Cable Competition

Table of Contents

I. Statement of the Problem Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'..... 4

II. Background Information Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...5

III. Description of Methodology Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'......8

IV. Statistical Analysis Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'......9

V. Conclusions Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'...Ð'..... 9

Abstract

At the beginning of January 2005, FCC data states that there were 37.9 million High-

Speed Internet lines deployed in the United States. Over 73 million American households

subscribed to cable television services with 34% of them having digital service

(Leichtman Research Group, 2005, p. 6). Residents in 78 of 120 communities in Wayne,

Oakland and Macomb counties have just one choice for cable service and pay 10 percent

more than their neighbors in communities with competition (Kurth, 2002, paragraph 2).

One company, Comcast Cable of Philadelphia Ð'- controls 75 percent of the market with 1

million customers.

Although Comcast Cable controls a large portion of the cable services in Metro Detroit,

they are facing intense pressure from competitors that are advertising lower monthly

cable rates then what Comcast charges. Also, in the areas where Comcast does not have

competition among cable providers, consumers pay higher monthly cable rates and

receive poorer services than those communities that Comcast faces competition

(Alexander, 1999, paragraph 11). To see if this is true, we took a sample of 216 cable

customers obtained in the 44 communities in Wayne, Oakland and Macomb

counties that have competing cable services to see if there is a significant difference in

monthly cable rates between Comcast Cable and it competitors.

Statement of the Problem

Headquartered in Philadelphia, Comcast Cable has over 21 million subscribers and is

largest provider of cable and broadband services in the United States. Comcast offers

cable TV, high-speed Internet, and digital phone services. Comcast also has

programming interests such as Outdoor Life Network, and majority states in E!

Entertainment Television and Comcast SportsNet (Hoover, 2006, paragraph 1).

Despite getting off to a very late start, competing cable companies and regional phone

companies are making strong headway against cable operators in the high-speed and

cable service business. Thanks largely to steep price cuts, generous promotional offers,

frequent equipment giveaways and other marketing gimmicks, the Baby Bells are now

signing up more data subscribers than their cable rivals, steadily narrowing the market

share gap between the two industries and threatening cable's nearly decade-long

dominance of the broadband business (Breznick & Schley, 2006, p. 8).

Thanks to strong DSL gains, cable's broadband market share has sunk to a new low

against their competitors, falling below the 60% mark for the first time ever. Although

cable operators still enjoy a commanding 58% share of the 40-million subscriber

residential broadband market, that share has slipped from about 62% a year ago, 67%

two years ago and as high as 75% in mid-2000 (Breznick & Schley, 2006, p. 12).

Industy analyst credit the change mainly to the stiff price cuts by competitors that have

entered the marketplace. The major problem that Comcast is facing in Michigan is the

perception among consumers that Comcast monthly cable rates are higher than their

competitors monthly cable rates.

Background Information

Monthly rates for cable have increased 40 percent in the past six years in Metro Detroit,

despite industry promises that federal deregulation would lead to lower prices and

increased competition. A study by the Federal