FCC Competition Report Doesn't Redefine Broadcast Markets
The FCC’s biennial 2022 Communications Marketplace Report’s video competition section lists the quadrennial review and ATSC 3.0 as focuses of FCC broadcast policy for the next two years and chronicles rising competition for broadcasters from online media, but it doesn’t indicate upcoming changes to the agency’s definition of the broadcast marketplace or MVPDs. “While the report is thorough in its coverage, it seems to miss some core dynamics of the local media advertising marketplace,” said BIA Advisory Services Managing Director Rick Ducey. “Local media are competing for all media spending. TV and radio stations don’t just compete with other stations, they compete with all other local ad-supported media.”
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The report says the agency is focused “in the near term” on an order in ATSC 3.0 proceeding on the planned sunsets of the substantially similar requirement and the A/322 physical layer protocol standard. “Over the next two years, the Commission will continue to monitor technological and marketplace developments, remaining alert for potential regulatory actions to help foster innovative, and competitive, service by television broadcasters,” said the report. It also lists the 2022 quadrennial review and the open NPRM on FM6 stations -- only 13 of which currently exist -- as areas that might affect future broadcast competition. The agency’s Communications Equity and Diversity Council’s work will also “result in potential recommendations to foster new, small, and diverse participants in the audio and video marketplaces,” the report said. Although the quadrennial process could lead to a loosening of ownership regulations, the report doesn't specifically predict the ownership deregulation called for by many broadcast commenters in the proceeding (see 2207060002). The FCC “must consider the real-world consequences of imposing, in a highly competitive marketplace, a burdensome and outdated regulatory regime,” said NAB in a July filing.
The competition report catalogs increasing competition from digital advertising and streaming media but doesn’t redefine the video market or point at possibly reclassifying streaming services as MVPDs as some broadcasters urged. Between 2018 and 2021, national ad revenue for online platforms increased from $60.2 billion to $67.4 billion, while falling from $28.1 billion to $24.6 billion for cable networks, from $18.1 billion to $17.9 billion for broadcast networks, and from $6.9 billion to $5.8 billion for broadcast stations. In 2021, local advertising revenue for broadcast TV stations fell to $9.7 billion; the agency's 2020 competition report listed it at $12 billion. Online local advertising revenue grew to $65 billion in 2021, the report said.
The competition report acknowledges competition from digital sources but doesn’t capture the converging nature of the advertising market or go far enough in depicting the competition broadcasters face, Ducey said. Radio and TV broadcasters sell both broadcast and digital ads such as TV spots to Google ad words and advertising on connected televisions, he said. “The report does not reflect the fluidity and dynamism of the market,” he said, nor does it capture the rising competition in local advertising that broadcasters face from the networks of websites and content owned by retailers such as Walmart. It's increasingly attractive to retailers to be able to advertise to customers when they're actually in the stores, he said. The FCC doesn’t have much regulatory reach over such networks, but they're additional competition for broadcasters, said Ducey.
The data in the report also shows increasing retransmission consent fees per subscriber, said the American Television Alliance in a news release. The fees increased more than 20% -- $168.83 to $203.03 -- from 2020 to 2021. “The average subscriber pays more than $200 per year for so-called ‘free’ broadcast television, representing an increase of more than 20% over the previous year,” said the ATVA release. “On top of exorbitant annual retrans fees, broadcasters have blacked out consumers’ access to these ‘free’ stations more than 1,800 times since 2010. Unfortunately, until Congress reforms outdated TV laws, these tactics will continue to harm consumers,” ATVA said. NAB declined to comment.
The FCC report also shows the rising influence of online video distributors. Viewership of OVD services grew from July 2021 to July 2022, while viewership of broadcast and cable TV fell, the report said. “In July 2022, both OVD and cable services captured about one-third of total viewing time while about 22% of viewing time was spent watching broadcast television,” the report said.
“The report affirms what an ocean of data has been telling us for years: that streaming is overtaking traditional linear cable TV as consumers’ first choice in the video marketplace,” said former FCC Commissioner Robert McDowell, who represents broadcast affiliate groups that have lobbied the agency to classify online video services as MVPDs. “Streaming has become the ‘cable industry’ of the 21st century and the FCC should act accordingly -- as evidenced by its own report,” said McDowell.