3 ms·

Unfortunately some things fall into the naturally monopoly category (http://en.wikipedia.org/wiki/Natural_monopoly http://en.wikipedia.org/wiki/Natural_monopoly

Unfortunately some things fall into the naturally monopoly category (http://en.wikipedia.org/wiki/Natural_monopoly http://en.wikipedia.org/wiki/Natural_monopoly). Figuring out what those are is an ongoing process. Government regulated industries get a bad rap these days - mostly because deregulation has been an ongoing fad for the last 30 years or so - but a lot of these have great track records. The California electricity crisis provides an instructive example of what kinds of effects deregulating an industry that was previously govt regulated can have - in short, significantly higher prices for badly degraded service [1]. Many of the proposed fixes are further govt intervention, but this time in the form of subsidies to businesses rather to incentivize necessary expansions rather than outright re-acquisition of the industry. So in short, competition isn't necessarily always good and doesn't always produce better results. In addition, de-regulated industries aren't necessarily free from government intervention and are opened up to market manipulation and exploitation. [1]: http://en.wikipedia.org/wiki/California_electricity_crisis http://en.wikipedia.org/wiki/California_electricity_crisis

shmerl 12y ago
> Mostly because deregulation has been an ongoing fad for the last 30 years or so Not all deregulation produced good results. On the contrary, a lot of it produced bad results, because it was often intended for selected interests and not for everyone. Here is a good overview: http://economixcomix.com/home/tpp/ http://economixcomix.com/home/tpp/
rhino369 12y ago
The problem with the CA power deregulation is that it deregulated wholesale while keeping retail rates strictly regulated. Most states have deregulated power and didn't have similar issues.
greggyb 12y ago
See siblings for thoughts on California. Deregulation can be done poorly or well. For a counter-anecdote, see the story of Southwest, an airline started with solely intrastate routes, which kept it from FAA regulation and allowed it to compete on price in a way that other airlines couldn't. It now carries the most domestic passengers[0], is highly rated for customer service, and has posted >40 straight profitable years (including the span of the most recent recession)[1]. FAA regulation was considered necessary due to the high fixed costs associated with operating an airline. I am fully aware of the concept of a natural monopoly (econ major here), but the fact is that the majority of cable providers were granted exclusive franchises by municipalities. You may object to the source, but I am at work and don't have time to track down other support for this statement. Hopefully we can both accept the facts even if you object to the reasoning[3]. The article is talking about cable television, but since the incumbent ISPs are the same firms as the cable television providers, I hope you can agree that the analysis, regardless of your agreement or disagreement, is at least relevant. Finally, there are many areas with multiple cable companies/ISPs (I live in one, and recently moved from an area where Verizon made a large FiOS investment and is competing very effectively with TWC - I do know that they've put a stop to expansion on FiOS). It is clearly possible to see competition in this area. The fact that many/most municipalities offered exclusive franchises and that we now see many monopolies in this area is only proof that many people _believed_ cable service to be a natural monopoly, not that it is. The fact that we see areas with competition in this sector is a strong piece of evidence that natural monopoly is not the case. [0]http://en.wikipedia.org/wiki/Southwest_Airlines http://en.wikipedia.org/wiki/Southwest_Airlines [1]http://southwest.investorroom.com/index.php?s=43&item=1975 http://southwest.investorroom.com/index.php?s=43&item=1975 [2]http://www.cato.org/pubs/pas/pa034.html http://www.cato.org/pubs/pas/pa034.html

shmerl 12y ago

> Mostly because deregulation has been an ongoing fad for the last 30 years or so Not all deregulation produced good results. On the contrary, a lot of it produced bad results, because it was often intended for selected interests and not for everyone. Here is a good overview: http://economixcomix.com/home/tpp/ http://economixcomix.com/home/tpp/

rhino369 12y ago

The problem with the CA power deregulation is that it deregulated wholesale while keeping retail rates strictly regulated. Most states have deregulated power and didn't have similar issues.

greggyb 12y ago

See siblings for thoughts on California. Deregulation can be done poorly or well. For a counter-anecdote, see the story of Southwest, an airline started with solely intrastate routes, which kept it from FAA regulation and allowed it to compete on price in a way that other airlines couldn't. It now carries the most domestic passengers[0], is highly rated for customer service, and has posted >40 straight profitable years (including the span of the most recent recession)[1]. FAA regulation was considered necessary due to the high fixed costs associated with operating an airline. I am fully aware of the concept of a natural monopoly (econ major here), but the fact is that the majority of cable providers were granted exclusive franchises by municipalities. You may object to the source, but I am at work and don't have time to track down other support for this statement. Hopefully we can both accept the facts even if you object to the reasoning[3]. The article is talking about cable television, but since the incumbent ISPs are the same firms as the cable television providers, I hope you can agree that the analysis, regardless of your agreement or disagreement, is at least relevant. Finally, there are many areas with multiple cable companies/ISPs (I live in one, and recently moved from an area where Verizon made a large FiOS investment and is competing very effectively with TWC - I do know that they've put a stop to expansion on FiOS). It is clearly possible to see competition in this area. The fact that many/most municipalities offered exclusive franchises and that we now see many monopolies in this area is only proof that many people _believed_ cable service to be a natural monopoly, not that it is. The fact that we see areas with competition in this sector is a strong piece of evidence that natural monopoly is not the case. [0]http://en.wikipedia.org/wiki/Southwest_Airlines http://en.wikipedia.org/wiki/Southwest_Airlines [1]http://southwest.investorroom.com/index.php?s=43&item=1975 http://southwest.investorroom.com/index.php?s=43&item=1975 [2]http://www.cato.org/pubs/pas/pa034.html http://www.cato.org/pubs/pas/pa034.html