Cable-telco competition

A cost analysis and comparison of fiber-optic and coaxial-line video distribution systems is presented that shows the effects of market penetration on cost. The cost estimates do not rule out profitable duopoly operation at penetration rates of only 25 to 30% with two entirely separate physical networks. A more likely organizational arrangement, however, would be one in which only a single physical network would exist and be used by one or more firms providing brokerage and distribution of television programs. Competition in brokerage and distribution can only be assured by regulations that provide for nondiscriminatory access to channels offered by the provider of the physical network. Entry to the video-transmission market by local-exchange telephone companies under conditions of nondiscriminatory access could lead to competition at the brokerage-distribution level and important consumer benefits from increased diversity of content and pricing structures.