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one educational station. These signals are imported by microwave. averging 3 hops of 35 mi.es each per charnel.

Within five years the system is assumed to reach maturity, apare

from further growth due to rising incomes or enlargement of its

franchise area.

Penetration is predicted to be 28.1% 18 the disege

signals are fully available, but 27.2% as a result of exclusivity

protection on the independent channels.

Part B summarizes the growth of penetration, subscribers, and system revenue (including advertisingl over the first 10

years.

In Part c we may assess the impact of copyright lees on pro

fitability.

For each of the four fee schedules described earlier

we report two rates of return--one assuming a 10 year average lite

time of capital, the second assuming 15 years. If fixed capi.al

equipment is replaced about every 15 years, this system will earn a 10.4% real rate of return on total invested capital absent any copyright fees. Alternatively, the statutory schedule inabor : reduces the rate of return to 9., and the flat 16.9% fee lovers

returns sharply to 5.5%. A shorter lifetime for equipment reduces

these returns by 2.5 to 3 percentage points.

in the analysis below we report rates of returns based only

on 15-year lifetimes. Fifteen years represents a compromise ben tween somewhat longer physical lifetimes for some parts of the cable plant and rather shorter economic lifetimeof currently operating

systems experiencing technological obsolescence. It appears

unlikely that 20-channel systems built today will remain

beyond 1945 without major rebuilding.

payments.

from about 22-27%

prospects for cable under present rules, even without copyright
can be built, central city areas of the major markets are not br 1964
Except where quite large systems of 25.000 or more wubscribers

below the 10% rate of return needed to attract investment funds,

Intermediate-sized systems in middle markets are decidedly

systems when one network is missing from the local signals.

kets there is great variation, with profitable. 55% penetration pally because of reduced density, while in the lowest ranked marsystems in the second 50 middle markets earn lover returns, princi.

are no copyright fees. Despite somewhat higher penetration rates

and rates of return from 1.5 to 10.4% when there

with somewhat different sets of local signals. Penetration ranges

detail above. Lines 2 and 3 are for similarly situated communities

Line 1 of Table 4 restates the example system discussed in

middle markete of large and intermediate sized systems respectively.

for particulars. Tables 4 and 5 report the expected experience in

the major findings here, the reader should consult the tabulations

in the seven tables which follow. While we shall briefly review and the impact of alternative copyright fee schedules are contained

The financial prospects for cable under the final rec rules

RESULTS--IN DETAIL

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7. INV, 2N 8. ZNU

IN, 11, IE

In these tables, N means network, I means independent, E means educational,

v means NHF, U means UHF.

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In the

table

means netveki seans independent V means to neana 0 .

seans educational:

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