Vertical Foreclosure in the U.S. Cable Television Market: An Empirical Study of Program Network Carriage and Positioning

49 Pages Posted: 14 Nov 2005

See all articles by Dong Chen

Dong Chen

Peking University - School of Economics

David Waterman

Indiana University - Department of Telecommunications

Multiple version iconThere are 2 versions of this paper

Date Written: October 2005

Abstract

We provide new evidence of vertical foreclosure in the U.S. cable television market, primarily using a 2004 database of 680 cable systems. Focusing on four program network groups (basic outdoor entertainment, basic cartoon, basic movie, and premium movie), we find that more frequent carriage of affiliated networks and less frequent carriage of rival networks, a pattern identified by previous empirical studies, persists in spite of extensive channel capacity expansion and digitization of cable systems, as well as new competition from DBS - developments that might be expected to reduce or eliminate vertical foreclosure effects. We also find a new form of vertical foreclosure in the digital environment: integrated cable operators that do carry rival networks are more likely to position them on higher priced digital tiers, or in other ways that appear to limit demand for them.

Keywords: Vertical integration, cable television, foreclosure

JEL Classification: l22, l82

Suggested Citation

Chen, Dong and Waterman, David, Vertical Foreclosure in the U.S. Cable Television Market: An Empirical Study of Program Network Carriage and Positioning (October 2005). Available at SSRN: https://ssrn.com/abstract=843544 or http://dx.doi.org/10.2139/ssrn.843544

Dong Chen (Contact Author)

Peking University - School of Economics ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China
86 10 62751462 (Phone)
86 10 62751460 (Fax)

David Waterman

Indiana University - Department of Telecommunications ( email )

1229 East 7th Street
Bloomington, IN 47405
United States
812-855-6170 (Phone)

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