Competition in the Cable Television Industry

In this article, we address three policy questions regarding the Portuguese cable televi-sion industry. First whether the high concentration in the industry has a technological justi cation. Second what is the level of market power that the cable television \u85rms exercise? Third, what is the impact on prices and welfare of two acquisitions an-nounced recently? We develop a structural model of the cable television industry that includes both a demand and a supply side. The model is estimated for a rich panel of Portuguese rm level data, and used to address these policy questions. The demand is described by a nested logit model model. Consumers have elastic demands. The costs are described by a \u85xed e¤ects cost frontier with a Cobb-Douglas speci\u85cation. Cable television services and broadband access to the internet services are characterized by increasing returns to scale, and economies of scope. Firms exercise more market power than if they played a Nash equilibrium, but less market power than if the colluded perfectly. The two announced acquisitions will have a small impact on prices and welfare