Is Cable Television a Natural Monopoly.pdfVIP

Comm. (Sankt Augustin) 9, S. 241-259 (1984) EliM. Noam Is Cable Television a Natural Monopoly? The Research Issue This study is an investigation of the economies of scale in cable television operations, and of the variation in these economies over the range of output. The results are intended as an empirical clarification of the question of whether cable television is a natural monopoly, an issue with significant public policy interest; its implications will be. discussed first. The American television industry is presently undergoing rapid change. Where once there was a limit on viewing options imposed by the scarcity of electro-magnetic spectrum, confining most viewers to a handful of channels that were dominated by three competing distribution systems, cable television is emerging now as the television of abundance, (Sloan Commission, 1971). Yet ironically, the market structure of abundant cable television is more restrictive than that of scarce conventional television, since the present franchising system has created a series of local cable distribution and programming monopolies. This raises concern about a cable operators ability, if left unconstrained, to charge monopolistic prices to subscribers, and, more significantly, to control the content of dozens of program channels. A variety of reform proposals have therefore been made, seeking to impose some of either conduct regulation, public ownership, common carrier status, or competitive market structure. The latter approach, in particular, has been taken by the Federal Communications Commission. After eleminating most of its conduct regulations over the past two years, the FCCs current philosophy is to rely on and encourage inter-media c