Holding the line: The CRTC and the pricing of Canadian basic cable television services

In this paper, pricing behavior of cable television (CATV) from under rules established by the Canadian Radio-Television and Telecommunications Commission in 1986 is examined. Estimation of a system of equations--for cost, input shares, and revenue--reveals that, while the rules held CATV firms to less than monopoly pricing, the price structure can be distinguished from marginal-cost pricing, even for larger systems operating under constant returns to scale. Although there was some improvement in efficiency following 1989, estimates of market power and its associated marginal efficiency cost suggests that any improvement resulted from nonrule-based sources such as reallocation of licensed areas or cost shocks