The Problem of Costs and Market Size for Canadian Cable Television Regulation

Description

The CRTC policy of awarding an exclusive right to provide cable television (CATV) service within a given licensed service area (LSA) rested partly on the presumption that CATV costs reflect economies of scale that are large relative to market size. Cost estimates from cross-sections of CATV operations from 1985 to 1991 show increasing returns to scale and suggest that many LSAs were too small to capture these economies. The results also indicate that economies of scale for basic service declined over the 1980s and that the "natural monopoly" characteristics of CATV may be eroded by further technological and regulatory changes.