Question

Service	Households (2015)	Households (Current Survey)
Time Warner Cable	75,625	74,520
At&T U-Verse	56,815	58,140
Dish Network	14,940	14,650
Direct TV	19,650	19,850
Google Fiber	-	1,150
Households with Service	167,030	168,310
No Service*	16,650	17,520
Total Households	183,680	185,830

*No service indicates that the household does not currently subscribe to a multi-channel video provider. Of these households, 68.4% indicated that they did subscribe to one or more Internet-based services such as Netflix or Hulu. In the 2015 survey, the same response was 63.2%.

Question:  

According to Department of Justice guidelines, is the industry heavily concentrated? How has that changed since the 2015 survey?

Answer 1

To calculate the degree of concentration of service providers, we have calculated N-firm concentration ratio as well as Herfindahl-Hirschman Index. Using N-firm concentration index (N=3), it was found that three were serving 88.23 percent subscribers in 2015 and the share of top three firms has declined to 87.52 in the current survey. It implies that concentration has not increased during the two survey periods. Rather a marginal decline was observed in concentration.

Formula for N-firm concentration ratio:

  

Where S1, S2, and S3 are the respective market share of top three firms

Table 1: N-firm concentration Ratio

	2015	Current Survey
Time Warner Cable	75625	74520
At&T U-Verse	56815	58140
Dish Network	14940	14650
Direct TV	19650	19850
Google Fiber	0	1150
Households with Service	167030	168310
No Service*	16650	17520
Total Households	183680	185830
Sum of top three service providers	147380	147310
N-firms concentration (N=3)	88.24	87.52

Note: CR3 is based on total subscribers

Herfindahl-Hirschman Index: the decline in concentration was observed using HHI also. It is visible as HHI value was 34.25 per cent in 2015 and 33.69 per cent in the current survey. HHI calculation is available in Table 2.

Formula:

Table 2: Herfindahl-Hirschman Index

	2015	Sum of square of each firm(2015)	Current Survey	Sum of square of each firm(latest period)
Time Warner Cable	75625	0.205	74520	0.196
At&T U-Verse	56815	0.116	58140	0.119
Dish Network	14940	0.008	14650	0.008
Direct TV	19650	0.014	19850	0.014
Google Fiber	0	0.000	1150	0.000
Households with Service	167030	1.000	168310	1.000
No Service*	16650		17520
Total Households	183680		185830
HHI		34.25		33.69

Conclusion: The industry is not heavily concnetrated. During the two periods, concentration has marginally decreased.