Abstract:
Set just before congressional deregulation of cable television in 1984, this economics and policy case offers students a chance to grapple with the question of whether local regulation of cable television is appropriate. It begins with a brief description of the escalating tension between cable companies and their municipal regulators during the late seventies and early eighties, then outlines the debate over particular issues: rate regulation, service requirements, franchise fees and franchise renewal procedures. Both implicit and explicit in these arguments were assumptions about the monopoly power of cable television; the final section of the case summarizes evidence produced by both sides to establish the size of scale economies in the cable business and the extent to which the industry operates in a competitive market.
Learning Objective:
This case provides an introductory vehicle for discussing issues concerning a natural monopoly--economies of scale, contestibility, close substitutes, etc.--and for weighing certain classic advantages and disadvantages of regulation.
