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The financial prospects for cable under the final FCC rules
and the impact of alternative copyright fee schedules are contained
in the seven tables which follow.
While we shall briefly review
the major findings here, the reader should consult the tabulations
Tables 4 and 5 report the expected experience in
middle markets of large and intermediate sized systems respectively.
Line 1 of Table 4 restates the example system discussed in
Lines 2. and 3 are for similarly situated communities
with somewhat different sets of local signals.
from about 22-27%
and rates of return from 7.5 to 10.4% when there
are no copyright fees.
Despite somewhat higher penetration rates,
systems in the second 50 middle markets earn lower returns, princi
pally because of reduced density, while in the lowest ranked mar
kets there is great variation, with profitable, 55% penetration
systems when one network is missing from the local signals.
Intermediate-sized systems in middle markets are decidedly
below the 10% rate of return needed to attract investment funds.
Except where quite large systems of 25,000 or more subscribers
can be built, central city areas of the major markets are not bright
prospects for cable under present rules, even without copyright
In these tables, Nmeans network, I means independent, E means educational;
V means NHF, U means UHF.
The prospects for large systems at the edge of major markets
(Table 6) are brighter.
In the top 50 markets penetration is in the
34-38% range with rates of return 11.0-12.6%.
In the second 50
markets penetration ranges up to 45% with rates of return from 9.7
In the smaller markets and also the fringe (outside) areas
we find more heterogeneous results, with quite profitable CATV
possibilities where fewer than three networks are available.
The corresponding intermediate-sized edge systems are again
unprofitable in all 3 network cases.
This indication of the im
portance of large systems, or economics of scale in technical
terms, is developed in more detail in Table 8, by systematically
varying the size of the most profitable system from each of the
four market types in Tables 4-7.
While large systems would seem
feasible in the major metropolitan areas, as of March 1971 only
20 systems had more than 20,000 subscribers and the largest had
less than 50,000 1/.Some fraction of these economies of scale can
be achieved when a series of smaller systems are under common
ownership and thereby realize savings from efficient use of
management and technical personnel and can share local programming and
and signal importation expenses.
The results presented in tables 4-8 are based on market, economic
and construction factors which typify the most common situations
which will be encountered in middle and edge locations of each of
the four types of markets.
Of course, within each category there
will be a degree of variation,
clustered around the typical situa
11 Television Digest, CATV and Station Coverage Atlas.
Imported by cable
ght fęe sche
FINANCIAL RATE OF RETURN
(15 year life) Copyright Fee Schedule No. 1
Markets 1-50 Density=150
2. 3NV, 1EU
Markets 101 +
7. INV, 2NU