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Bibliography

Comanor, William S. and Mitchell, Bridger M., "Cable

Television and the Impact of Regulation," The Bell
Journal of Economics and Management Science, Vol. 2,
No. 1 (Spring, 1971), pp. 154-212.

Comanor, William S. and Mitchell, Bridger M., "The Lost

Generation: A Correction," Bell Journal of Economics and Management Science, Vol. 2, (Autumn 1971), pp. 704-705.

Comanor, William S. and Mitchell, Bridger M., "The Costs

of Planning: The FCC and Cable Television," Journal of Law and Economics, Vol XV (1), April, 1972, pp. 177-206.

Foundation 70, "Cable in Embryo: Economic Considerations for

Urban Franchising," Wellesley, Mass., processed,
September 1971.

Halle and Stieglitz, Inc., "The Cable Television Industry,"

October, 1971.

Johnson, Leland L., et al. "Cable Communications in the

Dayton Miami Valley: Basic Report," Rand Report
R-943-KK/FF, January 1972.

Mitchell, Bridger M., "An Economic Analysis of the Ability

of CATV Systems in Top 100 Markets to Pay Copyright Royalities," Washington, D.c.. processed May 15, 1972.

Park, Rolla Edward, "Prospects for Cable in the 100 Largest

Television Markets," Bell Journal of Economics and Management Science, Vol. 3, No. 1, (Spring, 1972), pp. 130-150.

Park, Rolla Edward, "The Exclusivity Provisions of the

Federal Communications Commission's Cable Television
Regulations," Rand Corporation, R-1057-FF/MF, June 1972.

Seiden, M.H. and Associates, CATV Report, 1970.

Sloan Commission on Cable Communications, On the Cable:

The Television of Abundance, McGraw Hill, New York,
1971.

Weinberg, Gary, "Cost Analysis of CATV Components: Final

Report, RMC Report UR-170, June 1972, prepared for
the Office of Telecommunications Policy.

Federal Communications Commission, "Cable Television Ser

vice: Cable Television Relay Service," Federal Register, Vol. 37, No. 30., Part II, (Feb. 12, 1972), pp. 32523341.

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vice: Reconsideration of Report and Order," Federal Register, Vol 37, No. 136, Part II, ( July 14, 1972), pp. 13848-13910

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45

APPENDIX

Modified costs and Revenues

Several cost items in the Comanor-Mitchell Report have been modified for this study, either to take account of the FCC rules as finally adopted or as a result of the availability of more recent information. A brief summary of those costs which were modified for all systems investigated in this report is presented below:

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3.

Channel switchers. One switcher included in capital equipment costs for each imported signal.

4.

Pole rent. All results reported here include pole
rent of $250 per aerial mile in top 100 markets,
$175 in other markets.

5.

Local origination. We assume the Comanor-Mitchell
standard systems, with capital costs of $38,000 and
annual operating expenses of $4300, and for smaller
systems a minimum system, with capital costs of
$11,000 and operating expenses of $2500 per year for
live origination. All systems are assumed to provide
a time-and-weather channel.

6.

Public service channels. The final FCC rules require CATV systems to provide 3 non-broadcast channels for non-commercial public access, educational access, and government access respectively. The public access channel is to be provided without charge, while the other two channels will be free for five years. The costs of meeting these provisions are taken to be an additional 75% of the capital costs assumed for local origination, plus $4875 per year for part-time technician salaries.

7.

The previously proposed 5% "public dividend" tax
for support of non-commercial broadcasting has been
eliminated.

8.

Rate of subscribers growth over time. Park's recent
research on cable penetration completed after the
publication of the Comanor-Mitchell Report, indicates
a more rapid maturation of cable growth than was pre-
viously assumed. While the precise growth path has
not been definitively established, for this study we
have increased the rate of subscriber growth so that
the typical system reaches its mature size in the fifth
year. Thereafter, some additional growth occurs as real
incomes of potential subscribers are assumed to rise
at a rate of 2% per year.

As compared with Comanor-Mitchell, the effect of these
modifications is to increase the size of typical systems
in two ways:
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."

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