Question

What makes cable companies natural monopolies? How did cable profits affect the emergence of satellite transmissions?

Answer 1

Cable transmission need an elaborate connectivity just like electricity transmission that increased the fixed cost of the firms in the market, taking that into account a single firm in the market will be able to serve the market much better than several smaller firms doing it at a very high cost in the market. That high fixed cost and lower marginal cost makes the cable company a natural monopoly.

With satellite transmission in the market this monopoly will become diluted and the profit of those firms will be affected.