Disney’s Economic Analysis of Cable Video Programming Costs Flawed, Argues Time Warner Cable

SAN FRANCISCO, June 2, 2010 -- An economic analysis of cable television prices and video programming costs filed with the Federal Communications Commission this April by the Walt Disney Company can't be trusted because it considers the wrong factors in its analysis, according to a group of economic consultants with Charles River Associates.

"Dr. [Jeffrey] Eisenach's analysis provides no relevant information on the impact of programming cost increases on retail prices because his methodology of comparing costs and revenues over time has only the loosest connection to this issue of causation," write the  authors of the critique of a paper by Jeffrey A. Eisenach entitled: "Video Programming Costs and Cable TV Prices." Time Warner Cable commissioned the Charles Rivers Associates analysis.

"For example, Dr. Eisenach's comparison of video programming costs to the total revenues and total costs of the cable operators from their multiple lines of business does not control for the dramatic subscriber growth in cable's broadband and telephony services," they note. That obscures the big picture growth in the costs of video programming over the years and its impact on retail subscription prices.

The filing is one of several comments solicited by the FCC in an inquiry as to whether it needs to update its rules regarding retransmission consent -- the rules that govern the terms on which cable and satellite companies can retransmit broadcasters' signals to their own customers. Time Warner and a broad coalition of other cable, telecom and satellite companies and non-profit groups have asked the Commission to update the rules. They argue that a newly competitive landscape has given broadcasters too much power in the negotiating process.

A lawyer for Time Warner Cable asked the staff at the FCC to disregard Disney's economic analysis of video programming costs and subscriber prices due to the limitations mentioned in the Charles River Associates report.