	Background

		Video Programming and Distribution

Various entities and groups develop and distribute video content. Typically, the general public views  television programming through broadcast or subscription video service. According to a 2012 report  cited by FCC, seven companies’ broadcast and cable networks  accounted for about 95 percent of all television viewing hours in the  United States. Since 2005, Some Local Markets Have Gained Access to Additional MVPD Service

Since 2005, the introduction of telephone-based video service has  brought additional MVPD competition to some areas. With the new entry in some areas, roughly 1 in 3 households had access  to at least 4 MVPDs at year-end 2010. While the Internet has emerged as a new source for viewing video, online  viewing and revenues represents a small portion of overall media activity,  particularly as compared to traditional television. Consumers Continue to Acquire Programming and Content through Packages, but Online Video Providers Are Delivering New Choices

		MVPDs Generally Provide Large Packages of Channels

In general, MVPDs provide video content by packaging together a large  number of channels in different programming tiers—often the basic,  expanded basic, and premium tiers. Services like Hulu and Netflix allow consumers to  select content based on a program, or even an episode basis. Stakeholders Generally Noted That Laws and Regulations Have Not Kept Pace with Changes, and FCC Has Not Consistently Reported on Competition

		The Majority of Stakeholders Noted that Some Laws and Regulations Are Out of Date, but Little Agreement Exists on Potential Changes

The 1992 Act was written over 20 years ago, and for a variety of reasons,  the majority of stakeholders with whom we spoke stated that some  provisions of the laws and associated regulations do not reflect the  current marketplace. Since then, satellite and  telephone companies have entered the marketplace, and consumers  have more choices in selecting a video distributor. FCC Has Not Consistently Published Statutorily Required Reports

FCC is required by statute to report annually to Congress on both cable  industry prices and competition in the video marketplace, but has not met  this requirement every year. Since the 1992 Act, FCC has published the annual cable industry  price report 13 times, but did not publish the report in 2004, 2006, 2007,  and 2010. According to FCC officials, this review and change  contributed to the Commission missing the 2010 and 2011 video  competition reports. In our review  of the video competition reports, we saw little change in the reported  findings from year to year; therefore, less frequent reporting could allow  for continued measurement of industry performance while reducing the  burden on FCC and industry participants. Competition has expanded in some segments of the video  marketplace, most notably, the emergence of telephone companies  providing video distribution services. FCC’s cable industry price and video competition reports  provide useful information. FCC’s 2009 cable industry price and  2011 video competition reports covered several years of data and could  serve as models for issuing such reports on a less frequent basis. Since  these annual reports are statutorily required, Congress, with input from  FCC, would determine any new reporting frequency. Recommendation for Executive Action

To ensure that the Commission’s cable industry price and video  competition reports provide timely and useful information, while  minimizing the reporting burden and meeting statutory deadlines, we  recommend that the Chairman of the Federal Communications  Commission study the advantages and disadvantages of different  reporting frequencies, including annual and biennial reporting, and  transmit the results of its analysis to Congress. In its letter, FCC said that the Commission strives to use its  resources efficiently to meet the agency’s mission and its Congressional  requirements, and the Commission is reviewing our recommendation. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to examine (1) how competition has  changed since 2005; (2) the increased choices that consumers have in  acquiring video programming and content; (3) the factors that can spur or  hinder competition; and (4) stakeholders’ views on how the federal  government’s regulations, reports, and other activities have kept pace  with changes in the industry. We selected industry participants to include  producers, aggregators, and distributors of content, such as broadcast  and cable networks, multichannel video programming distributors  (MVPD)—cable, satellite, and telephone companies—and online video  distributors (OVDs). Our results reflect the competition, packages, and pricing in the  20 zip codes and are not generalizable to all zip codes. To identify the  prices for traditional MVPD services, we gathered data from FCC’s  reports on cable industry prices for the years 2005 through 2012, which  represent the most recent available data.
Why GAO Did This Study

Video provided through subscription video services, such as cable and satellite television, is a central source of news and entertainment for the majority of U.S. households. Technological advances have ushered in a wave of new products and services, bringing online distribution of video to consumers. Federal laws and regulations have sought to foster competition in the video programming and distribution marketplace, but many such laws were adopted prior to the emergence of these advances.
Among other things, GAO examined (1) how competition has changed since 2005; (2) the increased choices that consumers have in acquiring video programming and content; and (3) stakeholders' views on how the government's regulations, reports, and other activities have kept pace with changes in the industry. GAO reviewed relevant literature and reports; interviewed agency officials, industry stakeholders, and experts; and analyzed prices and service offerings in 20 randomly sampled zip codes (the prices and services offerings reflect conditions in the 20 zip codes and are not generalizable to all zip codes).

What GAO Found

Since GAO reported on competition in 2005, competition among video content producers is little changed, while competition among distributors has increased. According to data cited by the Federal Communications Commission (FCC), seven companies' broadcast and cable networks accounted for about 95 percent of all television viewing hours in the United States. Further, ownership of broadcast and cable networks changed little from 2005 through 2012. Alternatively, the introduction of video service provided by telephone companies, such as Verizon's FiOS service, has brought additional competition to video distribution. At year-end 2010, roughly 1 in 3 households could choose among 4 or more subscription video distributors: typically a cable company, 2 satellite companies, and a telephone company. With technological advances, companies are increasingly distributing video online. Online video distributors (OVD) are developing a variety of business models, including free and subscription-based services. However, online viewing and revenues represent a small portion of overall media viewing hours and revenue.
Consumers continue to acquire programming and content through packages, but OVDs are delivering new choices. All the video distributors that GAO analyzed required consumers to purchase a package of channels often through the basic, expanded basic, and premium tiers. According to FCC data, in 2011, the average price for expanded basic service was $57.46, and had increased over 33 percent since 2005, exceeding the 15 percent increase in the Consumer Price Index. OVDs and other companies allow consumers to select content on a program or episode basis. However, these services typically do not include the most recent television programs and movies, thereby limiting their value for some consumers.
Stakeholders generally noted that laws and regulations have not kept pace with changes in the video industry, and FCC has not consistently reported on competition. Some legislation governing the media industry was adopted over 20 years ago, before telephone companies entered the marketplace and the commercialization of the Internet facilitated new OVD services. A majority of stakeholders with whom GAO spoke stated that some provisions should be revisited. FCC is required to annually report to Congress on cable industry prices and competition in the video marketplace. However, since 1992, FCC has not published the cable industry price report 4 times--in 2004, 2006, 2007, and 2010--and has not published the video competition report 4 times--in 2007, 2008, 2010, and 2011. According to FCC officials, a variety of administrative factors contributed to the missed reports, and the reports are time consuming to prepare. The reports also impose burdens on some industry participants.
Less frequent reporting on cable industry prices and competition in the video marketplace could allow for continued measurement of industry performance while reducing the burden on FCC and industry participants. GAO found little change in the reported findings from year-to-year in FCC's video competition report. FCC's 2009 cable industry price and 2012 video competition reports followed missed reports, and these reports included data covering multiple years; these reports could serve as a model for issuing such reports less frequently. Since these reports are statutorily required, Congress, with input from FCC, would need to determine any new reporting frequency.

What GAO Recommends

FCC should study the advantages and disadvantages of different reporting frequencies for its cable industry price and video competition reports and transmit the results of its analysis to Congress. FCC said that the Commission strives to use its resources efficiently to meet the agency's mission and its Congressional requirements, and the Commission is reviewing GAO's recommendation.