Surging demand for direct-broadcast satellite caused cable's share of the pay TV market to slip from 80 percent to 78 percent for the year ended June 2001, the Federal Communications Commission reported last Monday.
In a status report to Congress on cable-industry competition, the FCC concluded that cable remained the dominant video-programming provider, despite DBS's strong showing.
Satellite carriers ended the reporting period with 16 million subscribers, up 3 million or 23 percent from the previous year. Cable operators, by contrast, added 1.3 million subscribers, an increase of 1.9 percent.
"The FCC's report clearly shows that consumers have choices in the market for subscription-video services and are exercising them," National Cable & Telecommunications Association president Robert Sachs said in a prepared statement.
The overall pay TV market grew by 4.6 percent at the close of the reporting period, the FCC said, with 88.3 million subscribers, compared with 84.4 million the previous year.
Non-cable companies served 19.3 million pay-TV subscribers, which means that slightly more than one in five subscription-TV households are not served by the incumbent cable operator. Eight years ago, cable incumbents had 95 percent of all pay-TV subscribers.
The FCC said competition has forced cable operators to lower prices or add channels without raising monthly rates.
Nevertheless, the FCC said cable rates rose 4.24 percent during the 12-month, a figure slightly higher than the 3.25 percent increase in the national inflation rate, as measured by the Bureau of Labor Statistics's Consumer Price Index.
The cable CPI makes some adjustments for channel additions. But the FCC report wasn't clear as to whether cable rates rose faster than inflation on a per-channel basis. In recent years, when adjusted for inflation, cable rates on a per-channel basis have declined.
The FCC issued the report at a time when both the cable and satellite industries are consolidating. The most notable proposed mergers are cable's planned marriage of AT&T Broadband and Comcast Corp. and the EchoStar Communications Corp.-DirecTV Inc. DBS deal.
Supporters of the EchoStar-DirecTV merger have advanced the transaction as necessary for DBS to more fully compete with cable for both video and high-speed-data customers.
"The [FCC's] report demonstrates the progress that DBS has made toward providing more competition to the cable monopoly, Satellite Broadcasting and Communications Association president Andy Wright said in a prepared statement. "However, the report also demonstrates that real competition has yet to be achieved."