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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 9.713.4%. 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 importance 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 11/. 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.

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TABLE 8

Financial Rate of Return

(15 year life)

Copyright Fee Schedule No.

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