Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the matter of                 | *  | MM Docket No. 92-266         |
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| Implementation of Section 3 of   | ** |                              |
| the Cable Television Consumer    |    |                              |
| Protection and Competition Act   | *  |                              |
| of 1992                          | *) |                              |
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| Statistical Report on Average    |    |                              |
| Rates for Basic Service, Cable   | *  |                              |
| Programming Service, and         | *) |                              |
| Equipment                        | ** |                              |
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**REPORT ON CABLE INDUSTRY PRICES**

**Adopted: April 1, 2002 Released: April 4, 2002**

By the Commission:

# Introduction

1.  Section 623(k) of the Communications Act, as amended by the Cable
    Television Consumer Protection and Competition Act of 1992 ("1992
    Cable Act"),[^1] requires the Commission to publish annually a
    statistical report on cable prices, or more specifically, average
    rates for the delivery of basic cable service, cable programming
    service, and equipment.[^2] The Act also requires the Commission to
    compare the average rates of cable operators subject to effective
    competition with those of operators not subject to effective
    competition.[^3] This 2001 Report is issued in compliance with those
    statutory obligations.[^4]

2.  The information and analysis provided in this Report are based on
    the Commission's 2001 survey of cable industry prices
    ("Survey").[^5] The Survey requested data from selected cable
    operators as of July 1, 2001 and July 1, 2000. Limited amounts of
    data were requested as of July 1, 1999. The Survey enables the
    Commission to compare prices charged by two groups of cable
    operators: (1) operators that are deemed to face effective
    competition (herein referred to as the "competitive group") and (2)
    operators that do not face effective competition (the
    "noncompetitive group"). Within the noncompetitive group,
    information was collected from both regulated and unregulated
    operators.[^6] Operators in the competitive group are limited to
    those operators that have sought and obtained a Commission finding
    of effective competition.[^7] As a result, within the noncompetitive
    group, there may be operators that face competition but have not
    filed a petition with the Commission seeking a finding of effective
    competition. Similarly, there may be operators within the
    competitive group that may have met the criteria for a finding of
    effective competition at the time the finding was made, but because
    of changed circumstances, may not meet the statutory criteria
    currently.

3.  The Survey collected information about average monthly rates for the
    basic service tier ("BST") and major cable programming service tier
    ("CPST").[^8] The BST typically consists of broadcast and other
    local origination stations plus a few satellite channels. The major
    CPST typically consists of satellite channels. Most cable customers
    subscribe to both BST and the major CPST.[^9] We collected
    information on the average monthly charge for equipment, consisting
    of an analog addressable converter and remote control unit. The
    Survey also collected information on service installation
    charges.[^10] The Survey further sought information needed to
    determine average rates per channel and to explain changes in rates
    between the Survey dates. In addition, we sought to gather
    information about the price and availability of digital programming
    service tiers, Internet access, and telephony offered by cable
    operators. We summarize, below, the major findings of the Survey.

# Summary of findings

4.  The Survey shows that the average monthly rate for BST and CPST
    programming services for the competitive and noncompetitive groups
    combined increased by 7.3%, from \$31.45 to \$33.75, for the
    12-month period ending July 1, 2001. The average monthly charge for
    equipment increased by 9.1%, from \$2.97 to \$3.24, and the overall
    charge for programming services and equipment increased by 7.5% from
    \$34.42 to \$36.99, over the same period.

5.  During the year ending July 1, 2001, the average monthly rate for
    BST programming increased by 2.1% and the average monthly rate for
    CPST programming increased by 10.8%. The average rate per channel
    increased by 1.5% for the year ending July 1, 2001.[^11] The average
    number of channels increased by 5.5%, from 56.3 to 59.4 channels,
    over the same period. Table 1 presents these and other results for
    the competitive and noncompetitive groups combined.

6.  Both the competitive and noncompetitive groups increased their
    average monthly rate for programming and equipment by 7.5% over the
    12-month period ending July 1, 2001.[^12] Over the same period,
    competitive and noncompetitive operators, respectively, increased
    rates for programming services by 7.0% and 7.3%. The average monthly
    charge for equipment increased for competitive and noncompetitive
    operators, respectively, by 12.8% and 9.1%. The average price per
    channel (based on the cost of programming services only) was
    unchanged for competitive operators and increased by 1.5% for
    noncompetitive operators. The competitive group averaged 60.9
    channels and the noncompetitive group averaged 59.3 channels,
    increases in channel offerings of 5.9% and 5.5%, respectively.

7.  For the 12 months ending July 1, 2001, competitive and
    noncompetitive operators attributed, on average, 64.7% and 58.2%,
    respectively, of rate increases to higher programming costs. Other
    factors that reportedly led to price increases were system upgrades,
    and general inflation. In addition, the competitive group attributed
    9.2%, and the noncompetitive group 13.4%, of their rate increases to
    unspecified costs. Competitive and noncompetitive operators also
    attribute 4.9% and 3.8%, respectively, of their rate increases to
    factors other than cost.

8.  The difference in average monthly rates between the competitive and
    noncompetitive groups (the "competitive differential") remained at
    6.3% for both 2000 and 2001. On July 1, 2000, the competitive and
    noncompetitive groups, respectively, charged \$32.49 and \$34.54,
    representing a 6.3% differential between the two groups. By July 1,
    2001, cable operators facing competition were charging, on average,
    \$34.93 while operators not facing competition were charging
    \$37.13, also representing a 6.3% differential. In addition, the
    differential in average monthly rate per channel was 9.4% on July 1,
    2001, as competitive and noncompetitive cable operators,
    respectively, charged 55.1 cents and 60.3 cents per channel. The
    monthly charge for equipment was three cents lower for the
    noncompetitive group at \$3.24, than for the competitive group, as
    of July 1, 2001. Tables 2-8 present these and other results from the
    Survey.

9.  Growth in capacity and advanced services continued, as shown in
    Tables 9-13, for both competitive and noncompetitive operators. For
    the noncompetitive group, the fraction of total revenue derived from
    programming declined from 83.1% to 79.9%, even as digital
    programming grew, primarily as a result of growth in cable Internet
    and telephony. Operators belonging to the competitive group
    experienced a similar shift among revenue sources. Approximately
    two-thirds of all cable systems (68.7% of competitive operators and
    63.2% of noncompetitive operators) have achieved a capacity of 750
    MHz and above. Over the year ending July 1, 2001, the percentage of
    noncompetitive cable systems deploying digital video service to at
    least a portion of their subscribers increased from 57.8% to 77.6%.
    Similarly, the percentage deploying Internet access service rose
    from 51.4% to 70.8%. The percentage offering cable telephony,
    however, remained virtually constant at 21.1% in July 2001, compared
    with 20.7% in July 2000. Over the same period, the percentage of
    subscribers electing to take digital programming increased from 7.5%
    to 15.7%, while the percentage of cable households purchasing cable
    Internet access service grew from 3.1% to 7.4%. The percentage of
    cable subscribers taking cable telephony increased from 0.7% in July
    2000 to 2.2% in July 2001.

10. Finally, the results of our econometric analysis suggest that the
    demand for cable service as well as the price charged for that
    service was sensitive to the type of competition faced by cable
    operators. In those areas where a cable operator faces effective
    competition from a wireline overbuilder (i.e., where a finding of
    effective competition was based on the LEC test or the wireline
    portion of the overbuild test), we found that operators tend to
    offer more channels at a lower rate. In the few areas where the
    Commission has made a finding of effective competition as a result
    of DBS penetration, we found that the presence of DBS competition
    had no statistically significant effect on the demand for cable
    service or on cable rates. However, because of the specific nature
    of the sample, no general conclusions may be drawn from this fact.

# Survey methodology

## Sample

11. To compare average monthly rates of competitive and noncompetitive
    cable operators,[^13] we selected a separate sample from each group.
    These samples included 283 of the 368 operators in the competitive
    group and 472 of the 9,789 operators in the noncompetitive group. To
    ensure that the samples were representative and to gain more precise
    estimates, we stratified both groups into subgroups (or strata) and
    selected a portion of the sample from each stratum. The competitive
    group was divided according to the test by which effective
    competition was determined and the noncompetitive group according to
    the number of subscribers in each operator's cable system. The
    number of operators selected from each stratum depended on the
    number of subscribers nationwide in that stratum. Attachment A
    displays sample-size percentages and contains further information on
    our stratified sampling methodology.[^14]

12. We divided competitive operators into five strata: (1) LEC; (2)
    wireline overbuild; (3) DBS overbuild;[^15] (4*)* low penetration;
    and (5) municipal. For the LEC, wireline overbuild, DBS overbuild,
    and municipal strata, we included all 99, 45, 39, and 17 operators,
    respectively, in our Survey because of the relatively small number
    of operators in each of these four strata. We chose to use a random
    sample for the low penetration stratum because that subgroup had a
    large number of operators, 168 in all, from which we randomly
    selected 83 for that stratum. This resulted in a total of 283
    operators for the competitive group.

13. Noncompetitive operators also were divided into five strata. The
    "very large" stratum includes operators serving more than 50,000
    subscribers in a single community. The "large" stratum contains
    operators serving more than 50,000 subscribers, but with no
    individual community reaching 50,000 subscribers. The "medium"
    stratum is comprised of operators serving from 10,001 through 50,000
    subscribers. The "small" stratum includes operators serving from
    1,001 through 10,000 subscribers and, finally, the "very small"
    stratum includes operators with fewer than 1,000 subscribers. A
    sample of operators not stratified by size would have placed a
    disproportionately greater emphasis on smaller systems relative to
    the number of subscribers the smaller systems serve. The high
    proportion of subscribers nationwide represented by the very large
    stratum resulted in the selection of all 97 operators in that
    stratum. Other selections include 113 of the 170 large operators;
    151 of the 888 medium-sized operators; 71 of the 2,717 small
    operators; and 40 of the 5,917 very small operators. If a system
    selected for our sample served more than one community, as
    identified by the FCC community unit identification codes, we
    randomly selected one of those communities for the Survey.

14. Of the 755 Survey questionnaires mailed to cable operators from both
    groups, respondents returned 731 questionnaires to the Commission.
    Of the 24 questionnaires not returned, 12 operators were no longer
    in business or had recently sold the system. Of the 731 returned
    questionnaires, 723 met the minimum necessary data requirements to
    be included in the analysis.[^16] As of July 1, 2001, cable
    operators that returned usable questionnaires served a total of 15.4
    million subscribers or 22.3% of the 69.0 million cable subscribers
    nationwide.[^17]

15. Of the 723 usable responses, competitive cable operators submitted
    266 questionnaires. These 266 respondents served approximately 2.3
    million subscribers, or 3.3% of all cable subscribers. Of these, 187
    respondents had direct competition in their geographic area, with 93
    meeting the LEC test, 78 meeting the overbuild test (with 40 in the
    wireline overbuild subgroup and 38 in the DBS overbuild subgroup),
    and 16 served a community in which the municipality owned one of the
    operators (thereby meeting the municipal test). Of the remaining
    respondents in the competitive group, 79 served less than 30% of
    households in their service area (thereby meeting the low
    penetration test). Noncompetitive cable operators submitted the
    remaining 457 responses. These respondents served 13.1 million
    subscribers, or approximately 19.0% of all cable subscribers.

## Variables

16. From the Survey responses, we calculated monthly average rates for
    the variables described below.

[Average monthly rate for BST and CPST programming]{.underline}. This is
the average monthly rate for programming services. It is the total of
the monthly rate paid by subscribers to receive the BST and major CPST.
It excludes additional charges that may be incurred for a CPST beyond
the major tier, pay-per-view or pay-per-program services, and digital
programming. It also excludes the cost of equipment, which is shown
separately.

[Average monthly charge for equipment]{.underline}. This variable is the
monthly charge paid by subscribers for an analog addressable set-top box
plus a remote control.

[Average monthly rate for programming and equipment]{.underline}. This
variable is the sum of the average monthly rate for programming and
equipment. It represents the rate that a typical subscriber pays for BST
and CPST service, and equipment.

[Average number of channels]{.underline}. This variable is the average
number of local and satellite channels in the BST and CPST channel
lineup. Consistent with the monthly rate for programming services, this
variable excludes channels on any CPST beyond the major tier, as well as
channels devoted to pay-per-view or pay-per-program services, and
channels devoted to digital service.

[Average monthly rate per channel]{.underline}. This variable is the
average monthly rate for programming service divided by the average
number of channels.[^18] We also report the average monthly rate per
satellite channel, which is equal to the average monthly rate for
programming service divided by the average number of satellite channels.

17. In addition to these variables, we sought information that would
    enable us to attribute the changes in average rates to various
    categories of increased costs or to other factors. We also sought
    information on (1) service installation charges; (2) availability
    and growth of digital service, Internet access, and telephony;
    and (3) the distribution of channels among major categories of
    programming. We present Survey findings on these additional
    variables. We also provide the results of an econometric analysis of
    factors influencing cable rates and the demand for cable service.

## Estimates of Average Monthly Rates

18. As noted in Section III.A and Attachment A, we used a stratified
    sampling methodology to estimate average monthly rates. This
    entailed dividing the competitive and noncompetitive groups into
    strata and drawing a sample from each stratum. Using those samples,
    we calculated average monthly rates for each stratum,[^19] and then
    combined those results to form averages for each major group
    (competitive and noncompetitive) using a weighted average
    methodology.[^20]

19. The weight given to each stratum depended on the number of
    subscribers nationwide in that stratum. Within the competitive
    group, we estimate that operators in the LEC stratum served 60.4% of
    subscribers.[^21] Similarly, we estimate that the percentage of
    subscribers served by operators in each of the remaining strata were
    as follows: wireline overbuild 16.1%, DBS overbuild 11.7%, low
    penetration 10.9%, and municipal 0.9%. Within the noncompetitive
    group, we estimate that operators in the very large and large strata
    served, respectively, 22.6% and 24.6% of subscribers. We also
    estimate that operators in the medium-sized stratum served 33.8%,
    operators in the small stratum served 15.6% and operators in the
    very small stratum served 3.3% of subscribers. These percentages
    became the weights used to calculate weighted averages of monthly
    rates for the competitive and noncompetitive groups.

# survey results

## Change in Average Monthly Rate for All Cable Operators

20. Table 1 shows the average monthly rate of competitive and
    noncompetitive operators combined for programming services and
    equipment as of July 1, 2000, and 2001.[^22] The average monthly
    rate for programming and equipment increased by 7.5% for the year
    ending July 1, 2001 from \$34.42 in July 2000 to \$36.99 in
    July 2001. This change is statistically significant at the 5% level
    as denoted by the asterisk next to the percent change.[^23]

21. Table 1 also presents the components of programming \-- BST and
    CPST. Between July 1, 2000 and July 1, 2001, the average rate for
    BST, which typically includes broadcast and other local channels
    plus a few satellite channels, increased by 2.1%, from \$12.57 to
    \$12.84. The average rate for CPST, which typically consists
    entirely of satellite channels, increased by 10.8%, from \$18.88 to
    \$20.91. In addition, Table 1 divides the number of channels on BST
    and major CPST into local and satellite channels and shows the
    average rate per channel for satellite channels and all channels
    (based on the cost of programming services only). Significantly, the
    large increase in the average rate for CPST service correlates with
    substantial growth in the number of satellite channels. While the
    number of local channels increased by 2.8%, from 14.1 to 14.5
    channels, satellite channels increased by 6.4%, from 42.2 to 44.9
    channels. Correspondingly, the increase of 0.5% in the average rate
    per satellite channel compares with an increase of 1.5% in the
    average rate per channel overall.[^24] Table 1 also reports the
    average monthly rate for equipment. The average monthly rate for an
    analog addressable converter and remote control increased by 9.1%,
    from \$2.97 to \$3.24 over the year ending July 1, 2001.

  ------------- --------------------------- ---------------------- ----------------------- ------ ---------------------- ----------------------- ----- ---------------------- ---------------------- -------- -------- --------------------- --------- -- -- --
                **Table 1. Average Monthly                                                                                                                                                                                                                   
                Rate, by Component                                                                                                                                                                                                                           
                (Competitive and                                                                                                                                                                                                                             
                Noncompetitive Groups                                                                                                                                                                                                                        
                Combined)**                                                                                                                                                                                                                                  

                                                                                                                                                                                                                                                             

                                                                   [July 1,                                              [July 1,                                             [12-Month                                [Percent                              
                                                                   2000]{.underline}                                     2001]{.underline}                                    Change]{.underline}                      Change]{.underline}                   

                Basic service tier (BST)                           \$12.57                                               \$12.84                                              \$0.27                                   2.1%                                  

                Cable programming service                          [\$18.88]{.underline}                                 [\$20.91]{.underline}                                [\$2.03]{.underline}                     10.8%\*                               
                tier (CPST)                                                                                                                                                                                                                                  

                Total programming services                         \$31.45                                               \$33.75                                              \$2.30                                   7.3%\*                                
                (BST and CPST)                                                                                                                                                                                                                               

                                                                                                                                                                                                                                                             

  Equipment                                 [\$2.97]{.underline}                                  [\$3.24]{.underline}                                 [\$0.27]{.underline}                                   9.1%                                           
  (set-top box                                                                                                                                                                                                                                               
  and remote                                                                                                                                                                                                                                                 
  control)                                                                                                                                                                                                                                                   

  Programming                               \$34.42                                               \$36.99                                              \$2.57                                                 7.5%\*                                         
  and equipment                                                                                                                                                                                                                                              
  combined                                                                                                                                                                                                                                                   

                                                                                                                                                                                                                                                             

                Number of local channels                           14.1                                                  14.5                                                 0.4                                      2.8%                                  

                Number of satellite                                [42.2]{.underline}                                    [44.9]{.underline}                                   [2.7]{.underline}                        6.4%\*                                
                channels                                                                                                                                                                                                                                     

                Total channels on BST and                          56.3                                                  59.4                                                 3.1                                      5.5%\*                                
                CPST                                                                                                                                                                                                                                         

                                                                                                                                                                                                                                                             

                Programming rate per                               \$0.797                                               \$0.801                                              \$0.004                                  0.5%                                  
                satellite channel                                                                                                                                                                                                                            

                Programming rate per                               \$0.591                                               \$0.600                                              \$0.009                                  1.5%                                  
                channel overall                                                                                                                                                                                                                              

                                                                                                                                                                                                                                                             

                \* An asterisk denotes a                                                                                                                                                                                                                     
                statistically significant                                                                                                                                                                                                                    
                change. *See* Attachment                                                                                                                                                                                                                     
                B-1.                                                                                                                                                                                                                                         
  ------------- --------------------------- ---------------------- ----------------------- ------ ---------------------- ----------------------- ----- ---------------------- ---------------------- -------- -------- --------------------- --------- -- -- --

22. The Bureau of Labor Statistics ("BLS") publishes a Consumer Price
    Index ("CPI") which measures price inflation related to all goods
    and services.[^25] By this measure, inflation increased by 2.7% over
    the 12 months ending July 2001. The BLS also publishes price indexes
    for many components and sub-components of the overall CPI. Among
    these, the BLS publishes a price index for cable services ("cable
    CPI"), which is one of the sub-components of the overall CPI. The
    cable CPI increased by 3.9% over the 12 months ending July 2001. The
    cable CPI cannot be compared directly with the results of our
    Survey, however, because the cable CPI covers a different mix of
    services, and includes quality adjustments such as for the number of
    channels added.[^26]

## Comparison between Competitive and Noncompetitive Groups

23. Table 2 shows the difference in average monthly rate ("competitive
    differential") between the group of operators facing effective
    competition and those not facing effective competition, as of July
    1, 2000, and 2001. On July 1, 2000, competitive and noncompetitive
    cable operators charged, respectively, \$32.49 and \$34.54; a 6.3%
    differential. On July 1, 2001, competitive operators were charging
    \$34.93 while noncompetitive operators were charging \$37.13; also a
    6.3% differential. Table 2 also compares the number of channels and
    the rate per channel. As of July 1, 2001, competitive operators
    offered 1.6 more channels and charged 9.4% less per channel than
    noncompetitive operators.

<table style="width:100%;">
<colgroup>
<col style="width: 16%" />
<col style="width: 1%" />
<col style="width: 18%" />
<col style="width: 1%" />
<col style="width: 20%" />
<col style="width: 2%" />
<col style="width: 16%" />
<col style="width: 3%" />
<col style="width: 12%" />
<col style="width: 1%" />
<col style="width: 0%" />
<col style="width: 4%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><strong>Table 2. Differential between the Competitive
and Noncompetitive Groups</strong></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="6"><p>Competitive Differential</p>
<p><u>Percent</u></p></td>
<td></td>
</tr>
<tr class="even">
<td><u>Date</u></td>
<td colspan="2"><u>Competitive</u></td>
<td colspan="2"><u>Noncompetitive</u></td>
<td colspan="2"><u>Amount</u></td>
<td colspan="4"><u>Percent</u></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="11">Average Monthly Rate</td>
<td></td>
</tr>
<tr class="even">
<td>July 1, 2001</td>
<td colspan="2">$34.93</td>
<td colspan="2">$37.13</td>
<td colspan="2">$2.20</td>
<td colspan="4">6.3% *</td>
<td></td>
</tr>
<tr class="odd">
<td>July 1, 2000</td>
<td colspan="2">$32.49</td>
<td colspan="2">$34.54</td>
<td colspan="2">$2.05</td>
<td colspan="4">6.3% *</td>
<td></td>
</tr>
<tr class="even">
<td colspan="11">Number of Channels</td>
<td></td>
</tr>
<tr class="odd">
<td>July 1, 2001</td>
<td colspan="2">60.9</td>
<td colspan="2">59.3</td>
<td colspan="2">-1.6</td>
<td colspan="4">-2.6%</td>
<td></td>
</tr>
<tr class="even">
<td>July 1, 2000</td>
<td colspan="2">57.5</td>
<td colspan="2">56.2</td>
<td colspan="2">-1.3</td>
<td colspan="4">-2.3%</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="11">Average Rate per Channel (Programming Only)</td>
<td></td>
</tr>
<tr class="even">
<td>July 1, 2001</td>
<td colspan="2">$0.551</td>
<td colspan="2">$0.603</td>
<td colspan="2">$0.052</td>
<td colspan="4">9.4% *</td>
<td></td>
</tr>
<tr class="odd">
<td>July 1, 2000</td>
<td colspan="2">$0.551</td>
<td colspan="2">$0.594</td>
<td colspan="2">$0.043</td>
<td colspan="4">7.8%</td>
<td></td>
</tr>
<tr class="even">
<td colspan="9"><p>* An asterisk denotes a statistically significant
differential. <em>See</em> Attachments B-1, B-2, and B-3.</p>
<p>*An asterisk denotes a statistically significant difference between
the two groups.</p></td>
<td colspan="3"></td>
</tr>
</tbody>
</table>

24. In order to determine if the competitive differentials shown in
    Table 2 hold over different system size thresholds, we calculated
    average rates by system size for the competitive and noncompetitive
    groups, as of July 1, 2001. Table 3 presents the results of these
    calculations and shows that the competitive differential varies
    across the size strata.

  -- --------------- ------------------- --------------------------- ------------------------------ -- --------- ---------------------------- ----- ----------------------- -- -- ------
     **Table 3.                                                                                                                                                                   
     Competitive                                                                                                                                                                  
     Differential,                                                                                                                                                                
     by System Size,                                                                                                                                                              
     as of July 1,                                                                                                                                                                
     2001**                                                                                                                                                                       

                                                                                                                                                                                  

                     [System             [Competitive]{.underline}   [Noncompetitive]{.underline}                [Differential]{.underline}         [Percent]{.underline}         
                     Size]{.underline}                                                                                                                                            

                     Very small and      \$31.72                     \$34.45                                     \$2.73                             8.6%\*                        
                     small                                                                                                                                                        

                     Medium-sized        \$36.40                     \$37.18                                     \$0.78                             2.1%                          

                     Large and very      \$35.64                     \$38.17                                     \$2.53                             7.1% \*                       
                     large                                                                                                                                                        

                                                                                                                                                                                  

     \* An asterisk                                                                                                                                                               
     denotes a                                                                                                                                                                    
     statistically                                                                                                                                                                
     significant                                                                                                                                                                  
     differential.                                                                                                                                                                
     *See*                                                                                                                                                                        
     Attachment B-4.                                                                                                                                                              
  -- --------------- ------------------- --------------------------- ------------------------------ -- --------- ---------------------------- ----- ----------------------- -- -- ------

25. Tables 4 and 5 divide the monthly average rate for the competitive
    and noncompetitive groups into BST and CPST components. The tables
    also report channels by local and satellite and average equipment
    price, for July 1, 2000, and July 1, 2001. For the competitive
    group, BST service increased by 4.0%, from \$11.95 to \$12.43. This
    compares with a 2.0% increase for the noncompetitive group, from
    \$12.62 to \$12.87. CPST service for the competitive group increased
    by 9.0%, from \$17.64 to \$19.23, while the increase for the
    noncompetitive group was 10.9%, from \$18.95 to \$21.02.

26. The monthly average rate for BST and CPST combined increased by 7.0%
    and 7.3%, respectively, for the competitive and noncompetitive
    groups. However, when equipment is added to average monthly rate,
    the rate of increase is the same for both groups \-- 7.5%. Within
    the competitive group, the average number of satellite channels
    offered increased by 6.9%, from 43.4 to 46.4 and the average rate
    per satellite channel declined by 0.9%, from 75.1 cents to 74.4
    cents. Within the noncompetitive group, satellite channels grew by
    6.4%, from 42.1 to 44.8, and the average rate per satellite channel
    increased by 0.6%, from 80.0 cents to 80.5 cents. The average rate
    per channel overall (including local and satellite channels) was
    unchanged and increased by 1.5%, respectively, for the competitive
    and noncompetitive groups.

  --------------- --------------------------- ----------------------- ------- ----------------------- ------ ---------------------- --------- --------------------- --------- -- --
                  T**able 4. Averages for the                                                                                                                                    
                  Competitive Group, by                                                                                                                                          
                  Service Component**                                                                                                                                            

                                                                                                                                                                                 

                                              [July 1,                        [July 1,                       [12-month                        [Percent                           
                                              2000]{.underline}               2001]{.underline}              Change]{.underline}              Change]{.underline}                

                                                                                                                                                                                 

                  Basic service tier (BST)    \$11.95                         \$12.43                        \$0.48                           4.0%                               

                  Cable programming service   [\$17.64]{.underline}           [\$19.23]{.underline}          [\$1.59]{.underline}             9.0%                               
                  tier (CPST)                                                                                                                                                    

                  Total programming services  \$29.59                         \$31.66                        \$2.07                           7.0%\*                             
                  (BST and CPST)                                                                                                                                                 

                                                                                                                                                                                 

                  Equipment (set-top box and  [\$2.90]{.underline}            [\$3.27]{.underline}           [\$0.37]{.underline}             12.8%                              
                  remote control)                                                                                                                                                

                  Programming and equipment   \$32.49                         \$34.93                        \$2.44                           7.5%\*                             
                  combined                                                                                                                                                       

                                                                                                                                                                                 

                  Number of channels (local)  14.1                            14.5                           0.4                              2.8%                               

                  Number of channels          [43.4]{.underline}              [46.4]{.underline}             [3.0]{.underline}                6.9%                               
                  (satellite)                                                                                                                                                    

                  Total channels on BST and   57.5                            60.9                           3.4                              5.9%                               
                  CPST                                                                                                                                                           

                                                                                                                                                                                 

                  Programming rate per        \$0.751                         \$0.744                        -\$0.007                         -0.9%                              
                  satellite channel                                                                                                                                              

                  Programming rate per        \$0.551                         \$0.551                        \$0.000                          -0.0%                              
                  channel overall                                                                                                                                                

                                                                                                                                                                                 

                  \* An asterisk denotes a                                                                                                                                       
                  statistically significant                                                                                                                                      
                  change.                                                                                                                                                        

                                                                                                                                                                                 

                                                                                                                                                                                 

                  **Table 5. Averages for the                                                                                                                                    
                  Noncompetitive Group, by                                                                                                                                       
                  Service Component**                                                                                                                                            

                                                                                                                                                                                 

                                              [July 1,                        [July 1,                       [12-month                        [Percent                           
                                              2000]{.underline}               2001]{.underline}              Change]{.underline}              Change]{.underline}                

                                                                                                                                                                                 

                  Basic service tier (BST)    \$12.62                         \$12.87                        \$0.25                           2.0%                               

                  Cable programming service   [\$18.95]{.underline}           [\$21.02]{.underline}          [\$2.07]{.underline}             10.9%\*                            
                  tier (CPST)                                                                                                                                                    

                  Total programming services  \$31.57                         \$33.89                        \$2.32                           7.3%\*                             
                  (BST and CPST)                                                                                                                                                 

                                                                                                                                                                                 

                  Equipment (set-top box and  [\$2.97]{.underline}            [\$3.24]{.underline}           [\$0.27]{.underline}             9.1%                               
                  remote control)                                                                                                                                                

                  Programming and equipment   \$34.54                         \$37.13                        \$2.59                           7.5%\*                             
                  combined                                                                                                                                                       

                                                                                                                                                                                 

                  Number of channels (local)  14.1                            14.5                           0.4                              2.8%                               

                  Number of channels          [42.1]{.underline}              [44.8]{.underline}             [2.7]{.underline}                6.4%\*                             
                  (satellite)                                                                                                                                                    

                  Total channels on BST and   56.2                            59.3                           3.1                              5.5%\*                             
                  CPST                                                                                                                                                           

                                                                                                                                                                                 

                  Programming rate per        \$0.800                         \$0.805                        \$0.005                          0.6%                               
                  satellite channel                                                                                                                                              

                  Programming rate per        \$0.594                         \$0.603                        \$0.009                          1.5%                               
                  channel overall                                                                                                                                                

                                                                                                                                                                                 

  \*An asterisk                                                                                                                                                                  
  denotes a                                                                                                                                                                      
  statistically                                                                                                                                                                  
  significant                                                                                                                                                                    
  change.                                                                                                                                                                        

                                                                                                                                                                                 
  --------------- --------------------------- ----------------------- ------- ----------------------- ------ ---------------------- --------- --------------------- --------- -- --

27. Finally, Table 6 reports the average monthly rate for each
    competitive stratum \-- wireline overbuild, DBS overbuild, LEC, low
    penetration, and municipal \-- compared with the average for the
    noncompetitive group. It shows that average monthly rates vary
    significantly among the competitive strata, from \$24.35 to \$37.13,
    as of July 1, 2001. The average monthly charge for every stratum of
    the competitive group except the DBS overbuild stratum, is lower
    than the average monthly rate of \$37.13 for the noncompetitive
    group. The average rate charged by operators in the DBS overbuild
    stratum is the same as the average for the noncompetitive group. The
    competitive response of those operators making up the DBS overbuild
    stratum, however, may not be representative of the competitive
    response to DBS among cable operators generally because this
    subgroup consists of only 38 operators and is made up almost
    entirely of small cable operators located in rural areas. Cable
    operators in rural areas may face higher costs per subscriber
    because operators in those areas may need more distribution plant
    per subscriber to reach their customers. The table also provides a
    comparison of the average number of channels and the average monthly
    charge per channel for each stratum of the competitive group and the
    noncompetitive group.

<table style="width:100%;">
<colgroup>
<col style="width: 7%" />
<col style="width: 6%" />
<col style="width: 13%" />
<col style="width: 1%" />
<col style="width: 12%" />
<col style="width: 4%" />
<col style="width: 9%" />
<col style="width: 13%" />
<col style="width: 4%" />
<col style="width: 9%" />
<col style="width: 3%" />
<col style="width: 10%" />
<col style="width: 1%" />
<col style="width: 3%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="13"><strong>Table 6. Comparison between Competitive Strata
and the Noncompetitive Group</strong></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="3"></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td colspan="2"><u>Date</u></td>
<td><p>Wireline</p>
<p><u>Overbuild</u></p></td>
<td colspan="2"><p>DBS</p>
<p><u>Overbuild</u></p></td>
<td colspan="2"><u>LEC</u></td>
<td><p>Low</p>
<p><u>Penetration</u></p></td>
<td colspan="2"><u>Municipal</u></td>
<td colspan="2"><p>Non-</p>
<p><u>Competitive</u></p></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="12">Average Monthly Rate</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2">July 1, 2001</td>
<td>$34.03*</td>
<td colspan="2">$37.13</td>
<td colspan="2">$35.03*</td>
<td>$34.30*</td>
<td colspan="2">$24.35*</td>
<td colspan="2">$37.13</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2">July 1, 2000</td>
<td>$31.45*</td>
<td colspan="2">$34.25</td>
<td colspan="2">$32.55*</td>
<td>$32.57</td>
<td colspan="2">$23.40*</td>
<td colspan="2">$34.54</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="12">Number of Channels</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2">July 1, 2001</td>
<td>56.0</td>
<td colspan="2">53.3</td>
<td colspan="2">65.3*</td>
<td>52.9</td>
<td colspan="2">51.4</td>
<td colspan="2">59.3</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2">July 1, 2000</td>
<td>52.7</td>
<td colspan="2">46.5</td>
<td colspan="2">62.4*</td>
<td>49.5</td>
<td colspan="2">50.8</td>
<td colspan="2">56.2</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="12">Average Rate per Channel (Programming Only)</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2">July 1, 2001</td>
<td>$0.587</td>
<td colspan="2">$0.727</td>
<td colspan="2">$0.489*</td>
<td>$0.663</td>
<td colspan="2">$0.447*</td>
<td colspan="2">$0.603</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2">July 1, 2000</td>
<td>$0.578</td>
<td colspan="2">$0.761</td>
<td colspan="2">$0.483*</td>
<td>$0.674</td>
<td colspan="2">$0.437*</td>
<td colspan="2">$0.594</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="13">*An asterisk denotes a statistically significant
differential when compared with the noncompetitive group.</td>
<td></td>
</tr>
</tbody>
</table>

## Explanation for Changes in Average Monthly Programming Rates

28. The Survey asked respondents to explain changes in their monthly
    programming rates between July 2000 and July 2001, and between July
    1999 and July 2000, by attributing those changes to various
    categories of increased costs or other factors. Table 7 shows the
    percentage by which each factor contributed to the increase in
    programming rates. Both the competitive and noncompetitive groups
    attributed much of their rate increases to changes in the cost of
    programming, including both the increased cost of existing
    programming and the initial cost associated with new programming.
    For the 12 months ending July 2001, the competitive group attributed
    64.7% and the noncompetitive group attributed 58.2% of their higher
    rates to programming costs. For the competitive and noncompetitive
    groups, respectively, system upgrades accounted for 10.6% and 9.9%
    of the increases in average monthly rates, general inflation
    accounted for 10.6% and 14.7% of the increases, and unspecified
    costs accounted for 9.2% and 13.4% of the increases. Survey
    responses showed that, for the same year, 4.9% of the rate changes
    made by the competitive group, and 3.8% of the rate changes made by
    the noncompetitive group, were unrelated to cost increases.

  -- --------------------------- --------------------- ------------------- ---------- ------------------- -- ------------------- ------------------- -- --
                                 **Table 7. Reported                                                                                                    
                                 Explanations for                                                                                                       
                                 Changes in Average                                                                                                     
                                 Monthly Programming                                                                                                    
                                 Rates**                                                                                                                

                                                                                                                                                        

                                                       Competitive Group                                     Noncompetitive                             
                                                                                                             Group                                      

     [Explanation]{.underline}                         [July 1,                       [July 1,               [July 1,            [July 1,               
                                                       2000]{.underline}              2001]{.underline}      2000]{.underline}   2001]{.underline}      

     Fees for existing                                 43.6%                          50.7%                  46.0%               46.1%                  
     programming                                                                                                                                        

     Fees for new programming                          9.2%                           14.0%                  8.0%                12.1%                  

     Upgrades to cable system                          15.3%                          10.6%                  14.4%               9.9%                   

     General inflation                                 12.3%                          10.6%                  13.8%               14.7%                  

     Unspecified costs                                 13.5%                          9.2%                   10.3%               13.4%                  

     Unrelated to costs                                6.1%                           4.9%                   7.5%                3.8%                   

                                                                                                                                                        

     Note: *See* Attachment B-5.                                                                                                                        
  -- --------------------------- --------------------- ------------------- ---------- ------------------- -- ------------------- ------------------- -- --

## Charges for Installation of Cable Service

29. Table 8 compares one-time charges for service installation exclusive
    of promotional discounts that may have been offered. The charge for
    service installation increased, although at a slower pace than
    monthly charges for programming and equipment. As of July 1, 2001,
    competitive operators charged \$38.67 and noncompetitive operators
    charged \$42.41 for installation at previously unwired households; a
    9.7% differential. For pre-wired installation, competitive operators
    charged \$27.28 and noncompetitive operators charged \$29.93; also a
    9.7% differential. Competitive operators charged \$25.00 and
    noncompetitive operators charged \$26.75 for service reconnection; a
    7.0% differential.

  --------------------------- -------------- ------------------- -------- ------------------- ---------------------- ------------------- ------- ------------------- ---------------------- -- -- --
                              **Table 8.                                                                                                                                                          
                              Average Charge                                                                                                                                                      
                              for                                                                                                                                                                 
                              Installation                                                                                                                                                        
                              of Cable                                                                                                                                                            
                              Service**                                                                                                                                                           

                                                                                                                                                                                                  

                                             Competitive Group                                                       Noncompetitive                                                               
                                                                                                                     Group                                                                        

  [Type of                                   [July 1,                     [July 1,            [Change]{.underline}   [July 1,                    [July 1,            [Change]{.underline}         
  Installation]{.underline}                  2000]{.underline}            2001]{.underline}                          2000]{.underline}           2001]{.underline}                                

  Unwired installation                       \$37.95                      \$38.67             1.9%                   \$41.85                     \$42.41             1.3%                         

  Pre-wired installation                     \$27.23                      \$27.28             0.2%                   \$29.44                     \$29.93             1.7%                         

  Service reconnection                       \$25.10                      \$25.00             -0.4%                  \$26.28                     \$26.75             1.8%                         

                                                                                                                                                                                                  

  Note: *See* Attachment B-6.                                                                                                                                                                     
  --------------------------- -------------- ------------------- -------- ------------------- ---------------------- ------------------- ------- ------------------- ---------------------- -- -- --

# other findings

## Distribution of Programming by Major Categories

30. Table 9 shows a breakdown by category of the average number of
    channels on BST and major CPST, as of July 1, 2000, and July
    1, 2001. The number of total channels grew by 3.4 within the
    competitive group and by 3.1 within the noncompetitive group. Most
    of this difference is reflected in an increase in the number of news
    and general entertainment channels. These channels increased by 2.8
    in the competitive group, from 36.9 to 39.7 channels, and by 2.4 in
    the noncompetitive group, from 36.3 to 38.7 channels.

  --------------------------- ------------------- ------------------- ------------------- -- ------------------- ------------------- ------------------- ------------------- -- -- --
  **Table 9. Average Number                                                                                                                                                        
  of BST and CPST Channels,                                                                                                                                                        
  by Category**                                                                                                                                                                    

                                                                                                                                                                                   

                              Competitive Group                                              Noncompetitive                                                                        
                                                                                             Group                                                                                 

  [Category of                [July               [July                                      [July                                   [July                                         
  Channel]{.underline}        2000]{.underline}   2001]{.underline}                          2000]{.underline}                       2001]{.underline}                             

  Local broadcast stations    10.7                                    10.9                                       10.5                                    10.7                      

  Public, educational, &      1.9                                     2.0                                        2.2                                     2.3                       
  governmental                                                                                                                                                                     

  Commercial leased access    0.8                                     0.8                                        0.5                                     0.6                       

  Other local origination     [0.7]{.underline}                       [0.8]{.underline}                          [0.9]{.underline}                       [0.9]{.underline}         

  Total of local channels     14.1                                    14.5                                       14.1                                    14.5                      

  News & general              36.9                                    39.7                                       36.3                                    38.7                      
  entertainment                                                                                                                                                                    

  Sports                      3.8                                     3.9                                        3.3                                     3.5                       

  Children's                  [2.7]{.underline}                       [2.8]{.underline}                          [2.5]{.underline}                       [2.6]{.underline}         

  Total satellite channels    43.4                                    46.4                                       42.1                                    44.8                      

  Total channels on BST and   57.5                                    60.9                                       56.2                                    59.3                      
  major CPST                                                                                                                                                                       

  Note: *See* Attachment C.                                                                                                                                                        
  --------------------------- ------------------- ------------------- ------------------- -- ------------------- ------------------- ------------------- ------------------- -- -- --

## Annual System Revenues

31. The Survey sought information on system-wide revenues from six major
    sources: (a) all types of analog and digital cable programming
    (non-premium, premium and pay-per-view); (b) equipment; (c) Internet
    access; (d) telephony; (e) advertising; and (f) other sources
    (commissions, leased access, etc.). While operators received the
    bulk of revenues from programming services, Table 10 shows that
    revenue from non-video sources increased as a percent of total
    revenue between 2000 and 2001, with Internet access and telephony
    showing the largest percentage increases.

  ---------------------- ------------------- -------------------- ------------------- -- -------------------- ------------------- -------------------- ------- ------------------- -------------------- -- -- --
  **Table 10. Percent of                                                                                                                                                                                      
  Annual System Revenue,                                                                                                                                                                                      
  by Source**                                                                                                                                                                                                 

                                                                                                                                                                                                              

                         Competitive Group                                                                    Noncompetitive                                                                                  
                                                                                                              Group                                                                                           

  [Source of             [July                                    [July                                       [July                                            [July                                          
  Revenue]{.underline}   2000]{.underline}                        2001]{.underline}                           2000]{.underline}                                2001]{.underline}                              

  Programming services                       82.2%                                       78.7%                                    83.1%                                            79.9%                      

  Equipment                                  4.5%                                        4.5%                                     4.1%                                             4.0%                       

  Internet access                            1.8%                                        3.8%                                     1.3%                                             3.1%                       

  Cable telephony                            1.4%                                        3.6%                                     0.5%                                             2.4%                       

  Advertising                                5.3%                                        5.1%                                     5.0%                                             4.9%                       

  Other sources                              [4.8%]{.underline}                          [4.3%]{.underline}                       [6.0%]{.underline}                               [5.7%]{.underline}         

  Total                                      100%                                        100%                                     100%                                             100%                       

                                                                                                                                                                                                              
  ---------------------- ------------------- -------------------- ------------------- -- -------------------- ------------------- -------------------- ------- ------------------- -------------------- -- -- --

## System Capacity and Advanced Services

32. Over the year ending July 1, 2001, the percentage of systems with
    capacity of 750 MHz and above increased from 58.3% to 68.7% for
    competitive operators and from 54.1% to 63.2% for noncompetitive
    operators. Table 11 shows that capacity on an analog basis,
    including capacity used for all types of programming \--
    non-premium, premium and pay-per-view, as well as analog channels
    devoted to digital tier services \-- grew to 83.3 and 81.7 channels,
    respectively, for the competitive and noncompetitive groups. Table
    12 shows that 74.1% of competitive systems and 77.6% of
    noncompetitive systems offered digital service. In addition, for
    competitive and noncompetitive systems, respectively, the number of
    systems offering cable modem service for Internet access grew to
    65.5% and 70.8%, and the number of systems offering cable telephony
    remained virtually unchanged at 19.8% and 21.1%.[^27]

  --------------------------- ------------------- -------------------- -- ------------------- -------------------- -- ---
  **Table 11. System                                                                                                  
  Capacity**                                                                                                          

                                                                                                                      

                              Competitive Group                           Noncompetitive                              
                                                                          Group                                       

                              [July               [July                   [July               [July                   
                              2000]{.underline}   2001]{.underline}       2000]{.underline}   2001]{.underline}       

                                                                                                                      

  Average system capacity     630                 666                     623                 652                     
  (MHz)                                                                                                               

                                                                                                                      

  Percent of systems with                                                                                             
  capacity of:                                                                                                        

  330 MHz and below           10.0%               8.5%                    9.0%                8.3%                    

  331 through 749 MHz         31.7%               22.8%                   36.9%               28.5%                   

  750 MHz and above           58.3%               68.7%                   54.1%               63.2%                   

                                                                                                                      

  Number of 6-MHz activated                                                                                           
  channels:                                                                                                           

  Devoted to analog service   69.2                72.0                    67.7                69.9                    

  Devoted to digital service  [6.7]{.underline}   [11.3]{.underline}      [7.0]{.underline}   [11.8]{.underline}      

  Total number of channels    75.9                83.3                    74.4                81.7                    

                                                                                                                      
  --------------------------- ------------------- -------------------- -- ------------------- -------------------- -- ---

  --------------------------- ------------------- ------------------- -- ------------------- ------------------- -- ---
  **Table 12. Advanced                                                                                              
  Services**                                                                                                        

                                                                                                                    

                              Competitive Group                          Noncompetitive                             
                                                                         Group                                      

                              [July               [July                  [July               [July                  
                              2000]{.underline}   2001]{.underline}      2000]{.underline}   2001]{.underline}      

  Percent of cable systems                                                                                          
  offering:                                                                                                         

  Digital programming         52.3%               74.1%                  57.8%               77.6%                  

  Internet access             51.7%               65.5%                  51.4%               70.8%                  

  Cable telephony             19.7%               19.8%                  20.7%               21.1%                  

  Percent of cable                                                                                                  
  subscribers taking:                                                                                               

  Digital service             5.9%                13.4%                  7.5%                15.7%                  

  Internet access             2.9%                6.9%                   3.1%                7.4%                   

  Cable telephony             1.2%                2.3%                   0.7%                2.2%                   

                                                                                                                    
  --------------------------- ------------------- ------------------- -- ------------------- ------------------- -- ---

## Digital Programming Service 

33. Table 13 provides additional information on the major digital tier
    of programming,[^28] as well as the average monthly cost of a
    digital converter (which is required to receive digital service) and
    remote. For operators belonging to the competitive group, the
    average price for programming and equipment for digital service
    increased by 4.7%, while the price per channel decreased by 10.2%.
    For operators in the noncompetitive group, the average price of
    digital programming and equipment increased by 8.5%, while the
    average price per channel decreased by 7.3%.

  --------------------- ---------------------- ---------------------- --------------------- -------- ---------------------- ---------------- ---------------------- -------- --------------------- ------- --
  **Table 13. Average                                                                                                                                                                                      
  Monthly Rate for                                                                                                                                                                                         
  Major Digital Tier**                                                                                                                                                                                     

                                                                                                                                                                                                           

                        Competitive Group                                                                                   Noncompetitive                                                                 
                                                                                                                            Group                                                                          

                        [July                  [July                  [%                             [July                                   [July                           [%                            
                        2000]{.underline}      2001]{.underline}      Change]{.underline}            2000]{.underline}                       2001]{.underline}               Change]{.underline}           

  Average programming   \$10.09                \$10.61                5.2%                           \$10.40                                 \$11.58                         11.3%                         
  rate ^†^                                                                                                                                                                                                 

  Converter & remote    [\$4.10]{.underline}   [\$4.24]{.underline}   3.4%                           [\$4.38]{.underline}                    [\$4.46]{.underline}            1.8%                          
  control                                                                                                                                                                                                  

  Programming and       \$14.19                \$14.85                4.7%                           \$14.78                                 \$16.04                         8.5%                          
  equipment                                                                                                                                                                                                

  Number of digital     24.0                   29.5                   22.9%                          26.3                                    32.4                            23.2%                         
  channels                                                                                                                                                                                                 

  Average price per     \$0.430                \$0.386                -10.2%                         \$0.426                                 \$0.395                         -7.3%                         
  channel ^††^                                                                                                                                                                                             

  ^†^ Does not include                                                                                                                                                                                     
  digital premium,                                                                                                                                                                                         
  pay-per-view, music                                                                                                                                                                                      
  (and other audio)                                                                                                                                                                                        
  channels. ^††^                                                                                                                                                                                           
  Programming only.                                                                                                                                                                                        
  --------------------- ---------------------- ---------------------- --------------------- -------- ---------------------- ---------------- ---------------------- -------- --------------------- ------- --

# ECONOMETRIC ANALYSIS OF CABLE RATES AND DEMAND FOR CABLE SERVICE 

## Factors Affecting Rates

34. In this section, we use regression analysis as well as various other
    types of econometric analysis to examine the influence of several
    factors on cable rates and to determine the effects of each factor
    separately by holding all other factors constant. This additional
    analysis is useful because the foregoing comparison of averages or
    means does not enable us to separate the influences of various
    factors on the averages. The number of channels offered, for
    example, may influence the rate charged. Cable operators that offer
    more channels typically charge higher rates. Regression analysis
    enables us to measure the effects of the number of channels offered
    on rates while holding the effects of all other variables that also
    influence rates constant. This type of analysis also enables us to
    determine whether specific factors influence rates, and to measure
    the extent of that influence.

35. In the Benchmark Order, the Commission identified a number of
    factors (or variables) that may affect cable rates and used
    regression analysis to measure the effects of these variables.[^29]
    These variables include competitive status, system size, average
    household income in the area served, and whether the operator was a
    multiple system operator ("MSO"), i.e., was affiliated with more
    than one system. System size was represented by two variables: total
    number of channels offered and number of system subscribers. In
    addition, several "product mix" ratios were identified and used as
    variables, including: (1) the ratio of satellite channels to total
    channels; (2) CPST subscribers to total subscribers; and (3)
    subscribers taking analog addressable converter leases relative to
    total subscribers. We analyzed 2001 Survey data using a regression
    equation similar to that used in the Benchmark Order in order to
    determine the current effects of each of these variables on average
    monthly rates. The results of this analysis are shown in Attachment
    D-1.[^30]

36. The results of this analysis show that MSO affiliation was
    associated with higher monthly rates in 2001. Holding all other
    variables constant, we found that operators with two or more
    systems, on average, had rates that were approximately 23% higher
    than single system operators.[^31] The variable for number of
    channels offered captured the full effects of size in our equation.
    The estimated coefficient for this variable was large and
    statistically significant. It shows that, other things held
    constant, average monthly rates increase as the number of channels
    offered increases. The effect, however, is nonlinear which means
    that as the number of channels offered increases, the effect on
    monthly rates diminishes. For example, the effect on rates of going
    from 40 channels to 50 channels is greater than the effect of going
    from 70 channels to 90 channels. We also found that the product mix
    variables mentioned above \-- the ratios of satellite channels, CPST
    subscribers, and converter leases \-- were not associated with
    significantly higher rates during 2001.

37. We also found significant differences in average rates among the
    five competitive strata compared with the noncompetitive group
    holding system size and other variables constant. When number of
    channels, MSO affiliation, and consumer income are held constant, we
    estimated for 2001 that competitive operators that meet the LEC test
    had rates that were 7.7% lower than the noncompetitive group. For
    the same year, the regression coefficients for the wireline
    overbuild and low penetration subcategories indicated that the
    prices charged by operators belonging to these subcategories were
    7.0% and 4.7% lower, respectively, than the rates charged by the
    noncompetitive group. We also found that systems owned by a
    municipality had rates that were 22.0% lower than rates charged by
    the noncompetitive group. For the DBS overbuild subgroup, rates were
    5.1% higher than rates charged by the noncompetitive group. As
    mentioned above, the DBS overbuild subgroup is made up largely of
    operators that serve rural areas and, therefore, may have higher
    distribution costs per subscriber than other operators.

38. We note that the equation used to explain the effects of competitive
    status on rates may be subject to a potential bias.[^32] More
    specifically, as explained above, monthly cable rates are influenced
    by changes in the number of channels offered. Cable operators,
    however, may be willing to supply more channels after raising
    monthly rates or, conversely, may seek to raise rates after
    supplying more channels. Therefore, it is not possible to determine
    the direction of causality between higher rates and an increased
    number of channels. This interdependency between variables results
    in estimates that reflect the mix of the effects of these variables
    on each other. As a result, the estimated value can no longer be
    attributed to an unambiguous effect of one variable on the other.
    This type of interdependency, or simultaneity problem as it is
    called in this type of analysis, can be eliminated by using a
    simultaneous equation technique such as the three-stage least
    squares ("3SLS") procedure which is discussed below.

## Simultaneous Analysis of Monthly Rates, Demand, and Quality of Service

39. In an effort to fully understand the effects of various factors on
    the demand for cable service and on average cable rates (including
    the effects of interactions among those factors), we estimated a
    model consisting of three equations measuring prices (or monthly
    rates), household subscriptions, and product quality. Our model is
    an extension of prior academic studies in which the demand for cable
    service, the number of channels offered (which is used as a proxy
    for quality of service), and monthly cable rates were analyzed
    simultaneously.[^33] The three equations in the model not only
    enable us to measure the direct effects of factors affecting
    subscription, price, and quality of cable service, but also provide
    us with estimates of other interesting parameters, including the
    price elasticity of demand for cable service.[^34]

40. Our three-equation model also incorporates the effects of
    competition on the demand for cable service, monthly cable rates,
    and quality of service by examining the effects of specific types of
    effective competition, e.g., wireline overbuild compared with DBS
    overbuild. Our hypothesis underlying each of the three equations is
    set forth below.

41. *The Demand Equation*. We hypothesize that household subscription to
    cable service is: (1) inversely related to cable rates (since, as
    cable rates increase, subscription is expected to decrease); (2)
    positively related to number of homes passed (since the number of
    homes passed, in the short run, represents the upper limit of a
    cable system's potential market); (3) positively related to system
    age (since subscribers will tend to be more aware of availability
    and quality of cable service the longer those services are
    available); (4) positively related to median household income
    (since, as income rises, households can better afford cable
    service); (5) inversely related to urbanization (since in urban
    areas many alternative forms of entertainment, including
    over-the-air broadcasts, are available to subscribers); (6)
    inversely related to wireline overbuild and DBS overbuild status
    (since the incumbent cable operator is likely to face lower demand
    for service in areas where there is competition from overbuild
    competitors); and (7) positively related to the number of channels
    offered on the system (since, as the number of channels increases,
    consumers may place a higher value on cable service and therefore
    are likely to demand more of that service).

42. *The Price Equation*. Our price equation hypothesizes that monthly
    rates (which are used as a proxy for the price of cable service)
    are: (1) negatively related to number of subscribers (since, as the
    number of subscribers increases, economies of scale should be
    adequate to offset any increased costs per subscriber associated
    with serving additional subscribers); (2) positively related to
    median household income (since areas with higher incomes may also
    have higher average wages and hence higher operating costs which may
    lead to higher monthly rates); (3) inversely related to the number
    of subscribers belonging to the MSO of which the operator is a part
    (since larger MSOs may have a relative cost advantage over single
    system operators or smaller MSOs, particularly in programming and
    financing costs, which may be reflected in lower monthly
    rates);[^35] (4) inversely related to the degree of vertical
    integration[^36] (since costs, especially programming costs, may be
    reduced as a result of efficiencies gained through vertical
    integration which, in turn, may be reflected in lower monthly
    rates); (5) inversely related to wireline overbuild and DBS
    overbuild status (since, as the degree of direct competition from an
    alternative MVPD provider increases, the price of cable service is
    likely to decrease); (6) inversely related to population density
    (since costs and therefore prices may be lower in areas with higher
    population density); (7) positively related to the number of
    channels offered (since it costs more to provide more channels and
    customers may be willing to pay more for more channels); and (8)
    positively related to system age (since it may cost more for an
    older system to provide service to its customers compared with a
    newer system).

43. *The Quality of Service Equation*. We hypothesize that the quality
    of cable service as measured by the number of channels offered
    is: (1) positively related to system capacity in megahertz (since,
    as capacity increases, the operator is likely to offer more
    channels); (2) positively related to wireline overbuild and DBS
    overbuild status (since operators that face competing MVPDs may be
    compelled to deliver more channels to attract subscribers); (3)
    positively related to median household income (since, as income
    rises, consumers can afford to pay for higher service quality, i.e.,
    more channels); (4) positively related to the degree of vertical
    integration (since vertical integration with programming networks
    may result in increased efficiency, which may lower programming
    costs, which, in turn, may result in an increase in the number of
    channels offered); (5) inversely related to the presence of digital
    service and Internet access service (since, unless there is an
    accompanying change in system capacity, the presence of digital
    and/or Internet access service may lead operators to shift channels
    from CPST to these services); and (6) positively related to number
    of subscribers (since, as the number of subscribers increases,
    operators may offer more channels in order to satisfy the diverse
    programming interests of their larger subscriber base).

44. *Results*. We estimated these three equations simultaneously using
    3SLS techniques, and the results are shown in Attachment D-2. Most
    notably, results from the demand equation indicate that the
    estimated price elasticity of demand for cable service is 2.19,
    which indicates that the demand for cable service is price
    elastic.[^37] This means that a one-percent increase in the price of
    cable service, for example, would result in a slightly more than
    two-percent decrease in the demand for that service, all other
    things being held constant. The estimated price elasticity suggests
    that there are substitutes for cable service, which is reflected by
    the negative and statistically significant coefficient for the
    wireline overbuild subgroup.[^38] This level of price elasticity
    suggests that cable subscriptions tend to be lower in those areas
    where a wireline competitor provides a substitute for cable service.
    The estimated coefficient for the DBS overbuild variable, however,
    is also negative, but is not statistically significant, which
    suggests that the presence of effective competition due to DBS
    overbuild status has no measurable effect on the demand for cable
    service. This may be due to the characteristics of the operators in
    the DBS overbuild subgroup. For example, it may be that the DBS
    overbuild subgroup consists of operators that are located primarily
    in rural areas where cable penetration may be limited by high
    deployment costs. There may, however, be other explanations for the
    differences between the wireline and DBS subgroups that are not
    captured by our analysis.

45. Our price equation shows that the presence of a wireline overbuilder
    has a negative effect on cable rates. However, based on our limited
    data, the presence of effective competition due to DBS overbuild
    status has no significant effect on cable rates.[^39] Contrary to
    our hypothesis, the data suggest that as the number of subscribers
    belonging to the MSO of which the operator is a part increases, the
    rates charged by that MSO also increase.[^40] It is unclear whether
    this effect is due to some exogenous factor not controlled for in
    our analysis,[^41] or whether, in fact, there is a positive
    correlation between horizontal concentration and cable rates. We
    found that vertical integration has no significant effect on cable
    rates. As expected, the results of our equation show that as more
    channels are offered, monthly rates tend to be higher. Both the
    number of system subscribers and the population density of the areas
    served have no measurable effect on monthly rates.

46. Our results show that the quality of cable service (as measured by
    the number of channels offered) increases directly with the system
    capacity of the operator. Also, the results show that in areas where
    wireline competitive providers are present, subscribers receive more
    channels. We found that where a finding of effective competition was
    due to DBS penetration, there is no measurable effect from DBS
    competition on number of channels offered. Larger systems, as
    measured by number of subscribers, tend to offer more channels. We
    found that the degree of vertical integration has a statistically
    significant negative effect on the number of channels offered.[^42]
    Contrary to our hypothesis, we found that operators offering digital
    services also offer more BST and CPST channels, most likely due to a
    reallocation of channel capacity from other service tiers. However,
    we found that Internet access service has no measurable effect on
    the number of channels offered.

47. The results of these three equations suggest that there are
    substitutes available for cable service. In areas where a wireline
    overbuild is present, cable subscribers receive more channels at
    lower prices and the subscriptions for cable service tend to be
    reduced. In areas where effective competition is achieved as a
    result of DBS penetration, there is no measurable effect on cable
    subscriptions, the price of cable service, or the number of channels
    offered.

# Conclusion

48. We found that operators belonging to the competitive and
    noncompetitive groups both increased their average monthly rates by
    7.5% for programming and equipment during the time period surveyed.
    We also found that the competitive differential between the
    competitive and noncompetitive groups remained unchanged at 6.3%.
    The average monthly rate per channel for operators in the
    competitive group was unchanged and for operators in the
    noncompetitive group increased by 1.5% over the 12-month period
    ending July 1, 2001.

49. Operators in the competitive and noncompetitive groups both
    attribute a large percentage of their rate increases to increased
    programming costs. System upgrades also are cited as a factor to
    explain higher rates. Both groups continue to increase system
    capacity and, as a result, offer their subscribers more BST and CPST
    channels along with new services such as digital programming tiers,
    Internet access, and telephony.

50. This report fulfills the Commission's annual statutory obligation to
    compare prices charged by cable operators facing effective
    competition with those of cable operators not facing effective
    competition for the delivery of basic service, other cable
    programming services, and equipment.

# administrative matters

51. It is ORDERED that this Report be issued pursuant to authority
    contained in Section 623(k) of the Communications Act of 1934, as
    amended, 47 U.S.C. § 543(k).

    FEDERAL COMMUNICATIONS COMMISSION

    William F. Caton

    Acting Secretary

<table>
<colgroup>
<col style="width: 5%" />
<col style="width: 17%" />
<col style="width: 6%" />
<col style="width: 10%" />
<col style="width: 4%" />
<col style="width: 13%" />
<col style="width: 12%" />
<col style="width: 13%" />
<col style="width: 0%" />
<col style="width: 16%" />
<col style="width: 0%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="11"><p><strong>ATTACHMENT A</strong></p>
<p><strong>SURVEY SAMPLE</strong></p></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Sample Group a<u>nd Strata</u></td>
<td colspan="2">Number of <u>Operators</u></td>
<td>Percent of <u>Subscribers</u></td>
<td><p>Sample</p>
<p><u>Size</u></p></td>
<td colspan="2">Number of <u>Responses</u></td>
<td colspan="2"><p>Usable</p>
<p><u>Responses</u></p></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">(A)</td>
<td colspan="2">(B)</td>
<td>(C)</td>
<td>(D)</td>
<td colspan="2">(E)</td>
<td colspan="2">(F)</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"><u>Competitive Group</u></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Local exchange carrier</td>
<td colspan="2">99</td>
<td>60.35%</td>
<td>99</td>
<td colspan="2">96</td>
<td colspan="2">93</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Wireline overbuild</td>
<td colspan="2">45</td>
<td>16.14%</td>
<td>45</td>
<td colspan="2">41</td>
<td colspan="2">40</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">DBS overbuild</td>
<td colspan="2">39</td>
<td>11.67%</td>
<td>39</td>
<td colspan="2">39</td>
<td colspan="2">38</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Low penetration</td>
<td colspan="2">168</td>
<td>10.92%</td>
<td>83</td>
<td colspan="2">80</td>
<td colspan="2">79</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Municipal</td>
<td colspan="2"><u>17</u></td>
<td><u>0.92%</u></td>
<td><u>17</u></td>
<td colspan="2"><u>16</u></td>
<td colspan="2"><u>16</u></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Total</td>
<td colspan="2">368</td>
<td>100%</td>
<td>283</td>
<td colspan="2">272</td>
<td colspan="2">266</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="6"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"><u>Noncompetitive Group</u></td>
<td colspan="2"></td>
<td colspan="6"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Very large</td>
<td colspan="2">97</td>
<td>22.62%</td>
<td>97</td>
<td colspan="2">97</td>
<td colspan="2">97</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Large</td>
<td colspan="2">170</td>
<td>24.59%</td>
<td>113</td>
<td colspan="2">111</td>
<td colspan="2">111</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Medium</td>
<td colspan="2">888</td>
<td>33.82%</td>
<td>151</td>
<td colspan="2">148</td>
<td colspan="2">148</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Small</td>
<td colspan="2">2,717</td>
<td>15.63%</td>
<td>71</td>
<td colspan="2">68</td>
<td colspan="2">67</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Very small</td>
<td colspan="2"><u>5,917</u></td>
<td><u>3.34%</u></td>
<td><u>40</u></td>
<td colspan="2"><u>35</u></td>
<td colspan="2"><u>34</u></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Total</td>
<td colspan="2">9,789</td>
<td>100%</td>
<td>472</td>
<td colspan="2">459</td>
<td colspan="2">457</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"><strong>Grand Total</strong></td>
<td colspan="2">10,157</td>
<td>100%</td>
<td>755</td>
<td colspan="2">731</td>
<td colspan="2">723</td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
</tr>
</tbody>
</table>

For the data file listing these communities, *see* fcc.gov/csb on the
Internet, *All Cable Communities Registered with the FCC (*updated as of
Feb. 2001). Subscriber data are from Form 325 filings (as of 1994), the
most recent year that subscriber counts are available on a system basis.
Since it is likely that the percentage growth in subscribers has been
fairly evenly distributed across all operators, the 1994 weights serve
as a reasonable approximation of year 2001 weights. Column A shows the
competitive group stratified by competitive test, and the noncompetitive
group by system size. In order to stratify by system size, it was
necessary to know the number of subscribers for each operator.
Consequently, we excluded 822 noncompetitive operators for which we
lacked a subscriber count. These 822 operators, however, are believed to
be similar to other operators in the sample frame, and thus our sampling
frame is representative of all operators. In Column B, an MSO is
considered an operator for each of its systems. For example, an MSO with
10 systems would count as 10 operators in column B. Column C shows the
number of subscribers in each stratum, as a percent of subscribers in
that group nationwide. Column D shows the sample size for each group and
strata. Column E is the number of questionnaires that were returned, and
Column F shows the remaining questionnaires after eliminating those
lacking the requisite 3 years of price data.

We determined the overall sample size for the competitive and
noncompetitive groups by applying a standard statistical formula, which
can be found in B. J. Mandel, S*tatistics for Management* (1984), at
258. Parameters were chosen to include a maximum allowable error of
\$0.49 at a confidence level of 99%, based on standard deviation
calculations using our 2000 Survey data. A non-response factor was added
to account for the ratio of the number of usable surveys to sample size
in the 2000 Survey. We distributed the number of sample selections among
strata, based on the percentages shown in Column C. Adjustments were
made, however, to ensure that each stratum had a sufficient number of
observations for statistical precision. Many of the cable systems
selected for our sample serve more than one community, as identified by
community unit identification codes. For those operators, we randomly
selected one community from each selected system.

.

<table>
<colgroup>
<col style="width: 22%" />
<col style="width: 13%" />
<col style="width: 13%" />
<col style="width: 13%" />
<col style="width: 13%" />
<col style="width: 9%" />
<col style="width: 3%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 12%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="7"><p><strong>ATTACHMENT B-1</strong></p>
<p><strong>AVERAGE MONTHLY RATES AND COMPARISON BETWEEN
GROUPS</strong></p></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td><u>Cable Service</u></td>
<td>All Surveyed <u>Operators</u></td>
<td><p>Competitive</p>
<p><u>Group</u></p></td>
<td>Noncompetitive <u>Group</u></td>
<td>Absolute <u>Difference</u></td>
<td colspan="4">Percent <u>Difference</u></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="8"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="8"><strong>July 1, 2001</strong></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td><strong>BST</strong></td>
<td>$12.84</td>
<td>$12.43</td>
<td>$12.87</td>
<td>$0.44</td>
<td colspan="4">3.5%</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.48</td>
<td>0.56</td>
<td>0.48</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Major CPST</strong></td>
<td>$20.91</td>
<td>$19.23</td>
<td>$21.02</td>
<td>$1.79</td>
<td colspan="4">9.3%</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.55</td>
<td>0.84</td>
<td>0.54</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Programming total</strong></td>
<td>$33.75</td>
<td>$31.66</td>
<td>$33.89</td>
<td>$2.23</td>
<td colspan="4">7.0%*</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.37</td>
<td>0.62</td>
<td>0.35</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Equipment</strong></td>
<td>$3.24</td>
<td>$3.27</td>
<td>$3.24</td>
<td>-$0.03</td>
<td colspan="4">-0.9%</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.13</td>
<td>0.18</td>
<td>0.13</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Programming and equipment</strong></td>
<td>$36.99</td>
<td>$34.93</td>
<td>$37.13</td>
<td>$2.20</td>
<td colspan="4">6.3%*</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.39</td>
<td>0.69</td>
<td>0.37</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Number of channels</strong></td>
<td>59.37</td>
<td>60.92</td>
<td>59.27</td>
<td>-1.65</td>
<td colspan="4">-2.7%</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>1.03</td>
<td>1.45</td>
<td>1.00</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Rate per channel</strong> <sup>†</sup></td>
<td>$0.600</td>
<td>$0.551</td>
<td>$0.603</td>
<td>$0.052</td>
<td colspan="4">9.4%*</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.01</td>
<td>0.02</td>
<td>0.01</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>No. of satellite channels</strong></td>
<td>44.88</td>
<td>46.42</td>
<td>44.79</td>
<td>-1.63</td>
<td colspan="4">-3.5%</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.89</td>
<td>1.26</td>
<td>0.86</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Rate per satellite channel</strong></td>
<td>$0.801</td>
<td>$0.744</td>
<td>$0.805</td>
<td>$0.061</td>
<td colspan="4">8.2%</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.02</td>
<td>0.04</td>
<td>0.02</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="8"><strong>July 1, 2000</strong></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td><strong>BST</strong></td>
<td>$12.57</td>
<td>$11.95</td>
<td>$12.62</td>
<td>$0.67</td>
<td colspan="4">5.6%</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.50</td>
<td>0.55</td>
<td>0.49</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Major CPST</strong></td>
<td>$18.88</td>
<td>$17.64</td>
<td>$18.95</td>
<td>$1.31</td>
<td colspan="4">7.4%</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.54</td>
<td>0.80</td>
<td>0.51</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Programming total</strong></td>
<td>$31.45</td>
<td>$29.59</td>
<td>$31.57</td>
<td>$1.98</td>
<td colspan="4">6.7%*</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.33</td>
<td>0.57</td>
<td>0.31</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Equipment</strong></td>
<td>$2.97</td>
<td>$2.90</td>
<td>$2.97</td>
<td>$0.07</td>
<td colspan="4">2.4%</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.11</td>
<td>0.16</td>
<td>0.11</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Programming and equipment</strong></td>
<td>$34.42</td>
<td>$32.49</td>
<td>$34.54</td>
<td>$2.05</td>
<td colspan="4">6.3%*</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.35</td>
<td>0.61</td>
<td>0.33</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Number of channels</strong></td>
<td>56.27</td>
<td>57.47</td>
<td>56.20</td>
<td>-1.27</td>
<td colspan="4">-2.2%</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>1.03</td>
<td>1.46</td>
<td>0.97</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Rate per channel</strong> <sup>†</sup></td>
<td>$.0.591</td>
<td>$0.551</td>
<td>$0.594</td>
<td>$0.043</td>
<td colspan="4">7.8%</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.01</td>
<td>0.02</td>
<td>0.01</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td><strong>No. of satellite channels</strong></td>
<td>42.16</td>
<td>43.41</td>
<td>42.09</td>
<td>-1.33</td>
<td colspan="4">-3.1%</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.86</td>
<td>1.26</td>
<td>0.83</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Rate per satellite channel</strong></td>
<td>$0.797</td>
<td>$0.751</td>
<td>$0.800</td>
<td>$0.049</td>
<td colspan="4">6.5%</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.02</td>
<td>0.04</td>
<td>0.02</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="even">
<td colspan="8"><strong>July 1, 1999</strong></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td><strong>Programming total</strong></td>
<td>$29.71</td>
<td>$27.96</td>
<td>$29.83</td>
<td>$1.87</td>
<td colspan="4">6.7%*</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.31</td>
<td>0.54</td>
<td>0.30</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Number of channels</strong></td>
<td>53.66</td>
<td>54.81</td>
<td>53.59</td>
<td>-1.22</td>
<td colspan="4">-2.2%</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.99</td>
<td>1.42</td>
<td>0.99</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Rate per channel</strong> <sup>†</sup></td>
<td>$0.587</td>
<td>$0.549</td>
<td>$0.589</td>
<td>$0.040</td>
<td colspan="4">7.3%</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.01</td>
<td>0.02</td>
<td>0.01</td>
<td>--</td>
<td colspan="4">---</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="7"><p>* An asterisk denotes a statistically significant
difference between the competitive and noncompetitive groups.</p>
<p><sup>†</sup> Equals the number of channels divided by the monthly
rate for programming. This average cannot be computed using the numbers
in this Attachment, because the number of channels and the monthly rate
shown are weighted separately.</p></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td colspan="7"><p><strong>ATTACHMENT B-2</strong></p>
<p><strong>AVERAGE MONTHLY RATES, COMPETITIVE GROUP BY
STRATA</strong></p></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td><u>Cable Service</u></td>
<td>Wireline <u>Overbuild</u></td>
<td><p>DBS</p>
<p><u>Overbuild</u></p></td>
<td><p>Local Exchange</p>
<p><u>Carrier (LEC)</u></p></td>
<td><p>Low</p>
<p><u>Penetration</u></p></td>
<td colspan="4"><u>Municipal</u></td>
<td></td>
</tr>
<tr class="even">
<td colspan="6"></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td colspan="6"><strong>July 1, 2001</strong></td>
<td colspan="4"></td>
</tr>
<tr class="even">
<td><strong>BST</strong></td>
<td>$15.09</td>
<td>$11.01</td>
<td>$11.45</td>
<td>$15.42</td>
<td colspan="4">$12.77</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.99</td>
<td>0.39</td>
<td>0.42</td>
<td>0.79</td>
<td colspan="4">1.28</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Major CPST</strong></td>
<td>$16.04</td>
<td>$23.31</td>
<td>$19.85</td>
<td>$17.01</td>
<td colspan="4">$9.50</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>1.52</td>
<td>1.07</td>
<td>0.57</td>
<td>0.97</td>
<td colspan="4">2.10</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Programming total</strong></td>
<td>$31.13</td>
<td>$34.32</td>
<td>$31.30</td>
<td>$32.43</td>
<td colspan="4">$22.27</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>1.10</td>
<td>0.84</td>
<td>0.46</td>
<td>0.54</td>
<td colspan="4">1.12</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Equipment</strong></td>
<td>$2.90</td>
<td>$2.81</td>
<td>$3.73</td>
<td>$1.87</td>
<td colspan="4">$2.08</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.27</td>
<td>0.24</td>
<td>0.14</td>
<td>0.19</td>
<td colspan="4">0.52</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Programming and equipment</strong></td>
<td>$34.03</td>
<td>$37.13</td>
<td>$35.03</td>
<td>$34.30</td>
<td colspan="4">$24.35</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>1.22</td>
<td>1.00</td>
<td>0.51</td>
<td>0.55</td>
<td colspan="4">1.31</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Number of channels</strong></td>
<td>55.98</td>
<td>53.26</td>
<td>65.32</td>
<td>52.94</td>
<td colspan="4">51.38</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>2.42</td>
<td>2.63</td>
<td>0.88</td>
<td>1.74</td>
<td colspan="4">3.02</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Rate per channel</strong> <sup>†</sup></td>
<td>$0.587</td>
<td>$0.727</td>
<td>$0.489</td>
<td>$0.663</td>
<td colspan="4">$0.447</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.03</td>
<td>0.05</td>
<td>0.01</td>
<td>0.02</td>
<td colspan="4">0.02</td>
<td></td>
</tr>
<tr class="even">
<td><strong>No. of satellite channels</strong></td>
<td>42.43</td>
<td>39.92</td>
<td>49.73</td>
<td>41.42</td>
<td colspan="4">40.81</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>2.12</td>
<td>2.21</td>
<td>0.78</td>
<td>1.53</td>
<td colspan="4">2.80</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Rate per satellite channel</strong></td>
<td>$0.796</td>
<td>$1.066</td>
<td>$0.647</td>
<td>$0.870</td>
<td colspan="4">$0.571</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.04</td>
<td>0.12</td>
<td>0.02</td>
<td>0.03</td>
<td colspan="4">0.04</td>
<td></td>
</tr>
<tr class="even">
<td colspan="6"><strong>July 1, 2000</strong></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td><strong>BST</strong></td>
<td>$14.43</td>
<td>$10.98</td>
<td>$10.95</td>
<td>$14.76</td>
<td colspan="4">$12.19</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>1.01</td>
<td>0.40</td>
<td>0.40</td>
<td>0.76</td>
<td colspan="4">1.25</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Major CPST</strong></td>
<td>$14.40</td>
<td>$20.46</td>
<td>$18.39</td>
<td>$16.01</td>
<td colspan="4">$9.23</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>1.44</td>
<td>0.93</td>
<td>0.56</td>
<td>0.95</td>
<td colspan="4">2.07</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Programming total</strong></td>
<td>$28.83</td>
<td>$31.44</td>
<td>$29.34</td>
<td>$30.77</td>
<td colspan="4">$21.42</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.97</td>
<td>0.71</td>
<td>0.44</td>
<td>0.49</td>
<td colspan="4">1.12</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Equipment</strong></td>
<td>$2.62</td>
<td>$2.81</td>
<td>$3.21</td>
<td>$1.80</td>
<td colspan="4">$1.98</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.25</td>
<td>0.24</td>
<td>0.12</td>
<td>0.17</td>
<td colspan="4">0.49</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Programming and equipment</strong></td>
<td>$31.45</td>
<td>$34.25</td>
<td>$32.55</td>
<td>$32.57</td>
<td colspan="4">$23.40</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>1.07</td>
<td>0.85</td>
<td>0.46</td>
<td>0.50</td>
<td colspan="4">1.29</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Number of channels</strong></td>
<td>52.68</td>
<td>46.50</td>
<td>62.41</td>
<td>49.52</td>
<td colspan="4">50.81</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>2.35</td>
<td>2.58</td>
<td>0.95</td>
<td>1.66</td>
<td colspan="4">3.06</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Rate per channel</strong> <sup>†</sup></td>
<td>$0.578</td>
<td>$0.761</td>
<td>$0.483</td>
<td>$0.674</td>
<td colspan="4">$0.437</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.03</td>
<td>0.05</td>
<td>0.01</td>
<td>0.03</td>
<td colspan="4">0.03</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>No. of satellite channels</strong></td>
<td>39.82</td>
<td>34.63</td>
<td>47.08</td>
<td>38.08</td>
<td colspan="4">40.44</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>1.95</td>
<td>2.17</td>
<td>0.83</td>
<td>1.48</td>
<td colspan="4">2.81</td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Rate per satellite channel</strong></td>
<td>$0.777</td>
<td>$1.13</td>
<td>$0.645</td>
<td>$0.906</td>
<td colspan="4">$0.558</td>
<td></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td>0.04</td>
<td>0.12</td>
<td>0.02</td>
<td>0.04</td>
<td colspan="4">0.04</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="6"><strong>July 1, 1999</strong></td>
<td colspan="4"></td>
</tr>
<tr class="even">
<td><strong>Programming total</strong></td>
<td>$27.23</td>
<td>$29.63</td>
<td>$27.71</td>
<td>$29.24</td>
<td colspan="4">$20.55</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.94</td>
<td>0.66</td>
<td>0.41</td>
<td>0.45</td>
<td colspan="4">1.14</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Number of channels</strong></td>
<td>50.62</td>
<td>42.63</td>
<td>59.77</td>
<td>47.03</td>
<td colspan="4">49.94</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>2.45</td>
<td>2.30</td>
<td>0.93</td>
<td>1.53</td>
<td colspan="4">2.91</td>
<td></td>
</tr>
<tr class="even">
<td><strong>Rate per channel</strong> <sup>†</sup></td>
<td>$0.578</td>
<td>$0.777</td>
<td>$0.477</td>
<td>$0.672</td>
<td colspan="4">$0.428</td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.03</td>
<td>0.05</td>
<td>0.01</td>
<td>0.03</td>
<td colspan="4">0.03</td>
<td></td>
</tr>
</tbody>
</table>

^†^ Equals the number of channels divided by the monthly rate for
programming. This average cannot be computed using the numbers in this
Attachment, because the number of channels and the monthly rate shown
are weighted separately.

+-----------------+---------+---------+----------+---------+-------+---+---+
| **ATTACHMENT    |         |         |          |         |       |   |   |
| B-3**           |         |         |          |         |       |   |   |
|                 |         |         |          |         |       |   |   |
| **AVERAGE       |         |         |          |         |       |   |   |
| MONTHLY RATES,  |         |         |          |         |       |   |   |
| NONCOMPETITIVE  |         |         |          |         |       |   |   |
| GROUP BY        |         |         |          |         |       |   |   |
| STRATA**        |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| [Cable          | Very    | Large   | Medi     | Small   | Very  |   |   |
| Servi           | Large   |         | um-Sized |         | Small |   |   |
| ce]{.underline} | [O      | [O      | [Operat  | [O      | [Op   |   |   |
|                 | perator | perator | ors]{.un | perator | erato |   |   |
|                 | s]{.und | s]{.und | derline} | s]{.und | rs]{. |   |   |
|                 | erline} | erline} |          | erline} | under |   |   |
|                 |         |         |          |         | line} |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
|                 |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **July 1,       |         |         |          |         |       |   |   |
| 2001**          |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **BST**         | \$11.36 | \$10.84 | \$12.78  | \$16.36 | \$    |   |   |
|                 |         |         |          |         | 22.56 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.26    | 0.29    | 0.47     | 0.95    | 1.26  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Major CPST**  | \$23.64 | \$23.03 | \$21.09  | \$17.15 | \     |   |   |
|                 |         |         |          |         | $5.85 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.37    | 0.37    | 0.50     | 0.98    | 1.52  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Programming   | \$35.00 | \$33.87 | \$33.87  | \$33.51 | \$    |   |   |
| total**         |         |         |          |         | 28.41 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.33    | 0.34    | 0.28     | 0.41    | 0.98  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Equipment**   | \$3.76  | \$3.76  | \$3.31   | \$2.00  | \     |   |   |
|                 |         |         |          |         | $1.03 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.10    | 0.11    | 0.11     | 0.22    | 0.22  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Programming   | \$38.76 | \$37.63 | \$37.18  | \$35.51 | \$    |   |   |
| and equipment** |         |         |          |         | 29.44 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.34    | 0.35    | 0.30     | 0.49    | 1.04  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Number of     | 66.84   | 63.51   | 59.79    | 45.85   | 34.21 |   |   |
| channels**      |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.80    | 0.96    | 0.84     | 1.47    | 2.01  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Rate per      | \$0.529 | \$0.545 | \$0.584  | \$0.778 | \$    |   |   |
| channel** ^†^   |         |         |          |         | 0.899 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.01    | 0.01    | 0.01     | 0.02    | 0.04  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **No. of        | 48.91   | 47.15   | 46.05    | 36.19   | 26.88 |   |   |
| satellite       |         |         |          |         |       |   |   |
| channels**      |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.68    | 0.77    | 0.73     | 1.37    | 1.79  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Rate per      | \$0.726 | \$0.739 | \$0.764  | \$1.026 | \$    |   |   |
| satellite       |         |         |          |         | 1.192 |   |   |
| channel**       |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.01    | 0.01    | 0.02     | 0.05    | 0.07  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **July 1,       |         |         |          |         |       |   |   |
| 2000**          |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **BST**         | \$11.12 | \$10.54 | \$12.57  | \$16.23 | \$    |   |   |
|                 |         |         |          |         | 21.48 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.33    | 0.27    | 0.47     | 0.93    | 1.26  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Major CPST**  | \$21.50 | \$21.04 | \$18.89  | \$15.00 | \     |   |   |
|                 |         |         |          |         | $5.68 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.35    | 0.33    | 0.48     | 0.91    | 1.47  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Programming   | \$32.62 | \$31.58 | \$31.46  | \$31.23 | \$    |   |   |
| total**         |         |         |          |         | 27.16 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.28    | 0.31    | 0.27     | 0.33    | 0.87  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Equipment**   | \$3.45  | \$3.39  | \$3.05   | \$1.88  | \     |   |   |
|                 |         |         |          |         | $1.00 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.08    | 0.09    | 0.10     | 0.21    | 0.21  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Programming   | \$36.07 | \$34.97 | \$34.51  | \$33.11 | \$    |   |   |
| and equipment** |         |         |          |         | 28.16 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.29    | 0.33    | 0.29     | 0.38    | 0.93  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Number of     | 63.81   | 60.37   | 56.41    | 43.22   | 32.56 |   |   |
| channels**      |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.83    | 0.97    | 0.84     | 1.29    | 1.80  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Rate per      | \$0.518 | \$0.536 | \$0.577  | \$0.765 | \$    |   |   |
| channel** ^†^   |         |         |          |         | 0.900 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.01    | 0.01    | 0.01     | 0.02    | 0.04  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **No. of        | 46.61   | 44.38   | 42.89    | 33.75   | 25.29 |   |   |
| satellite       |         |         |          |         |       |   |   |
| channels**      |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.68    | 0.77    | 0.71     | 1.23    | 1.63  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Rate per      | \$0.711 | \$0.735 | \$.0.764 | \$1.019 | \$    |   |   |
| satellite       |         |         |          |         | 1.211 |   |   |
| channel**       |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.01    | 0.01    | 0.02     | 0.04    | 0.07  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **July 1,       |         |         |          |         |       |   |   |
| 1999**          |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Programming   | \$30.68 | \$29.75 | \$29.72  | \$29.68 | \$    |   |   |
| total**         |         |         |          |         | 26.34 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.25    | 0.28    | 0.27     | 0.33    | 0.83  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Number of     | 61.26   | 57.64   | 53.20    | 41.54   | 32.24 |   |   |
| channels**      |         |         |          |         |       |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.87    | 0.95    | 0.82     | 1.29    | 1.67  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| **Rate per      | \$0.508 | \$0.531 | \$0.579  | \$0.759 | \$    |   |   |
| channel** ^†^   |         |         |          |         | 0.870 |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+
| Standard error  | 0.01    | 0.01    | 0.01     | 0.02    | 0.04  |   |   |
+-----------------+---------+---------+----------+---------+-------+---+---+

^†^ Equals the number of channels divided by the monthly rate for
programming. This average cannot be computed using the numbers in this
Attachment, because the number of channels and the monthly rate shown
are weighted separately.

<table>
<colgroup>
<col style="width: 18%" />
<col style="width: 2%" />
<col style="width: 14%" />
<col style="width: 0%" />
<col style="width: 13%" />
<col style="width: 5%" />
<col style="width: 16%" />
<col style="width: 0%" />
<col style="width: 16%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 12%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="9"><p><strong>ATTACHMENT B-4</strong></p>
<p><strong>COMPARISION OF AVERAGE MONTHLY RATES</strong></p>
<p><strong>BETWEEN GROUPS BY SYSTEM SIZE</strong></p></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td><u>System Size</u></td>
<td colspan="2"><p>Competitive</p>
<p><u>Group</u></p></td>
<td colspan="3"><p>Noncompetitive</p>
<p><u>Group</u></p></td>
<td><p>Difference</p>
<p><u>in Averages</u></p></td>
<td colspan="3"><p>Percent</p>
<p><u>Difference</u></p></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="10"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="10"><strong>July 1, 2001</strong></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td><strong>Very large and large</strong></td>
<td colspan="2">$35.64</td>
<td colspan="3">$38.17</td>
<td>$2.53</td>
<td colspan="3">7.1%*</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td colspan="2">0.60</td>
<td colspan="3">0.35</td>
<td>--</td>
<td colspan="3">---</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td><strong>Medium sized</strong></td>
<td colspan="2">$36.40</td>
<td colspan="3">$34.18</td>
<td>$0.78</td>
<td colspan="3">2.1%</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td colspan="2">0.49</td>
<td colspan="3">0.30</td>
<td>--</td>
<td colspan="3">---</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td><strong>Small and very small</strong></td>
<td colspan="2">$31.72</td>
<td colspan="3">$34.45</td>
<td>$2.73</td>
<td colspan="3">8.6%*</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td colspan="2">0.68</td>
<td colspan="3">0.59</td>
<td>--</td>
<td colspan="3">---</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="10"><strong>July 1, 2000</strong></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td><strong>Very large and large</strong></td>
<td colspan="2">$33.02</td>
<td colspan="3">$35.50</td>
<td>$2.48</td>
<td colspan="3">7.5%*</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td colspan="2">0.53</td>
<td colspan="3">0.31</td>
<td>--</td>
<td colspan="3">--</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td><strong>Medium sized</strong></td>
<td colspan="2">$34.08</td>
<td colspan="3">$34.51</td>
<td>$0.43</td>
<td colspan="3">1.3%</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td colspan="2">0.47</td>
<td colspan="3">0.27</td>
<td>--</td>
<td colspan="3">---</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td><strong>Small and very small</strong></td>
<td colspan="2">$29.83</td>
<td colspan="3">$32.24</td>
<td>$2.41</td>
<td colspan="3">8.1%*</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td>Standard error</td>
<td colspan="2">0.64</td>
<td colspan="3">0.43</td>
<td>--</td>
<td colspan="3">---</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="9">* An asterisk denotes a statistically significant
difference between competitive and noncompetitive groups.</td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td colspan="9"></td>
<td colspan="2"></td>
<td></td>
</tr>
<tr class="even">
<td colspan="9"></td>
<td colspan="2"></td>
<td></td>
</tr>
</tbody>
</table>

<table style="width:100%;">
<colgroup>
<col style="width: 19%" />
<col style="width: 12%" />
<col style="width: 7%" />
<col style="width: 12%" />
<col style="width: 8%" />
<col style="width: 11%" />
<col style="width: 8%" />
<col style="width: 12%" />
<col style="width: 8%" />
<col style="width: 0%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="9"><p><strong>ATTACHMENT B-5</strong></p>
<p><strong>OPERATORS’ EXPLANATION FOR CHANGES IN MONTHLY
RATE</strong></p>
<p><strong>COMPETITIVE AND NONCOMPETITIVE GROUPS</strong></p></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="4"></td>
<td colspan="4"></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="4"><p>Change in Monthly Rate,</p>
<p><u>July 1, 1999 to July 1, 2000</u></p></td>
<td colspan="4"><p>Change in Monthly Rate,</p>
<p><u>July 1, 2000 to July 1, 2001</u></p></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"><u>Competitive Group</u></td>
<td colspan="2"><u>Noncompetitive Group</u></td>
<td colspan="2"><u>Competitive Group</u></td>
<td colspan="2"><u>Noncompetitive Group</u></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><u>Explanation</u></td>
<td>Amount <u>Attributed</u></td>
<td>% of <u>Total</u></td>
<td>Amount <u>Attributed</u></td>
<td>% of <u>Total</u></td>
<td>Amount <u>Attributed</u></td>
<td>% of <u>Total</u></td>
<td>Amount <u>Attributed</u></td>
<td>% of <u>Total</u></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><p><strong>Cost increases for program licenses</strong></p>
<p><strong>&amp; copyright fees:</strong></p>
<p><strong>existing programs</strong></p></td>
<td>$0.71</td>
<td>43.6%</td>
<td>$0.80</td>
<td>46.0%</td>
<td>$1.05</td>
<td>50.7%</td>
<td>$1.07</td>
<td>46.1%</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.07</td>
<td></td>
<td>0.07</td>
<td></td>
<td>0.08</td>
<td></td>
<td>0.07</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><p><strong>Cost increases for program licenses</strong></p>
<p><strong>&amp; copyright fees:</strong></p>
<p><strong>new programs</strong></p></td>
<td>$0.15</td>
<td>9.2%</td>
<td>$0.14</td>
<td>8.0%</td>
<td>$0.29</td>
<td>14.0%</td>
<td>$0.28</td>
<td>12.1%</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.05</td>
<td></td>
<td>0.04</td>
<td></td>
<td>0.08</td>
<td></td>
<td>0.06</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>For upgrades to distribution facility and headend plant and
equipment</strong></td>
<td>$0.25</td>
<td>15.3%</td>
<td>$0.25</td>
<td>14.4%</td>
<td>$0.22</td>
<td>10.6%</td>
<td>$0.23</td>
<td>9.9%</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.06</td>
<td></td>
<td>0.05</td>
<td></td>
<td>0.07</td>
<td></td>
<td>0.06</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>General inflation unaccounted for elsewhere</strong></td>
<td>$0.20</td>
<td>12.3%</td>
<td>$0.24</td>
<td>13.8%</td>
<td>$0.22</td>
<td>10.6%</td>
<td>$0.34</td>
<td>14.7%</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.03</td>
<td></td>
<td>0.03</td>
<td></td>
<td>0.03</td>
<td></td>
<td>0.03</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Other cost increases or decreases</strong></td>
<td>$0.22</td>
<td>13.5%</td>
<td>$0.18</td>
<td>10.3%</td>
<td>$0.19</td>
<td>9.2%</td>
<td>$0.31</td>
<td>13.4%</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.07</td>
<td></td>
<td>0.05</td>
<td></td>
<td>0.07</td>
<td></td>
<td>0.07</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Unrelated to cost change</strong></td>
<td>$0.10</td>
<td>6.1%</td>
<td>$0.13</td>
<td>7.5%</td>
<td>$0.10</td>
<td>4.9%</td>
<td>$0.09</td>
<td>3.8%</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.04</td>
<td></td>
<td>0.05</td>
<td></td>
<td>0.04</td>
<td></td>
<td>0.05</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Total change in monthly rate (sum of above)</strong></td>
<td>$1.63</td>
<td>100%</td>
<td>$1.74</td>
<td>100%</td>
<td>$2.07</td>
<td>100%</td>
<td>$2.32</td>
<td>100%</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Standard error</td>
<td>0.16</td>
<td></td>
<td>0.13</td>
<td></td>
<td>0.20</td>
<td></td>
<td>0.16</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="10"></td>
</tr>
</tbody>
</table>

<table style="width:100%;">
<colgroup>
<col style="width: 24%" />
<col style="width: 17%" />
<col style="width: 3%" />
<col style="width: 14%" />
<col style="width: 3%" />
<col style="width: 14%" />
<col style="width: 6%" />
<col style="width: 10%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 3%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="9"><p><strong>ATTACHMENT B-6</strong></p>
<p><strong>AVERAGE MONTHLY CHARGES FOR INSTALLATION OF CABLE SERVICE
(EXCLUDING PROMOTIONS)</strong></p></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="3"></td>
<td colspan="4"></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="3">July 1, 2000</td>
<td colspan="4">July 1, 2001</td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td><p>Type of</p>
<p><u>Installation</u></p></td>
<td><p>Competitive</p>
<p><u>Group</u></p></td>
<td colspan="2">Noncompetitive <u>Group</u></td>
<td colspan="2">Competitive <u>Group</u></td>
<td colspan="2">Noncompetitive <u>Group</u></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td><strong>Unwired installation</strong></td>
<td>$37.95</td>
<td colspan="2">$38.67</td>
<td colspan="2">$41.85</td>
<td colspan="2">$42.41</td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td>Standard Error</td>
<td>1.36</td>
<td colspan="2">1.28</td>
<td colspan="2">0.92</td>
<td colspan="2">0.91</td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td><strong>Pre-wired installation</strong></td>
<td>$27.23</td>
<td colspan="2">$27.28</td>
<td colspan="2">$29.44</td>
<td colspan="2">$29.93</td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td>Standard Error</td>
<td>1.28</td>
<td colspan="2">1.20</td>
<td colspan="2">0.93</td>
<td colspan="2">0.87</td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td><strong>Service reconnection</strong></td>
<td>$25.10</td>
<td colspan="2">$25.00</td>
<td colspan="2">$26.28</td>
<td colspan="2">$26.75</td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td>Standard Error</td>
<td>0.98</td>
<td colspan="2">1.00</td>
<td colspan="2">0.81</td>
<td colspan="2">0.79</td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td colspan="10"></td>
<td></td>
</tr>
<tr class="even">
<td colspan="10"></td>
<td></td>
</tr>
</tbody>
</table>

+----------------+------+------+-----+-----+------+------+-----+-----+
| **ATTACHMENT   |      |      |     |     |      |      |     |     |
| C**            |      |      |     |     |      |      |     |     |
|                |      |      |     |     |      |      |     |     |
| **AVERAGE      |      |      |     |     |      |      |     |     |
| NUMBER OF      |      |      |     |     |      |      |     |     |
| CHANNELS ON AN |      |      |     |     |      |      |     |     |
| ANALOG BASIS** |      |      |     |     |      |      |     |     |
|                |      |      |     |     |      |      |     |     |
| **BY CATEGORY  |      |      |     |     |      |      |     |     |
| OF             |      |      |     |     |      |      |     |     |
| PROGRAMMING**  |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                | [Com |      |     |     | [No  |      |     |     |
|                | peti |      |     |     | ncom |      |     |     |
|                | tive |      |     |     | peti |      |     |     |
|                | Gr   |      |     |     | tive |      |     |     |
|                | oup] |      |     |     | Gr   |      |     |     |
|                | {.un |      |     |     | oup] |      |     |     |
|                | derl |      |     |     | {.un |      |     |     |
|                | ine} |      |     |     | derl |      |     |     |
|                |      |      |     |     | ine} |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                | [Nu  |      | [   |     | [Nu  |      | [   |     |
|                | mber |      | Ann |     | mber |      | Ann |     |
|                | of   |      | ual |     | of   |      | ual |     |
|                | C    |      | C   |     | C    |      | C   |     |
|                | hann |      | han |     | hann |      | han |     |
|                | els] |      | ge] |     | els] |      | ge] |     |
|                | {.un |      | {.u |     | {.un |      | {.u |     |
|                | derl |      | nde |     | derl |      | nde |     |
|                | ine} |      | rli |     | ine} |      | rli |     |
|                |      |      | ne} |     |      |      | ne} |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| [Categor       | [    | [    | [N  | [Pe | [    | [    | [N  | [Pe |
| y]{.underline} | July | July | umb | rce | July | July | umb | rce |
|                | 2    | 2    | er] | nt] | 2    | 2    | er] | nt] |
|                | 000] | 001] | {.u | {.u | 000] | 001] | {.u | {.u |
|                | {.un | {.un | nde | nde | {.un | {.un | nde | nde |
|                | derl | derl | rli | rli | derl | derl | rli | rli |
|                | ine} | ine} | ne} | ne} | ine} | ine} | ne} | ne} |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **BST and      |      |      |     |     |      |      |     |     |
| Major CPST     |      |      |     |     |      |      |     |     |
| Channel        |      |      |     |     |      |      |     |     |
| Lineup** ^†^   |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Local        | 10.7 | 10.9 | 0.2 | 1   | 10.5 | 10.7 | 0.2 | 1   |
| broadcast**    |      |      |     | .9% |      |      |     | .9% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | .48  | .47  |     |     | .38  | .37  |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **PEG** ^†^    | 1.9  | 2.0  | 0.1 | 5   | 2.2  | 2.3  | 0.1 | 4   |
|                |      |      |     | .3% |      |      |     | .5% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 0.20 | 0.21 |     |     | 0.18 | 0.19 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Leased       | 0.8  | 0.8  | 0.0 | 0   | 0.5  | 0.6  | 0.1 | 20  |
| access**       |      |      |     | .0% |      |      |     | .0% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 0.11 | 0.11 |     |     | 0.06 | 0.06 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Other        | 0.7  | 0.8  | 0.1 | 14  | 0.9  | 0.9  | 0.0 | 0   |
| local**        |      |      |     | .3% |      |      |     | .0% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 0.11 | 0.17 |     |     | 0.09 | 0.09 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Children's   | 2.7  | 2.8  | 0.1 | 3   | 2.5  | 2.6  | 0.1 | 4   |
| satellite**    |      |      |     | .7% |      |      |     | .0% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 0.15 | 0.15 |     |     | 0.09 | 0.09 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Sports       | 3.8  | 3.9  | 0.1 | 2   | 3.3  | 3.5  | 0.2 | 6   |
| satellite**    |      |      |     | .6% |      |      |     | .1% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 0.21 | 0.20 |     |     | 0.12 | 0.13 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Other        | 36.9 | 39.7 | 2.8 | 7   | 36.3 | 38.7 | 2.4 | 6   |
| satellite**    |      |      |     | .6% |      |      |     | .6% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 1.47 | 1.53 |     |     | 0.75 | 0.82 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Total of     | 57.5 | 60.9 | 3.4 | 5   | 56.2 | 59.3 | 3.1 | 5   |
| above**        |      |      |     | .9% |      |      |     | .5% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 1.45 | 1.46 |     |     | 1.00 | 0.97 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Other        |      |      |     |     |      |      |     |     |
| Channels**     |      |      |     |     |      |      |     |     |
| ^†††^          |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Devoted to   | 11.7 | 11.1 | -   | -5  | 11.5 | 10.6 | -   | -7  |
| analog         |      |      | 0.6 | .1% |      |      | 0.9 | .8% |
| service**      |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 0.64 | 0.73 |     |     | 0.42 | 0.44 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Devoted to   | 6.7  | 11.3 | 4.6 | 68  | 7.0  | 11.8 | 4.8 | 68  |
| digital        |      |      |     | .7% |      |      |     | .6% |
| service**      |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 1.06 | 1.08 |     |     | 0.74 | 0.84 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Total        |      |      |     |     |      |      |     |     |
| Channels**     |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Total number | 75.9 | 83.3 | 7.4 | 9   | 74.4 | 81.7 | 7.3 | 9   |
| of channels**  |      |      |     | .7% |      |      |     | .8% |
+----------------+------+------+-----+-----+------+------+-----+-----+
| **Total number | 75.9 | 83.3 | 7.4 | 9   | 74.4 | 81.7 | 7.3 | 9   |
| of channels**  |      |      |     | .7% |      |      |     | .8% |
+----------------+------+------+-----+-----+------+------+-----+-----+
|                |      |      |     |     |      |      |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+
| Standard error | 1.84 | 1.80 |     |     | 1.18 | 1.14 |     |     |
+----------------+------+------+-----+-----+------+------+-----+-----+

^†^ Excludes CPST tiers beyond the major CPST, as well as premium,
pay-per-view, digital and audio (*e.g.*, music) channels.

^††^ PEG: Public, educational, and governmental.

^†††^ Excludes channels in the BST and major CPST lineup and audio
channels.

+---+--------------------------+-----------------+------------------------+
|   | **ATTACHMENT D-1**       |                 |                        |
|   |                          |                 |                        |
|   | **REGRESSION RESULTS     |                 |                        |
|   | SHOWING EFFECTS OF       |                 |                        |
|   | COMPETITIVE STATUS,**    |                 |                        |
|   |                          |                 |                        |
|   | **MSO AFFILIATION,       |                 |                        |
|   | SYSTEM SIZE, NUMBER OF   |                 |                        |
|   | CHANNELS, AND**          |                 |                        |
|   |                          |                 |                        |
|   | **HOUSEHOLD INCOME ON    |                 |                        |
|   | AVERAGE MONTHLY RATES**  |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | [                        | [Coefficient^   |                        |
|   | Variable^1^]{.underline} | 2^]{.underline} |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Low penetration dummy    | -0.048          |                        |
|   |                          |                 |                        |
|   |                          | (0.015)\*       |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | LEC dummy                | -0.080          |                        |
|   |                          |                 |                        |
|   |                          | (0.014)\*       |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Municipal dummy          | -0.249          |                        |
|   |                          |                 |                        |
|   |                          | (0.035)\*       |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Overbuild dummy          | -0.071          |                        |
|   |                          |                 |                        |
|   |                          | (0.019)\*       |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | DBS dummy                | 0.050           |                        |
|   |                          |                 |                        |
|   |                          | (0.020)\*\*     |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | MSO dummy                | 0.228           |                        |
|   |                          |                 |                        |
|   |                          | (0.026)\*       |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Reciprocal of average    | -10.795         |                        |
|   | total channels           |                 |                        |
|   |                          | (0.652)\*       |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Log of median household  | 0.018           |                        |
|   | income                   |                 |                        |
|   |                          | (0.020)         |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Intercept                | 3.387           |                        |
|   |                          |                 |                        |
|   |                          | (0.212)\*       |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Adjusted R-squared       | 0.48            |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Number of observations   | 722             |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Impact of LEC systems    | 0.077           |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Impact of Overbuild      | 0.069           |                        |
|   | Systems                  |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   |                          |                 |                        |
+---+--------------------------+-----------------+------------------------+
|   | Impact of DBS systems    | 0.051           |                        |
+---+--------------------------+-----------------+------------------------+

> ^1^ Dependent variable is log of average monthly rates. Values for log
> of median household income is from US Department of Commerce, County
> and City Data Book (1994). Values for all other variables are from the
> Survey.
>
> ^2^ standard errors are in parenthesis.

\* Denotes significance at the 1% level.

\*\* Denotes significance at the 5% level.

**ATTACHMENT D-2**

**THREE-STAGE LEAST SQUARES ESTIMATION RESULTS FOR DEMAND, PRICE AND
QUALITY EQUATIONS**

+----------------------+-----------+-----------------+----------------+
| [Vari                | Demand    | Price Equation: | Quality        |
| able^1^]{.underline} | Equation: |                 | Equation: Log  |
|                      | Log of    | Log of Average  | of Number [of  |
|                      | Number of |                 | Channel        |
|                      |           | [Monthly        | s]{.underline} |
|                      | [         | Rat             |                |
|                      | Subscribe | es]{.underline} |                |
|                      | rs^2^]{.u |                 |                |
|                      | nderline} |                 |                |
+----------------------+-----------+-----------------+----------------+
| Log of subscribers   |           | -0.001          | 0.0859         |
|                      |           |                 |                |
|                      |           | (0.014)         | (0.007)\*      |
+----------------------+-----------+-----------------+----------------+
| Log of average       | -2.193    |                 |                |
| monthly rate         |           |                 |                |
|                      | (0.768)\* |                 |                |
+----------------------+-----------+-----------------+----------------+
| Log of number of     | 3.668     | 0.257           |                |
| channels             |           |                 |                |
|                      | (0.410)\* | (0.053)\*       |                |
+----------------------+-----------+-----------------+----------------+
| Log of system        | 0.273     |                 |                |
| households passed    |           |                 |                |
|                      | (0.036)\* |                 |                |
+----------------------+-----------+-----------------+----------------+
| Log of system        |           |                 | 0.363          |
| megahertz            |           |                 |                |
|                      |           |                 | (0.029)\*      |
+----------------------+-----------+-----------------+----------------+
| Log of MSO           |           | 0.018           |                |
| subscribers          |           |                 |                |
|                      |           | (0.002)\*       |                |
+----------------------+-----------+-----------------+----------------+
| Log of system age    | 0.268     | 0.017           |                |
|                      |           |                 |                |
|                      | (0.095)\* | (0.017)         |                |
+----------------------+-----------+-----------------+----------------+
| Log of median        | -0.180    | -0.005          | 0.666          |
| household income     |           |                 |                |
|                      | (0.303)   | (0.026)         | (0.036)        |
+----------------------+-----------+-----------------+----------------+
| Log of percent urban | 0.229     |                 |                |
| population           |           |                 |                |
|                      | (0.047)\* |                 |                |
+----------------------+-----------+-----------------+----------------+
| Log of population    |           | -0.003          |                |
| density              |           |                 |                |
|                      |           | (0.008)         |                |
+----------------------+-----------+-----------------+----------------+
| Log of number of     |           | -0.001          | -0.014         |
| vertically           |           |                 |                |
| integrated channels  |           | (0.006)         | (0.006)\*      |
+----------------------+-----------+-----------------+----------------+
| Digital service      |           |                 | 0.053          |
| dummy                |           |                 |                |
|                      |           |                 | (0.013)\*      |
+----------------------+-----------+-----------------+----------------+
| Internet access      |           |                 | 0.017          |
| service dummy        |           |                 |                |
|                      |           |                 | (0.013)        |
+----------------------+-----------+-----------------+----------------+
| Wireline competition | -0.536    | -0.068          | 0.059          |
| dummy                |           |                 |                |
|                      | (0.178)\* | (0.014)         | (0.021)\*      |
+----------------------+-----------+-----------------+----------------+
| DBS competition      | -0.440    | 0.035           | 0.016          |
| dummy                |           |                 |                |
|                      | (0.289)   | (0.023)         | (0.036)        |
+----------------------+-----------+-----------------+----------------+
| Constant             | -1.452    | 2.31            | 0.248          |
|                      |           |                 |                |
|                      | (3.446)   | (0.240)\*       | (0.373)        |
+----------------------+-----------+-----------------+----------------+
| Number of            | 702       | 702             | 702            |
| Observations         |           |                 |                |
+----------------------+-----------+-----------------+----------------+

^1^ Data for log of system age variable is from FCC Form 325. We used
data from US Department of Commerce, County and City Data Book (1994)
for median household income, population density, and percent urban
population variables. Data for vertically integrated channels is from
2001 Competition Report at Appendix D, Table D-1. This variable includes
all BST and CPST channels that are vertically integrated. Premium and
pay-per-view channels are not included in the calculation. Values for
all other variables are from the Survey.

^2^ Standard errors are in parenthesis.

\* Denotes significance at the 1% level.

**Notes on Attachment D-2**

1\. Attachment D-2 shows the results of our three-equation structural
model, which describes the relationships among all the variables
included in the model. The endogenous variables (i.e., those variables
the value of which are determined within the model) are functions of
other endogenous variables, predetermined or exogenous variables (i.e.,
variables whose values are determined outside the model), and random
variables. The estimated coefficients express the direct effects of each
explanatory variable (both endogenous and exogenous) on the dependent
variables (i.e., the variable determined by the other variables in the
equation).[^43]

2.  We estimated the following three structural equations:

> Demand equation: Log of subscribers = f (log of average monthly rate,
> log of number of channels offered, log of number of system households
> passed, log of system age, log of household median income, log of
> percent urban population, wireline competition dummy, DBS competition
> dummy).
>
> Price equation: Log of average monthly rate = f (log system
> subscribers, log of number of channels offered, log of number of
> subscribers belonging to the MSO of which the operator is a part, log
> of system age, log median household income, log of population density,
> log of number of vertically integrated channels, wireline competition
> dummy, DBS competition dummy).
>
> Quality equation: Log of number of channels = f (log of system
> subscribers, log of system megahertz, log of household median income,
> log of number of vertically integrated channels, digital service
> dummy, Internet access service dummy, wireline competition dummy, DBS
> competition dummy).

3\. The variables included in our model are similar to those used in
previous academic studies.[^44] Several variables, including number of
subscribers, number of channels offered, and average monthly rates,
produce two-way (or simultaneous) relationships. To illustrate, we
believe that demand for cable service is sensitive to changes in average
monthly rates and to the number of channels offered. At the same time,
as demand increases, cable operators may be able to offer more channels
and charge higher rates for their service. To correct for this
simultaneity problem, we chose a three-stage least squares ("3SLS")
procedure.[^45] This procedure uses a three-step method to solve
simultaneous relationships among the variables and to account for any
possible correlation between random variables in the equations. This
technique yields estimates that are asymptotically more efficient than
the two-stage least squares method. However, if the random variables are
independent, then two-stage and three-stage estimators produce similar
results.

4\. As its name implies, 3SLS involves three stages to purge the
simultaneous relationships among the variables and contemporaneous
relationships among the structural equations. In the first stage, we
derive predicted values for each of the explanatory endogenous
variables. These predicted values of the explanatory endogenous
variables are then used to estimate coefficients for each of the
equations, which in turn are used to obtain estimates of the error terms
of the structural equations for the second stage. The third stage
involves use of generalized least-squares estimation of all coefficients
in the system, using a covariance matrix for the error terms of the
structural equations that are estimated from the second-stage.[^46]

5\. The estimated coefficients shown in the table above were derived
using the procedure described above. The predicted values used in the
second stage were estimated in separate "first stage" regressions of the
log of number of subscribers, average monthly rates, and number of
channels on a set of instrument variables, which served as independent
variables in the equations. The instrument variables included all the
predetermined variables, including log of number of system households
passed, log of system age, log of household median income, log of
percent urban population, wireline competition dummy, DBS competition
dummy, log of population density, log of number of vertically integrated
channels, log of number of MSO subscribers, digital tier dummy, Internet
access service dummy, and log of system megahertz.

[^1]: Section 623(k) was adopted as Section 3(k) of the 1992 Cable Act,
    Pub. L. No. 102-385, 106 Stat. 1460, codified at 47 U.S.C. §
    543(k)*.*

[^2]: *See* 47 U.S.C. § 543(k). The 1992 Cable Act defines basic cable
    service as the tier of service that includes the retransmission of
    local television broadcast signals. *See* 7 U.S.C. § 543(b)(7).
    Cable programming service is defined as any video programming other
    than video programming carried on the basic service tier, and video
    programming offered on a per channel or per program basis. *See* 47
    U.S.C. § 543(k)(1)(2). Equipment refers to a converter box, remote
    control, and other equipment necessary to access programming. *See*
    47 U.S.C. § 543(b)(3).

[^3]: Effective competition exists where a multichannel video
    programming distributor ("MVPD") meets one of four tests within its
    franchise area: (1) fewer than 30% of households subscribe to the
    service of the cable system (herein referred to as the "low
    penetration test"); (2) at least two MVPDs serve 50% or more of
    households and at least 15% of those households take service other
    than from the largest MVPD (the "overbuild test"); (3) a municipal
    MVPD offers service to at least 50% of households (the "municipal
    test"); or (4) a local exchange carrier ("LEC") or its affiliate (or
    any MVPD using the facilities of the LEC or its affiliate) offers
    video programming service (other than direct broadcast satellite
    ("DBS") service) comparable to the service of an unaffiliated MVPD
    (the "LEC test"). *See* 47 U.S.C. § 543(1)(1)(A-D).

[^4]: For the results of previous surveys, *see* *Implementation of
    Section 3 of the Cable Television Consumer Protection and
    Competition Act of 1992, Statistical Report on Average Prices for
    Basic Service, Cable Programming Services, and Equipment*, 16 FCC
    Rcd 4346 (2001); *Implementation of Section 3 of the Cable
    Television Consumer Protection and Competition Act of 1992,
    Statistical Report on Average Prices for Basic Service, Cable
    Programming Services, and Equipment*, 15 FCC Rcd 10927 (2000);
    *Implementation of Section 3 of the Cable Television Consumer
    Protection and Competition Act of 1992, Statistical Report on
    Average Prices for Basic Service, Cable Programming Services, and
    Equipment*, 14 FCC Rcd 8331 (1999); *Implementation of Section 3 of
    the Cable Television Consumer Protection and Competition Act of
    1992, Statistical Report on Average Prices for Basic Service, Cable
    Programming Services, and Equipment*, 12 FCC Rcd 22756 (1997);
    *Implementation of Section 3 of the Cable Television Consumer
    Protection and Competition Act of 1992, Statistical Report on
    Average Prices for Basic Service, Cable Programming Services, and
    Equipment*, 12 FCC Rcd 3239 (1997); *Report on the Cable Services
    Bureau's Survey on the Rate Impact of the Federal Communications
    Commission's Revised Rate Regulations*, 9 FCC Rcd 5484 (1994);
    *Implementation of Sections of the Cable Television Consumer
    Protection and Competition Act of 1992: Rate Regulation*, 9 FCC Rcd
    4119 (1994) ("*Benchmark Order*"); *Implementation of Sections of
    the Cable Television Consumer Protection and Competition Act of
    1992: Rate Regulation*, 8 FCC Rcd 5631 (1994).

[^5]: Pursuant to 47 U.S.C. § 543(k), the Commission directed cable
    operators, selected as part of a random sample representative of the
    industry, to respond to certain data requests. *See Implementation
    of Section 3 of the Cable Television Consumer Protection and
    Competition Act of 1992*, *Statistical Report on Average Prices for
    Basic Service, Cable Programming Services, and Equipment*, 16 FCC
    Rcd 10749 (2001).

[^6]: Cable operators are not subject to rate regulation in franchise
    areas where the Commission has made a finding of effective
    competition. In other franchise areas, local communities may
    continue to have the authority to regulate the rates of the basic
    service tier and equipment. *See* 47 U.S.C. § 543(l)(2).

[^7]: *See* fn. 3, *supra*.

[^8]: The term "service tier" means a cable service for which the
    operator charges a separate rate. *See* 47 U.S.C. § 522(l7). The
    "major" CPST tier typically meets two criteria: (1) offers the most
    number of channels among the CPST tiers, and (2) has the highest
    number of subscribers among the CPST tiers.

[^9]: Most subscribers (89%) take both BST and the major CPST; the
    remaining 11% take BST service only.

[^10]: Installation charges represent one-time charges in contrast to
    monthly charges.

[^11]: We calculated average monthly rate per channel equal to average
    monthly rate divided by number of channels. Ideally, when
    calculating price changes, we would like to take into account
    changes in the quantity and quality of service provided. In the case
    of cable rates, however, that is difficult to do because there is no
    readily available measure of service and programming quality. Both
    the quantity and quality of services provided have changed
    significantly in recent years as cable operators have upgraded their
    systems' capacity. Increased system capacity, typically, results in
    additional channels of service and may also result in improved
    signal quality, improved system reliability and the provision of new
    services. We report average monthly rates on a per channel basis as
    a proxy for quality adjusted price changes.

[^12]: Throughout this report, there is only a slight difference, if
    any, in the overall average and the average for the noncompetitive
    group. This is because the group of operators that have received a
    specific Commission "effective competition" finding represents a
    relatively small group of cable operators, and thus there is only a
    slight effect from this group on the overall average. We estimate
    that competitive and noncompetitive operators serve, respectively,
    approximately 6% and 94% of cable households nationwide.

[^13]: Operator is defined for this report on a system basis. For
    example, if a multiple system operator ("MSO") has 10 cable systems,
    that MSO is considered to be 10 operators for the purpose of this
    report.

[^14]: For a general explanation of stratified sampling methodology,
    *see* G. W. Snedecor and W. G. Cochran*,* Statistical Methods
    434-59, 7^TH^ ed. (1980). A positive correlation exists between
    system size and the monthly rate for cable service. Using
    statistical analysis of data from the year 2000 survey, we
    stratified noncompetitive cable systems prior to selecting the
    sample according to size thresholds that yielded relatively uniform
    rates within each stratum.

[^15]: We subdivided the operators meeting the overbuild test into two
    subgroups \-- wireline overbuild and DBS overbuild.

[^16]: To be included in the statistical analysis, respondents must have
    provided the average monthly rate and number of channels offered as
    of July 1999, 2000, and 2001.

[^17]: Kagan World Media, *Kagan's 10-Year Cable TV Industry
    Projections,* Broadband Cable Financial Databook 2001, (July 2001)
    at 10.

[^18]: The value of cable services can be measured in various ways. Some
    analysts have suggested that the average number of channels (or
    satellite channels) received by subscribers, along with their
    respective per channel rates, are an appropriate measure of value.
    Alternatively, others have suggested that subscribers may not
    similarly value an increase in the number of channels as more
    channels are added, and thus the additional channels may have a
    declining marginal value. Because of the difficulty of obtaining
    consumer valuation data, our Survey did not seek information on how
    consumers value the channels on the BST and CPST tiers they receive,
    or how they would value those tiers if given the option of receiving
    fewer channels or different channels than those offered.

[^19]: The use of statistics as an analytical tool is a way of
    estimating the unknown characteristics of a population by examining
    a random sample selected from that population. The monthly rates we
    calculate from our samples probably do not match exactly the average
    monthly rate for the entire population of cable operators, even
    though our samples are representative. Rather, the average monthly
    rate for the entire population falls within a range around our
    sample's reported average. This range is bounded by the sample
    average plus or minus 1.955 multiplied by the standard error of our
    estimated average. This gives us a "95.5% confidence interval." If,
    for example, a sample's average monthly rate is \$35.00 and the
    standard error is \$0.50, we estimate that the true average monthly
    rate is between \$34.02 and \$35.98 with 95.5% probability. We
    arrive at \$34.02, the lower end of the range, by subtracting 1.955
    x \$0.50 from \$35.00, and we arrive at \$35.98, the higher end of
    the range, by adding 1.955 x \$0.50 to \$35.00. We report the
    standard errors for the estimated averages in the Attachments. *See*
    J. Kmenta, Elements of Econometrics 70-153 (1971) for a further
    explanation of sampling techniques.

[^20]: These weighted averages could be calculated by several methods.
    In the method we use, the weighted average for each group equals the
    sum of the average monthly rate calculated for each stratum times
    the percent of subscribers in that stratum. For further information
    on methods of calculating weighted averages, *see* W. E. Deming,
    Some Theory of Sampling 135-211 (1950).

[^21]: The LEC stratum consists of both the incumbent cable operators
    who competed with an affiliate of a LEC at the time that a finding
    of effective competition was made and the LEC affiliate. The other
    strata, except for the DBS stratum, similarly consist of the
    incumbent cable operator as well as the relevant competitor. The DBS
    stratum includes only the incumbent because monthly rates of the DBS
    competitor are not part of the Survey. Most of the operators
    represented by the LEC stratum are incumbent operators. Only a small
    percentage (about 20%) of the operators belonging to this stratum
    are new entrants, which are either LEC affiliates or former LEC
    affiliates in cases where the LEC may have sold these operations
    subsequent to the finding of effective competition.

[^22]: We combined the averages for the competitive and noncompetitive
    groups using a weight of 6.1% for the competitive group and 93.9%
    for the noncompetitive group. *See* Attachment A for information on
    data used to compute those weights.

[^23]: In all tables, a 5% level is used to denote statistical
    significance.

[^24]: Because the average monthly rate per channel is a
    weighted-average, a direct division of the average monthly rate by
    the average number of channels does not yield the average monthly
    rate per channel.

[^25]: *See* www.bls.gov/cpi/#data for information on the CPI series.

[^26]: BLS bases the cable CPI on a survey of items on consumers'
    monthly cable bills, including premium services (i.e.,
    pay-per-program services) and installation costs, which are not
    included in our monthly average. When an item shows a significant
    change in price, BLS attempts to make a quality adjustment. BLS may
    increase or decrease the observed price of an item, depending on
    whether the change deteriorated or improved the quality of the
    particular product or service in question. In the case of cable
    service, the addition of channels is perceived, in most cases, as an
    improvement in quality. For a further discussion of BLS methodology,
    *see* www.bls.gov/cpi/fact9.htm.

[^27]: These percentages refer to the percentage of cable systems
    offering these services, and not the percentage of U.S. households
    passed.

[^28]: Services on digital tiers are separate from BST and CPST. Charges
    for digital tier service were not included in the calculation of
    average monthly rates that serve as the focus of this report.

[^29]: *See Benchmark Order,* 9 FCC Rcd 4119 at Appendix C (1994).

[^30]: We found that some of the variables used in the benchmark
    analysis were not statistically significant in our analysis and thus
    are not shown in Attachment D-1.

[^31]: The benchmark analysis found a similar, although smaller,
    difference and attributed this difference in average rates to
    possible cost differences or differences in the quality of service
    (or other non-price dimensions of the product offering) between
    multiple system operators and single system operators. *See*
    *Benchmark Order* at Appendix C.

[^32]: For a further explanation of this potential bias, s*ee*
    *Benchmark Order*, 9 FCC Rcd 4119 at Appendix C.

[^33]: *See, e.g.,* R. N. Rubinovitz, *Market Power and Price Increases
    for Basic Cable Service since Deregulation,* Rand Journal of
    Economics 10 (Spring 1993) ("Rubinovitz"); J. W. Mayo and Y. Otsuka,
    *Demand, Pricing, and Regulation: Evidence from the Cable TV
    Industry,* Rand Journal of Economics 405 (Autumn 1991) ("Mayo and
    Otsuka"); T. Chipty, *Horizontal Integration for Bargaining Power:
    Evidence from the Cable Television Industry*, Journal of Economics
    and Management Strategy 385 (Summer 1995); G. S. Ford and J. D.
    Jackson, *Horizontal Concentration and Vertical Integration in the
    Cable Television Industry,* Review of Industrial Organization 507
    (1997) ("Ford and Jackson"). These studies examined a variety of
    factors that influence the demand, price, and quality of cable
    service, and our model uses similar factors. For a description of
    other equally valid approaches, *see* R. W. Crandall and H.
    Furchtgott-Roth, Cable TV Regulation or Competition, the Brookings
    Institution (1996) at Appendix B.

[^34]: According to a well-established economic theory related to
    consumer demand, substitutability of a product or service depends
    upon the level of responsiveness of the quantity demanded to changes
    in price for that good. The responsiveness of the quantity demanded
    to changes in price of the good is known as "price elasticity of
    demand." For example, the price elasticity of demand for cable
    services would measure the effects of changes in average monthly
    cable rates on the demand for cable services assuming that all other
    factors, such as the number of channels offered, were held constant.
    Another such parameter is income elasticity of demand. Income
    elasticity is defined as the responsiveness of demand for a
    particular good or service to changes in household income. *See* C.
    E. Ferguson and J. P. Gould, Microeconomic Theory 4^TH^ ed., (1975).

[^35]: *See, e.g.*, Ford and Jackson; and D. Waterman and A. A. Weiss,
    Vertical Integration in Cable Television, MIT Press and AEI Press
    136-7 (1997).

[^36]: The degree of vertical integration is measured by the number of
    BST and major CPST channels which are devoted to the carriage of
    programming networks in which the operator has an ownership
    interest. Data for the number of channels devoted to the carriage of
    vertically affiliated networks is from the 2001 Competition Report,
    at Appendix D, Table D-1. We also considered an alternative method
    for measuring the degree of vertical integration. This method, which
    involved identifying whether or not the operator has an affiliation
    with a programming network, produced similar results.

[^37]: A price elasticity estimate of less than one is referred to as
    "inelastic." Conversely, an elasticity estimate of more than one is
    considered "elastic." Recent econometric estimates of the price
    elasticity of demand for cable service range from 2.41 to 3.22.
    *See, e.g.,* Ford and Jackson; and General Accounting Office, *The
    Effects of Competition from Satellite Providers on Cable Rates* 30
    (2000) ("GAO Report").

[^38]: Throughout the analysis, a 5% level is used to denote statistical
    significance.

[^39]: As explained above, the operators meeting the criteria for this
    subgoup include only those who have filed a petition seeking a
    finding of effective competition with the Commission and where the
    Commission has made such a finding. There may be other operators,
    however, who could meet the criteria for effective competition, but
    who have not filed a petition with the Commission. In 30 states, for
    example, DBS penetration has reached an average level of more than
    20% (*see* *Annual Assessment of the Status of Competition in
    Markets for Delivery of Video Programming,* at ¶ 58, FCC 01-389,
    released Jan. 14, 2002 ("2001 Competition Report")). In those
    states, there are most likely a number of operators who would be
    able to meet the test for effective competition based on overbuild
    status (50% of homes passed and 15% penetration by a competitor),
    but who have not filed a petition with the Commission seeking such a
    finding.

[^40]: *See, e.g.,* GAO Report; and W. M. Emmons and R. A. Prager, *The
    Effects of Market Structure and Ownership on Prices and Service
    Offerings in the U.S. Cable Television Industry*, Rand Journal
    732-50 (Winter 1997) for similar findings.

[^41]: For example, the demographics of the various areas served by
    operators may differ in a consistent manner.

[^42]: This may be due to the possibility that vertically integrated
    systems are using a larger proportion of their channel capacity than
    non-vertically integrated systems for services other than the BST
    and major CPST, the measure of channel capacity used in our model.
    For example, our model does not include premium or pay-per-view
    services. Results from a recent academic study show that the number
    of channels offered tends to vary depending on the type of networks
    with which the operator is vertically integrated (a refinement not
    included in our analysis). According to this study, which was based
    on pre-1992 data, operators vertically integrated with the owners of
    networks carried on BST and CPST tend to offer an increased number
    of both CPST and premium channels. Those operators that are
    vertically integrated with the owners of premium service networks
    tend to offer fewer CPST and premium channels. *See* T. Chipty,
    *Vertical Integration, Market Foreclosure, and Consumer Welfare in
    the Cable Television Industry,* American Economic Review 436 (July
    2001).

[^43]: *See* R. C. Mittelhammer, G. G. Judge, and D. J. Miller,
    Econometric Foundations 446-95 (2000) ("Mittelhammer") for a further
    discussion of this methodology.

[^44]: Previous studies using similar sets of independent variables
    include Rubinovitz; Mayo and Otsuka; Chipty; and Ford and Jackson.

[^45]: In ideal terms, we would prefer that all influences captured in a
    demand equation go in one direction only, i.e., influences should go
    from the independent variables to the dependent variable. In this
    case, the influences go in both directions. In economic terms, this
    is called "simultaneity." Failure to deal with this problem will
    result in biased estimations of the demand function.

[^46]: For a further explanation of this technique, *see* Mittelhammer.