This graph depicts the rate of cable inflation from 2000 to 2007 and beyond. The rate of cable inflation relative to general inflation in the U.S. economy is often cited as evidence of cable's market power. For the first five years of this decade, cable prices increased at a much faster rate than general inflation. But in 2005, the rate of increase of cable prices, as reflected by the slope of the green line, appears to conform to the rate of increase of all prices, as reflected by the slope of the blue line. It just so happens that 2005 marked the beginning of the telcos' push into video services. There are alternative explanations for the relative decline in cable prices, including FCC Chairman Martin's efforts to regulate the cable industry. (Cable operators likely recognize that cable price increases fuel pro-regulatory agendas.) But it is reasonable to interpret the recent cable inflation data as evidence of the beneficial effects of telco entry.
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