| The innovation of new digital technology as well as the changes in communications policies are the principal forces behind convergence and diversification in the cable industry. With the help of technological innovation and changes in regulatory policies that have made the convergence in services possible, cable operators are now providing consumers with voice services in local markets.;In the face of the new era of convergence, this study estimates, empirically, the deployment pattern of cable telephony by cable operators in U.S. local residential telecommunications markets and discovers what factors are important in order to lead to additional competition in markets in the future. This study establishes a model that the size of local markets and the specific cost advantages of local cable systems associate with the deployment of cable telephony by cable operators.;Probit regression analyses, using data from the 2005 Television & Cable Fact Book, the Federal Communications Commission and the U.S. Government Census reveal that cable operators deploy cable telephony in specific local markets where sufficient market size, the economies-of-scale and scope of cable systems, and less sunk investment in networks meet and generate a long-run duopoly profit from voice services. Horizontal integration and local video competition with other MVPD service providers do not appear to increase cable operators' incentives to deploy cable telephony in local markets. |
