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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 9.7

13.4%.

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 W/.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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11,1E

12,200

34.4

11.0

10.5

9.9

5.9

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4. 3NV, 1EU 5. 2NV, INU 6. INV, 2NU

[blocks in formation]

7. INV, 2NU

11, IB

41.5%

Underground=5% 10.7% 10.2% 9,7% 4.9%

18.4 17.8 12.0

1 EU

8. 2NU

IN, 11, 12

10,000

65.5

19.0

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10.2NU

IN, 31, LE

9,000

65.5

12.3

11.9

11.5

5.7

#=Minimum origination facilities and no advertising revenues

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