Multichannel video programming distributor

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In the United States, a multichannel video programming distributor (MVPD) is a service provider that delivers video programming services, usually for a subscription fee (pay television). These operators include cable television (CATV) systems, direct-broadcast satellite (DBS) providers, and wireline video providers (including Verizon FiOS as well as AT&T U-verse) and competitive local exchange carriers (CLECs) using IPTV.

Section 602 (13) of The Communications Act of 1934 (as amended by the Telecommunications Act of 1996) defines an 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.[1]

Origins of cable television[edit]

Prior to 1975, cable television served one purpose: to provide television signals to rural areas that were too far away from broadcast stations for a signal to be received. RCA then launched Satcom I, the first of several satellites allowing new services such as HBO and fledgling Atlanta-based superstation WTCG to send out their programming for hundreds of dollars per hour rather than the $3,000 per hour required to use telephone lines to transmit the services.[2] Satellites were also cheaper than microwave relay systems.[3]

By 1980, 15 million of the 75-80 million U.S. homes with at least one television set had a cable television subscription, and one prediction was for that number to double by 1985.[2]

By 1981, eleven communications satellites were in use, and the Federal Communications Commission planned 24 to be in use by 1985. Most cable channels wanted space on Satcom I, since cable companies had receiving dishes aiming in that direction. In November 1981, Satcom III-R replaced Satcom I, which changed to voice and data distribution.[3]

Growth of satellite[edit]

Some areas were too remote for cable or even any over-the-air reception, and other areas did not have a cable television system.[4] In the early days of home satellite dishes, the two types of service were low-power C-band service with large dishes, and high-power Ku-band.[5] On October 18, 1979, the FCC began allowing people to have home satellite earth stations without a federal government license. Originally, the receivers – which were 8 to 12 feet wide and made of fiberglass or aluminum mesh – cost more than $5,000, and sometimes as much as $10,000. The wider that the dish was, the better its ability to provide adequate channel reception. Programming sent from ground stations was relayed from 18 satellites in geostationary orbit located 22,300 miles above the Earth. The dish had to be pointed directly at the satellite, with nothing blocking the signal, and the farther the signal had to travel, the wider the dish had to be.[6][4][7]

The retail price for satellite receivers soon dropped, with some dishes costing as little as $2,000 by 1984.[6] Dishes pointing to one satellite were even cheaper,[8] but using an actuator, it was possible to move from one satellite to another. Once a user paid for a dish, it was possible to receive even premium movie channels, raw feeds of news broadcasts or television stations from other areas. People in areas without local broadcast stations, and people in areas without cable television, could obtain good-quality reception with no monthly fees.[6][7] By the end of 1984, an estimated one million dishes were in use, with over 120 channels available, some not available any other way. Some people who installed dishes simply were not happy with cable. HBO and other cable-originated services were considering scrambling so that people would have to pay to receive them in the same manner as cable television systems.[7]

In 1979, COMSAT announced a plan to allow viewers to receive programming directly from broadcast satellites, a concept called direct-broadcast satellite or DBS. This system would cost "hundreds of millions of dollars" and, at the time, was expected to be ready by the 1990s. Later, the company changed its target date to 1986. By 1983, the FCC had authorized several other companies to offer DBS service. These included CBS, RCA and Western Union, as well as Rupert Murdoch-led Skyband. Unlike the larger television receive-only dishes, DBS used higher-powered satellites with smaller, more affordable dishes that were two to three feet wide.[9]

On November 16, 1983, the first DBS service, with 50 customers paying $39.95 a month for five channels in the Indianapolis, Indiana area, was launched by United Satellite Communications Inc. (USCI), a joint venture of Prudential Insurance, General Instrument and investors that included Francesco Galesi. USCI did not wait for more powerful satellite technology, but instead used the Canadian Anik C2. The company also signed an agreement with ESPN and made programming arrangements with distributors rather than existing cable channels. USCI also had two movie channels and a music video channel similar to MTV. While cable could provide more channels at a cheaper rate, cable was too expensive to offer in rural areas. Also, cable was not yet available in larger cities such as Philadelphia and Chicago. USCI president Nathaniel Kwit stated that 30 million people would never be served by cable companies, and DBS would have 5 million subscribers by 1990.[9][10][11][12] One prediction for USCI was for 2.4 million customers by 1986.[13]

With little success in Indiana, USCI began looking to Washington, D.C., Baltimore and Philadelphia. Early in 1984, USCI expanded into 15 markets in the Northeast and Midwest. At first, USCI leased its equipment because people might be reluctant to buy an unproven technology, but the company later sold its dishes. COMSAT planned to compete with USCI, offering lower prices, but lost its backing from CBS in June 1984.[11][14][15] Of the eight original companies planning DBS service, none had a working system by the start of 1985. The expected cost of entering the market ranged from $200 to $500 million, with $100 million required to put a satellite in orbit. Only Direct Broadcast Satellite Corp., United States Satellite Broadcasting and Dominion Satellite Network still had plans to go ahead, while RCA was looking at changes in its system. Even USCI, which used a Canadian satellite that did not require FCC approval to use, was in trouble. The company had the capability to serve 52 percent of people in the United States but after a year, USCI had only 11,000 customers. USCI's inability to get channels such as CNN, along with a monthly cost of at least $24.95, in addition to the $400 to $700 for the receiver needed to pick up a still-weak signal, kept the numbers low.[14][15] Another problem was that HBO and other channels used C-band while USCI was Ku-band.[13] USCI needed a significantly higher amount of money and began looking at possible mergers. The company could not afford to expand and it had been unable to strike deals with other companies, so its service ended without warning on April 1, 1985.[16] USCI filed for bankruptcy, and one company offered to convert USCI dishes to C-band.[17] People were allowed to keep their dishes; half had bought them and half had leased them, however it was unclear who if anyone would provide the service.[13]

In October 1984, the U.S. Congress passed the Cable Communications Act of 1984, which gave those using dishes the right to see signals for free unless they were scrambled, and required those who did scramble to make their signals available for a fee.[7][18] Since cable channels could prevent reception by big dishes, other companies had an incentive to offer competition. Dominion planned inspirational programming, USSB intended to sell dishes with three channels of free programming, and Direct Broadcast Satellite Corp. would be a common carrier airing programming from those who paid.[14]

By 1987, nine channels were scrambled, but 99 others were available free-to-air. While HBO initially charged a monthly fee of $19.95, soon it became possible to unscramble all channels for $200 a year. Dish sales went down from 600,000 in 1985 to 350,000 in 1986, but pay television services were seeing dishes as something positive since some people would never have cable service, and the industry was starting to recover. Scrambling would also lead to the development of pay-per-view.[18] On November 1, 1988, NBC began scrambling its C-band signal but left its Ku-band signal unencrypted in order for affiliates to not lose viewers who could not see their advertising. Most of the two million satellite dish users in the United States still used C-band. ABC and CBS were considering scrambling, though CBS was reluctant due to the number of people unable to receive local network affiliates.[19]

In 1992, nearly all MVPD customers had cable television service.[20]

In 1994, PrimeStar, DirecTV and USSB began offering digital satellite service. With one million subscribers in 18 months, digital direct broadcast satellite set a record for the quickest acceptance of a new technology; by comparision, it took four years before the VCR sold one million units. EchoStar and AlphaStar debuted in 1996.[21]

2.2 million people subscribed to C-band service requiring 6-foot dishes costing as much as $1,500; this number remained steady, while digital satellite service with 18-inch dishes experienced phenomenal growth, reaching 4.5 million subscribers by the end of 1996, up by about two million subscribers in a year. Cable television services had 65 million subscribers, but were already starting to see customers switch to satellite. Satellite television offered more channels than cable did at the time due to limited headend capacity, although broadcast networks were not allowed if their affiliates could be received with an antenna. DirecTV and USSB had 2.5 million subscribers, while PrimeStar, with 27-inch dishes that could be rented rather than purchased, had 1.6 million subscribers.[21]

Cable companies responded to the success of satellite by adopting digital cable services that offered more channels, and required the use of digital set-top boxes. They also owned a share of PrimeStar, because offering cable in rural areas was deemed to be too expensive.[21]

A January 8, 2001 report commissioned by the FCC stated that in the year ending June 2000, the number of satellite subscribers had increased from 10.1 million to 13 million people, an increase three times that of cable. Satellite represented 15.4 percent of those paying for television service, while the percentage of those who had cable dropped from 82% to 80%. Cable charges increased at a rate 50% higher than the Consumer Price Index.[22] By 2012, satellite dishes accounted for 30% of the pay television market.[20]

Cable Television Consumer Protection and Competition Act[edit]

The Cable Television Consumer Protection and Competition Act of 1992 stated "No cable system or other multichannel video programming distributor shall retransmit the signal of a broadcasting station, or any part thereof, except with the express authority of the originating station."[23] This meant that instead of must-carry, stations could demand retransmission consent, requiring that the station be compensated for distributing its signal.[23]

Telephone companies[edit]

In 2005, telephone provider Verizon entered into the pay television area with the introduction of its own wireline video provider FiOS. In 2008, AT&T followed suit with the introduction of its AT&T U-verse service.

Digital TV Transition Fairness Act[edit]

On January 7, 2009, U.S. Senator Bernie Sanders of Vermont introduced the Digital TV Transition Fairness Act. Sanders introduced the idea in a letter to FCC chairman Kevin Martin sent on September 19, 2008, which stated, in part, "Americans should not be forced to pay for cable, satellite, or other telecommunications video services to get their free broadcast channels." The bill provided funds to help people pay for not only converter boxes, but would also subsidize antennas and, where necessary, cable, satellite or other services. The bill was referred to committee.[24][25]

On June 15, 2009, U.S. Representative Peter DeFazio of Oregon introduced a version of Sanders' bill in the United States House, that would require MVPDs to offer a $10 basic package to anyone who lost at least one channel as a result of the digital television transition (with broadcasters waiving fees), pay for outdoor antennas (including installation) and extend the converter box program beyond July 31, 2009.[26][27]

Proposals to expand wireless broadband[edit]

Even after the digital television transition, which resulted in 100 MHz of spectrum becoming available for wireless broadband use, a total of 800 MHz was needed. A Consumer Electronics Association (CEA) study claimed that $62 billion worth of spectrum could be repurposed to about $1 trillion for wireless use, and one proposal would have required all television stations, including low-power broadcasters, to give up their enitre spectrum, with subsdized MVPDs replacing over-the-air television, even after viewers spent money on preparing for the digital transition.[28][29] Broadcasters responded, "In the broadcasting context, the 'total value' is not a strict financial measure, but rather is one that encompasses the broader public policy objectives such as universal service, local journalism and public safety."[28] Broadcasters pointed out that the government, viewers and the related industries spent $1.5 billion making sure that a minority of the audience would be ready for the digital transition; and argued that any change would have meant the loss of free over-the-air television service to people in rural areas, particularly "local journalism, universal service, availability of educational programming, and timely and reliable provision of emergency information."[28]

FCC broadband advisor Blair Levin wanted a plan by February 2010. Among the possibilities were restricting over-the-air stations to a single standard definition channel, and requiring each network affiliate to be one of a group of subchannels of a single channel, with high definition service being available only from a MVPD. Although other types of spectrum was being considered for reallocation for broadband use, Levin said of the broadcast spectrum, "It's very attractive for wireless." As for the CEA "total recall" proposal, Levin said, "The discussions to date between the broadcasters and the commission would free up spectrum but allow all channels to broadcast over the air."[29]

Regarding the CEA study's findings, David Donovan of The Association for Maximum Service Television said to Broadcasting & Cable magazine:

Wireless companies are asking the government to participate in the biggest consumer bait-and-switch in American history. For the last few years, the government told consumers that digital television would bring them free over-the-air HDTV and more channels. Now, after purchasing billions of dollars in new digital equipment and antennas, wireless advocates are asking the government to renege on its promise. High-definition programming and more digital channels would become the sole and exclusive province of pay services. The American public simply will not stand for this.[29]

Michigan Rep. John Dingell in a letter to FCC chairman Julius Genachwoski, predicted a spectrum reallocation using broadcast stations would cause "an adverse effect on consumers."[30] Another proposal was "geo-filtered WiMAX", which would allow high-definition service but only in a particular market, with the remainder of the spectrum sold for $60 billion. WiMax would replace the existing services but would make MVPD services cheaper, while still allowing broadcasters to make more money. The additional spectrum made available could then be sold to pay the industry's debt.[29]

Municipal systems[edit]

In 2008, Greenlight was introduced in Wilson, North Carolina, which created the system at a cost of $28 million.[31]

In November 2010,[32] Salisbury, North Carolina introduced Fibrant, a fiber optic broadband utility offering Internet, cable and telephone service.[33] Fibrant was one of 60 municipal networks located across the country. The city borrowed $30 million to install the service, which offered faster Internet speeds at a lower price than competitors. The North Carolina General Assembly was considering legislation to stop such networks, which private companies opposed to them as the municipal utilities did not have to pay taxes and did not have the ability to subsidize.[32] After eight months, 96% of customers continued to subscribe, and 1,255 people had service or wanted it.[33] A total of 4,500 subscribers were needed for the service to be self-sufficient; this was predicted to happen in 2014.[34]

Merging TV and Internet[edit]

In December 2009, the FCC began looking into using set-top boxes to turn television sets into broadband video players. FCC Media Bureau Chief Bill Lake had said earlier that television and the Internet would soon be the same, but only 75 percent of homes had computers, while 99 percent had television service. A Nielsen survey said 99 percent of video viewing was done through television.[35]

On May 21, 2012, Discovery Communications CEO David M. Zaslav said that in the future, companies would sell cable channels using the Internet. These companies would not have their own delivery system, but would depend on existing cable companies or other Internet service providers.

Sky Angel asked to distribute Discovery Channel in this manner, a request which Discovery declined. Sky Angel asked that the Federal Communications Commission declare it to be an MVPD. In spring 2012, the FCC asked for comments on such a plan.[36]

The National Cable & Telecommunications Association, American Cable Association, Time Warner Cable, Comcast and Cablevision said that online video distributors (OVDs) were not MVPDs unless they had their own distribution facilities, and the decision to change this status could not be done by the Media Bureau. Instead, such a change would have to be made by the full commission or by Congress. Specifically, Comcast said, "Congress did not and could not conceive of OVD services ... as MVPD services."[37] Affiliates of ABC, CBS and NBC asked to include OVDs in the MVPD definition. By not being included as MVPDs, OVDs would not be subject to retransmission rules. The Media Bureau pointed out in its request for comment that if companies such as Netflix, Hulu Plus, Vudu and Vimeo were given program-access protection and subjected to MVPD regulations, some companies might be put out of business.[37]

Cord cutters[edit]

Parks Associates estimated that in 2008, about 900,000 American households relied entirely on the Internet for television viewing, and the company expected that number to increase. Leichtman Research Group found that six percent of Americans watched at least one show online each week in 2008, a figure that grew to eight percent in 2009. The number of Americans subscribing to cable service increased two percent in 2008, but the growth had slowed. Sanford C. Bernstein & Co. found that in the fourth quarter of 2008, the increase was seven-tenths of one percent, or 220,000 homes, the lowest ever recorded.[38]

A Centris report showed that due to the sluggish economy, 8% of Americans expected to cancel their pay television service by the third quarter of 2009. About half of Americans tried to get a better deal from a provider other than the one they were subscribed to. Netflix, Amazon.com, iTunes, Hulu and YouTube, as well as the less-than-legal download service BitTorrent, made cancelling service possible for those who would be unable to see their favorite programs over the air. Sports programming was a big reason for not cancelling pay television service, although online options existed for many events. Another problem was the inability to watch many programs live, or at least soon enough in the case of a television series.[39]

2010 was the first year that pay television saw quarterly subscriber declines. In the second quarter of 2012, Sanford Bernstein determined that losses took place in five quarters.[40] Leichtman found that the decrease in pay subscriptions was not happening in large numbers. One reason was that some sports events, as well as other types of television (such as series airing on cable-originated networks), could not be seen online. Sanford Bernstein said the number of pay television subscribers increased by 677,000 during the first quarter of 2010, and a poll conducted by The New York Times and CBS News showed that 88% of people surveyed had such a service, and only 15% had considered going exclusively to web services. People under the age of 45, the survey said, were four times more likely to use the Internet only. To combat the trend, pay television providers were allowing people to stream television programs on desktop, laptop and tablet computers. Craig Moffett of Sanford C. Bernstein still stated that high prices and other methods would eventually drive customers away, calling cord cutting "perhaps the most overhyped and overanticipated phenomenon in tech history."[41]

Comcast reported a loss of 275,000 subscribers in the third quarter of 2010, bringing the total for the calendar year to 625,000. The company said most of these losses were not from people leaving for another service. Moffett said the economy was a big reason for canceling service, pointing out that cable companies needed to offer lower-cost packages,[42] but a survey by Strategy Analytics revealed financial considerations were not the primary reason. People were not satisfied with what they could get, and online sources had a wider array of content. The survey showed that 13% of cable subscribers intended to cancel service in the next year. Slightly more than half were under the age of 40, and nearly all had a high school education. Two-thirds had or planned further schooling, and just over half earned at least $50,000 a year.[43]

In second quarter 2011, Comcast lost 238,000 television customers, compared to 265,000 a year earlier, though the company was making up for these losses with increases in other services such as Internet. Moffett said the slowing rate indicated that online sources were not making people drop cable as quickly. On the other hand, Time Warner Cable and Charter Communications lost more customers in the quarter than in 2010.[44] Time Warner Cable lost 130,000, while Dish Network lost 135,000; by comparison, DirecTV gained 26,000 subscribers, compared to 100,000 the previous year. Nielsen Media Research estimated that the number of households with at least one television set had decreased from 115.9 million to 114.7 million, while also estimating an increase in program viewing by computer, tablets or smartphones. Services such as U-verse were increasing their subscriber numbers by offering special features:[45] U-verse's "My Multiview" option allowed people to watch four channels at once, while Cablevision's "iO TV Quick Views" allowed the display of up to nine channels at once.[46]

A Nielsen report showed that during the fourth quarter of 2011, the number of people paying for television had dropped by 15 million people (a rate of 1.5 percent), and the number of cable subscribers dropped by 2.9 million.[47]

A 2012 Deloitte report said 9% of television households dropped cable service during 2011 and an additional 11% planned to cancel their service.[48] Sanford Bernstein estimates 400,000 dropped pay video services during the second quarter of 2012, up from 340,000 in 2011. One reason for the drop was due to college students returning home for the summer, while the companies made up for the loss in other quarters. However, the number of new homes paying for television service is less than the total number of new homes.[40] Another possible reason is services, such as time shifting and live recording capabilities, that were once exclusive to pay television services are now being offered to cord cutters.[49]

Although the number of subscribers usually increases in the third quarter, in 2012 only 30,000 people added pay television service, according to a study by the International Strategy & Investment Group. Cable lost 340,000 subscribers (with Time Warner Cable accounting for 140,000 of that number) and satellite gained only 50,000; telephone companies added 320 subscribers.[50]

Throughout 2012, pay television added only 46,000 new subscribers, out of 974,000 new households overall, according to SNL Kagan. 84.7 percent of households subscribed, compared to 87.3 percent in early 2010.[51]

Another category of cord-cutters was labeled by Nielsen in March 2013 as "Zero TV". In 2007, two million households had neither subscribed to a pay television service or received television programming via antenna. By 2013, this number had increased to five million. Most people in this category were younger, and did not have children in the household. People could still view shows via online streaming through services such as Netflix. At the 2013 National Association of Broadcasters Show, the solution for broadcasters was stated to be Mobile TV.[51]

A 2013 Leichtman survey showed that the 13 largest MVPD companies, covering 94 percent of the country, experienced their first year-to-year subscriber losses. 80,000 subscribers dropped their service in the year ending March 31, 2013. 1.5 million cable customers dropped their service, with Time Warner Cable losing 553,000 and Comcast losing 359,000 subscribers. AT&T and Verizon added 1.32 million subscribers; DirecTV and Dish added 160,000 subscribers, compared to 439,000 the previous year. Before 2013, only quarter-to-quarter losses had been recorded industrywide. Internet video and switching to receiving television programming by antenna were reasons. Bruce Leichtman described the subscription television industry as "saturated".[52]

A TDG study showed nearly 101 million U.S. households subscribed to television at the industry's peak in 2011, but the number would fall below 95 million in 2017.[53]

"Cord-nevers"[edit]

On November 28, 2011, a report by Credit Suisse media analyst Stefan Anninger said that young people who grew up accustomed to watching shows online would be less likely to subscribe to pay television services, terming these people as "cord-nevers". Anninger predicted that by the end of 2012, the industry's subscriber count would drop by 200,000 to 100.5 million, blaming the economy; Anninger's report also stated that consumers were not likely to return to paying for television even after the economy recovered. In the case of land-line telephones, people had believed younger people would eventually get them, but now numerous subscribers only have mobile phones. Anninger predicted that the same would hold true for pay television, and that providers would need to offer lower-priced packages with fewer channels in order to reverse the trend.[54]

Also using the term "cord-nevers" was Richard Schneider, whose company Antennas Direct was selling antennas through the Internet. After a decade in business, the company was selling 600,000 antennas a year. However, Schneider said some people only knew of the Internet and services such as Netflix and were not even aware broadcast television even existed.[51] In a speech on November 16, 2012, Time Warner CEO Jeff Bewkes said "cord nevers" did not see anything worth paying for.[55]

See also[edit]

References[edit]

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