Price, programming and potential competition in US cable television markets

Potential competition in the US cable television industry is empirically examined for 385 markets. Predicted entry probabilities are included in a supply-demand model to permit empirical investigation of the effect of potential competition on incumbent cable operator's price and channel programming decisions. Estimation results show incumbents offer more channels to consumers in markets facing greater potential competition from broadband service provider (BSP) wireline overbuilders and/or incumbent local exchange carriers. In particular, when the probability of entry rises to about 42%, the average cable system provides six more channels, and price per channel declines from US$ 0.77 to US$ 0.66.