The Causes and Consequences of Growth in the Cable Television Industry

The cable television industry is a large, integral part of the information technology industry in the United States. The purpose of this paper is to describe the development of the cable television industry and analyze the institutional and economic determinants of its growth. As will be shown, the growth in the number of subscribers to cable television services was moderate from its inception until the late 1970s, enjoyed a period of substantial gain from that time until the mid-1980s, and subsequently flattened. While not inconsistent with the natural, unfettered development of nascent industries, the determinants of these periods of growth match closely with the developments in three related areas. These are (1) the seemingly boundless demand for new and varied video programming by consumers, (2) technological innovations in communication distribution technologies, including technological spillovers from other telecommunications industries, and (3) changes in the regulatory environment, or 'rules of the game,' governing both the structure of cost and the competitive environment in the industry. An ancillary goal of this paper is to also consider the implications of the existing institutional structure of the cable television industry in the context of the 'convergence' of telecommunications services mentioned above.