TURNING THE CABLES:
                Economic and Strategic Analysis of
               Cable Entry into Telecommunications

Abstract                         

     This paper explains cable television's entry into
telecommunications in the U.S. and elsewhere.  Technical advances
now offer scope economies between video and telephony services
while regulatory initiatives have removed many legal barriers
separating the two industries.  Together with favorable market
conditions, these developments make cable telephony a lucrative
opportunity at a time when video markets have come under attack
from several new competitors.  

     To predict whether this opportunity is exploited through
direct entry, acquisition or joint venture, we assess the strategic
merits of each entry mode.   Key strategic factors include whether
the cable operator can make credible and effective threats to
follow an alternative entry path, and the extent to which incumbent
providers have made sunk investments.  We conclude by examining
some implications of policies toward entry mode choice and find
they may have unintended consequences, such as when a ban on
acquisition results in uneconomic direct entry or no entry
whatsoever.