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When cable TV consumers evade cable access fees by [#permalink]
11 Jun 2006, 23:03
This post received KUDOS
100% (01:06) correct
0% (00:00) wrong based on 4 sessions
When cable TV consumers evade cable access fees by purchasing illegal 'pirated' cable boxes, a vicious cycle results. The use of pirated cable boxes by consumers forces cable companies to raise rates, which, in turn, leads more consumers to purchase pirated cable boxes in order to recieve free cable programming.
The vicious cycle described above could not result unless which of the following were true?
a) An increase in cable TV rates causes some consumers to cancel their service or reduce the number of premium channels to which they subscribe.
b) Some methods for detecting and disabling pirated cable boxes are effective at forcing pirated cable TV consumers to pay user fees or forgo cable TV programming, although the success rates vary considerably.
c) When cable TV executives establish cable access fees in order to generate an acceptable level of profit, they do not adequately account for revenue that will be lost through pirated cable use.
d) No one who routinely uses illegal pirated cable boxes can be induced by lower cable access fees to stop using pirated cable boxes unless fines for theuse of such boxes are raised at the same time.
e) Cable TV consumers do not differ with respect to the cable access fees that would cause them to consider purchasing illegal pirated cable boxes.
Will go with C.
The vicious cycle depends on cable TV companies increasing the rates.
If the cable TV companies take into account the loss of revenue due to piracy and decide the access fees they won't increase the access fees when few cable TV consumers resort to piracy
Viscious Cycle --> People evade cable fees so company make less revenue so they increase cable fees so more people evade fees
This cycle would not happen if companies had given enough consideration to lost revenue and fixed the rates in such a way that they will generate their income, in which case they dont have to increase rates and more people will not start evading.
C.. no doubt.
If the executives took into account the piracy of cable, they would have built the increase in cost in their current fees. Hence they would not increase the fees if piracy did occur and thus negating the effect of the viscous cycle.
If operators keep adding their operational cost and don't do anything to stop piracy or penalise those who are involved in it. How will the piracy stop?
Consumers are opportunists and always go for the cheaper means (of course not comprising with quality) which are free available and not controlled...
Lets wait for the OA...
The OA is C
Here we are looking for an assumption. For the cycle to occur, the lost revenue must force the cable companies to raise their rates. But if cable TV executives adequately account for revenue that will be lost through pirated cable use,then the vicious cycle would not occur.