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MARKET CATEGORIES AND SYSTEM LOCATION

In examining the probable effect of various provisions for

payment of copyright fees we will consider separately the

characteristics of typical cable systems in four types of markets:

the top 50 markets, markets ranked 51-100, markets below 100,

and areas located outside television markets.

The FCC rules permit

different signal carriage in each of these situations, and impose

differential requirements affecting system costs.

In addition, the

density of housing, the prevalence of underground utilities and the

level of family income also varies by market size.

A tabular

summary of these major market characteristics is set forth in

Table 1.

As R. E. Park's econometric findings 2/ strongly demonstrate, the

location within the market is also of fundamental importance to

determining penetration levels.

For this study we therefore sub

divide each of the markets 1-50, 51-100, and 100+ into typical

"middle market" and "edge market" systems.

Middle market

locations are close to off-the-air signals, while edge market

systems are approximately half-way between the transmitter and the

B-contour limit of the local signals.

(The forth category, an

"outside market" system, is necessarily at or beyond the location

of a typical edge market system.)

Thus the typical systems to be

analyzed fall into one of seven boxes in the following matrix:

2/ "Prospects for Cable in the 100 Largest Television Markets"

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Capacity requirements

20 channels 2-way capability

20 channels 12 channels

12 channels 2-way capability 2-way capability -way capability

Local origination

standard; minimum below 10,000 subscribers

standard; minimun standard; minimum minimum below 10,000

below 10,000 subscribers

subscribers

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Within each box, indicating a specific market type/system

location, we further consider the two or three most likely lineups

of available local signals.

While we have not reported every

combination which can occur, the cases tabulated are representative

of the majority of signal patterns to be encountered and they

cover a degree of variation sufficient to include most other

possibilities.

8

CABLE PENETRATION

At the time Comanor and Mitchell's research was under

taken virtually no reliable statistical information was available

to quantify the effects on cable penetration of the number, types

and quality of local signals available, the additional cable

signals provided, the price of cable service and the incomes of

potential subscribers.

That study provided estimates of most of

these variables by use of multiple regression analysis on a randomly

selected sample of 149 systems drawn from the Television Factbook.

The authors noted that these systems were largely outside of

the top 100 markets or in areas of quite poor reception, or both.

Projection of penetration in the major markets under the then

proposed FCC rules (allowing four distant independent signals)

was recognized as subject to considerable error.

Since publication of the Comanor-Mitchell paper the measurement

of factors determining penetration has been advanced considerably

by Park in his study "Prospects for Cable in the 100 Largest

Television Markets."

Park uses statistical techniques closely

related to those employed earlier.

He improves on the Comanor

Mitchell study in three major ways:

First, all 63 cable systems analyzed by Park had at least

three A-contour, good reception-quality signals available off

the-air.

Second, all data were verified with system operators by

telephone interview, insuring greater accuracy than available

from only published sources.

Third, two improved measures of signal quality were incor

porated into the analysis. Distance of the cable system from

each transmitter was explicitly included, and UHF signals were

measured separately to account for more rapid signal attenuation

with distance and the absence of UHF tuners in some households.

The complete penetration equation as estimated by Park

measures the effects of the following variables :

....number of off-the-air VHF signals, with separate

categories for networks, duplicate networks, inde-
pendent, educational and foreign signals; by distance
from transmitter

..... number of off-the-air UHF signals, by the same

categories; by distance from transmitter; with
measurement of UHF set penetration

.... number of cable signals, by the same categories

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on the viability of cable systems in the major markets.

In pro

jecting penetration rates for the systems studied here the average

figure predicted by Park's equation has generally been used, since

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