Review of Industrial Organization 21: 231–249, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
Measuring the Impact of Regulation: A Study of
Canadian Basic Cable Television
STEPHEN M. LAW
Department of Economics, Mount Allison University, Sackville, N.B. Canada
JAMES F. NOLAN
Department of Agricultural Economics, University of Saskatchewan, Saskatoon, SK Canada S7N
Abstract. We evaluate the appropriateness of regulation within the Canadian cable television in-
dustry by applying both parametric and non-parametric approaches to measure scale efﬁciency.
Although we begin with a sample offering adequate degrees of freedom for parametric estimation,
important policy issues lead us to consider further estimation over sub-samples. Since some of these
sub-samples are small enough that parametric models cannot guarantee reliable estimates, we obtain
production characteristics non-parametrically through data envelopment analysis. The nonparametric
results for scale efﬁciency support the parametric results. We ﬁnd evidence against a natural mono-
poly argument that might have justiﬁed continuation of the mandated monopolization of Canadian
cable television service. By the end of the sample period, there were no longer substantial economies
of scale in most relevant markets.
Key words: Cable television, regulation, scale efﬁciency.
JEL Classiﬁcations: L5 Regulation and Industrial Policy, L9 Industry Studies: Transportation and
Since its inception, cable television service provided by the cable television
(CATV) industry has been the subject of substantial intervention on the part of
regulators in Canada. Among other requirements, the Canadian Radio-television
and Telecommunications Commission (CRTC) maintained a system of exclusive
Licensed Service Areas (LSAs) for CATV operations.
The issues to be addressed in this research are the following: (1) Was the en-
forced monopoly provision of basic cable television justiﬁed? Was the industry
The authors would like to thank the editors of this journal for their valuable input. In ad-
dition, Malcolm Brown, Michael Denny, Bryan Ferguson, John Rowcroft and participants at the
1998 Canadian Economic Association Meetings in Ottawa also contributed helpful comments. Law
acknowledges ﬁnancial support from UNBRF 29-4. The usual caveats apply.