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Vertical integration and the must carry rules in the cable television industry: An empirical analysis
Unformatted Document Text:  Must carry rules 20 Market-level variables First, as expected, OTA_A, the number of stations available in a system’s ADI, had a positive effect on DROP, meaning that the availability of more local stations in the market increases the chances of a station being dropped. However, the effect was only statistically significant at a higher than usual confidence level (i.e., 10%). Second, a system’s ADI rank, RANK_A, has a significantly positive effect on DROP ( β = .004, p < .10). This suggests that cable systems in bigger markets (with lower ADI ranks) were more likely to carry a station even though there are more stations available in the market. This finding is not consistent with an anticompetitive rational for carriage denials. It instead supports the theory that cable systems in bigger markets carry more broadcast stations to increase their value in the face of competition from over-the- air broadcasting and other multi-channel video services (Dertouzos & Wildman, 1989). Finally, the other market-level variable, RETAIL_C, per capita retail sales in a system’s county, had no significant effect on cable’s local carriage behavior. Station-level variables First, while a station’s household viewing share had significantly positive effect on its cable carriage, the effect of a station’s age was significantly negative. That is, the lower viewing share a station had or the younger a station was, the more likely the station was not carried by a cable system. Specifically, a 1% increase in a station’s viewing share increased its probability of being carried by a system by .003 and decreased its odds of not being carried by 4.9%. As for station age, being on air one year longer decreased the odds of a station not being carried by a cable system by 6%. Both findings go against the theory that cable’s non-carriage behavior was anti-competitively motivated.

Authors: Yan, Zhaoxu.
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Must carry rules
20
Market-level
variables
First, as expected, OTA_A, the number of stations
available in a system’s ADI, had a positive effect on DROP, meaning that the availability
of more local stations in the market increases the chances of a station being dropped.
However, the effect was only statistically significant at a higher than usual confidence
level (i.e., 10%).
Second, a system’s ADI rank, RANK_A, has a significantly positive effect on
DROP (
β
= .004, p < .10). This suggests that cable systems in bigger markets (with
lower ADI ranks) were more likely to carry a station even though there are more stations
available in the market. This finding is not consistent with an anticompetitive rational for
carriage denials. It instead supports the theory that cable systems in bigger markets carry
more broadcast stations to increase their value in the face of competition from over-the-
air broadcasting and other multi-channel video services (Dertouzos & Wildman, 1989).
Finally, the other market-level variable, RETAIL_C, per capita retail sales in a
system’s county, had no significant effect on cable’s local carriage behavior.
Station-level
variables
First, while a station’s household viewing share had
significantly positive effect on its cable carriage, the effect of a station’s age was
significantly negative. That is, the lower viewing share a station had or the younger a
station was, the more likely the station was not carried by a cable system. Specifically, a
1% increase in a station’s viewing share increased its probability of being carried by a
system by .003 and decreased its odds of not being carried by 4.9%. As for station age,
being on air one year longer decreased the odds of a station not being carried by a cable
system by 6%. Both findings go against the theory that cable’s non-carriage behavior was
anti-competitively motivated.


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