Study Slams Cooper’s Cable Research - Multichannel

Study Slams Cooper’s Cable Research

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Washington -- Consumer advocate Mark Cooper has provided 'a distorted view
of the facts' and 'economically unsound theories' about the cable industry's
pricing and programming decisions, according to a cable-industry-funded analysis
of Cooper's work.

The analysis was performed by
University of California at Berkeley professor Michael Katz, whom Comcast Corp.
hired to review Cooper's January 2003 paper 'Cable Mergers, Monopoly
Power and Price Increases.'

Katz was the Federal Communication Commission's chief economist in 1994 when
the agency was aggressively overseeing cable rates.

In a 22-page report obtained by Multichannel
News
, Katz said he uncovered
numerous errors in basic economics, adding that Cooper's arguments in the
cable-bashing paper were 'so flawed that they do not provide even a starting
point for a proper analysis of the issues …'

Cooper argued in his paper that cable operators constantly jacked up rates as
a result of monopoly power, not as a result of rising programming costs or
higher capital spending.

Moreover, Cooper said basic rates should not have gone up
as much as they did because revenue from digital tiers and cable modem service covered capital
expenditures.

Working from the same data, Katz found that FCC data contradicted Cooper by
showing that in 2001 cable capital spending was $13.8 billion but revenue from
digital services, video and data, was $5.2 billion.

Katz ended his paper by noting that from his experience at the FCC in early
1990s, regulating the price of cable when operators needed to add channels and
pay higher program license fees to assure quality was a complicated task.

'I am proud of the work that the [FCC] staff did.
Inevitably, however, difficulties arose in regulating the supply of a product as
complex as cable television services,' Katz said.

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