Testing the Effectiveness of Regulation and Competition on Cable Television Rates

Posted by D. Daniel Sokol

Mary T. Kelly (Economics, Villanova University School of Business) and John S. Ying (Economics, University of Delaware) present an empirical analysis of Testing the Effectiveness of Regulation and Competition on Cable Television Rates.

ABSTRACT: Regulation of the cable television industry was marked by remarkable periods of deregulation, re-regulation, and re-deregulation during the 1980s and 1990s. Using FCC firm-level survey data spanning 1993 to 2001, we model and econometrically estimate the effect of regulation and competition on cable rates. Our calculations indicate that while regulation lowered rates for small system operators, it raised them for medium and large systems. Meanwhile, competition consistently decreased rates from 5.6 to 8.8 percent, with even larger declines during periods of regulation. Our results suggest that competition is more effective than regulation in containing cable prices.