Local phone companies have monopolies on phone service within their areas. Cable television can be transmitted via the wires that are already in place and owned by the phone companies. Cable television companies argue that if the telephone companies were to offer cable service, these telephone companies would have an unfair advantage, because their cable transmissions could be subsidized by the profits of their monopolies on phone service.
Which of the following, if true, would ease the cable companies’ fear of unfair competition?
A. In order to use existing telephone wire, telephone companies would need to modernize their operations, a process so expensive it would virtually wipe out all profit from their monopoly for the foreseeable future.
B. If a phone company were to offer cable service within a particular area, it would have a monopoly within that area.
C. The cost of television service, whether provided by cable or telephone companies, scales; that is, the total cost of transmission rises only marginally as more homes are added to the network.
D. Cable programming that offers more channels is already available through satellite dish, but the initial cost of the dish is extremely high.
E. Cable television will never be able to compete with the burgeoning video rental industry, especially as more homes now have video cassette recorders than ever did before.
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