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 NEWS  Federal  Communications  Commission  445  12  th  Street,  S.  W.  Washington,  D.  C.  20554  This  is  an  unofficial  announcement  of  Commission  action.  Release  of  the  full  text  of  a  Commission  order  constitutes  official  action.  See  MCI  v.  FCC.  515  F  2d  385  (D.  C.  Circ  1974).  News  Media  Information  202  /  418-  0500  Internet:  http://  www.  fcc.  gov  TTY:  1-  888-  835-  5322 
 FOR  IMMEDIATE  RELEASE:  NEWS  MEDIA  CONTACT:  January  27,  2005  Jacki  Ponti  at  202-  418-  0436 
 JOINT  INTERNATIONAL  BUREAU  AND  MEDIA  BUREAU  WORKING  PAPER  ON  DBS-  CABLE  COMPETITION 
 Washington,  D.  C.  --  The  International  and  Media  Bureaus  announced  today  the  availability  of  a  paper  that  examines  substitutability  between  Direct  Broadcast  Satellite  (“  DBS”)  and  basic  cable 
 services.  The  joint  working  paper  entitled  “Competition  between  Cable  Television  and  Direct  Broadcast  Satellite  –  It’s  More  Complicated  than  You  Think,”  by  economists  Andrew  Wise  and 
 Kiran  Duwadi,  is  now  available  on  the  International  Bureau’s  Working  Paper  web  site  at  http://  hraunfoss.  fcc.  gov/  edocs_  public/  attachmatch/  DOC-  255869A1.  pdf. 


 The  analyses  and  conclusions  in  the  Working  Paper  Series  are  those  of  the  authors  and  do  not  necessarily  reflect  the  views  of  other  members  of  the  Commission  staff  or  the  Commission  itself. 
 The  working  paper  finds  that  there  is  a  cost  to  switching  between  cable  and  DBS.  DBS  is  often  considered  a  substitute  for  basic  cable  service,  but  the  paper  finds  that  cable  subscribers  may  face 
 substantial  switching  costs  to  move  from  cable  to  DBS  services.  Wise  and  Duwadi  use  price  data  from  the  FCC’s  annual  cable  price  survey  and  other  related  demographic  variables  to 
 examine  the  cost  of  switching  from  cable  to  DBS  and  vice  versa.  They  find  some  firm-  specific  cable  attributes  and  demographic  variables  that  influence  consumer  choice,  and  find  that 
 switching  costs  appear  to  affect  consumers’  decisions  to  switch  from  one  service  to  another. 
 The  paper  explains  that  substantial  price  changes,  taking  into  account  differences  in  quality,  can  cause  consumers  to  switch  between  services.  The  paper  also  examines  whether  consumer 
 behavior  varies  depending  on  the  size  of  cable  price  per  channel  or  quality-  adjusted  price  change  (i.  e.,  monthly  cable  rates  divided  by  the  number  of  channels  for  the  first  two  tiers  of  channels). 
 The  authors  find  that  when  quality-  adjusted  prices  for  basic  cable  services  increase  substantially,  subscribers  will  switch  from  cable  to  DBS,  presumably  at  the  point  at  which  the  price  change  is 
 larger  than  the  cost  of  switching.  As  a  result,  while  switching  costs  may  dampen  price  effects  in  cable-  DBS  competition,  the  presence  of  DBS  still  acts  as  an  imperfect  constraint  on  the  ability  of 
 cable  operators  to  raise  price  per  channel. 


 -FCC- 
 News  about  the  Federal  Communications  Commission  can  also  be  found  on  the  Commission’s  web  site  www.  fcc.  gov. 
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