*************************************************** NOTICE *************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, itallic, underlining, etc. from the original document will not show up in this text version. Features of the orginal document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Implementation of Section 3 ) of the Cable Television ) Consumer Protection and ) Competition Act of 1992 ) MM Docket No. 92-266 ) Statistical Report on ) Average Rates for Basic ) Service, Cable Programming ) Services, and Equipment ) REPORT ON CABLE INDUSTRY PRICES Adopted: December 11, 1997 Released: December 15, 1997 By the Commission: I. Introduction 1. Section 623(k) of the Communications Act of 1934, as amended ("Communications Act"), which was added by the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), requires the Commission to publish annually a statistical report on average rates for the delivery of basic cable service, other cable programming services, and equipment. Specifically, Section 623(k) directs the Commission to compare prices charged by cable systems facing effective competition with those not facing effective competition. This report, which is based upon the results of a survey of cable industry prices (the "Survey"), is issued in compliance with that statutory requirement, and represents the fifth survey of cable rates conducted by the Commission since 1992. 2. The information and analysis provided in this report is based upon the results of the Commission's 1997 survey of cable industry prices. On June 13, 1997, the Commission issued an order directing cable operators serving community unit identification numbers ("CUIDs") selected for the sample to respond to Commission data requests (under Section 623(k) of the Communications Act) no later than August 1, 1997. In general, the Survey requested data from the cable industry as of July 1, 1996 and July 1, 1997. Cable operators also were asked to explain the reasons for any change in their rates between July 1, 1995 and 1996, and between July 1, 1996 and 1997, and indicate their regulatory status. After the data were collected, the Commission was able to supplement the Survey data with information about the respondents regulatory status. Thus, the Survey, in conjunction with this additional information permits the Commission to compare prices and channel capacity between regulated and unregulated cable operators as well as competitive and noncompetitive operators. II. Summary of Findings 3. Pursuant to the statutory requirement, the Survey gathered information on the prices charged by two groups of cable operators: (1) the competitive group (made up of cable operators that meet the Communications Act's definition of effective competition); and (2) the noncompetitive group (made up of cable operators that do not face effective competition). Within the noncompetitive group, information was collected from regulated and unregulated operators. We report summary statistics for the sample in Attachment A. The major findings of the Survey are summarized below. 4. First, the average monthly charge for programming services and equipment rose for both the competitive and noncompetitive groups. The noncompetitive group charged higher average monthly rates than the competitive group in each of the three time periods studied. 5. Second, subscribers who purchase cable services from regulated operators pay less, on an average per channel basis, for programming services and equipment, than subscribers that purchase services from unregulated operators. Moreover, regulated operators offer more channels than unregulated operators on average, and the differences in the number of channels offered and per channel rates between regulated and unregulated operators are statistically significant. 6. Third, both competitive and noncompetitive operators attribute most of their rate increases to increases in inflation, programming costs, channel additions, and system upgrades. Competitive and unregulated operators also attribute significant portions of their rate increases to increases in equipment costs. 7. Fourth, both competitive and noncompetitive operators increased their average channel capacity, and had reductions in their average monthly rates per channel. 8. Finally, we find that for both competitive and noncompetitive operators, the package of services received by subscribers has changed over time. Both groups have increased their channel capacity and now offer subscribers additional satellite channels. III. Survey Methodology A. Sample 9. We used a stratified random sampling technique to collect information from two groups of cable operators. One group serves 192 communities where effective competition exists ("competitive group"), and the other group serves 466 communities where effective competition is absent ("noncompetitive group"). The noncompetitive group was further divided into three size strata. The size of each stratum was determined according to the proportion of systems in each size group across the whole industry. The competitive group sample was drawn from two lists: a list of competitive CUIDs compiled from the 1993 cable rate survey, and a list of operators serving CUIDs that the Commission subsequently has found to be subject to effective competition. The noncompetitive group was selected from among the operators serving the approximately 33,000 remaining CUIDs where effective competition has not been found. A total of 658 survey questionnaires were mailed to cable operators serving the selected CUIDs, and 590 completed questionnaires were returned to the Commission. 10. Of the 590 questionnaires returned to the Commission, 485 met minimum necessary data requirements. The remaining 105 lacked sufficient information to be included in the Survey results. Completed surveys were received from 1.5% of the total universe of approximately 33,000 CUIDs. Operators serving these 485 CUIDs served 14.7 million subscribers, or approximately 24% of all cable subscribers. Thus, the sample is sufficiently large to allow the Commission to draw meaningful statistical conclusions from the data. 11. Approximately 17%, or 83, of the 485 usable questionnaires belong to the competitive group. As of July 1, 1997, operators serving these 83 CUIDs provided service to approximately 1.1 million subscribers, or 55% of the 2 million subscribers who purchase cable services from cable operators that meet the conditions for effective competition. 12. As of July 1, 1997, 21 of the 83 respondents in the competitive group report that they face head-to-head (overbuild) competition in the geographic area they serve. Of these, 12 respondents report that they face competition from a local exchange carrier ("LEC"), or a LEC affiliate. The remaining 62 respondents meet the effective competition test either because they serve fewer than 30% of the households in their respective franchise areas (58 CUIDs) or because they face competition from a municipal provider (four CUIDs). 13. Approximately 49.5% (199) of the 402 noncompetitive group responses are from cable operators subject to rate regulation ("regulated group"). These respondents provide cable services to 9.4 million subscribers. The remaining 203 responses in the noncompetitive group are from cable operators not subject to rate regulation ("unregulated group"). These operators provide cable services to 4.2 million subscribers. Thus, as of July 1, 1997, the noncompetitive group consists of cable operators that provide service to 13.6 million subscribers or 23% of the 59.7 million cable subscribers that purchase services from operators that do not meet the conditions for effective competition. B. Variables 14. For purposes of this report, six variables were selected to serve as the focus of the analysis. These variables are: programming services, equipment, average monthly rates, average number of channels received, average monthly rate per channel, and average monthly rate per satellite channel. A brief description of each variable follows. 15. Programming Services. This variable is the monthly price paid by subscribers for the basic service tier ("BST") and the most popular cable programming services tier ("CPST"). This excludes CPSTs that are New Product Tiers ("NPTs") because their rates are subject to market-based regulation rather than traditional rate regulation. This variable is constructed for each CUID by summing the price charged for BST and CPST service. 16. Equipment. This variable is the monthly charge paid by most subscribers for a converter and remote control unit. A converter may be addressable or nonaddressable. The equipment variable was constructed for each CUID by adding the price paid for a remote control unit and the type of converter purchased by the largest number of the CUID's subscribers. 17. Average Monthly Rate. This variable is the sum of the programming services and equipment charges and represents the amount charged a typical subscriber for BST and CPST (other than NPTs) service and equipment. Fees for other cable services, such as premium, a la carte, and pay-per-view channels are not included in the Survey. 18. Average Number of Channels Received. This variable is the number of channels received by a typical subscriber on the BST and CPST (other than NPTs) as reported by the survey respondents. As with the monthly rate, channels devoted to premium, a la carte, and pay-per-view services are not included. 19. Average Monthly Rate Per Channel. This variable is calculated by dividing the average monthly rate by the average number of BST and CPST (other than NPTs) channels received, as reported by the survey respondents. 20. Average Monthly Rate Per Satellite Channel. This variable is calculated by dividing the average monthly rate by the average number of BST and CPST (other than NPTs) satellite channels received, as reported by the survey respondents. 21. Measures of value for cable services are not easily defined. Some have variously suggested the average number of channels received by subscribers, satellite channels received by subscribers, and their respective per channel rates as measures of value. Alternatively, it has been suggested that an increase in the number of channels (satellite or otherwise) may not be similarly valued across all subscribers, or that additional channels have a declining marginal value. Because our survey was directed to cable operators, we did not specifically seek information on how consumers value individual channels within the BST and CPST package they receive, or how they would value these packages if given the option of receiving fewer channels than offered. We report on the average monthly rate per channel and the average monthly rate per satellite channel in order to compare rates across CUIDs and over time on a comparable basis. C. Calculation of Averages for the Noncompetitive Group 22. To increase the precision of the estimates reported for the noncompetitive group, the reported averages for this group were calculated according to the following three steps. First, each noncompetitive CUID was categorized into one of three size strata according to number of subscribers in the CUID's system. Second, an average for each of the six primary variables was calculated for each size strata. Third, an overall average for each primary variable was calculated for the noncompetitive sample by weighting the average for each strata by the proportion of similarly sized systems in the industry. IV. Survey Results A. Competitive and Noncompetitive Groups 23. As required by the Communications Act, the survey results are reported for two groups: competitive and noncompetitive. The average monthly rates charged by the competitive and noncompetitive groups for programming services and equipment are shown in Table 1. As shown in Table 1, the differential between the competitive and noncompetitive groups was 6.8% in 1995 and 1996, and narrowed to 5.8% in 1997. Table 1: Comparison of Competitive and Noncompetitive Groups 1.Average Monthly Rates Date Competitive Group Noncompetitive Group $ Difference % Difference 7/1/95 $22.88 $24.43 $1.55 6.8%.* 7/1/96 $24.88 $26.57 $1.69 6.8% * 7/1/97 $27.26 $28.83 $1.57 5.8% * Source: 1997 Price Survey. Average rate is for BST, CPST, a remote, and a converter. An asterisk signifies a statistically significant difference between competitive and noncompetitive groups at 95% level of confidence. See Attachment D-2 for standard errors for the reported averages. 1. Rates charged by individual CUIDs are affected by factors other than competitive status. For example, size may be a factor that influences rates. In order to determine the extent to which size is an influencing factor, we have calculated the average monthly rate for each size strata for both the competitive and noncompetitive groups, and present the results of these calculations in Attachment D-1. Also shown in Attachment D-1, are the standard errors of the estimate which were calculated for each mean reported. 2. In addition to a comparison of means by group and by size strata, we also estimated multiple regression equations for each year which allow us to compare the differences in average monthly rates between the competitive and noncompetitive groups controlling for size. The estimated regression coefficients are shown in Attachment E. The estimated regression coefficients for the size variables for all three years are significantly different from zero indicating that size is a factor that systematically influences rates. For comparison purposes, the regression results (which hold size constant) show the following percentage differences between the competitive and noncompetitive groups: 5.0% for 1995, 4.0% for 1996, and 4.7% for 1997. The differences between these percentages and those shown in Table 1 (which are based on means) are accounted for by the size variables. 3. Within the competitive group, there are four subcategories according to the four criteria under which a finding of effective competition can be made, as discussed in footnote 3 and paragraph 9 above. Attachment D-5 shows the average monthly rates, average number of channels, and average monthly rate per channel for each of the four subcategories of the competitive group. 4. Table 2, below, shows the average monthly rates for programming services and equipment for the competitive group. The average monthly rate rose by 8.7% between 1995 and 1996, and by 9.6% between 1996 and 1997. The average number of channels received by subscribers increased from 38 in 1995 to 46.5 in 1997. As a result, the average monthly rate per channel rose by 4.5% between 1995 and 1996, and declined by 5.7% between 1996 and 1997. Also, the average monthly rate per satellite channel declined by 7.3% between 1996 and 1997. We note that the increases in average monthly rates between 1995 and 1996 and between 1996 and 1997, and the increase in the average number of channels in 1997, are statistically significant. However, the changes in average prices for the programming services and equipment subcategories are not statistically significant. Table 2: Competitive Group 2. Service Element 7/1/95 (A) 7/1/96 (B) % Change A & B 7/1/97 (C) % Change B & C Average Monthly Rate $22.88 $24.88 8.7%* $27.26 9.6%.* Programming Services n/a $23.32 - $25.29 8.4% Equipment n/a $1.56 - $1.97 7.0% Channels 38 39.6 4.2% 46.5 17.4%* Average Monthly Rate Per Channel $0.67 $0.70 4.5% $0.66 -5.7% Average Monthly Rate Per Satellite Channel n/a $1.09 - $1.01 -7.3% Source: 1997 Price Survey. Average rate is for BST, CPST, a remote and a converter. An asterisk signifies a statistically significant change over time. See Attachment D-2 for standard errors for the reported averages. 1. Table 3, below, reports results for the noncompetitive group. The average monthly rate for the noncompetitive group increased by 8.8% between 1995 and 1996, and 8.5% between 1996 and 1997. These increases for average monthly rates are statistically significant. The package of services received by subscribers has not been static over this period. Subscribers received 44 channels, on average, in July 1995, and paid $24.43 per month for those channels, or $0.60 per channel. In July 1997, subscribers received 49.4 channels, an increase of 5.4 channels over July 1995, and paid $28.83 per month, or $0.63 per channel. Thus, on a per channel basis, the average monthly rate increased by 5.0% between 1995 and 1997, or, as shown in Table 3, by 1.7% between 1995 and 1996, and by 3.3% between 1996 and 1997. Also, the average monthly rate per satellite channel increased by 2.1% between 1996 and 1997. Table 3: Noncompetitive Group Service Element 7/1/95 (A) 7/1/96 (B) % Change A & B 7/1/97 (C) % Change B & C Average Monthly Rate $24.43 $26.57 8.8%* $28.83 8.5%* Programming Services n/a $24.28 - $26.31 8.4%* Equipment n/a $2.29 - $ 2.52 10.0%* Channels 44 47 6.8%* 49.4 5.1%* Average Monthly Rate Per Channel $0.60 $0.61 1.7% $0.63 3.3% Average Monthly Rate Per Satellite Channel n/a $0.95 - $0.97 2.1% Source: 1997 Price Survey. Average rate is for BST, CPST, a remote and a converter. An asterisk signifies a statistically significant change over time. See Attachment D-2 for standard errors for the reported averages. 2. Charts 1 through 2a, attached, show average monthly rate, average monthly rate per channel, and average monthly rate per satellite channel for the competitive and noncompetitive groups for the period from 1995 to 1997. While Chart 1 indicates that average monthly rates charged by both the competitive and noncompetitive groups increased between July 1, 1995 and July 1, 1997, Chart 2 and Chart 2a show that the average monthly rate per channel and average monthly rate per satellite channel for both groups were relatively more stable. 3. This year's Survey also asked respondents to explain changes in rates between July 1, 1995 and July 1, 1996, and between July 1, 1996 and July 1, 1997. We find that both competitive and noncompetitive respondents attribute most of their rate increases to inflation, increases in programming costs, channel additions, and system upgrades. Between 1996 and 1997, operators in the competitive group attribute an average of 24% of their rate increases to inflation and an average of 33% to higher programming costs. Operators in the noncompetitive group attribute an average of 34% of their rate increases to inflation and an average of 29% to higher programming costs, over the same time period. Table 4, below, summarizes the results for the competitive and noncompetitive groups, as do Charts 3 through 6, attached. Table 4: Explanation of Changes in Rates Competitive Group Noncompetitive Group 1995-1996 1996-1997 1995-1996 1996-1997 Inflation 38% 24% 35% 34% Programming Costs 33% 33% 37% 29% Channel Additions 10% 10% 12% 13% System Upgrades 6% 16% 7% 11% Equipment 7% 11% 5% 8% Other 6% 6% 4% 5% Total 100% 100% 100% 100% Source: 1997 Price Survey. Programming Costs include copyright fees. This table is based on responses received from operators serving 360 CUIDs (307 noncompetitive and 53 competitive.) 4. The Survey also requested detailed information about each operator's channel lineup. Attachments C-1 and C-2 show how the competitive and noncompetitive groups changed their channel lineups during the survey period. Both the competitive and noncompetitive groups increased their average channel capacity during this period and, for the most part, used that increased capacity to offer additional satellite channels on their CPSTs. The competitive group offered 38 channels, on average, in 1995, and increased to 46.5 channels in 1997, an increase of 8.5 channels over this two year period. The noncompetitive group offered 44 channels in 1995, and increased to 49.4 channels in 1997, an increase of 5.4 channels, on average, over the same period. These changes in the number of channels offered are statistically significant. B. Regulated and Unregulated Groups 5. As noted above, the Survey included questions intended to identify the respondent's regulatory status. Tables 5 and 6, respectively, report results for the regulated and unregulated groups. Table 5: Regulated Group Service Element 7/1/95 (A) 7/1/96 (B) % Change A & B 7/1/97 (C) % Change B & C Average Monthly Rate $24.35 $26.63 9.4%* $28.80 8.1%* Programming Services n/a $24.40 - $26.45 8.4%* Equipment n/a $2.23 - $2.36 5.8% Channels 45.1 48.8 8.2%* 51.2 4.9%* Average Monthly Rate Per Channel $0.57 $0.58 1.8% $0.60 3.4% Average Monthly Rate Per Satellite Channel n/a $0.94 - $0.97 3.2% Source: 1997 Price Survey. Average rate is for BST, CPST, a remote and a converter. An asterisk signifies a statistically significant change over time. See Attachment D-3 for standard errors for the reported averages. 6. As shown in Table 5, above, and Table 6, below, the average monthly rates for both the regulated and unregulated groups increased over the past three years. Between 1995 and 1996, the average monthly rate for the regulated and unregulated groups increased by 9.4% and 9.2%, respectively. Between 1996 and 1997, the average monthly rate rose by 8.1% for the regulated group and by 8.4% for the unregulated grou p. Table 6: Unregulated Group Service Element 7/1/95 (A) 7/1/96 (B) % Change A & B 7/1/97 (C) % Change B & C Average Monthly Rate $24.21 $26.44 9.2%* $28.67 8.4%* Programming Services n/a $24.12 - $26.06 8.0%* Equipment n/a $2.30 - $ 2.61 13.5%* Channels 43.3 45.6 5.3%* 47.8 4.8%* Average Monthly Rate Per Channel $0.61 $0.63 3.3% $0.65 3.2% Average Monthly Rate Per Satellite Channel n/a $0.95 - $0.98 3.2% Source: 1997 Price Survey. Average rate is for BST, CPST, a remote and a converter. An asterisk signifies a statistically significant change over time. See Attachment D-3 for standard errors for the reported averages. 7. Our data indicate no statistically significant difference in the average monthly rate charged by regulated and unregulated operators. The regulated group, however, offers their subscribers more channels (the difference is statistically significant in 1996 and 1997) and charges less on a per channel basis (the difference is statistically significant in 1995, 1996, and 1997) than the unregulated group. In addition, the regulated group consistently charges less for equipment than the unregulated group. For 1996 and 1997, the regulated group charged $2.23 and $2.36, respectively, per month for equipment, while the unregulated group charged $2.30 and $2.61. These differences were found to be statistically significant. Thus, we can conclude that subscribers that purchase cable services from regulated operators typically pay less, on a per channel basis, for programming services and less for equipment than subscribers that purchase cable services from unre gulated operators. 8. Charts 7 through 8a, attached, show how the average monthly rate, the average monthly rate per channel, and average monthly rate per satellite channel for the regulated and unregulated groups have changed since 1995. Although Chart 7 shows that the average monthly rate charged by the regulated and unregulated groups have increased over time, Charts 8 and 8a show that on a per channel basis the average monthly rate charged by both groups has been relatively more stable over this time period. 36. Table 7, below, summarizes the explanation for changes in rates for the regulated and unregulated groups. Both the regulated and unregulated groups attribute most of their rate increases to inflation, increases in programming costs, channel additions, and system upgrades. For the unregulated group, increases in equipment are also significant. For the year ending in July 1997, the regulated group attributes 41% of their rate increase to inflation and 28% of their rate increase to higher programming costs. The unregulated group attributes 29% to inflation and 33% to higher programming costs for the same time period. Table 7: Explanation for Changes in Rates Regulated Group Unregulated Group 1995-1996 1996-1997 1995-1996 1996-1997 Inflation 37% 41% 33% 29% Programming and License Fees 33% 28% 40% 33% Channel Additions 14% 13% 10% 13% System Upgrades 7% 10% 6% 11% Equipment 3% 3% 9% 11% Other 6% 5% 2% 3% Total 100% 100% 100% 100% Source: 1997 Price Survey. Programming and License fees includes copyright fees. Also see Charts 9 through 12 for a graphical presentation of these data. C. Comparison by System Size 37. Table 8, below, shows the average monthly rate charged by each of the three size strata which were calculated for the competitive group. As shown in the table, smaller systems typically charge less, and their rates have increased less rapidly, than larger systems. Table 8: Comparison of Average Monthly Rate by Size Strata Competitive Group Size Strata 7/1/95 (A) 7/1/96 (B) % Change A & B 7/1/97 (C) % Change B & C Large Systems $24.64 $27.04 9.7% $28.67 6.02% Medium-Size Systems $24.00 $26.00 8.3% $28.93 11.3% Small Systems $21.48 $23.21 8.1% $24.36 5.0% Source: 1997 Price Survey. Large systems are those with 50,000 or more subscribers, medium-sized systems are those between 10,000 and 49,999 subscribers, and small systems are those with fewer than 10,000 subscribers. Note, this is not the legal definition for small systems. Average rate is for BST, CPST, a remote and a converter. An asterisk signifies a statistically significant change over time. See Attachment D-1 for standard errors for the reported averages. 38. Table 9, below, shows the average monthly rate charged by each of the three size strata which were calculated for the noncompetitive group. As shown in the table, smaller systems typically charge less, and their rates have increased less rapidly, than larger systems. However, it also should be noted that smaller systems typically offer fewer channels than larger systems. Thus, larger systems typically charge less on a per channel basis than smaller systems. The average number of channels offered and the average rate per channel for e ach size stratum are shown in Attachment D-4. Table 9: Comparison of Average Monthly Rate by Size Strata 3.Noncompetitive Group Size Strata 7/1/95 (A) 7/1/96 (B) % Change A & B 7/1/97 (C) % Change B and C Large Systems $25.29 $27.61 9.2%* $30.19 9.3%* Medium-Size Systems $24.60 $26.81 9.0%* $28.94 7.9%* Small Systems $22.23 $23.86 7.3%* $25.56 7.1%* Source: 1997 Price Survey. Large systems are those with 50,000 or more subscribers, medium-sized systems are those between 10,000 and 49,999 subscribers, and small systems are those with fewer than 10,000 subscribers. Note, this is not the legal definition for small systems. Average rate is for BST, CPST, a remote and a converter. An asterisk signifies a statistically significant change over time. See Attachment D-1 for standard errors for the reported averages. V. Conclusion 39. We draw the following conclusions from this Survey. The results indicate that prices rose for both the competitive and noncompetitive groups. The noncompetitive group charged higher prices than the competitive group for each of the three time periods studied. The percentage differential between competitive and noncompetitive narrowed between 1996 and 1997. 40. On a statistical basis, our analysis indicates that the prices charged by the regulated group are not significantly different from the prices charged by the unregulated group. Both groups attribute their rate increases primarily to inflation, higher programming costs, channel additions, and system upgrades. Additionally, competitive and unregulated groups also attribute a significant portion of their rate increases to equip ment cost increases. 41. Both the competitive and noncompetitive groups offered subscribers more channels, and had corresponding reductions in average monthly rates per channel. Regulated operators, on average, offer more channels than unregulated operators, and subscribers of regulated operators pay significantly less on a per channel basis than subscribers purchasing services from unregulated operators. Also, regulated operators charge less, on average, for equipment than unregulated operators. 42. Finally, we find that both the competitive and noncompetitive groups have mostly used their increased channel capacity to offer additional satellite channels on their CPSTs. VI. ADMINISTRATIVE MATTERS 43. It is ORDERED that this Report is issued pursuant to authority contained in Section 623(k) of the Communications Act of 1934, as amended, 47 U.S.C. 534(k). FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary Attachment A: Descriptive Statistics for CUIDs Used in the Statistical Analysis 1995 1996 1997 Respondents Subscribers Respondents Subscribers Respondents Subscribers Competitive Group Small 31 18,447 31 19,293 29 18,137 Medium 20 44,273 21 47,601 32 104,865 Large 12 598,895 13 633,043 22 953,486 Total 63 643,165 65 699,937 83 1,076,488 Unregulated Group Small 35 24,544 35 25,778 35 26,279 Medium 91 1,335,696 90 1,353626 89 1,303,747 Large 75 2,683,609 75 2,737,927 79 2,869,625 Total 201 4,044,849 200 4,117,337 203 4,199,651 Regulated Group Small 15 31,179 15 31,576 15 31,680 Medium 59 823,069 59 852,078 49 802,962 Large 147 8,694,423 146 8,892,609 135 8,606,152 Total 221 9,548,671 220 9,776,263 199 9,440,794 Noncompetitive Total 422 13,593,520 420 13,893,600 402 13,640,445 Sample Grand Total 485 14,236,685 485 14,593,537 485 14,716,933 Source: 1997 Price Survey. Survey responses were included in the analysis if the respondent provided data for the components of rates (e.g, equipment and programming), channel capacity, and subscribers. Note: A CUID associated with a system with fewer than 10,000 subscribers is categorized as small, a CUID associated with a system with 10,000 to 49,999 subscribers is categorized as medium, and a CUID associated with a system with more than 49,999 subscribers is categorized as large. Attachment B: Average Charge For Other Services Competitive Non-competitive 1996 1997 1996 1997 Installation $29.61 (2.34) $39.56 (1.72) $33.47 (0.82) $39.59 (0.80) Disconnection $5.72 (3.05) $4.69 (2.52) $0.95 (0.38) $0.90 (0.36) Reconnection $19.06 (1.68) $23.45 (0.82) $18.76 (0.55) $22.70 (0.47) Tier Change $12.63 (2.28) $10.85 (2.31) $6.19 (0.52) $6.50 (0.51) Source: 1997 Price Survey. Standard error of the estimate is reported in parenthesis. Attachment C-1 : Operators That Changed The Number of Active Channels Between 1996 and 1997 Total Sample Competitive Noncompetitive Regulated Unregulated No Change 154 28 126 51 75 Reduced Channel Capacity Between 1 and 10 Channels 10 1 9 2 7 Increased Channel Capacity Between 1 and 5 Channels 251 36 215 119 96 Increased Channel Capacity Between 6 and 7 Channels 25 2 23 10 13 Increased channel Capacity Between 8 and 10 Channels 24 9 15 9 6 Increased Channel Capacity Between 11 and 15 Channels 7 1 6 4 2 Increased Channel Capacity Between 16 and 30 Channels 9 4 5 1 4 Increased Channel Capacity Between 31 and 50 Channels 5 2 3 3 0 Total 485 83 402 199 203 Attachment C-2 : How Respondents Changed Their Active Channels Between 1996 and 1997 Competitive Noncompetitive Respondents Average Respondents Average Broadcasting Channel Capacity Increased 13 1. 2 67 1.3 Decreased 13 -2.5 44 -1.6 Public Access Channel Capacity Increased 10 1.2 31 1.2 Decreased 8 -1.1 35 -1.3 Educational Channel Capacity Increased 7 1.1 11 1.4 Decreased 1 -1.0 7 -1.1 Government Channel Capacity Increased 5 1.2 11 1.2 Decreased 0 n/a 9 -1.0 Basic Satellite Channel Capacity Increased 23 1.2 106 2.5 Decreased 14 -6.6 47 -2.8 CPST-1 Channel Capacity Increased 36 8.5 209 4.3 Decreased 2 -3.0 24 -6.3 CPST-2 Channel Capacity Increased 10 1.0 20 3.1 Decreased 1 -1.0 0 NA Average Change in Channel Capacity 4.27* (0.88) 2.54* (0.22) Source: 1997 Price Survey. This table shows the number of respondents that changed channel capacity. As of July, there are 83 competitive CUIDs and 402 noncompetitive CUIDs. An asterisk signifies a statistically significant increase in average channel capacity. Standard error of the estimate is reported in parenthesis. Attachment D-1: Comparison of Competitive and Noncompetitive Groups By Size Strata Average Monthly Rates Size Competitive Group Noncompetitive Group $ Difference between Means % Difference between Means 1997 Large $28.67 (0.68) $30.19 (0.26) $1.52 5.3% Medium $28.93 (0.82) $28.94 (0.25) $0.01 0.03% Small $24.36 (0.93) $25.56 (0.64) $1.20 4.9% 1996 Large $27.04 (0.79) $27.61 (0.58) $0.57 2.1% Medium $26.00 (0.89) $26.81 (0.24) $0.81 3.1% Small $23.21 (0.80) $23.86 (0.56) $$0.65 2.8% 1995 Large $24.64 (0.81) $25.29 (0.57) $0.65 2.6% Medium $24.00 (0.81) $24.60 (0.22) $0.60 2.5% Small $21.48 (0.80) $22.23 (0.60) $0.75 3.5% Source: 1997 Price Survey. Average rate is for BST, CPST, a remote and a converter. An asterisk signifies a statistically significant change over time. Standard error of the estimate is reported in parenthesis. An asterisk signifies a statistically significant difference between competitive and noncompetitive groups at 95% level of confidence. Attachment D -2 : Comparison of Competitive and Noncompetitive Groups Year Competitive Group Noncompetitive Group $ Difference between Means % Difference between Means Average Monthly Rate 1997 $27.26 (0.54) $28.83 (0.19) $1.55 5.8.%* 1996 $24.88 (0.53) $26.57 (0.18) $1.69 6.8%* 1995 $22.88 (0.52) $24.43 (0.18) $1.55 6.8%* Average Number of Channels 1997 46.5 (1.8) 49.4 (0.6) 2.9 6.2% 1996 39.6 (1.7) 47 (0.6) 7.4 18.7%* 1995 38 (1.6) 44 (0.6) 6 15.8%* Average Monthly Charge Per Channel 1997 $0.66 (0.03) $0.63 (0.01) -$0.03 -4.6% 1996 $0.70 (0.04) $0.61 (0.01) -$0.09 -12.9%* 1995 $0.67 (0.04) $0.60 (0.01) -$0.07 -10.4%* Average Monthly Charge Per Satellite Channel 1997 $1.09 (0.08) $0.97 (0.0004) -$0.12 -11.0% 1996 $1.01 (0.06) $0.95 (.0008) -$0.06 -5.9% Programming Services 1997 $25.29 (0.45) $26.31 (0.24) $1.02 4.0%* 1996 $23.32 (0.47) $24.28 (0.22) $0.96 4.1% Equipment Charges 1997 $1.97 (0.16) $2.52 (0.05) $0.55 27.9%* 1996 $1.56 (0.19) $2.29 (0.05) $0.73 4.7%* Source: 1997 Price Survey. Noncompetitive CUIDs can be regulated or unregulated. The average monthly rate is for BST, CPST, a remote, and a converter. Programming services and equipment charges were not requested for 1995. Standard error of the estimate is reported in parenthesis. An asterisk signifies a statistically significant difference between the competitive and noncompetitive groups at 95% level of confidence. Attachment D -3: Comparison of Regulated and Unregulated Groups Year Regulated Group Unregulated Group $ Difference between Means % Difference between Means Average Monthly Rate 1997 $28.80 (0.26) $28.67 (0.25) -$0.13 -0.5% 1996 $26.63 (0.26) $26.44 (0.23) -$0.19 -0.71% 1995 $24.35 (0.25) $24.21 (0.22) -$0.14 -0.57% Average Number of Channels 1997 51.2 (0.93) 47.8 (0.92) -3.4 -6.6%* 1996 48.8 (0.88) 45.6 (0.82) -3.2 -6.6%* 1995 45.1 (0.89) 43.3 (0.75) -1.8 -4.0% Average Monthly Charge Per Channel 1997 $0.60 (0.01) $0.65 (0.01) $0.05 8.3%* 1996 $0.58 (0.01) $0.63 (0.01) $0.05 8.6%* 1995 $0.57 (0.01) $0.61 (0.01) $0.04 7.01%* Average Monthly Charge Per Satellite Channel 1997 $0.97 (0.03) $0.98 (0.001) $0.01 1.03% 1996 $0.94 (0.04) $0.95 (0.001) $0.01 1.06% Programming Services 1997 $26.45 (0.28) $26.06 (0.28) -$0.39 -1.5% 1996 $24.40 (0.26) $24.12 (0.32) -$0.28 -1.14% Equipment Charges 1997 $2.36 (0.10) $2.61 (0.07) $0.25 10.59%* 1996 $2.23 (0.09) $2.30 (0.07) $0.07 3.13% Source: 1997 Price Survey. Noncompetitive operators can be regulated or unregulated. The average monthly rate is for BST, CPST, a remote, and a converter. Programming services and equipment charges were not requested for 1995. Standard error of the estimate is reported in parenthesis. An asterisk signifies a statistically significant difference between regulated and unregulated groups at 95% level of confidence. Attachment D -4 : Comparison by Size Strata Year Large Systems Medium-Size Systems Small Systems Average Monthly Rate 1997 $30.19 (0.26) $28.94 (0.25) $25.56 (.64) 1996 $27.61 (0.58) $26.81 (.24) $23.86 (.56) 1995 $25.29 (0.57) $24.60 (.22) $22.23 (.60) Average Number of Channels 1997 55.2 (0.84) 49.0 (.97) 36.6 (1.88) 1996 52.2 (1.8) 47.7 (.91) 33.6 (1.69) 1995 49.1 (1.6) 44.2 32.0 Average Monthly Charge Per Channel 1997 $0.57 (0.01) $0.62 (.01) $0.78 (.03) 1996 $0.55 (0.01) $0.59 (.01) $0.79 (.04) 1995 $0.54 (0.01) $0.58 (0.01) $0.78 (0.04) Average Monthly Rate Per Satellite Channel 1997 $0.85 (0.01) $1.03 (0.07) $1.17 (0.07) 1996 $0.84 (0.01) $0.94 (0.04) $1.22 (0.07) Programming Services 1997 $27.42 (0.24) $26.17 (.22) $24.03 (.56) 1996 $25.07 (0.71) $24.32 (.22) $22.44 (.47) Equipment Charges 1997 $2.77 (0.08) $2.77 (.08) $1.53 (.20) 1996 $2.53 (0.19) $2.46 (.10) $1.42 (.20) Source: 1997 Price Survey. Noncompetitive CUIDs by size strata. See footnote 9 for description of size strata. The average monthly rate is for BST, CPST, a remote, and a converter. Programming services and equipment charges were not requested for 1995. Standard error of the estimate is reported in parenthesis. Attachment D-5: Average Monthly Rate, Number of Channels, and Monthly Rate per Channel by Category of Effective Competition Average Monthly rate Year Low Penetration Other MVPD Municipals LEC 1997 $27.90 (.67) $25.62 (1.98) $24.25 (2.59) $26.41 (.53) 1996 $25.40 (.55) $22.26 (1.84) $22.39 (2.66) n/a 1995 $23.41 (.56) $20.39 (1.62) $20.40 (1.99) n/a Average Number of Channels 1997 44.6 (2.40) 47.3 (4.29) 51 (7.11) 53.5 (2.75) 1996 38.6 (1.87) 41.7 (3.91) 48.5 (6.51) n/a 1995 37 (1.84) 40.3 (3.39) 46.8 (5.48) n/a Average Monthly Rate Per Channel 1997 $0.72 (.04) $0.56 (.05) $.0.48 (.04) $0.51 (.03) 1996 $0.74 (.04) $0.55 (.06) $0.47 (.05) n/a 1995 $0.71 (.04) $0.52 (.06) $0.44 (.05) n/a Number of CUIDs in Sample 1997 58 9 4 12 1996 54 7 4 0 1995 52 7 4 0 Source: 1997 Price Survey. The Average Monthly Rate is for BST, CPST, a remote and a converter. Standard error of the estimate is reported in parenthesis. See footnote 3 for a definition of the four categories of effective competition. Note: the sample size for the Other MVPD, Municipals and LEC subcategories may be too small to draw statistically valid conclusions. Attachment E : Regression Results Year Variable Coefficient 1995 Competitive Dummy -0.05 (0.192) Reciprocal of Average Number of Subscribers -0.21 (0.548) Reciprocal of Average Total Channels -5.86 (0.70) Intercept 3.34 (0.02) Adjusted R Square .18 Competitive Impact -0.05 1996 Competitive Dummy -0.04 (.02) Reciprocal of Average Number of Subscribers -0.250 (.14) Reciprocal of Average Total Channels -6.63 (0.64) Intercept 3.43 (0.02) Adjusted R Square .22 (0.6) Competitive Impact -0.04 1997 Competitive Dummy -0.05 (0.02) Reciprocal of Average Number of Subscribers -0.25 (.13) Reciprocal of Average Total Channels -8.12 (0.65) Intercept 3.55 (.015) Adjusted R Square .29 Competitive Impact -.047 Source: 1997 Price Survey. Dependent variable is log of average monthly rate per subscriber for BST and CPST, a remote and a converter. Numbers in parenthesis are standard errors. Total number of observations: 485. The competitive impact is calculated by taking the anti-log of the competitive coefficient minus one.