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1 1 (1997)

handle is hein.amenin/aeiaapg0001 and id is 1 raw text is: This volume examines the effect of rate regulation in cable televi- sion and focuses on the impact of price controls on consumer wel- fare. Thomas W. Hazlett and Matthew L. Spitzer find that rate regulation in cable television has affected consumers in a number of significant ways, though not always in accord with common expectations or popular conclu- sions. Deregulation following the Cable Act of 1984 led not to a fly-up in rates but to price increases driven by-and commensurate with-quality upgrades in the cable television pack- age. Reregulation following the Cable Television Consumer Protection and Competition Act of 1992, after a false start in 1993, did effectively constrain cable rates by about 8 to 10 percent in 1994. The reregulation of cable, how- ever, was accompanied by a dramatic drop in viewer ratings for basic cable program services, which suggests a loss of quality in the eyes of consumers. The most dramatic evidence of the failure of rate regulation to lower rates is found in data that indicate that subscribership was neither restricted by cable deregulation nor expanded by reregulation. The strong support given to regulation by competitors to cable, including broadcasters and local telephone companies, and the vocal opposition to rate regulation expressed by programming interests further buttress the hypothesis that rate regulation has not lowered quality-adjusted cable rates. That failure of regulation is all the more striking in light of the overwhelming evidence that cable operators enjoy considerable amounts of market power, price substantially above aver- age cost, and realize excess returns. Thomas W. Hazlett is professor of agricultural and resource economics at the University of California, Davis. Matthew L. Spitzer is the William T. Dalessi Professor of Law at the University of Southern California. The MIT Press Massachusetts Institute of Technology Cambridge, Massachusetts 02142 HAZPH 0-262-08253-5 The AEI Press Publisher for the American Enterprise Institute 1150 17th Street, N.W., Washington, D.C. 20036

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