NTCA: Affordable video content will drive competition, broadband investment in rural markets

The NTCA (National Telephone Cooperative Association) says in a FCC filing that the ability for smaller telcos to get access to competitively-priced video content in rural areas will drive competition and new broadband investments.

Although the NTCA's members serve small areas, they share the same concerns recently filed by a host Tier 1 telcos CenturyLink (NYSE: CTL) and Verizon (NYSE: VZ) that the FCC needs to keep content costs in check.

"The provision of video services is key to rural LECs' ability to deliver robust broadband services to consumers in high-cost areas," NTCA said in an FCC filing. "Indeed, the Commission has long recognized the linkage between video and broadband services. Access to video content at affordable rates and under reasonable terms and conditions is needed not only to generate greater video competition, but also to spur broadband investment in rural service areas."

Given the costs of building out network facilities to support video and acquiring content, only 73 percent of respondents to an NTCA survey said they offer video services, down from 76.9 percent in 2013.

Despite the slight decline, a majority of respondents -- 98 percent -- said that access to "reasonably-priced programming is a significant barrier to the provision of such services" a factor it added "impedes further broadband deployment."

Another 63 percent of NTCA respondents said making a business case to offer video service was a key barrier, up from 49 percent in 2014. Further, 67 percent cited the challenge of competing with other large multichannel video provider distributors (MVPDs) as a "major impediment" to entering the video services business.

NTCA said these results reflect "the inherent disadvantages RLECs encounter serving high-cost, sparsely populated areas, in addition to their lack of scale and scope as compared to larger MVPDs."

Citing its authority under the 1992 Cable Act and its responsibility to encourage broadband rollouts, NTCA said that the FCC should take steps to enable rural ILECs to get access to video programming at affordable rates and under reasonable terms and conditions.

Among its many proposals, the NTCA said that the FCC should put in place rules to prevent programmers from forcing small MVPDs to buy content they don't want and mandatory "broadband tying," a measure where rural MVPDs are forced to pay per-subscriber fees for non-video broadband customers.

"Programmers should not be permitted to require rural MVPDs to place content in specific service tiers, nor should they withhold favorable pricing from small MVPDs that are presently reserved for large ones," said the NTCA. "Finally, the Commission should monitor the market for "over the top" video services to ensure that exclusive arrangements do not prevent rural MPVDs and broadband providers from gaining access to web-based video content."

By putting in place rules and incentives that allow rural telcos to get access to get access to video content at affordable rates and reasonable terms, NTCA said that it will drive more RLECs to invest in upgrading their broadband networks.

At the same time, a service provider's ability to deliver a video service in tandem with broadband drives up overall broadband adoption rates. According to National Exchange Carrier Association survey, rural LECs that offer a bundle of broadband and video had broadband adoption rates of nearly 24 percent higher than those that lacked a video service.

"As NTCA and others have previously noted, access to video content at affordable rates and under reasonable terms and conditions spurs rural broadband investment," NTCA said. "This is because when RLECs offer video and broadband Internet access services together, rural consumers' adoption of broadband increases. The Commission has long recognized the intrinsic link between a provider's ability to offer video service and to deploy broadband networks."

For more:
- see this FCC filing (.pdf)

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