so you want a monopoly?

Monopolies are bad, right? We like competition: it’s part of what makes an innovative society. But wait: do we want competing electricity providers? Or water suppliers? Hmm. With competition comes the desire to economize on costs and in some cases that can mean compromising safety or reliability. So we have government-regulated, in some cases government-owned, utilities to provide these essential services.

We used to have a telephone monopoly but that was broken up, in the same of competition, into seven different entities: how many are left? Four or five? So much for competition.

Locally, we have a telephone provider and a cable TV provider, both regulated monopolies: they get access to every home without competing and we (allegedly) get reliable service at a fair price. Leaving reliability aside, prices should stay the same or possibly decline if no new services are added. Given the plethora of new services — call waiting/forwarding, distinctive rings — all of which are a one-time change with a monthly charge, why doesn’t the base rate go down? I would assume it would approach $0. I don’t expect it to reach that but I think a responsive regulator would be driving it that way. Too cheap to meter? I doubt it. We do need some payback/profit motive to ensure reliability and innovation.

In today’s market, we have additional services on top of these monopolies: we have phone over cable, internet over cable or telephone link, TV over satellite (partnered with the telco). So now you can get all manner of services that do compete, on top of the basic ones. If I was regulating these services, I would expect lower charges on the basic services — telephone, cable TV — as each new add-on was rolled out. A couple of reasons for this:

  • Make each service less expensive
  • Make each service more accessible which allows the (taxable) add-ons to gain more traction
  • Allow market forces to work with more flexibility/choice
  • Allow greater penetration of broadband, by either means, for future growth

If broadband internet is the electricity of the 21st century, we need something as ambitious and comprehensive as the Rural Electrification Administration to make sure everyone gets the benefits.

Mar 17, 2010

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