatives to Drive Growth (press release),
Aug. 7, 2012.
516 DIRECTV 2011 Form 10-K at 35.
517 Id. at 48.
518 Id.
519 DIRECTV, DIRECTV Announces Second Quarter 2012 Results (press release), Aug. 2, 2012.
520 DISH Network 2011 Form 10-K at 8. The launch appears to have been delayed. See Steve Donohue, Rocket
Failure Will Delay Launch of Dish Network's EchoStar XVI Satellite
, Aug. 9, 2012,
http://www.fiercecable.com/story/rocket-failure-will-delay-launch-dish-networks-echostar-xvi-satellite/2012-08-09
(visited Nov. 7, 2012).
521 AT&T, 2011 Annual Report, at 41.
522 AT&T, AT&T to Invest $14 Billion to Significantly Expand Wireless and Wireline Broadband Networks, Support
Future IP Data Growth and New Services
(press release), Nov. 7, 2012.
523 Verizon, 2011 Annual Report, at 36.
524 Mari Rondeli, RBOC CapEx Shifts to Support Wireless Growth, Cable TV Investor: Deals & Finance, SNL
KAGAN, Sept. 27, 2012, at 14-15.
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wireline capital expenditures declined 15 percent in the first half of 2012, relative to the first half of
2011.525
e.

Profitability

142.
In reporting profitability, MVPDs often combine revenues and costs from multiple
services.526 For example, cable MVPDs that offer video, Internet access, and telephone services often
combine the revenues and costs of these services to estimate profitability. As such, for cable MVPDs we
are not able to separate out profitability metrics for video services only. In contrast, DBS MVPDs focus
on video services and derive the vast majority of their revenue and profits from video services. Thus,
estimates of DBS profitability may be interpreted as profits from video services. AT&T and Verizon
combine revenues and costs from video, Internet access, and telephone services from residential,
commercial, and international customers from both their upgraded and their legacy wireline systems.527
Because they combine a wide range of services from two systems, we cannot derive meaningful profit
metrics for AT&T and Verizon that relate to video services or bundles that include video services.
143.
Because MVPDs may be at different stages in building out or upgrading their systems, it
may be more appropriate to examine trends in financial performance within a company, rather than to
make comparisons across companies. One measure of financial performance is operating cash flow.528
Table 13 shows that operating cash flow generally increased from 2010 to 2011 for Comcast, Time
Warner Cable, DIRECTV, and DISH Network. With the exception of DISH Network, operating cash
flow generally increased for the first six months of 2012, compared to the first six months of 2011.

525 Id.
526 Profit is defined as revenue minus costs, although its measurement may vary in different contexts. See Donald S.
Watson & Mary A. Holman, PRICE THEORY AND ITS USES 144 (Houghton Mifflin Company) (4th ed. 1977). See
also
Brian Butler, A DICTIONARY OF FINANCE AND BANKING 280-81 (Oxford University Press) (2nd ed. 1997)
(stating that it is not always possible to derive one single figure for profit for an organization from an accepted set of
data). See also Vogel at 336, Table 8.3 (showing select cable MVPD operating revenues and expenses).
527 See Verizon, 2011 Annual Report, at 36-38.
528 Operating cash flow is a measure of the amount of cash generated by a company's normal business operations.
Operating cash flow indicates whether a company is able to generate sufficient positive cash flow to maintain and
grow its operations, or whether it may require external financing. Operating cash flow is calculated by adjusting net
income for items such as depreciation, changes to accounts receivable and changes in inventory. Financial analysts
sometimes prefer to look at cash flow metrics, because the metrics strip away certain accounting effects and are
thought to provide a clearer picture of the current reality of the business operations. For example, booking a large
sale provides a big boost to revenue, but if the company is having a hard time collecting the payment, then the sale is
not a true economic benefit to the company. On the other hand, a company may be highly profitable on a cash flow
basis, but may have a low net income if it has a lot of fixed assets and uses accelerated depreciation calculations.
Investopedia, http://www.investopedia.com/terms/o/operatingcashflow.asp#axzz2EJ18VnmI (visited Dec. 6, 2012).
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Table 13: MVPD Operating Cash Flow (in billions)

Year
End of Year
End of Year
Year to Date
Year to Date
2010
2011
June 2011
June 2012

Cable

Comcast529
$14.3
$15.3
$7.6
$8.1
Time Warner
$6.9
$7.2
$3.6
$3.9
Cable530
Charter531
$1.4
$1.4
$0.7
$0.7

DBS

DIRECTV532
$5.2
$5.3
$2.8
$3.0
DISH
$2.0
$2.4
$1.4
$1.1
Network533
144.
Another measure of financial performance is free cash flow.534 The free cash flow is
relevant to evaluating the financial health of MVPDs that have completed system upgrades. Table 14
shows that from 2010 to 2011, free cash flow increased for Comcast and Time Warner Cable, but
decreased for Charter and DIRECTV.535 When comparing the first six months of 2011 with the first six

529 For Comcast, we report operating income before depreciation and amortization ("OIBDA"). The estimates
shown for Comcast in Table 11 are for Comcast's cable segment only, and do not include operating cash flow for
other segments (i.e., broadcast television, filmed entertainment, and theme parks). Comcast 2011 Form 10-K at 50;
Comcast, Comcast Reports 2nd Quarter 2012 Results (press release), Aug. 1, 2012.
530 For Time Warner Cable, we report OIBDA. Time Warner Cable, Time Warner Cable Reports 2011 Fourth-
Quarter and Full Year Results
(press release), Jan. 26, 2012; Time Warner Cable, Time Warner Cable Reports 2012
Second-Quarter Results
(press release), Aug. 2, 2012.
531 Charter does not report OIBDA, however, Charter does report earnings before interest, taxes, depreciation, and
amortization ("EBITDA"). Our estimates for operating cash flow are derived by subtracting interest expense and
income tax from EBITDA. Charter, Charter Announces Fourth Quarter and Full Year 2011 Results Delivered on
Strategic Priorities and Executed on Disciplined Financial Strategy
(press release), Feb. 27, 2012; Charter, Charter
Second Quarter 2012 Results Focus on Strategic Initiatives to Drive Growth
(press release), Aug. 7, 2012.
532 Estimates include DIRECTV U.S. segment only. DIRECTV does not report OIBDA, however, DIRECTV does
report operating profit before depreciation and amortization, which we use as an estimate for operating cash flow.
DIRECTV 2011 Form 10-K at 35; DIRECTV, DIRECTV Announces Second Quarter 2012 Results (press release),
Aug 2, 2012.
533 DISH Network does not report OIBDA, however DISH Network does report EBITDA. Our estimates for
operating cash flow are derived by subtracting interest expense and income tax from EBITDA. DISH Network 2011
Form 10-K at 58; DISH Network, SEC Form 10-Q for the Period Ending June, 30, 2012, at 59.
534 A measure of financial performance calculated as operating cash flow minus capital expenditures. Note that
negative free cash flow is not bad in itself. If free cash flow is negative, it could be a sign that a company is making
large investments. If these investments earn a high return over time, the strategy has the potential to pay off in the
long run. Investopedia, http://www.investopedia.com/terms/f/freecashflow.asp#axzz2EJ9HMwld (visited Dec. 6,
2012).
535 Free cash flow estimates for individual cable companies come from Cable TV Investor: Deals & Finance, SNL
KAGAN, Mar. 30, 2012, at 4.
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months of 2012, Table 14 shows that free cash flow generally increased for Comcast, DIRECTV, and
DISH Network, but declined for Time Warner Cable and Charter.

Table 14: MVPD Free Cash Flow (in billions)

Year
End of Year
End of Year
Year to Date
Year to Date
2010
2011
June 2011
June 2012

Cable

Comcast536
$5.4
$7.0
$3.7
$4.6
Time Warner
$2.3
$2.7
$1.7
$1.5
Cable537
Charter538
$0.7
$0.5
$0.2
$0.1

DBS

DIRECTV539
$2.3
$1.8
$0.9
$1.5
DISH
$0.9
$1.8
$0.9
$0.9
Network540

B.

Broadcast Television Stations

1.

Introduction

145.
We next consider the strategic group of broadcast television stations. Broadcast stations
package video programming and deliver it directly over the air to those consumers who do not subscribe
to an MVPD, as well as to MVPD subscribers who own television sets that are not connected to an
MVPD service. Broadcast television stations' programming is also an input for MVPD services.
146.
Commercial broadcast stations cater to two distinct sets of customers: audiences and
advertisers.541 They seek to provide desirable content to attract and maximize their audiences. In turn,

536 The estimates shown for Comcast in Table 12 combine free cash flow for all Comcast's business segments (i.e.,
cable networks, broadcast television, filmed entertainment, and theme parks). Comcast, Comcast Reports 4th
Quarter and Year End 2011 Results
(press release), Feb. 15, 2012; Comcast, Comcast Reports 2nd Quarter 2012
Results
(press release), Aug. 1, 2012.
537 Time Warner Cable, Time Warner Cable Reports 2011 Fourth-Quarter and Full Year Results (press release),
Jan. 26, 2012; Time Warner Cable, Time Warner Cable Reports 2012 Second-Quarter Results (press release), Aug.
2, 2012.
538 Charter, Charter Announces Fourth Quarter and Full Year 2011 Results Delivered on Strategic Priorities and
Executed on Disciplined Financial Strategy
(press release), Feb. 27, 2012; Charter, Charter Second Quarter 2012
Results Focus on Strategic Initiatives to Drive Growth
(press release), Aug. 7, 2012.
539 Estimates include DIRECTV U.S. segment only. DIRECTV, DIRECTV Announces Fourth Quarter and Full
Year 2011 Results
(press release), Feb. 16, 2012; DIRECTV, DIRECTV Announces Second Quarter 2012 Results
(press release), Aug. 2, 2012.
540 DISH Network 2011 Form 10-K at 63; DISH Network, SEC Form 10-Q for the Period Ending June, 30, 2012, at
61.
541 Advertisers and audiences are mutually dependent. Television stations need to attract audiences in order to earn
money from advertising. They need advertising revenues in order to make investments in programming that will
(continued....)
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they primarily derive revenues by selling time during their broadcasts to advertisers based on the size and
demographic characteristics of the audiences they reach.542 Individual commercial stations compete
primarily with other commercial broadcast stations within their local markets (DMAs) for audiences and
advertising revenue.543 Noncommercial educational ("NCE") stations, while not relying on advertising
revenues,544 compete with commercial stations for viewers. Other media, including daily newspapers,
local and national cable networks, and Internet sites, earn advertising revenues by attracting audiences
within the geographic areas they serve.545 A broadcast station's advertising revenues depends on
viewership of its television programs, regardless of whether consumers receive the station's signal over
the air or via an MVPD. Today, broadcast stations are turning to additional revenue sources, including
retransmission consent fees from MVPDs, ancillary digital television revenues, and advertising sold on
their web sites.546 Noncommercial broadcast stations rely on underwriters, viewer donations, and
government funding for their operations, and seek to attract audiences as a way to increase their revenues
from these sources.
147.
On June 12, 2009, full-power television stations completed the transition from analog to
digital service pursuant to a statutory mandate.547 The flexibility provided by digital broadcasting allows
television stations to offer high definition ("HD") programming, provide multiple streams of
programming and/or distribute programming to mobile devices. Utilizing multicasting,548 stations can
provide a more diverse array of locally-oriented programming specifically designed to serve their
audiences.549 In addition, stations may affiliate their multicast streams with established networks to give
viewers in smaller markets more over-the-air viewing options. Digital television stations also can use a
(Continued from previous page)
attract audiences. See David S. Evans & Richard Schmalensee, The Industrial Organization of Markets with Two-
Sided Platforms
, COMPETITION POL'Y INT'L 151, 155-56 (2007) (discussing the economics of two-sided platforms
and its application to competition policy issues, especially as it relates to advertising-supported media).
542 "[B]roadcasting in any and all of its forms is an audience aggregation business." See Vogel at 288.
543 Under Commission rules, broadcast television stations serve a community of license. See supra, n.138.
544 In light of their noncommercial nature, NCE stations are statutorily prohibited from airing commercial
advertisements in exchange for consideration. See 47 U.S.C. 399(B)(a)(1), 47 C.F.R. 73.621(e).
545 See, e.g., Nexstar Broadcasting Group, Inc., SEC Form 10-K for the Year Ended December 31, 2012, at 7
("Nexstar 2012 Form 10-K"); Sinclair Broadcast Group, Inc., SEC Form 10-K for the Year Ended December 31,
2012
, at 23 ("Sinclair 2012 Form 10-K").
546 Gray Television, Inc., SEC Form 10-K for the Year Ended December 31, 2012, at 4 ("Gray 2012 Form 10-K");
Sinclair 2012 Form 10-K at 5; LIN Television Corp., SEC Form 10-K for the Year Ended December 31, 2012, at 12
("LIN 2012 Form 10-K"). See also infra, Sec. III.B.3.b.
547 47 U.S.C. 309(j)(14)(A). Full-power analog television service has terminated, and full-power stations are now
broadcasting in digital mode only. See Amendment of Parts 73 and 74 of the Commission's Rules to Establish Rules
for Digital Low Power Television, Television Translator, and Television Booster Stations and to Amend Rules for
Digital Class A Television Stations
, MB Docket No. 03-185, Second Report and Order, 26 FCC Rcd 10732, 10733,
1 (2011). Low-power stations (including Class A TV stations and TV translators) must transition to digital by
September 1, 2015. See id. at 10733, 2 and n. 1; see also infra, n.550.
548 Multicasting allows broadcast stations to offer digital streams or channels (i.e., digital multicast signals) of
programming simultaneously, using the same amount of spectrum previously required for analog programming. See
FCC, DTV.gov: What is DTV?, http://www.dtv.gov/whatisdtv.html.
549 Under Commission rules, digital stations asserting must-carry rights are entitled to carriage only of a single
programming stream and other programming-related content on that stream. See Carriage of Digital Television
Broadcast Signals
, CS Docket No. 98-120, First Report and Order and Further Notice of Proposed Rulemaking, 16
FCC Rcd 2598, 2622, 57 (2001).
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portion of their spectrum to provide ancillary and supplementary services, such as subscription video, data
transfer, and audio signals.
2.

Broadcast Television Industry Structure

148.
In this section of the Report, we describe critical elements of the broadcast television
industry. We then explain horizontal concentration and vertical integration in the market. Next, we
describe conditions affecting market entry during the relevant period, including an overview of existing
regulations and market conditions that might influence entry decisions. Finally, we describe recent entry
into and exit from the market.
149.
The broadcast television station group consists of commercial and noncommercial, full-
power, Class A, and low-power stations.550 In this Report, however, we focus on commercial, full-power
broadcast stations because of their impact on competition in the market for the delivery of video
programming and the limitations on available data for other types of stations. The Commission licenses
broadcast television stations to both individual and group owners to serve local communities within
DMAs.
150.
Nationally, the number of broadcast stations has not changed much since the last report.
As of June 30, 2011, there were 1025 commercial UHF stations and 359 commercial VHF stations. In
addition, there were there were 286 noncommercial educational UHF stations and 107 noncommercial
educational VHF stations. There were also 6,843 television translators, Class A stations, and low power
television stations. As of December 31, 2011, there were 1,027 commercial UHF stations and 360
commercial VHF stations in the United States. In addition, there were 289 noncommercial educational
UHF stations and 107 noncommercial educational VHF stations. There were also 6,739 television
translators, Class A stations, and low power television stations. As of June 30, 2012, there were 1029
commercial UHF stations and 358 commercial VHF stations. The figures for NCE stations were
unchanged from the end of 2011, and there were 6,642 television translators, Class A stations, and low
power television stations. At the end of 2012, there were 1,028 commercial UHF stations, 358
commercial VHF stations, 288 noncommercial UHF stations, 107 noncommercial VHF stations, and
6,609 television translators, Class A stations, and low power television stations.551

550 Not included in this group are television translator stations which rebroadcast the programs of a full-power
television broadcast station. Television translator stations typically serve communities that cannot receive the
signals of free over-the-air television stations because they are too far away from a full-power television station or
because of geographic limitations. See, e.g., FCC Consumer Advisory: The DTV Transition and LPTV/Class A and
Translator Stations, http://www.fcc.gov/cgb/consumerfacts/DTVandLPTV.html. In 2000, the Commission
established the Class A television service to implement the Community Broadcasters Protection Act of 1999. See
Community Broadcasters Protection Act of 1999, Pub. L. No. 106-113, 5008, 113 Stat. 1501, 1501A-594-98
(1999) (codified as amended at 47 U.S.C. 336(f)). Thus, certain qualifying low-power television (LPTV) stations
are accorded Class A status, which indicates that these stations have "primary" status as television broadcasters and
have a measure of interference protection from full service television stations. See id. 336(f)(1)(A)(ii). Pursuant
to Commission rules, stations eligible for this status must provide locally originated programming, often to rural and
certain urban communities that have little or no access to such programming. See id. 336(f)(2)(A)(ii)(II);
Establishment of a Class A Television Service, MM Docket No. 00-10, Report and Order, 15 FCC Rcd 6355, 6357,
1 (2000). Created by the Commission in 1982, low-power television service has been a secondary spectrum priority.
See Inquiry Into the Future Role of Low-power Television Broadcasting and Television Translators in the National
Telecommunications System
, Report and Order, BC Docket No. 78-253, 51 Rad. Reg. 2d (P & F) 476, 486 (1982),
aff'd sub nom. Neighborhood TV Co. v. FCC, 742 F.2d 629 (D.C. Cir. 1984).
551 See FCC, Licensed Broadcast Station Totals, http://transition.fcc.gov/mb/audio/BroadcastStationTotals.html
("FCC Broadcast Station Totals").
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Table 15: Total Full Power Broadcast Television Stations by Year

552

Station Type

12/31/10
6/30/11
12/31/11
6/30/12
12/31/12
UHF Commercial
1,022
1025
1,027
1,029
1,028
VHF Commercial
368
359
360
358
358

Total

1,390
1,384
1,387
1,387
1,386
UHF Noncommercial
284
286
289
289
288
VHF Noncommercial
107
107
107
107
107

Total

391
393
396
396
395

Grand Total

1,781
1,777
1,783
1,783
1,781
151.
The transition from analog to digital service described in the 14th Report has allowed
broadcast television stations to offer more programming, including both HD signals and standard-
definition ("SD") multicast signals.553 Between the end of 2010 and the end of 2011, the number of
multicast channels grew from 4,552 to 4,597.554 Much of this growth has been fueled by the launch of
new digital networks and the affiliate expansions of such digital networks, including networks targeting
minorities and Spanish language offerings, as well as multicasting by low power stations.555
152.
Programming is a critical input for broadcast television stations to compete effectively in
the industry. Stations combine local programming, either produced in-house or acquired from
independent sources, syndicated programming, and/or network programming. The mix of programming
varies by station, and depends on whether the station is affiliated with a network or operates as an
independent station.556 Whether or not a station is affiliated with one of the four major networks (ABC,
CBS, FOX, or NBC) has a significant impact on the composition of the station's revenues, expenses, and
operations.557

552 See FCC Broadcast Station Totals.
553 See 14th Report, 27 FCC Rcd 8682, 157.
554 SNL Kagan, TV Stations Multiplatform Analysis `13 Update: Expansion of Digital Multicasting, Mobile, Social
Media Content
, Feb. 21, 2013. These figures do not include digital class A and low-power TV stations.
555 See id. at 3; TV Stations Multiplatform Analysis `12 Update: New Digital Networks, Mobile TV Channels
Expand Content Options
, SNL KAGAN (Jan. 31, 2012) at 1; Bounce Media, LLC, About Bounce,
http://www.bouncetv.com/about-bounce/ (visited Nov. 14, 2012). See also infra, 184.
556 The Commission defines broadcast television networks as "any person, entity, or corporation which offers an
interconnected program service on a regular basis for 15 or more hours per week to at least 25 affiliated television
licensees in 10 or more states; and/or any person, entity, or corporation controlling, controlled by, or under common
control with such person, entity, or corporation." 47 C.F.R. 73.3613(a)(1). Stations affiliated with a network may
be owned and operated by the network (O&Os) or owned by other entities that have agreements with a network for
distribution of the network's programming.
557 Nexstar 2012 Form 10-K at 7; Gray 2012 Form 10-K at 9. Station groups differ in the importance they ascribe to
network affiliation contracts with respect to their broadcast licenses. See infra, n.608.
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153.
Most full-power commercial stations (approximately 92 percent) get at least some of their
programming from broadcast networks on their primary signals.558 Commercial broadcast networks
generally fall into five main categories: English-language (e.g., ABC, CBS, FOX, NBC, The CW, and
MyNetworkTV); Spanish-language (e.g., Univision, Telemundo, and TeleFutura); shopping (e.g., HSN),
religious (e.g., TBN and CTN), and regional specialty networks (e.g., Memorable Entertainment
Television). Three of the major networks (ABC, CBS, and NBC) generally provide their affiliates with
about 22 hours per week of prime time programming.559 FOX, MyNetworkTV, and The CW supply
affiliates with up to 15 hours per week of prime time programming.560 In addition, these networks may
supply affiliates with daytime programming (e.g., morning news programs, game shows, talk shows
(including Sunday public affairs), and late night programs). Spanish language and religious networks
provide nearly round-the-clock programming for affiliates.561
154.
Broadcast stations also acquire programming from television syndicators that distribute
original ("first-run syndication") programming, such as Jeopardy! and Judge Judy, or reruns of network
television series ("off-net" syndication), such as reruns of Seinfeld and The Simpsons, to television
stations.562 In addition, local broadcast stations produce programming in-house, such as local newscasts,
public affairs shows, and coverage of regional and local sporting events.563
a.

Horizontal Concentration

155.
National Group Ownership. The Act imposes a cap that limits the percentage of
television households that one television station group owner can serve to 39 percent of U.S. television
households.564 According to SNL Kagan, as of 2012, the largest group owners by coverage total of U.S.
television households, include ION Media Networks (owned by Avenue Capital, Black Diamond Capital,
and Trilogy Capital), Univision Communications (Broadcast Media Partners Inc.), CBS Television
Stations (CBS Corp.), FOX Television Stations (News Corp.), NBC Universal Stations (Comcast Corp.
and General Electric),565 Tribune Broadcasting (owned by an Employee Stock Ownership Plan),566 ABC
Owned Television Stations (The Walt Disney Company), Gannett Broadcasting (Gannett Company),

558 BIA/Kelsey, BIA Media Access Pro Television Database as of October 2012 (evaluation of network affiliation
data for all Nielsen DMAs).
559 Nexstar 2012 Form 10-K at 16.
560 Id.
561 See, e.g., Entravision Communications Corp., SEC Form 10-K for the Year Ended December 31, 2012, at 6-7
("Entravision 2012 Form 10-K"); Trinity Broadcasting Network, Watch Us: Broadcast Schedule,
http://www.tbn.org/watch-us/broadcast-schedule (visited Mar. 20, 2013).
562 Some firms specialize in one type of syndication. Financial arrangements between syndicators and stations vary.
Some syndication rights are acquired for a per episode or series fee, but others involve sharing advertising time or
barter. Vogel at 212-15. Under a barter agreement, a national program distributor retains a fixed amount of
advertising time within the program in exchange for the programming it supplies. See, e.g., Gray 2012 Form 10-K
at 9.
563 See, e.g., Nexstar 2012 Form 10-K at 10; Gray 2012 Form 10-K at 10.
564 1996 Act, 202(c); 47 C.F.R. 73.3555(e).
565 See supra, n.92.
566 On July 1, 2013, Tribune and Local TV Holdings, LLC, announced that they had entered into an agreemet for
Tribune to acquire Local TV's television stations. See Tribune, Tribune to Acquire Local TV, Creating Content
and Distribution Powerhouse
(press release), July, 1, 2013. The applications for consent to transfer control were
filed on July 15, 2013.
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Sinclair Broadcast Group, Inc., and Hearst Corp. During the 2011-2012 season, Sinclair increased its
coverage of TV households from 19 percent to 25 percent of U.S. television households.567
156.
Analyzing the largest group owners in terms of revenue results in a similar list.
According to TVNewsCheck, the top station groups in 2011 in terms of revenue include Fox, CBS,
NBCUniversal, ABC, Tribune, Sinclair, Gannett, Hearst, Belo Corp., and Univision.568
157.
Local Duopolies. Commission rules limit the number of broadcast television stations that
a single entity can own within a DMA based on the number of independently owned stations in the
market.569 The local television ownership limit permits a single entity to own two television stations in
the same local market if (1) the "Grade B" contours of the stations do not overlap; or (2) at least one of
the stations in the combination is not ranked among the top four stations in terms of audience share, and
(3) at least eight independently owned and operating commercial or noncommercial full-power broadcast
television stations would remain in the market after the combination.
158.
Using BIA data and counting stations in the same market with a common parent, we
estimate that as of 2012, there are about 128 duopolies among commonly owned stations in the United
States and approximately an additional 58 local marketing agreements ("LMAs").570 Broadcast stations
owned-and-operated by parents of multiple broadcast networks are generally more likely than other
stations to participate in duopolies. Through the dual network rule, the Commission limits the extent to
which broadcast television licensees can affiliate with broadcast networks under common ownership.571
The dual network rule effectively permits common ownership of multiple broadcast networks, but
prohibits a merger of two out of the "top four" networks (i.e., ABC, CBS, FOX, and NBC). Univision
Corporation, Inc., which owns the Univision and TeleFutura broadcast networks, operates 12 duopolies;
CBS Corp., which has ownership interests in the CBS and The CW networks, has 10 duopolies; News
Corp., which owns the FOX and MyNetwork TV networks, has nine duopolies; Comcast/NBCUniversal
("Comcast/NBCU"), which owns the NBC and Telemundo broadcast networks, operate six duopolies. In
contrast, Disney Corp., whose sole broadcast network is ABC, does not operate any duopolies.
159.
Large television group owners with major broadcast network affiliates are also more
likely to operate duopolies. Sinclair, which owns 59 full-power stations as of 2012, is involved in more
duopolies than any other station group, with 14 co-owned duopolies and 12 LMAs. LIN TV Corp
("LIN") operates nine duopolies of co-owned stations and is involved in two LMAs. Belo Corp. operates

567 SNL Kagan, TV Station Deals Databook, 2012 Edition, at 14, 15.
568 Kim McAvoy, Fox is TV's New Station Group Leader, TVNewsCheck, Apr. 15, 2012, at
http://www.tvnewscheck.com/article/58737/fox-is-tvs-new-station-group-leader (visited Nov. 26, 2012).
569 See 47 C.F.R. 73.3555(b). See also infra, 179. In the context of the Media Ownership proceeding, the
Commission is considering revising this rule. See 2010 Quadrennial Regulatory Review Review of the
Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the
Telecommunications Act of 1996; Promoting Diversification of Ownership In the Broadcasting Services
, MB
Docket Nos. 09-182, 07-294, Notice of Proposed Rulemaking, 26 FCC Rcd 17489, 17493, 17498-511, 8, 25-59
(2011) ("Media Ownership NPRM").
570 See BIA/Kelsey, BIA Media Access Pro Television Database as of July 2012 ("BIA Database July 2012")
(evaluation of station ownership information for all Nielsen DMAs). For purposes of this analysis, we count full-
power stations within a DMA that have a common parent company (i.e., co-owned) as a duopoly. We also count
two stations linked by LMAs, if the programmer provides more than 15 percent of a station's weekly broadcast
programming. See 47 C.F.R 73.3555 note 2(j). For the purposes of this Report, the Commission has not verified
the BIA data.
571 47 C.F.R. 73.658(g).
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five duopolies and is involved in two LMAs. Hearst Television Inc., Newport Television LLC, and the
Tribune Company each operate four duopolies. Newport Television LLC is also involved in four LMAs.
160.
There was at least one duopoly in 72 markets as of July 2012.572 Five top ranked markets
have four duopoly combinations: New York, Los Angeles, Dallas-Ft. Worth, San Francisco-Oakland-San
Jose, and Seattle-Tacoma.573 While larger DMAs tend to have a greater number of duopolies, smaller
DMAs have duopolies as well. Smaller markets are more likely to have LMAs than co-owned stations.
Seven markets ranked below 100 have co-owned duopolies, while 23 markets ranked below 100 have
LMAs. The smallest market with a duopoly is Victoria, Texas, ranked 204.
b.

Vertical Integration

161.
Some stations are vertically integrated upstream, with suppliers of programming, as well
as downstream, with distributors of programming. For instance, the stations' parent company may have
ownership interests in television production studios, movie studios, sports teams, broadcast television
networks, cable networks, or syndicators. Similarly, Comcast's acquisition of NBC/Universal resulted in
downstream vertical integration of NBC's O&O stations with a cable MVPD.574
162.
As reflected in the 14th Report, the parent companies of six of the top seven station
groups ION Media Networks, Univision Communications, Inc., CBS Television Stations, FOX
Television Stations, NBC Universal Stations, and ABC Owned Television Stations, representing 188
O&Os, own all or part of at least one broadcast television network.575 Broadcast networks typically own
and operate their own stations in the largest television markets. Spanish-language broadcast networks,
e.g., Univision and Telemundo, own and operate television stations in the largest Spanish-speaking
markets.
163.
In addition to ownership of broadcast networks, a number of owners of local broadcast
stations have affiliations with cable networks. Through its ownership of NBC Universal, Comcast has
ownership interests in 50 national cable networks.576 Other broadcast station owners with affiliated cable
networks are: The Walt Disney Company with interests in 39 cable networks; Univision with interests in
nine affiliated cable networks; and CBS Corporation with interests in 28 cable networks.577 News Corp.
has ownership interests in 29 national cable networks. In addition, since the last report, News Corp. took
an interest in the Yankee Entertainment & Sports Network ("Yes Network"), increasing its count of
affiliated regional cable networks to 46.578 Several broadcast television groups owners that are not
vertically integrated with broadcast networks also have ownership interests in cable networks. These
owners include Hearst Television Inc. (32 cable networks), InterMedia Partners (five cable networks),

572 See BIA Database July 2012 (evaluation of station ownership information for all Nielsen DMAs). In addition,
San Juan, Puerto Rico, which is not part of any DMA, has six television station combinations.
573 These markets are ranked one, two, five, six, and twelve respectively as of the 2011-2012 television season. See
Nielsen 2011-12 Local Market Estimates.
574 See supra, n.92.
575 See 14th Report, 27 FCC Rcd at 8688, 172.
576 In this Report, we count SD and HD networks separately.
577 See 14th Report, 27 FCC Rcd at 8688, 173. Comcast, Viacom, News Corp., and The Walt Disney Company
also control production studios, which are the primary source of programming for their networks, and hold ultimate
distribution rights for their programming, subject to contractual negotiations. See infra, Sec. V.A.
578 See 14th Report, 27 FCC Rcd at 8688, 173; News Corporation, News Corporation And Yankee Global
Enterprises Announce News Corporation's Acquisition Of An Equity Stake In The YES Network
(press release),
Nov. 20, 2012, at http://www.newscorp.com/news/news_548.html (visited Nov. 27, 2012).
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Tribune Company (six cable networks), Cox Communications Inc. (six cable networks), and Hubbard
Broadcasting Corp. (four cable networks). Combined, Hearst, InterMedia, Tribune, Cox, and Hubbard,
own 83 stations. Other broadcast station groups operate local and regional cable news channels.579 Belo
Corp., for example, owns 20 television stations and six regional cable news channels.580
164.
Both Viacom and E.W. Scripps hold their broadcast television station groups and cable
network holdings in separate corporate entities. Because their station groups and cable networks have
common corporate directors, however, we consider them to be affiliated. Counting Viacom's 34 cable
networks and CBS's 28 cable networks, these affiliated companies have interests in 62 cable networks.
Including Scripps Networks Interactive, E.W. Scripps has interests in 11 cable networks. 581
165.
Comcast is the only distributor of video programming with ownership interests in each
mode of video distribution covered by this Report; it is an MVPD that owns and operates 26 full-power
television stations (10 NBC O&Os and 16 Telemundo O&Os) and maintains an ownership interest in
Hulu, an OVD.582 News Corp. (which holds 27 broadcast television stations) and Disney/ABC (which
holds 8 broadcast television station) also have ownership interests in Hulu.583 Other than Comcast, Cox
Media Holdings is the only MVPD that owns broadcast stations serving a DMA where it also owns a
cable system.584
c.

Entry and Exit Conditions

166.
Entry and exit in the broadcast television industry occurs subject to the broadcast
television allocation and licensing regime: ownership of television station properties can change hands;
licensees may go out of business and return broadcast licenses for the Commission to reissue; or the
Commission may auction channels for new broadcast stations. The amount of spectrum the Commission
has authorized exclusively for broadcast television use and the allocation of that spectrum across the
United States limits the number of entities that can enter and exit the industry. In addition to spectrum,
programming is another critical input for broadcast television stations. Stations also require access to
capital in order to remain competitive and operational. Both regulatory and non-regulatory conditions
affecting the availability of programming may impact stations' entry and exit decisions, and we discuss
those conditions below. We then describe recent entry and exit from the market.

579 See 14th Report, 27 FCC Rcd at 8688, 173.
580 Belo Corp., SEC Form 10-K for the Year Ended December 31, 2012, at 17 ("Belo 2012 Form 10-K"). On June
13, 2013, Belo and Gannett announced that they have entered into a merger agreement. See Gannett, Belo, Gannett
to Acquire Belo, Accelerating Ongoing Transformation Into Diversified Higher-Margin Multi-Media Company
(press release), June 13, 2013. The applications for consent to transfer control were filed on June 19, 2013.
581 See 14th Report, 27 FCC Rcd at 8689, 174.
582 See id. at 8689, 175; infra, 226. Comcast's cable systems overlap with NBCUniversal's stations in six
markets: San Francisco, Philadelphia, Chicago, Miami, Hartford, and Washington, DC. Comcast-NBCU Order, 26
FCC Rcd at 4289, 126 n.302. On July 1, 2013, NBCUniversal acquired Philadelphia Telemundo affiliate WSSI-
TV from ZGS Communications. See Telemundo, Telemundo Stations Group Acquires Philadelphia Affiliate WWSI-
TV
(press release), July 2, 2013.
583 See infra, 226.
584 See 14th Report, 27 FCC Rcd at 8689, 175. In the Orlando-Daytona Beach-Melbourne DMA, Cox owns two
television stations WFTV, an ABC affiliate, and WRDQ, an independent station as well as a cable system serving
Ocala, Florida. See Cox Media Group, Orlando, http://www.coxmediagroup.com/orlando/ (visited Nov. 27, 2012);
Cox Communications, Inc., Welcome, http://ww2.cox.com/ (visited Nov. 27, 2012).
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(i)

Regulatory Conditions

167.
Licensing of Broadcast Spectrum. A broadcast station may not operate in the United
States without first receiving Commission authorization.585 The Commission therefore is responsible for
licensing broadcast spectrum to respective applicants and ensuring that the spectrum is used to serve the
public interest. 586 Courts have consistently held that the Commission retains significant discretion under
its public interest standard in approving applications for broadcast spectrum licenses.587 The Act also
prohibits broadcast stations from assigning or transferring control of their licenses without obtaining
Commission approval.588 In addition, certain obligations are imposed on licensees during each license
term, which is generally eight years.589 Under the Act, in order to grant an application for renewal of a
broadcast license, the Commission must find that, during the previous license term, the station has served
the public interest, convenience, and necessity; there have been no serious violations of the licensee of the
Act or the Commission's rules and regulations; and there have been no other violations by the licensee of
the Act or the Commission's rules and regulations which, taken together, would constitute a pattern of
abuse.590
168.
Ownership Limits. The Commission has adopted several rules limiting the ownership
interests of broadcasters to further the Act's goals of competition, localism, and diversity.591 Congress
mandates that the Commission review its media ownership rules every four years to determine whether
they "are necessary in the public interest as a result of competition."592 Currently, the Commission's
media ownership rules limit local television ownership, local radio ownership, newspaper/broadcast
cross-ownership, radio/television cross-ownership, and dual network ownership.593 The local television
ownership rule permits a single entity to own two television stations in the same market only if certain

585 47 U.S.C. 301.
586 47 U.S.C. 303(c), 308(a), 309(a).
587 See, e.g., FCC v. RCA Communications, Inc., 346 U.S. 86, 90 (1953) ("In choosing among applicants, the
Commission was to be guided by the `public interest, convenience, or necessity[.]' . . . The statutory standard no
doubt leaves wide discretion and calls for imaginative interpretation."); FCC v. Pottsville Broadcasting Co., 309
U.S. 134, 137-38 (1940) ("In granting or withholding permits for the construction of stations, and in granting,
denying modifying or revoking licenses for the operation of stations, `public convenience, interest, or necessity' was
the touchstone for the exercise of the Commission's authority. While this criterion is as concrete as the complicated
factors for judgment in such a field of delegated authority permit, it serves as a supple instrument for the exercise of
discretion by the expert body which Congress has charged to carry out its legislative policy.").
588 47 U.S.C. 310(d).
589 47 U.S.C 307(c); 47 C.F.R. 73.1020. Among other things, each licensee is required to maintain a main studio
in or within a prescribed distance of its station's community of license (47 C.F.R 73.1125(a)); establish and
enforce an equal opportunity program (47 C.F.R. 73.2080); and maintain an accessible public inspection file (47
C.F.R 73.3526-27). In 2012, the Commission began requiring each television broadcast station to place its public
inspection file online in a central, Commission-hosted database instead of maintaining the file at the station's main
studio. See Standardized and Enhanced Disclosure Requirements for Television Broadcast Licensee Public Interest
Obligations
, MM Docket No. 00-168, Second Report and Order, 27 FCC Rcd 4535, 4536-37, 1-3 (2012).
590 See 47 U.S.C. 309(k)(1).
591 See 47 C.F.R. 73.3555.
592 1996 Act, 202(h).
593 Id.
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conditions are met.594 The newspaper/broadcast cross-ownership rule prevents the common ownership of
a radio or television broadcast station and a daily newspaper where the station's broadcast signal
encompasses the entire community where the newspaper is published. 595 The radio/television cross-
ownership rule restricts the common ownership of radio and television broadcast stations in a single
market after factoring in the size of the relevant market. 596
169.
Territorial Exclusivity. The territorial exclusivity rules restrict the geographic area in
which a television broadcast station may obtain exclusive rights to video programming. Under the
network territorial exclusivity rule, a broadcast station may not have an agreement with a network
preventing another station located in a different community from broadcasting any of the network's
programming, or preventing another station located in the same community from broadcasting the
network's programs not purchased by the broadcast station.597 Under the rule governing territorial
exclusivity for non-network (i.e., syndicated programming) programming, a broadcast station may not
enter into an agreement with a non-network programming distributor that prevents another station located
in a community more than 35 miles away from broadcasting the same programming.598
170.
Incentive Spectrum Auctions. On February 22, 2012, President Obama signed legislation
providing the Commission with the authority to conduct a broadcast incentive auction by which full
power and Class A television broadcast licensees can submit voluntarily bids to relinquish or modify their
spectrum usage rights in exchange for a portion of the spectrum auction proceeds.599 The Commission
released a Notice of Proposed Rulemaking seeking comment on the broadcast incentive auctions in
October 2012.600 The incentive auction of broadcast television spectrum will have three major pieces: (1)
a "reverse auction" in which broadcast television licensees submit bids to voluntarily relinquish spectrum
usage rights in exchange for payments; (2) a reorganization or "repacking" of the broadcast television
bands in order to free up a portion of the UHF band for other uses; and (3) a "forward auction" of initial
licenses for flexible use of the newly available spectrum.601 Under the legislation, broadcasters interested
in exiting the business may bid to entirely relinquish a station's spectrum usage rights in the reverse
auction.602 Such exit would reduce the overall number of competing broadcast television stations.603
Broadcasters that wish to remain in the business also have an opportunity to strengthen their finances

594 47 C.F.R. 73.3555(b). See supra, 157. Similarly, the local radio ownership rule limits the number of
commercial radio stations one entity may own in a local market. 47 C.F.R. 73.3555(a).
595 47 C.F.R. 73.3555(d).
596 47 C.F.R. 73.3555(c).
597 47 C.F.R. 73.658(b).
598 47 C.F.R. 73.658(m), 76.53. An exception is made, however, for communities located in hyphenated markets,
i.e., television markets that include more than one city (e.g., Dallas-Fort Worth, TX). 47 C.F.R. 73.658(m),
76.51.
599 See Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, 6401-05, 126 Stat. 156, 222-
30 (2012).
600 See Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auctions, Docket No.
12-268, Notice of Proposed Rulemaking, 27 FCC Rcd 12357 (2012).
601 Id. at 12359, 5.
602 Id. at 12364, 16.
603 Id.
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through the cash infusion resulting from a winning reverse auction bid to channel share or to move from a
UHF to a VHF channel. 604
(ii)

Non-regulatory Conditions

171.
The primary means of entering the television broadcast industry is to purchase broadcast
properties from licensees who are already operating stations rather than constructing new broadcast
station infrastructure and obtaining a new license. Once the Commission has approved the transaction
and the new owner takes over the operations of an existing station, the new owner may decide to change
programming by affiliating with a different network, purchasing new syndicated programming, or
changing on-air talent for local programming, such as newscasts, subject to the terms of their contracts.
172.
Access to Capital. Entities seeking to enter the broadcasting industry, either by
purchasing properties or launching a new station, require access to capital, which may come in the form
of debt or equity financing. In determining whether to lend money or invest in a licensee, banks or other
firms look at expected revenues and expenses, especially whether new owners could increase profits by
changing programming or reducing expenses. Structural changes in the media industry, combined with
the strong correlation of their revenues and profits to economic cycles, indicate that financing media
transactions with debt entails some risk.605 In particular, high interest rates may lead station owners to file
for bankruptcy and transfer control to lenders or sell their stations,606 while reducing the number of
potential station buyers who can obtain loans and service debt without strain.607
173.
Programming. Access to programming also affects the ability of licensees to enter and
remain in the industry.608 Network affiliation agreements and syndication contracts often last several
years. For example, if a station loses its network affiliation, it may not be able to affiliate with an
alternative network, because that alternative network is likely to already have a distribution agreement in

604 Id.
605 Historically, the broadcast sector has been highly leveraged, and the recent recession increased financial strain.
Price Colman, TV Groups Cope with Leverage Troubles, TVNEWSCHECK, Mar. 4, 2009,
http://www.tvnewscheck.com/article/2009/03/04/30075/tv-groups-cope-with-leverage-troubles (visited Oct. 19,
2012). Lenders impose restrictions (covenants) on the ratio of debt to equity and earnings before interest and taxes
(EBIT) to interest. LIN 2012 Form 10-K at 27-28; Sinclair 2012 Form 10-K at 25-26; Nexstar 2012 Form 10-K at
15-16; Gray 2012 Form 10-K at 19-20. Some station groups have faced concerns about breaching such loan
covenants. See, e.g., Taigh Khan, S&P Cuts Media General on Declining Revenue, Tightening Covenants, SNL
KAGAN (Oct. 28, 2012).
606 LIN 2012 Form 10-K at 27-28; Sinclair 2012 Form 10-K at 25-26; Nexstar 2012 Form 10-K at 15-16; Gray 2012
Form 10-K at 19-20.
607 "[W]hen credit markets froze in 2007, a big no-exit sign was hung over TV broadcasting. The gap between bid
and ask is more like a gulf." Price Colman, Hot Trend: Outsourcing Management, TVNewsCheck, Aug. 25, 2010,
http://www.tvnewscheck.com/article/2010/08/25/44718/hot-trend-outsourcing-station-management (visited Oct. 28,
2012). On August 31, 2012, the Coalition for Broadcast Investment ("CBI") submitted a letter asking the
Commission to clarify its policies and procedures under Section 310(b)(4) of the Communications Act, which
restricts foreign ownership and voting interest in entities that control Commission licenses. The Media Bureau
invited comment on CBI's letter. See Media Bureau Announces Filing of Request for Clarification of the
Commission's Policies and Procedures under 47 U.S.C. 310(b)(4) by the Coalition for Broadcast Investment
, DA
12-281 (MB Feb. 26, 2013).
608 Broadcasters differ in the value they place on programming with respect to a station's purchase price. For
example, Gray and LIN believe that the value of a television station is derived primarily from the attributes of its
broadcast license, rather than its type of programming, i.e., whether or not it is an affiliate of one of the major four
broadcast networks. Gray 2012 Form 10-K at 55-56; LIN 2012 Form 10-K at 43.
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place with another station in the market. The loss of this programming could require the station to obtain
replacement programming at a higher cost, and that may be less attractive to its target audience, thereby
causing it to lose advertising revenues while potentially increasing expenses. Similarly, popular
syndicated programming may not be available for a new station due to exclusive distribution
arrangements with competing stations or cable networks.609 As an alternative to contracting for expensive
third-party programming, stations may produce their own programming in-house or lease time to other
parties (e.g., producers of infomercials) willing to pay stations.
(iii)

Recent Entry and Exit

174.
Overall, between June 30, 2011, and June 30, 2012, the number of full-power commercial
television stations on the air increased by three, going from 1,384 to 1,387.610 During this period, the total
number of full-power noncommercial television stations also increased by three, going from 393 to
396.611 In 2011, 55 full-power stations were sold, for a total of $1.18 billion, or $21.5 million per station,
with an average cash flow multiple of 8.8.612 By the second quarter of 2012, 35 stations were purchased
for a total of $445.91 million, or $12.74 million per station, with an average cash flow multiple of 9.3.613
By the third quarter of 2012, 81 stations were purchased for a total $1.76 billion, or $21.7 million per
stations, with an average cash flow multiple of 9.1.614 These figures are consistent with a general increase
in station transaction volume since 2010, when just 23 full-power stations traded hands in deals totaling
$152 million. 615 Average cash flow multiples for 2011 and 2012 (per available data) are similar to the
2010 value of 9.3.616
175.
Since the last report, several broadcast station owners have exited the television broadcast
business by selling stations.617 For example:
At the end of 2011, McGraw Hill sold its broadcasting group to Scripps for $212 million.
The deal involved ABC affiliates in Denver, San Diego, Bakersfield and Indianapolis, as well
as Azteca America affiliates in Denver, Fort Collins, Colorado Springs, San Diego and
Bakersfield.618

609 Stations compete against in-market broadcast stations for exclusive access to syndicated programming within
their markets. In addition, cable networks occasionally acquire programs that might otherwise be offered to stations,
and some programs are available via OVDs. Nexstar 2012 Form 10-K at 10; LIN 2012 Form 10-K at 14. Stations
usually purchase syndicated programming two to three years in advance, and sometimes must make multi-year
commitments. Gray 2012 Form 10-K at 21; Sinclair 2012 Form 10-K at 28.
610 See FCC, Licensed Broadcast Stations Totals, http://transition.fcc.gov/mb/audio/BroadcastStationTotals.html.
611 Id.
612 SNL Kagan, B-Stats Data for the Second Quarter of 2012, July 30, 2012.
613 Id.
614 SNL Kagan, B-Stats Data for the Third Quarter of 2012, Oct. 30, 2012.
615 SNL Kagan, B-Stats Data for the Second Quarter of 2012, July 30, 2012.
616 Id.
617 There does not appear to be any entry of new broadcast station owners since the 14th Report.
618 Azam Ahmed, McGraw-Hill to Sell Broadcasting Unit to Scripps for $212 Million, N.Y TIMES, Oct. 2, 2011,
http://dealbook.nytimes.com/2011/10/03/mcgraw-hill-to-sell-broadcasting-unit-to-e-w-scripps-for-212-million
(visited Nov. 12, 2012); Merrill Knox, Scripps Completes Purchase of 9 McGraw-Hill Stations, TV Spy, Dec. 3,
2011, https://www.mediabistro.com/tvspy/scripps-completes-purchase-of-9-mcgraw-hill-stations_b34408 (visited
Nov. 12, 2012).
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In a transaction that closed in October 2012, New Vision Television sold its 13 network
affiliates to LIN TV Corp. for $330.4 million and the assumption of $12 million of debt.619
We noted in the last report that Clear Channel Communications had sold all of its television
assets, 60 full-power stations, in 2008 to new entrant Newport Television ("Newport"), a
holding company formed by private equity firm Providence Equity Partners.620 In 2012,
Newport entered into agreements to sell all but four of its stations to third parties, including
Nexstar Broadcasting Group, Sinclair, Cox, and Shield Media, for approximately $1
billion.621 Newport is still seeking buyers for its remaining stations.
3.

Broadcast Television Industry Conduct

176.
A second key element of our analysis of broadcast television station competition is an
examination of the conduct of industry participants in particular, the business models and competitive
strategies of these entities. Broadcast stations derive most of their revenue from local and national
advertising, selling on-air time to advertisers so they may reach viewers.622 To differentiate themselves,
stations primarily invest in the purchase and production of programming. In this section of the Report,
we discuss broadcast television station competition in terms of both price and non-price rivalry.
a.

Price Rivalry

177.
Price to Consumers. Broadcast television stations do not compete on price in the
traditional sense because they do not charge consumers directly for the delivery of their signals.
Broadcast television is free to consumers who receive it over-the-air. Nevertheless, since about 90
percent of all television households receive broadcast stations from an MVPD, most consumers indirectly
pay for broadcast stations as part of their MVPD service fees, which are calculated, in part, to cover
retransmission consent fees that the MVPD pays to local stations.623 In the case of cable, broadcast
television stations are part of the basic service package, which is generally a low price offering.624 As of
January 1, 2012, the average cable system charged $20.55 per month for its basic service tier, which
includes 49 channels on average.625 As of November 2012, AT&T U-verse charges $19 per month for a
basic television service including only local channels.626 As of November 2012, Verizon offers 72
channels as part of its FiOS TV Local Digital plan for $12.99 per month.627 DBS providers may charge

619 Mikolo Ilas, LIN TV Completes Purchase of New Vision TV Stations, SNL KAGAN, Oct. 12, 2012; Haseeb Ali,
LIN TV Buying Network Affiliates From New Vision, SNL Kagan, May 7, 2012.
620 See 14th Report, 27 FCC Rcd at 8693, 186.
621 Volker Moerbitz, Shield Media Becomes TV Group Owner With $14.4M Acquisition, SNL KAGAN, Oct.22,
2012; Newport Sells 22 Stations for $1 Billion, TVNewsCheck, July 19, 2012,
http://www.tvnewscheck.com/article/60876/newport-sells-22-stations-for-1-billion (visited Nov. 12, 2012).
622 We discuss additional sources of revenue further, infra, Sec. III.B.4 & Table 19.
623 National Universe Estimates -- Market Breaks, Nielsen, Jan. 1, 2013. See also infra, Table 17.
624 47 U.S.C. 543(b)(7), 47 C.F.R. 76.901(a).
625 See 2013 Cable Price Report, at Tables 1, 4.
626 See AT&T Inc., Shop: Compare TV Packages, http://www.att.com/u-verse/explore/tv-landing.jsp (visited Nov.
6, 2012). This plan only includes local channels; AT&T does not specify the number.
627 See Verizon Communications Inc., FiOS TV, Local Channel Plan (using 22201 zip code in Arlington, VA),
http://www22.verizon.com/home/FiOSTV/Plans (visited Nov. 6, 2012). This plan includes 72 channels, including
14 in HD. In addition to the broadcast stations' primary signals, this package includes broadcast multicast signals
(continued....)
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subscribers an additional fee to receive broadcast television stations. As of November 2012, DIRECTV
generally offers local channels at no additional charge as part of its packages, but eligibility for this offer
is based on a customer's service area.628 As of November 2012, DISH includes local television station
services as part of some packages, but charges an additional $6.00 per month to subscribers opting for
local television stations in other packages.629
178.
Price to Advertisers. Television broadcast stations earn about 88 percent of their revenue
through the sale of advertising time during their programs, a slight decline since the last report.630 In the
broadcasting industry, competition for advertising revenue occurs primarily within individual markets.631
Generally, advertising rates are determined by a station's overall ability to attract viewers in its market
area and a station's ability to attract viewers generally and among particular demographic groups that an
advertiser may be targeting.632 Specifically, advertising rates depend upon factors such as: (1) the size of
a station's market; (2) a station's overall ratings; (3) a program's popularity among targeted viewers;
(4) the number of advertisers competing for available time; (5) the demographic makeup of the station's
market; (6) the availability of alternative advertising media in the market; (7) the presence of effective
sales forces; (8) the development of projects, features and programs that tie advertiser messages to
programming; and (9) the level of spending commitment made by the advertiser.633 Within network
shows, stations are generally permitted to sell a fixed amount of advertising time, about 2.5 to three
minutes per hour. The network sells any remaining advertising time and includes such advertising in
network programming. The network retains the associated revenue. In the alternative, stations can use
their allotted 2.5 to three minutes of time during network shows to promote their own programming. In
newscasts or during other non-network shows, stations may sell approximately nine minutes of
advertising time per hour.634
179.
Local advertisers purchase time directly from a station's local sales staff. Such
advertisers typically include car dealerships, retail stores, and restaurants.635 National advertisers that
wish to reach a particular region or local audience buy advertising time through national advertising sales
representative firms.636 Such advertisers typically include automobile manufacturers and dealer groups,
telecommunications companies, fast food franchisers, and national retailers.637 Stations compete for
(Continued from previous page)
and PEG channels, as well as WGN America and the Weather Channel. Additional national networks are available
to households that bundle video services with broadband or voice service from Verizon.
628 DIRECTV, English Packages (using 22314 zip code in Alexandria, VA),
http://www.directv.com/DTVAPP/new_customer/base_packages.jsp?footernavtype=-1&lpos=header (visited Nov.
6, 2012).
629 DISH Network, Entertainment: Channels, Washington, DC/Hagerstown (using 22314 zip code in Alexandria,
VA), http://www.dishnetwork.com/packages/local/default.aspx (visited Nov. 6, 2012).
630 SNL Kagan, Radio/TV Station Revenue Projections: 2011-2021, Aug. 28, 2012. See 14th Video Competition
Report, 27 FCC Rcd at 8695, 190. See also infra, Sec. III.B.3.b.
631 Nexstar 2012 Form 10-K at 10; Gray 2012 Form 10-K at 11; Sinclair 2012 Form 10-K at 23-24.
632 Nexstar 2012 Form 10-K at 7-8; Gray 2012 Form 10-K at 4; Sinclair 2012 Form 10-K at 23.
633 Nexstar 2012 Form 10-K at 7-8; LIN 2012 Form 10-K at 11-12; Sinclair 2012 Form 10-K at 23.
634 Vogel at 317, n. 29.
635 Nexstar 2012 Form 10-K at 7-8.
636 Nexstar 2012 Form 10-K at 7-8; Entravision 2012 Form 10-K at 11.
637 Nexstar 2012 Form 10-K at 8.
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advertising revenue with other stations in their respective markets; advertisers may also place
advertisements with other media including newspapers, radio stations, magazines, outdoor advertising,
transit advertising, yellow page directories, direct mail, local cable systems, DBS systems, and web sites
online, as well as telephone and/or wireless companies.638
180.
While individual stations do not make their advertising rates publicly available, prices for
a composite group of television stations are available.639 Local advertisers typically use the cost per
rating point ("CPP") measure to value advertising time, which represents the percentage of households in
a local market with television sets watching a station or show at a given time.640 CPPs vary by the time of
day, with prime time (8 p.m.-11 p.m., Eastern and Pacific Time; 7 p.m.-10 p.m., Central and Mountain
Time), being the most expensive.641 For the top 100 television markets, on average, a station's CPP for a
30-second advertisement during prime time was $27,667 in 2011, up from $26,343 in 2010. That is, on
average, a station within the top 100 markets charged advertisers $27,667 to reach one percent of the
television households within its DMA with a 30-second commercial. In 2012, the average prime time
CPP for a station rose to $32,019. During the late newscasts (11 p.m. Eastern and Pacific Time; 10 p.m.,
Central and Mountain Time), on average, stations charge lower prices. In 2011 and 2012, on average, the
CPPs for a 30-second advertisement during this time slot were $15,800 and 17,716, respectively (up from
$14,934 in 2010).642 Advertisers assess the relative expense and efficiency of delivering a message via
different media, e.g., a broadcast network compared with a group of broadcast television stations, on the
basis of cost per thousand households ("CPM").643 Table 16 includes CPM figures to provide another
basis for comparing prices charged to advertisers.

638 Gray 2012 Form 10-K at 11; Belo 2012 Form 10-K at 5.
639 See TVB, Trends: TV Cost & CPM Trends, http://www.tvb.org/trends/4718 (visited Nov. 28, 2012) ("TV Cost
& CPM Trends").
640 See The Museum of Broadcast Communications, Cost-Per-Thousand (CPM) and Cost-Per-Point (CPP),
http://www.museum.tv/eotvsection.php?entrycode=cost-per-thou (visited Nov. 6, 2012); Vogel at 290-91, 574-75.
For example, if 100,000 households in a DMA own television sets, and 20,000 of those households are tuned to a
particular broadcast television station, then a station's rating is 20. If it charges $25,000 per point during a particular
program, then it can earn $500,000.
641 TV Cost & CPM Trends.
642 Other non-advertising sources of revenue for broadcast television stations include retransmission consent fees,
network compensation, DTV revenue, online revenue, and mobile revenue. These sources of revenue are discussed
further, infra, Sec. III.B.4.b.
643 Vogel at 292.
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Table 16: Top 100 Television Markets: Average Price of a 30-Second Commercial

644

Prime Time

Late News

Year

CPP

CPM

CPP

CPM

2010
$26,343
$26.76
$14,934
$15.17
2011
$27,677
$28.00
$15,880
$15.99
2012
$32,019
$32.08
$17,716
$17.75
181.
Price to MVPDs. As discussed above, broadcast television stations are entitled to
carriage on MVPDs' systems.645 Commercial stations are entitled to decide whether to seek mandatory
carriage or negotiate for compensation for their signals. As noted above, the Commission has an open
proceeding addressing issues related to retransmission consent.646 In that proceeding, the Commission
sought comment on whether it should be a per se violation of the good faith standard for a station to grant
another station (or station group) the right to negotiate its retransmission consent agreement(s) when the
stations are not commonly owned ("joint negotiations").647 MVPDs have argued to the Commission that
such joint negotiations lead to broadcast stations charging higher prices to MVPDs, which leads to higher
prices for consumers.648 Broadcast stations, in turn, claim that joint negotiations help lower the
transactions costs of negotiating retransmission consent agreements, and help level the playing field
between broadcasters and MVPDs.649 Broadcasters also claim that revenue from retransmission consent
is necessary to support stations' public service obligations, such as local news and information
programming, and for stations to remain economically viable. 650

644 See TV Cost & CPM Trends (visited Nov. 28, 2012) (citing SQAD Media Market Guide 1st Quarter Projections
(Fall books)).
645 See supra, 50-54, for further discussion of retransmission consent.
646 See Retransmission Consent NPRM, supra, n.144.
647 See Retransmission Consent NPRM, 26 FCC Rcd at 2731-32, 23 (noting that consent for Joint Negotiations
"might be reflected in local marketing agreements ("LMAs"), Joint Sales Agreements ("JSAs"), shared services
agreements, or other similar agreements.").
648 See, e.g., Time Warner Cable Comments, MB Docket No. 09-182, at 7 (filed July 12, 2010) (citing an economist
who believes that it is "very likely" that retransmission consent is jointly negotiated where stations are involved in
some sort of sharing agreement); ACA Comments, MB Docket No. 09-182, at 2, 13-17 (filed July 12, 2010)
(arguing that "available evidence . . . suggests" that higher rates are being paid by cable operators where one
broadcast station negotiates retransmission consent on behalf of another station in the same market). ACA
Comments at 14-19; CenturyLink Comments at 3-5; DIRECTV Comments at 18-19; OPASTCO/NTCA Comments
at 12.
649 See, e.g., NAB Reply at 4-5,
650 See, e.g., NAB Comments at 24-25; ABC Affiliates Reply at 2-10 (arguing, inter alia, that that retransmission
consent revenue is needed to replace the compensation previously paid by the broadcast networks to their affiliates,
which no longer exists and in many cases has been replaced by license fees that stations are required to pay to the
networks for network programming).
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b.

Non-Price Rivalry

182.
Broadcast stations compete with each other for viewers and advertisers on two major
non-price criteria: (1) programming651 and (2) the type of viewing experience.652 Each of these items is
described below in turn.
183.
Programming. The largest point of differentiation among broadcast stations is the type of
programming they offer and when such programming is offered. Consumers watch multiple broadcast
stations and switch stations based on the type of programming carried. When choosing the type of
programming to air, stations weigh the cost of acquiring programming, the number of viewers they can
expect to attract, the amount of advertising they can sell, and the prices they can charge to advertisers.
184.
Commercial stations also use multicast streams to offer consumers additional
programming choices. For instance, multicast streams often carry newer networks such as This TV (with
133 digital multicast affiliates), Bounce TV (with 154 digital multicast affiliates), and Retro TV (with 44
digital multicasting affiliates). 653 In addition, multicasting enables stations in smaller markets to affiliate
with multiple established networks. For example, The CW (with 115 digital multicast outlets) and My
Network TV (92 outlets) are examples of more established networks that enhance their coverage with
multicasting.654
185.
Network affiliates typically market themselves based on their broadcast network
affiliation and channel position (e.g., FOX 5) and their on-air news talent. Programming from broadcast
networks can attract large audiences, and broadcast networks provide their affiliates with entertainment
programming and sporting events, such as the Olympics, NFL games, Major League Baseball ("MLB")
games, and the Academy Awards, that are extremely popular with both viewers and advertisers.655
Networks also tend to schedule their most popular programming during the months of the year when
Nielsen measures television audiences for all 210 markets (February, May, July, and November) to
determine local advertising rates.656
186.
Local news programming is another source of product differentiation for broadcast
television stations in their competition for both advertisers and viewers.657 This programming, which

651 Nexstar 2012 Form 10-K at 10; Gray 2012 Form 10-K at 10-11; Sinclair 2012 Form 10-K at 22-23.
652 Signal coverage and MVPD carriage also impact a television station's competitive position. Gray 2010 Form 11-
K at 8, 20.
653 SNL Kagan, TV Station Database (Oct. 2, 2012).
654 Id.
655 Nexstar 2012 Form 10-K at 4; Sinclair 2012 Form 10-K at 13. The network affiliation agreements, generally
exclusive for each of the 210 television markets, provide affiliates with the right to air network programming first.
The contracts may run from two to 10 or more years. The Commission's right-to-reject rule grants an affiliate the
right to (1) reject or refuse network programs which the station reasonably believes to be unsatisfactory, unsuitable,
or contrary to the public interest and (2) substitute a program which, in the station's opinion, is of greater local or
national importance. 47 C.F.R. 73.658(e). The financial arrangements between networks and their affiliated
stations regarding payments for programming are evolving. See infra, Sec. III.B.4.b.
656 While networks and stations consider May to be the most important measuring period of the year, they also
compete intensely in February and November, when audiences are likely to stay at home. Vogel at 291. See also
Nielsen Media Research, Glossary of Media Terms, Sweeps, http://www.nielsenmedia.com/glossary/ (visited Mar.
22, 2012). Nielsen refers to these months as "sweep months." Nielsen excludes the Honolulu, Fairbanks, and
Juneau DMAs from its July measurement period.
657 LIN 2012 Form 10-K at 9-10; Sinclair 2012 Form 10-K at 11.
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stations produce, is typically the largest source of their revenue, accounting for 35 to 40 percent of their
advertising base.658 Some stations seek to increase their local advertising revenues in part by producing
programming with local advertising appeal and sponsoring or co-promoting local events and activities.659
To attract audiences, stations also strive to provide exclusive news stories, unique features such as
investigative reporting, and coverage of community events, and to secure broadcast rights to regional and
local sporting events.660 In 2011, the average television station aired 5.5 hours of local news per
weekday, up from 5.3 hours in 2010.661 NAB contends that operating agreements among non-commonly
owned broadcasters enable stations to maintain and sometimes expand news on stations, despite a
difficult economic climate.662
187.
Stations also air syndicated programming, including off-network programs (e.g.,
Criminal Minds or How I Met Your Mother), first-run programs (e.g., Jeopardy, Entertainment Tonight,
or Wheel of Fortune) and sporting events.663 Competition for programming involves negotiating with
national program distributors or syndicators that sell first-run and rerun packages of programming in their

658 Vogel at 304. See also Robert Papper, Part I: TV News Staffing Soars to 2nd Highest Level Ever with More
Hiring Projected; Profitability Rises Again
, Hofstra University, 2012, http://www.rtdna.org/media/Part1_2012.pdf
("RTNDA/Hofstra 2012 Survey") (visited Nov. 6, 2012) (noting that local news produces, on average, about 48
percent of a TV station's revenue).
659 See, e.g., Nexstar 2012 Form 10-K at 8; LIN 2012 Form 10-K at 12. Nexstar states that each of the stations it
owns, operates, programs, or provides sales and other services to create a highly recognizable brand, primarily
through the quality of news programming and community presence. Nexstar asserts that strong local news typically
generates higher ratings among attractive demographic groups and enhances audience loyalty, potentially resulting
in higher ratings for programs preceding and following the newscasts. Nexstar claim that high ratings and strong
community identities also makes stations attractive to advertisers. In 2010, Nexstar earned approximately 30
percent of its advertising revenues from spots aired during local news programming. Nexstar's stations produce
between 15 to 25 hours per week of local news programming. Nexstar 2012 Form 10-K at 3.
660 Nexstar 2012 Form 10-K at 10; Gray 2012 Form 10-K at 10-11.
661 RTNDA/Hofstra 2012 Survey, Part II: A Record Amount of TV News...Again, Hofstra University, 2012,
http://www.rtdna.org/media/Parttwo.pdf at 1. While RTNDA/Hofstra released survey results in 2012, the survey
was conducted during the fourth quarter of 2011. This survey presents the national average hours of news for all
stations. A 2011 FCC staff analysis found, however, that 520 commercial and 262 noncommercial stations do no
local news. See FCC, The Information Needs of Communities, July 2011, at 100,
http://www.fcc.gov/infoneedsreport.
662 See, e.g., NAB Comments at 20-23. Such arrangements include joint sales agreements, shared services
agreements, and local marketing agreements. As stated above, our attribution rules currently make attributable
certain LMAs, also referred to as time brokerage agreements ("TBAs"), in which a broker purchases discrete blocks
of time from a licensee and supplies programming and sells advertising for the purchased time. According to
commenters, a local news service ("LNS") agreement is as an agreement in which multiple local broadcast
television stations contribute certain news staff and equipment to a joint news gathering effort coordinated by a
single managing editor. According to commenters in the ownership proceeding, a shared service agreement
("SSA") is an agreement, or series of agreements, in which one in-market station provides operational support and
programming for another in-market station. We are currently seeking comment on LNS agreements and SSAs in the
Media Ownership proceeding. See Media Ownership NPRM, 26 FCC Rcd at 17564-70, 195-208.
663 See, e.g., LIN 2012 Form 10-K at 12; Nexstar 2012 Form 10-K at 2, 10; Sinclair 2012 Form 10-K at 13; Gray
2012 Form 10-K 10-11; ESPN Inc., WDCW-TV/DC50 Named SEC Network Affiliate in Washington DC DC50 to
Air Men's SEC Basketball and Football Through ESPN Regional Television's Syndicated Network
(press release),
Jan. 4, 2012. ESPN, a cable network, has a division called ESPN Regional Television that syndicates collegiate
sports programming. See The Walt Disney Company, SEC Form 10-K for the Year Ended September 29, 2012, at 3.
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respective markets.664 Stations compete against in-market broadcast stations for exclusive access to
syndicated programming within their markets.665 Syndicated programming can be expensive for stations
and may represent a long-term financial commitment.666 Stations usually purchase syndicated
programming two to three years in advance and sometimes must make multi-year commitments.667 An
average broadcast station spends about 23.6 percent of its expenses on acquiring syndicated
programming.668 For example, syndication rights for the series The Big Bang Theory and Modern Family
cost stations about $2.5 million per episode in barter and cash.669
188.
Despite its price tag, a popular program may be a profitable investment for a station if it
provides a lead-in audience for a station's local newscasts, differentiates the station from competing
stations, and/or increases audience and revenues. Other factors may help to reduce the costs of syndicated
programming for stations. For example, large group owners can use economies of scale to negotiate
favorable contractual terms with program suppliers.670
189.
Viewing Experience. Several factors affect consumers' viewing experiences, including
the availability of HD programming, availability of content via a television station's website, and
consumers' ability to view video on a time-shifted basis on television sets, personal computers, and/or
mobile devices. As of 2012, 85.3 million U.S. television households, or 74.4 percent of such households,
had sets capable of displaying and/or receiving digital signals, including HD television signals.671 This
figure is up from 75.5 million, or 65.1 percent of television households, in 2011.672 Broadcasters have
provided increasing amounts of HD programming in response to the increasing number of HD televisions.
As of the end of 2011, 1,501 (82.2 percent) of full-power stations were broadcasting in HD, up from
1,036 stations in 2010.673 Approximately 60 percent of stations broadcast local news in HD, with figures
higher in larger markets.674
190.
Penetration of DVRs continues to rise as well. Approximately 46.3 million, or 40.4
percent of television households, had DVRs in 2011.675 In 2012, DVR households increased to 50.34

664 Nexstar 2012 Form 10-K at 10.
665 Id.; Gray 2012 Form 10-K 10-11. In addition, cable networks occasionally acquire programs that might
otherwise be offered to stations.
666 Syndicated programming can impose financial risks on stations. Broadcast stations cannot predict whether a
particular show will be sufficiently popular to enable it to sell enough related advertising time to cover the costs of
the program. A station may have to replace a poorly performing program before it has recovered the costs of
obtaining it. Sinclair 2012 Form 10-K at 28; Gray 2012 Form 10-K at 21; Belo 2012 Form 10-K at 11.
667 Gray 2012 Form 10-K at 21; Belo 2012 Form 10-K at 11.
668 NAB, Television Financial Report, 2012, at 3 ("2012 NAB Television Financial Report").
669 Deana Myers, What is a Sitcom's Chance of Success, SNL KAGAN, Feb. 9, 2012.
670 Nexstar 2012 Form 10-K at 3.
671 Nielsen, July 2012 National Media Related Universe Estimates, Jul. 26, 2012. ("Nielsen July 2012 Universe
Estimates"). Figures apply to the television season at issue. MVPD households with HD television sets wishing to
receive HD service must have HD service included in their subscriptions.
672 Id.
673 See NAB Comments at 10 (citing TV Stations Multiplatform `13 Update: New Digital Networks, Mobile TV
Channels Expand Content Options
, SNL KAGAN (Jan. 31, 2012) ("Kagan Multiplatform Analysis 2012"))
674 Id.
675 November 2011 National Media Related Universe Estimates, Nielsen, Nov. 29, 2011.
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million or 43.8 percent of all television households.676 The availability of DVRs coupled with other
technological developments has spurred consumers' desire and ability to watch video on a time shifted
basis. As digital video recorders have gained popularity, Nielsen began reporting "live-plus-same-day
playback," ("LSD") viewing as the currency for buying and selling local television time, where such
ratings are available.677 In August 2010, it found that while the total effect of DVR playback on ratings
was small, the audience composition changed.678

Table 17: Television Households and Media Usage Estimates (in thousands)

679
2010-2011 2011-2012
Total U.S. Households
117,220
118,590
U.S. TV HHs
115,900
114,700
Broadcast Only
11,080
10,970
MVPD
104,820
103,730
DVR Owner
42,540
46,320
HD TV Households
75,490
85,250
191.
Television stations use their online and mobile platforms to address consumers'
increasing desire to view video programming in more places and times and on more devices.
Broadcasters use their websites as extensions of their local brands, and offer advertisers online
promotions coordinated with the on-air advertisements. SNL Kagan estimates that at the end of 2012, 94
percent of full-power commercial television stations operated a website and about 86 percent streamed
video content.680 Sixty-nine percent of broadcast television station websites provided updates on local
news and weather, while 55 percent provided local classified advertisements.681 About 81 percent of
websites contained links to stories via Facebook and 76 percent had links via Twitter.682 Nearly 44
percent of station websites had mobile app downloads for smartphones.683 A Radio Television Digital
News Association ("RTNDA") and Hofstra University study found that 82.2 percent of television stations
surveyed took a "three-screen approach" distributing news programming online and via mobile devices,

676 Nielsen July 2012 Universe Estimates.
677 Katy Bachman, Nielsen Returns `Live' to the Ratings, ADWEEK, July 1, 2010,
http://www.adweek.com/news/advertising-branding/nielsen-returns-live-ratings-102743 (visited Nov. 6, 2012). See
also
The Nielsen Company, Measurement, Television Measurement, 2011-12 Sweeps Dates,
http://www.nielsen.com/us/en/measurement/television-measurement.html (visited Nov. 6, 2012).
678 Katy Bachman, Nielsen Releases Analysis of LSD Data, ADWEEK, Aug. 5, 2010,
http://www.adweek.com/news/advertising-branding/nielsen-releases-analysis-lsd-data-115873 (visited Nov. 6,
2012). LSD viewers tended to be younger and higher-income than live viewers generally. As described in Section
III.B.4, infra, advertisers buy time on broadcast and cable networks on the basis of viewership of commercials.
679 Nielsen, National Media Related Universe Estimates, Sept. 3, 2011; Nielsen, National Media Related Universe
Estimates, Sept. 11, 2010.
680 2012 SNL Kagan TV Stations Databook at 11.
681 Id.
682 Id.
683 Id.
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as well as over-the-air." 684 The larger the news department, the more likely the station was to use the
three-screen approach. While most stations with a three-screen approach were broadcast network
affiliates, the size of their markets did not appear to impact their decision to utilize this approach.685
192.
In addition, since the last report, broadcasters increasingly are using mobile DTV to
provide consumers with on-the-go access to local news and other video content. At the end of 2010, 60
operating commercial mobile DTV stations broadcast more than 80 live mobile video channels in major
markets.686 This number increased to 105 live mobile DTV stations at the end of 2011.687 According to
NAB, currently "[m]ore than 130 stations in 30 states have commenced providing mobile DTV service,
and are offering over 150 channels of programming."688 As noted in the last report, the Open Mobile
Video Coalition ("OMVC") had a successful mobile DTV trial in September 2010.689 In August 2012,
Mobile Content Venture ("MCV"), a joint venture of 12 station groups,690 launched the Dyle Mobile DTV
service in 35 markets, reaching more than 55 percent of the U.S. population.691 NAB notes that the
Mobile 500 Alliance is "aggressively moving forward with a Mobile DTV rollout."692 This consortium of

684 RTNDA/Hofstra 2012 Survey, Part III: TV News Business Isn't Limited to Just TV Anymore, at 4-5. Stations use
social media for promotion and as a tool for conversations with their audiences. Belo notes that the websites of its
television stations provide consumers with news and information as well as a variety of other products and services.
Belo obtains immediate feedback through online communication with its audience, which allows the Belo to tailor
the way in which it delivers news and information to serve the needs of its audience. Belo 2012 Form 10-K at 4-5.
685 RTNDA/Hofstra 2012 Survey, Part III at 4-5.
686 See 14th Report, 27 FCC Rcd 8702-03, 204-205.
687 Justin Nielson, TV Stations Multiplatform Analysis `12 Update: New Digital Networks and Mobile TV Channels
Expand Content Options
, SNL KAGAN, Jan. 31, 2012, at 10.
688 NAB Comments at 12 (citing SNL Kagan Service, TV Station Database (Aug. 20, 2012)).
689 14th Report, 27 FCC Rcd at 8703, 205. Membership in OMVC is open to U.S.-based television broadcasters
and related entities dedicated to advancing mobile digital television and currently includes over 900 TV stations,
including public television stations, and sixteen out of the top 20 station groups. OMVC, Who are the OMVC's
Members?, at http://www.openmobilevideo.com/about-omvc/members/ (visited Nov. 8, 2012). On January 1, 2013,
OMVC's functions were integrated within NAB. See NAB, Mobile TV Industry Pioneer OMVC to Integrate
Functions Within NAB
(press release), Dec. 18, 2012.
690 The twelve founding broadcast groups were FOX, NBC (including the Telemundo stations), ION, Belo Corp.,
Cox Media Group, E.W. Scripps, Gannett Broadcasting, Hearst, Media General, Meredith Corp., Post-Newsweek
Stations, Inc., and Raycom Media that separately formed Pearl Mobile DTV Company LLC, as a vehicle for their
involvement in MCV. MVC, Twelve Major Broadcast Groups to Form Joint Venture to Develop National Mobile
Content Service
(press release), Apr. 13, 2010.
691 NAB Comments at 12. Deborah Yeo, Up Close with Dyle Mobile TV, SNL KAGAN, Aug 30, 2012. The markets
are Atlanta, GA; Austin, TX; Birmingham, AL; Boston, MA; Charlotte, NC; Chicago, IL; Cincinnati, OH;
Cleveland, OH; Columbus, OH; Dallas, TX; Dayton, OH; Denver, CO; Detroit, MI; Greenville, SC ; Houston, TX;
Kansas City, MO; Knoxville, TN; Las Vegas, NV; Los Angeles, CA; Miami, FL; Minneapolis, MN; Montgomery,
AL; New York, NY; Orlando, FL; Philadelphia, PA; Phoenix, AZ; Portland, OR; Raleigh, NC; San Francisco, CA;
Seattle, WA; St. Louis, MO; Tampa, FL; Tulsa, OK; Washington, DC; and West Palm Beach, FL. MVC, About
MVC
, http://www.themcv.com/about-mcv (visited Nov. 6, 2012).
692 NAB Comments at 13.
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50 member companies, including two public broadcasters, which hold licenses to 437 television stations,
plans to launch 15 to 20 Mobile DTV channels in markets across the country.693
4.

Broadcast Television Industry Performance

193.
In this section of the Report, we examine broadcast stations' performance generally in
terms of audience, revenue, and profitability, as well as investment and innovation. We also review the
interplay between the trends in broadcasters' sources of revenues and expenses, their strategies for
distributing video programming, and other factors influencing broadcasters' performance. While the
majority of broadcast television station licensees are part of parent companies that are involved in other
industries, some group owners are only involved in broadcast television. To provide context to our
discussion of the profitability of the broadcast television station industry as a whole, as well as investment
and innovation by television broadcast stations, we examine a select group of these "pure play" television
station-only group owners: Belo Corp.,694 Gray Television Inc., LIN, Nexstar Broadcasting Group, and
Sinclair695 (together, the "Pure Play Companies").696 As publicly traded pure play companies, they
provide detailed information about their performance in the broadcast industry.
194.
Because of its dependence on advertising revenue, which is highly correlated with overall
economic conditions, broadcasting is a highly cyclical industry.697 This is in part because marketers often
view advertising as a discretionary expense and cut back when the economy declines.698 In addition,
some categories of advertisers, especially the automobile sector, are responsible for a large proportion of
stations' advertising revenues. Automobile dealers can account for 25 percent of a typical television
station's revenues in good times.699 While the automobile sector's share of station groups' advertising
fell in recent years, these revenues appear to be rebounding somewhat.700 Station revenues tend to be
higher in even years, due to political advertising, which tends to peak immediately before elections.701 In
addition, NBC affiliates experience higher revenues during Olympic Games broadcasts, which air in even
years.702

693 Mobile 500 Alliance, About, http://mobile500alliance.com/about-2 (visited Nov. 8, 2012); Mobile 500 Alliance,
Members, http://mobile500alliance.com/members/ (visited Nov. 8, 2012).
694 Belo spun off its newspaper businesses and related assets into a separately traded company, A. H. Belo
Corporation, in February 2008. Belo Corp., SEC Form 10-K for the Year Ended December 31, 2010, at 5. As a
result, for the time period covered by our analysis, Belo was a pure play television company.
695 While Sinclair has invested in non-broadcast businesses in order to diversify its risks, these only represent a
small portion of its overall operating results. Sinclair 2012 Form 10-K at 13.
696 SNL Kagan used these five companies in its tracking index for the broadcast television station industry as of June
30, 2012.
697 Vogel at 301-03; Gray 2012 Form 10-K at 17; LIN 2012 Form 10-K at 23; Sinclair 2012 Form 10-K at 25.
698 "Advertisers generally reduce their spending during economic downturns . . . ." Belo 2012 Form 10-K at 9. See
also
Nexstar 2012 Form 10-K at 21.
699 Vogel at 309.
700 See 14th Video Competition Report, 27 FCC Rcd at 8704, 207. See also, e.g., Belo 2012 Form 10-K at 9 ("for
the year ended December 31, 2012, 23.1 percent of our total spot revenues were from the automotive industry");
Gray 2012 Form 10-K at 6 ("For the years ended December 31, 2012..., we derived approximately 18% . . . of our
total broadcast advertising revenue from customers in the automotive industry").
701 Nexstar 2012 Form 10-K at 7; Gray 2012 Form 10-K at 6.
702 Belo 2012 Form 10-K at 10.
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195.
In the short run, most of a station's operating costs are fixed.703 Regardless of the amount
of advertising inventory it sells, a station must pay for the cost of operating its facilities as well as the
costs of programming rights. Therefore, when economic conditions are favorable and a station is able to
charge high prices for its commercial inventory, it can be profitable. Conversely, because stations remain
highly dependent on advertising revenues, when they decline, aside from laying off employees and
reducing sales commissions, stations usually are unable to reduce expenses, and thus profits can decline
sharply. Other sources of station revenue include retransmission consent fees, ancillary DTV services,
and online advertising.704
196.
Broadcast television stations face changing technology. Industry participants note that
information delivery and programming alternatives such as MVPDs, the Internet, mobile devices, DVRs,
and home video entertainment systems have fractionalized television viewing and audiences, expanded
the number of outlets for advertisers, and increased competition for the acquisition of programming.705
Industry participants also note that video compression techniques enable MVPDs and competing
television stations to carry more programming (e.g., via multicasting), potentially fractionalizing
audiences and advertisers even further.706
a.

Audiences

197.
The industry relies on Nielsen data to measure broadcast television station audiences.
Nielsen measures television ratings as a percentage of households with television sets who view a
program.707 Consistent with the trend noted in the 14th Report, both television penetration and the total
number of television households continue to decline.708 For the 2010-2011 season, Nielsen reports
television penetration at 99 percent, or about 115.9 million U.S. television households.709 Nielsen
estimates these figures at approximately 97 percent and 114.7 million households for the 2011-2012
season.710 According to Nielsen, factors that may have contributed to this downward trend include the
digital transition, the economic downturn leading rural and lower-income households to conclude that the
price of acquiring television sets is too high, and younger, urban consumers who may substitute online
viewing for traditional television viewing.711
198.
The percentage of television households relying exclusively on over-the-air broadcast
service (as opposed to accessing broadcast stations via an MVPD) remained relatively steady since the
last report. According to Nielsen, in July 2011, approximately 9.6 percent of all U.S. television

703 Vogel at 304.
704 See infra, Sec. III.B.4.b.
705 Belo 2012 Form 10-K at 9-10; Nexstar 2012 Form 10-K at 21; Gray 2012 Form 10-K at 23; Sinclair 2012 Form
10-K at 35; LIN 2012 Form 10-K at 30.
706 Nexstar 2012 Form 10-K at 22; Sinclair 2012 Form 10-K at 35.
707 Nielsen, News & Insights: Top Tens & Trends, Television,
http://www.nielsen.com/us/en/insights/top10s/television.html (visited Nov. 13, 2012).
708 See 14th Report, 27 FCC Rcd at 8705, 210.
709 Nielsen 2010 & 2011 Television Audience Report at 4-5.For the purposes of this Report, we use Nielsen's
January 1 estimates for our December 31 estimates of the prior year.
710 Nielsen, National Universe Estimates 01-01-2013, August 24, 2012.
711 Other studies indicate that college students are watching video content on computers and laptops in lieu of
television sets. See College-Age TV Watchers Have No Cords to Cut, eMarketer, Dec. 15, 2011,
http://www.emarketer.com/Article.aspx?id=1008735&R=1008735 (visited Nov. 13, 2012).
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households, or about 11.1 million households, were broadcast only.712 As of July 2012, there were also
almost 11.1 million broadcast-only households, which represented 9.7 percent of all television households
at that time.713 NAB provides different figures that show a larger increase. According to NAB, the most
recent data suggests that 17.8 percent of the 116.3 million U.S. television households, or 20.7 million
households, rely solely on over-the-air television service.714 This figure is up from 15 percent of
households in the previous year.715 NAB states that over-the-air reliance is higher among lower income
households and racial/ethnic minorities, and homes headed by younger adults.716
199.
Viewing shares of broadcast network affiliates and non-commercial broadcast television
stations held steady between the 2010-2011 and 2011-2012 television seasons, and viewing shares of
independent stations, whose shares are relatively low, increased in primetime during this period. In
contrast, the combined viewing shares of advertising-supported cable networks decreased in total day
shares during this period. As shown in Table 18, the total day share of viewing for broadcast network
affiliates stayed at 28 percent between the 2010-2011 television season and the 2011-2012 television
season.717 During prime time,718 their share stayed at 33 percent for both the 2010-2011 and 2011-2012
television seasons. Independent stations' total share was three percent in both the 2010-2011 season and
2011-2012 season. During prime time, their share rose from two percent in the 2010-2011 season to three
percent in the 2011-2012 season. NCE stations' total and prime time shares were two percent in the
2010-2011 and 2011-2012 seasons.719

712 Nielsen July 2012 Universe Estimates.
713 Id. The actual number of households declined from 11.09 million to 11.08 million, while the percentage
increased, due to Nielsen's lowering its estimate of total television households.
714 NAB Comments at 2 (citing GfK-Knowledge Networks, Home Technology Monitor 2012 Ownership Survey
and Trend Report (Spring 2012-March 2012)).
715 Id.
716 Id. at 3-4.
717 Nielsen 2011 Television Audience Report at 18 & Nielsen 2012 Television Audience Report at 15. Total day
viewing includes viewing Monday-Sunday, 6 a.m.-6 a.m. A share is the percentage of television households
watching television who are watching a particular programming source. Due to simultaneous multiple-set viewing,
Nielsen reports audience shares that exceed 100 percent when totaled. We have normalized the audience shares by
recalculating them on a base (or denominator) equaling 100 percent and adjusting the numerators accordingly.
718 Monday-Saturday, 8-11 p.m. Eastern and Pacific Time (7-10 p.m. Central and Mountain Time), Sunday 7-11
p.m. Eastern and Pacific Time (6-10 p.m. Central and Mountain Time).
719 For the 2009-2010 television season, Nielsen began releasing "C3" ratings data for television viewing, which
measures the commercials watched both live and for three days via DVR playback. This is the metric under which
much of broadcast and cable network advertising is bought and sold. See Nielsen, "C3" TV Ratings Show Impact of
DVR Ad Viewing
, Oct. 14, 2009, http://nielsen.com/us/en/newswire/2009/c3-tv-ratings-show-impact-of-dvr-ad-
viewing.html (visited Nov. 14, 2012). To include VOD, and online viewing in their ratings, networks must include
the same set of commercials that appear in the initial live telecast. This measurement does not apply to local ratings.
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Table 18: Audience Shares

720

Total Day

2009-2010 2010-2011 2011-2012

Viewing Source:

Network Affiliates
29
28
28
Independents
2
3
3
Non-Commercial Networks
2
2
2
Ad Supported Cable
52
53
52
Premium Pay Networks
4
4
4
All Other Cable Networks
5
5
6
All Other Tuning
6
5
5

Total Day Total:

100
100
100

Prime Time

2009-2010 2010-2011 2011-2012

Viewing Source:

Network Affiliates
34
33
33
Independents
2
2
3
Non-Commercial Networks
2
2
2
Ad Supported Cable
50
51
51
Premium Pay Networks
3
4
3
All Other Cable Networks
4
4
4
All Other Tuning
5
4
4

Prime Time Total:

100
100
100
200.
In addition, stations are attracting audiences on their digital multicast streams. For
example, WVUE in New Orleans, after launching Bounce TV on a digital multicast channel in November
2011, earned higher ratings than several basic cable networks and is competing strongly with several
broadcast outlets.721 Stations also are attracting consumers to their websites. In this regard, one report
citing a Fall 2010 survey indicates that out of 80 markets measured, television websites attracted more

720 Nielsen 2012 Television Audience Report at 15. Figures apply to the television season at issue.
721 Bounce TV Powers Ratings on WVUE, TVNEWSCHECK, Jan. 13, 2012,
http://www.tvnewscheck.com/article/2012/01/13/56717/bounce-tv-powers-ratings-on-wvue (visited Nov. 13, 2012).
In December 2011, WVUE reported that its Bounce TV signal earned a 0.4 total day local market rating, tying
CNN's Headline News (0.4) and outranking cable networks TV One (0.2), Oxygen (0.2), BBC America (0.2) and
CNBC (0.1).
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visitors than newspaper websites in 22 markets (or 27 percent), while the major daily newspapers'
websites led in the amount of traffic attracted in the remaining markets.722
b.

Revenue

201.
This section of the Report describes broadcast television stations' revenue from
advertising during the relevant period. It then considers other sources of broadcast television station
revenue during the period, including network compensation, retransmission consent fees, revenues from
non-broadcast ancillary services, online revenues, and other revenues.
202.
Broadcast television station revenues reached a high of $26.30 billion in 2000 and
declined thereafter.723 In 2010, however, industry revenues showed some recovery and, rose by 23
percent from the prior year to $22.31 billion.724 Industry revenues fell approximately three percent in
2011 to $21.62 billion, but were projected to report a 16 percent rebound to $25.04 billion when 2012
data was available.725

Table 19: Broadcast Television Station Industry Revenue Trends (in millions)

726

Revenue Sources

2010
2011
2012
(projected)
Advertising
$19,944
$18,639
$21,300
Network Compensation
$48
$25
>$1
Retransmission Consent
$1236
$1,757
$2,361
Online
$1,087
$1,195
$1,375

Total

$22,314
$21,617
$25,035

Percentage Change

23%
-3%
16%
203.
Advertising Revenue. On-air advertising is by far the most significant source of revenue
for televisions stations, although its share of overall broadcast television station industry revenues is
declining. It represented about 86 percent of broadcast television station industry net revenues in 2011
and was expected to represent 85 percent of industry revenues in 2012, down from 89 percent of net
revenues in 2010.727

722 Borrell Associates Inc., Benchmarking TV's Local Online Sales, February 2011, at 19,
http://www.tvb.org/media/file/Borrell_2010_TV_Internet_Growth_Feb2011.pdf ("Borrell Study 2011"). Citing
data from the Media Audit, Borrell measured the number of visitors who logged onto a major newspaper website
during a month within the Fall of 2010 and compared it with the number of visitors who had logged onto individual
television stations' sites.
723 Tony Lenoir, Negative Growth Outlook for TV Station Revenue in `11 but Double-Digit Gains Seen in `12, SNL
KAGAN, Oct. 3, 2011. As noted above, revenues tend to be higher in even years.
724 SNL Kagan, Total TV Station Industry Revenue Projections, 2006-2018, Dec. 17, 2012.
725 Id.
726 Id.
727 Net revenues equal all advertising, online revenues, and network compensation received by stations, plus
retransmission consent revenues received from MVPDs, minus retransmission consent revenues network affiliates
pay networks. See also 14th Report, 27 FCC Rcd at 8708, 216.
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204.
Broadcast television stations sell two categories of advertising: local spot and national
spot. Local advertisers purchase local spot advertising to reach viewers within a station's market. They
may work with local advertising agencies or directly with a station's sales staff.728 Local advertising is
more sensitive to the economic climate of a station's geographic market. For example, even if a station is
attracting large audiences, if the local economy is struggling, local businesses may choose not to advertise
or to limit their advertising.729 Using SNL Kagan data, we estimate that local advertising represented
about 48 percent or $10.3 billion of broadcast television station industry revenues in 2011, and
represented about 47 percent or $11.8 billion of industry revenues in 2012, compared to $11.3 billion in
2010, representing approximately 50 percent of industry revenues.730 NAB estimates that, in 2011, on
average, about 62.2 percent of a station's gross advertising revenues were from local advertising.731 The
percentages may vary depending on the station and the DMA a station serves. Local advertisers may
choose to advertise using local broadcast television or radio stations, newspapers, regional cable
networks, geographically-targeted websites, or other local media. Between 2010 and 2011, broadcast
stations' share of local advertising revenue decreased from 15.8 percent to 15.0 percent. During that
same period, however, total advertising spending across all local media dropped from $71.0 billion
nationwide to $68.5 billion, and broadcast television stations' collective local advertising revenues
declined from $11.3 billion to $10.3 billion. Between 2011 and 2012, broadcast stations' share of local
advertising revenue increased from 15.0 percent to 16.8 percent. Total advertising spending across all
local media rose from $68.5 billion nationwide to $70.3 billion, and broadcast television stations'
collective local advertising revenues went up from $10.3 billion to $11.8 billion.

728 Nexstar 2012 Form 10-K at 35-36.
729 Smaller local businesses generally feel a recession's impact more immediately than large national businesses,
and would be more likely to curtail local television advertising spending. Vogel at 303.
730 SNL Kagan, U.S. Advertising Market Overview, 2002-2021, Dec. 27, 2012. Some broadcast station groups cite
lower percentages. Nexstar states that local advertising, excluding political, represented 57.3 percent of it stations'
gross revenues (that is, revenues before subtracting agency commissions) in 2011 and 47.8 percent in 2012. Nexstar
2012 Form 10-K at 37. Gray's percentages were similar: 60.9 percent in 2011, and 47.3 percent in 2012. Gray
2012 Form 10-K at 37. See also 14th Report, 27 FCC Rcd at 8709, 217.
731 NAB, Television Financial Report, 2012, at 2 ("2012 NAB Television Financial Report").
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Table 20: Local Advertising Revenue by Sector (in millions)

732

Revenue

2010
2011
2012
(projected)
Broadcast TV Stations
$11,265
$10,308
$11,802
Cable TV
$4,270
$4,164
$4,867
Radio
$11,300
$11,264
$11,405
Internet
$10,341
$11,602
$12,274
Daily Newspaper
$18,574
$16,915
$15,720
Regional Sports Networks
$763
$842
$925
Mobile
$494
$974
$2,064
Telco
$105
$161
$230
Other
$13,899
$12,313
$11,061
Total Local
$71,011
$68,543
$70,348
205.
National advertising time is sold through national sales representative firms ("reps")
working with advertising agencies, whose clients typically include automobile manufacturers and dealer
groups, telecommunications companies, fast food franchisers, and national retailers.733 In exchange for
representing the stations, the rep firms typically earn commissions of about seven to eight percent of net
billings, defined as dollars paid for advertising minus ad agency commissions.734 National advertising is
generally bought through advertising agencies. The advertising agencies generally receive commissions
of 15 percent of the gross advertising rates paid for advertising they place.735 National spot advertising
represented about 39.1 percent of total broadcast television station industry revenues, or $8.3 billion, in
2011, and is projected to be about 37.9 percent, or $9.5 billion, of industry revenues in 2012. In its
television financial reports, NAB estimates that as of 2011, about 35.6 percent of an average station's
revenues come from national and regional advertising.736 National advertisers may choose to advertise on
broadcast stations but are more likely to utilize arrangements with broadcast networks, cable networks,
television syndicators, or DBS. National sales tend to represent a larger proportion of revenues for
stations in larger markets.737 Broadcast television stations' share of the national advertising market was
5.8 percent in 2011 and was projected to be 6.4 percent in 2012. In the last report, we reported that cable
networks and VOD surpassed broadcast television networks in their share of overall national advertising
revenue in 2008. This trend continued in 2011 and 2012, with the gap between broadcast television

732 SNL Kagan, U.S. Advertising Market Overview, 2002-2021, Dec. 27, 2012.
733 Nexstar 2012 Form 10-K at 8.
734 Vogel at 312-13, n. 7. Gross advertising revenues refer to the total amount spent by advertisers, while net
revenues refer to amount of advertising revenues received by stations.
735 Nexstar 2012 Form 10-K at 35.
736 2012 NAB Television Financial Report at 2.
737 Vogel at 312-13, n.7. Sinclair states that it has focused on decreasing its dependence on national advertising, as
overall spending by national advertisers has declined, and other outlets have merged. Sinclair 2012 Form 10-K
at 43.
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networks and cable networks and VOD decreasing slightly. In 2011, broadcast television networks and
cable networks and VOD accounted for 12.0 percent and 17.2 percent of national advertising revenues,
respectively. In 2012, those figures were projected to be 12.5 percent and 17.5 percent.

Table 21: National Advertising Revenue by Sector (in millions)

738

Revenue

2010
2011
2012
(projected)
Broadcast TV Stations
$8,678
$8,331
$9,498
Broadcast Networks
$17,687
$17,177
$18,619
Cable & VOD Networks
$22,550
$24,564
$26,074
DBS
$842
$918
$1,069
Internet
$15,879
$17,082
$18,700
Radio
$2,881
$2,795
$2,816
Satellite Radio
$76
$87
$98
Radio Network
$1,102
$1,136
$1,193
Daily Newspaper
$4,221
$3,777
$3,433
Barter Syndication
$2,813
$2,756
$2,640
Mobile
$885
$1,533
$2,685
Other
$62187
$63,044
$62,019

National Total

$139,801
$143,200
$148,844
206.
Political advertising can be both local and national.739 For example, a mayoral candidate
may only need to purchase advertising in one DMA in order to reach potential voters, in which case the
advertising is local.740 Candidates running for statewide offices, however, or presidential candidates
seeking to reach audiences in swing states, will frequently purchase time within multiple DMAs covering
the particular state, in which case a national rep firm may purchase time on behalf of the candidates. In
2010, the Pure Play Companies earned $244 million in political advertising, representing ten percent of
their revenues.741 In 2012, these companies were expected to earn a combined $317.7 million in political
advertising revenues.742 Political advertising was projected to represent approximately 11 percent of total
broadcast television revenue in 2012.743 SNL Kagan estimates that, in 2010, broadcast television stations

738 SNL Kagan, U.S. Advertising Market Overview, 2002-2021, Dec. 27, 2012.
739 See, e.g., Sinclair 2012 Form 10-K at 48-49.
740 Kate Brady, Political Ads: Final Tips From the Rep, TVNEWSCHECK, Oct. 1, 2010,
http://www.tvnewscheck.com/article/2010/10/01/45773/political-ads-final-tips-from-the-rep (visited Dec. 3, 2012).
741 Tony Lenoir, Broadcast TV Guide to the 2012 Elections, SNL KAGAN, Aug. 24, 2011, at 14 ("2012 Election
Guide").
742 Peter Leitzinger, TV Political Ad Revenue on Pace for 68% Growth Over `08, SNL KAGAN, Sept. 20, 2011, at
24, Table 4.
743 Tony Lenoir, SNL Broadcast Investor: Broadcast TV Political Ad Revenue Projections 2012-2021, SNL KAGAN,
Jan 11, 2012, at Fig. 1.
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received 75 percent of political advertising revenues.744 NAB estimates that for an average station,
political advertising represented 2.2 percent of revenues in 2011.745
207.
The ability of advertisers to switch among media depends on how they plan their media
budgets. Broadcast television advertising can be purchased in several ways: by flight (e.g., for a one-
week period, such as for movie openings or sales) or monthly, quarterly, or annually, (e.g., the entire
advertising campaign at once).746 Annual buys give media buyers leverage to negotiate the best rates.
The closer the media buyer is to the beginning of the television season schedule when placing the buy, the
higher the rates will likely be. If the media is sold out, the rates may need to be high enough to bump
another advertiser's spots. At times, it may be so close to the flight that the station does not have any
space available to sell. On the other hand, buyers who plan annually run the risk of unexpected
scheduling changes. For example, a buyer may have purchased advertising time on an NBC affiliate on a
Thursday evening, but reached fewer people than expected when a program turned out to be less popular
than expected, or a competing network scheduled a more popular program during the same time period.
208.
Network Compensation. Compensation from broadcast networks previously was the
second largest revenue stream for network-affiliated broadcast stations. Traditionally networks have
compensated affiliates with cash payments closely related to affiliates' local market ratings performances.
Since the late 1990s, however, broadcast networks began to phase out these payments. As of 2011, NAB
began reporting network programming as an expense rather than a revenue source.747 SNL Kagan
estimates that between 2010 and 2011, total network affiliate compensation dropped from about $48.2
million, or 0.2 percent of the total $22.3 billion in industry revenues, to 25.1 million, or 0.1 percent of the
total $21.6 billion in industry revenues.748 These figures were projected to drop further for 2012 to $287
thousand, or 0.001 percent of the total $25.0 billion in industry revenues. Network compensation to
television broadcast stations has all but disappeared, and today, television stations instead commonly pay
compensation to networks in order to air their programming.749
209.
Retransmission Consent Fees. As compensation from networks has disappeared,
broadcast stations are demanding larger retransmission consent fees from MVPDs. As a result, such fees
have replaced network compensation as the second largest source of revenue for broadcast television
stations.750 Like cable networks, broadcast stations negotiate per subscriber fees from MVPDs in
exchange for carriage rights. Since the last report, retransmission consent fees have increased in dollar
terms and as a share of industry revenues. SNL Kagan data show that retransmission consent fees
represented about 8.1 percent, or $1.76 billion in broadcast television station industry revenues in 2011,

744 2012 Election Guide at 14.
745 2012 NAB Television Financial Report at 2.
746 Kerri Byrd, What to Know About an Annual Media Buy, Evk Advertising, Dec. 21, 2010,
http://www.evokad.com/2010/12/what-to-know-about-an-annual-media-buy/ (visited Dec. 3, 2012).
747 See 2011 NAB Television Financial Report at ii.
748 SNL Kagan, TV Station Deals Databook, 2012 Edition, at 3; SNL Kagan, Total TV Station Industry Revenue
Projections, 2006-2018
, Dec. 17, 2012.
749 See TV Network Industry Benchmarks; ABC Affiliates Reply Comments at 4-5.
750 2011 SNL Kagan TV Stations Databook at 5. Numerous commenters in this proceeding have noted that
retransmission consent fees continue to rise and have become a significant part of television station's overall
revenue picture. See, e.g., ABC Affiliates Reply at 4-10; ACA Comments at 12-14; AT&T Comments at 12-13;
CenturyLink Comments at 3-4. DIRECTV Comments at 18-19.
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and about 9.4 percent, or $ 2.36 billion in 2012.751 Local broadcasters, however, do not retain all of this
revenue. Instead, television stations are required to pay a portion of such fees to their networks for
programming, often on a per MVPD subscriber basis.752 Station groups that are vertically integrated with
broadcast networks or affiliated with cable networks may have more leverage than other station owners,
since they can integrate retransmission consent negotiations with carriage of their networks. Group
owners may be able to earn more than individual station owners because they have more experience and
leverage with MVPDs. Stations in smaller markets may not earn as much in total dollars from
retransmission consent fees because there are not as many subscribers, but they may earn the same per-
subscriber fees as stations in larger markets.753
210.
Ancillary DTV Revenues. DTV technology allows broadcasters to use part of their
licensed digital spectrum to provide non-broadcast "ancillary or supplementary" services (e.g.,
subscription video, data transfer, or audio signals), provided they pay the Commission a five percent fee
of gross revenues received from such services. 754 Compared with other revenue sources, ancillary
services remain a small portion of total revenue. Commercial and noncommercial educational DTV
broadcast station licensees file FCC Form 317 on an annual basis, reporting whether they have provided
ancillary services at any time during the 12 month period preceding September 30 of the filing year.755
Licensees that earn revenues from such services are required to pay fees to the Commission. As of 2011,
gross revenues from feeable services are modest. Yearly numbers are as follows:

751 See supra, Table 17. For Nexstar, retransmission consent revenues (consisting of a per-subscriber-based
compensatory fee and excluding advertising revenue) represented 9.1 percent of net revenues in 2010, 11.8 percent
in 2011, and 15.4 percent in 2012. Nexstar 2012 Form 10-K at 37. Nexstar explains that the increases are due to
renegotiated contracts providing for higher rates per subscriber, as well as the addition of new television stations in
December 2012 and the second half of 2011. Similarly, Gray's retransmission consent revenues increased due to
improved terms of renegotiated contracts, representing 5.4 percent of revenues in 2010, 6.6 percent in 2011, and 8.3
percent in 2012. Gray 2012 Form 10-K at 37. Neither LIN nor Sinclair break out retransmission consent revenues
separately. See 2012 Form LIN 10-K at 47; Sinclair 2012 Form 10-K at 39.
752 See, e.g., ABC Affiliates Reply Comments at 4-5, 8.
753 See 14th Report, 27 FCC Rcd at 8714, 225.
754 Filing of FCC Annual DTV Ancillary/ Supplementary Services Report, Public Notice, 18 FCC Rcd 23972, 23973
(MB 2003). See also 47 U.S.C. 336(a)(2), (e).
755 Fees are reported in the year received, although they may be for services rendered in past years, in future years,
or both. This occurs very few times and involves small sums of money. As broadcast stations decide to use DTV
for broadcasting, e.g., to launch a new network such as Bounce TV, rather than for ancillary services, fluctuations in
the reported figures for non-broadcast ancillary services may occur.
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Table 22: Ancillary DTV Revenues

Number of DTV

Predominant

Licensees That

Gross Revenues From

Fees Collected From

Year

Reported Feeable

Feeable Services

Feeable Services

Services

1999
0
$0
$0
2000
4
$570,000
$28,500
2001
2
$390,000
$19,500
2002
6
$148,280
$7,414
2003
3
$45,000
$2,250
2004
10
$78,625
$3,931
2005
11
$176,777
$8,839
2006
38
$798,153
$39,888
2007
35
$417,649
$20,868
2008
54
$337,857
$16,897
2009
57
$2,044,454
$102,223
2010
99
$7,125,374
$356,268
2011
85
$841,177
$42,059
2012
81
$499,970
$24,998
211.
Online Revenues. In addition to selling advertising time over-the-air, stations often sell
advertising on their websites. SNL Kagan estimates that online revenues represented about $1.2 billion,
or 5.5 percent of $21.6 billion in the total broadcast station industry revenues in 2011, and $1.4 billion, or
5.5 percent of the $25.0 billion in total broadcast television station industry revenues in 2012.756 Other
sources have slightly higher or lower estimates. NAB estimates that in 2011, online advertising
represented about $465,454, or 2.7 percent of an average station's $16.175 million in net revenues.757
212.
Borrell also estimated the total amount of money advertisers spent on local online
advertising nationwide and the share represented by broadcast television station websites. Borrell
considers broadcast television station sites to primarily compete with the websites of other local media,
such as newspapers' websites, as well as online sites unaffiliated with a media entity, e.g., Craigslist and
Patch.758 According to Borrell, between 2011 and 2012, broadcast television stations decreased their
market share of local online advertising. Borrell estimates that television broadcasters accounted for 11.9
percent, or about $2.2 billion of the $18.5 billion spent on local online advertising in 2012, down from

756 See Table 17.
757 2012 NAB Television Financial Report at 2. NAB calculates online revenue as a percentage of a broadcast
station's net revenue (i.e., the amount spent by advertisers on a station (gross advertising revenues) advertising
agency commission national and regional sales rep firm commission = all other sources of station revenue).
758 Borrell Associates Inc., Benchmarking TV's Local Online Revenues, May 2013, at 8,
http://www.tvb.org/media/file/Borrell2013_LocalTVStations_OnlineRevReport.pdf ("Borrell Study 2013").
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12.8 percent, or $2.0 billion in 2011.759 It states that the average station's market share depended on
market size, with the stations in the smallest markets averaging 1.74 percent of local online advertising
and larger-market stations averaging 0.35 percent of local online advertising, due to heavy competition
from stand-alone sites and other local media.760 Borrell states that local television online revenues grew
to $2.3 billion in 2012, a 17 percent increase from 2011, and estimates for this trend to continue into
2013.761 Borrell suggests that growth will continue due to new digital development (e.g., app development
and social media management) by stations.762 Average station's online revenues for 2012 differ based on
market size, with stations in the smallest markets averaging $0.3 million and the largest market stations
averaging $1.4 million.763
213.
Other Revenues. Advertising revenues from mobile services and applications are still
nascent for most stations. NAB estimates that mobile revenues represented $12,254, less than 0.1 percent
of an average station's total $17,439,709 in net revenues in 2011.764 In Borrell's survey, few stations
reported any advertising revenue from mobile applications in 2010, and of those that did, mobile
advertising represented on average 2.5 percent of total revenues, with the typical station, getting between
$20,000 and $50,000.765 NAB estimates that in 2011 advertising revenues from multicast channels
represented almost 0.5 percent of an average station's total net revenues.766
c.

Profitability

214.
To assess profitability trends in the broadcast television station sector in 2011 and 2012,
we consider data on a station-level basis, using benchmarks in NAB's Television Financial Reports and,
on a company-level basis, examining the Pure Play Companies. When entering the broadcast television
station industry, companies often buy or sell individual stations or the portfolio of assets of a broadcast
television station group owner based on a multiple of profitability.767

759 Id. at 6-8. For its calculations, Borrell relied on three sources: a database of Local Ad Spending Report (LA$R)
estimates for all Television Market Areas (TMAs), a database of ad revenue and expenses for 6,260 U.S. and
Canadian online operations, and a survey of 70 station managers on digital operations. Id. at 4.
760 Id. at 12.
761 Id. at 5, 7.
762 Id. at 5.
763 Id. at 11.
764 2012 NAB Television Financial Report at 2. NAB defines mobile revenue as any revenue derived directly from
streaming to mobile devices. Id. at 164.
765 Borrell Study 2011 at 22. Borrell defines mobile advertising as advertising derived from mobile applications. Id.
at 5-7. Borrell states that "[b]y 2015, most forecasters agree, the majority of all `online' advertising will become
untethered from desktops and delivered to mobile devices such as iPads, smart phones, and GPS-enabled laptops."
Id. at 7.
766 2012 NAB Television Financial Report at 2. To calculate total net revenues, NAB subtracts agency and rep firm
commission for gross advertising revenues, and adds all other forms of revenue.
767 Vogel at 307-10. See also Price Colman, For Sale: Young Broadcasting for Just $350M, TVNEWSCHECK, June
30, 2011, http://www.tvnewscheck.com/article/2011/06/30/52237/for-sale-young-broadcasting-for-just-350m
(visited Dec. 5, 2012).
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Table 23: Broadcast Television Station Industry Profitability

a. Net Operating Revenue (in thousands)
2010
06/2011
2011
06/2012
2012
Belo
$687,395
$317,849
$650,142
$337,517
$714,719
Nexstar
$313,350
$145,450
$206,491
$172,506
$378,632
Gray
$346,058
$145,943
$307,131
$175,365
$404,831
LIN
$420,047
$196,754
$409,072
$224,210
$553,462
Sinclair
$767,186
$366,074
$720,387
$451,293 $1,061,679

Average NAB Station

$16,175

N/A

$17,440

N/A

b. (Recurring) EBITDA (in thousands)
2010
06/2011
2011
06/2012
2012
Belo
$241,659
$93,736
$204,970
$111,708
$259,183
Nexstar
$112,656
$45,826
$96,278
$63,525
$146,922
Gray
$136,160
$43,394
$98,762
$65,029
$176,618
LIN
$141,806
$51,973
$113,890
$69,610
$112,370
Sinclair
$295,696
$134,704
$278,402
$176,719
$426,490

Average NAB Station

$5,498

N/A

$5,669

N/A

c. Net Income before Taxes (in thousands) 768
2010
06/2011
2011
06/2012
2012
Belo
$139,020
$22,435
$87,856
$63,277
$156,659
Nexstar
$4,926
($6,077)
($6,166)
$14,988
$45,074
Gray
$36,610
(806)
$13,574
$23,580
$47,317
LIN
$56,724
$13,311
$33,656
$33,479
$22,491
Sinclair
$113,851
$53,711
$121,373
$82,486
$212,340

Average NAB Station

$3,863

N/A

$4,228

N/A


768 Information in this table is based on data from NAB Financial Reports and SNL Kagan.
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215.
We use NAB average station financial statistics as an indicator of profitability: station
EBITDA (which NAB calls "cash flow") and station pre-tax profits.769 NAB calculates an average
broadcast television station's cash flow by subtracting station operational expenses (expenses from all of
the station's departments: engineering, programming, production, news, sales, advertising and
promotions, and general administrative expenses) from total net revenues, which are gross advertising
revenues minus agency commissions and national and regional rep firm commissions. Similarly, we can
examine the recurring EBITDA770 of the Pure Play Companies. Recurring EBITDA excludes earnings or
losses from nonrecurring events, such as the gain or sale of assets, early retirement of debt, restructuring,
or asset write-downs, and facilitates consideration prior to widely varying debt-financing arrangements.771
For the purpose of this Report, we believe recurring EBITDA and EBIDTA are better indicators of
profitability within the broadcast television industry than pre-tax income, which incorporates revenues
and expenses from extraordinary events, as well as interest payments on debt.
216.
To better compare trends among a single station and select station groups, we can
calculate the profit margins, i.e., EBITDA (or recurring EBITDA) divided by net operating revenues (i.e.,
revenues earned by the station or station group, minus commissions from advertising agencies and rep
firms).772 As seen in Table 24, the profit margins for 2011 and 2012 were similar. As noted above,
broadcast station revenues generally tend to be higher in even-numbered years, primarily due to the influx
of political advertising, and NBC affiliates also earn additional revenues from their coverage of the
Olympics in those years.

Table 24: Profit Margins

2010
06/2011
2011
06/2012
2012
Belo
0.352
0.295
0.315
0.331
0.363
Nexstar
0.360
0.315
0.466
0.368
0.388
Gray
0.393
0.297
0.322
0.371
0.436
LIN
0.338
0.264
0.278
0.310
0.203
Sinclair
0.385
0.368
0.386
0.392
0.402

Average NAB Station

0.340

N/A

0.325

N/A


769 We report national average figures, but recognize that profitability varies by a number of station characteristics,
including market size.
770 See supra, n.528. SNL Kagan, Nexstar EBIDTA and FCF (Free Cash Flow) Analysis. Free cash flow is
a measure of financial performance calculated as operating cash flow minus capital expenditures. It represents the
cash that a company is able to generate after laying out the money required to maintain or expand its asset base.
Investopedia, Dictionary: Free Cash Flow,
http://www.investopedia.com/terms/f/freecashflow.asp#axzz1qAPFGRjM (visited June 19, 2013).
771 Vogel at 308-09.
772 This report compares year-end figures for 2010 and 2011. For 2012, profit margins for the Pure Play Companies
ranged from 20.3 percent (LIN) to 43.6 percent (Gray). The average station profit margin for 2012 from NAB is not
yet available.
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d.

Investment and Innovation

217.
As in our analysis of profitability, we analyze broadcast station industry investment
trends by examining (1) an average television station's average capital expenditures divided by net
operating income and (2) capital expenditures divided by net income for the Pure Play Companies.

Table 25: Broadcast Television Station Industry Investment

773
a. Capital Expenditures (in thousands)
2010
06/2011
2011
06/2012
2012
Belo
$14,968
$6,742
$15,758
$10,788
$21,289
Nexstar
$13,799
$6,952
$13,349
$7,198
$17,260
Gray
$19,395
$16,652
$24,274
$11,561
$24,523
LIN TV
$17,648
$7,997
$20,069
$13,716
$28,230
Sinclair
$11,694
$20,656
$35,835
$18,473
$43,986

Average NAB Station

$541

N/A

$665

N/A

b. Net Operating Revenue (in thousands)
2010
06/2011
2011
06/2012
2012
Belo
$687,395
$317,849
$650,142
$337,517
$714,719
Nexstar
$313,350
$145,450
$206,491
$172,506
$378,632
Gray
$346,058
$145,943
$307,131
$175,365
$404,831
LIN
$420,047
$196,754
$409,072
$224,210
$553,462
Sinclair
$767,186
$366,074
$720,387
$451,293 $1,061,679

Average NAB Station

$16,175

N/A

$17,440

N/A

218.
To calculate the capital expenditure ratios for station groups we divide capital
expenditures by net operating revenues. We then compare these ratios for different years to analyze
investment trends in the industry. 774 The capital expenditure ratios for several Pure Play Companies
increased significantly between 2010 and 2011, as seen in Table 26. Nexstar's 2011 capital expenditure
ratio was higher due to decreased revenue,775 and Sinclair notes that it had had higher capital expenditures
in 2011 primarily for news operations and HD upgrades to its master control systems.776

773 Information in this table is based on data from NAB Financial Reports and SNL Kagan.
774 This Report compares year-end figures for 2010 and 2011. For 2012, capital expenditure ratios for the Pure Play
Companies ranged from 3.0 (Belo) to 6.1 (Gray). The average station capital expenditure ratio for 2012 from NAB
is not yet available.
775 Nexstar 2012 Form 10-K at 44.
776 Sinclair 2012 Form 10-K at 54.
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Table 26: Capital Expenditure Ratios

2010
06/2011
2011
06/2012
2012
Belo
0.022
0.021
0.024
0.032
0.030
Nexstar
0.044
0.048
0.065
0.042
0.046
Gray
0.056
0.114
0.079
0.066
0.061
LIN
0.042
0.041
0.049
0.061
0.051
Sinclair
0.015
0.056
0.050
0.041
0.041

Average NAB Station

0.033

N/A

0.038

N/A

C.

Online Video Distributors

1.

Introduction

219.
Consistent with the 14th Report, we define OVDs as entities that distribute video content
to consumers over the Internet.777 This section of the Report examines the structure, conduct, and
performance of OVDs.
220.
In contrast to an MVPD, whose market typically is tied to the provider's own facilities-
based infrastructure, or a broadcaster, whose market typically is defined by the station's signal coverage
area and DMA, an OVD's geographic market generally covers all regions capable of receiving high-speed
Internet service. Consumers can access online video via multiple Internet-enabled devices, including
computers, smartphones, tablets, gaming consoles, television sets, and other equipment.
221.
In this Report, we examine entities that offer video content akin to the professional
programming traditionally offered by broadcast stations, or broadcast and cable networks, and which is
usually created or produced by media and entertainment companies using professional-grade equipment,
talent, and production crews that hold or maintain the rights for distribution. We distinguish
professionally produced content from both (1) semi-professionally produced video, which refers to
consumer or user-generated content that has professional or industrial qualities (e.g., shot with
professional-grade equipment, using professional talent), and which may be produced exclusively for
online audiences; and (2) user-generated content that is publicly available, created or produced by end
users, often with little to no brand equity or brand recognition.778
222.
In the Comcast-NBCU Order, the Commission concluded that, regardless of whether
online video currently is a complement to or a substitute for MVPD service, it is potentially a substitute
product.779 Public Knowledge commends the Commission for not categorizing OVDs as either
"competitors" or "not competitors" to MVPDs. It notes that MVPDs, OVDs, and broadcast television
stations are related entities that interact in complex ways with mixed incentives.780 Public Knowledge

777 See supra, n.4.
778 See, e.g., Comcast-NBCU Order, 26 FCC Rcd at 4298-99, 144-46 & n. 365; Letter from William T. Lake,
Chief, Media Bureau, to Michael H. Hammer, Counsel, Comcast Corporation, et al., MB Docket No. 10-56, Attach.
at 3-6, 8-9, 14 (May 21, 2010).
779 See Comcast-NBCU Order, 26 FCC Rcd at 4256, 41. See also 14th Report, 27 FCC Rcd at 8721, 240.
780 Public Knowledge Comments at 2.
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also states that OVDs primarily compete with some non-core services offered by MVPDs, such as video-
on-demand,781 but only represent a substitute for a minority (albeit a growing minority) of viewers.782
Comcast, Netflix, and Google contend that OVDs primarily complement, rather than supplement,
traditional MVPD services.783 For example, Netflix states that OVDs more closely resemble premium
networks such as HBO than MVPD services, which offers entire packages of networks.784 Verizon and
WGAW, however, state that OVDs are emerging as an alternative to traditional MVPD service, including
Verizon's FiOS service.785 ABC Affiliates argue that OVDs compete directly with broadcast television
stations to distribute broadcast network programming.786
2.

OVD Structure

223.
We begin our consideration of OVDs with an examination of the industry structure. We
focus on several U.S. players in today's OVD marketplace.787 We then consider horizontal concentration
and vertical integration in the market. Next, we describe conditions affecting market entry and rivalry,
including an overview of existing regulations and market conditions that might influence entry decisions
and rivalry. Finally, we describe recent entry into and exit from the OVD market.
224.
Programmers and Content Producers/Owners. Individual content owners or
programming networks make their programming available online on their websites, sometimes referred to
as "verticals" or "portals."788 The websites may be brand extensions of existing media properties and/or

781 Public Knowledge Comments at 3. Likewise in its third quarter 2012 earnings statement, Netflix lists TV
Everywhere services as a primary source of competition. Netflix, Inc., 3Q 2012 Earnings Statement,Oct. 23, 2012,
at 6.
782 Public Knowledge Comments at 3.
783 Comcast Comments at 31; Netflix Comments at 6-7; Google Reply at 1-2. In addition, Comcast states that while
OVDs are complimentary to MVPDs, OVDs have had a significant impact on MVPD behavior and innovation,
undercutting any claim that today's video distribution marketplace is not competitive. Comcast Reply at 4-5.
784 Netflix Comments at 4. See also Netflix, Inc., 2Q 2012 Earnings Statement, July 24, 2012. at 1. For example,
Netflix states that audiences of for AMC's Med Men, Breaking Bad, and The Walking Dead as well as FX's Sons of
Anarchy
grew because Netflix's library of prior seasons of these programs enabled new viewers to catch up with the
series. Netflix 2Q 2012 Earnings Statement, July 24, 2012, at 4. See also Comcast Comments at 31.
785 Verizon Comments at 5, 24; WGAW Comments at 15
786 ABC Affiliates Reply at 2. ABC Affiliates claim that if broadcast network affiliates do not pay license fees to
their networks, the networks will migrate programs that would otherwise be on a free, over-the-air broadcast to a
subscription-based platform such as an OVD. Id. at 3. The Comcast-NBC U Order includes a condition relating to
the possible migration of major sporting events from broadcast to cable networks as set forth in Section Two of the
NBC Affiliates Agreement, but the Commission declined to further restrict the migration of sports programming to
OVDs, citing constitutional concerns. Comcast-NBCU Order, 26 FCC Rcd at 4305-06, 161-62.
787 Sandvine, a provider of Internet network equipment and software, measured more than 42,000 unique websites
that serve at least one streaming video and 28,000 sites streaming multiple videos online in the United States within
one month during Fall 2011. Sandvine, Global Internet Phenomena Report, Fall 2011, at 15. We note that these
sites may include user-generated video and short-form video.
788 PC Magazine defines a "portal" as a web `"supersite' that provides a variety of services." It notes that television
networks provide general purpose portals, but not e-mail. PC Magazine, Encyclopedia, Definition of: Portal,
http://www.pcmag.com/encyclopedia/term/49528/portal (visited July 3, 2013). See, e.g., ABC,
http://watchabc.go.com/ (visited July 3, 2013) ("ABC Network Portal"); NBC, http://www.nbc.com/ (visited Dec. 2,
2012) ("NBC Network Portal"); CBS, http://www.cbs.com/ (visited Dec. 2, 2012) ("CBS Network Portal"). In
addition, local television stations often act as OVDs by making video content available online. See, e.g., KSTP-TV,
Twin Cities Live, http://twincitieslive.com/ (visited July. 2, 2013); WPIX-TV, http://www.wpix.com/ (visited Dec 2,
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contain content unique to the Internet. Many studios, sports leagues, and programming networks also
offer mobile applications ("apps").
225.
Networks take different approaches to making content available online and have adopted
a number of business strategies. For example, CBS places much of its content on its website with full
commercial loads and disabled fast-forwarding.789 FOX places content on its website eight days or longer
after it airs on broadcast television.790 Viacom's Comedy Central, on the other hand, makes episodes
available the day they air.791
226.
Hulu, which is owned by News Corporation, NBCUniversal, and the Walt Disney
Company, offers videos from more than 410 content companies, including its joint venture participants as
well as The CW, Univision, Lionsgate, Comedy Central, Sony Pictures, and Warner Brothers.792
Throughout 2011, Hulu increased content on the free Hulu site by 40 percent and increased content on the
subscription service Hulu Plus by 105 percent compared with what was available in 2010.793 Until
recently and in a departure from the other major broadcast networks, CBS declined to participate in Hulu,
in part, so it could continue to utilize a platform in which it retained all the advertising revenue for its
content.794 In November 2012, however, CBS reached a non-exclusive multiyear licensing agreement
with Hulu Plus for access to CBS's library content.795
227.
In addition to the networks, several studios operate OVDs. Sony is, among other things,
a producer and owner of video content as well as a manufacturer of consumer electronics equipment.
Launched in 2007, Sony's Crackle OVD service offers a wide variety of free, streaming online content,
including movies, television shows, and original programming, much of which comes from Sony's own
(Continued from previous page)
2012). See also NAB Comments at 9-10 (noting that most local stations report that they have a three screen
approach to news distribution: on-air, online, and mobile).
789 Laura Martin and Dan Median, The Future of TV: The Invisible Hand, Needham & Company, June 22, 2012, at
4.
790 FOX, http://www.fox.com/the-mindy-project/full-episodes/2710595960/ (visited Oct. 22, 2012). Some of FOX's
programming is available earlier for authenticated MVPD subscribers.
791 See Comedy Central, The Daily Show, http://www.thedailyshow.com/full-episodes/thu-october-18-2012-barack-
obama/ (visited Oct. 12, 2012). Viacom provides access to The Daily Show and The Colbert Report online
immediately after airing due to the topical nature of their content. Laura Martin and Dan Median, The Future of TV:
The Invisible Hand
, Needham & Company, LLC, June 22, 2012 at 4.
792 Hulu, About, http://www.hulu.com/about (visited Oct. 22, 2012) ("More About Hulu"). In October 2012,
Providence Equity Partners sold its stake in Hulu for a reported $200 million. Ryan Lawler, It's Done: Early Hulu
Investor Providence Equity Partners Has Sold Its Stake for $200M
, TECHCRUNCH, Oct. 12, 2012,
http://techcrunch.com/2012/10/12/providence-equity-sells-its-stake-in-hulu/ (visited Nov. 5, 2012).
793 Jason Kilar, CEO, Hulu, "2011, 2012 and Beyond," Hulu Blog, Jan. 12, 2012,
http://blog.hulu.com/2012/01/12/2011-2012-and-beyond/ (visited Nov. 1, 2012). See also Comcast Comments at
27. For a description of Hulu's history, see 14th Report, 27 FCC Rcd at 8722, 246.
794 Sarah Barry James, Why CBS Likes Hulu Japan Over Hulu in the US, SNL KAGAN, Sept. 20, 2011. Hulu's
content partners typically keep 70 percent of revenues, with Hulu's owners splitting the remaining 30 percent.
Deana Myers, Hulu Continues on Quick Growth Path, SNL KAGAN, Oct. 15, 2012.
795 Hulu and CBS Corporation, CBS and Hulu Announce Licensing Agreement for Library Content on the Hulu Plus
Subscription Service
(press release), Nov. 5, 2012. See also Haseeb Ali, Hulu Strikes Multiyear Content Deal with
CBS
, SNL KAGAN, Nov. 5, 2012.
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content library.796 In January 2012, Paramount Pictures launched an UltraViolet streaming and download
service which lets users rent or purchase films and store a copy in the cloud.797 In 2011, Time Warner
purchased the movie recommendation portal Flixster,798 and has since added the ability to stream
movies.799
228.
Major U.S. professional sports leagues, such as MLB, the National Basketball
Association ("NBA"), the National Hockey League ("NHL"), and Major League Soccer ("MLS"),
participate in the OVD marketplace by offering subscription streaming services for live viewing of full-
length games on their respective portals.800 In contrast, the NFL only offers online access to games via
DIRECTV801 and wireless access via Verizon Wireless.802
229.
Affiliates of Online Services. Yahoo! Inc. operates an Internet portal that aggregates
news, entertainment, and other content, and primarily earns revenue from Internet display and search
advertising. In October 2011, Yahoo! launched Yahoo! Screen, a revamped portal for its television shows
and premium video content.803 Yahoo!Screen content includes original shows as well as content secured
through licensing deals with Hulu, CBS, ABC News, Ultimate Fighting Championship, and special
interest video network Revision3.804 Between June 2011 and June 2012, the total number of unique

796 See Crackle, About Crackle, http://www.crackle.com/about/ (visited Dec. 13, 2012) ("About Crackle"); Crackle,
Crackle FAQ: General Questions, http://www.crackle.com/outreach/faq#general_questions (visited Dec. 14, 2012)
("Crackle FAQ"); Daniel Frankel, Sony's Crackle Launches On Xbox Live, PAIDCONTENT.ORG, Feb. 1, 2012,
http://paidcontent.org/article/419-sonys-crackle-launches-on-xbox-live/ (visited Dec. 14, 2012) ("Crackle on
Xbox").
797 Viacom, Paramount Pictures, Paramount Movies, What is Ultraviolet,
http://www.paramountmovies.com/index.html?pageId=195 (visited July 3, 2013). See also Jeff Cahbot, Paramount
Launches Online UltraViolet Streaming & Download Service
, HDREPORT, Jan. 26, 2012, http://hd-
report.com/2012/01/26/paramount-launches online-ultraviolet-streaming-download-service/ (visited July 3, 2013).
Cloud computing is a general term for delivering computer services over the Internet. For consumers, cloud
competing has two major benefits: (1) a user does not need to invest in a computer and software to host data; and
(2) the user does not need to maintain the systems. Amazon and Google are key players in cloud computing. Harry
Newton and Steve Schoen, NEWTON'S TELECOM DICTIONARY 306 (Flatiron Publishing) (27th ed. 2013).
798 Time Warner Inc., Warner Bros. Home Entertainment Group to Acquire Flixster (press release), May 4, 2011.
799 Viacom, Paramount Home Media Distribution and Warner Bros. Home Entertainment Announce Home Media
Distribution Deal for the U.S. and Canada and a Joint Commitment to Flixster
(press release), Oct. 4, 2012.
800 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 10-11. NBA, MLB, and NHL games are also
available via Apple's digital media receiver, Apple TV. See Dan Frommer, Apple TV Now Has MLB.TV And NBA
Live Game Streaming
, BUSINESS INSIDER, Mar. 9, 2011, http://articles.businessinsider.com/2011-03-
09/tech/30032181_1_boxee-roku-mlb-tv (visited Dec. 13, 2012); Jonathan Seff, Apple TV 4.4 Update Adds Photo
Stream, NHL, and More
, MACWORLD, Oct. 12, 2011,
http://www.macworld.com/article/162974/2011/10/apple_tv_4_4_update_adds_photo_stream_nhl_and_more.html
(visited Dec. 13, 2012).
801 DIRECTV, Sports: NFL Sunday Ticket, http://www.directv.com/DTVAPP/content/sports/nfl (visited Dec. 3,
2012).
802 Verizon Wireless, NFL Mobile Kicks Off With Verizon Wireless in April (press release), March 9, 2010.
803 Ben Parr, Yahoo Launches Revamped Premium Video Portal, MASHABLE, Oct. 4, 2011,
http://mashable.com/2011/10/04/yahoo-screen/ (visited Dec. 12, 2012).
804 See id.; Revision 3, Our Company: Company Overview, http://revision3.com/company (visited July 3, 2013).
Revision3 is an Internet television network that produces original content, including lifestyle and technology video
shows geared to 13-34 year old males. See Andy Plesser, Revision3 Is "Biggest" Internet TV Network With 70
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viewers watching Yahoo!'s online video advertisements grew 12.3 percent, compared to total industry
growth of 9.3 percent.805 In November 2012, Yahoo! extended its partnership with Samsung Electronics
Company to integrate Yahoo!'s broadcast interactivity platform into Samsung's 2012 Smart TVs.806 In
December 2012 Yahoo! reached an agreement to distribute content from NBC Sports Group.807
230.
Facebook, Inc. operates a social networking site, and primarily earns revenues from
online advertising. In 2011, Facebook entered the OVD market and began offering online movie rentals
for a fee, reaching deals with Warner Brothers, Miramax, and Universal Studios to distribute movies via
apps. As of November 2011, the apps from Miramax and Warner Brothers had received 3,000 monthly
users, earning about $9,000 per month.808
231.
Affiliates of Retailers, Manufacturers, and Other Businesses. Prior to July 2011, Netflix
combined its streaming and DVDs-by-mail operations and subscribers could receive both services under a
single hybrid plan.809 As a result of changes in its pricing and plan structure, Netflix no longer offers the
hybrid plan. Consumers who wish to receive DVDs-by-mail and watch streaming content must elect two
separate subscription plans.810 Netflix indicates that it continually adds new movies and television series
to its content offerings, and is particularly interested in adding popular television series.811 In particular,
in Summer and Fall 2011, it announced distribution agreements with DreamWorks Animation, Discovery
Communications, AMC Networks, Disney, The CW, and NBCUniversal.812 In December 2012, it
reached a distribution agreement to become the exclusive U.S. subscription service for first-run movies
from the Walt Disney Studios beginning in 2016.813 On February 1, 2013, Netflix introduced its original
(Continued from previous page)
Million Monthly Video Views, BUSINESS INSIDER, May 19, 2011, http://articles.businessinsider.com/2011-05-
19/tech/30038978_1_revision3-video-views-network (visited Dec. 12, 2012). According to figures provided by
Revision3's CEO in May 2011, the network had 17 million monthly unique viewers who watched 70 million video
views. See id. GoodMorningAmerica.com, which was launched on Yahoo!, is the top morning news website. Will
Richmond, Yahoo Has Become a Magnet for Video Syndication by Big Media, VIDEONUZE, Dec. 10, 2012,
http://www.videonuze.com/article/yahoo-has-become-a-magnet-for-video-syndication-by-big-media (visited Dec.
12, 2012).
805 Perkin di Grazia, Yahoo! Remains Flat as Market Expands, SNL KAGAN, Aug. 2, 2012.
806 Yahoo!, Yahoo! And Samsung Form Multi-Year Partnership to Deliver Interactive TV (press release), Nov. 5,
2012. Television viewers see on-screen prompts from Yahoo! that run alongside television programs that provide
access to trivia, additional show information, gaming, and commerce. Showtime Networks and the National
Geographic Channel are two of the initial television programming partners.
807 Yahoo!, Yahoo! Sports, NBC Sports Group Team Up for News, Fantasy, and Video Coverage of Sporting Events
(press release), Dec. 9, 2012.
808 Perkin di Grazia, Facebook Not Delivering for Movie Studios, SNL KAGAN, Nov. 23, 2011.
809 Netflix, SEC Form 10-Q/A for the Quarter Ended Sept. 30, 2012, at 3.
810 In July 2011, Netflix introduced DVD-only plans and separated the combined plans, resulting in a price increase
for subscribers to the hybrid plan. In Fall 2011, the company announced the rebranding of its DVD service and the
separation of its DVD-by-mail and streaming websites. Due to negative consumer reaction, subsequently, Netflix
retracted its plans to rebrand and to separate the DVD-by-mail and streaming websites. Netflix SEC Form 10-Q/A
for the Quarter Ended Sept. 30, 2012, at 3. See also 14th Report, 27 FCC Rcd at 8725, 8752, 252, 325.
811 Netflix 3Q 2012 Earnings Statement, Oct. 23, 2012, at 3.
812 Comcast Comments at 26-27. See also Netflix, Inc., NBCUniversal and Netflix Renew Multi-Year TV And Film
Content Agreement
(press release), July 13, 2011.
813 The Walt Disney Studios, Netflix and The Walt Disney Studios Announce Multi-Year Premium Pay TV Window
Agreement in the United States
(press release), Dec. 4, 2012.
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series, House of Cards.814 Netflix plans to release additional original content and it debuted season four
of Arrested Development on May 26, 2013.815
232.
Several technology companies, notably Amazon, Apple, Google, and Microsoft, also
serve as OVDs. Each company takes a slightly different approach to integrating their online video
services with storage services, apps, and devices to attract and retain customers.816
233.
Amazon, primarily an online retailer, announced in 2011 that customers who pay an
annual fee for the company's Amazon Prime service could receive commercial-free, instant streaming of
thousands of movies and television shows at no extra charge.817 To expand its Amazon Prime Instant
Video service, Amazon entered distribution agreements with CBS, Disney, Viacom, Discovery, and
NBCUniversal.818 In August 2012, Amazon announced that its Prime Instant Video library had reached
22,000 titles, an increase from 5,000 titles at its 2005 launch and a 70 percent increase in titles in 2012,
with 96.4 percent of its titles viewed each week.819 In addition, Amazon offers more than 100,000 movies
and television shows for rent or purchase.820 In August 2012, Amazon introduced an Instant Video app
for the iPad, enabling customers to stream or download Amazon Instant Video movies or television
episodes from their video library directly on an iPad.821 Amazon's OVD content is available on multiple
devices,822 but not as many as Hulu Plus or Netflix.823 The Amazon Kindle carries Amazon's OVD

814 Netflix reportedly paid producer David Fincher $100 million to create two thirteen-episode seasons, releasing all
thirteen episodes of the first season at once. Nancy Haas, And the Award for the Next HBO Goes to . . . , GQ,
February 2013, http://www.gq.com/entertainment/movies-and-tv/201302/netflix-founder-reed-hastings-house-of-
cards-arrested-development?currentPage=1 (visited April 19, 2013). See also infra, Sec. III.C.3.b.
815 Todd Spangler, , "House of Cards" Had only "Gentle" Impact on Netflix Subscription Growth, VARIETY, April
22, 2013, http://variety.com/2013/digital/news/netflix-originals- have gentle-impact-on-sub-growth-1200407278/
(visited April 23, 2013). FOX originally aired the first three seasons of Arrested Development, but then canceled the
series in 2006. Nancy Haas, And the Award for the Next HBO Goes to . . . , GQ, February 2013,
http://www.gq.com/entertainment/movies-and-tv/201302/netflix-founder-reed-hastings-house-of-cards-arrested-
development?currentPage=1 (visited April 19, 2013).
816 Avinash Celestine, Tech Wars Take Microsoft, Apple and Amazon Out of the Their Comfort Zones, THE
ECONOMIC TIMES, Nov. 4, 2012, http://articles.economictimes.indiatimes.com/2012-11-
04/news/34893363_1_surface-tablet-windows-rt-kindle-fire, (visited Nov. 12, 2012).
817 See 14th Report, 27 FCC Rcd at 8726, 254.
818 Comcast Comments at 27-28.
819 Amazon.com, Inc., Amazon Prime Crosses Big Milestone: More Items Are Now Shipped with Prime Free Two-
Day Shipping Than with Free Super Saver Shipping
(press release), Aug. 27, 2012.
820 Amazon.com, Inc., Amazon Instant Video, http://www.amazon.com/Instant-
Video/b/ref=topnav_storetab_mov_aiv?ie=UTF8&node=2858778011
(visited Nov. 1, 2012).
821 Amazon.com, Inc., Amazon Instant Video App Now Available for iPad (press release), Aug. 1, 2012.
822 See Amazon.com, Watch Anywhere, http://www.amazon.com/gp/feature.html?ie=UTF8&docId=1000663511
(visited Dec. 14, 2012); Amazon.com, Help, Watching Amazon Instant Video,
http://www.amazon.com/gp/help/customer/display.html/ref=hp_3757_watchfaq?nodeId=200238920 (visited Dec.
14, 2012); Amazon.com, Help, Amazon Instant Video,
http://www.amazon.com/gp/help/customer/display.html/ref=hp_13819211_aiv?nodeId=3757 (visited Dec. 14,
2012).
823 See infra, Sec. III.C.3.
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offerings. Amazon sometimes earns a small margin on the Kindle but sometimes reports a loss.824 In
2011, Amazon launched a cloud-based storage service, Cloud Drive, which enables users to store 5
gigabytes (GB) of video or music remotely for free, and store 20 GB of data in exchange for an album
purchase from Amazon.com or $20 per year, with additional storage plans for an extra fee.825
234.
Apple's primary business is selling devices. It also sells content via its integrated OVD
service, iTunes,826 including movies and television episodes.827 In 2007, the company launched Apple
TV, a set-top box that wirelessly connects Macs or PCs to television sets, enabling viewers to watch
movies or TV programs purchased on iTunes.828 In 2008, Apple introduced its iTunes Movie Rentals
service, offering movie rentals from all major studios for viewing on computers, Apple mobile devices,
and Apple TVs.829 Using Apple TV and iTunes, consumers can view content from YouTube,830
Netflix,831 MLB, the NBA, the NHL, and Hulu Plus in HD.832 Per the iTunes revenue sharing model,
these OVDs give Apple a percentage of their monthly subscriber fees.833 Apple TV has become the best-

824 See Avinash Celestine, Tech Wars Take Microsoft, Apple and Amazon Out of the Their Comfort Zones, THE
ECONOMIC TIMES, Nov. 4, 2012, http://articles.economictimes.indiatimes.com/2012-11-
04/news/34893363_1_surface-tablet-windows-rt-kindle-fire, (visited Nov. 12, 2012). One technology blogger
writes "Amazon can give away the razor because they're already in the business of selling blades. The other guys
don't even have blades to sell." John Gruber, Amazon's New Kindles, DARING FIREBALL, Sept. 28, 2011,
http://daringfireball.net/2011/09/amazons_new_kindles (visited Nov. 12, 2012).
825 Amazon.com, Introducing Amazon Cloud Drive, Amazon Cloud Player for Web, and Amazon Cloud Player for
Android
(press release), March 29, 2011, http://www.amazon.com/gp/dmusic/marketing/CloudPlayerLaunchPage;
see also Amazon Cloud Player, http://amazon.com/gp/dmusic/marketing/CloudPlayerLaunchPage (visited July 5,
2013).
826 See 14th Report, 27 FCC Rcd at 8725-6, 253. Avinash Celestine, Tech Wars Take Microsoft, Apple and
Amazon Out of the Their Comfort Zones
, THE ECONOMIC TIMES, Nov. 4, 2012,
http://articles.economictimes.indiatimes.com/2012-11-04/news/34893363_1_surface-tablet-windows-rt-kindle-fire,
(visited Nov. 12, 2012).
827 Apple Inc., Apple Announces iTunes 6 With 2,000 Music Videos, Pixar Short Films & Hit TV Shows (press
release), Oct. 12, 2005.
828 Apple Inc., Apple TV Coming to Your Living Room (press release), Jan. 9, 2007. At the time, users could choose
from over 250 feature-length movies and 350 television programs in near DVD quality.
829 Apple Inc., Apple Premieres iTunes Movie Rentals With All Major Film Studios (press release), Jan. 15, 2008.
830 Apple Inc., YouTube Coming to Apple TV (press release), May 30, 2007.
831 Bill Holmes, Vice President of Business Development, Netflix, Netflix Comes to Apple TV, Netflix U.S. and
Canada Blogs, Aug. 31, 2010, http://blog.netflix.com/2010/08/netflix-comes-to-apple-tv.html (visited Nov. 1, 2012).
832 Apple Inc., Apple TV: What's on Apple TV, http://www.apple.com/appletv/whats-on/ (visited Nov. 1, 2012).
Apple introduced the version of Apple TV that enables high definition viewing in March 2012. Apple Inc., Apple
Brings 1080p High Definition to New Apple TV
(press release), March 7, 2012. See also Comcast Comments at 28.
833 Perkin di Grazia, Hulu Gives in to Apple TV Demands, SNL KAGAN, Aug. 13, 2012. Like Hulu, Apple retains 30
percent of revenues, with the rest going to its content partners. Laura Martin and Dan Medina, The Future of TV:
The Invisible Hand
, Needham & Company, LLC, June 22, 2012, at ii. In August 2012, Apple received a patent for
an application that would enable Apple TVs to have the functionality of a cable set-top box, i.e., an on-screen guide,
the ability to record programs and the ability to watch cable networks live. Donna Tam, Apple Gets a Patent for an
Apple TV Cable Box
, CNET NEWS, Aug. 14, 2012, http://news.cnet.com/8301-13579_3-57493033-37/apple -gets-a-
patent-for-an-apple-tv-cable-box/ (visited Nov. 2, 2012).
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selling set-top connected device in the U.S. market, with 2.8 million units sold in 2011.834 In March
2012, Apple announced that its iCloud service would enable consumers to store movies and television
programs remotely, and wirelessly connect their Apple TVs to iPhones, iPads, Macs, or PCs, to facilitate
viewing on any of these devices.835
235.
Google, primarily an online search business, purchased Motorola Mobility, a
manufacturer of mobile devices and MVPD set-top boxes in May 2012.836 YouTube, which Google
purchased in November 2006, has an extensive catalog of online movie rental content.837 In October
2010, Google launched Google TV, an app for Internet-enabled television sets, Blu-ray players, and set-
top boxes designed to facilitate viewers' access to online video.838 In March 2012, Google introduced a
cloud-based entertainment store, Google Play. Google Play is compatible with smartphones and tablets
using Google's Android operating system.839 In July 2012, Google announced that it was adding
thousands of episodes of cable and broadcast television programs from major studios, including
NBCUniversal, ABC Studios, and Sony Pictures to Google Play.840 In September 2012, Google reached

834 Perkin di Grazia, Hulu Gives in to Apple TV Demands, SNL KAGAN, Aug. 13, 2012. Some reports indicate that
Apple has been speaking with MVPDs to develop a set-top box for live television that would aggregate OVDs. Julia
Boorstin, Apple TV May Not Be So Revolutionary, CNBC, Aug. 16, 2012, http://finance.yahoo.com/news/apple-tv-
may-not-revolutionary-161848693.html (visited Nov. 1, 2012). WGAW and Public Knowledge contend that
networks' and MVPDs' reluctance to enable Apple to distribute programming on an a la carte basis is delaying
Apple's entry. WGAW Comments at 16-17; Public Knowledge White Paper at 9.
835 Apple Inc., Apple Brings 1080p High Definition to New Apple TV (press release), March 7, 2012. Apple is
reportedly purchasing cloud storage services from Microsoft and Amazon on a wholesale basis to avoid the cost and
delay of building its own services that could run anywhere from $100 million to $1 billion. Gavin Clarke, Apple's
iCloud Runs on Microsoft and Amazon Services
, THE REGISTER, Sept. 2, 2011,
http://www.theregister.co.uk/2011/09/02/icloud_runs_on_microsoft_azure_and_amazon/ (visited Dec. 12, 2012).
836 Todd Spangler, Google Wraps Up Motorola Mobility, MULTICHANNEL NEWS, May 28, 2012. Google has stated
that it was interested in acquiring Motorola's patent portfolio to protect the Android ecosystem. Google, Inc.
Acquisition of Motorola Mobility Holdings, Inc. by Google, Inc. Call
, Corrected Transcript, FACTSET CALLSTREET,
LLC, Aug. 15, 2011. Subsequent reports suggested that Google planned to sell the Unit within Motorola Mobility
that sells set-top boxes and other equipment to MVPDs. Matthew Campbell, Serena Saitto, and Brian Womack,
Google Said to Tap Barclay's to Sell Motorola's Home Business, BLOOMBERG, Aug. 29, 2012,
http://www.bloomberg.com/news/2012-08-29/google-said-to-hire-barclays-to-sell-motorola-s-home-business.html
(visited Nov. 13, 2012).
837 See 14th Report, 27 FCC Rcd at 8724, 249.
838 Richard Lawler, Sony Google TV HDTVs and Blu-Ray Player Launch Details Revealed, ENGADGET, Oct. 12,
2010, http://www.engadget.com/2010/10/12/sony-google-tv-hdtvs-and-blu-ray-player-launch-details-revealed/
(visited Dec. 4, 2012). Since Google launched Google TV, it added a TV and Movies app to enable users to browse
content from Netflix, YouTube, and Amazon.com among other sources. Kyle Daly, Who Will Win TV Tech Wars,
SNL KAGAN, Nov. 4, 2011. It has nonetheless had difficulty securing cooperation from content aggregators such as
the broadcast networks, and OVDs such as Hulu and MLB.tv. Andrew Wallenstein and Steve Clarke, Google Revs
TV Reboot,
DAILY VARIETY, June 27, 2012.
839 Jamie Rosenberg, Director of Digital Content, Google, Inc., Introducing Google Play: All Your Entertainment,
Anywhere You Go
, Google Official Blog, March 6, 2012, http://googleblog.blogspot.com/2012/03/introducing-
google-play-all-your.html#!/2012/03/introducing-google-play-all-your.html
(visited Nov. 1, 2012).
840 Andy Rubin, Senior Vice President of Mobile and Digital Content, Google, Inc., Android @I/O: The
Playground is Open
, Google Official Blog, June 27, 2012, http://googleblog.blogspot.com/2012/06/android-io-
playground-is-open.html#!/2012/06/android-io-playground-is-open.html (visited Nov. 1, 2012). See also Comcast
Comments at 29.
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an agreement with Twentieth Century Fox to make television programs and movies available for rent or
purchase on Google Play and YouTube.841 In October 2012, Google announced that it would enable users
to rent or purchase movies and television programs on Google TV.842
236.
Microsoft, primarily a software company, introduced Zune in 2006, an integrated online
music store and device which enabled customers to purchase and listen to music.843 It introduced an HD
version in 2009 that added video capabilities.844 At that time, the Zune player accounted for two percent
of the music-player market.845 In June 2011, Microsoft discontinued manufacturing Zune players,
concentrating instead on Windows Phones.846 Xbox game consoles are another part of Microsoft's
entertainment strategy.847 As of October 2012, Microsoft had sold 67 million Xbox consoles
worldwide.848 It has more than 62 television and entertainment partners for the Xbox 360, including
OVDs Netflix, Hulu Plus, and YouTube.849
237.
Wal-Mart, primarily a retailer of consumer goods, owns Vudu, a service that provides
consumers with a television set-top box enabling instant viewing of movies rentals and purchases.850 As

841 Jonathan Zepp, Manager of TV & Film Content Partnerships, Google, Inc., More Movies and TV Shows from
Twentieth Century Fox Coming to Google Play and YouTube
, Google Official Blog, Sept. 18, 2012,
http://googleblog.blogspot.com/2012/09/more-movies-and-tv-shows-from-twentieth.html (visited Nov. 12, 2012).
842 Ambarish Kenghe, TV Product Manager, Google, Inc., Google Play Movies, TV Shows, and Music Now on
Google TV
, Google Official TV Blog, Oct. 8, 2012, http://googletv.blogspot.co.uk/2012/10/google-play-movies-tv-
shows-and-music.html (visited Nov. 1, 2012).
843 Microsoft News Center, Welcome to the Social, Nov. 13, 2006, http://www.microsoft.com/en-
us/news/features/2006/nov06/11-13Zune.aspx (visited Nov 16, 2012).
844 Nick Wingfield, R.I.P. Zune, N.Y. TIMES, June 4, 2012, http://bits.blogs.nytimes.com/2012/06/04/r-i-p-zune/
(visited Nov. 12, 2012).
845 Farhad Manjoo, The Flop That Saved Microsoft, SLATE.COM, Oct. 26, 2012,
http://www.slate.com/articles/technology/technology/2012/10/microsoft_zune_how_one_of_the_biggest_flops_in_t
ech_history_helped_revive.html (visited Nov. 12, 2012). The lack of market share meant that developers were less
inclined to develop apps for Zune, making it less attractive for consumers. Id.
846 Shawn Night, Microsoft Discontinues Zune Media Player, Shifts Focus to Windows Phone, TECHSPOT, Oct. 4,
2011, http://www.techspot.com/news/45728-microsoft-discontinues-zune-media-player-shifts-focus-to-windows-
phone.html (visited Nov. 12, 2012).
847 Nick Wingfield, R.I.P. Zune, N.Y. TIMES, June 4, 2012, http://bits.blogs.nytimes.com/2012/06/04/r-i-p-zune/
(visited Nov. 12, 2012).
848 Todd Spangler, The Incredible, Shrinking TV Screen: What the Tablet Revolution Means for the Pay TV Industry,
MULTICHANNEL NEWS, Oct. 29, 2012.
849 Microsoft, Xbox: Video, http://www.xbox.com/en-US/entertainment/video?xr=shellnav (visited Nov. 12, 2012).
In addition, MVPDs Comcast and FiOS and cable networks HBO and ESPN are offering access to video via Xbox
as part of their TV Everywhere services. Todd Spangler, The Incredible, Shrinking TV Screen: What The Tablet
Revolution Means for the Pay TV Industry
, MULTICHANNEL NEWS, Oct. 29, 2012. See also George Winslow, A
Divide That's Not as Deep As You Think
, BROADCASTING & CABLE, Sept. 17, 2012.
850 See 14th Report, 27 FCC Rcd at 8727, 256. See also Brad Stone, Wal-Mart Adds Its Clout to Movie Streaming,
N.Y. TIMES, Feb. 22, 2010, http://www.nytimes.com/2010/02/23/technology/23video.html?partner=rss&emc=rss
(visited Dec. 14, 2012) ("Wal-Mart Clout"); Azadeh Ensha, Vudu, Roku, Boxee: What's the Difference?, N.Y.
TIMES, Mar. 24, 2009, http://gadgetwise.blogs.nytimes.com/2009/03/24/vudu-roku-boxee-whats-the-difference/
(visited Dec. 14, 2012); Brad Stone, Vudu Casts Its Spell on Hollywood, N.Y. TIMES, Apr. 29, 2007,
http://www.nytimes.com/2007/04/29/business/yourmoney/29vudu.html (visited Dec. 14, 2012).
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of 2012, Vudu offered its interactive movie store as a feature that electronics manufacturers could build
into devices,851 many available for sale at Wal-Mart stores. In March 2012, Wal-Mart and Vudu
announced an in-store "disc-to-digital" service that allows customers to bring DVD and Blu-ray movies
from participating studios, including Paramount, Sony, Fox, Universal, and Warner Brothers, to Wal-
Mart stores and, for a fee, receive digital access to those same titles on any Internet-connected device
through Vudu.com.852 For an additional fee, customers could upgrade their DVD movies to HD digital
copies. In October 2012, Wal-Mart announced that it would actively market Boxee Inc.'s set-top
devices853 and that Boxee would feature Wal-Mart's Vudu service on its home page.854
238.
Best Buy, primarily an electronics retailer, offers the CinemaNow service, allowing users
to rent or purchase movies and television programs.855 Users can access CinemaNow content via a
variety of devices, some of which can be purchased at Best Buy, including computers, Internet-enabled
television sets, and Blu-ray players.856 Once users begin to watch movie rentals, they have 24-48 hours to
complete the process, depending on the movie.857
239.
MVPD-Affiliated OVDs. Several MVPDs offer OVD services to non-subscribers.858 In
May 2011, DIRECTV announced that it would make its NFL Sunday Ticket games available to non-
subscribers via Sony PlayStations and broadband, but only if they live in areas where DIRECTV service
is unavailable, such as apartment buildings or in residences with poor sightlines to a satellite signal.859 As
of September 2012, this service for non-subscribers costs $300 per season.860 In May 2012, DISH
Network began offering DISHWorld, an online service that delivers a package of international channels
to Roku devices.861 In August 2012, it enabled subscribers to access the programming on their Macs or

851 See Vudu, VUDU is Available on Virtually Every Internet-Connected Blu-ray Player and HDTV on the Market,
http://www.vudu.com/devices.html (visited Dec. 15, 2012) ("Vudu Devices"); Vudu, VUDU Expands Distribution
to HDTVs and Blu-ray Players from LG, Mitsubishi, Samsung, SANYO, Sharp, Toshiba and VIZIO
(press release),
Jan. 8, 2010.
852 Wal-Mart Stores, Inc., Retailer Partners with Hollywood to Increase Value of Movie Ownership with Any Time
Access to DVDs
(press release), March 13, 2012.
853 James McQuivey, Wal-Mart Uses Boxee TV to Accelerate Cord-Shaving, Forrester Research, Nov. 1, 2012,
http://blogs.forrester.com/james_mcquivey/12-11-01-wal_mart_uses_boxee_tv_to_accelerate_cord_shaving (visited
Nov. 12, 2012). For additional information about, Boxee, see infra, 242.
854 Boxee, Home, http://www.boxee.tv/ (visited on July 3, 2013).
855 See 14th Report, 27 FCC Rcd at 8727, 257.
856 See id.; Best Buy, CinemaNow: About Us, www.cinemanow.com/aboutUS (visited July 3, 2013).
857 Best Buy, CinemaNow: Terms of Service, http://www.cinemanow.com/termsOfService (visited July 3, 2013).
858 See supra, Sec. III.A.3.c (describing MVPDs' TV Everywhere offerings).
859 DIRECTV, LLC, NFL and DIRECTV Extend NFL Sunday Ticket Agreement Through 2014 Season, March 24,
2009 (press release); DIRECTV, LLC, DIRECTV's Playbook Includes New Options for Its Exclusive NFL Sunday
Ticket Service
(press release), Aug. 17, 2011.
860 John Guadiosi, Sony Discounts DirecTV NFL Sunday Ticket on PlayStation Network, FORBES, Sept. 8, 2012,
http://www.forbes.com/sites/johngaudiosi/2012/09/08/sony-discounts-directv-sunday-ticket-on-playstation-network/
(visited Dec. 4, 2012).
861 DISH Network LLC, DISH and Roku Ink Strategic Partnership for International Programming (press release),
May 23, 2012.
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PCs.862 DISHWorld subscribers can access 72 channels in seven languages and need not be subscribers
of the DISH DBS service. Programming packages start at $14.99 per month; for an additional $10,
consumers can watch content on up to three devices.863
240.
In February 2012, Verizon announced a joint venture with Redbox operator Coinstar to
launch an online streaming video service.864 The joint venture, intended to challenge Netflix and
Amazon's subscription services, offers subscription streaming, movie sales, and rentals, along with DVDs
from Redbox's 36,800 kiosks nationwide.865 Called Redbox Instant by Verizon ("Redbox Instant"), a
beta test version was launched in December 2012 for $8 per month providing unlimited access to its
subscription video catalog. For an additional $9 per month, a subscriber can add four Redbox credits that
can be redeemed for Redbox DVD rentals.866 The streaming service offers newly released movies from
premium network EPIX.867 The sale and rental services include movies from NBCUniversal, Paramount
Pictures, Relativity, and Warner Brothers Home Entertainment.868 When fully launched, Redbox Instant
will be offered online and through the Google TV set-top box as well as Internet-enabled television sets,
Blu-ray players, tablets, and mobile devices from Apple, Google, Samsung, and LG.869
241.
OVD Aggregators. Several OVDs function as aggregators, offering apps, specialized set-
top boxes, or other equipment that enable viewing of online content on television sets. For example,
Roku manufactures set-top boxes designed to enable the streaming of television shows and movies to
television sets.870 It offers nearly 500 channels, with apps for content partners including Netflix, Hulu
Plus, Amazon, Sony's Crackle, and Vudu.871 Roku offers streaming content from OVD services, such as

862 DISH Network LLC, DISH Enhances Its International IPTV Services (press release), Aug. 28, 2012. See also
Comcast Comments at 29-30.
863 Haseeb Ali, DISH Expands IPTV Services, SNL KAGAN, Aug. 28, 2012.
864 Verizon Comments at 24; Comcast Comments at 30. See also David Goldman, Verizon and Redbox Team Up to
Battle Netflix
, CNN MONEY, Feb. 6, 2012, http://money.cnn.com/2012/02/06/technology/verizon_redbox/index.htm
(visited Oct. 22, 2012) ("Verizon and Redbox Team Up"); Verizon, Verizon and Coinstar's Redbox Form Joint
Venture to Create New Consumer Choice for Video Entertainment
(news release), Feb. 6, 2012,
http://newscenter.verizon.com/press-releases/verizon/2012/verizon-and-coinstars-redbox.html (visited Oct. 22,
2012). Verizon and Redbox hold, respectively, 65 and 35 percent ownership shares of the joint venture. Id.
865 Cliff Edwards and Michael White, Redbox-Verizon Streaming to Challenge Netflix by Year-End, BLOOMBERG
NEWS, Sept. 22, 2012, http://www.bloomberg.com/news/2012-09-21/redbox-verizon-streaming-to-start-in-time-for-
christmas.html (visited Oct. 22, 2012). See also Comcast Comments at 30.
866 Redbox Instant by Verizon, Redbox Instant by Verizon Unveils Details of Disc + Digital Movie Service (press
release), Dec. 12, 2012.
867 Id.
868 Id.
869 Id.
870 Roku, http://www.roku.com/, (visited Oct. 23, 2012); Roku, Now Playing, http://www.roku.com/channels#!now-
playing, (visited July 3, 2013).
871 Perkin di Grazia, The Future According to Roku, SNL KAGAN, March 28, 2012. In addition, HBO Go is
available to select MVPD subscribers on an authenticated basis. For example, Time Warner Cable allows its
customers who subscribe to HBO Go to access the HBO Go app on Roku. Jeff Simmermon, Time Warner Cable,
Director, Digital Communications, Our Customers Can Use HBO Go on Roku, Xbox, and Samsung Smart TVs,
Time Warner Cable Untangled Blog, May 17, 2012, http://www.twcableuntangled.com/2012/05/our-customers-can-
use-hbo-go-on-roku-xbox-and-samsung-smart-tvs/ (visited Nov. 2, 2012).
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Netflix and Hulu Plus, apps that offer content from individual cable or broadcast network portals, and
new media brands such as Glenn Beck TV.872 In Fall 2012, Roku introduced the streaming stick, which
plugs into a select number of Internet-enabled television sets and has built-in WiFi that allows customers
to control Roku with a television remote.873
242.
Boxee manufactures set-top boxes designed to enable the streaming of television and
movies to television sets.874 In October 2012, Boxee launched Boxee TV that for $99 integrates apps
from major OVDs, tuning to broadcast television channels, the ability to watch programs on phones,
tablets, and computers, and unlimited DVR storage for an extra $9.99 per month.875 The box is available
in Wal-Mart stores as well as the Boxee website.876 Boxee TV comes with its own dual tuner that only
picks up signals which a viewer can receive via an antenna within his or her household.877
a.

Horizontal Concentration and Vertical Integration

243.
Horizontal Concentration. As we discussed in the 14th Report, it is difficult to measure
the horizontal concentration in the OVD marketplace.878 Players continue to enter and exit and business
models, including those for advertising-based, subscription, and rental OVDs, are diverse and evolving.
Even if it were possible to define or categorize all of the players in the OVD marketplace, an analysis of
horizontal concentration would still be difficult because ratings/viewing information is not standardized.
Many OVDs are integrated with subsidiaries or divisions of companies with multiple non-OVD business
lines, and several other OVDs, such as Hulu, are privately owned. Of the major players, only Netflix
publicly reports subscriber and revenue figures for its online streaming service. Moreover, due to the lack
of standardized metrics for measuring viewership,879 measuring online video viewership raises unique
challenges. In addition, services that measure online video viewership generally do not report
professional and non-professional video content ratings separately on a systematic basis.
244.
Vertical Integration. As discussed above, many OVDs are vertically integrated with
studios, programmers, providers of infrastructure, and device manufacturers.880 For example, Comcast,
which is an MVPD and an ISP, has ownership interests in Universal Studios, NBC and Telemundo

872 Perkin di Grazia, The Future According to Roku, SNL KAGAN, March 28, 2012.
873 Haseeb Ali, Roku Secures $45M in Strategic Investment from News Corp., Other Investors, SNL KAGAN, July
26, 2012; Roku, Inc., Roku Products: Roku Streaming Stick, http://www.roku.com/streamingstick#roku-ready
(visited Nov. 2, 2012).
874 Boxee, About Boxee, http://www.boxee.tv/#/company/about (visited Nov. 2, 2012).
875 Boxee, Features, http://www.boxee.tv/#/features (visited Nov. 2, 2012); Sarah Barry James, A More
Broadcaster-Friendly Boxee
, SNL KAGAN, Oct. 18, 2012. As a result of Samsung's acquisition of Boxee,
announced on July 3, 2013, Boxee informed its users that its Cloud DVR service would be terminated on July 10,
2103. See Joan E. Solsman, Samsung Buys Boxee, CNET News, July 3, 2013, http://news.cnet.com/8301-1023 3-
57592174-93/samsung-buys-boxee/ (visited July 12, 2013); Boxee, http://www.boxee.tv/ (visited July 8, 2013).
876 Sarah Barry James, Boxee Going After "Mainstream Audience" with Wal-Mart, SNL KAGAN, Nov. 1, 2012.
877 Sarah Barry James, A More Broadcaster-Friendly Boxee, SNL KAGAN, Oct. 18, 2012.
878 See 14th Report, 27 FCC Rcd at 8727-28, 258-60.
879 See also infra, 293.
880 Public Knowledge notes that a single company may control entities in multiple strategic groups. Public
Knowledge Comments at 6. See also 14th Report, 27 FCC Rcd at 8728, 261.
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broadcast television networks and stations, and the OVD Hulu.881 Likewise, Verizon owns both the FiOS
broadband and MVPD service and an OVD through its joint venture with Redbox. CBS owns and
operates broadcast and cable networks as well as OVD TV.com and portals of CBS and The CW. In
addition, Netflix has invested in its own content delivery network, while Amazon, Microsoft, and Google
own and operate servers that enable them to provide online video storage services to consumers. Several
OVDs, including Apple, Amazon, Google, Microsoft, and Sony, also manufacture devices such as game
consoles, tablets, and online video set-top boxes.
b.

Conditions Affecting Entry and Exit

245.
Below, we discuss the regulatory conditions potentially affecting entry and competition
in this market. Thereafter, we describe the market, or non-regulatory, conditions that may influence entry
decisions and competition, including the need for OVDs to acquire rights to content and to secure
sufficient, reasonably priced Internet access for transmission of OVD content. We then describe recent
entry and exit from the market.
(i)

Regulatory Conditions

246.
Definition of an MVPD. In 2012, the Media Bureau issued a public notice seeking
comment on the most appropriate interpretation of the terms "multichannel video programming
distributor" and "channel" as defined in the Act in response to a program access complaint filed by Sky
Angel, a provider of video programming.882
247.
Verizon and Comcast assert that excluding OVDs from the definition of an MVPD is an
appropriate policy to encourage the growth of OVDs and the deployment and adoption of broadband
services.883 They argue that defining OVDs as MVPDs, and thereby imposing traditional MVPD
regulation on OVDs, could have unintended consequences and derail continued innovation in this
developing industry.884
248.
WGAW and Public Knowledge support a definition of MVPD that does not require
programming distributors to own or operate their transmission paths.885 WGAW argues including entities
that make use of third-party facilities to provide video programming in the definition would be consistent
with Congress' intent to enhance competition.886 Public Knowledge argues that the Commission should
allow OVDs to operate as MVPDs and doing so would enhance MVPD competition.887 ABC Affiliates
argue that the Commission should categorize certain OVDs as MVPDs and specifically apply the

881 As a condition of the Comcast-NBCUniversal transaction, the Commission required Comcast to hold its interest
in Hulu solely as an economic interest; i.e. neither Comcast nor Comcast-NBCU shall exercise any right to influence
the conduct or operation of Hulu, including that arising from agreements, arrangements or operation of its equity
interests. Comcast-NBCU Order, 26 FCC Rcd at 4274, 90, Appendix A.
882 Media Bureau Seeks Comment on Interpretation of the Terms "Multichannel Video Programming Distributor"
and "Channel" as Raised in Pending Program Access Complaint Proceeding
, MB Docket 12-83, Public Notice, 27
FCC Rcd 3079 (MB 2012). See also VDC Corp. v. Turner Network Sales, Inc., et al., Program Access Complaint
(Jan. 18, 2007); Sky Angel U.S., LLC v. Discovery Communications LLC, et al., Program Access Complaint, MB
Docket No. 12-80, CSR-8605-P (Mar. 24, 2010).
883 Verizon Comments at 23-24; Comcast Reply at 7.
884 Verizon Comments at 23-24; Comcast Reply at 7.
885 Public Knowledge Comments at 8; WGAW Comments at 13-14.
886 WGAW Comments at 13-14.
887 Public Knowledge Comments at 8-10. NATOA contends that a proper resolution on how to treat OVDs from a
regulatory standpoint rests with Congress. NATOA Comments at 6.
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Commission's retransmission consent regulations to them in order to prevent the migration of
entertainment and sports programming to subscription-based video distribution platforms.888
249.
Open Internet. OVDs require broadband Internet speeds and capacity to transmit video
content to customers. In 2010, the Commission adopted an order seeking to maintain an open Internet.889
The Commission's Open Internet rules require transparency from fixed and mobile broadband
providers.890 In addition, fixed broadband providers are prohibited from blocking access to lawful
content, applications, and services. They must also allow access to non-harmful devices and cannot
unreasonably discriminate in transmitting lawful network traffic.891 Mobile broadband providers are
prohibited from blocking access to lawful websites and applications competing with the providers' voice
or video telephony services.892 WGAW states that the Commission's Open Internet rules are a first step
in protecting OVDs' ability to compete in the media marketplace.893 Public Knowledge asserts that the
Commission should continue to enforce the "Open Internet" rules and related policies.894
250.
Closed Captioning. In January 2012, the Commission adopted rules placing closed
captioning obligations on the owners, providers, and distributors of video programming delivered using
Internet protocol (IP).895 The rules were adopted pursuant to the Twenty-First Century Communications
and Video Accessibility Act of 2010 ("CVAA"), which directed the Commission to require closed
captioning of IP-delivered video programming that is published or exhibited on television.896 OVDs must
comply with these requirements.
(ii)

Non-regulatory Conditions

251.
An OVD entrant faces several non-regulatory costs and challenges that influence its
decision to enter the market, including content acquisition and ability to access sufficient Internet capacity
to provide customers with a high-quality OVD viewing experience.
252.
Access to Content. The entry of new OVDs and the growth of the OVD marketplace are
dependent on the ability of OVDs to acquire or create compelling programming that will attract viewers
and subscribers.897 One potential barrier to content acquisition is cost. For example, in December 2012,

888 ABC Affiliates Reply at 6, 10.
889 See Preserving the Open Internet; Broadband Industry Practices, GN Docket No. 09-191, WC Docket No. 07-
52, Report and Order, 25 FCC Rcd 17905, 17906, 1 (2010) ("Open Internet Order"). This order is currently on
appeal in the D.C. Circuit. See, e.g., Notice of Appeal, Verizon v. FCC, No. 11-1355 (filed Sept. 30, 2011, D.C.
Cir.). In addition, Southern Company Services recently filed a petition for clarification or reconsideration with the
Commission concerning one aspect of the Open Internet Order. See Southern Company Services, Petition for
Clarification or Reconsideration, GN Docket No. 09-191, WC Docket No. 07-52 (filed Oct. 24, 2011).
890 See Open Internet Order, 25 FCC Rcd at 17906, 1.
891 See id.
892 See id.
893 WGAW Comments at 2.
894 See Public Knowledge Comments at 11.
895 See Closed Captioning of Internet Protocol-Delivered Video Programming: Implementation of the Twenty-First
Century Communications and Video Accessibility Act of 2010
, MB Docket No. 11-154, Report and Order, 27 FCC
Rcd 787 (2012). Petitions for reconsideration are currently pending before the Commission.
896 47 U.S.C. 613(c)(2).
897 See Public Knowledge Comments at 2 (OVDs need to be able to reach distribution agreements for programming
comparable to that of MVPDs).
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Netflix and Disney reached an agreement that will give Netflix exclusive distribution rights for Disney
movies for the premium cable network window, which typically is an 18-month period that begins nine to
16 months following the U.S. theatrical release.898 Analysts estimate that Netflix's cost for this
programming will be between $200 million and $350 million.899 Netflix has stated that it will spend
about $2.1 billion on content acquisitions in 2013.900 Other companies' decisions to enter the OVD
marketplace depend in part on whether they can obtain content distribution rights and at what cost.901
253.
OVDs' content acquisition also may be affected by vertical integration and pre-existing
business relationships. For example, vertical integration or exclusivity arrangements between content
producers/owners and cable networks, broadcast networks, or MVPDs may impede unaffiliated OVDs.902
OVD content acquisition also can be difficult when content owners are vertically integrated with, or enjoy
exclusive relationships with, other OVDs.903 To foster program acquisition, Public Knowledge argues the
Commission should extend the program access rules to cover OVDs.904
254.
Internet Capacity, Usage, and Cost. Access to high-speed data pipelines capable of
delivering a high quality video signal is critical for OVD entrants.905 OVDs require such Internet capacity
to transmit their programming, and consumers need sufficient broadband service to access OVDs'
content. Analysts' estimates of transmission speeds required for OVDs vary. For example, Bernstein
Research estimates that compressed, high definition signals require about 4 million bits (or 4 megabits)
per second (Mbps) of throughput, while SNL Kagan estimates that high definition video requires 8 Mbps
and standard definition requires 2 Mbps.906 As of June 30, 2011, the Commission estimates that for fixed

898 Sarah Barry James, Starz Wars, SNL KAGAN, Dec. 6, 2012.
899 Jill Goldsmith, Can Netflix Absorb the Cost of Content?, DAILY VARIETY, Dec. 6, 2012.
900 Amazon "Losing Up to $1bn" a Year on Streaming, INSIDE SATELLITE TV, Nov. 20, 2012.
901 See also Andy Fixmer and Ian King, Intel Seeking Media Rights to Start Online Pay-TV System, BLOOMBERG ,
March 13, 2012, http://www.bloomberg.com/news/2012-03-13/intel-said-to-seek-programming-rights-to-start-
online-television-service.html (visited Oct. 31, 2012) ("Intel Pay-TV"). WGAW Comments at 16-17.
902 In this regard, Public Knowledge claims that as the largest buyers of video content, MVPDs can keep their
programming suppliers from putting some content online. It also asserts that many large incumbent MVPDs use
"most favored nation" (MFN) and other clauses in their contracts to prevent independent networks from making
content available online. Public Knowledge White Paper at 7, 9. Comcast, however, states that it makes its
NBCUniversal content available to OVDs through licensing agreements pursuant to the conditions of the Comcast-
NBCU transaction. Comcast Comments at 31.
903 See, e.g., The Economics of Online Video (White Paper), ADVERTISING AGE, June 19, 2010, at 10 ("AD AGE
2010 White Paper"); Emma Barnett, Joost ex-CEO Holds Broadcasters Responsible for Demise of Company, THE
TELEGRAPH, July 7, 2009, http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/digital-
media/5771174/Joost-ex-CEO-blames-broadcasters-for-demise-of-company.html (visited Dec. 14, 2012) (discussing
belief of former CEO of OVD Joost that broadcasters' decision to create their own online video services hindered
Joost's ability to acquire the content rights necessary to be competitive).
904 Public Knowledge White Paper at 7, 20-21. However, Public Knowledge does not support the extension of the
program access rules to OVDs.
905 Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution, but Challenges Persist, SNL
KAGAN, Sept. 11, 2012.
906 Craig Moffett and Carlos Kirjner, Weekend Media Blast: What if Television HAD to Be Delivered Over the
Internet?
, BERNSTEIN RESEARCH, Aug. 24, 2012, at 2; Ian Olgeirson and Deana Myers, Service Providers Lessen
OTT Substitution, but Challenges Persist
, SNL KAGAN, Sept. 11, 2012. An SNL Kagan 2012 survey of cable
operators indicates that typical broadband speeds in major markets range from 10 Mbps on the low end to 20 Mbps
(continued....)
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connections, 27 percent of reportable connections (or 23.2 million connections) were slower than 3 Mbps
in the downstream direction, 16 percent (or 13.8 million connections) were at least 3 Mbps in the
downstream direction but slower than 6 Mbps, and 57 percent (or 49.6 million connections) were at least
6 Mbps in the downstream direction.907
255.
The total amount of data needed per month to watch an OVD service depends on the
amount of time spent watching and the quality of the video. For example, SNL Kagan estimates that a
household watching four hours of video per day would need 105 GB per month to watch all of the video
in standard definition, or 422 GB per month to watch all of the video in high definition.908
256.
Sandvine, a manufacturer of Internet networking equipment, has explored the traffic and
adoption patterns of online video. It reports that between 2008 and 2011, users shifted from a "download
now, use later" method of viewing video to on-demand viewing, requiring real-time delivery of data over
the Internet.909 According to Sandvine, this shift to on-demand consumption of online video has caused
the peak period, generally 9:00 p.m. to 11:00 p.m., for wireline traffic to get busier and the off-hours to be
less busy.910 Moreover, the heaviest one percent of downstream users account for 21.3 percent of the
overall amount of downstream capacity used.911 Sandvine also reports real-time entertainment is gaining
a four to five percent share of total Internet traffic on North American fixed access networks every six
months, and as of Spring 2012 accounts for 58.0 percent of peak aggregate traffic, up from 53.6 percent in
September 2011, and from 49.2 percent in Spring 2011.912 Sandvine states that as of Spring 2012,
(Continued from previous page)
on the high end. Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution, but Challenges
Persist
, SNL KAGAN, Sept. 11, 2012.
907 Internet Access Services: Status as of June 30, 2011 (IATD, WCB June 14, 2012), at 3,
http://www.fcc.gov/document/fcc-releases-new-data-internet-access-services-
5?__utma=25079213.1638407786.1357158398.1357158398.1357158398.1&__utmb=25079213.35.9.13571589802
66&__utmc=25079213&__utmx=-
&__utmz=25079213.1357158398.1.1.utmcsr=(direct)|utmccn=(direct)|utmcmd=(none)&__utmv=-
&__utmk=80408148 . For mobile connections, 85 percent of reportable connections (or 102.1 million connections)
were slower than 3 Mbps in the downstream direction, about 5 percent (or 6.6 million connections) were at least 3
Mbps in the downstream direction but slower than 6 Mbps, and 9 percent (or 10.9 million connections) were at least
6 Mbps in the downstream direction. Id. at 3-4. The Commission has benchmarked broadband as a transmission
service that enables an end user actually to download Internet content at 4 Mbps and to upload Internet content at 1
Mbps over the service provider's network. See Inquiry Concerning the Deployment of Advanced
Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to
Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the
Broadband Data Improvement Act
, GN Docket Nos. 09-137, 09-51, Sixth Broadband Deployment Report, 25 FCC
Rcd 9556, 9563-64, 11 (2010) (Sixth Broadband Deployment Report).
908 Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution, but Challenges Persist, SNL
KAGAN, Sept. 11, 2012. One gigabyte is equal to two raised to the 30th power, i.e., 1,073,741,824 bytes. Harry
Newton and Steve Schoen, NEWTON'S TELECOM DICTIONARY 551 (Flatiron Publishing) (27th ed. 2013).
909 Sandvine, Adoption Trends of Over-the-Top Video from a Cable Network Perspective (July 2011) ("Sandvine
Over-the-Top Video White Paper"), at 3.
910 Sandvine, Global Internet Phenomena Report, 1H 2012, at 7; see also id., Figure 3 "Illustration of Peak Hour,
Peak Period and Prime Time."
911 Sandvine, Global Internet Phenomena Report, Fall 2011, at 11.
912 Sandvine, Global Internet Phenomena Report, 1H 2012, at 19.
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Netflix's share of peak hour downstream traffic was 32.9 percent, YouTube's share was 13.8 percent, and
Hulu's share was 1.6 percent.913
257.
Similarly, peak mobile network demand is concentrated between 7:00 pm and 9:00 pm.914
Cisco reported that as of the end of 2011, mobile video traffic represented more than half of all wireless
data traffic.915 Between September 2011 and March 2012, real-time entertainment grew from 30.8
percent of peak traffic (upstream and downstream) to 50.2 percent, accounting for the majority of mobile
network traffic.916 During the first half of 2012, Netflix represented 2.1 percent of mobile data in North
America, making it the eighth largest source of traffic.917 Several reports indicate that WiFi carries the
majority of U.S. mobile data traffic, with 64 percent of U.S. households WiFi enabled as of 2012.918
Cisco estimates that about 84 percent of mobile video occurs in and around fixed locations and that on the
iPad, WiFi traffic surpasses 90 percent.919
258.
In their comments, several MVPDs described the relationship between OVD adoption
and their own company's efforts to increase Internet speeds. Verizon asserts that the increase in traffic
from online video has spurred MVPDs to invest in upgrades to their broadband facilities. 920 Comcast
contends that its deployment of broadband networks has facilitated OVD growth.921 Google, 922
NATOA,923 and Verizon924 note that they have built out ultra-high speed networks.
259.
Some commenters, however, claim that that the fact that ISPs are also MVPDs causes
problems for OVDs. Netflix, Public Knowledge, and WGAW claim that the market power of network
operators threaten the success of OVDs because OVDs rely on ISPs to deliver their services and the ISPs
are typically MVPDs.925 Netflix and Public Knowledge argue that ISPs can favor their own traffic, either

913 Id.
914 Sandvine, Global Internet Phenomena Report, Fall 2011, at 10.
915 Comcast Comments at 26.
916 Sandvine, Global Internet Phenomena Report, 1H 2012, at 8.
917 Id. at 2.
918 John Fletcher, Wi-Fi Carrying Majority of Mobile Data Traffic, SNL KAGAN, Oct. 25, 2012.
919 Chris Osika, Senior Director, Global Lead, Cisco, The Explosive Evolution of Online Media , Cisco Blog, Oct.
15, 2012, http://blogs.cisco.com/sp/the-explosive-evolution-of-online-media/ (visited Nov. 9, 2012).
920 Verizon Comments at 25.
921 Comcast Comments at 3.
922 Google states that in July 2012 it launched Google Fiber, a large-scale ultra-high-speed network, in Kansas City,
Missouri, and Kansas City, Kansas. Google Reply at 3. Google contends that the Commission, state, and local
governments can increase competition and innovation in video distribution by adopting public policies designed to
encourage broadband deployment. Google Reply at 5.
923 NATOA Reply at 2.
924 Verizon states that it enables FiOS residential consumers to stream video, play online games, and download large
files at speeds utilizing Verizon's new Quantum offerings that feature speeds of up to 300 Mbps downstream and 65
Mbps upstream. Verizon contends that these are the nation's fastest, mass scale residential Internet speeds available,
and that the FiOS Quantum service likely will prompt competitors to increase the speeds of their broadband
offerings. Verizon Comments at 9.
925 Netflix Comments at 9-10; Public Knowledge Comments at 10; WGAW Comments at 15. Public Knowledge
states that the Commission must take into account that a key input is controlled by a "supplier" that may have an
incentive to withhold it. Public Knowledge Comments at 11.
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by (1) prioritizing their own bits, or (2) not counting their own or affiliated bits toward ISP imposed data
caps, or (3) imposing usage based billing or data caps, even though off-peak usage has zero marginal cost
and does not impact network congestion.926 Netflix urges the Commission to remain vigilant of such
threats.927 WGAW contends that the Commission should initiate an industry-wide investigation into the
use of data caps and traffic prioritization as possible violations of "net neutrality" and protect consumers
from these practices.928 In this regard, Comcast comments that ISPs continue to invest in and improve the
broadband platforms that enable consumers' access to online video and other services.929
260.
Some ISPs, including MVPDs and wireless providers, have initiated bandwidth caps or
usage-based price tiers, using a variety of business models.930 During the first half of 2012, most major
MSOs formalized bandwidth caps or usage-based/metered pricing.931 They generally adopted thresholds
that exceed typical traffic and chose either to cap usage or to implement overage charges for customers
who exceed the limits. Exceptions include Time Warner Cable, which offers voluntary opt-in limits in
exchange for a $5 discount on monthly charges across its Texas footprint, and Cablevision, which as of
2012 had not established formal limits. In May 2012, Comcast announced that it is experimenting with
different approaches to data caps and usage pricing through trials in some markets but for all markets
raised the existing data cap from 250 GB to 300 GB per month.932 In the markets where Comcast is not
experimenting with usage based pricing, it has suspended enforcement of its data caps. Cox
Communications, Charter, and Suddenlink Communications offer data tiers, tying caps to the speed of

926 Netflix Comments at 9-10; Public Knowledge Comments at 10-11; Public Knowledge White Paper at 10-11.
927 Netflix Comments at 10. Likewise, Public Knowledge argues that the Commission cannot hope for OVDs to
become full competitors unless adequate broadband competition exists and the Commission should analyze last-mile
broadband facilities as a key input to providing online video service. Public Knowledge Comments at 10-11, 13-14.
928 WGAW Comments at 15.
929 Comcast Reply at 4.
930 See Stacy Higginbotham, Which ISPs are Capping Your Broadband and Why?, GIGAOM, Oct. 1, 2012,
http://gigaom.com/2012/10/01/data-caps-chart/ (visited July 5, 2013).
931 Ian Olgeirson and Mari Rondeli, HSD Subs Tilt Toward Premium Tiers; Usage Constraints Gain Broader
Foothold
, SNL KAGAN, July 19, 2012. See also Netflix Comments at 7-8. Public Knowledge states that by some
estimates, more than half of the United States' 75 million fixed broadband subscribers are already subject to some
kind of usage cap. Letter from Michael Weinberg, Vice President for Emerging Innovation, Public Knowledge, to
Marlene H. Dortch, Secretary, FCC, (Aug. 9, 2012) ("Public Knowledge Aug. 9, 2012 Ex Parte") at Attach. 1,
Andrew Odlyzko et al., Know Your Limits: Considering the Role of Data Caps and Usage Based Billing in Internet
Access Service
, Public Knowledge, May 2012, at 4-5 ("Public Knowledge UPB White Paper"). Google states that in
contrast to some broadband service plans criticized by Netflix in its comments, Google Fiber's service plans are not
subject to data caps. Google Reply at 4, n.16.
932 Cathy Avgiris, Executive Vice President and General Manager, Communications and Data Services, Comcast
Cable, Comcast to Replace Data Usage Cap with Improved Management Approaches, Comcast Voices Blog, May
17, 2012, http://corporate.comcast.com/comcast-voices/comcast-to-replace-usage-cap-with-improved-data-usage-
management-approaches (visited Dec. 21, 2012). One approach, which Comcast launched in Nashville, TN, and
Phoenix, AZ, begins with a 300 GB data cap, with increasing data allotments for each successive tier of high-speed
data service. Customers have the option of purchasing additional gigabytes in increments (e.g., 50 GB for $10).
The second approach increases the data cap to 300 GB for all tiers and also offers additional gigabytes in
increments. Id. Customers who exceed the threshold will receive warnings from Comcast for up to three months in
a twelve-month period, after which Comcast automatically bills them for the extra data they use. Broadband
Bonanza: Comcast Has New Caps, Tiers, In-Home WiFi
, CABLEFAX DAILY, Sept. 19, 2012.
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Internet service that consumers purchase.933 Among telcos, AT&T imposed a monthly broadband data
cap in May 2011, limiting legacy DSL subscribers to 150 GB and U-Verse customers to 250 GB.
Likewise, CenturyLink imposed tier-based usage caps. Verizon, which relies on fiber-to-the-home
architecture, does not impose bandwidth caps or usage-based-pricing.934
261.
Major wireless providers also have begun to impose data caps.935 For example, in July
2012, both AT&T and Verizon Wireless announced plans to facilitate customers' sharing of data across
smartphones, tablets, and other devices.936 The new shared data plans charge a monthly fee for each
device and then charge for a shared pool of monthly data transfer ranging from 1 GB to 20 GB.937 Early
evidence suggests that consumers materially increase their data consumption when upgrading to Long
Term Evolution ("LTE") devices.938
262.
WGAW claims that data caps allow MVPDs to discriminate against OVDs, undermining
competition in the video marketplace.939 Public Knowledge argues that data caps are increasingly having
a negative impact on consumers and the growth of many OVDs.940 It also contends that congestion issues
can arise as much from a network operator's design decisions as from network traffic.941 SNL Kagan
reports that, so far, bandwidth caps have not emerged as a major hurdle to OVD substitution for MVPD
services.942 Nevertheless, both SNL Kagan and Bernstein Research estimate that, if the cost of watching
OVDs (i.e., the cost of the OVD plus the price of using broadband services to watch it) becomes
comparable to that of an MVPD service, then substitution of OVDs for MVPDs may diminish.943 Cable

933 Ian Olgeirson and Mari Rondeli, HSD Subs Tilt Toward Premium Tiers; Usage Constraints Gain Broader
Foothold
, SNL KAGAN, July 19, 2012.
934 Id.
935 See, e.g., AT&T, An Update for Our Smartphone Customers With Unlimited Data Plans (press release), July 29,
2011 (announcing reduction in speeds for smartphone customers with unlimited data plans who exceed certain
bandwidth thresholds) ("Smartphone Update"); Julianne Pepitone, AT&T Raises Limit for Smartphone Data
Slowdown
, CNNMONEY, Mar. 1, 2012,
http://money.cnn.com/2012/03/01/technology/att_data_slowdown/index.htm?hpt=hp_t2 (visited Dec. 21, 2012)
("Smartphone Data Slowdown"); Trefis Team, Crowded Pipes Prompt Verizon To Nix Unlimited Data Plans,
FORBES, May 31, 2011, http://www.forbes.com/sites/greatspeculations/2011/05/31/crowded-pipes-prompt-verizon-
to-nix-unlimited-data-plans/ (visited Dec. 17, 2012).
936 AT&T, AT&T Gives Customers More Choice With New Shared Wireless Data Plans (press release), July 18,
2012; Brenda Raney, Verizon Wireless Executive Director of Corporate Communications, Updated Statement on
Data Plans
, Verizon Wireless News Center Blog, May 17, 2012,
http://news.verizonwireless.com/news/2012/05/data-pricing.html (visited Nov. 13, 2012).
937 John Fletcher, Bring on the Expensive Dumb Pipes, SNL KAGAN, Aug. 14, 2012.
938 William Densmore and Michael Weaver, U.S. and Canada Second-Quarter 2012 Wireless Metrics: Data
Strategies Diverge
, FitchRatings, Sept. 27, 2012, at 2.
939 WGAW Comments at 12.
940 Public Knowledge Aug. 9, 2012 Ex Parte at 1.
941 Public Knowledge UBP White Paper at 24-25.
942 Ian Olgeirson and Mari Rondeli, HSD Subs Tilt Toward Premium Tiers; Usage Constraints Gain Broader
Foothold
, SNL KAGAN, July 19, 2012.
943 Craig Moffett and Carlos Kirjner, Weekend Media Blast: What if Television HAD to Be Delivered Over the
Internet?
, BERNSTEIN RESEARCH, Aug. 24, 2012, at 4. See also Ian Olgeirson and Deana Myers, Service Providers
Lessen OTT Substitution, but Challenges Persist
, SNL KAGAN, Sept. 11, 2012. SNL Kagan modeled different
scenarios to illustrate the potential impact of usage fees on the economic benefits of OVD substitution. SNL
(continued....)
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operators, on the other hand, contend that usage-based pricing allocates costs among customers more
fairly, helps to promote network growth, and enables access to online video.944
c.

Recent Entry and Exit

263.
The OVD marketplace continues to expand and change. Entrants often use new
technologies and experiment with a variety of business models.945 OVDs are constantly entering and
exiting the market and changing the services and programming they offer, in response to viewer demand
as well as external factors, such as the ability to access content and reach consumers.946
264.
Entry. Since the last report, Barnes & Noble joined Amazon and other retailers by
offering a tablet for viewing OVD; Aereo began packaging broadcast signals for online viewing; and
other companies have announced plans to offer cable networks on an a la carte basis.947
265.
In October 2012 Barnes & Noble launched the NOOK Video service to enable customers
to stream and download movies and television programs for rental or purchase.948 Nook Video premiered
concurrently with the Nook HD and Nook HD+ tablets. It distributes movies and television programs
from Warner Brothers, Disney, Sony Pictures, Starz, HBO, and Viacom. Its service is cloud-based, and
integrates consumers' compatible physical DVD and Blu-ray purchases and digital video collections
across devices through UltraViolet. Both Target and Wal-Mart, which have ceased selling Amazon's
Kindle, market the Nook HD tablets.949
266.
In February 2012, Aereo, an Internet television service backed by Barry Diller and
IAC/InterActiveCorp, launched a service in New York City that streams live and recorded broadcast
television to smartphones, tablets, and Internet-connected TVs.950 Aereo picks up over-the-air signals
(Continued from previous page)
Kagan's model included variables such as the mix of standard definition and high definition programming, the per
GB overage fee ($.25 to $1.00), and the usage caps (GB allocated per month).
944 See NCTA, http://www.ncta.com/sites/prod/files/Tiered-Pricing-a-winning-model-for-consumers.pdf.
945 Comcast Comments at 3; Google Reply at 1.
946 Public Knowledge Comments at 4.
947 Also, since the last Report, DIRECTV, Dish, and Verizon began offering OVD services to non-subscribers, as
described above. See supra, 239-40.
948 Barnes & Noble, Inc., NOOK Video to Premiere This Fall (press release), Sept. 25, 2012; Barnes & Noble, Inc.,
Barnes & Noble Announces Expanded NOOK Video Content to Come from NBCUniversal and 29th Century Fox
Home Entertainment
(press release), Oct. 30, 2012.
949 Stephanie Clifford and Julie Bosman, Wal-Mart is Deleting the Kindle from Stores, N.Y TIMES, Sept. 20, 1012,
http://www.nytimes.com/2012/09/21/business/wal-mart-stores-dropping-amazon-kindle-tablets-and-e-readers.html
(visited April 19, 2013).
950 Jeff John Roberts, Broadcasters Sue to Stop $12 Streaming Service Aereo, GIGAOM, March 2, 2012,
http://paidcontent.org/2012/03/02/419-broadcasters-sue-to-stop-12-streaming-service-aereo/ (visited Nov. 16, 2012).
See also Comcast Comments at 30. Aereo launched its service in Boston on May 15, 2013, and plans to begin
service in Atlanta on June 17, 2013. See Aereo, Aereo Sets Launch Date for Boston (press release), April 23, 2013;
Aereo, Aereo Sets Launch Date for Atlanta (press release), May 14, 2013. It previously announced its intent to
expand to a total of 22 cities in 2013. See Aereo, Aereo Announces Expansion Plans for 22 New U.S. Cities (press
release), Jan. 8, 2013.
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using a collection of dime-sized antennas. It charges viewers $12 per month.951 Some commenters argue,
however, that Aereo appropriates content without the consent of the content owner.952
267.
Reports indicate that Intel is interested in entering the market.953 It proposes to offer a
web-connected set-top box capable of streaming TV and video-on-demand programming that would let
consumers view programming on any Internet-connected device.954 Intel's plans are in part dependent on
whether the company can gain the programming rights needed for the proposed service.955
268.
Exit. Since the last report, no major OVDs have exited. As described above, some
OVDs have curtailed services. For example, Apple no longer rents television programs, and Microsoft
ceased providing Zune service.
3.

OVD Conduct

269.
In addition to industry structure, a second key element of our analysis of OVD
competition is an examination of the conduct of industry participants in particular, the business models

951 Sarah Barry James, A More Broadcaster-Friendly Boxee, SNL KAGAN, Oct. 18, 2012. In May 2013, Aereo
announced a new pricing structure that starts with a base plan of $8 a month, giving consumers access to its cloud-
based antenna/DVR technology and 20 hours of DVR storage. For an additional $4 a month, consumers can receive
60 hours of DVR storage. See Aereo, Aereo Unveils a New, Simpler Pricing Structure for Consumers (press
release), May 13, 2013.
952 Comcast Reply at 7. The ABC Affiliates contend that local broadcast television stations would be unable to
produce their current quality and quantity of local news without securing fees from competitive OVDs that
retransmit and resell their signals. ABC Affiliates Reply at 10-11. In March 2012, ABC and WNET, both broadcast
television station owners in New York City, as well as other content and broadcast operators sought an injunction
barring Aereo from transmitting broadcast television programs to its subscribers while programs were airing on
broadcast television. Complaint, Am. Broad. Cos., Inc. v. Aereo, Inc., No. 12 Civ. 1540 (filed Mar. 1, 2012,
S.D.N.Y.); Complaint, WNET v. Aereo, Inc., No. 12 Civ. 1543 (filed Mar. 1, 2012, S.D.N.Y.). On July 11, 2012, the
United States District Court for the Southern District of New York denied the plaintiffs' motion for a preliminary
injunction. Am. Broad Cos. v. Aereo, Inc., 874 F. Supp. 2d 373 (S.D.N.Y. 2012). The plaintiffs appealed to the
Second Circuit. On April 1, 2013, the Second Circuit upheld the district court's decision. WNET v. Aereo, Inc., 712
F.3d 676 (2d Cir. 2013). On April 15, 2013, the plaintiffs responded by asking the Second Circuit for a rehearing en
banc
, and on July 16, 2013 the Second Circuit denied the plaintiffs' request for rehearing. WNET v Aereo, Inc., Nos.
12-2786, 12-2807, 2013 WL 3657978 (2nd Cir. July 16, 2013). In contrast, in December 2012, Aereo reached an
agreement with Bloomberg Television for carriage of its cable network, with Aereo paying Bloomberg TV for its
program content. See Shalini Ramachandran, Aereo Adds First Cable Channel: Bloomberg TV, WALL ST. J., Dec.
13, 2012. In California, a company called Aereokiller was providing similar service as Aereo. Once again, the
content owners, including FOX and NBCUniversal, among others, filed a complaint in the federal district court of
California. Complaint, Fox Television Stations, Inc. v. Aereokiller, No. CV-12-6921 (filed Aug. 10, 2012, C.D.
Cal); Complaint, NBCUniversal Media v. Aereokiller, No. CV-12-6950 (filed Aug. 13, 2012, C.D. Cal.). The
district court granted the content providers a preliminary injunction. Fox Television Stations, Inc. v. Barrydriller
Content Sys., PLC
, No. CV 12-6921-GW JCX, 2012 WL 674498 (C.D. Cal. Dec. 27, 2012). Aereokiller appealed
the decision to the Ninth Circuit and the case is still pending appeal. See Shalini Ramachandran, New Threat to
Aereo TV
, WALL ST. J., Apr. 8, 2013,
http://online.wsj.com/article/SB1000142412788732382030457841062264628176.html (visited July 15, 2013).
953 WGAW Comments at 16; Comcast Comments at 31. See also Andy Fixmer and Ian King, Intel Seeking Media
Rights to Start Online Pay-TV System
, BLOOMBERG, March 13, 2012, http://www.bloomberg.com/news/2012-03-
13/intel-said-to-seek-programming-rights-to-start-online-television-service.html (visited Oct. 31, 2012) ("Intel Pay-
TV").
954 Intel Pay-TV.
955 Id.; WGAW Comments at 16-17.
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and competitive strategies of these entities. The OVD industry is evolving, and no single business
strategy has emerged as the dominant model.956 In this section, we provide an overview of the current
business models, and competitive strategies of a sample of OVDs, comparing prices and non-price
product features of select OVDs. We then discuss OVD competition generally in terms of non-price
rivalry.
a.

Business Models and Competitive Strategies of Select OVDs

270.
Unlike the broadcasting or MVPD industries, the OVD industry does not have a single
revenue model. Also, unlike MVPDs, which generally compete to be the sole provider for a consumer,
multiple OVDs are often used or subscribed to by a single customer based on the content offered and the
prices charged. Depending on the OVD, consumers access programming in several ways, including: (1)
for free, usually with advertising; (2) through a subscription service, with or without advertising; (3)
through an on-demand rental service, similar to MVPDs' VOD services; or (4) via "electronic sell-
through" ("EST") content downloading. Several OVDs offer multiple options.957
271.
Advertiser-Supported. Hulu is the major player among advertiser-supported OVDs. Its
major competitors are Sony's Crackle and CBS's TV.com. The free advertiser-supported Hulu and
TV.com are only available on PCs. Crackle is available on several devices. Hulu generally allows access
to the five most recent episodes of in-season television programs, with episodes appearing one day after
the initial airing.958 Portal sites from ABC, CBS, FOX, and NBC as well as Viacom's cable networks
(e.g. Comedy Central and MTV) are also advertiser supported. CBS makes almost 90 percent of its prime
time lineup available for streaming.959

Table 27: Advertiser-Supported OVD Services

960

Hulu

Crackle

TV.com

No. of TV Shows
1,575
100
115
No. of TV Episodes961
21,886
N/A
N/A
No. of Movies
1,750
250
0
Advertisements
yes
yes
yes
HD Service
no
no
no
Device Brands
PC only
11
PC only
272.
Subscription. We categorize the subscription services into two types: general and sports.
The major, subscription-based, general OVDs are Netflix, Amazon, and Hulu Plus.962 Among these
subscription services, only Hulu Plus includes advertising. Hulu Plus receives programming from more

956 See 14th Report, 27 FCC Rcd at 8738-39, 286-89.
957 Comcast states that OVDs continue to leverage innovative technologies and business models to offer consumers
new ways to access their favorite programs. Comcast Reply at 3.
958 News Corp., however, only makes episodes of FOX networks programs available on Hulu eight days after the
initial airing.
959 George Winslow, A Divide That's Not as Deep as You Think, BROADCASTING & CABLE, Sept. 17, 2012.
960 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 10.
961 The number of TV episodes equals the total number of television shows multiplied by the number of episodes per
television series.
962 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 6. See also Netflix 3Q 2012 Earnings
Statement
, Oct. 23, 2012, at 6.
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than 330 content partners.963 When it entered the streaming market, Hulu Plus's vertical integration with
News Corp., NBCUniversal, and Walt Disney Company gave it exclusive access to television programs
the day after they air. Netflix pays an increasing amount to studios and networks each year to build its
library.964 Amazon, the last major entrant to the OVD subscription market, has an e-commerce business
that can subsidize its OVD business. In addition, Amazon had a large cloud-computing infrastructure to
facilitate its online streaming service. It signed several content licensing deals in 2012.965

963 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 7.
964 Id. See also Netflix 2Q 2012 Earnings Statement, July 24, 2012, at 3.
965 These partnerships include Viacom (February 2012 for two years), Discovery (March 2012 for two years),
Warner Brothers (July 2012 for one year), and EPIX (September 2012 for three years). Deana Myers, Amazon
Making Its Move in SVOD Battle
, SNL KAGAN, Sept. 27, 2012.
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Table 28: Subscription OVD Services: General

966

Netflix

Hulu Plus

Amazon Prime

Instant Video

Price per Month
$7.99
$7.99
N/A967
Price Per Year
$95.88
$95.88
$79.00968
No. of TV Seasons969
4,083
N/A
1,411
No. of TV Episodes
N/A
48,588
N/A
No. of Movies
10,493
2,646
1,602
Advertisements
No
Yes
No
HD Service
Yes (1080p)
Yes (720p)
Yes (720p)
TV Content
Past Seasons
Current Season
Past Seasons
Window970
(Available Day After
Initial Airing) and Past
Seasons
No. of Device Brands
30
18
11
on Which OVD Can
Be Accessed
273.
Several major professional sports leagues also offer subscription OVD services for live-
viewing of full-length games outside of a game's local television market. The games are available for
viewing on several devices at various prices. MLB.TV offers a regular service for $19.99 per month
($84.99 per baseball season), allowing PC-access to all regular-season games. For $24.99 per month
($99.00 per season), viewers can watch games on a variety of devices. For NHL games, subscribers can
pay $9.99 a day or $169 to watch games throughout the hockey season. For NBA games, subscribers can
pay $39.99 per season to watch games only on mobile devices, or $29.95 per month ($169 per season) to
watch games on a variety of devices, including mobile devices, PCs, and Internet-enabled television sets.
MLS Live offers access to soccer games for $14.99 per month ($59.99 per season) on mobile devices,
PCs, and Roku boxes.

966 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 7. Perkin di Grazia, State of Online
Subscription Video Services
, SNL KAGAN, April 13, 2012.
967 In November 2012, Amazon began to offer Amazon Prime for $7.99 on a trial basis. Sarah Perez, Amazon
Offers $7.99 Monthly Subscription to Amazon Prime [Update: Amazon Confirms It's Only a Test], TECHCRUNCH
,
Nov. 6, 2012, http://techcrunch.com/2012/11/06/amazon-offers-7-99-monthly-subscription-to-amazon-prime/
(visited Dec. 3, 2012). Currently, Amazon only offers a yearly subscription for Amazon Prime.
968 Amazon Prime Instant Video service is included with the Amazon Prime yearly membership. Amazon. Com,
Amazon Prime, http://www.amazon.com/dp/B00DBYBNEE?_encoding=UTF8&ref_=footer_prime (visited July 15,
2013). Student memberships cost $39 per year, or $3.25 per month. Amazon.com, Help: Payment, Pricing &
Promotions: Membership Programs: Amazon Student
,
http://www.amazon.com/gp/help/customer/display.html?nodeId=200500380 (visited Nov. 12, 2012).
969 The number of TV seasons equals the total number of television shows multiplied by the number of seasons per
television series offered.
970 Excludes OVD original series.
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Table 29: Subscription OVD Services: Sports

971

MLB.TV

NHL

NBA League Pass

MLS Live

GameCenterLive

Price
$19.99/month -
$9.99/day or
$39.99/season
$14.99/month or
$24.99/month or
$169/season
(mobile only);
$59.99/season
$84.99/year -
$29.95/month or
$99.99/year
$169/season (TV,
PC, mobile)
Content
Out of market
Out of market
Out of market
Out of market
games
games
games
games
HD Service
Yes
No
No
Yes
No. of Device
Brands on Which
9
10
4
4
OVD Can Be
Accessed
274.
Rental. Rental, or online VOD services, allow consumers to stream or download content
from a central source to a PC, set-top box, or other device. Viewers can then view the content as often as
they wish within a defined period, for instance 24 hours. The most recent releases are generally the most
popular. People tend to watch less content on a rental basis than on a subscription basis, given the
requirement to pay for each title. Prices for rentals are generally consistent among OVDs, ranging from
free for promotional videos or older titles to $6.00 for new releases. Services therefore generally compete
on non-price factors, such as the library size and the number of devices that can be used to view the
programming. As of 2012, no major OVD offered television programs for rent but instead focused
exclusively on movies.972

971 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 11.
972 In August 2011, Apple suspended rentals of television episodes. Brian Stelter, Apple Ends Its TV Episode Rental
Service
, N.Y. TIMES, Aug. 26, 2011, http://www.nytimes.com/2011/08/27/technology/apple-ends-its-tv-episode-
rental-service.html (visited Nov. 8, 2012).
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Table 30: Rental OVD Services

973

Amazon iTunes

Vudu

Cinema

YouTube

PlayStation

Xbox

Instant

Now

Network

Live

Video

Market-

place
Price per
$0.99-
$1.99-
$2.00-
$2.99-
Free-$3.99
$0.99-
$3.00-
Movie
$3.99
$4.99
$5.99
$3.99
$5.99
$6.00
Purchase
No. of
42,375
15,00
13,556
4,414
9,000
4,096
7,692
Movies
0
HD
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Service
(720p)
(720p)
(1080p)
(720p)
(720p)
(1080p)
(1080p)
No. of
Device
Brands
11
1
22
12
10
1
1
on Which
OVD
Can Be
Accessed
275.
Electronic Sell-Through. Electronic sell through ("EST") is a digital distribution model
for content owners to generate revenue from downloads of content over the Internet that mimics the
physical sale model of a traditional retail store.974 Consumers pay a one-time fee to download a
television show, movie, or other media to be stored locally on a hard drive or remotely via a cloud storage
service. 975 With the exception of YouTube, the main players in the OVD rental market also are EST
distributors. 976 Generally EST movie library sizes are comparable to rental library sizes. Some services,
including Amazon and CinemaNow, offer more selections for sale than for rent. The prices of movies
range from $4.99 to $20.00 and the prices for television programs range from $0.99 to $3.99.977

973 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 8. See also supra, Sec. III.C.2.
974 Anytime Pte Ltd, Media Centre: Glossary of Terms,
http://www.anytimeondemand.com/glossary_of_terms.html#electronic (visited Nov. 8, 2012).
975 Home Media Magazine, Digital Glossary, http://www.homemediamagazine.com/electronic-delivery/digital-
glossary (visited Nov. 27, 2012) ("Digital Glossary"). When discussing EST, this particular Report focuses on
situations where video content "is made available to consumers on a download-to-own basis, as opposed to . . .
where content is `rented' for a specific period of time." Anytime Pte Ltd, Media Centre: Glossary of Terms,
http://www.anytimeondemand.com/glossary_of_terms.html#electronic (visited Nov. 27, 2012).
976 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 9.
977 Id.
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Table 31: OVD EST Services

978

Amazon iTunes

Vudu

CinemaNow

PlayStation

Xbox

Instant

Network

Live

Video

Market-

place
Price per
$4.99-
$4.99-
$9.99-
$9.95-$19.99
$9.99-
$17.00-
Movie
$14.99
$19.99
$14.99
$17.99
$20.00
Purchase
Price Per
$0.99-
$1.99-
$1.99-
$1.99
$1.99-
$2.00-
TV
$2.99
$2.99
$3.99
$2.99
$3.00
Purchase
No. of TV
8,766
N/A
1,448
293*
262
2,446*
Seasons
No of TV
N/A
90,000
N/A
N/A
N/A
N/A
Episodes
No. of
46,547
15,000
13,556
7,010
5,196
7,692
Movies
HD
Yes
Yes
Yes
Yes (720p)
Yes (1080p)
Yes
Service
(720p)
(720p)
(1080p)
(1080p)
No. of
Device
Brands on
11
1
22
12
1
1
Which
OVD Can
Be
Accessed
*CinemaNow and Xbox only give data on the number of shows, not individual season or episodes.
b.

Non-Price Rivalry

276.
OVDs compete with, and differentiate themselves from one another based on several
non-price factors. For consumers, key points of non-price rivalry include picture quality, the extent of the
content library and release dates of content, availability of original programming, the ability to discover
available content, and the ability to watch OVDs on a variety of devices. For advertisers, key aspects of
non-price rivalry include the ability to measure viewership, the size of OVDs' audiences, and the ability
to target audiences with relevant advertising.
277.
Consumers. OVDs vary in their picture quality. For example, none of the major
advertiser-supported OVDs offers HD service. Among subscription OVDs, Netflix offers HD service in
1080p, while Hulu Plus and Amazon Prime offer it in 720p. Most major EST and rental OVD services
offer HD service, several in 1080p.
278.
The on-demand libraries of Netflix, Amazon, Hulu, and other OVDs that license content
from studios and networks offer consumers a range of choices from the latest hits to older movies and
television programs.979 In February 2012, Netflix's agreement with Starz ended980 and, in September

978 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 9.
979 Netflix Comments at 5. Comcast Reply at 3. See also supra, Tables 27 & 28.
980 Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution, but Challenges Persist, SNL
KAGAN, Sept. 11, 2012. Netflix states that the movies from EPIX only represented 5 percent of its viewing, and the
(continued....)
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2012, Netflix lost exclusive OVD access to EPIX when EPIX signed a licensing agreement with Amazon
Prime. Netflix reports that two thirds of its viewing hours consists of television series, with the other
third of its viewing hours consisting of movies.981 In December 2012, Netflix and the Walt Disney
Company announced a new multi-year agreement making Netflix the exclusive U.S. subscription
television service for first-run live-action and animated movies from the Walt Disney Studios.982 Netflix
is the exclusive distributor of such movies for several months after they are available on DVD.983 This
represents the first time that a major studio has selected an OVD over a premium television network for
this distribution window.984 While several subscription OVDs offer access to an increasing library of
titles, few deals with studios are exclusive, making product differentiation a challenge.985
279.
A number of OVDs are investing in original programming to distinguish themselves from
their competition.986 Analysts suggest this strategy is a response to the increasing scarcity of exclusive
content and an attempt to build OVDs' brands, similar to cable networks' strategies.987 Comcast contends
that OVDs' distribution of original programming demonstrates that content owners and producers see
OVDs as a new way of reaching consumers,988 and Verizon states that such original programming offers
true alternatives to traditional cable networks.989
280.
In particular, in 2013 Netflix introduced its original series House of Cards, and plans to
develop additional original series.990 Netflix says that it tries to build audiences for its programs over
time and is less concerned with a program's immediate success.991 In the summer of 2012, Hulu
(Continued from previous page)
two parties could not reach a contractual agreement providing for exclusivity that made sense to both parties.
Netflix 3Q 2012 Earnings Statement, Oct. 23, 2012, at 3.
981 Netflix 3Q 2012 Earnings Statement, Oct. 23, 2012, at 2-3. See also Netflix, Inc. UBS Global Media and
Communications Conference
, Corrected Transcript, FACTSET CALLSTREET, LLC, Dec. 5, 2012, at 21-22.
982 Netflix Inc., Netflix and the Walt Disney Studios Announce Multi-Year Premium Pay TV Window Agreement in
the United States
(press release), Dec. 4, 2012. The new releases will be available beginning 2016, when Disney's
agreement with Starz ends. In addition, Netflix can stream Disney's library titles immediately, and direct-to-video
new releases starting in 2013.
983 Brooks Barnes, Netflix Reaches Deal to Show New Disney Films in 2016, N.Y. TIMES, Dec. 4, 2012,
http://mediadecoder.blogs.nytimes.com/2012/12/04/netflix-bests-starz-in-bid-for-disney-movies/?ref=media (visited
Dec. 5, 2012).
984 Ben Fritz and Joe Flint, Netflix Buys Exclusive Rights to Disney Movies, L.A. TIMES, Dec. 4, 2012,
http://www.latimes.com/entertainment/envelope/cotown/la-fi-ct-disney-netflix-20121205,0,1100223,full.story
(visited Dec. 5, 2012).
985 Perkin di Grazia, Amazon Needs More than Content Deals to Compete, SNL KAGAN, Feb. 17, 2012.
986 Id. See also Netflix Comments at 5; Comcast Comments at 27, 29; Verizon Comments at 24-25.
987 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 4.
988 Comcast Reply at 7.
989 Verizon Comments at 15, 24-25.
990 Netflix Comments at 5. Nancy Haas, And the Award for the Next HBO Goes to . . . , GQ, February 2013,
http://www.gq.com/entertainment/movies-and-tv/2013/netflix-founder-reed-hastings-house-of-cards-arrested-
development?currentPage=1 (visited April 19, 2013).
991 Netflix, Inc. UBS Global Media and Communications Conference, Corrected Transcript, FACTSET CALLSTREET,
LLC, Dec. 5, 2012, at 24-27, 29.
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presented ten original series commissioned from independent writers, directors, and producers.992 It also
licensed 13 television programs that will appear exclusively on Hulu.993 While the original series may not
draw the same size audiences as series from broadcast and cable networks, Hulu says it is seeking original
shows that appeal to specifically targeted viewers rather than broad audiences.994 Likewise, YouTube has
partnered with entities such as the London Symphony Orchestra and other institutions to produce unique
content.995 Similarly, Sony's Crackle offered 43 original video series as of November 2012.996 In May
2012, Amazon also announced its plans to develop original video content for distribution through its
Instant Video service.997
281.
The term "discovery" refers to an OVD's ability to identify and highlight content that
might be of interest to a consumer in a convenient manner.998 Ericsson, a provider of communications
technology and services, reports that consumers are substituting recommendation-based navigation for
search engines and program guides.999 OVDs' discovery screens vary.1000 For example, Netflix's
recommendation engine, search capabilities, and social media features aim to match subscribers with
content choices that a specific subscriber might enjoy.1001 Netflix's suggestions do not distinguish among
the preferences of multiple users within an individual household. Suggestions include a significant
number of options, up to 18 on a single screen and 72 across multiple screens. Hulu has a "featured" and

992 Andy Forsesell, Senior Vice President, Content, Hulu, Hulu Blog, Summertime . . . and the Viewing is Easy, May
20, 2012, http://blog.hulu.com/2012/05/20/summertime%e2%80%a6and-the-viewing-is-easy/ (visited Nov. 1,
2012).
993 Amy Chozick and Brian Stelter, An Online TV Site Grows Up, N.Y. TIMES, April 16, 2012,
http://www.nytimes.com/2012/04/17/business/media/hulu-the-online-tv-site-adds-original-
programming.html?pagewanted=print (visited Nov. 1, 2012). See also Comcast Comments at 27.
994 Amy Chozick and Brian Stelter, An Online TV Site Grows Up, N.Y. TIMES, April 16, 2012,
http://www.nytimes.com/2012/04/17/business/media/hulu-the-online-tv-site-adds-original-
programming.html?pagewanted=print (visited Nov. 1, 2012). A Hulu executive states that developing original
series enables Hulu to minimize the risk of cannibalizing viewers from its own partners. Id.
995 Google Reply at 3.
996 Sony, Crackle: Shows: TV & Originals, http://www.crackle.com/c/shows (visited Nov. 12, 2012) (including
Comedians in Cars Getting Coffee starring Jerry Seinfeld).
997 Dan Graziano, Amazon to Develop Original Programming, BGR MEDIA, LLC, May 2, 2012,
http://bgr.com/2012/05/02/amazon-studios/ (visited July 15, 2013).
998 Chuck Parker, Why Discovery is So Hard to Implement; Enabling Technology, THE ONLINE REPORTER, May 4,
2012.
999 Ericsson Consumerlab, TV and Video: An Analysis of Evolving Consumer Spending Habits, August 2012, at 9
("Ericsson 2012 TV and Video White Paper"). A search involves a user looking for something specific and trying
to find it. A recommendation involves a service suggesting a movie or television program based on genres, actors,
or other features of content a user has viewed in the past. Chuck Parker, Why Discovery is So Hard to Implement;
Enabling Technology
, THE ONLINE REPORTER, May 4, 2012. For example, for each movie or television program,
Amazon's site notes "Customers Who Viewed This Item Also Viewed . . ." and suggests a list of similar programs.
Amazon.com, Amazon Instant Video: Mad Men, http://www.amazon.com/Dark-
Shadows/dp/B008359JXI/ref=sr_1_1?ie=UTF8&qid=1352906710&sr=8-1&keywords=mad+men (visited Nov. 14,
2012).
1000 Chuck Parker, Why Discovery is So Hard to Implement; Enabling Technology, THE ONLINE REPORTER, May 4,
2012.
1001 Netflix Comments at 3-4.
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"most popular" category that is not user or household specific. Hulu presents nine choices on a screen,
but requires users to scroll through hundreds of options. Amazon and Vudu's guides vary depending on
whether a user is accessing content on an iPad, in which case discovery is limited, or a Sony Play Station
3 console, where popular content is highlighted.
282.
Some analysts contend that discovering content online is generally difficult. They
suggest that consumers must already know what they want to watch, and often are not introduced to
another program or movie as they are when watching cable or broadcast television.1002 In this regard, one
industry observer suggests that for discovery to improve, OVDs will need to (1) simplify the user
interface, and (2) make algorithms more sophisticated in order to incorporate nuances of movies and
programs people enjoy watching.1003 Netflix and Comcast contend that OVDs and device manufacturers
are driving MVPDs to improve television user interfaces, including programming guides.1004
283.
The ability to view content on multiple devices is another key form of non-price rivalry.
Consumers increasingly want to view video programming when they want, where they want, and on a
variety of devices.1005 SNL Kagan estimates that, as of 2012, more than 25 million U.S. households have
at least one Internet-connected video device, such as a game console, set-top box, television set, or Blu-
ray player.1006 SNL Kagan contends that the pervasiveness of connected devices eliminates a barrier for
OVD market entry and represents new opportunities for OVD expansion.1007
284.
Netflix reports that consumers can access its service on more than 900 individual
Internet-connected devices.1008 Verizon comments that OVDs such as Netflix and Amazon are available
through apps on television sets and Blu-ray/DVD players that deliver high quality video over the Internet
to a consumer's television screen.1009 YouTube users may view paid content from any smartphone, tablet,

1002 Laura Martin and Dan Medina, The Future of TV: The Invisible Hand, Needham & Company, LLC, June 22,
2012, at 15. Psychological studies indicate that people are more likely to make a purchase when offered a limited
array of six choices rather than a more extensive array of 24 or 30 choices. Moreover, participants actually reported
greater subsequent satisfaction with their selections when their original set of options had been limited. Sheena S.
Iyengar and Mark R. Lepper, When Choice is Demotivating: Can One Desire Too Much of a Good Thing?, 79 J.
PERSONALITY & SOC. PSYCHOL. 995 (2000).
1003 Chuck Parker, Why Discovery is So Hard to Implement; Enabling Technology, THE ONLINE REPORTER, May 4,
2012.
1004 Netflix Comments at 1-2; Comcast Reply at 4. In a survey conducted by DigitalSmiths, a manufacturer of video
search and navigation technology, 62 percent of respondents said that they would like to find television programs
and movies, either on an OVD or MVPD, based on their mood. DigitalSmiths, Q4 2012 Video Discovery Trends
Report: Consumer Behavior Across Pay-TV, VOD, OTT and Next Gen Features
, October 2012, at 11,
http://www.digitalsmiths.com/digitalsmiths-q4-2012-video-discovery-trends-report-consumer-behavior-across-pay-
tv-vod-ott-and-next-gen-features/ (visited Nov. 14, 2012) ("DigitalSmiths Q4 2012 Trends Report"). See also
DigitalSmiths, About Us, http://www.digitalsmiths.com/about/ (visited Nov. 18, 2012).
1005 Comcast Reply at 3-4 (noting that OVDs are working to make their content available to the widest audience
possible on as many devices as possible). Commenters observe that OVDs and device manufacturers are spurring
MVPDs to make more programming available to consumers in more ways and over more devices. Comcast Reply
at 4; Netflix Comments at 1-2.
1006 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 4.
1007 Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution, but Challenges Persist, SNL
KAGAN, Sept. 11, 2012. See also Table 31 above listing examples of number of devices.
1008 Netflix Comments at 3. See also Tables 26-29, estimating the number of companies, i.e. brands, that
manufacture these devices.
1009 Verizon Comments at 5.
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or Internet-connected television set, as well as from their personal computers.1010 Hulu Plus users are able
to stream content on devices, including smart TVs, Apple's iPads, iPhones and iPod Touch, Microsoft's
Xbox 360, Amazon's Kindle Fire, Barnes & Noble's Nook Tablet, multiple Android tablets, and Wii
game consoles.1011
285.
Movies purchased from one OVD, however, are not necessarily viewable on another
OVD's devices. For example, movies purchased on Apple's iTunes will not play on non-Apple devices,
and movies purchased on Amazon or CinemaNow will not play on Apple devices.1012 YouTube's movie
rentals are only available on PCs, Google TV, and Android devices.1013 On the other hand, Apple's
vertical integration of its iTunes service, its iOS operating system, and Apple devices enable users to
seamlessly share videos with iPhones, iPads, and Apple TVs.1014
286.
To address the lack of interoperability, in 2010, OVDs, studios, retailers, and other
entities formed the Digital Entertainment Content Ecosystem ("DECE") to develop a cloud-based storage
system, called UltraViolet, to enable consumers to watch movies and television programs across multiple
devices.1015 Warner Brothers' Flixster, and Sony Picture's and Universal's dedicated UltraViolet websites
allow UltraViolet users to access titles on a range of Android/iOS devices, as well as PCs and Macs.1016
Moreover, the "disc to digital" features on Samsung Blu-ray devices enable consumers to add existing
DVDs and Blu-ray discs from participating studios to their UltraViolet digital libraries, making them
accessible via download and streaming on a wide range of devices.1017
287.
Advertisers. Some OVDs rely on advertising revenues. Online video ads enable
advertisers to gather information and details about the extent to which customers interact with their
brands that are not always readily available with traditional media.1018 Because online advertising and
traditional television advertising use different ratings metrics, calculating an advertising campaign's total

1010 Google Reply at 2.
1011 Hulu, Hulu Plus: Devices, http://www.hulu.com/plus/devices (visited Nov. 1, 2012); Rajiv Makhijani and
Zachary Pinter, Software Developers, Hulu, Hulu Plus Arrives on Seven Android Tablets. With a Brand New Style,
Hulu Blog, March 29, 2012, http://blog.hulu.com/2012/03/29/hulu-plus-arrives-on-seven-android-tablets-with-a-
brand-new-style-2/ (visited Nov. 1, 2012); Dallas Mahrt, Senior Software Developer, Hulu, Hulu Plus Arrives on
Apple TV
, Hulu Blog, July 31, 2012, http://blog.hulu.com/2012/07/31/hulu-plus-arrives-on-apple-tv/ (visited Nov. 1,
2012). See also Comcast Comments at 27.
1012 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 9.
1013 Id. at 8.
1014 Id. at 9.
1015 Digital Entertainment Content Ecosystem LLC, Digital Entertainment Content Ecosystem Unveils UltraViolet
Brand
(press release), July 20, 2010.
1016 Digital Entertainment Content Ecosystem LLC, UltraViolet Attracts More Than 750,000 Households in First
Three Months
(press release), Jan. 10, 2012.
1017 Disney is the only major studio not participating in UltraViolet. Both Disney and Apple have alternative
services, KeyChest and iCloud, respectively. Deana Myers, Subscription Dominates Online Video Market, SNL
KAGAN, Nov. 30, 2011. See also Wade Holden, Retail Disc Business Drops 10% in 2011, SNL KAGAN, March 29,
2011; Sarah Barry James, UPDATE: Disney on UltraViolet: "We're Taking a Wait-and-See Approach", SNL
KAGAN, Feb. 7, 2012.
1018 See, e.g., Nicole Rawski, How to Really Measure Engagement, IMEDIA CONNECTION, June 15, 2012,
http://www.imediaconnection.com/content/32065.asp (visited Nov. 19, 2012).
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reach and frequency across different platforms is difficult.1019 The key television ratings metric for
advertisers is the "C3 rating," a measurement of network television commercials watched live and on
DVRs within three days of their original airing.1020 For online viewing to be included in a program's C3
television viewing, a network must include the same set of commercials in the program online that it
includes on air.1021
288.
Debate remains whether advertising viewed on OVD sites should be measured in the
same manner as for that aired on traditional television, particularly if OVDs seek a larger share of total
advertising budgets.1022 One advertising executive suggests that a metric that includes both television and
online video viewing would be a major factor in spurring the growth of online video since networks and
studios may be more willing to make programming available online if they can market the value of online
audiences to advertisers.1023
289.
As discussed above, television advertising prices are based on the cost of delivering
1,000 impressions (cost per thousand, or CPM) nationally, and cost per point locally.1024 While online
advertising also uses pricing based on CPM, prices also may be based on an advertisement's
performance.1025 With this pricing model, advertisers pay based on a set of agreed upon performance
criteria, such as a percentage of online revenues or delivery of new sales leads.1026 The Interactive
Advertising Bureau ("IAB") reports that performance-based pricing has grown increasingly popular,
representing 62 percent of Internet advertising revenue in 2010, 64 percent in 2011, and 67 percent during
the first six months of 2012.1027 CPM-based pricing declined from 33 percent of Internet advertising
revenues in 2010 to 32 percent in 2011 and 31 percent during the first half of 2012.1028
290.
Online video advertisements, which offer a combination of sight, sound, and motion, earn
higher CPMs than other forms of Internet display advertising.1029 The common industry practice is for
sellers of online advertising to charge from the moment their video advertisement starts to play, even if a

1019 Jeanine Poggi, Nielsen Marries TV, Online Ratings, ADVERTISING AGE, Oct. 1, 2012,
http://adage.com/article/media/nielsen-marries-tv-online-ratings/237516/ (visited Nov. 7, 2012).
1020 Claire Atkinson, Commercial-Ratings White Paper: How Commercial Ratings Changed the $70B TV Market,
ADVERTISING AGE, Oct. 13, 2008, at 2 ("Ad Age Commercial Ratings White Paper"). See also TVB, Local
Broadcast TV Markets Surpass National Time-Shifted Viewing
(press release), Nov. 26, 2012.
1021 Paige Albiniak, Nielsen Now Counting All Runs, BROADCASTING & CABLE, April 25, 2011,
http://www.broadcastingcable.com/article/467188-Nielsen_Now_Counting_All_Runs.php (visited Nov. 7, 2012).
1022 The Economics of Online Video 2011 (White Paper), ADVERTISING AGE, Feb. 14, 2011, at 13 ("AD AGE 2011
White Paper").
1023 AD AGE 2011 White Paper at 17.
1024 See also supra, Sec. III.B.2.a.
1025 Online advertisers may also use a hybrid of impression- and performance-based pricing models.
1026 Interactive Advertising Bureau, Wiki, Main Glossary, Performance Pricing Model,
http://www.iab.net/wiki/index.php/Performance_pricing_model (visitedJuly 9, 2013).
1027 Interactive Advertising Bureau, IAB Internet Advertising Revenue Report, 2012 First Six Months' Results,
October 2012, at 18.
1028 Id.
1029 comScore, 2012 U.S. Digital Future in Focus, February 2011, at 15. Generally, online video advertising
includes any advertisement in video format, including those that appear with OVD programming.
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viewer only watches it for a few seconds.1030 In April 2012, Hulu became the first OVD to announce that
it would only charge advertisers when a viewer watches the entire advertisement.1031 This metric is
known as the "completion rate" of an online video advertisement. Analysts believe Hulu will be able to
charge higher rates as a result of stimulating demand among advertisers for its limited commercial
inventory. Hulu states its completion rate for online video advertisements is 96 percent, compared to an
industry average of 88 percent for online video commercials airing in long-form programs.1032 Hulu is
viewed by some as the leader among advertiser-supported OVDs and charges some of the highest CPMs
in the industry.1033 Advertisers also seek to protect their brands, generally preferring professional content
to unpredictable, user-generated content. Hulu maintains that its presentation of advertising is a source of
value to advertisers because it uses patented technology to present relevant ads that generate higher recall,
purchasing, and completion rates than others.1034 In addition, Hulu viewers can sometimes choose from a
selection of advertisements, and determine if an advertisement is not relevant to them, in which case a
new advertisement will play at no cost to the original advertiser.1035 According to Nielsen, Hulu's
commercials have two times the recall rate of advertisements found elsewhere.1036
291.
In traditional television, Nielsen ratings are the sole currency for advertisers.1037 For
online video, Nielsen and comScore are the major ratings services. Because they use different
methodologies, their results differ.1038 In February 2011, three advertising trade groups launched an
initiative called "Making Measurement Make Sense" to standardize online measurement metrics.1039 In
August 2011, Nielsen launched its Online Campaign Ratings service, which subsequently became the first
Internet measurement service to provide demographic ratings for online advertising campaigns with

1030 Perkin di Grazia, Hulu Innovating Video Advertising, SNL KAGAN, April 25, 2012.
1031 Id. TubeMogul, an online video marketing company, reports that based on a survey it conducted, a positive
relationship exists between advertisement completion rates and recollection of the advertisement's message.
TubeMogul, Research Reports, Is A Completed Ad a Remembered Ad?, Dec. 5, 2012,
http://www.tubemogul.com/research/report/46-Is-a-Completed-Video-Ad-a-Remembered-Ad- (visited Dec. 5,
2012).
1032 Perkin di Grazia, Hulu Innovating Video Advertising, SNL KAGAN, April 25, 2012.
1033 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 10. AD AGE 2011 White Paper at 16. Despite
its large audience, YouTube's carriage of advertising has developed slowly, in part because of its reliance on user-
generated content. The Economics of Online Video 2011 (White Paper), ADVERTISING AGE, Feb. 14, 2011, at 16
("AD AGE 2011 White Paper).
1034 AD AGE 2011 White Paper at 16.
1035 Perkin di Grazia, Hulu Innovating Video Advertising, SNL KAGAN, April 25, 2012.
1036 Id.
1037 Watching the TV Watchers, DAILY VARIETY, Jan. 12, 2011, at 8.
1038 Cotton Delo, Your Guide to Who Measures What in the Online Space, ADVERTISING AGE, Sept. 19, 2011,
http://adage.com/article/media/guide-measures-online-space/229858/ (visited Nov. 7, 2012). Nielsen and comScore
have traditionally measured online viewing using large panels of consumers who participate voluntarily, and then
project the behavior to the entire population based on demographic variables. Michael Depp, Online Metrics Inch
Closer to Standardization
, NETNEWSCHECK, Dec. 4, 2011, http://www.netnewscheck.com/article/15811/online-
metrics-inch-closer-to-standardization (visited Nov. 7, 2012).
1039 The trade groups are the Interactive Advertising Bureau (IAB), The Association of National Advertisers (ANA),
and the American Association of Advertising Agencies (4A's). IAB, ANA, 4A's, IAB, ANA, & 4A's Join Forces to
"Make Measurement Make Sense" Leading Trade Groups Take on Top Industry Challenge
(press release), Feb.
28, 2011.
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certain metrics comparable to those used for television advertising.1040 In September 2012, The CW
became the first television network to sign on with Nielsen Online Campaign Ratings, guaranteeing
advertisers that they will reach a minimum number of targeted viewers during the 2012-2013 television
season.1041 Microsoft has worked with Nielsen to measure viewing on its Xbox game consoles, spurring
Viacom and other cable network owners to enter agreements with Microsoft.1042 Nielsen reportedly will
include tablets in its television ratings by the end of 2013.1043
4.

OVD Performance

292.
Due to data limitations, our analysis of OVD performance is limited to that of a few of
the most widely recognized industry players and is not intended to be a comprehensive assessment of the
entire OVD industry. With these limitations, we describe OVD viewership, subscribership, revenue,
investment, and profitability.1044
a.

OVD Viewership and Subscribership

293.
Audience. The online video industry uses several metrics to measure audience size and
usage of online video content, including the number of videos per viewer and the amount of time viewers
spend watching.1045 As we noted above, different ratings services use different methodologies to measure
viewership, leading to different rankings.1046 The chart below, based on comScore information from June

1040 Nielsen, The CW to Use Nielsen Online Campaign Ratings for All Online Audience Guarantees (press release),
Sept. 27, 2012.
1041 Id. If the guarantees fall short, The CW will include inventory on its website along with inventory on its linear
network in its make-goods. Jeanine Poggi, Nielsen Marries TV, Online Ratings, ADVERTISING AGE, Oct. 1, 2012,
http://adage.com/article/media/nielsen-marries-tv-online-ratings/237516/ (visited Nov. 7, 2012). A make-good is an
offer by television network to rerun a commercial, at no additional charge. The second airing of the commercial is
generally of value equal to or greater than the original placement and used to compensate advertisers for
unanticipated ratings that fall short of the rating which the network originally guaranteed. Occasionally a television
network will return cash to the advertiser instead. Vogel at 577.
1042 George Winslow, A Divide That's Not as Deep as You Think, BROADCASTING & CABLE, Sept. 17, 2012.
1043 Jon Lafayette, Comcast Rx Helps Nielsen Swallow Tablets: After Long Wait, Mobile Viewing to be Added to C3
and C7 Ratings
, BROADCASTING & CABLE, March 25, 2013. Nielsen worked with Comcast to develop the technical
capabilities to track programs viewed on tablets.
1044 In addition, due to the limitations of available data, our performance analysis includes data regarding OVDs that
distribute professionally produced as well as user-generated video content, both short-form and long-form.
1045 comScore, Surviving the Upfronts in a Cross-Media World: An Actionable Guide for Success, June 6, 2012, at
7, http://www.comscore.com/Insights/Presentations_and_Whitepapers/2012/Surviving_the_Upfronts_in_a_Cross-
Media_World (visited April 22, 2013) ("comScore, Surviving the Upfronts in a Cross-Media World").
1046 For example, although Amazon does not make Nielsen's top ten rankings in December 2011 or August 2012,
comScore ranked it number nine in December 2011 and number ten in August 2012. See comScore, Inc., comScore
Releases December 2011 U.S. Online Video Rankings
(press release), Jan. 17, 2012; comScore, Inc., comScore
Releases August 2012 U.S. Online Video Rankings
(press release), Sept. 19, 2012. See also The Nielsen Company,
Nielsen Wire, December 2011: Top U.S. Online Video Destinations, Jan. 25, 2012; The Nielsen Company, Nielsen
Wire, August 2012 Top Online Video Sites, Sept. 27, 2012, http://www.nielsen.com/us/en/newswire/2012/august-
2012-top-u-s-video-sites.html (visited July 10, 2013).
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2012,1047 illustrates, among other things, that more than 180 million U.S. Internet users watched online
video content for an average of 20.6 hours per viewer (i.e., 1238.1 minutes/60 minutes) in June 2012.1048

1047 Nielsen does not publicly report the most popular online video sites on a regular basis; thus June 2012 data are
not available. See Nielsen, Search Result for "Online Destinations for Video,"
http://blog.nielsen.com/nielsenwire/?s=online+destinations+for+video (visited Nov. 8, 2012). Due to July 2011
changes in the methodology of its Video Census product, Nielsen's results from the second quarter of 2011 are not
comparable to those from the second quarter of 2012. Nielsen, The Cross-Platform Report, Quarter 1, 2012, at 12.
1048 comScore, Inc., comScore Releases June 2012 U.S. Online Video Rankings (press release), July 18, 2012
("comScore Video Metrix") See also 14th Report, 27 FCC Rcd at 8751, Table 23 (June 2011 data). The list of top
ten properties remained relatively stable since the last report. The only change reflects a decline in the number of
unique viewers of the Hulu site. Vimeo replaced Hulu on the list. While sources differ on the number of Hulu
viewers, Nielsen, for example, reports that the unique viewers of Hulu, excluding Hulu Plus, declined from 19
million in December 2011 to 12 million in August 2012. The Nielsen Company, Nielsen Wire, December 2011:
The Top Online Video Destinations
, Jan. 25, 2012,; The Nielsen Company, Nielsen Wire, August 2012 Top Online
Video Sites
, Sept. 27, 2012, http://www.nielsen.com/us/en/newswire/2012/august-2012-top-u-s-video-sites.html
(visited July 10, 2013).. We note that many of the parent companies of the websites listed in the table (e.g., Google,
Yahoo!, AOL, Facebook, and Vevo) specialize in short-form, rather than long-form content. Will Richmond,
Cloud-Based Startup Portico Aims to Package Online Video Into TV Experiences, VIDEONUZE, Dec. 6, 2012,
http://www.videonuze.com/article/cloud-based-startup-portico-aims-to-package-online-video-into-tv-experiences
(visited Dec. 6, 2012).
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Table 32: Top U.S. Online Video Properties Ranked by Unique Views (June 2012)

1049

Property

Total Unique

Videos

1050

Minutes per Viewer

Viewers

(in thousands)
(in thousands)
Google Sites1051
154,507
18,274,297
484.4
Yahoo! Sites
51,453
717,806
75.5
Facebook.com
49,003
287,798
20.6
VEVO
46,202
594,806
51.8
Viacom Digital
38,921
433,381
54.2
Microsoft Sites
38,122
433,514
41.8
AOL, Inc.
38,117
544,932
63.7
Amazon Sites
29,826
97,697
17.5
Turner Digital
23,425
215,229
39.7
Vimeo1052
21,425
71,241
28.3

Total Internet

1053
180,373
32,997,209
1,238.1
294.
Subscribership. As of June 30, 2012, Netflix had 22.7 million subscribers to its domestic
streaming service, up from 20.2 million subscribers at the end of December 2011, when Netflix first
began to report streaming subscriber figures.1054 Netflix notes that seven out of its nine million DVD
subscribers at the end of June 2012 also subscribed to its streaming service.1055 The mix of Netflix's

1049 comScore Video Metrix. These data reflect total U.S. home/work/university locations.
1050 comScore defines a video as any streamed segment of audiovisual content, including both progressive
downloads and live streams. For long-form, segmented content (e.g., television episodes with advertising in the
middle) each segment of the content is counted as a distinct video segment.
1051 As reflected in this table, "Google Sites" includes the website YouTube which hosts user-generated video, as
well as professionally-produced video. In terms of unique viewers, YouTube is the leader, attracting more than 140
million viewers each month. YouTube offers hundreds of channels of professionally-produced, themed
programming, such as music videos and games. YouTube: YouTube Partner Program,
http://www.youtube.com/yt/partners/ (visited July 3, 2013). Vevo, a distributor of music videos jointly owned by
Sony Music Entertainment, Universal Music Group, and Abu Dhabi Media Company, operates both its own website
and a channel within YouTube. Vevo, Vevo Partners with Abu Dhabi Media Company (press release), Oct. 19,
2009. See also Vevo, About Us: Company Profile, http://www.vevo.com/About#/About (visited Nov. 6, 2012).
Among YouTube's partner channels, Vevo was the most popular. comScore Video Metrix; comScore, Surviving
the Upfronts in a Cross-Media World
at 5.
1052 Vimeo, owned by IAC, offers videos by independent producers without advertising. at 27. See also, Vimeo,
LLC, About Us, http://vimeo.com/about (visited Nov. 8, 2012); Sam Gutelle, Vimeo Seeks Profit for Itself and Its
Creators with Tip Jars, Paywalls
, TUBEFILTER, Sept. 20, 2012, http://www.tubefilter.com/2012/09/20/vimeo-tip-jar-
pay-to-view/ (visited Dec. 6, 2012).
1053 Total Internet includes totals for all sites, not just the top ten sites reported separately here.
1054 We use the term "subscribers" to refer to paid subscribers only. Netflix and other OVD services offer free trial
memberships to new and certain rejoining members. Therefore, the total number of subscribers is slightly higher
than the total number of paid subscribers. For purposes of determining the number of unique subscribers, Netflix
counts a domestic subscriber who has elected both a DVD and streaming subscription plan to be a single unique
subscriber. Netflix, Inc., SEC Form 10-Q/A for the Quarterly Period Ended Sept. 30, 2012, at 3-4.
1055 Netflix Comments at 3.
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subscribers continues to shift. At the end of the third quarter of 2012, domestic streaming subscribers
grew to 23.8 million, and domestic DVD subscribers fell to 8.5 million.1056 Netflix notes that its
subscriber growth is seasonal, reflecting when consumers most frequently buy Internet-connected devices
(October through March), and when they tend to increase video watching (July through September).1057
295. Hulu reported that by the end of 2011 Hulu Plus had more than 1.5 million subscribers
compared with fewer than 300,000 at the end of 2010, making it the fastest-growing video subscription
service in U.S. history.1058 As of June 30, 2012, Hulu Plus had more than two million subscribers.1059
296.
Amazon does not disclose the number of subscribers to its Prime service or the number of
members who take advantage of the video streaming service.1060 As of October 2011, one report
estimated that Amazon had between three million and five million subscribers, with it aiming for seven
million to ten million Prime subscribers in 2013.1061
b.

Revenue

297.
OVDs earn revenues from advertisers as well as directly from consumers through
subscriptions, EST, and rentals. We examine the available revenue data below.1062 Overall, SNL Kagan
estimates that OVDs earned about $1.9 billion in total revenues in 2010, about $3.1 billion in 2011, and
projects that data will reflect they earned about $3.9 billion in 2012.1063

1056 Netflix 3Q 2012 Earnings Statement, Oct. 23, 2012, at 1. Comcast and Verizon note that while Comcast is the
largest MVPD service, Netflix has more subscribers. Comcast Comments at 25; Verizon Comments at 24. Comcast
had 22.3 million video subscribers at the end of 2011 and 22.1 million subscribers as of June 30, 2012. See Comcast
Comments at 4.
1057 Netflix, Inc., SEC Form 10-K for the Year Ended December 31, 2011, at 2.
1058 Jason Kilar, CEO, Hulu, 2011, 2012 and Beyond, Hulu Blog, Jan. 12, 2012,
http://blog.hulu.com/2012/01/12/2011-2012-and-beyond/ (visited Nov. 5, 2012).
1059 JP Colaco, Senior Vice President of Advertising, Hulu, 100% Completion Rate, Hulu Blog, April 17, 2012,
http://blog.hulu.com/2012/04/17/100/ (visited Nov. 5, 2012). Because Hulu is a privately-held company, it does not
report subscriber or other performance metrics on a regular basis.
1060 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 7.
1061 Edmond Lee and Danielle Kucera, Amazon Is Said to Have Fewer Prime Members Than Estimated,
BLOOMBERG, Feb. 12, 2012, http://www.bloomberg.com/news/2012-02-14/amazon-said-to-have-fewer-prime-
subscribers-than-estimated-shares-decline.html (visited Nov. 5, 2012).
1062 Estimates of advertising revenues for OVDs, as defined in this Report, are not readily available.
1063 SNL Kagan, Internet Video-on-Demand Revenue Projections, 2009-2022, Nov. 2012; SNL Kagan, U.S. Internet
Advertising Revenue Model, 2011-2021
, Sept. 2011; SNL Kagan, Internet Video-on-Demand Revenue Projections,
2008-2021
, Nov. 2011; Deana Myers, Subscription Video Dominates Online Video Market, SNL KAGAN, Nov. 30,
2011.
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Table 33: OVD Revenue Streams

1064
(Revenue in millions)
2010
2011
2012

Revenue Source

Subscription

$969.8
$2,076.0
$2,564.7
Movie Purchases
$296.8
$327.0
$413.6
TV Purchases
$233.5
$263.7
$318.3

Total EST

$530.3
$590.7
$731.9
Movie Rentals
$353.7
$455.9
$637.1
TV Rentals
$.5
$.7
$.2

Total Rentals

$354.3
$456.6
$637.3

Total Paid/

$1,854.4
$3,123.3
$3,933.9

Subscription

298.
Advertising. OVDs, like other companies that utilize the Internet platform, may obtain
advertising fees from variety of advertising formats: (1) search, (2) display, (3) classifieds, (4) lead
generation, (5) mobile, and (6) e-mail.1065 Search advertising accounted for about 46-47 percent of all
Internet advertising from 2010 through the second quarter of 2012.1066 IAB reports total Internet

1064 SNL Kagan, Advertising Forecasts: U.S. Market Trends & Data for All Major Media, 2010 Edition, at 92, U.S.
Internet Advertising Gross Billings Revenue Model, 2007-2019; SNL Kagan, Internet Video-on-Demand Revenue
Projections
, 2009-2022, Nov. 2012; Deana Myers, Subscription Dominates Online Video Market, SNL KAGAN,
Nov. 30, 2011; Wade Holden and Deana Myers, Online Movie Spending to Hit $1B in 2012, SNL KAGAN, Nov. 30,
2012. Estimates of revenues vary. For example, IHS estimates that EST movie revenues were $236 million in
2011, and rental movie revenues were $273 million. IHS iSuppli, Netflix Surpasses Apple to Take Lead in U.S.
Online Movie Business in 2011
(press release), June 1, 2012.
1065 See eMarketer.com, US Digital Ad Spending to Top $37 Billion in 2012 as Market Consolidates, Sept. 20, 2012,
http://www.emarketer.com/newsroom/index.php/digital-ad-spending-top-37-billion-2012-market-consolidates/
(visited Nov. 6, 2012); SNL Kagan, U.S. Internet Advertising Revenue Model,2012-2022, July 2012. Search
advertising is a format where advertisers pay a fee to an Internet company to list and/or link the advertiser's site to a
specific search word or phrase. Display advertising refers to a format whereby an advertiser pays an Internet
company for space to display a static or hyperlinked banner or logo on one or more of the Internet company's pages.
For classified advertising, advertisers pay fees to Internet companies to list specific products or services. Lead
generation refers to fees advertisers pay to Internet advertising companies that refer qualified purchase inquiries or
provide consumer information where the consumer opts into being contacted by a marketer. Mobile advertising is
advertising tailored to and delivered through wireless mobile devices. E-mail advertising refers to banner ads, links,
or advertiser sponsorships that appear in commercial email communications. Interactive Advertising Bureau, IAB
Internet Advertising Revenue Report, 2012 First Six Months' Results
, October 2012, at 20, 20,
http://www.iab.net/insights_research/industry_data_and_landscape/adrevenuereport (visited Nov. 6, 2012)..
1066 eMarketer.com, US Digital Ad Spending to Top $37 Billion in 2012 as Market Consolidates, Sept. 20, 2012,
http://www.emarketer.com/newsroom/index.php/digital-ad-spending-top-37-billion-2012-market-consolidates/
(visited Nov. 6, 2012); Interactive Advertising Bureau, IAB Internet Advertising Revenue Report, 2012 First Six
Months' Results
, October 2012, at 12, 20,
http://www.iab.net/insights_research/industry_data_and_landscape/adrevenuereport (visited Nov. 6, 2012).
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advertising reached $31.7 billion in 2011, compared with $26.0 billion in 2010.1067 During the first six
months of 2012, it estimates total Internet advertising spending was $17 billion.1068 IAB estimates that
video represented about five percent of total Internet advertising in 2010 and 5.7 percent in 2011.1069 IAB
also estimates that video accounted for six percent of Internet advertising during the first half of 2012.1070
Similarly, eMarketer estimates that video represented 5.4 percent of total Internet advertising in 2010, 6.3
percent in 2011, and projects that it will account for 7.9 percent of Internet advertising in 2012.1071
eMarketer also reports that total U.S. online ad spending was almost $32 billion in 2011, compared with
$26.29 billion in 2010, and that it expects online ad spending to grow to $37.31 billion in 2012.1072
299.
As shown in Table 34, comScore estimates that, in June 2012, U.S. Internet users
watched 11.0 billion video advertisements, and a total of 4.6 billion advertising minutes, with the online
video advertisements reaching 53.0 percent of the U.S. population.1073 The comScore data also includes
several video advertising networks, such as BrightRoll Video Network, TubeMogul Video Ad Platform,
Tremor Media Video Network, Specific Media, and Auditude, Inc., as well as Adap.tv and SpotXchange
Video Ad Marketplace video advertising exchange.1074 The five leading properties for video ads viewed
during June 2012 were: (1) Google Sites, 1.41 billion ads viewed; (2) BrightRoll Video Network, 1.39
billion ads viewed; (3) Hulu, 1.33 billion ads viewed; (4) Adap.tv, 1.1 billion ads viewed; and (5)
TubeMogul Video Ad Platform, 1.0 billion ads viewed.1075

1067 Interactive Advertising Bureau, IAB Internet Advertising Revenue Report, 2011 Full Year Results, April 2012, at
5, http://www.iab.net/insights_research/industry_data_and_landscape/adrevenuereport (visited Nov. 6, 2012).
1068 Interactive Advertising Bureau, IAB Internet Advertising Revenue Report, 2012 First Six Months' Results,
October 2012, at 12.
1069 Interactive Advertising Bureau, IAB Internet Advertising Revenue Report, 2011 Full Year Results, April 2012, at
12, http://www.iab.net/insights_research/industry_data_and_landscape/adrevenuereport (visited Nov. 6, 2012).
1070 Interactive Advertising Bureau, IAB Internet Advertising Revenue Report, 2012 First Six Months' Results,
October 2012, at 10, 12.
1071 eMarketer.com, US Digital Ad Spending to Top $37 Billion in 2012 as Market Consolidates, Sept. 20, 2012,
http://www.emarketer.com/newsroom/index.php/digital-ad-spending-top-37-billion-2012-market-consolidates/
(visited Nov. 6, 2012).
1072 eMarketer.com, US Digital Ad Spending to Top $37 Billion in 2012 as Market Consolidates, Sept. 20, 2012,
http://www.emarketer.com/newsroom/index.php/digital-ad-spending-top-37-billion-2012-market-consolidates/
(visited Nov. 6, 2012). eMarketer revised its 2012 projections downward based on IAB data for the first quarter,
and because it appears that the Internet advertising market is maturing faster than expected.
1073 comScore Video Metrix.
1074 Id. An advertising network is an aggregator or broker of advertising inventory for many sites that offers a single
advertiser the opportunity to buy inventory from a single source. Ad networks are the sales representatives for the
websites within the network. An advertising exchange is a sales channel between publishers and ad networks that
can also provide aggregated inventory to advertisers. They provide a technology platform that facilitates automated
auction based pricing and buying in real-time. Interactive Advertising Bureau, Wiki, Main Glossary, Ad Network
and Ad Exchange,
http://www.iab.net/wiki/index.php/Category:Glossary (visited Nov. 6, 2012). Advertising
exchanges first entered the online video advertising market in early 2010. AD AGE 2011 White Paper at 17.
1075 comScore Video Metrix. Four properties, Google Sites, TubeMogul, ESPN, and Auditude, Inc., are new to the
top ten. See also 14th Report, 27 FCC Rcd at 8754, Table 24 (June 2011 data).
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Table 34: Top U.S. Online Video Properties by Video Ads Viewed (June 2012)

1076

Property

Video Ads

Total Ad

Frequency

Reach of Total

(in thousands)

Minutes

(Ads per Viewer)

U.S. Population

(millions/month)
(%)
Google Sites
1,412,882
147
18.7
24.7%
BrightRoll Video
1,387,252
805
12.7
35.7%
Network
Hulu
1,328,224
583
51.8
8.4%
Adap.tv
1,146,957
649
14.9
25.1
TubeMogul Video
1,041,279
330
17.2
19.8
Ad Platform
Tremor Video
836,352
447
17.6
15.5%
SpotXchange Video
732,171
404
14.2
16.8%
Ad Marketplace
Specific Media
694,406
332
7.8
29.1%
ESPN
611,875
191
33.7
5.9%
Auditude, Inc.
611,733
208
12.0
16.7%

Total:

11,005,355
4,613
67.7
53.0%
300.
SNL Kagan estimates that in 2010 Hulu generated $256 million in advertising revenues,
$336 million in 2011, and $441 million in 2012. Because content owners retain 70 percent of advertising
revenue generated on the site, Hulu earned about $55 million in 2010, $70 million in 2011, and it earned
$92 million in 2012.1077 SNL Kagan estimates that advertising represented 96.5 percent of Hulu's
revenues in 2010, 74.5 percent of its revenues in 2011, and 61.3 percent of its revenues in 2012, with the
remaining revenues generated from Hulu Plus subscriptions (of which Hulu's content partners also retain
70 percent).1078
301.
Subscription, EST, and Rental. Research firm IHS iSuppli ("IHS") estimates the total
revenues for online subscription services surpassed rental and EST movie revenues in 2011, growing
from $4.3 million in 2010 to $454 million in 2011.1079 According to IHS, consumers may view
subscription OVDs as relatively inexpensive means of watching movies online on an unlimited basis,
especially older titles, in comparison with purchasing individual movies. While EST is more profitable
than rentals for movie studios on a per-transaction basis, IHS estimates that EST revenue growth between
2010 and 2011 was relatively flat, growing 2.4 percent to reach $236 million in 2011. According to IHS,
new releases account for 70 to 80 percent of EST movies titles purchased, whereas consumers rely
overwhelmingly on subscription services for older releases. IHS estimates that revenues for online movie
rentals grew 75 percent between 2010 and 2011, from $155 million to $273 million.
302.
Table 35 below shows OVDs ranked in terms of the subscription, EST, and rental
revenues they generate from distributing movies.1080 In 2011, Netflix overtook Apple to become the

1076 comScore Video Metrix.
1077 Perkin di Grazia, Profile: Hulu LLC, SNL KAGAN, Dec. 20, 2012.
1078 Id.
1079 IHS iSuppli, Netflix Surpasses Apple to Take Lead in U.S. Online Movie Business in 2011 (press release), June
1, 2012.
1080 IHS iSuppli, Netflix Surpasses Apple to Take Lead in U.S. Online Movie Business in 2011 (press release), June
1, 2012.
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largest U.S. online movie service, according to IHS.1081 It attributes this in part to Netflix's decision to
charge consumers directly for its online streaming service in 2011, as well as the growth in the number of
consumers relying on subscription OVD services to watch movies. For EST movie revenues, IHS
estimates that iTunes earned 63 percent of such revenue in 2011, down slightly from 64.6 percent of EST
movie revenues in 2010. Vudu's share of EST movie revenues grew from 2.7 percent in 2010 to 4.2
percent in 2011, in part due to its availability on a wide range of devices.

Table 35: Online Movie Market Share Rankings (Share of Revenue in U.S. Dollars)

1082
2011 Rank

Company

2009
2010
2011
1
Netflix
0.0%
0.5%
44.0%
2
Apple (iTunes)
71.5%
60.8%
32.3%
3
Microsoft
11.2%
16.7%
7.6%
4
Wal-Mart (Vudu)
0.5%
2.7%
4.2%
5
Sony
5.4%
6.8%
2.4%
Others
11.4%
12.6%
9.5%

Total of Top 5

89%
87%
90%
c.

Investment

303.
As emerging and evolving businesses, OVDs are investing in programming, proprietary
Internet-enabled devices, infrastructure, and technology. Many of these initiatives are described above in
the company-specific business models.1083 We summarize investment-specific information here.
304.
OVDs must invest in programming to attract viewers. For OVDs, the acquisition of
programming may represent a fixed or variable cost.1084 For example, Netflix typically pays a flat fee for
multi-year licensing agreements with studios.1085 As noted above, Netflix reached a distribution
agreement with the Walt Disney Company to be the exclusive U.S. subscription service for first-run
movies, beginning in 2016.1086 While the financial terms of the agreement were not disclosed, analysts
estimate that Netflix paid between $200 million and $350 million for these rights.1087 The Verizon-
Redbox joint venture will pay networks and studios based on the number of subscribers, similar to

1081 Id. Netflix states that movies are responsible for one-third of its viewing traffic, with the remaining traffic
attributable to television programs. Netflix 3Q 2012 Earnings Statement, Oct. 23, 2012, at 2-3.
1082 IHS iSuppli, Netflix Surpasses Apple to Take Lead in U.S. Online Movie Business in 2011 (press release), June
1, 2012.
1083 See supra, Sec. III.C.3.a.
1084 For broadcast and cable networks, programming from studios generally represents a fixed cost. For MVPDs
programming from cable and broadcast networks generally represents a variable cost based on the number of
subscribers able to view the network.
1085 Netflix, Inc., SEC Form 10-K for the Year Ended December 31, 2011, at 6.
1086 See supra, 230.
1087 Jill Goldsmith, Can Netflix Absorb the Cost of Content?, DAILY VARIETY, Dec. 6, 2012. Pay cable networks
typically pay studios 10 percent to 12 percent of the U.S. box office receipts of each movie, up to $200 million. Ben
Fritz and Joe Flint, Netflix Buys Exclusive Rights to Disney Movies, L.A. TIMES, Dec. 4, 2012,
http://www.latimes.com/entertainment/envelope/cotown/la-fi-ct-disney-netflix-20121205,0,1100223,full.story
(visited Dec. 5, 2012).
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MVPDs.1088 Both Hulu and Apple split revenues from each of its revenue streams (i.e., advertising and
subscription for Hulu, and EST and rental for Apple) with their content partners, with studios and
networks receiving 70 percent and the OVDs retaining the remaining 30 percent.1089
305.
Several OVDs have invested in manufacturing proprietary devices to facilitate OVD
viewing. These include Amazon (Kindle Fire), Apple, Google (acquisition of Motorola), Sony (Play
Station), Microsoft (Xbox), BestBuy (Insignia Flex), Roku, and Boxee. For example, Apple's vertical
integration of its OVD service, its iOS operating system, and Apple devices enable users to seamlessly
share videos with iPhones, iPads, and Apple TVs.1090 In addition, several OVDs are investing in the
UltraViolet alliance or their own technology to facilitate viewing on multiple third party devices.1091
306.
OVDs also are investing in infrastructure and technology to facilitate delivery of their
content to consumers, including cloud computing.1092 Google, Microsoft, Apple, and Amazon have
invested in their operating systems and/or cloud services so computers and mobile devices will
seamlessly upload files to one master remote location.1093 Cloud syncing uses data when uploading a
video as well as downloading a video to each device connected to the cloud, and therefore, while making
online video viewing more convenient for consumers, can increase Internet traffic.1094
307.
As described above, Netflix reports that it continues to invest in technology and user
interface design to enable its subscribers to easily find and discover movies and television programs.1095
Also as described above, Hulu has invested patented technology designed to offer advertising that is
relevant to users in a manner that generates higher recall and purchasing intent among, and higher
completion rates, from users than other forms of advertising.1096
308.
Finally, OVDs are developing content delivery networks ("CDNs"). A CDN is a system
of computers that stores copies of popular Internet content and bypasses transit links by inserting this
content into the service provider's network closer to the consumer.1097 According to Netflix and Public

1088 Cliff Edwards and Michael White, Redbox-Verizon Streaming to Challenge Netflix by Year-End, BLOOMBERG,
Sept. 22, 2012, http://www.bloomberg.com/news/2012-09-21/redbox-verizon-streaming-to-start-in-time-for-
christmas.html (visited Nov. 13, 2012).
1089 Deana Myers, Hulu Continues on Quick Growth Path, SNL KAGAN, Oct. 15, 2012; Laura Martin and Dan
Medina, The Future of TV: The Invisible Hand, Needham & Company, LLC, June 22, 2012, at ii.
1090 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 9.
1091 See supra, 227.
1092 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 6.
1093 Sandvine, Global Internet Phenomena Report, Fall 2011, at 13. Netflix is a customer of Amazon's cloud
computing services. SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 6.
1094 Sandvine, Global Internet Phenomena Report, Fall 2011, at 13.
1095 Netflix Comments at 3-4.
1096 AD AGE 2011 White Paper at 16.
1097 Sandvine, Global Internet Phenomena Report, 1H 2012, at 28; Craig Moffett and Carlos Kirjner, Weekend
Media Blast: What if Television HAD to Be Delivered Over the Internet?
, BERNSTEIN RESEARCH, Aug. 24, 2012, at
4. See also Public Knowledge UBP White Paper at 23, 26-27. For example, as of 2012, Akamai Technologies, the
largest CDN in terms of revenues, overlays its network of 105,000 servers in 1,080 networks in 78 countries, so end
users are interacting with an Akamai server at the edge of the network. Informa Telecoms & Media, CDN Future
Scenarios: Extract
, 2012, at 2. See also Linda Hardesty and Jonathan Tombes, CDNs Bridge First and Last Miles,
COMMC'NS TECH., Oct. 15, 2009; Public Knowledge UBP White Paper at 27. For online video, the user's quality of
experience ("QoE") depends on two major factors: display quality (how good the picture looks) and transport
(continued....)
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Knowledge, the use of CDNs eases Internet traffic congestion and improves the viewing experience.1098
Third party CDNs save OVDs the cost of hosting multiple copies of the content themselves.1099 CDNs
deliver a large portion of total Internet content, estimated to be greater than 60 percent.1100 In June 2012,
Netflix introduced its own CDN, called Open Connect. ISPs can also choose to receive Netflix data at
common Internet exchanges.1101 To assist ISPs, Netflix has shared its hardware design and the open
source software components of the Open Connect server.1102 Other OVDs that have their own CDNs
include Amazon, Microsoft, and Google.1103 In addition, Microsoft and Amazon offer CDN services to
other OVDs.
d.

Profitability

309.
As noted, many of the prominent OVDs are subsidiaries or operations within a larger
business. Because the assets, liabilities, revenues and expenses of the parent company and the
subsidiaries are often presented in consolidated financial statements that reflect the total resources of the
combined entity rather than any of its specific component parts, assessing the profitability of a subsidiary
of a larger enterprise can be difficult.1104 Of the companies that are the focus of our OVD analysis, only
Nexflix, which is a standalone OVD, breaks out operating income from streaming services in publicly
available reports.1105 Due to the diverse nature of OVD business models and strategies, we do not believe
that Netflix alone is sufficiently representative of the entire OVD segment. Thus, for this Report, we are
unable to conduct an analysis of the profitability of OVDs. As OVDs continue to mature and evolve, we
anticipate that future public reporting of more entities may include data on profitability and other metrics
to assess the financial viability of this segment of the delivered video market.
(Continued from previous page)
quality (how often the picture stalls and rebuffers). Sandvine, Global Internet Phenomena Report, 1H 2012, at 24.
Because CDNs enable content to be closer to the access edge of the Internet, consumers benefit from lower round-
trip time (latency) of online video. Id.
1098 Netflix and Public Knowledge state that CDNs represent an alternative to tiered ISP pricing and data caps for
addressing the growth in Internet traffic. Netflix Comments at 8; Public Knowledge UPB White Paper at 23.
1099 Sandvine, Global Internet Phenomena Report, 1H 2012, at 28. Public Knowledge argues that CDNs relieve
ISPs of some of the necessary capital investments in broadband networks to facilitate online video viewing. Public
Knowledge UBP White Paper at 23-24.
1100 Craig Moffett and Carlos Kirjner, Weekend Media Blast: What if Television HAD to Be Delivered Over the
Internet?
, BERNSTEIN RESEARCH, Aug. 24, 2012, at 4. While CDNs can mitigate some video traffic, they are not
well suited to popular live events such as sports, news, and specials. Id.
1101 Netflix Comments at 8. See also Wade Holden, Netflix Aiming to Cut Costs With Its Own Content Delivery
Network
, SNL KAGAN, June 21, 2012.
1102 Netflix Comments at 8.
1103 Informa Telecoms & Media, CDN Future Scenarios: Extract, 2012, at 3.
1104 For example, during Amazon's third-quarter earnings conference call, analysts asked executives questions
related to the returns on Amazon's investments in acquiring content and developing Kindle Fire tablets. Amazon
declined to provide specifics. Sarah Barry James, Update: Analysts Tell Amazon, "Show Us the Money!", SNL
KAGAN, Oct. 25, 2012.
1105 For 2012, Netflix had revenues of approximately $3.6 billion, operating income of almost $50 million and net
income of approximately $17.2 million. Netflix, Inc., SEC Form 10-K for the Year Ended December 31, 2012, at
19. Sources of OVD revenue are discussed further, supra, III.C.4.b.
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5.

Consumer Behavior

310.
In this section of the Report, we consider trends in consumer behavior related to OVDs.
We also consider whether and the extent to which consumers substitute OVDs for MVPDs.
311.
Access to broadband plays a key role in the ability of consumers to access online video.
SNL Kagan estimates that at the end of 2010, there were 79.2 million high-speed data households, with
cable operators serving 44.4 million and telephone companies serving 34.8 million.1106 At the end of
2011, this number increased to 82.9 million, with cable operators serving 47.3 million and telephone
companies serving 35.7 million.1107 As of August 2012, there were 85.1 million high-speed data
households, with cable operators serving 49.0 million and telephone companies serving 36.0 million.1108
312.
In the last Report, based on findings from Nielsen's Cross-Platform Report, we noted
that the amount of time consumers spend watching online video varies by age, gender, ethnicity, life-stage
and lifestyle.1109 For the second quarter of 2012, Nielsen data indicate similar viewing patterns. Among
different age groups, adults aged 65 years or older spend the most time watching traditional television
more than 45 hours per week, compared with an average of 31 hours and 45 minutes per week for all
Americans.1110 Likewise, among different age groups, adults aged 18-24 spent the most time watching
online video more than one hour per week, compared with an average of 44 minutes per week for all
Americans.1111 ComScore estimates that during March 2012, 84 percent of Americans (including people
without Internet access) aged 25-34 watched online video, compared with 81 percent of adults aged 34-
44, and 25 percent of adults aged 65 or older.1112
313.
Among the general U.S. population, traditional television viewing dwarfs viewing of
online video. According to Nielsen, during the second quarter of 2012, Americans watched on average
31 hours and 45 minutes per week of traditional television and two hours and 32 minutes per week of
time-shifted television, compared with four hours and 34 minutes per week using the Internet, 44 minutes
per week watching video on the Internet, and only ten minutes per week of video on a mobile phone.1113
Nielsen also reports that Americans spent an average of one hour and nine minutes per week using a

1106 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 5. For its estimates, SNL Kagan includes
commercial customers using DOCSIS cable modem and DSL services. Its estimates of subscribers to telephone
companies' high-speed data services include subscribers served by DSL and fiber-to-the-home connections. SNL
Kagan, Broadband Cable Financial Databook, 2012 Edition, at 46, U.S. Cable and Telco HSD Market Share Trends
Table.
1107 SNL Kagan, The State of Online Video Delivery, 2012 Edition, at 5.
1108 Ian Olgierson and Mari Rondeli, HSD Subscriber Growth Widens Cable's Lead Over Slumping Telcos in Q2,
SNL KAGAN, Aug. 17, 2012.
1109 See 14th Report, 27 FCC Rcd at 8756, 337.
1110 Nielsen, The Cross-Platform Report, Quarter 2, 2012, at 4, Table 1.
1111 Id. The estimates are based on the total population of the United States, including those who do not have access
to online video.
1112 comScore, Surviving the Upfronts in a Cross-Media World at 6.
1113 Nielsen, The Cross-Platform Report, Quarter 2, at 4, Table 1.. This estimate is based on the total U.S.
population over the age of two, whether or not they have the technology (i.e., DVRs, games consoles, etc.) in their
households. Because Nielsen changed the methodology of how it tracks online video viewing in July 2011, data
between our previous report, which covered the second quarter of 2011, and this Report, which covers the second
quarter of 2012, are not comparable for the purpose of analyzing trends. Year over year trends are available
beginning the third quarter of 2011. Nielsen, The Cross-Platform Report, Quarter 2, at 10.
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DVD/Blu-ray device and one hour and 25 minutes per week using a game console.1114 Online viewing
remains concentrated compared with traditional television viewing. Ranked by in-home streaming
behavior of people living in Internet households, the top 20 percent watches an average of 19.4 minutes
per day, compared with an average of 2.9 minutes per day for all people who live in households with
Internet connections.1115 In contrast, ranked by in-home television viewing behavior of people living in
Internet households, the top 20 percent watch an average of 10 hours and seven minutes per day of
television, compared with an average of four hours and 14 minutes per day for all persons living in
Internet households.
314.
SNL Kagan estimates that there were 26.6 million Internet-connected television
households (i.e., an Internet-enabled game console, OVD set-top box, television set, or Blu-ray player),
representing 22.8 percent of all television households, at the end of 2011, and estimates that by the end of
2012, the number will grow to 41.6 million, or 35.4 percent of households.1116 On average, households
viewing online video have 2.8 Internet-enabled devices (i.e., a game console, standalone OVD set-top
box, television set, Blu-ray player, tablet, desktop computer, or laptop computer).1117
315.
A 2012 study commissioned by Discovery Communications on the usage of Internet-
connected devices found: 79 percent of 18-49 year old consumers who own both a television set and an
Internet-enabled device watch television through an MVPD set-top box; 56 percent stream television on a
computer; 48 percent watch through a device such as a game console, Blu-ray player, OVD set-top box,
or OVD app on their television set; and 29 percent view via a mobile device such as tablet or
smartphone.1118 Nielsen reports that as of the second quarter of 2012, Americans who could stream video
content on gaming devices spent an average of six hours and 26 minutes per month doing so.1119 During
that same period, Nielsen reported that a large majority of Hulu users watched video directly on their
computers, while more than half of Netflix users watched via other devices such as game consoles, Blu-
ray players, Roku boxes, or IPTV apps.1120
316.
Observers differ with respect to the degree to which consumers are replacing MVPD
services with OVD services. Several reports indicate that some OVD substitution for MVPD services
exists. Consumers can cancel their MVPD service ("cord cutting") or reduce their MVPD spending
("cord shaving"). SNL Kagan estimates that nearly 2.7 percent of occupied U.S. households replaced
their MVPD service with OVDs in 2011, and projects that 3.7 percent will do so in 2012.1121 Ericsson
indicates that between 2011 and 2012, seven percent of U.S. consumers it surveyed indicated that they

1114 Nielsen, The Cross-Platform Report, Quarter 2, at 4, Table 1.
1115 Nielsen, The Cross-Platform Report, Quarter 2, at 7, Table 8a.
1116 SNL Kagan, The Future of 3-D and Internet TV, 2012 Edition, at 15.
1117 Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution,but Challenges Persist, SNL
KAGAN, Sept. 11, 2012.
1118 The study was conducted by Discovery Communications and research firm Interpret. Discovery
Communications, Viewers LIKE (Love) TV . . . Everywhere!, Discovery Blog, Oct. 3, 2012,
http://corporate.discovery.com/blog/tag/interpret-llc/ (visited Nov. 10, 2012). Consumers may rely on more than
once device to watch video; thus, these percentages add up to more than 100 percent.
1119 Nielsen, The Cross-Platform Report, Quarter 2, at 4, Table 3.
1120 Nielsen, The Cross-Platform Report, Quarter 2, at "A Snapshot of Simultaneous Usage."
1121 See Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution, SNL KAGAN, Sept. 11, 2012.
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had dropped their MVPD service, while 14 percent reported that they had reduced it.1122 A survey by
DigitalSmiths reports similar findings, observing that cord shavers dropped premium networks, e.g., HBO
or Showtime.1123 A Forrester Research analyst contends that while cord-cutting requires technological
sophistication, cord-shaving is about price.1124 Ericsson states that the availability of OVDs allows
consumers to reduce MVPD spending.1125
317.
Additional reports indicate that as new households form, U.S. consumers are deciding to
forgo an MVPD subscription altogether; that is, they are "cord nevers." SNL Kagan finds that
collectively cable, telco, and DBS MVPDs are experiencing slower subscriber growth, and that the gains
are not keeping pace with the increases in household formations.1126 It estimates that MVPD penetration
of households, including for households that have multiple subscriptions, declined from 84.2 percent in
2010 to 84.1 percent in 2011, and estimates the penetration to be 83.7 percent in 2012.
318.
The Diffusion Group ("TDG"), a research firm, which has tracked OVD substitution in
surveys since 2010, contends that cord cutters and cord nevers have different demographic profiles. Its
findings suggest that cord cutters are older, have higher incomes, and are more likely to have children
under 18 years old living inside the home.1127 Nearly one third of cord nevers are between the ages of 18
and 24, more than half have annual incomes under $30,000, and only one-fifth have children under 18
living at home. TDG contends that young consumers may view a combination of over-the-air
broadcasting with OVD service as an imperfect but sufficient substitute for MVPD service. Another
analyst maintains that the technical aspects of cord-cutting require too much effort for most people.1128
319.
SNL Kagan reports that the availability of large libraries of archival content and the
availability of new content, coupled with the availability of broadband and an increasing number of
Internet-connected devices, has enabled OVD substitution.1129 In a TVGuide.com survey, among those
who streamed video, 73 percent indicated that they did so to catch up on missed television episodes, 56
percent did so to catch up on programs discovered mid-season or between seasons, while eight percent

1122 Ericsson 2012 TV and Video White Paper at 8. In addition, 12 percent said that they increased spending on
MVPD services. Id.
1123 DigitalSmiths Q4 2012 Trends Report at 4-5. DigitalSmiths, a company that develops software to enable
consumers to discover television programs and movies, indicates that those who increased spending on MVPD
services added premium networks such as HBO or Showtime. The report concludes that while cord-cutting is still
mostly "hype," it advises MVPDs to improve the customer experience to retain subscribers who are considering
dropping the service and to stay ahead of competition from OVDs.
1124 James McQuivey, Wal-Mart Uses Boxee TV to Accelerate Cord-Shaving, Forrester Research, Nov. 1, 2012,
http://blogs.forrester.com/james_mcquivey/12-11-01-wal_mart_uses_boxee_tv_to_accelerate_cord_shaving (visited
Nov. 12, 2012). McQuivey predicts that Boxee's offering of unlimited DVR storage for $10 per month, combined
with its bundle of OVD services, may prompt some consumers to cut back on their MVPD subscriptions.
1125 Ericsson 2012 TV and Video White Paper at 8.
1126 Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution, but Challenges Persist, SNL
KAGAN, Sept. 11, 2012.
1127 The Diffusion Group, Pay TV Refugees Now Account for 13 percent of U.S. Broadband Households (press
release), Nov. 27, 2012.
1128 James McQuivey, Wal-Mart Uses Boxee TV to Accelerate Cord-Shaving, Forrester Research, Nov. 1, 2012,
http://blogs.forrester.com/james_mcquivey/12-11-01-wal_mart_uses_boxee_tv_to_accelerate_cord_shaving (visited
Nov. 12, 2012).
1129 Ian Olgeirson and Deana Myers, Service Providers Lessen OTT Substitution, but Challenges Persist, SNL
KAGAN, Sept. 11, 2012.
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streamed because they had cut back on MVPD services, and ten percent because they had cancelled their
MVPD subscription.1130

IV.

COMPARISON OF COMPETITION: RURAL VERSUS URBAN AREAS

320.
In this portion of the Report, we compare video programming competition in rural and
urban areas.1131 We discuss this issue for each of the three categories of video programming discussed
above MVPD, broadcast, and OVD.
321.
Increasing the availability of satellite-delivered video programming in rural and
underserved areas is a goal of Section 628(a) of the Act.1132 In the 14th Report, the Commission adopted a
"baseline" definition of the term "rural" to mean a county with a population density of 100 persons or
fewer per square mile.1133 Under this definition, roughly 61 million people, or 21 percent of the U.S.
population, live in rural counties. These counties comprise 3.1 million square miles, or 86 percent of the
geographic area of the United States.1134 Data on the delivery of video programming are not generally
available in a manner that enables us to aggregate county data by population density. Thus we rely on
available evidence provided in the record or from other sources to compare alternatives for the delivery of
video programming between rural and urban areas.

A.

MVPDs

322.
MVPDs serving rural and smaller markets provide a range of services to millions of
households, including video via coaxial cable, IPTV, digital telephony, and broadband Internet access.1135
As stated above, ACA reports that its membership of nearly 850 small and medium sized cable operators
provide services to about 7.4 million subscribers, with more than half of its members serving fewer than
1,000 subscribers.1136 NTCA, a trade association representing more than 580 rural telecommunications
providers, states that the number of its members providing video service rose from approximately 417 in

1130 eMarketer, TV Viewers Stream Content to Play Catch-up, Nov. 5, 2012,
http://www.emarketer.com/%28S%280j0sa345o5y2wwjklat1te45%29%29/Article.aspx?R=1009461 (visited Nov.
10, 2012). A DigitalSmiths survey found that more than 50 percent of respondents who planned to drop or switch
MVPD services stated that they would consider keeping their MVPD service if they offered better ways to find
programming. DigitalSmiths Q4 2012 Trends Report at 4.
1131 See Notice, 27 FCC Rcd at 8602-8603, 72-74.
1132 47 U.S.C. 548(a) ("The purpose of this section is . . . to increase the availability of satellite cable programming
and satellite broadcast programming to persons in rural and other areas not currently able to receive such
programming").
1133 14th Report, 27 FCC Rcd at, 8759 344. This definition also was used in the 16th Mobile Wireless Report. See
16th Mobile Wireless Report
, 385.
1134 United States Census Bureau, 2010 Census Urban and Rural Classification and Urban Area Criteria ,
http://www.census.gov/geo/www/ua/2010urbanruralclass.html (visited Nov. 5, 2012). The National Association of
Telecommunications Officers and Advisors ("NATOA") claims that a definition of "rural" that is based on
population per square mile will not include all areas that have rural characteristics. It states that urban, rural, and
suburban areas exist in a continuum and the lines between each are not distinct. NATOA contends that rural areas
exist within counties of various population densities and that these areas interact with each other and urban centers
in their region. See NATOA Comments at 5. We recognize the points raised by NATOA, but note that it does not
offer an administratively feasible definition to capture this issue.
1135 See ACA Comments at 1. See also supra, 104-9.
1136 See ACA Comments at 3.
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2010 to roughly 447 in 2011.1137 In 2011, 35 of its members sold DBS service, down from 106 in
2007.1138 NTCA, on the other hand, reports a rise in the number of its members delivering IPTV, from
159 systems in 2010 and to 202 in 2011.1139 Of the NTCA member companies offering IPTV in 2011, an
estimated 47 did so via fiber-to-the-home, fiber-to-the curb, or Ethernet technologies with the balance
using DSL technology. Of those offering video in 2011, 104 did so using more than one platform, i.e.,
coaxial cable, IPTV (whether over DSL or fiber) and/or DBS.1140 Overall, NTCA reports that its
members face inherent disadvantages because they serve high-cost, sparsely populated areas, in addition
to their lack of scale and scope compared to larger MVPDs.1141
323.
Nielsen finds that rural counties tend to rely on DBS more than urban counties for MVPD
services. Nielsen categorizes counties as rural or urban based on Census household counts and proximity
to metropolitan areas and reports no change since the last report. Thus, Nielsen's estimates that as of the
end of 2012, the distribution of television households was as follows: 40 percent in highly urbanized
counties belonging to the 21 largest Metropolitan Statistical Areas (A Counties); 31 percent in counties
with more than 85,000 households that are not defined as A Counties (B Counties); and 29 percent in
counties with fewer than 85,000 households (C and D Counties).1142 According to Nielsen's 2012
estimates, in A Counties, 68 percent of television households relied on cable service and 23 percent of
television households relied on DBS. Sixty-two percent of television households in B Counties
subscribed to cable and 27 percent subscribed to DBS. In C and D counties, 46 percent of television
households relied on cable service, compared with 44 percent who subscribed to DBS.1143
324.
Small and rural MVPDs report that the one of the biggest challenges they face, much like
that facing other MVPDs, is access to video content at competitive rates, although they assert they have
less leverage in negotiating.1144 These MVPDs indicate that a variety of programmer and broadcaster
strategies make it difficult for rural MVPDs to offer content in competitive retail packages that reflect

1137 See OPASTCO-NTCA Comments at 1-2. The Organization for the Promotion and Advancement of Small
Telecommunications Companies ("OPASTCO") and NTCA filed joint comments. OPASTCO is a trade association
representing 520 small incumbent rural exchange carriers ("RLECs") serving rural America. See OPASTCO-NTCA
Comments at 1, n.2. On March 1, 2013, OPASTCO and NTCA merged with the new organization named NTCA,
The Rural Broadband Association. See Sean Buckley, NTCA, OPASTCO Merge into One Common Organizations,
FIERCETELECOM, Feb. 7, 2013, http://www.fiercetelecom.com/story/ncta-opastco-merge-into-one-common-
organization (visited July 15, 2013).
1138 See OPASTCO-NTCA Comments at 2. These results are based on a 2011 survey of NTCA's membership.
1139 See id.
1140 See OPASTCO- NTCA Comments at 2. These companies may serve customers in more sparsely populated
areas using DBS or coaxial cable, while providing IPTV via fiber or DSL to the more densely populated segments of
their market.
1141 See NTCA Comments at 3.
1142 See Nielsen 2012 Television Audience Report at 6. Nielsen classifies C Counties as counties not defined as A
or B counties that have more than 20,000 households or are in Consolidated Metropolitan Statistical Areas or
Metropolitan Statistical Areas with more than 20,000 households. Nielsen classifies D counties as all counties not
classified as A, B, or C counties; they are very rural. See Nielsen Media Research, Glossary of Media Terms
(defining Nielsen's classifications of A, B, C, and D counties), http://www.nielsenmedia.com/glossary/ (visited June
18, 2013).
1143 Id.
1144 See OPASTCO-NTCA Comments at 4.
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what their subscribers want and can afford.1145 OPASTCO-NTCA assert that difficulty obtaining access
to "must have" programming at affordable rates and under reasonable terms and conditions is the most
significant obstacle that they face when attempting to provide or expand video services.1146 For example,
several small and rural MVPDs contend that the only viable way rural MVPDs gain access to "must
have" programming is to agree to purchase unwanted programming, which drives up the retail price of
their service offerings (i.e., "forced tying"). OPASTCO-NTCA asserts that rural MVPDs have found
that, in order to provide customers with access to the 10 most requested channels, they must pay for and
distribute as many as 120 to 125 additional programming channels.1147
325.
OPASTCO-NTCA indicate that program venders also require that certain channels be
placed in specific service tiers or that a certain percentage of subscribers receive the channels, forcing
rural MVPDs to include these channels in the most popular tiers of service they offer (i.e. "forced
tiering"). They state that this practice makes it impossible for rural MVPDs to offer truly basic, stripped
down service tiers at affordable rates that their subscribers actually desire. It also prevents rural MVPDs
from offering service packages that help to distinguish themselves from their competitors.1148 According
to OPASTCO-NTCA, to obtain "must have" video content, some programmers also require rural MVPDs
to pay additional fees based on the number of broadband subscribers they serve for access to online
content, regardless of whether or not those customers subscribe to video services. Further, OPASTCO-
NTCA reports that rural MVPDs have no way to assess whether the programming price offered to them is
in line with what larger MVPDs pay for the same content, compromising their ability to negotiate fair and
reasonable rates. OPASTCO-NTCA thus encourages a prohibition on mandatory non-disclosure
provisions.1149
326.
Small and rural carriers also argue that they pay disproportionately higher prices for
retransmission consent.1150 CenturyLink states retransmission consent fees have increased in the last few
years, and customers have lost access to content due to stalled retransmission consent negotiations. 1151
ACA states, where broadcasters had previously relied primarily on advertising revenues to fund their
operations, today affiliates of the four major television networks are increasingly relying on a dual
revenue model that includes carriage fees.1152 CenturyLink suggests that to ensure competition, the
Commission should allow temporary access to duplicate programming during negotiations, define what
"competitive marketplace considerations" are, and adjust good faith standards to end broadcasters'
control of retransmission consent negotiations.1153

1145 See id. at 3.
1146 See id. at 4- 5.
1147 See id. at 8. In response, Comcast contends that NBCUniversal does not require the purchase of programming
in bundles (i.e., forced tying). See Comcast Comments at 6.
1148 See OPASTCO-NTCA Comments at 9-10.
1149 See id. at 7.
1150 As indicated previously, the Commission has initiated a proceeding to examine certain concerns related to
retransmission consent. See Retransmission Consent NPRM, supra, n.144. See also supra, 51-55.
1151 See CenturyLink Comments at 45.
1152 See ACA Comments at 11.
1153 See CenturyLink Comments at 5.
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B.

Broadcast Television Stations

327.
Television markets containing rural populations tend to have fewer local full-power
stations than those comprised of urban areas. Consumers in smaller markets may also rely more on
multicasting than those in large markets for the delivery of major network programming such as that of
ABC, CBS, FOX, and NBC. As of November 2012, 49 of the 210 television markets had three or fewer
full-power commercial broadcast stations assigned to them. All of these markets are ranked below
100.1154 Combined, all 49 markets with three or fewer stations represent about 4.57 million television
households, or four percent of the estimated 114.2 television households nationwide as of the 2012-13
television season.1155 Of the 49 markets, 31 receive at least one of the four major networks via a digital
multicast signal.1156 Yet Nielsen estimates for 2012 that the percentages of households relying on over-
the-air distribution of broadcast stations are about the same in the four different categories of counties
9.3 percent in A Counties, or 4.19 million television households; 11.1 percent in B Counties, representing
3.97 million television households; and 9.4 percent, or 1.62 million in C Counties; and 9.6 percent, or
1.54 million in D Counties.1157

C.

OVDs

328.
As noted above, consumers need high-speed Internet access in order to have access to
OVDs' video content.1158 Unfortunately, many consumers in rural America lack access to this important
resource. The Commission's 2012 Rural Broadband Report found that 76.2 percent of the 19 million
Americans that still lack access to 3 Mbps/768 kbps or faster of fixed broadband service live in rural
areas, even though only 24 percent of all Americans reside in rural areas.1159 The Report also found that
close to three out of ten rural Americans 28.2 percent are without access to fixed broadband at
3 Mbps/768 kbps or faster, which is nine times larger than the three percent of Americans without access
in non-rural areas.1160 Additional data further indicates that rural consumers have fewer options with
respect to broadband technologies and providers than other consumers.1161

V.

KEY INDUSTRY INPUTS

A.

Content Creation and Aggregation of Video Programming

1.

Overview

329.
Major studios often develop and license television programs and movies. These studios
are typically subsidiaries of entertainment companies that also operate broadcast and/or cable
networks.1162 As noted in the 14th Report, the broadcast and cable networks of seven companies Disney,

1154 BIA, television station by market data, November 2012. DMA ranks and number of stations within each DMA
are not directly correlated.
1155 Nielsen Company, Local Television Market Universe Estimates, used throughout the 2012-2013 television
season.
1156 BIA, televisions station by market data, November 2012.
1157 Nielsen Company, Media Related TV Households and Penetrations by County Within DMA, 2012-2013
Universe Estimates
, November 2012. See also supra, n.138.
1158 See supra, 220.
1159 See FCC, EIGHTH BROADBAND PROGRESS REPORT, GN Docket No. 11-121, 27 FCC Rcd 10342 (2012).
1160 See id.
1161 See id.
1162 14th Report, 27 FCC Rcd at 8765, 360.
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News Corp., NBC Universal, Time Warner Inc., CBS, Viacom, and Discovery account for roughly 95
percent of all television viewing hours in the United States.1163 Of these, only Discovery does not operate
a major television or movie studio, though it does produce its own programming.1164 In addition, these
companies may produce programs for competing networks.1165 Independent studios, such as The
Weinstein Company, also produce television programming and movies for distribution.1166 Movie and
television studios generally retain the distribution rights for the programming they produce and
distribute.1167 Yet in some cases studios may distribute programs and movies on behalf of third parties for
a fee.1168
330.
Companies producing and distributing television programming and films face significant
risk. Studios must invest significant amounts of money prior to distributing the video programming for
public consumption. And revenues are dependent on public acceptance, which is difficult to predict.1169
Given this risk, individual networks increasingly produce more of their content in-house. The percentage
of series produced by an in-house production entity for the 2011 broadcast network fall lineup was: ABC,

1163 Craig Moffett et al., Weekend Media Blast: Why We Haven't Seen a Virtual MSO Yet, Bernstein Research, Jan.
27, 2012, at 2. See also 14th Report, 27 FCC Rcd at 8765, 360. News Corp. recently restructured and placed its
former media and entertainment assets in the publicly traded company 21st Century Fox. See Nathalie Tadena,
News Corp. Completes Split of Publishing, Entertainment Businesses, WALL ST. J., June 28, 2013, at
http://online.wsj.com/article/BT-CO-20130628-713636.html?mod=googlenews_wsj (visited July 1, 2013). In this
section, News Corp. refers to the company as it was structured prior to the split on June 28, 2013.
1164 In contrast, Sony Corporation ("Sony") operates a television and movie studio, but does not operate cable or
broadcast networks.
1165 For example, in 2012, News Corp.'s Twentieth Century Fox Television produced Modern Family for Disney's
ABC, The New Normal for Comcast's NBC, How I Met Your Mother for CBS, and Futurama for Viacom's Comedy
Central. News Corp., SEC Form 10-K for the Year Ended June 30, 2012, at 10 ("News 2012 Form 10-K").
1166 The Weinstein Co., About The Weinstein Company, http://weinsteinco.com/about-us/ (visited Oct. 1, 2012).
1167 For example, Warner Brothers Television Group ("WBTVG"), a subsidiary of Time Warner, develops and
produces television series (e.g., The Big Bang Theory, Mike & Molly and The Mentalist), reality-based entertainment
shows, and animation programs for Time Warner's cable networks and third parties. Time Warner Inc., SEC Form
10-K for the Year Ended December 31, 2012
, at 10 ("Time Warner 2012 Form 10-K"). In 2012, Warner Brothers
Entertainment Inc. ("Warner Bros."), another subsidiary of Time Warner, wholly financed the production,
marketing, advertising and distribution of eight films, while distributing nine films financed in whole or in part by
other parties. In most cases, Warner Bros. substantially retains the worldwide distribution rights for the movies. Id.
at 9.
1168 For example, in August 2012, DreamWorks Animation and News Corp.'s Twentieth Century Fox entered into a
five-year distribution deal. Under the deal, Twentieth Century Fox will receive an eight percent fee for the
theatrical, DVD, and international television distribution of DreamWorks Animation's movies. Twentieth Century
Fox will also receive a six percent fee for executing digital rentals. Brooks Barnes, DreamWorks Animation Leaves
Paramount for 20th Century Fox as Distributor
, N.Y. TIMES, Aug. 20, 2012,
http://mediadecoder.blogs.nytimes.com/2012/08/20/dreamworks-animation-leaves-paramount-for-20th-century-fox-
as-distributor/ (visited Oct. 1, 2012).
1169 See, e.g., Time Warner 2012 Form 10-K at 24; News 2012 Form 10-K at 31; Walt Disney Co., SEC Form 10-K
for the Year Ended September 29, 2012
, at 17 ("Disney 2012 Form 10-K"). According to Time Warner, the public
acceptance of the studios' content depends on many factors, including the availability of competing content, the
availability of alternative forms of leisure and entertainment time activities, studios' ability to develop strong brand
awareness and target key audience demographics, the amount and success of third-party retail promotional
partnerships, and studios' ability to anticipate and adapt to changes in consumer tastes and behavior on a timely
basis. Time Warner 2012 Form 10-K at 24.
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52 percent; CBS, 63 percent; The CW, 90 percent; FOX, 72 percent; and NBC, 74 percent. For 2012, the
respective figures were: ABC, 56 percent; CBS, 67 percent; The CW, 90 percent; FOX, 74 percent; and
NBC, 86 percent.1170 Industry observers and participants anticipate networks relying more on in-house
productions in order to retain control over their content, including OVD and VOD distribution.1171
331.
Broadcast Programming. Procuring television programming represents the primary
expense of broadcast networks 1172
.
Broadcast networks obtain their programming from several sources,
including in-house production studios, third-party studios, and sports leagues.1173 Premium sports
programming is the most expensive type of programming with reality and non-fiction programming being
the least expensive.1174 As indicated in the 14th Report, broadcast networks' programming expenses also
include the production of non-entertainment programming, such as news and public affairs.1175 SNL
Kagan estimates that programming costs for 12 nationally distributed English and Spanish-language
broadcast networks increased from approximately $12.7 billion in 2010 to $13.5 billion in 2012.1176
332.
Broadcast network programming is typically chosen several months ahead of any
scheduled air date. Every year major broadcast television networks begin the process by selecting
multiple television scripts for development into a pilot or sample episodes.1177 For the 2012 pilot season,

1170 WGAW Comments at 5. In order to increase competition and diversity in the media marketplace, WGAW asks
the Commission to require broadcast networks to devote at least 25 percent of their prime time schedules to
programming that is owned and produced by independent sources. WGAW Comments at 13. WGAW defines
independent producers as studios or production companies that are not owned or affiliated with a major broadcast or
cable network or an MVPD provider. Id.
1171 See, e.g., Spencer Wang, Shub Mukherjee, and Michael Senno, Entertainment Industry: Not All Cable
Networks Are Created Equal
, Credit Suisse, Jan. 31, 2012, at 34 ("Wang") ("[W]e believe that cable networks that
own more of their programming will have more control over their destiny. . . [E]ven if the total [number of MVPD
subscribers] declines, networks that own the programming that they air will be able to [earn revenue from] their
content by selling these rights to [OVDs]."); Time Warner 2012 Form 10-K at 31 ("[V]ertically integrated networks
could elect to buy more shows from their in-house production studios, driven in part by their desire to have more
control over digital rights."); Sony Kabushiki Kaisha (Sony Corporation), SEC Form 20-F for the Fiscal Year Ended
March 31, 2012
, at 33 ("[B]roadcast networks in the U.S. continue to produce their own shows internally."). Sony
remains the largest independent producer without a network connection. See SNL Kagan, Media Trends, 2012
Edition, at 258 ("SNL Kagan 2012 Media Trends"). AT&T claims in its comments that "[n]ow, more than ever,
content is king. And the entities that control popular content have greater leverage over content distributors than
ever before . . . . [C]ontent producers and owners have far greater ability to move markets and affect new video
distribution models (such as [OTT] video distribution) than do video distribution providers and broadband
providers." AT&T Comments at 2-3.
1172 14th Report, 27 FCC Rcd at 8767, 362.
1173 Id.
1174 Wang at 31.
1175 14th Report, 27 FCC Rcd at 8767, 362.
1176 SNL Kagan, TV Network Industry Benchmarks: Broadcast (2010-12) ("SNL Kagan Broadcast Benchmarks").
SNL Kagan defines programming expenses as the direct cost of creating, acquiring, and distributing content and
services. For the years 2010-12, SNL Kagan included financial data from CBS, ABC, NBC, FOX, The CW,
Univision, UniMs, Telemundo, ION, MyNetwork TV, Azteca America, and Estrella TV. See e.g., SNL Kagan, TV
Network Summary: Broadcast Networks by Programming Expenses ($000) (2010-12)
. See also SNL Kagan, Media
Trends
, 2011 Edition, at 20-21 ("SNL Kagan 2011 Media Trends"). NBC has higher costs in even years due to the
Olympics. Id. at 21.
1177 14th Report, 27 FCC Rcd at 8768, 363.
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studios produced approximately 88 pilots for the major broadcast networks. Of this amount, about half
were selected for the 2012-13 television season.1178 The networks usually buy 13 episodes of a weekly
series. If the show attracts a certain number of viewers, the networks maintain an option to complete the
television season by ordering an additional nine to 11 episodes.1179 Pilot costs have risen over time with a
drama pilot now costing $5.5 million on average and a comedy pilot costing $2 million on average.1180
Broadcast networks may also pay studios around $1.5 million to license a television show.1181
333.
As discussed in the 14th Report, broadcast networks' net operating revenues1182 are
primarily from selling advertising time during their network programming.1183 The amount of
commercial time and the rates advertisers pay are primarily dependent on the size of, and appeal to, the 18
to 49-year old adult audience the demographic group advertisers most covet.1184 Therefore, a decrease
in audience ratings may adversely affect a broadcast network's financial performance.1185 Between 2010
and 2011, net operating revenues for the broadcast television network industry declined slightly from
$15.4 billion to $15.3 billion. In 2012, net operating revenues increased to $17.3 billion.1186

1178 Deana Myers, CBS Ups Pilot Ordering, SNL KAGAN, Mar. 19, 2013; Anthony Ocasio, Complete Guide to 2012
Fall TV Shows What Will You Watch?
, SCREENRANT, June 2012, at http://screenrant.com/2012-fall-tv-show-
guide-aco-171944/ (visited Oct. 2, 2012). See also Lesley Goldberg, TV Pilots 2012: The Complete Guide,
HOLLYWOOD REP., Feb. 6, 2012, at http://www.hollywoodreporter.com/live-feed/tv-pilots-2012-complete-guide-
287221 (visited Oct. 2, 2012).
1179 14th Report, 27 FCC Rcd at 8768, 363.
1180 FilmL.A., Television Pilot Production Report (2012), at
http://www.filmla.com/uploads/2012%20FilmL.A.%20Television%20Pilot%20Production%20Report_1339527959.
pdf (visited Oct. 2, 2012).
1181 14th Report, 27 FCC Rcd at 8768, 363.
1182 Net advertising revenue is the total amount networks charge advertisers to carry their commercials net of
commissions charged to client companies by ad agencies to buy time on the networks, i.e., the revenues that
broadcast networks actually receive. Net operating revenue includes net advertising revenue plus all other sources
of revenues. See Table 36 (broadcast television network industry financial performance).
1183 14th Report, 27 FCC Rcd at 8768, 364.
1184 See News 2012 Form 10-K at 13.
1185 14th Report, 27 FCC Rcd at 8768-69, 364. Nevertheless, ABC increased its advertising rates between 2010
and 2011 for prime time programming despite a decline in prime time ratings. Walt Disney Co., SEC Form 10-K for
the Year Ended October 1, 2011
, at 30.
1186 SNL Kagan Broadcast Benchmarks. Increased total revenues for broadcast networks in even years are in part
due to NBC's airing of the Olympics. Political advertising tends to impact broadcast stations more than broadcast
networks because most political advertising is purchased on a regional basis (e.g., on a statewide basis for
gubernatorial and senatorial elections as well as presidential campaigns targeting swing states). In some cases
though, presidential campaigns will purchase advertising on broadcast networks. See 14th Report, 27 FCC Rcd at
8769, 364 n.1177.
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Table 36: Broadcast Television Network Industry Financial Performance

1187

Revenue

(in thousands)
2010
2011
2012
Gross Advertising
$17,686,894
$17,177,287 $18,865,666
Net Advertising
$15,033,860
$14,600,694 $16,035,816
Other Operating Revenue
$397,453
$683,268
$1,246,136

Net Operating Revenue

$15,431,313
$15,283,962 $17,281,952

Expenses

(in thousands)
2010
2011
2012
Operating SG &A
$2,362,948
$2,371,282
$2,386,526
Programming
$12,696,697
$12,281,262
$13,514,140
Network Compensation
$48,126
$25,098
$0

Total Operating

$15,107,771
$14,677,642
$15,900,953

Expenses

Cash Flow

(in thousands)
2010
2011
2012
Cash Flow
$323,542
$606,320
$1,381,499
Cash Flow Margin (%)
2.10%
3.97%
7.99%
334.
A studio may not profit from a television series during its initial airing on a broadcast
network. The network license fee for an episode is typically lower than the production costs.1188 Studios
therefore hope to earn a profit in subsequent distribution windows for the episodes. To achieve this
objective, studios distribute their programming via syndication to broadcast television stations and/or
cable networks, DVD and Blu-ray release, international distribution, and online distribution.1189 The 14th
Report
indicates the performance of a television series in later distribution windows is highly correlated
with the ratings of its initial broadcast.1190 But a television series must usually air for at least three to four
years on a broadcast network before it is suitable for domestic syndication.1191 The most popular network

1187 SNL Kagan Broadcast Benchmarks. The financial metrics contained in the tables for this section represent the
year-end estimates of SNL Kagan.
1188 CBS Corp., SEC Form 10-K for the Year Ended December 31, 2012, at I-3.
1189 14th Report, 27 FCC Rcd at 8769, 365.
1190 Id. at 8769-70, 365.
1191 Id. at 8770, 365. See also SNL Kagan 2012 Media Trends at 252 ("A broadcast network series generally
needs to have aired at least 100 episodes to be profitable in syndication, a point typically reached in season five.").
Yet in June 2012, Warner Bros. Television Group ("WBTVG") sold both the broadcast station and cable network
syndication rights of its show Two Broke Girls after the show's first season. TBS agreed to pay a record-breaking
$1.6 million per episode for the show (all-time high for a sitcom selling to a cable network), which will begin airing
on the network in 2015. CBS bought the broadcast station rights for the show and will also begin airing it in 2015.
See SNL Kagan 2012 Media Trends at 251; Cynthia Littleton, `2 Broke Girls' Pact Makes CBS an Off-Net Player,
VARIETY, June 20, 2012, at http://www.variety.com/article/VR1118055763/?refcatid=4076 (visited Jan. 9, 2013).
While trade publications may refer to Warner Brothers Television Group as "WBTV," Time Warner, Inc. uses the
acronym "WBTVG."
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television series are sold to both broadcast television stations and cable networks.1192 Not all television
series though are appropriate for every type of subsequent distribution.1193 With respect to the syndication
market, broadcast stations and cable networks prefer television series with episodes having self-contained
storylines; this gives them the flexibility to schedule episodes out of sequence.1194 In the past, studios
primarily sold television comedies to broadcast television stations. But as cable networks have earned
higher programming fees from MVPDs, their programming budgets have increasingly enabled them to
bid for both broadcast network comedies and dramas.1195

Table 37: Television Studio Revenue Streams

1196
(Revenue in millions)
2010
2011
2012
Broadcast Network
$12,693
$12,441
$13,958
Syndication (Cash)
$3,227
$3,090
$3,018
Syndication (Gross Barter)
$2,813
$2,756
$2,640
Basic Cable Networks/RSNs
$22,460
$24,766
$26,744
(Cash)
Premium Cable TV Domestic
$2,989
$3,210
$3,356

Total Domestic

$44,182
$46,264
$49,716

Total International

$10,555
$10,951
$11,370

Total TV Programming

$54,737
$57,215
$61,086
335.
Cable Programming. Cable networks operate similarly to broadcast networks. Like
broadcast networks, programming costs also represent a significant expense for cable networks; and cable
networks license programming from in-house production studios, third-party studios, and sports
leagues.1197 SNL Kagan estimates that basic cable networks' programming expenses were approximately
$22 billion in 2011, representing 44.4 percent of the total $49.6 billion in net operating revenues for cable
networks. Programming expenses rose to $24 billion in 2012, representing 45.7 percent of the $52.5
billion in net operating revenues for cable networks.1198 As explained in the 14th Report, on average, an

1192 Deana Myers, Off-Network Deals Continue to Break Records, SNL KAGAN, July 9, 2012.
1193 Generally, reality television programming maintains little syndication value. Rights holders therefore provide
entire seasons online for consumer viewing. 14th Report, 27 FCC Rcd at 8770, 365 & n.1185.
1194 Id. at 8770, 365.
1195 Id. For instance, WBTVG announced in July 2012 that News Corp.'s FX Network had agreed to pay $750,000
per episode for its show Mike & Molly. Episodes of Mike & Molly will begin airing on FX in September 2014. See
SNL Kagan 2012 Media Trends at 251; Michael O'Connell, `Mike & Molly' Heads to Syndication on FX in 2014,
HOLLYWOOD REP., July 3, 2012, at http://www.hollywoodreporter.com/live-feed/mike-molly-syndication-fx-2-
broke-girls-344620 (visited Jan. 9, 2013).
1196 See SNL Kagan 2011 Media Trends at 196 (data for 2010-12).
1197 14th Report, 27 FCC Rcd at 8771, 366.
1198 SNL Kagan, TV Network Industry Benchmarks: Basic Cable Networks (2010-12) ("SNL Kagan Basic Cable
Benchmarks"). Sales, general, and administrative expenses ("SGA") represent the other major expense for
broadcast and cable networks. 14th Report, 27 FCC Rcd at 8771, 366 n.1188.
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hour-long, scripted cable drama is produced at a lower cost compared to a broadcast drama
approximately $2 million per episode. Cable networks also tend to pay lower licensing fees than
broadcast networks about $1 million per episode.1199 A studio's return on investment though may be
less for a popular cable network program compared to a broadcast network program because the former is
likely to receive a smaller audience viewership during its original airing.1200 In addition, cable network
series consist of 10 to 13 episodes per season compared with 22 to 24 episodes for a broadcast network
programs.1201
336.
Basic cable networks remain the primary source of profit for entertainment
conglomerates.1202 The 14th Report notes that basic cable networks earn revenues primarily from two
sources advertising and MVPD license fees paid on a per subscriber basis. Subscriber fees though
continue to be more lucrative for basic cable networks.1203 In 2011, basic cable networks earned about

1199 14th Report, 27 FCC Rcd at 8771, 366. Yet in September 2012, Fox 21, a division of News Corp.'s Fox
Entertainment Group, reached an agreement to pay $6 million to produce actress Renee Zellweger's "Cinnamon
Girl" television pilot for Lifetime Networks. Lifetime licensed the U.S. television rights and plans to pay half the
production costs. This deal is described as the highest cost ever for a basic cable network pilot. Liza Foreman, Fox
21 Pays $6M for Renee Zellweger `Cinnamon Girl' Pilot for Lifetime
, THE WRAP, Sept. 21, 2012, at
http://www.thewrap.com/tv/column-post/fox-21-lifetime-pay-6m-renee-zellweger-cinnamon-girl-pilot-exclusive-
57616 (visited Oct. 9, 2012).
1200 14th Report, 27 FCC Rcd at 8771, 366. Yet the third season premiere of AMC's The Walking Dead in October
2012 delivered close to 11 million total viewers. AMC's CEO Joshua Sapan explained, "[t]he premiere was the
most-watched drama in basic cable history . . ., and with the exception of Sunday Night Football, outperformed all
of broadcast TV for the week in [the] key adult 18 to 49 [demographic]." Sarah Barry James, Part 2: The Cable
Effect and Broadcast Ratings
, SNL KAGAN, Nov. 14, 2012.
1201 Bill Carter, Embracing Cable's Concept of Opening Night, N.Y. TIMES, Jan. 15, 2012, at
http://www.nytimes.com/2012/01/16/business/media/networks-embrace-cables-way-of-introducing-new-shows.html
(visited Oct. 31, 2012). Cable networks generally air a television show's episodes consecutively with no pre-
emptions or repeats, while broadcast networks spread the episodes out over a period of nine months. Id. Broadcast
network executives have indicated an interest in shifting more broadcast television shows to the 10 to 13 episode
model. Id. For the 2012-13 television season, NBC has taken this approach with respect to its 30 Rock and
Parenthood televisions shows; 30 Rock will only air for 13 episodes and Parenthood for 15. The 13 episodes of 30
Rock
will guarantee that it continues to make a profit for NBC in syndication. Bill Carter, `30 Rock' Will Return,
but Only for 13 Episodes, NBC Says
, N.Y. TIMES, May 10, 2012, at
http://mediadecoder.blogs.nytimes.com/2012/05/10/30-rock-will-return-but-only-for-13-episodes-nbc-says/ (visited
Oct. 9, 2012). Fox has also taken this approach with respect to its television show Fringe. Bill Carter, Fox Renews
`Fringe', Defining Ratings Success Down
, N.Y. TIMES, Apr. 27, 2012, at
http://mediadecoder.blogs.nytimes.com/2012/04/27/fox-renews-fringe-defining-ratings-success-down/ (visited Oct.
9, 2012).
1202 14th Report, 27 FCC Rcd at 8771, 367. Unlike basic cable networks, premium cable networks are typically
only available to subscribers for an additional fee, are commercial-free, and offer specialized programs including
unedited movies, original series, and sporting events. Id.
1203 Id. In some instances, entertainment conglomerates tie their less popular or newer basic cable networks with
their more popular broadcast and cable networks when negotiating programming agreements with MVPDs, which
impacts the fees MVPDs must pay for all the networks. In February 2013, Cablevision Systems Corp. filed a
complaint against Viacom International Inc. regarding a programming agreement the two companies signed in
December 2012. Specifically, Cablevision's complaint alleges that Viacom violated antitrust law by coercing it to
sign the agreement. According to the complaint, Viacom required Cablevision to either distribute fourteen lesser
known channels as a condition for access to Viacom's most popular channels, which include Comedy Central,
MTV, BET, and Nickelodeon, or pay a one billion dollar penalty. The case is currently pending in a New York
federal district court. See Complaint at 1-2, Cablevision Systems Corp. v. Viacom International Inc., No. 13 Civ.
(continued....)
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$21 billion in net advertising revenues and approximately $22 billion in net advertising revenues in
2012.1204 With respect to subscriber fees, basic cable networks earned about $27 billion in 2011 and
almost $29 billion in 2012.1205 While established cable networks require MVPDs to pay subscriber fees,
newer networks typically pay MVPDs for carriage.1206 The top networks enjoy relatively high per
subscriber license fees. Yet less viewed cable networks, even those that are well-established, might
receive only a few pennies per month per subscriber. For example, in 2012 ESPN charged $5.04 per
month per subscriber (up from $4.77 in 2011). Comparatively, 3net1207 the most expensive non-sports
network charged $1.29 in 2012 (up from $1.25 in 2011); MTV charged $0.40 in 2012 (up from $0.37 in
2011).1208
(Continued from previous page)
01278 (S.D.N.Y. Feb. 26, 2013); see also Jonathan Stempel, Cablevision: Viacom Made $1 Billion Threat Over
Bundling
, REUTERS, Mar. 7, 2013, at http://www.reuters.com/article/2013/03/08/us-viacom-cablevision-
idUSBRE9261DR20130308 (visited June 26, 2013).
1204 SNL Kagan Basic Cable Benchmarks.
1205 Id. Basic cable networks earned approximately $1.9 billion in additional operating revenue in both 2011 and
2012. Id. This revenue may include ancillary revenues from consumer product licensing, brand licensing, home
entertainment sales of programming, and syndication or international distribution. 14th Report, 27 FCC Rcd at
8771-72, 367 n.1194.
1206 14th Report, 27 FCC Rcd at 8771-72, 367.
1207 3net is a 24/7 3D network that is jointly owned by Sony, Discovery, and IMAX Corporation. The network was
launched on February 13, 2011. See 3D NETCO LLC, http://www.3net.com/about (visited Oct. 10, 2012).
1208 SNL Kagan, TV Network Summary: Basic Cable Network by Affiliate Revenue Per Avg Sub/Month (2010-12).
Other networks (e.g., FamilyNet and ReelzChannel) do not charge MVPDs subscriber fees. Id.
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Table 38: Basic Cable Network Financial Performance

1209

Revenue

(in thousands)
2010
2011
2012
Gross Advertising
$22,500,242
$24,556,746
$25,741,814
Net Advertising
$19,167,706
$20,875,178
$21,879,906
Subscriber Fees
$24,896,827
$26,894,388
$28,755,095
Other Operating Revenue
$1,379,891
$1,879,877
$1,876,770

Net Operating Revenue

$45,444,424
$49,649,443
$52,511,771

Expenses

(in thousands)
2010
2011
2012
Operating
$6,751,451
$7,040,544
$7,235,007
SG&A
Programming
$20,059,977
$21,957,461
$24,176,248

Total

$26,811,428
$28,998,004
$31,411,256

Expenses

Cash Flow

(in thousands)
2010
2011
2012
Cash Flow
$18,633,068
$20,650,211
$21,100,724
Cash Flow Margin (%)
41.0%
41.6%
40.2%
337.
Movies. As detailed in the 14th Report, the production, distribution, and marketing of
movies require significant expenditures over an extended period of time.1210 The production process for a
movie involves several components, including securing financing for the film, development of a
screenplay, assembling the artistic and technical staff, and the post-filming editing/post-production
process.1211 Studios will often distribute their own movie productions, but may acquire movies from
content creators for theatrical release and/or other distribution outlets.1212 Feature films typically are
produced for initial distribution in theaters, followed by distribution in ancillary windows, such as home
entertainment distribution (e.g., DVDs and Blu-ray discs), digital downloads, and pay television
distribution.1213
338.
Studios do not typically profit on a movie until well after its theatrical run. The cost of
producing and marketing films has significantly increased in recent years, outpacing domestic theater
revenues.1214 The 14th Report explains that on average, six or seven out of ten major theatrical movies are

1209 See SNL Kagan Basic Cable Benchmarks.
1210 14th Report, 27 FCC Rcd at 8773, 368.
1211 Id.
1212 Id.
1213 Id. See also Lions Gate Entertainment Corp., SEC Form 10-K for the Year Ended March 31, 2012, at 19-23.
1214 14th Report, 27 FCC Rcd at 8773, 369. Viacom and Disney, for instance, base estimates on a movie's ultimate
revenue from all distribution windows within ten years of the movie's initial release. See Viacom Inc., SEC Form
10-K for the Year Ended September 30, 2012
, at 65; Disney 2012 Form 10-K at 49.
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unprofitable, with one potentially breaking even.1215 Studios mitigate this risk by partnering with
premium cable networks; these networks spend hundreds of millions of dollars in advance to license a
specified number of airings of a studio's movie catalog (in some cases exclusively) for up to nine
years.1216 In turn, the premium networks retain the allegiance of MVPDs their primary customers.
Studios negotiate license fees based on the theatrical performance of the movies in the catalog. SNL
Kagan estimates that in 2012 premium networks spent 61.7 percent ($1.95 billion) of their programming
budgets on movies, compared with 38.3 percent ($1.21 billion) on original programming.1217 In 2011,
premium networks spent 62.3 percent ($1.89 billion) of their programming budgets on movies, compared
with 37.7 percent ($1.14 billion) on original programming.1218 On average, approximately 25 percent of
the retail price MVPDs charge consumers for premium networks goes to the movie studios.1219
339.
The largest source of domestic revenue for studios is the home entertainment distribution
of movies, although the proportion of such revenue has declined in the last couple of years.1220 In 2012,
SNL Kagan estimates that the home video window accounted for 29 percent ($6.4 billion) of movie
studios' domestic revenue. In 2011, it accounted for 32 percent ($7.0 billion).1221 This type of
distribution includes the sale and/or lease of DVDs and Blu-ray discs to wholesalers and retailers who in
turn sell or rent them to consumers. Studios also continue to distribute their content for individual rental
through such companies as Redbox or via subscription services such as Netflix.1222 Given the decline in
home distribution sales, large retailers of DVDs and Blu-rays must now contend with movies being
released in all distribution windows at the same time. In 2011, on average, movies appeared on pay-per-
view/VOD 16 days before debuting on DVDs/Blu-rays; in 2010 movies were released on pay-per-
view/VOD an average of four days after they were available on disc.1223
340.
Despite the decline in home distribution sales, studios are receiving increasing revenues
from pay-per-view/VOD services. For 2012, SNL Kagan estimates studios earned $1.3 billion in
revenues from pay-per-view/VOD transactions, representing six percent of movie studios' total domestic
revenues. In 2011, studios received $1.2 billion from these transactions, accounting for 5.6 percent of
movie studios' total domestic revenues that year.1224 In general, a pay-per-view/VOD transaction is about

1215 14th Report, 27 FCC Rcd at 8773, 369.
1216 Id.
1217 SNL Kagan 2012 Media Trends at 205.
1218 Id.
1219 14th Report, 27 FCC Rcd at 8774, 369.
1220 Studios attribute the decline in DVD sales to several factors, including the general economic downturn, the
availability of subscription services and discount kiosks, the maturation of the standard definition DVD format,
piracy, and the declining popularity of catalog titles. Id. at 8782, 384.
1221 See Table 39 (movie picture studio revenue stream).
1222 14th Report, 27 FCC Rcd at 8774-75, 370.
1223 Wade Holden, Video-to-PPV/VOD Window a Thing of the Past, SNL KAGAN, Mar. 29, 2012. Movies that
grossed $9.9 million or less at the box office were on VOD an average of 34 days before they were released on disc.
Yet movies that grossed more than $100 million maintained a four-day pay-per-view/VOD window in 2011
compared to a nine-day window in 2010. SNL Kagan 2012 Media Trends at 215.
1224 See Table 39 (movie picture studio revenue stream).
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seven times more profitable for a studio than a DVD rental transaction at a discount kiosk such as Redbox
or from a subscription service such as Netflix.1225
341.
Movie studios have experimented with releasing movies in theaters and on VOD
simultaneously, a "premium VOD" window, but their strategies vary.1226 While some independent
studios, such as IFC Films and Magnolia, make simultaneous VOD and theater a part of their standard
distribution plans, studios releasing major movies have hesitated, in part because of the concern about
cannibalizing revenues from the theatrical release window as well as resistance from theater owners.1227
Theater owners have threatened to pull movies if studios choose to release a movie in VOD too close to
the theatrical release.1228 Several major theater chains also have refused to book movies that are released
simultaneously on VOD.1229

1225 Time Warner, Inc., Presentation to Morgan Stanley Technology, Media & Telecom Conference, Corrected
Transcript, Feb. 29, 2012, at 4. An electronic sell-through transaction (i.e., an iTunes movie purchase) is 20 to 30
times more profitable than a discount kiosk or subscription transaction. Id.
1226 In the fall of 2011, Lionsgate distributed the movie Margin Call in theaters and VOD for the price of $6.99,
theorizing that audiences in smaller markets might be less inclined or able to watch it in theaters, earning almost $6
million in theatrical revenues and more than $4 million in VOD revenues. Sarah Barry James, Lionsgate Exec
Opens Up About New Windows, Summit Deal
, SNL KAGAN, Jan. 30, 2012. See also Pat Saperstein, `Margin Call'
Changes VOD Picture
, VARIETY, Dec. 18, 2011, http://www.variety.com/article/VR1118047677 (visited Nov. 15,
2012) ("Saperstein"). Some industry executives consider the results of Lionsgate's experiment with Margin Call to
be a "game changer." Id.
1227 Saperstein.
1228 Deana Myers, Premium VOD Draws Healthy Results for `Margin Call', SNL KAGAN, Nov. 30, 2011. For
example, Universal Studios halted its plan to make the movie Tower Heist available via VOD three weeks after its
theater debut due to resistance from theater owners. David Lieberman, Universal Halts `Tower Heist' VOD Plan as
Exhibitors Agree to Further Talks
, DEADLINE, Oct. 12, 2011, http://www.deadline.com/2011/10/universal-halts-
tower-heist-vod-plan/ (visited Nov. 27, 2012).
1229 Saperstein.
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Table 39: Motion Picture Studio Revenue Streams

1230
(Revenue in millions)
2010
2011
2012

Domestic:

Theatrical Rentals
$5,612
$5,574
$5,613
Home Video
$7,879
$6,986
$6,365
PPV/VOD
$1,152
$1,231
$1,323
Premium Cable TV
$1,866
$1,889
$1,950
Digital
$957
$1,617
$2,013
Basic Cable
$2,769
$2,857
$2,960
Broadcast Networks
$292
$246
$227
TV Syndication
$173
$178
$183
Other1231
$1,226
$1,253
$1,305
Total Domestic:
$21,927
$21,830
$21,939
Total International:
$25,076
$24,867
$24,886
Total:
$47,003
$46,696
$46,805
342.
Sports. As explained in the 14th Report, professional and collegiate leagues license the
rights of major sporting events to broadcast networks or stations as well as to cable networks such as
ESPN. In some cases, sports leagues or teams operate their own regional or national cable networks (e.g.,
the NFL Network, the MLB Network, and the Mid-Atlantic Sports Network (owned by the Baltimore
Orioles and Washington Nationals MLB teams)).1232 There also are many RSNs that are affiliated with
entertainment conglomerates, such as Fox or Comcast.1233 We estimate that there are 119 RSNs in
operation today.1234 Broadcast networks and stations typically use their own equipment and facilities to
produce sports programming and then earn revenue by selling advertising and sponsorships. In some
instances, broadcast networks negotiate with independent production companies for "time buys" an

1230 Wade Holden, Digital Delivery Closing Gap in Distributor Revenue, SNL KAGAN, Sept. 25, 2012, at 3-4. See
also
SNL Kagan 2012 Media Trends at 173-74.
1231 "Other" includes hotel, airline and merchandise licensing.
1232 14th Report, 27 FCC Rcd at 8775, 371.
1233 Id. See also infra, App. C, Table C-1. News Corp. announced in November 2012 that it had entered an
agreement with Yankee Global Enterprises to acquire a 49 percent equity stake in the YES Network. The YES
Network is an RSN delivering live local coverage of the New York Yankees MLB baseball team and the Brooklyn
Nets NBA basketball team. After three years, News Corp. may acquire an additional stake in the YES Network to
raise its ownership interest to 80 percent. See News Corp., News Corporation and Yankee Global Enterprises
Announce News Corporation's Acquisition of An Equity Stake in the YES Network
(press release), Nov. 20, 2012, at
http://www.newscorp.com/news/news_548.html (visited Nov. 20, 2012) ("News Corp.-Yankees Press Release").
On December 28, 2012, News Corp. also purchased SportsTime Ohio, an RSN that airs various professional,
collegiate, and high school sports games to more than 5 million homes in Ohio and parts of Kentucky, Indiana, West
Virginia, and western Pennsylvania and New York. Derek Baine, New Corp. Expands Its Ohio RSN Franchise,
SNL KAGAN, Jan. 2, 2013.
1234 See infra, App. D. See also 2012 Program Access Order, 27 FCC Rcd at 12698, App. G, Table 1 (this figure
includes terrestrially and satellite-delivered RSN networks as well as the HD feeds of the networks).
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agreement in which an independent producer pays the production costs and acquires the advertisers, while
the network supplies the on-air talent.1235
343.
Sports programming continues to be a distinct form of programming in comparison to
movies and other types of television programming. First, it is easier to predict audience and advertiser
interest with sports programming, especially for marquis events. Major sporting events including the
championship games for professional football, baseball, and basketball, the Olympics, and championship
games for certain NCAA sports consistently generate among the highest ratings of any programming,
especially among those in the demographics most desirable to advertisers, including the 18-to-35 male
demographic.1236 Nielsen has also found that sports programming is the least time-shifted genre of
television programming. According to Nielsen, in 2012, the 18-49 demographic watched nearly all of
sports television programming live or within the same day if airing.1237 Therefore, major sporting events
are typically viewed as "premium" programming. This has led broadcast and cable networks to pay
increasingly large amounts to sports teams for television rights.1238 Second, sporting events tend to have
little value beyond their initial telecast because there is very little interest in an event once the results are
known. Ancillary markets for sports programming are thus limited with the exception of websites
providing fans with additional opportunities for interaction.1239
344.
Professional sports leagues continue to license their programming for video distribution
in a variety of manners. For instance, the NFL only negotiates media rights with national networks.1240
This strategy remains lucrative for the NFL as its programming is believed to be the most valuable on
air.1241 In 2011, CBS, FOX, NBC, and ESPN paid nearly $40 billion for the right to air NFL games

1235 14th Report, 27 FCC Rcd at 8775-76, 371.
1236 Id. at 8776, 372. See also SNL Kagan 2012 Media Trends at 108; Hina Nawaz, Sports Coverage Builds
Rating Strength for NBC Sports Network, FUEL TV
, SNL KAGAN, Oct. 19, 2012 (explaining that the NBC Sports
Network and FUEL TV experienced ratings growth due to the Olympics and the Ultimate Fighting Championship,
respectively). The Olympics are also credited for increasing the ratings for NBC's 2012 fall broadcast television
shows. See James M. Ratcliffe et al., U.S. Cable & Satellite Communications 3Q Preview: Steady As She Goes,
Barclays, Oct. 23, 2012, at 11 ("NBC leveraged the momentum during the Olympics to heavily promote its new
shows this fall. . . .") ("Ratcliffe Report").
1237 Nielsen, State of the Media: 2012 Year in Sports, at 3, http://www.nielsen.com/us/en/reports/2013/state-of-the-
media--2012-year-in-sports.html (visited May 8, 2013).
1238 14th Report, 27 FCC Rcd at 8776, 8777, 372, 375. Broadcast and cable networks often pay for the television
rights and production costs using subscriber fees charged to MVPDs and/or contributions from broadcast affiliates.
Id. at 8777, 375. While some sports rights moved from broadcast to cable in recent years, broadcast retains select
sports leagues, such as the NFL, and major sporting events. Deana Myers, Sports Rights: Paying Off for
Broadcast?
, SNL KAGAN, Feb. 7, 2012. News Corp.'s President and COO, Chase Carey stated, "in a world that has
more and more choices and more and more technologies, we think sports become ever increasingly valuable." Sarah
Barry James, Sports Becoming Even More Important for News Corp., SNL KAGAN, Nov. 6, 2012.
1239 14th Report, 27 FCC Rcd at 8776, 372. According to Nielsen, the mobile web audience among sports sites
increased by 22 percent from November 2010 to November 2011. Nielsen, State of the Media: 2011 Year in Sports
at 2, http://www.nielsen.com/us/en/insights/reports-downloads/2012/state-of-the-media--2011-year-in-sports.html
(visited Oct. 22, 2012). In September 2011, 25 percent of mobile web users 18 and over visited a sports site with
27.8 percent of those visiting NFL.com. NFL.com therefore received approximately seven percent of all mobile
web traffic for those 18 and over. Id. at 5.
1240 Each team in the NFL receives an equal share of the broadcast and licensing revenues and 40 percent of gate
receipts from away games. Thus, the most profitable NFL team generally earns only 20 percent more gross
revenues than the least. 14th Report, 27 FCC Rcd at 8776-77, 373.
1241 Anthony J. DiClemente & Chris Merwin, Who Bears the Burden of Higher Sports Rights Costs, Barclays
(continued....)
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through the 2021 season. For the broadcast networks, these deals represent a price increase of just below
60 percent over the previous agreements expiring at the end of the 2013 season. With respect to ESPN,
its deal represents a 70 percent increase in price from the previous agreement. Under the new agreement
though, ESPN has the right to air 500 new hours of NFL-branded programs and air games in 144
countries. The new agreement also retains ESPN's right to allow its subscribers to view NFL
programming online.1242
345.
In the 14th Report we explained that unlike the NFL's licensing fees, licensing fees for
MLB and the NBA are closely associated with the size of the team's market and individual team
performance.1243 Historically, the NBA and MLB have not depended on national television revenue as
much as the NFL, partially because NBA and MLB teams play significantly more games in their home
markets. In addition, while some NBA and MLB games are carried by national networks, professional
basketball and baseball games are more likely to be carried on RSNs because the NBA and MLB allow
individual teams to negotiate contracts for local broadcast rights.1244 In 2012, the MLB reached an eight-
year deal with FOX, TBS, and ESPN that allows MLB games to air on these respective networks through
the 2021 season; the three deals have a total value of $12.4 billion. Under the agreement, FOX will retain
the World Series and All-Star Game. While the terms of ESPN's agreement remain similar to its previous
agreement, ESPN received some additional rights, including a wild-card game during the postseason.1245
346.
MLB and NBA teams also continue to receive major contracts for their television
rights.1246 In the spring of 2012, the San Diego Padres playing in the 26th-largest baseball market
signed a 30-year television agreement with FOX Sports San Diego valued at $1.2 billion.1247 Similarly,
the New York Yankees and the YES Network announced an agreement in November 2012 that provides
the network with the television rights to the Yankees through 2042; the Yankees will reportedly receive
about $350 million a year for its rights.1248 With respect to the NBA, in February 2011, Time Warner
Cable signed a 20-year, $3 billion agreement with the Los Angeles Lakers to launch two RSNs one in
(Continued from previous page)
Capital, Jan. 27, 2012, at 1 ("DiClemente Report").
1242 Id. at 2-3.
1243 14th Report, 27 FCC Rcd at 8777, 374.
1244 Id.
1245 Mark Newman, MLB Reaches Eight-Year Agreement with FOX, Turner, MLB.COM, Oct. 2, 2012, at
http://mlb.mlb.com/news/article.jsp?ymd=20121002&content_id=39362362&vkey=news_mlb&c_id=mlb (visited
Nov. 13, 2012); Deana Myers, ESPN Doubles Fees Paid for MLB, SNL KAGAN, Aug. 29, 2012.; Mark Newman,
MLB, ESPN Agree on Record Eight-Year Deal, MLB.COM, Aug. 28, 2012, at
http://mlb.mlb.com/news/article.jsp?ymd=20120828&content_id=37476712&c_id=mlb&vkey=news_mlb (visited
Nov. 13, 2012).
1246 See 14th Report, 27 FCC Rcd at 8777, 374. See also Bob Nightengale, Cash Flows Through MLB Cable
Outlets
, USA TODAY, Feb. 10, 2012, at http://usatoday30.usatoday.com/SPORTS/usaedition/2012-02-10-MLB-TV-
cover-0210_CV_U.htm (visited Nov. 15, 2012) ("Nightengale").
1247 Nightengale; Padres Sale Agreement in Place, Needs MLB Approval, CBSSPORTS.COM, Aug. 7, 2012, at
http://www.cbssports.com/mlb/story/19743586/padres-sale-agreement-in-place-needs-mlb-approval (visited Oct. 24,
2012). MLB believes these TV deals will help provide greater parity in the sport. See Nightengale.
1248 Andy Fixmer & Scott Soshnick, YES Network Said to Extend Yankees Rights Through 2042, BLOOMBERG, Nov,
20, 2012, at http://www.bloomberg.com/news/2012-11-20/yes-network-said-to-extend-yankees-rights-through-
2042.html (visited Nov. 20, 2012). See also News Corp.-Yankees Press Release.
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English and the other in Spanish built around the team; other teams have also signed major contracts
with RSNs in recent years.1249
347.
MVPDs maintain that increases in programming costs are attributable in part to the rising
fees for sports programming.1250 Analysts remain uncertain about the ability of RSNs, ESPN, and other
networks to place the increasing costs of sports programming on MVPDs and their subscribers.1251 To
combat this trend, some MVPDs have begun to place sports programming on a separate tier given the
growing potential for subscribers to terminate or scale back on their MPVD subscriptions.1252 And in the
fall of 2012, DIRECTV began requiring new subscribers who live in areas with more than one RSN, such
as New York or Los Angeles, to pay a $3 monthly sports surcharge if they want access to the RSNs.1253
2.

Distribution Strategies

348.
As previously discussed, technology continues to evolve and provide alternative methods
for the distribution, storage, and consumption of video content. Alternative distribution of video content

1249 Mike Reynolds, TWC's Lakers Deal Changes Game, MULTICHANNEL NEWS, Feb. 21, 2011. The agreement
made the Los Angeles Lakers the most valuable team within the league. Kurt Badenhausen, L.A. Lakers Top 2012
List of the NBA's Most Valuable
Teams, FORBES, Jan. 25, 2012,
http://www.forbes.com/sites/kurtbadenhausen/2012/01/25/the-nbas-most-valuable-teams/ (visited Nov. 27, 2012).
TWC launched these two RSNs on October 1, 2012. These networks are respectively named Time Warner Cable
SportsNet and Time Warner Cable Deportes. See Ratcliffe Report at 14.
1250 See, e.g., Comcast Corp., SEC Form 10-K for the Year Ended December 31, 2012, at 31; Time Warner Cable
Inc., SEC Form 10-K for the Year Ended December 31, 2012, at 20; DIRECTV, SEC Form 10-K for the Year Ended
December 31, 2012
, at 21; DISH Network Corp., SEC Form 10-K for the Year Ended December 31, 2012, at 56.
See also Sarah Barry James, Sports Rights: How Much Higher Can They Go?, SNL KAGAN, Dec. 17, 2012
(identifying the concerns of Matthew Polka, CEO of ACA, whose "primary complaint is that every pay TV
subscriber regardless of whether they watch sports is forced to shoulder the costs of these deals.").
1251 DiClemente Report at 7 ("[W]e expect the distributors will attempt to pass increasing sports rights costs onto the
consumer, a successful strategy in the past but one that may be met with more stringent resistance this time around
. . ."). See also Craig Moffett et al., U.S. Telecom, Cable & Satellite Monday Chart: The "Something's Gotta
Give" Chart of Programming Expense
, Bernstein Research, Oct. 1, 2012, at 1-2; Adam Swanson, Sports Content
Continues to Bolster License Fees in 2011
, SNL KAGAN, Sept. 10, 2012 (explaining that sports rights are one of the
biggest factors to increase the license fees for cable networks).
1252 Cox Communications offers an economy package for $35 a month that includes several basic cable networks,
but excludes ESPN and RSNs. Comcast and Time Warner Cable have also tested and offered similar tiers. Deborah
Yao, Cox Rolling Out Economy Cable TV Tier, SNL KAGAN, Jan. 24, 2012. DISH Network in contrast to
DIRECTV has reportedly considered dropping ESPN if it does not agree to be distributed on a separate sports tier
in order to reduce the cost for subscribers who are non-sports fans. In New York, DISH Network dropped three
RSNs SportsNet New York, YES, and MSG Plus. Derek Baine, Dish to Dump ESPN?, SNL KAGAN, Sept. 13,
2011. In 2012, Dish Network let its agreement with the Big Ten Network expire. Adam Rittenberg, Agreement
Expires Between BTN, Dish
, ESPN.COM, Sept. 15, 2012, at
http://espn.go.com/blog/bigten/post/_/id/58512/agreement-expires-between-btn-dish (visited Oct. 24, 2012).
1253 Joe Flint, DirecTV Adds Local Sports Surcharge for Some New Subscribers, L.A. TIMES, Dec. 10, 2012, at
http://articles.latimes.com/2012/dec/10/entertainment/la-et-ct-directv-sports-surcharge-20121210 (visited May 13,
2013). See also Adam Swanson & Derek Baine, Multichannel Operators Put Their Own Spin on Sports Rights
Costs
, SNL KAGAN, Dec. 21, 2012. In early 2013, Cablevision and Verizon's FiOS TV announced they would also
begin adding a monthly sports surcharge to several of their customers' bills. Alex Sherman, Cablevision to Charge
Customers Sports Fee in Cable Packages
, BLOOMBERG, Feb. 21, 2013, at http://www.bloomberg.com/news/2013-
02-21/cablevision-to-charge-customers-sports-fee-in-cable-packages.html; Todd Spangler, Verizon to Tack on RSN
Fee to FiOS TV
, MULTICHANNEL NEWS, Jan. 25, 2013, at http://www.multichannel.com/telco-tv/verizon-tack-rsn-
fee-fios-tv/141384.
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entails an evolution of rights and strategic business decisions among the networks, their affiliates, and the
studios, which we discussed extensively in the 14th Report and update here.1254
349.
In January 2012, for example, Disney reached an agreement with Comcast that enables
Comcast's Xfinity customers to watch ABC shows live, on demand, and across multiple devices.1255 The
agreement covers Disney's cable networks, ABC, and ABC's O&Os.1256 In November 2012, Cablevision
and NBCUniversal signed a long-term affiliation agreement that covers NBCUniversal's portfolio of
broadcast and cable network programming. The agreement provides Cablevision subscribers with rights
to on-demand content and access to live channels across multiple platforms.1257
350.
Premium networks, such as HBO, Starz and Showtime, also offer their MVPD
subscribers unlimited access to their network programming through their own branded web sites and
mobile applications.1258 Some networks though have taken a more cautious approach. Discovery
Communications, for instance, has chosen not to give any MVPD TV Everywhere rights for its
networks.1259 In 2011, Time Warner Cable withdrew live streams of Viacom and News Corp. content
from its iPad app after the companies objected.1260

1254 See 14th Report, 27 FCC Rcd at 8779-84, 377-87.
1255 Comcast Corp., The Walt Disney Company and Comcast Corporation Announce a Long-Term, Comprehensive
Distribution Agreement that Advances the Successful Multichannel Business Model
(press release), Jan. 4, 2012
("Disney-Comcast Press Release"). In October 2012, Disney announced a similar agreement with Cablevision. The
financial terms of the deal were not disclosed. Cablevision customers will be able to watch Disney content on
multiple platforms, including mobile, under the multiyear distribution deal. The companies said the deal covers 70
services including retransmission consent for ABC O&O stations in New York and Philadelphia. Melodie Warner,
Cablevision, Disney Reach Distribution Pact, WALL ST. J., Oct. 4, 2012, at
http://www.marketwatch.com/story/cablevision-disney-reach-distribution-pact-2012-10-04 (visited Nov. 1, 2012);
Jon Lafayette, Disney Signs Distribution Agreement with Cablevision, BROADCASTING & CABLE, Oct. 4, 2012, at
http://www.broadcastingcable.com/article/489719-Disney_Signs_Distribution_Agreement_With_Cablevision.php
(visited Nov. 1, 2012). In December 2012, Disney reached comparable comprehensive agreements with Cox
Communications and Charter Communications. See Somaditya Roy, Disney, Charter Ink Distribution Agreement,
SNL KAGAN, Dec. 31, 2012; Cox Communications & The Walt Disney Co., Disney, Cox Announce Comprehensive
Distribution Agreement
(press release), Dec. 13, 2012.
1256 Disney-Comcast Press Release.
1257 Somaditya Roy, NBCU, Cablevision Sign Affiliation Deal, SNL KAGAN, Nov. 5, 2012. Also in November 2012,
NBCU struck a similar agreement with Verizon that begins in early 2013 for FiOS TV customers. See
NBCUniversal, NBCUniversal and Verizon Offer TV Everywhere Rights for Top Sports, News and Entertainment
Programming to Verizon FiOS TV Customers Beginning Early Next Year
(press release), Nov. 26, 2012.
1258 See CBS Corp., Showtime Apps, http://www.sho.com/sho/apps (visited Oct. 26, 2012); Time Warner Inc.,
HBO Go, http://www.hbogo.com/#home/ (visited Oct. 26, 2012). See also, e.g., Bright House Networks, HBO and
Cinemax Now Available "On the Go" to Bright House Networks Customers
(press release), Jan. 10, 2012. Starz
Entertainment LLC recently made its Starz Play, Encore Play, and MoviePlex Play apps available to AT&T's U-
verse subscribers. Haseeb Ali, U-verse TV Subs Get Starz Authenticated Online Services, SNL KAGAN, Dec. 17,
2012.
1259 Jeanine Poggi, Cable Execs Root for TV Everywhere, but No Timeline on Mass Adoption, ADVERTISING AGE,
May 23, 2012, at http://adage.com/article/media/cable-executives-root-tv/234951/ (visited Oct. 26, 2012).
Discovery's CEO, David Zaslav, has indicated that the company will not strike TV Everywhere deals until audience
measurement improves. See Mikolo Ilas, Discovery Cautious on TV Everywhere until Measurement Improves, CEO
Says
, SNL KAGAN, Dec. 5, 2012.
1260 Brian McNeill, Time Warner Cable Removes Programming from iPad App Following Cable Network
Complaints
, SNL KAGAN, Mar. 31, 2011.
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351.
As noted in the 14th Report, in November 2011, WBTVG and ABC struck a notable
distribution agreement.1261 Under the agreement, WBTVG will syndicate its first-run shows on the ABC
network after three years instead of the traditional four years. WBTVG also can sell the distribution
rights for its ABC-aired shows to subscription services, such as Netflix and Hulu, after the completion of
each season. In exchange, ABC has the right to simulcast the network feeds of its WBTVG programming
to any device, as well as the right to distribute up to five of the most recently aired episodes of a show via
an MVPD's VOD service or an OVD for a 30-day period. With respect to revenues, ABC retains all the
revenue from advertising-supported OVDs; WBTVG keeps revenues from in-season electronic sell-
through platforms, such as iTunes, and out-of-season DVD and Blu-ray disc sales. Finally, ABC retains
revenues from any OVD subscription service in which it has an ownership interest, namely Hulu Plus. 1262
352.
Over the last two years, CBS has entered into agreements with select OVDs that permit
the online streaming of some of its content. Specifically, in February 2011, CBS announced that it would
allow Netflix to begin streaming certain programs from its content library starting in April 2011,
including Cheers and Frasier, which were unavailable on any other platform prior to this deal.1263 In
November 2012, CBS announced a similar agreement with Hulu Plus. Beginning in January 2013, Hulu
Plus subscribers have access to more than 2,600 episodes from CBS's library series, such as Medium,
Numb3rs, CSI: Miami, Star Trek, and I Love Lucy. In addition, a selection of CBS's library shows will
rotate through the free Hulu.com service.1264
353.
As we discuss above, Netflix has struck a deal to become the exclusive U.S. subscription
television service for Walt Disney Studios' first-run live-action and animated feature films, entering into a
multiyear licensing agreement that begins in 2016 for theatrically released films from Disney, Walt
Disney Animation Studios, Pixar Animation Studios, Marvel Studios and Disneynature. Disney direct-to-
video releases will be available on Netflix beginning in 2013. Disney and Netflix also signed a multiyear
catalog agreement that immediately made accessible older Disney titles such as Dumbo, Pocahontas and
Alice in Wonderland.1265

B.

Consumer Premises Equipment

354.
Changes in consumer premises equipment ("CPE") and user equipment technology
continue to have an important impact on competition in the video programming market. CPE is the
necessary means by which consumers access the services that broadcasters, MVPDs, and OVDs provide.
Because CPE is an integral part of viewing video programming, CPE features such as recording, home
networking, mobile access, and user interface are factors to consumers when choosing their programming
provider and which services to purchase. Further, interoperability of CPE can impact the ability to
consumers to seamlessly switch providers. Today the CPE marketplace is more dynamic than it has ever
been, offering consumers an unprecedented and growing list of choices to access video content.
355.
In this section, we report on a number of developments in this area that affect the manner
and state of competition in the video marketplace. Specifically, we update developments since the last

1261 14th Report, 27 FCC Rcd at 8784, 387.
1262 Id.
1263 Liz Shannon Miller, CBS Picks Netflix Over Hulu to Stream Classic Shows, GIGAOM, Feb. 22, 2011, at
http://gigaom.com/video/cbs-netflix/ (visited Nov. 27, 2012).
1264 CBS Corp., CBS and Hulu Announce Licensing Agreement for Library Content on the Hulu Plus Subscription
Service
(press release), Nov. 5, 2012 (visited Nov. 27, 2012).
1265 Kyle Daly, Netflix, Disney Ink Deals Brining Exclusive New Releases, Catalog Titles to Streaming Platform,
SNL KAGAN, Dec. 4, 2012.
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report, and examine the technological, regulatory and market developments that have had an effect on, or
are likely in coming years to affect, competition in the video market. First we consider MVPD and non-
affiliated vendors' development of navigation devices. Then we review developments in devices used to
access online and mobile video services.
1.

CPE Used to Access MVPD Services

a.

Leased CPE

356.
MVPDs are deploying set-top boxes that allow consumers to move content among other
MVPD-provided set-top boxes in the home and incorporate IP connectivity, allowing set-top boxes to
perform more like gateways. DIRECTV states that its average monthly subscriber acquisition costs have
increased from $712 to $853 due to investment into new CPE technology.1266 MVPDs continue to expand
their video distribution to portable screens, such as Internet-connected smart phones and tablet computers.
Cable companies continue to support CableCARD and, as described in more detail below, are working to
implement an IP-based recordable output.1267
357.
MVPDs have now widely implemented multi-room DVR and home networking
solutions. Also known as "Whole-Home DVR," consumers have the ability to move recorded video
content from a central DVR to other TVs or MVPD-provided set-top boxes in the home. DIRECTV's
"Genie" allows consumers to experience HD DVR functionality through a central DVR to a C31
Client1268 or RVU1269-enabled TV within the home, thus eliminating the need for additional set-top
boxes.1270 "Genie" works in up to four rooms at the same time and allows five programs to be
concurrently recorded on a one terabyte storage drive. It also makes programming available on a variety
of remote devices.1271 Similarly, DISH Network's "Hopper" multi-room DVR can record up to six shows
at a time on a two terabyte drive.1272 The DVR networks up to three additional TVs using MoCA

1266 DIRECTV Comments at 9.
1267 See infra, 364. In 2004, the Commission adopted a requirement that cable operators provide an IEEE 1394
interface on all HD set-top boxes as a means of enabling a market for devices that interact with the operator supplied
set-top box. In 2010, the Commission relaxed this requirement to permit operators to provide the same functionality
over IP. IP has overwhelming marketplace support and serves the same purpose that our IEEE 1394 connection
requirement was intended to serve. See Navigation Devices Third Report and Order, 25 FCC Rcd 14677-79, 39-
44; TiVo Inc.'s Request for Clarification and Waiver of the Audiovisual Output Requirement of Section
76.640(b)(4)(iii)
, MB Docket No. 12-230, Memorandum Opinion and Order, 27 FCC Rcd 14875 (MB 2012)
(clarifying the rule and waiving the rule until June 2, 2014); but see EchoStar Satellite L.L.C. v. FCC, 704 F.3d 992
(D.C. Cir. 2013).
1268 The C31 Client is a small DIRECTV RVU (pronounced "R-view") set-top box used to extend DVR
functionality to additional TVs within the home from DIRECTV's "Genie" (HR34) DVR (Media Server). The C31
contains no hard drive or tuner. See DirecTV University: C31 RVU Client Spec Sheet, http://www.perfect-
10.tv/webstore/spec-sheets/RVU-C31.pdf (visited Nov. 19, 2012).
1269 RVU, pronounced "R-View," is a protocol combining open standards (including Digital Living Network
Alliance (DLNA) and Universal Plug and Play (UPnP)) and a Remote User Interface (RUI) protocol allowing RVU
client devices, such as TVs, to display content from an RVU server (DVR) through connections in the home such as
WiFi, Ethernet, or Multimedia Over Coax (MoCA). See RVU Protocol: Networked Home Entertainment With Pixel
Accurate Remote Graphics (whitepaper), http://www.rvualliance.org/files/static_page_files/RVU_White_Paper.pdf
(visited Nov. 21, 2012).
1270 DIRECTV Comments at 6.
1271 DIRECTV Genie, http://www.directv.com/technology/genie (visited Nov. 8, 2012); Comcast Comments at 20-
21.
1272 Frequently Asked Questions About Hopper, http://godish.com/hopper/hopper-faqs.aspx (visited Nov 8, 2012).
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(MultiMedia over Coax)1273 connectivity to multi-room extender boxes called "Joeys."1274 The "Hopper"
also has a feature called "PrimeTime Anytime" whereby commercials can be automatically skipped for
the four major broadcast networks' primetime programming.1275 In November 2012, the U.S. District
Court of Los Angeles, in a decision that remains under seal, denied Fox Broadcasting's request for a
preliminary injunction to shut down DISH Network's ad-skipping DVR feature.1276 FOX appealed the
district court's decision denying the preliminary injunction.1277 In addition, certain MVPDs now stream
video content to video game consoles, tablet computers, and other IP-enabled devices.1278
358.
Some MVPDs are deploying cloud-based user interfaces that take advantage of IP
connectivity in leased set-top boxes. Cloud-based solutions allow MVPDs more flexibility to innovate
and deploy features faster without having to swap out a customer's set-top box. The cloud is essentially
transforming video products from a hardware experience to a software experience. Comcast is working
with partners, such as Disney, to deliver a robust content experience through a cloud-enabled seamless,
multi-platform interface known as "X1" (formally Xcalibur). Customers will experience a unified search
and instant play of live TV, DVR recordings, and VOD. Comcast has launched "X1" in Boston and
Atlanta and plans to add five additional markets by the end of 2012. 1279 "X1" currently runs on a
QAM/IP hybrid video gateway with a DOCSIS 3.0 modem.1280 Comcast is expected to deploy an all IP
set-top box called the "XI3" in 2013.1281 This new gateway will use the cloud based interface to get linear
video that will be transcoded from QAM video to IP streams that can be delivered to the home.1282
Cablevision expected to offer its network based "DVR Plus" service with a new cloud-based set-top
navigation system in all its East Coast systems by the end of 2012.1283 Time Warner Cable's Syracuse,

1273 Multimedia over Coax Alliance (MoCA), http://www.mocalliance.org/ (visited Nov. 9, 2012).
1274 Richard Lawler, Dish Network Starts Rolling Out Hopper/Joey Multi-room DVR Setup Today,
http://www.engadget.com/2012/03/15/dish-network-starts-rolling-out-hopper-joey-multiroom-dvr-setu/ (visited Nov
8, 2012).
1275 There's a Whole New Animal in Whole-Home Entertainment, http://godish.com/hopper (visited Nov. 8, 2012).
1276 CED Magazine, Judge Rejects Injunction Against Dish DVR, ASSOCIATED PRESS, Nov. 8, 2012,
http://www.cedmagazine.com/news/2012/11/judge-rejects-injunction-against-dish-
dvr?et_cid=2938296&et_rid=216334141&linkid=http%3a%2f%2fwww.cedmagazine.com%2fnews%2f2012%2f11
%2fjudge-rejects-injunction-against-dish-dvr (visited Nov. 8, 2012). Edvard Pettersson, Fox Loses Bid to Block
Dish's AutoHop Ad-Skipping Service
, BLOOMBERG NEWS, Nov. 8, 2012, http://www.businessweek.com/news/2012-
11-07/dish-says-it-wins-ruling-im-news-corp-dot-suit-over-autohop (visited Nov 8, 2012).
1277 Edvard Pettersson, Fox Broadcasting on Appeal Seeks to Stop Dish's Autohop, BLOOMBERG NEWS, June 4,
2013, http://www.bloomberg.com/news/2013/2013-06-04/fox-broadcasting-on-appeal-seeks-to-stop-dish-s-
autohop.html (visited July 17, 2013).
1278 Verizon Comments at 23; NCTA Comments at 6; DIRECTV Comments at 4-6; Comcast Comments at 7-8.
1279 Comcast Comments at 5-6, 9-10.
1280 Jeff Baumgartner, Philly Next for Comcast's X1, Light Reading Cable, November 16, 2013,
http://www.lightreading.com/video-services/philly-next-for-comcasts-x1/240143374 (visited Jan. 11, 2013).
1281 Richard Lawler, Humax's take on an IP-connected TV box for Comcast passes through the FCC, Engadget,
http://www.engadget.com/2012/11/28/comcast-humax-xi3-h-ip-cable-box/ (visited Jan. 11, 2013).
1282 Meet Comcast's IP-Only Set-Top, Heavy Reading ,
http://www.heavyreading.com/document.asp?doc_id=225519&site=lr_cable (visited Jan. 11, 2013).
1283 Jeff Baumgartner, Cablevision Packs More Video Into the Cloud, Light Reading Cable, Aug. 7, 2012,
http://www.lightreading.com/document.asp?doc_id=223653&site=lr_cable (visited Nov. 14, 2012).
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New York system launched graphically richer VOD capabilities through cloud-based box art,1284 metadata
servers, and sign up and search functions.1285
359.
Additionally, MVPDs continue to work on ways to expand new services through their
CPE and access to their services by retail products. Verizon's new "My FiOS" mobile application
provides consumers with a feature-rich single point of remote access to not only their FiOS services but
also Verizon's Home Monitoring and Control Service.1286 Time Warner's "IntelligentHome," Comcast's
"XFINITY Home," and Cox's "Home Security Services" are new home monitoring and security systems
operating as extensions of cable MVPD networks. Portable media players, gaming consoles, and
Internet-connected smart phones and tablet computers continue to grow as popular ways to interact with
video. Consumers can access Netflix on more than 900 different Internet-connected devices.1287
b.

CableCARDs and Section 629 of the Communications Act

360.
Pursuant to Section 629 of the Act,1288 the Commission adopted regulations to assure the
commercial availability of consumer electronics equipment that can access MVPD services.1289 In
enacting the section, Congress pointed to the vigorous retail market for CPE used with the telephone
network and sought to create a similarly vigorous market for devices used with MVPD services.1290 The
Commission has made regulatory efforts to develop this market and continues to analyze marketplace
developments.
361.
To carry out the directives of Section 629, in 1998, the Commission required MVPDs to
make available a security element separate from the other elements of a navigation device or set-top
box.1291 The separation of security from the navigation device was designed to let unaffiliated consumer
electronics companies offer retail video navigation devices and let MVPDs retain control over system
security; in this vein, the Commission required the separate security to "be designed to connect to and
function with other navigation devices . . . through the use of a commonly used interface or an interface
that conforms to appropriate technical standards."1292 The Commission also required MVPDs to rely on
this separated security in their own devices, a requirement that many refer to as "common reliance" or the

1284 The term "box art" refers to cover artwork on game or movie packaging intended to catch viewer's attention
similar in purpose to that of movie posters.
1285 Mike Robuck, TWC Launches 1st Cloud-based VOD Search Application in Syracuse, CED, June 6, 2012,
http://www.cedmagazine.com/news/2012/06/twc-launches-1st-cloud-based-vod-search-application-in-syracuse
(visited Nov. 14, 2012).
1286 See Verizon Comments at 11.
1287 See Netflix Comments at 3.
1288 See 47 U.S.C. 549 ("The Commission shall, in consultation with appropriate industry standard-setting
organizations, adopt regulations to assure the commercial availability, to consumers of multichannel video
programming and other services offered over multichannel video programming systems, of converter boxes,
interactive communications equipment, and other equipment used by consumers to access multichannel video
programming and other services offered over multichannel video programming systems, from manufacturers,
retailers, and other vendors not affiliated with any multichannel video programming distributor.").
1289 47 U.S.C. 549(a).
1290 H.R. REP. NO. 104-204, at 112-3 (1995).
1291 Implementation of Section 304 of the Telecommunications Act of 1996,13 FCC Rcd 14775 (1998); 47 C.F.R.
76.1204(a)(1).
1292 Implementation of Section 304 of the Telecommunications Act of 1996,13 FCC Rcd 14775 (1998); 47 C.F.R.
76.1204(b).
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"integration ban."1293 In 2003, the Commission specified a standard (the "CableCARD" standard) that
cable operators shall rely on to meet these rules.1294 On January 15, 2013, the D.C. Circuit vacated the
Order adopting the CableCARD standard, but not the Order that requires cable operators to separate
security and base that separate security on a commonly used interface or technical standards.1295 Because
CableCARD is the de facto standard that cable operators use to meet these rules, we expect that most will
continue to rely on CableCARDs despite the D.C. Circuit's ruling.
362.
Despite the CableCARD standards, consumer adoption of retail CableCARD-compatible
devices has not matched the Commission's expectations.1296 The following table shows the reported
number of CableCARD deployments for use in retail CableCARD-enabled devices since 20061297 and the
deployment of operator-supplied set-top boxes with CableCARDs since the integration ban went into
effect on July 1, 2007.1298

1293 Implementation of Section 304 of the Telecommunications Act of 1996,13 FCC Rcd 14775 (1998); 47 C.F.R.
76.1204(a)(1).
1294 Implementation of Section 304 of the Telecommunications Act of 1996: Commercial Availability of Navigation
Devices; Compatibility Between Cable Systems and Consumer Electronics Equipment
, CS Docket No. 97-80, PP
Docket No. 00-67, Second Report and Order and Second Further Notice of Proposed Rulemaking, 18 FCC Rcd
20885 (2003).
1295 Echostar Satellite, LLC v. FCC, 704 F.3d 992 (D.C. Cir. 2013).
1296 Navigation Devices Third Report and Order, 25 FCC Rcd at 14660, 4.
1297 The Commission directed certain cable operators to file reports with the Commission detailing CableCARD
deployments. See Implementation of Section 304 of the Telecommunications Act of 1996: Commercial Availability
of Navigation Devices,
CS Docket No. 97-80, Second Report and Order, 20 FCC Rcd 6794, 6814-15, 39 (2005)
("2005 Deferral Order").
1298 Effective July 1, 2007, cable operators were required to separate security in their leased devices and rely on the
same conditional access mechanism that consumer electronics manufacturers use in their commercially available
devices. 47 C.F.R. 76.1204(a)(1). See Implementation of Section 304 of the Telecommunications Act of 1996:
Commercial Availability of Navigation Devices
, CS Docket No. 97-80, Order and Further Notice of Proposed
Rulemaking, 18 FCC Rcd 7924, 7926 4 (2003); 2005 Deferral Order, 20 FCC Rcd at 6802-03 13.
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Table 40: Deployment of CableCARDS (Cumulative)

1299

CableCARD Deployment for

Operator-supplied Set-

Year (as of

Use in Retail Devices Top 10

top Boxes With

June)

Cable Operators

CableCARDS

2006
170, 000
2007
271,000
2008
372,000
6,232,800
2009
437,800
14,085,000
2010
520,000
21,000,000
2011
582,000
29,300,000
2012
618,000
36,000,000
363.
While the Commission's CableCARD rules have allowed vendors like TiVo and
Hauppauge to build retail devices that connect to cable systems, the cable industry criticizes the
CableCARD regime as expensive and ineffective.1300 MVPDs insist that device regulation is unnecessary
to drive innovation of navigation devices.1301 According to certain public interest and local government
entities, disagreement in the industry about the best mechanism to achieve a competitive retail market for
CPE devices has limited the choices available to consumers.1302
364.
In October 2010, the Commission adopted rules to eliminate four impediments to
consumer adoption of CableCARDs, including rules that: (1) ensure that retail devices can access all
video programming that is prescheduled by the programming provider; (2) increase transparency in
CableCARD pricing and billing; (3) streamline CableCARD installation; and (4) streamline requirements
for manufacturers who build CableCARD devices.1303 In the same order the Commission replaced the
requirement for an IEEE 1394 connector that was meant to be a recordable digital output from MVPD
leased set-top boxes with a requirement for an IP based open-standard connection with certain
requirements in service discovery, video transport, and remote command pass-through for home
networking.1304 The order required cable operators to deploy set-top boxes that meet the IP-based output
requirement beginning on December 1, 2012, but the Media Bureau has waived that rule until June 2,

1299 See Letters from Neal M. Goldberg, Vice President and General Counsel, NCTA, to Marlene H. Dortch,
Secretary, FCC, CS Docket No. 97-80 (filed June 29, 2006, June 25, 2007, June 23, 2008, June 26, 2009, June 23,
2011, June 30, 2011, July 30, 2012).
1300 See Comcast Comments at 33.
1301 Verizon Comments at 22-23.
1302 Public Knowledge Comments at 12; Montgomery County, MD Reply at 25-34.
1303 Navigation Devices Third Report and Order, 25 FCC Rcd at 14662-14676, 8-38.
1304 As discussed above, on January 15, 2013, the D.C. Circuit vacated the Navigation Devices Second Report and
Order
. Echostar Satellite, LLC v. FCC, 704 F.3d 992 (D.C. Cir. 2013). We do not opine on the scope of the court's
decision in the instant proceeding.
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2014.1305 Once that requirement takes effect, retail-purchased CPE will be able more effectively to
network with and view content from MVPD-provided devices.
c.

CableCARD Successors

365.
The Commission and industry have undertaken several efforts to update, extend, or
replace the CableCARD regime.1306 In 2010, the Commission began to explore a replacement concept
referred to as "AllVid." The AllVid NOI introduced the concept of an adapter that could act either as a
small "set-back" device for connection to a single smart video device or as a gateway allowing all
consumer electronics devices in the home to access multichannel video programming services in addition
to any other services the devices might have access to.1307 Unlike CableCARD technology, this adapter
could support the development and marketing of retail smart video devices that attach to any MVPD
service anywhere in the United States. Such an approach could greatly enhance the incentives for
manufacturers to enter the retail market. As conceived, an MVPD would supply an adapter that would
communicate with the MVPD service, perform the tuning and security decryption functions that may be
specific to that particular MVPD, and deliver video to retail devices using a common home networking
protocol. In this manner, a retail smart video device would be able to integrate MVPD and non-MVPD
services, as well as perform navigation functions, including the presentation of programming guides and
search functionality. More recently, the Media Bureau granted Charter Communications, Inc. a waiver of
the integration ban to "increase the chance of an industry-wide standard developing" and to "accelerate
Charter's deployment of downloadable security."1308 The Commission is continuing to monitor and
evaluate the market for devices that can access MVPD services.
2.

CPE Used to Access OVD Services

366.
Broadband allows consumers to receive IP-delivered video content within the home
across multiple broadband-capable devices, game consoles, and standalone devices like those provided by
Apple, Roku, Boxee, Google, Xbox, and Playstation. These devices allow users to navigate and receive
video delivered via broadband Internet and display it on a television monitor or wireless device such as a
laptop or tablet. In December 2012 Netflix announced that Sony's Playstation 3 (PS3) was the world's
most popular platform for viewing Netflix content.1309 Also, it is becoming more common to include IP

1305 TiVo Inc.'s Request for Clarification and Waiver of the Audiovisual Output Requirement of Section
76.640(b)(4)(iii)
, MB Docket No. 12-230, Memorandum Opinion and Order, 27 FCC Rcd 14875 (MB 2012).
1306 One such industry effort is called tru2way, previously called the Open Cable Applications Platform. It is an
update to the CableCARD regime that supports two-way services like video-on-demand and interactive program
guides. While consumer electronics manufacturers have been reluctant to implement tru2way in retail devices, cable
operators may continue to support tru2way for their own internal purposes. See Todd Spangler, Comcast New Way
on Tru2way
, MULTICHANNEL NEWS, June 14, 2010, http://www.multichannel.com/article/453729-
Comcast_New_Way_on_Tru2way.php (visited Nov. 26, 2012).
1307 Video Device Competition; Implementation of Section 304 of the Telecommunications Act of 1996: Commercial
Availability of Navigation Devices; Compatibility between Cable Systems and Consumer Electronics Equipment
,
MB Docket No. 10-91, Notice of Inquiry, 25 FCC Rcd 4275, 4281-3, 17-23 (2010).
1308 Charter Communications, Inc. Request for Waiver of Section 76.1204(a)(1) of the Commission's Rules, MB
Docket No. 12-238, Memorandum Opinion and Order, 28 FCC Rcd 5212, 5217-8, 9 (MB 2013). TiVo, Inc. has
filed a petition for reconsideration of this decision, and the Consumer Electronics Association has filed an
application for review of this decision.
1309 Netflix, Playstation becomes Top Platform in the World for Netflix Development and Living Room Viewing
(news release), Dec. 4, 2012.
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capabilities in television sets.1310 Today most high-end TVs are already IP-enabled through built-in
Ethernet and/or WiFi connections.1311 In the OVD section of this Report, we note that many of the
leading OVDs make their services available via a wide variety of consumer electronics products.1312 The
converse is also true many consumer electronics products give consumers access to a variety of OVD
services.
367.
Vendors have also begun to integrate and blend linear television service from MVPDs
and broadcasters with OVD services. For example, Boxee's LiveTV is a digital television tuner
peripheral that connects to Boxee's media player, where the over-the-air broadcast television signals are
presented to consumers alongside OVD services. In addition, Apple is in talks with some of the largest
cable operators about letting consumers use an Apple device as a set-top box for live television and other
content.1313
3.

Handheld and Mobile Video Devices

a.

Mobile IP Devices

368.
The proliferation of portable media devices with broadband IP capability has opened up
new video distribution opportunities for MVPDs and OVDs alike. Devices such as laptops, netbooks,
smartphones and media tablets all have IP connections and high resolution screens for consumers to
watch video. Forecasts by International Data Corporation (IDC) for tablet sales in 2012 were revised
upward as the year progressed, from 107 million to 117 million, and forecasts for 2013 project that over
165 million tablets will be sold.1314 The number of smartphones with 4G connectivity continues to rise as
well, which enables video providers to potentially deliver high quality video to viewers.1315 To access the
mobile IP market, MVPDs have begun making their video content accessible over a host of portable
devices. For example, Comcast's Xfinity TV service provides on-demand video to laptops, smartphones,
and tablets.1316 DIRECTV's "nomad" service allows consumers to copy recordings from their HD DVR
to their phones, laptops, or tablets for viewing without an active network connection. Consumers who
have a TiVo brand DVR in their home can use a Tivo Stream to stream or to copy recordings from their
DVR to Apple devices for off-line viewing.1317 To facilitate these services, MVPDs and programmers are

1310 Bismarck Lepe, Making Sense of the Connected TV Craze, Jan. 28, 2012,
http://venturebeat.com/2012/01/28/making-sense-of-the-connected-tv-craze/ (visited Nov. 15, 2012).
1311 Bradley Mitchell, Home Networking for Internet TV (Television), About.com Guide,
http://compnetworking.about.com/od/consumerelectronicsnetworks/a/home-nnetworking-for-internet-tv.htm (visited
Nov. 15, 2012).
1312 See supra, Sec. III.C.2 & 3 (information regarding devices for access to OVD video programming).
1313 Jessica E. Vascellaro and Shalini Ramachandran, Apple's New Front in Battle for TV, WALL ST. J., Aug. 15,
2012, http://online.wsj.com/article/SB10000872396390444233104577591713616924328.html (visited Nov. 15,
2012).
1314 IDC, IDC Raises Its Worldwide Tablet Forecast on Continued Strong Demand and Forthcoming New Product
Launches
(press release), Sept. 19, 2012, https://www.idc.com/getdoc.jsp?containerId=prUS23696912 (visited Nov.
15, 2012).
1315 Zach Epstein, NPD: One in Five Smartphones Sold in Q2 Was 4G Capable, HTC Leads Market, BGR Media,
LLC, Oct. 14, 2011, http://www.bgr.com/2011/10/14/npd-one-in-five-smartphones-sold-in-q2-was-4g-capable-htc-
leads-market/ (visited Nov. 26, 2012).
1316 Letter from Michael Powell, NCTA President and CEO, to Julius Genachowski, Chairman, FCC, MB Docket
No. 07-269 (July 7, 2011) at 4 ("Letter from Michael Powell").
1317 See Introducing TiVo Stream, http://www.tivo.com/products/tivo-stream/index.html (visited Nov. 21, 2012).
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looking to cloud-delivery mechanisms for IP connected devices including, tablets, smartphones,
televisions, laptops, and other mobile devices.1318
b.

Specialty Mobile Devices

369.
For the purposes of this Report, specialty mobile devices are those that include
specialized hardware to receive mobile video services from the mobile provider's network, as opposed to
those that receive mobile video via the Internet. Such devices often have the advantage of being served
by a broadcast or point-to-multipoint system, so they do not consume data from a data plan, and many
devices can receive content simultaneously in a crowded location such as a stadium or arena. However,
the specialized hardware needed to access the mobile video services requires vendors to design devices
for a specific service, potentially restricting the number of services that can be accessed by a device, and
diminishing the willingness of vendors to build devices that support the service.
370.
Since the last report, the trend in mobile video CPE has been to focus on IP delivery, but
some advances have been made using ATSC Mobile/Handheld ("ATSC M/H"). ATSC M/H receivers
have appeared in the market, mostly in the form of USB tuner peripherals that connect to personal
computers.1319 These USB receivers allow consumers to view ATSC M/H broadcasts on their laptops.1320
ATSC M/H also is used by Dyle. Dyle, and thus ATSC M/H, is now being built into a Samsung 4G
smartphone, and an accessory that can be attached to an Apple mobile device.1321 The resulting increase
in specialty receiver penetration could allow mobile broadcast video services that rely on ATSC M/H
specialty receivers to succeed where the previous attempts have been unsuccessful.
371.
In order to compete in the mobile video marketplace by delivering video over their own
networks, satellite-based providers face technical challenges such as antenna size, weight, and ability to
track satellites while in motion. Because they must be larger than what is typically found in a handheld
device, mobile satellite-based devices are more often integrated into passenger vehicles. Several
companies have attempted to introduce mobile video services targeted toward family-sized passenger
vehicles, with little success. CruiseCast, a joint service of AT&T Inc. and RaySat Broadcasting Corp.,
began operation in June 2009, but in November 2009 ceased activating new customers and refunded
existing customers for equipment purchased.1322 ICO mim (mobile interactive media) launched its North
American geosynchronous satellite in 2007. ICO had planned to provide interactive mobile video,
navigation, and emergency assistance, but does not appear to have expanded beyond trials begun in

1318 Letter from Michael Powell at 2.
1319 See WinTV Aero-m product description, Hauppauge Computer Works, Inc.,
http://www.hauppauge.com/site/products/data_aero-m.html (visited Nov. 26, 2012).
1320 Universal Serial Bus ("USB") is a set of connectivity specifications that allows easy, high-speed connections of
peripherals to PCs that, once plugged in, configure automatically. USB is found in over ten billion PCs, consumer
electronics, and mobile devices. See USB (Universal Serial Bus),
http://www.intel.com/content/www/us/en/io/universal-serial-bus/universal-serial-bus.html (visited Nov. 26, 2012).
1321 See Dyle, Samsung Galaxy S Lightray 4G From MetroPCS, http://www.dyle.tv/devices/samsung-galaxy-s-
lightray-4g-from-metropcs/ (visited Nov. 21, 2012).
1322 Amy Gilroy, AT&T CruiseCast Ceases Activations, TWICE, Nov 2, 2009,
http://www.twice.com/article/367231-
AT_T_CruiseCast_Ceases_Activations.php?nid=2402&source=title&rid=6258981 (visited Nov. 26, 2012).
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2009.1323 SiriusXM's Backseat TV was dropped in 2012 by the largest auto manufacturer that had still
supported it.1324

VI.

PROCEDURAL MATTERS

372.
This 15th Report is issued pursuant to authority contained in sections 4(i), 4(j), 403, and
628(g) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 403, and 548(g).
373.
It is ORDERED that the Office of Legislative Affairs shall send copies of the 15th Report
to the appropriate committees and subcommittees of the United States House of Representatives and the
United States Senate.
374.
It is FURTHER ORDERED that the proceeding in MB Docket No. 12-203 IS
TERMINATED.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary

1323 See ICO mim website, http://investor.ico.com/releasedetail.cfm?releaseid=557027 and
http://investor.ico.com/releasedetail.cfm?releaseid=585678 (visited Nov. 26, 2012).
1324 Suzanne Kane, Chrysler Drops Sirius Backseat TV, The Car Connection, Mar 2, 2012,
http://www.thecarconnection.com/news/1073619_chrysler-drops-sirius-backseat-tv (visited Nov. 21, 2012).
185

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APPENDIX A

List of Commenters

Comments

Access Fort Wayne
Access Tucson Community Media
Alliance for Community Media
American Cable Association
American Community Television, Inc.
Amherst Community Television, Inc. (AmherstMedia.org)
Andrea Price, Public Access of Indianapolis, Inc.
AT&T Inc.
Athol-Orange Community TV
Austin Community College Television
Belmont Community Media Center, Inc. (Belmont Media Center)
Billerica Access Television, Inc.
Boston Community Access and Programming Foundation (Boston Neighborhood Network)
Cape Cod Community Media Center
Capital Community Television (CCTV) of Salem, Oregon
CCTV Center for Media & Democracy, Chittenden County, Vermont
CenturyLink
Charter Township of Springfield
Chicago Access Corporation (CAN TV)
Chelmsford TeleMedia Corporation, Chelmsford, Massachusetts
City of Austin, Texas
City of Battle Creek, Michigan
City of Boston, Massachusetts
City of Connersville, Indiana
City of Erie Cable TV Access Corporation
City of Midland, Michigan
City of Missouri City, Texas
City of Pasco, Washington
City of Tacoma, Washington
College Access Television at Indiana University-Purdue University Fort Wayne (IPFW)
Comcast Corporation
Community Access Partners of San Buenaventura (CAPS)
Community Access Television Services, Bloomington, Indiana
Community Media Access Partnership (CMAP TV)
Community Media Center of Marin, Marin County, California (CMCM)
Community Media Network (CMN TV, Troy, MI)
Community Television of Santa Cruz County (CTV)
Cox Communications, Inc.
CreaTV San Jose (filed by Pam Kelly
CreaTV San Jose (filed by Juan Serna)
CreaTV San Jose (filed by Suzanne St. John-Crane)
Dakota Media Access
Davis Media Access
Denver Open Media/Open Media Foundation
DIRECTV, LLC
186

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East Longmeadow Community Access Television
Easton Community Access Television (ECAT)
Education Resource Channel @ Middle Tennessee
Fairfax Cable Access Corporation, Fairfax, Virginia
FAIR TV, Fairfield, Connecticut
Falmouth Community Television Corporation, Falmouth, Massachusetts
Foxboro Cable Access, Inc.
GCPS TV, Gwinnett County Public Schools, Gwinnett County, Georgia
Grand Rapids Cable Access Center, Inc. d/b/a Grand Rapids Community Media Center (GRCMC)
Greater Metro Telecommunications Consortium
Hingham Community Access & Media
Itasca Community Television, Inc. (dba ICTV)
Lincoln County Television
Louisville/Jefferson County Metro Government
Manhattan Community Access Corporation (Manhattan Neighborhood Network "MNN")
Marin Telecommunications Agency, Marin County, California
Media Bridges Cincinnati, Inc.
MetroEast Community Media
Metropolitan Area Communications Commission
Michael McDonald, Village of Leonard, Michigan
Midpeninsula Community Media Center
Mountain View Community Television d.b.a. KMVT Community Television 15
National Association of Broadcasters
National Association of Telecommunications Officers and Advisors
National Cable & Telecommunications Association
Netflix, Inc.
Newton Communications Access Center (Newtv)
North Andover Community Access and Media, Inc.
Northampton Community Television
Organization for the Promotion and Advancement of small Telecommunications Companies and the
National Telecommunications Cooperative Association
Pasadena Community Access Corporation (PCAC)
Peabody Access Telecommunications, Inc.
People TV, Inc.
Philadelphia Public Access Corporation of Philadelphia, Pennsylvania
Pittsburgh Community Television Corporation
Princeton Community TV
Public Knowledge
Rainier Communications Commission
Sacramento Community Cable Foundation d.b.a. Access Sacramento
Saint Paul Neighborhood Network
Salem Community Television Town of Salem, New Hampshire
Scott Counsell, Zion Church Ministries/RGB Ministries of Everett, Massachusetts
Somerville Community Access Television, Somerville, Massachusetts
South Coast Community Media Access Center (dba TV Santa Barbara)
Suburban Community Channels White Bear Lake, Minnesota
Telecommunications Board of Northern Kentucky
Thurston Community Television
Trumbull Community Television Committee
Verizon
Village of Elk Grove Village, Illinois
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WACA TV, Ashland Cable Access
Waycross Community Media
White Plains Community Media, White Plains, New York
Wilbraham Public Access
Winchester Community Access & Media, Winchester, Massachusetts
Wisconsin Community Media
WKTV, Community Television, Wyoming, Michigan
Writers Guild of America, West, Inc.
Woodbridge (CT) Government Access Television
Worcester Community Cable Access, Inc. (WCCA TV)

Reply Comments

ABC Television Affiliates Association
Access Fort Wayne
Adam Lynn
Alleghany Community Television Inc.
Alliance for Community Media
AT&T Inc.
Bedford Community Access Television of Bedford, Massachusetts
Birmingham Area Cable Board, Birmingham, Michigan
Caledonia Community Cable Corporation, Kent County, Michigan
City of Boston, Massachusetts
City of Lakewood, California
City of Philadelphia, Pennsylvania
City of Saint Paul, Minnesota
Comcast Corporation
Community Media Access Collaborative Fresno/Clovis, California (CMAC)
Community Television Association of Maine
Content Interests (CBS Corporation, NBCUniversal, News Corporation, Time Warner Inc., The Walt
Disney Company, and Viacom Inc.)
District of Columbia Office of Cable Television
Frontier Community Access Television, Inc. (FCAT)
Google Inc.
JCTV, Jefferson City, Missouri
Lowell Telecommunications Corporation
Michael Bodine of the City of Tybee Island, Georgia
Montgomery County, Maryland
Mt. Hood Cable Regulatory Commission
Na Leo O Hawaii, Inc. d/b/a Na Leo O Hawaii Community Television
National Association of Broadcasters
National Association of Telecommunications Officers and Advisors
Portland Community Media, Portland, Oregon
SJCCTV, Smithfield, North Carolina
Telecommunications Board of Northern Kentucky
188

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APPENDIX B

National Video Programming Services

Table B-1

National Video Programming Services Affiliated with One or More MVPDs

Network Owner

Networks Wholly Owned or Owned in Part

Bright House Networks
3net, 3net HD, Animal Planet, Animal Planet HD, Discovery Channel,
Discovery Channel HD, Discovery Espaol, Discovery Familia,
Discovery Fit & Health, Discovery Fit & Health HD, Destination
America, Destination America HD, HD Theater, iN Demand, iN
Demand HD, Investigation Discovery, Investigation Discovery HD,
Military Channel, Military Channel HD, OWN, OWN HD, Science
Channel, Science Channel HD, The HUB, The HUB HD, TLC, TLC
HD, Turbo, Velocity HD
Cablevision
AMC, AMC HD, FUSE, FUSE HD, IFC, IFC HD, Sundance Channel,
(AMC Networks Inc.)
Sundance Channel HD, WE tv, WE tv HD
Comcast/NBCU(1)
Bravo, Bravo HD, Chiller, Chiller HD, Cloo, CNBC, CNBC HD, CNBC
World, CNBC World HD, E! Entertainment TV, E! Entertainment TV
HD, FEARnet, FEARnet HD, G4, G4 HD, Golf Channel, Golf Channel
HD, iN Demand, iN Demand HD, MLB Network, MLB Network HD,
MSNBC, MSNBC HD, mun2, NBC Sports Network, NBC Sports
Network HD, NHL Network, NHL Network HD, Oxygen Network,
Oxygen Network HD, PBS Kids Sprout, PBS Kids Sprout HD,
Retirement Living TV, ShopNBC, SYFY, SYFY HD, Telemundo,
Telemundo HD, TV One, TV One HD, The Style Network, The Style
Network HD, The Weather Channel, The Weather Channel HD,
Weatherscan, Universal HD, Universal Sports, Universal Sports HD,
USA Network, USA Network HD
Cox Enterprises
iN Demand, iN Demand HD, MLB Network, MLB Network HD, Travel
Channel, Travel Channel HD
DIRECTV
Game Show Network, GSN HD, MLB Network, MLB Network HD,
Audience Network, Audience Network HD
Liberty Media Corporation(2)
3net, 3net HD, Animal Planet, Animal Planet HD, Destination America,
(Starz, LLC) (3)
Destination America HD, Discovery, Discovery HD, Discovery Espaol,
Discovery Familia, Discovery Fit & Health, Discovery Fit & Health HD,
Encore, Encore HD, Encore Action, Encore Action HD, Encore Drama,
Encore Drama HD, Encore Espaol, Encore Family, Encore Love,
Encore Suspense, Encore Westerns, GAC, HD Theater, HSN, HSN HD,
HSN2, Indieplex, Investigation Discovery, Military Channel, Military
Channel HD, MoviePlex, OWN, OWN HD, QVC, QVC HD, RetroPlex,
Starz, Starz HD, Starz Cinema, Starz Cinema HD, Starz Comedy, Starz
Comedy HD, Starz Edge, Starz Edge HD, Starz in Black, Starz in Black
HD, Starz Family, Starz Family HD, Science Channel, Science Channel
HD, TLC, TLC HD, The Hub, The HUB HD
Time Warner Cable
iN Demand, iN Demand HD, MLB Network, MLB Network HD
189

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Notes:

(1) On August 22, 2012, Comcast sold its interest in A&E to the other owners Disney and Hearst. As a result of this
transaction, the 17 A & E Networks changed from cable-affiliated to non-cable affiliated, but broadcast-affiliated,
networks. See NBCUniversal Media, LLC, SEC Form 8-K (Aug. 22, 2012).
(2) On February 21, 2008, the Commission approved the transfer of license and authorization that resulted in Liberty
Media Corporation ("Liberty") acquiring a de facto controlling interest in DIRECTV. On November 19, 2009,
Liberty through a series of transferred its interest in DIRECTV, three RSN's and GSN to a wholly owned subsidiary
called DIRECTV Group, Inc. We list these as affiliated with this media company since Liberty and DIRECTV
share common ownership, officers, and directors.
(3) On January 11, 2013, Liberty Media Corporation separated its Starz assets. The separate entity, Starz, LLC,
offers 16 movie channels including the flagship networks Starz, Encore and MoviePlex. We include Liberty/Starz
here since Liberty and DIRECTV share of common ownership, officers, and directors.

Sources:

AMC Networks Inc., SEC Form-K for the Quarterly Period Ending December 31, 2012, at 4.
Bright House Networks, About Us, http://brighthouse.com/corporate/default (visited Dec. 5, 2012).
Cablevision, About Cablevision, http://www.cablevision.com/about/index.jsp (visited Dec. 5, 2012).
Comcast-NBCU Order, 26 FCC Rcd at 4410-18, Appendix D; GE/Comcast /NBCU Application at 19-20, 30-31.
Columbia Journalism Review, Who Owns What, http://www.cjr.org/resources/ (visited Dec. 5, 2012).
Cox Enterprises, Corporate Overview, http://www.coxenterprises.com/about-cox/corporate-overview.aspx (visited
Dec. 5, 2012).
DIRECTV, About Us, http://www.directv.com/DTVAPP/content/about_us/our_company (visited Dec. 5, 2012).
Game Show Network, http://gsntv.com/about/# (visited Mar. 14, 2013).
iN Demand, http://www.indemand.com/about/ (visited Mar. 14, 2013).
Liberty Media Corporation, Company Overview, http://www.libertymedia.com/company-overview.aspx (visited
Dec. 5, 2012).
NCTA, Cable Networks, at http://www.ncta.com (visited Dec. 5, 2012).
SNL Kagan, Economics of Basic Cable Networks (2012 Edition).
Starz, LLC, http://www.starz.com/channel (visited Jan. 22, 2013).
Time Warner Cable Inc, TWC/Insight Application at Exhibit F.
Time Warner Cable Inc, SEC Form 10-K for the Period Ending December 31, 2012, at 5.
190

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Table B-2

National Networks Affiliated with a Television Network, Broadcast Television Licensee, or Other

Media Company

Network Owners:

Networks Wholly Owned or Owned in Part

CBS Corporation
CBS Sports Network, CBS Sports Network HD, FLIX, FLIX HD, Showtime,
Showtime HD, Showtime Beyond, Showtime Beyond HD, Showtime Extreme,
Showtime Extreme HD, Showtime Family Zone, Showtime Family Zone HD,
Showtime Next, Showtime Next HD, Showtime Showcase, Showtime Showcase
HD, Showtime 2, Showtime 2 HD, Showtime Women, Showtime Women HD,
Smithsonian Channel, Smithsonian Channel HD, TMC, TMC HD, TMC Xtra,
TMC Xtra HD, TV Guide Network, TVGN HD
Crown Media
Hallmark Channel, Hallmark Channel HD, Hallmark Movie Channel, Hallmark
Holdings
Movie Channel HD
Daystar Television Daystar TV
Network
Discovery
3net, 3net HD, A&E, A&E HD, Animal Planet, Animal Planet HD, Destination
Communications
America, Destination America HD, Discovery, Discovery HD, Discovery Espaol,
Discovery Familia, Discovery Fit & Health, Discovery Fit & Health HD, HD
Theater, Investigation Discovery, Military Channel, Military Channel HD, OWN,
OWN HD, Science Channel, Science Channel HD, TLC, TLC HD, The Hub,
Velocity HD
Hearst Corporation
3net, 3net HD, A&E, A&E HD, Bio, Bio HD, Crime & Investigation, Crime &
Investigation HD, ESPN 3D HD,(1) ESPN Classic, ESPN Deportes, ESPN, ESPN
HD, ESPN2, EPSN2 HD, ESPNEWS, ESPNEWS HD, ESPNU, EPSNU HD, H2,
H2 HD, History, History HD, History en Espaol, History International, Lifetime,
Lifetime HD, Lifetime Real Women, Lifetime Real Women HD, LMN, LMN HD,
Military History Channel
Hubbard
Reelz Channel, Reelz Channel HD, Ovation TV, Ovation TV HD
Broadcasting
Corporation
InterMedia Partners Gospel Music Channel, Gospel Music Channel HD, The Sportsman Channel, The
Sportsman Channel HD, WAPA-America
News Corporation
Big Ten Network, BTN HD, FOX Business Network, FOX Business Network HD,
FOX College Sports, FOX College Sports HD, FOX Deportes, FOX Movie
Channel, FOX News Channel, FOX News Channel HD, FOX Soccer Channel,
FOX Soccer Channel HD, FOX Soccer Plus, FOX Sports Net, FOX Sports Net
HD, FUEL TV, FUEL TV HD, FX Network, FX Network HD, Nat Geo Mundo,
Nat Geo WILD, Nat Geo WILD HD, National Geographic Channel, National
Geographic Channel HD, SPEED Channel, SPEED HD, TV Guide Network,
Ultilisima, Ultilisima HD
Scripps Networks Cooking Channel, Cooking Channel HD, DIY Network, DIY Network HD, Food
Interactive
Network, Food Network HD, Great American Country, HGTV, HGTV HD, Travel
Channel, Travel Channel HD
191

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Network Owners:

Networks Wholly Owned or Owned in Part

The Walt Disney
3net, 3 net HD, A&E, A&E HD, ABC Family, ABC Family HD, Bio, Bio HD,
Company
Crime & Investigation Network, Crime & Investigation HD, Disney Channel,
Disney Channel HD, Disney Junior, Disney XD, Disney XD HD, ESPN 3D HD,(1)
ESPN Classic, ESPN Deportes, ESPN, ESPN HD, ESPN2, ESPN2 HD, ESPNews,
ESPNews HD, ESPNU, ESPNU HD, H2, H2 HD, History Channel, History
Channel HD, History International, History International HD, LMN, LMN HD,
Lifetime Real Women, Lifetime TV, Lifetime TV HD, Military History Channel,
SOAPnet
Time Warner Inc.
@Max, @Max HD, 5 Star Max, 5 Star Max HD, Action Max, Action Max HD,
Boomerang, Cartoon Network/Adult Swim, Adult Swim HD, Cinemax, Cinemax
HD, CNN, CNN HD, CNN Airport, CNN Headline News, CNN Espaol, CNN
International, HBO, HBO HD, HBO2, HBO2 HD, HBO Comedy, HBO Comedy
HD, HBO Family, HBO Family HD, HBO Signature, HBO Signature HD, HBO
Zone, HBO Zone HD, Max Latino, Max Latino HD, More Max, More Max HD,
NBA, NBA HD, NuvoTV, Outer Max, Outer Max HD, TBS, TBS HD, TMC,
TMC HD, Thriller Max, Thriller Max HD, TNT, TNT HD, Tru TV, Tru TV HD,
WMAX, WMAX HD
Tribune Company
WGN America, WGN America HD, Cooking Channel, Cooking Channel HD,
Food Network, Food Network HD
Viacom Inc.
BET, BET HD, BET Gospel, BET Hip Hop, CENTIC, CMT, CMT HD, CMT
Pure Country, CMT Pure Country HD, Comedy Central, Comedy Central HD,
LOGO, MTV, MTV HD, MTV Hits, MTV Jams, MTV2, Nick 2,
Nickelodeon/Nick at Nite, Nickelodeon/Nick at Nite HD, Nicktoons Network,
Nick Jr, Palladia HD, Spike TV. Spike TV HD, TeenNick, EPIX HD, Tr3s, TV
Land, TV Land HD, VH1, VH1 HD, VH1 Classic, VH1 Soul
Trinity
JCTV, Smile of a Child, TBN, TBN HD, TBN Enclave, The Church Channel
Broadcasting
Network
Univision
Bandamax, De Pelicula, De Pelicula Classico, Galavision, Ritmoson Latino,
Communications
Telehit, Univision Deportes, Univision Noticias, Univision TInovelas

Note:

(1) On June 13, 2013, Disney announced that it will shut down ESPD 3-D by the end of 2013. See Ryan Nakashima,
3-D TV Falling Flat: ESPN to Pull Plug on 3-D Broadcasts by Year's End, Saying Too Few Viewers, WASH. POST,
June 13, 2013.

Sources:

CBS Corporation, About CBS, http://www.cbscorporation.com/index.php (visited Dec. 11 2012).
Columbia Journalism Review, Who Owns What, http://www.cjr.org/resources/ (visited Dec. 11, 2012).
Crown Media Holdings, Company Overview, http://ir.crownmedia.net/index.cfm (visited Dec 11, 2012).
Discovery Communications, Inc., SEC Form 10-K for the Fiscal Year Ending December 31, 2012, at 3.
192

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Discovery Communications, Our Company, http://corporate.discovery.com/our-company/overview/ (visited Dec.
11, 2012).
Hearst Corporation, About Hearst, http://www.hearst.com/broadcasting/index.php (visited Dec. 3, 2012).
NCTA, Cable Networks, http://www.ncta.com (visited Dec. 5, 2012).
News Corporation, Cable Network Programming, http://www.newscorp.com/operations/cable.html (visited Dec. 3,
2012).
Scripps Networks Interactive, SEC Form 10-K for the Fiscal Year Ending December 31, 2012, at 4.
Scripps Networks Interactive, About Us, http://www.scrippsnetworks.com/about.aspx?code=about (visited Dec. 3,
2012).
SNL Kagan, Economics of Basic Cable Networks (2012 Edition).
Time Warner Inc., About Us, http://www.timewarner.com/our-company/about-us/ (visited Nov. 30, 2012).
Trinity Broadcasting Network, About Us, http://www.tbnnetworks.com/ (visited Dec. 3, 2012).
Univision, Company Overview, http://univision.com/ (visited Dec. 3, 2012).
Viacom Inc., About Viacom, http://www.viacom.com/aboutviacom/Pages/default.aspx. (visited Dec. 3, 2012).
Walt Disney Corporation, Company Overview, http://corporate.disney.go.com/corporate/overview.html (visited Dec.
3, 2012).
193

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APPENDIX C

Regional Video Programming Services

Table C-1

Regional Video Programming Services Affiliated with One or More MVPDs

Network Owners

Networks Wholly or Owned in Part

Bright House Networks

Regional News Networks:

Bay News 9, Bay News 9 HD, Bay News
9 en Espaol, CFN 13 (Central FL News)

Regional Sports Networks:

Bright House Sports Network, Bright
House Sports Network HD
Cablevision Systems

Regional News Networks:

News 12 CT, News 12 Bronx, News 12
Corporation(1)
Brooklyn, News 12 Hudson Valley, News 12 Long Island, News 12
(Madison Square
NJ, News 12 Traffic & Weather CT, News 12 Traffic & Weather
Garden) (2)
Long Island, News 12 Traffic & Weather Hudson Valley, News 12
Traffic & Weather NJ, News 12 Traffic & Weather NY, News 12
Westchester

Regional Sports Networks:

MSG, MSG HD, MSG Plus, MSG Plus
HD
Charter

Regional Sports Networks:

Comcast/Charter SportsNet Southeast
Communications
Comcast/NBCU

Regional News Networks:

CN8, New England Cable News, New
England Cable News HD

Regional Sports Networks:

Comcast Entertainment TV (CET),
Comcast SportsNet Bay Area, Comcast SportsNet Bay Area HD,
Comcast SportsNet California, Comcast SportsNet California HD,
Comcast SportsNet Chicago, Comcast SportsNet Chicago HD,
Comcast SportsNet Mid-Atlantic, Comcast SportsNet Mid-Atlantic
HD, Comcast SportsNet New England, Comcast SportsNet New
England HD, Comcast SportsNet Philadelphia, Comcast SportsNet
Philadelphia HD, Comcast SportsNet Northwest, Comcast SportsNet
Northwest HD, Comcast SportsNet Washington, Comcast SportsNet
Washington HD, Comcast SportsNet West, Comcast SportsNet West
HD, Comcast SportsNet Southwest, SportsNet New York, SportsNet
New York HD
Cox Communications,

Regional News Networks:

24/7 News Channel, Arizona News
Inc.
Channel, Kansas 22 Now, Las Vegas One News, Local News on
Cable (Hampton), News Now 53 (Oklahoma City), News Now 53
(Tulsa), NewsWatch 15 (Louisiana), Pittsburgh Cable News Channel,
Rhode Island News Channel, San Diego's News Channel 15

Regional Sports Networks:

Channel 4 San Diego, Channel 4 San
Diego HD, Cox Sports Television
DIRECTV

Regional Sports Networks:

Roots Sports Northwest, Roots Sports
Northwest HD, Roots Sports Pittsburgh, Roots Sports Pittsburgh HD,
Roots Sports Rocky Mountain, Roots Sports Rocky Mountain HD
194

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Network Owners

Networks Wholly or Owned in Part

Time Warner Cable

Regional News Networks:

Antelope Valley Channel 3 (Southern
CA), Bay News 9, Bay News 9 HD ,BEVOD (TX), Capital News 9
(Albany, NY), Channel 858 (Southern CA), Desert Cities TV
(Southern CA), The Green Channel (HI), K-Life(HI), Metro Weather
(Kansas City), NEON (OH), News 8 Austin (TX), News 8 Radar
Now (TX), News 8 Traffic Now (TX), News 8 Non-Stop Weather
(TX), News 10 Now (TX), News 14 Carolina (Charlotte, NC), News
14 Carolina (Raleigh, NC), News 14 Carolina (Greensboro, NC),
News 14 Carolina (Wilmington, Jacksonville, Morehead city, NC),
Nippon Golden Network (HI), NY1 News (NY), NY1 Road and Rail
Report (NY), OC 16 (HI), Oiwi (HI), Rhode Island News Channel,
SoCal1 (Southern CA), Texas Channel (Austin, Waco, San Antonio,
Corpus Christi, TX), Texas Chanel (Dallas), Texas Channel (El Paso),
TWC-TV (New England), YNN (Austin, TX), YNN Austin, YNN
Austin Radar Now, YNN Austin Traffic Now, YNN Austin Weather,
YNN Buffalo (NY), YNN Capital Region (Albany, NY), YNN
Central NY, YNN Hudson Valley (NY), YNN Rochester (NY),
Wichita Falls TV (TX)

Regional Sports Networks:

Bright House Sports Network, Bright
House Sports Network HD, Comcast/Charter SportsNet Southwest
Metro Sports (Kansas City), Metro Sports HD, Metro Sports (NE),
Metro sports (NE) HD, Metro Sports 2 (Kansas City, MO), News 8
Non-Stop Sports (TX), SportsNet New York, SportsNet New York
HD, SunSports, SunSports HD, TWC Connection/Sports (Mid-Ohio),
TWC Connections/Sports (Southwest Ohio), TWC Sports (Albany,
NY), TWC Sports (Albany) HD, TWC Sports Central New York,
TWC Sports (WI), TWC SportsNet (Buffalo), TWC Sports
(Rochester), TWC SportsNet (Southern California), TWC SportsNet
HD, TWC SportsNet Deportes, TWC SportsNet Deporters HD, YNN
Non-Stop Sports

Sources:

AMC Networks Inc., SEC Form 10-Q for the Quarterly Period Ending September 30, 2011, at 7.
Application of News Corporation and The DIRECTV Group, Inc., Transferors, and Liberty Media Corporation,
Transferee, For Authority To Transfer Control,
Consolidated Application For Authority to Transfer Control, Jan.
29, 2007, at 10-11.
Cablevision, About Cablevision, http://www.cablevision.com/about/index.jsp (visited Dec. 5, 2012).
Charter Communications, About Charter, http://www.charter.com/footer/footerPage.jsp?tag=about (visited Dec. 5,
2012).
Columbia Journalism Review, Who Owns What, http://www.cjr.org/resources/ (visited Dec. 5, 2012).
Comcast-NBCU Order, 26 FCC Rcd at 4410-18, Appendix D; GE/Comcast /NBCU Application at 19-20, 30-31.
195

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Cox Enterprises, Corporate Overview, http://www.coxenterprises.com/about-cox/corporate-overview.aspx (visited
Dec. 5, 2012).
Madison Square Garden, Inc., SEC Form 10-K for the Fiscal Year Ending June 30, 2012, at 3.
NCTA, Cable Networks, at http://www.ncta.com (visited Dec. 5, 2012).
SNL Kagan, Economics of Basic Cable Networks (2012 Edition).
196

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Table C-2

Regional Networks Affiliated with a National Broadcast Television Network, Broadcast Television

Licensee, or Other Media Company

Network Owners

Networks Wholly or Owned in Part

Allbritton

Regional News Networks:

NewsChannel 8, NewsChannel 8 HD
Communications
Belo Corporation

Regional News Networks:

24/7 News Channel (Boise, ID), 3TV
24/7 News, Local News on Cable (Hampton), NewsWatch 15
(Louisiana), Northwest Cable News (Washington, Oregon, Idaho),
TXCN (Texas)
News Corporation

Regional Sports Networks

: FOX Sports Arizona, FOX Sports
Arizona HD, FOX Sports Carolinas, FOX Sports Carolinas HD, FOX
Sports Detroit, FOX Sports Detroit HD, FOX Sports Florida, FOX
Sports Florida HD, FOX Sports Houston, FOX Sports Houston HD,
FOX Sports Indiana, FOX Sports Indiana HD, FOX Sports Kansas
City, FOX Sports Kansas City HD, FOX Sports Midwest, FOX
Sports Midwest HD, FOX Sports New Orleans, FOX Sports New
Orleans HD, FOX Sports North, FOX Sports North HD, FOX Sports
Ohio, FOX Sports Ohio HD, FOX Sports Oklahoma, FOX Sports
Oklahoma HD, FOX Sports San Diego, FOX Sports San Diego HD,
FOX Sports South, FOX Sports South HD, FOX Sports Southwest,
FOX Sports Southwest HD, FOX Sports Tennessee, FOX Sports
Tennessee HD, FOX Sports Utah, FOX Sports Utah HD, FOX Sports
West, FOX Sports West HD, FOX Sports Wisconsin, FOX Sports
Wisconsin HD, SportSouth, SportSouth HD, SportsTime Ohio,
SportsTime Ohio HD, Sun Sports, Sun Sports HD, Yankee
Entertainment & Sports (YES) Network, Yankee Entertainment &
Sports (YES) Network HD
Scripps Networks

Regional Sports Networks:

FOX Sports South, FOX Sports South
Interactive
HD, SportsSouth, SportsSouth HD

Sources:

Belo Corporation, Belo Companies, Cable News, http://www.belo.com/companies/cable-news (visited Dec. 5,
2012).
CBS Corporation, About CBS, http://www.cbscorporation.com/index.php (visited Dec. 5, 2012).
Columbia Journalism Review, Who Owns What, http://www.cjr.org/resources/ (visited Dec. 5, 2012).
NCTA, Cable Networks, http://www.ncta.com (visited Dec. 5, 2012).
News Corporation, Cable Network Programming, http://www.newscorp.com/operations/cable.html (visited Dec. 5,
2012).
NewsChannel 8, About Us, http://www.tbd.com/about/ (visited Dec. 5, 2012)
Scripps Networks Interactive, About Us, http://www.scrippsnetworks.com/about.aspx?code=about (visited Dec. 5,
2012).
SNL Kagan, Economics of Basic Cable Networks (2012 Edition).
197

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A

PPENDIX D

Regional Sports Networks

Regional Network Name(1)

MVPD Owner

Other Owners

Altitude Sports Network
Stan Kroenke (owner of the
Denver Nuggets and the
Colorado Avalanche)
Altitude Sports Network HD
Stan Kroenke (owner of the
Denver Nuggets and the
Colorado Avalanche)
Bright House Sports Network
Time Warner Cable
Bright House Sports Network HD
Time Warner Cable
Big Ten Network
Big Ten Conference, News
Corporation
Big Ten Network HD
Big Ten Conference, News
Corporation
Channel 4 San Diego(2)
Cox Enterprises
Channel 4 San Diego HD
Cox Enterprises
Comcast/Charter Sports Southeast
Comcast, Charter
Comcast/Charter Sports Southeast HD
Comcast, Charter
Comcast SportsNet Bay Area
Comcast/NBCU
San Francisco Giants
Comcast SportsNet Bay Area HD
Comcast/NBCU
San Francisco Giants
Comcast Sports Net California
Comcast/NBCU
Comcast SportsNet California HD
Comcast/NBCU
Comcast SportsNet Chicago
Comcast/NBCU
J. Joseph Ricketts (owner of
the Cubs), Jerry Reinsdorf
(owner of the Bulls and the
White Sox), Rocky Wirtz
(owner of the Blackhawks)
Comcast SportsNet Chicago HD
Comcast/NBCU
J. Joseph Ricketts (owner of
the Cubs), Jerry Reinsdorf
(owner of the Bulls and the
White Sox), Rocky Wirtz
(owner of the Blackhawks)
Comcast SportsNet Houston(3)
Comcast/NBCU
Houston Astros, Houston
Rockets
Comcast SportsNet Houston HD
Comcast/NBCU
Houston Astros, Houston
Rockets
Comcast SportsNet Mid-Atlantic
Comcast/NBCU
Comcast SportsNet Mid-Atlantic HD
Comcast/NBCU
Comcast SportsNet New England
Comcast/NBCU
Comcast SportsNet New England HD
Comcast/NBCU
198

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FCC 13-99

Regional Network Name(1

)

MVPD Owner

Other Owners

Comcast SportsNet Northwest
Comcast/NBCU
Comcast SportsNet Northwest HD
Comcast/NBCU
Comcast SportsNet Philadelphia
Comcast/NBCU
Philadelphia Phillies
Comcast SportsNet Philadelphia HD
Comcast/NBCU
Philadelphia Phillies
Comcast SportsNet Washington
Comcast/NBCU
Comcast SportsNet Washington HD
Comcast/NBCU
Comcast Sports Southwest
Comcast/NBCU
Comcast Sports Southwest HD
Comcast/NBCU
Cox Sports Television (New Orleans)
Cox Enterprises
Cox Sports Television HD (New
Cox Enterprises
Orleans)
Fox Sports Arizona
News Corporation
Fox Sports Arizona HD
News Corporation
Fox Sports Carolinas
News Corporation
Fox Sports Carolinas HD
News Corporation
Fox Sports Detroit
News Corporation
Fox Sports Detroit HD
News Corporation
Fox Sports Florida
News Corporation
Fox Sports Florida HD
News Corporation
Fox Sports Houston
News Corporation
Fox Sports Houston HD
News Corporation
Fox Sports Indiana
News Corporation
Fox Sports Indiana HD
News Corporation
Fox Sports Kansas City
News Corporation
Fox Sports Kansas City
News Corporation
Fox Sports Midwest
News Corporation
Fox Sports Midwest HD
News Corporation
Fox Sports New Orleans
News Corporation
Fox Sports New Orleans HD
News Corporation
Fox Sports North
News Corporation
Fox Sports North HD
News Corporation
Fox Sports Ohio
News Corporation
Fox Sports Ohio HD
News Corporation
199

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Regional Network Name(1

)

MVPD Owner

Other Owners

Fox Sports Oklahoma
News Corporation
Fox Sports Okalahoma HD
News Corporation
Fox Sports San Diego
News Corporation
Fox Sports San Diego HD
News Corporation
Fox Sports South
News Corporation
Fox Sports South HD
News Corporation
Fox Sports Southwest
News Corporation
Fox Sports Southwest HD
News Corporation
Fox Sports Tennessee
News Corporation
Fox Sports Tennessee HD
News Corporation
Fox Sports Utah
News Corporation
Fox Sports Utah HD
News Corporation
Fox Sports West
News Corporation
Fox Sports West HD
News Corporation
Fox Sports Wisconsin
News Corporation
Fox Sports Wisconsin HD
News Corporation
Lakers RSN(4)
Time Warner Cable
Lakers RSN HD
Time Warner Cable
Lakers RSN (Spanish language)
Time Warner Cable
Lakers RSN HD (Spanish language)
Time Warner Cable
Longhorn Network
University of Texas at
Austin, Walt Disney
Longhorn Network HD
University of Texas at
Austin, Walt Disney
MASN
Baltimore Orioles and the
Washington Nationals
MASN HD
Baltimore Orioles and the
Washington Nationals
Metro Sports (Kansas City)
Time Warner Cable
Metro Sports HD (Kansas City)
Time Warner Cable
Metro Sports (Nebraska)
Time Warner Cable
MSG
Cablevision
MSG HD
Cablevision
MSG Plus
Cablevision
MSG Plus HD
Cablevision
200

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Regional Network Name(1

)

MVPD Owner

Other Owners

NESN
Boston Red Sox and
Boston Bruins
NESN HD
Boston Red Sox and
Boston Bruins
OC Sports (Hawaii)
Time Warner Cable
OC Sports HD (Hawaii)
Time Warner Cable
PAC-12 Network
PAC-12 Conference
PAC-12 Network HD
PAC-12 Conference
ROOT Sports: Northwest (4)
DIRECTV Sports
Networks
ROOT Sports: Northwest HD
DIRECTV Sports
Networks
ROOT Sports: Pittsburgh
DIRECTV Sports
Networks
ROOT Sports: Pittsburgh HD
DIRECTV Sports
Networks
ROOT Sports: Rocky Mountain
DIRECTV Sports
Networks
ROOT Sports: Rocky Mountain HD
DIRECTV Sports
Networks
SportsNet New York
Comcast, TWC
SportsNet New York HD
Comcast, TWC
SportsSouth
News Corporation
SportsSouth HD
News Corporation
SportsTime Ohio(5)
News Corporation
SportsTime Ohio HD
News Corporation
Sun Sports
News Corporation
Sun Sports HD
News Corporation
TWC Sports (Central NY)
Time Warner Cable
TWC Sports HD (Central NY)
Time Warner Cable
TWC SportsNet (Buffalo)
Time Warner Cable
TWC SportsNet HD (Buffalo)
Time Warner Cable
TWC SportsNet (Rochester)
Time Warner Cable
TWC SportsNet HD (Rochester)
Time Warner Cable
TWC Connection/Sports (Mid-Ohio)
Time Warner Cable
TWC Connection/Sports (SW Ohio)
Time Warner Cable
TWC Sports 32 (Wisconsin)
Time Warner Cable
201

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Regional Network Name(1

)

MVPD Owner

Other Owners

TWC Sports 32 HD (Wisconsin)
Time Warner Cable
Texas Channel (Texas)
Time Warner Cable
Yankee Entertainment & Sports (YES)
Yankee Global Enterprises,
Network (New York)(6)
News Corporation
Yankee Entertainment & Sports (YES)
Yankee Global Enterprises,
Network HD (New York)
News Corporation
YNN Non-Stop Sports (Texas)
Time Warner Cable

Notes:

(1) This list is provided for illustrative purposes only. Inclusion or exclusion of a network should not be read to
state or imply any position as to whether the network qualifies as an "RSN" as defined by the Commission.
(2) While press reports indicate that Channel 4 San Diego will no longer hold the rights for the Major League
Baseball games of the San Diego Padres in 2012, these reports also indicate that Channel 4 San Diego carries
NCAA Division I basketball games. See Cox to Layoff Baseball Programming Employees, Aug. 30, 2011,
available at http://www.10news.com/news/29032885/detail.html; SDSU Men's Hoops at Arizona to be Simulcast
on 4SD
, Nov. 22, 2011, available at http://goaztecs.cstv.com/sports/m-baskbl/spec-rel/112211aab.html.
(3) On October 1, 2012, Comcast SportsNet Houston launched a new regional sports network featuring the games
of the Houston Astros (of MLB) and the Houston Rockets (of the NBA), available at
http://www.comcastsportsnet.com/houston.
(4) On April 1, 2011, FSN Northwest, FSN Pittsburgh, and FSN Rocky Mountain changed their names to ROOTS
Sports, which is wholly owned by DIRECTV Sports Networks.
(5) On December 28, 2012, News Corporation announced it has purchased the regional sports network SportsTime
Ohio featuring the games of the Cleveland Indians baseball team and the Cleveland Cavaliers (of the NBA),
available at http://msn.foxsports.com/mlb/story/cleveland-indians-sell-tv-network-to-fox-sports-media-group-
122812.
(6) On November 20, 2012, News Corporation and Yankee Global Enterprises announce News Corporation's
acquisition of a 49 percent equity interest in the Yes Network, available at
http://www.newscorp.com/news/news_548.html.

Sources:

Altitude Sports and Entertainment, About Us, http://www.altitude.tv/AboutUs/AboutUs/default.aspx (visited
Dec. 5, 2012)
Big Ten Network, About Us, http://btn.com/about/ (visited Dec. 2, 2012)
Bright House Networks, About Us, http://www.brighthouse.com/corporate/about (visited Dec. 3, 2012).
Longhorn Network, About Us, http://espn.go.com/longhornnetwork/index (visited Dec. 3, 2012).
Mid-Atlantic Sports Network, About MASN, http://www.masnsports.com/masn_news_information/ about-
masn.html (visited Dec. 5, 2012).
NCTA, Cable Networks, http://www.ncta.com (visited Dec. 5, 2012).
New England Sports Network, About NESN, http://www.nesn.com/about-nesn.html (visited Dec. 5, 2012).
202

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Pacific 12 Conference, PAC-12 Official Site, http://www.pac-12.org/ (visited Dec. 5, 2012).
SNL Kagan, Economics of Basic Cable Networks (2012 Edition).
SportsTime Ohio, Channel Lineup, http://www.sportstimeohio.com/tv-schedule (visited Dec. 5, 2012).
SNL Kagan, Media Trends (2011 Edition), at 70-74.
203

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STATEMENT OF

ACTING CHAIRWOMAN MIGNON CLYBURN

Re:
Annual Assessment of the Status of Competition in the Market for the Delivery of Video
Programming
, MB Docket No. 12-203.
I commend the staff for this comprehensive and timely report, which provides a useful snapshot
of the video programming marketplace. I am encouraged by some of the pro-consumer trends it reveals.
Options for accessing video programming are swelling. Nearly all consumers now have a choice
among three multichannel video program distributors or MVPDs, and today more than a one-third of all
households can choose from four or more providers. Consumers can increasingly access content on a
variety of devices that they own, such as tablets, video game systems, set-top boxes, and computers.
Online video distribution is also thriving. In addition to allowing consumers to view video anywhere and
anytime, these developments may also save consumers monthly on lease rates for equipment, as they are
freed from renting set-top boxes. Indeed, all of these trends are leading to more choices in terms of
programming packages and prices, and that's great for consumers.
However, I am concerned, because not all of our citizens are realizing the promise of these
competitive benefits. Nearly 3 out of 10 rural Americans do not have access to high-speed Internet that is
sufficient to receive online video distributors' services, and I sincerely hope that these consumers are not
forgotten as these services become more popular and offer more extensive programming.
In this regard, I note that broadcast TV remains one of the most affordable sources of
entertainment and news. As the Report shows, 11 million Americans still rely on free, over-the-air
broadcast signals as their exclusive source for TV viewing. And multicasting is bringing additional
programming to consumers, including networks and programming targeting minorities and niche
audiences.
Special thanks are due to everyone in the Media Bureau who worked on this exhaustive report,
but I would like to single out Marcia Glauberman today, because she has worked on every competition
report since 1995. I know that this report, like the previous ones that Marcia worked on, will be a
valuable public resource for information about the video marketplace.
204

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STATEMENT OF

COMMISSIONER JESSICA ROSENWORCEL

Re:
Annual Assessment of the Status of Competition in the Market for the Delivery of Video
Programming
, MB Docket No. 12-203.
Yesterday the Academy of Television Arts & Sciences announced the nominees for the 65th
annual primetime television awards. To be fair, the Emmy Award nominations have a bit more razzle-
dazzle than the report before us. The Federal Communications Commission's 15th annual video
competition report may have a lot going for it--but star power it lacks.
Still, I think there is something instructive in the list of this year's Emmy Award nominees. It
says something about the state of video, platforms for creativity, and content choices for viewers. The
nominees spanned from programming on traditional commercial broadcast networks to public television
to cable channels to new platforms like Netflix. What used to be a field limited to linear programming
has now expanded. What was once an award featuring content only viewable in primetime now includes
programming viewable at any time.
Our report today tells a parallel tale. Traditional video models are still strong, but new ways of
watching are gaining a toehold.
As our data demonstrates, linear television still leads the pack, with the average American
watching 34 hours and seven minutes of programming every week. But the times are a changing. We
now typically watch two hours and 40 minutes of time-shifted television every week. On top of that, we
view 40 minutes of Internet video each week. This last category is only bound to grow, now that more
than a third of all households have a television connected to the Internet--often through a gaming
console.
What do we make of these trends? The ways we create, distribute, and consume content are
changing. We are no longer limited to what is on, we look for video content when we want it, where we
want it--on any screen handy. It is an exciting time, with enhanced possibilities for consumers--and
creators.
So thank you to the Media Bureau for this compendium of data on the state of video markets.
Were there an award for best regulatory report, I would nominate you for it now. What you have
produced is smart, useful, and compelling--and that, I think, is something we should honor.
205

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STATEMENT OF

COMMISSIONER AJIT PAI

Re:
Annual Assessment of the Status in Competition in the Market for the Delivery of Video
Programming
, MB Docket No. 12-203.
I'm pleased to support the Commission's 15th Video Competition Report. This report is quite
comprehensive--without appendices, it stands at 185 pages--and it contains a wide range of useful and
interesting statistics. But when you take a step back from the blizzard of facts and figures, the report's
principal lesson is simple--and profound. Today, more Americans have more choices when it comes to
video programming than ever before. They can watch a greater variety of programming than ever before.
They can view that programming on a wider array of devices than ever before. And they have a greater
ability than ever before to watch that programming when they want to watch it.
All of this means that American consumers are reaping the benefits of competition and innovation
in the video marketplace. While many fondly refer to the period between 1948 and 1959 as the Golden
Age of Television, there is no time like the present for those who savor quality content. For instance, it
used to be that the road from television to feature films was a one-way street for a successful actor.
Today, however, it is increasingly common for film stars to move to television to find creatively
challenging work. To give just a few examples, Kevin Spacey now stars in the Emmy-nominated Netflix
drama House of Cards, Jessica Lange is featured in FX's Emmy-nominated American Horror Story, and
Robin Williams will return to broadcast television this fall in CBS's The Crazy Ones.
This report signals good news beyond the state of video competition. In July 2012, we released
the 14th iteration of this Report. Almost exactly one year later, we are adopting its successor. This
means that we are fulfilling our statutory mandate to "annually report to Congress on the status of
competition in the market for the delivery of video programming."1325 After a bit of a rough patch, it is
great to see that we are back on track.
I commend Chairwoman Clyburn for her leadership in making that happen. And I thank all of the
Media Bureau staff who worked tirelessly to produce this report: Hillary DeNigro, Marcia Glauberman,
Dan Bring, Johanna Thomas, Jake Riehm, Erica Porter, Emily Burke, Dana Scherer, Ali Zayas, John
Kiefer, John Gabrysch, Sean Mirzadegan, Sean Yun, and Brendan Murray. The care and effort that you
put into this report will be obvious to all who read it.

1325 47 U.S.C. 548(g).
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