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
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.
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 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