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FCC releases experimental study

Fewer programming networks achieve profitability in markets dominated by one
or two multichannel distributors with limited channel capacity, according to an
experimental study released by the Federal Communications Commission Monday.

The study was launched to assist the FCC as it reworks rules limiting the
size of cable distributors.

The study -- conducted by FCC staff and a researcher from Penn State University -- examined
the behavior of individuals playing the roles of executives from programming networks
and multichannel distributors.

Buyers' decisions were examined under three scenarios. In one, there
were two major cable operators with market shares of 44 percent and 39 percent, respectively,
and a direct-broadcast satellite operator. Another consisting of a single large cable operator
with 51 percent market share and several smaller pay TV distributors.

Finally, there was a market of two moderately sized cable operators with
shares of 27 percent and 24 percent and several smaller distributors.

According to the findings, only the most popular networks achieved
profitability when the number of programmers was greater than cable operators'
channel capacity.

When channel-capacity constraints were removed, however, all programming
networks were consistently able to earn a profit.

The DBS operator's bargaining power to negotiate price reductions decreased
when two cable operators had major shares of the market.

Greater DBS operators' programming fees could result in an increase in
subscriber fees paid by DBS customers, the study predicted.

Comments on the study are due to the FCC July 18; replies
Aug. 2.