7. The previously proposed 5% "public dividend" tax 8. Rate of subscribers growth over time. Park's recent As compared with Comanor-Mitchell, the effect of these a) study systems gain subscribers more rapidly in early years; b) the size of a study system is measured in its fifth year, rather than its size after twelve to fifteen years. Figure Al provides a graphical comparison of the growth curve used for this study and the earlier ComanorMitchell study. As in the Comanor-Mitchell Report, financial (internal) rates of return are calculated for a firm of indefinite life by assuming that the firm reaches an equilibrium of revenues and costs after one 15-year lifetime, or generation, of equipment. Thereafter, the plant is rebuilt periodically, while subscriber penetration is held constant at the mature level. The rate of return is generally robust with respect to exact assumptions about conditions in later generations. Another solution to this terminal value problem is to assign the firm a value at the end of its first generation, based on operating characteristics such as revenues, subscribers, etc. For an example of this method see L. L. Johnson, "Cable Communications in the Dayton Miami Valley: Basic Report." The Penetration Equation Technical details of the penetration equation are summarized below. For further discussion see R. E. Park, "Prospects for Cable in the 100 Largest Television Markets." = number of B-contour off-air UHF signals of type i Ui Vi = number of B-contour off-air VHF signals of type i Pen= penetration = subscribers/households passed by cable In order to use Park's estimated equation to predict penetration for the typical systems investigated in this report, representative values must be assigned to the variables of the equation. The following values are employed in all of the simulations: P = $62.40, corresponding to the $5 per month plus $1 C = 50%. The effect of varying color set penetration u = 80% 90% 95% 99% if o local network UHF signals F = 0. Foreign stations are not included among the In simulating cable systems for this study, we consider systems located in the central area of a television market, where off-the-air signal quality is generally high, and outlying areas of the same market, where quality is diminished. In the penetration equation the distance variable d is a measure of the reduction in quality. A d value of 0 corresponds to a viewer in the center of the market, while a value of 1 represents a viewer at the B-contour of the off-the-air signal. For the systems in this study we have used the following values: |