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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
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