CABLE TELEVISION

The problem is that the relationship between regulation and price, quality, and consumer welfare related to cable TV is unclear. Beard,áEkelund, Ford,áand Sabaá(2001) reported that while in the past the cable industry was allowed to increase rates if new channels were offered, pre-1984 cable was regulated by local governments with franchise bidding arrangements that were reliant on cost inflation, and other factors. During this period cable was viewed as a monopoly and this led to deregulation with the Cable Communications Policy Act in 1984, which provided jurisdictional guidelines regarding the regulation of cable television, deregulating different parts of the industry. Following this Act, cable operators were free from rate regulation other than effective competition. This resulted in a growth in cable investments, with increases in improvements and prices. Price increases led to the Cable Act of 1992, which reintroduced local governmental control of rates.

Beard et al. (2001) studied the effect of price-quality tradeoff on consumer welfare related to new regulations of cable TV. Data for more than 11,000 cable systems across the United States were studied which included a sample of 717 systems for analysis. The authors found that the changes in the cable industry due to regulation are neutral, with gains of extra channels counterbalanc

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letion and factors such as consumer views of censorship of cable channels. Goolsbee and Petrin (2004) examined effects of cable TV compared to direct broadcast satellites (DBS). Goolsbee and Petrin used date from 30,000 households in 317 markets with controls for product quality and taste. Consumer level demand for satellite system, basic cable, premium cable, and local antenna were assessed. These authors found that without DBS, cable prices would be 15% higher and cable quality would be decreased. A welfare gain of up to $190 per year was estimated for satellite buyers compared to $50 for cable subscribers. Thus, when studying effects of regulation and price-quality tradeoffs on customer welfare, it is important to consider DBS. In addition, Yoo (2005) reported that consumers may prefer cable with the ability to use direct payments for less censored viewing; HBO generates eight times more revenue per viewer compared to broadcast network CBS. This finding points to the need to understand multiple consumer-related factors to more fully understand consumer welfare levels. Sources for Data Collection Primary sources for data collection will include data from the Warren Cable Factbook, local City and County Factbooks, th
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Approximate Word count = 1798
Approximate Pages = 7 (250 words per page)

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