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this represents the central experience to be expected in the

major markets.

In addition, a selected number of intermediate

sized systems have been analyzed using penetration rated 33%

greater than predicted on average.

Such increased penetration

is definitely atypical, and would be expected to occur in only

about one out of ten market situations, because of factors not

fully accounted for in the penetration equation.

11

DENS ITY

Density, the number of homes per cable mile, can vary

considerably from one potential franchise area to another.

Comanor and Mitchell reported an average density of 95 within

major markets, and 79 outside, in their sample of Factbook

systems.

More recently available data for a number of munici

palities in the Dayton, Ohio and Boston, Massachusetts areas are

tabulated in the appendix. For systems in this study we have

assumed somewhat higher densities than considered by Comanor

Mitchell, ranging from 80 homes per mile outside of television

markets up to 200 homes per mile with 20% of plant underground

in the central areas of markets 1-50.

In practice, of course, both higher and lower densities

will be encountered.

But the tendency to a substantially higher

figure for any important number of similar systems is unlikely

in view of the FCC's emphasis that it will not authorize carriage

of broadcast signals by systems which do not serve all parts of

the community. 3

3 Federal Register, p. 3276, $180

THE EFFECT OF THE EXCLUSIVITY RULES

The new FCC rules require cable operators to "black-out"

numerous classes of programs on imported signals when those

programs are also shown by a local station.

The degree of pro

tection provided varies with the type of programuning and may

extend up to two years.

For our purposes the primary effect of

these rules is to reduce the attractiveness of distant signals to

subscribers and thus reduce cable penetration.

Aside from pro

viding for one channel-switching device for each imported signal,

we have not allowed any additional costs of performing the blacking

out function itself, keeping records, etc.

At this writing, evidence on the magnitude of the exclusivity

effect is limited to a preliminary study by R. E. Park, "The

Exclusivity Provisions of

the Federal Communications Commission's

Cable Television Regulations."

From detailed program listings for

four stations ---two networks and two independents ---plus partial

listings for ten other stations, Park synthesizes the expected

proportion of a broadcast week that a distant signal would be

blacked out.

A portion of his findings are reproduced in Table 2.

Park's results indicate, for example, that in those top 50

markets in which local service provides three networks and one

independent, the cable system importing two additional independents

will be required to black them out about 39% of the time.

If it

imports a third independent (on a stand-by basis, since the rules

TABLE 2

PERCENTAGE OF TIME DISTANT SIGNAL CHANNELS ARE BLACKED-OUT

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Source:

R.E. Park, "The Exclusivity Provisions of the Federal

Communications Commission's Cable Television Regulations,"

Table 2, p.5.

allow only two distant signals at any moment

on the cable) and

"fills in the blanks" where possible, it can reduce the blacked

out time to about 24%.

Importing a fourth independent further

reduces this to 15%, etc.

The boxed-in figures represent the

expected effect when no stand-by signals are imported.

The impact of the exclusivity rules on subscriber penetration

is likely to be at least as great as the reduction in viewing

hours.

Programs receiving protection will be predominantly those

with large audiences, many of whom would value an earlier or

alternative viewing date or time which cable could otherwise

provide.

Nevertheless, lacking data to refine an estimate of this

effect, we assume that exclusivity protection is equivalent in

its impact on penetration to a proportionate reduction in the

number of full-time distant independents carried on the cable,

using the appropriate boxed figures from Table 2.

Will it be profitable for a cable system import stand-by

independent signals? The costs of additional imports will rise

as the CATV system must go further to find each additional inde

pendent.

Concurrently, the proportion of time that can be filled

in with each extra signal is declining.

The exclusivity rules

thus place the cable firm in a situation of sharply diminishing

returns as regards additional penetration from distant signals.

Generally, the answer will be "no."

Exceptions may occur where the

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