Market Power of Local Cable Television Franchises: Evidence from the Effects of Deregulation

Adam Jaffe and David M. Kanter

RAND Journal of Economics, 1990, vol. 21, issue 2, 226-234

Abstract: The 1989 Cable Act eliminated most price regulation of cable television operators, including the right of municipalities to enforce price terms in franchise agreements. Deregulation was justified, at least partially, by the contention that competition from other entertainment media eliminated any market power of cable franchises. We examine the value at sale of existing cable systems before and after deregulation. Assuming that this value represents the expected present value of future profits, deregulation had the predicted negligible effect on profits in cities with significant broadcast competition. However, profits appear to have increased in areas where the competition from broadcast television was less severe. We explore several explanations for this increase and conclude that significant market power is the most plausible explanation.

Date: 1990
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