CALIFORNIA STATE UNIVERSITY, HAYWARD

COLLEGE OF BUSINESS AND ECONOMICS

MANAGERIAL ECONOMICS

GUIDELINES FOR CASE ANALYSIS

Cable Wars

I. MAIN ISSUES

1. Assessment of Market Power:

(i) Is Cable TV a natural monopoly, i.e. does a single firm in this industry enjoy economies of scale that are large relative to the market , thus leading to the monopolization of this market? (See Ex. 2, 5, 6, 7 and 8)

(ii) What are the substitutes for Cable TV and what is the definition of the relevant market? List all the possible instruments and media that are competing for the consumers information and entertainment dollar

(iii) What evidence is provided by the empirical studies on regulated and unregulated Cable TV rates (see Ex. 3 and 4) that may throw light on the extent of market power that may be enjoyed by a Cable TV operator?

2. Types and Nature of Natural Monopoly Regulation:

(i) What is the rationale and nature of natural monopoly regulation contained in the theoretical literature (see your textbook)?

(ii) What are the different types of regulation that can be imposed on a utility like Cable TV and what are the systematic and hoped-for consequences of such regulations?

II. ALTERNATIVE REMEDIES (EVALUATE EACH)

1. Franchised Monopoly with regulated rates

2. Allowing multiple or competitive franchises

3. Deregulation of Cable TV

4. Hybrid solutions

Please use the data in the case to support your arguments on these issues and look at the questions at the end of the case.