EXHIBIT 1.7 COST AND REVENUE IMPACTS OF VERTICAL INTEGRATION OF CABLE TV BUSINESS
Non Telco cost of cable TV operation
Telco cost of cable TV operation
(1) CASE 1: COST PENALTY EXCEEDS REVENUE GAIN
Cost penalty due to
vertical integration
Movement of demand curve due
to vertical integration
A
Number of customers
(2) CASE 2: COST PENALTY IS LOWER THAN REVENUE GAIN
Non Teico
cost of cable TV operation
Telco cost of cable TV operation
Cost penalty due to vertical integration
- 20 -
Movement of demand curve due to vertical
integration
Number of customers
Number of customers served by non-telco network (B) is lower
than number served by telco network (A)
Number of customers served by non-telco
network (B) is higher than number served by telco network (A)