The problem of market size for Canadian cable television regulation

The policy of the Canadian radio television and telecommunications commission of awarding an exclusive right to provide cable television (CATV) service within a given licensed service area (LSA) rests partly on the presumption that CATV costs reflect economies of scale that are large relative to market size. Cost estimates from crosssections of CATV operations from 1985-1991 show increasing returns to scale and suggest that many LSAs were too small to capture these economies. The results also indicate that economies of scale for basic service declined over the 1980s and that the 'natural monopoly' characteristics of CATV may be eroded by further technological and regulatory changes.