Consumer Price Index

How BLS Measures Price Change in the Consumer Price Index for Cable and Satellite Television and Radio

Cable and satellite television and radio service (hereinafter cable television), a component of 'video and audio,' is included in the 'recreation' index of the Consumer Price Index (CPI). The CPI publishes an index for cable television at the U.S. level only. The relative importance level for cable television, according to the December 2007 U.S. city average for All Urban Consumer Price Index (CPI-U) is 1.187.

The base period weight for each CPI item group is the out-of-pocket expenditures households incurred for that item in 2005-06. Included are fees for installation and periodic charges. Pay-per-view movies and events are not included in the index, because they do not consistently appear on a monthly basis for proper comparison.

Movements in the cable television index reflect price changes in a sample of outlets selected among those that provide service to the 87 CPI sampling areas.

This sample of outlets reflects actual expenditures for cable and satellite as reported by respondents residing in these areas. There are approximately 1242 quotes priced for cable television.

Selection of characteristics to be priced

When CPI field representatives seek retail prices for cable television, they first select either installation charges combined with periodic charges or just periodic charges (which can include all levels of basic service, and basic service combined with premium channel options). The selection is made using probability sampling.

If the selection is just periodic charges, then the field representative, using probability sampling methods, selects the level of service to be priced. Periodic charges may include such options as minimum basic, expanded basic, and expanded basic plus premium channels. Once a service is selected, then the number and type of channels included are identified.

If the selection is installation and periodic charges, then the type of installation (original or additional), the number of connections, the need for a converter box, and the number and type of channels included in the minimum basic service are identified.

As a final step, the selection of optional items, such as a remote control, is completed. Once the characteristics to be priced have been selected, then the appropriate charges, franchise fees, and taxes are obtained and reported.

Quality changes

One of the most difficult problems for the CPI is to accurately quantify changes in the quality of items and to factor these quality changes out of the items' price movements. Once a BLS field representative selects an item for the CPI, and describes it by enumerating all of its quality determining attributes, then, each successive time a field representative collects the item's price, a comparison of its current characteristics is made to its previous description. If any characteristics change, a quality improvement or deterioration may have occurred.

In addition, because quality change often accompanies price change, when the price of an item changes significantly, the field representative asks the respondent to identify a cause.

When there are changes in an item's characteristics or significant changes in its price, an analyst in the national office carefully reviews the collected data. Then, using both information from the field representative and knowledge about the market for the item, the analyst determines if a quality change has occurred. If so, and if the analyst can identify the value of the quality change, the value of that quality change is removed prior to calculation of the index. However, if the quality change is significant, and the analyst cannot determine its value, that item is not used in calculating the index for the month in which the quality change is reported. For example, suppose the level of service selected for pricing now includes nine more channels, for a total of 80 channels, up from 71 channels previously included. Since the number of channels has increased, the quality of the priced service has increased. The analyst estimates the price impact of adding nine channels as follows: The price of the selected level of service containing 71 channels was $40.00 during the previous collection month. We divide the price by the number of channels (40/71) to estimate a price per channel, 0.563. We then multiply the price per channel by the new number of channels, 80, to estimate the price for the previous month had 80 channels been included, $45.07. We then compare the current price of $47.00 to the estimated previous month price for 80 channels when reflecting the price change in the index, and show an increase of 4.3%.

Additional information

Additional information on the Consumer Price Index can be found in the BLS Handbook of Methods, chapter 17, "The Consumer Price Index," Bulletin 2490 (1997). This chapter is also available on the BLS Internet site here or you may call the Information and Analysis Section of the CPI at (202) 691-7000.

Information in this report is in the public domain and, with appropriate credit, may be reproduced without permission. This information is available to sensory impaired individuals upon request. Voice phone: (202) 606-7828; TDD phone: (202) 606-5897; TDD message referral phone: 1-800-326-2577.

Last Modified Date: March 6, 2008

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