Phil, things like cables and phone lines going to houses are “natural monopolies” in that it costs so much to install them that competitors probably can never get started. In fact, if the technology to deliver video over phone lines were available or anticipated when cable TV was building out in the 70s, the owner of the phone lines (pre-breakup AT&T) could probably have stopped the new cable TV companies from ever getting off the ground (by using the fact that AT&T has already paid for its pipe to the home to lowball the new companies). In other words, the probable reason we have two data pipes going into most homes in the U.S. rather than just one is that the first data pipe (the phone line) was not at that time of the introduction of the second pipe technically able to carry the new kind of data (video).
It is desirable that these duopolists (the owners of the phone lines and the cable-TV cables going to the home) are not able to use their natural duopoly as a wedge to enter markets for data services like search engines, online travel agencies, online stores, etc, in the way that Microsoft used their ownership of DOS to lever their way into dominance of markets like word processors and web browsers.
One way to do that is to draw a line at the level of “IP connectivity” and impose a regulation that say that the duopolists are in the business of selling this IP connectivity (and if they like, levels below IP connectivity like raw copper) but cannot enter the market (or prefer partners who are in the market) of selling services that ride on top of IP connectivity and depend on IP connectivity to deliver value to the residential consumer.
This proposal has the advantage that up to now on the internet companies that provide IP connectivity have mostly stayed out of most of the markets that depend on IP connectivity to deliver value to the residential consumer.
It is possible to enshrine such a separation into law and regulations without letting one cable-internet user on a local network (or whatever they call them) shared by a whole block of houses hog up most of the bandwidth of the local network. I.e., there is nothing incompatible here with contracts that impose a monthly cap on bytes received.
And even if spam filtering is made an exception to the separation, so that both connectivity providers (cable-internet and DSL providers) and Google can offer spam filtering, that does not mean that spammer get a free license to spam. What we want is to prevent Verizon or Comcast from making it impossible or more difficult for the Joe Consumer to go to Expedia than to go to Travelocity (or the Comcast Travel Store) -- or more difficult for him to go to Windows Live Search than to Google Search—and we can do that while still allowing Verizon and Comcast to cut off recalictrant spammers (or requiring Joe Consumer to get his email from a email provider that does not happen to be a duopolist who will cut off recalitrant spammers).
Bob Frankston has been eloquent on this issue for at least 10 years now.
Phil, things like cables and phone lines going to houses are “natural monopolies” in that it costs so much to install them that competitors probably can never get started.
How does that square with the fact that in places without government-granted monopolies, there are often more than one provider? My apartment building has two separate cable companies, in addition to Verizon fiber. Is there a general argument for how rental houses often end up with two or more separate cable boxes from more than one provider in areas without government suppression of competition, while still holding that it can’t happen in the general case?
Installing wires requires digging up roads, using utility poles and leaving utility boxes on other peoples’ property. You need permission from local government to do that, period. In some places, the local governments only give one company permission to do that. That’s a government granted monopoly. In other places, they give permission to more than one company, so that they can compete with each other. That’s a government granted oligarchy. But whether there’s one pre-existing cable company or five, if you want to start a new cable company, you need government permission, and you probably won’t get it. It’s nothing like a free market.
And it’s worth noting that a gentlemen’s agreement to not compete too hard is profitable for all parties in a heavily restricted market. Ergo, the government-granted oligopoly is only superior to the monopoly insofar as you expect business executives to be irrational enough to not cooperate in the iterated Prisoner’s Dilemma.
There are other alternatives as well. There’s a company here that provides high speed broadband to businesses via a network of roof mounted microwave transmitters. Businesses use them because they offer better value than paying a local cable company to hook a building up. My parents in rural England had a number of options for broadband despite no cable companies operating in the area, including DSL and a wireless relay from a satellite uplink.
Phil, things like cables and phone lines going to houses are “natural monopolies” in that it costs so much to install them that competitors probably can never get started. In fact, if the technology to deliver video over phone lines were available or anticipated when cable TV was building out in the 70s, the owner of the phone lines (pre-breakup AT&T) could probably have stopped the new cable TV companies from ever getting off the ground (by using the fact that AT&T has already paid for its pipe to the home to lowball the new companies). In other words, the probable reason we have two data pipes going into most homes in the U.S. rather than just one is that the first data pipe (the phone line) was not at that time of the introduction of the second pipe technically able to carry the new kind of data (video).
It is desirable that these duopolists (the owners of the phone lines and the cable-TV cables going to the home) are not able to use their natural duopoly as a wedge to enter markets for data services like search engines, online travel agencies, online stores, etc, in the way that Microsoft used their ownership of DOS to lever their way into dominance of markets like word processors and web browsers.
One way to do that is to draw a line at the level of “IP connectivity” and impose a regulation that say that the duopolists are in the business of selling this IP connectivity (and if they like, levels below IP connectivity like raw copper) but cannot enter the market (or prefer partners who are in the market) of selling services that ride on top of IP connectivity and depend on IP connectivity to deliver value to the residential consumer.
This proposal has the advantage that up to now on the internet companies that provide IP connectivity have mostly stayed out of most of the markets that depend on IP connectivity to deliver value to the residential consumer.
It is possible to enshrine such a separation into law and regulations without letting one cable-internet user on a local network (or whatever they call them) shared by a whole block of houses hog up most of the bandwidth of the local network. I.e., there is nothing incompatible here with contracts that impose a monthly cap on bytes received.
And even if spam filtering is made an exception to the separation, so that both connectivity providers (cable-internet and DSL providers) and Google can offer spam filtering, that does not mean that spammer get a free license to spam. What we want is to prevent Verizon or Comcast from making it impossible or more difficult for the Joe Consumer to go to Expedia than to go to Travelocity (or the Comcast Travel Store) -- or more difficult for him to go to Windows Live Search than to Google Search—and we can do that while still allowing Verizon and Comcast to cut off recalictrant spammers (or requiring Joe Consumer to get his email from a email provider that does not happen to be a duopolist who will cut off recalitrant spammers).
Bob Frankston has been eloquent on this issue for at least 10 years now.
How does that square with the fact that in places without government-granted monopolies, there are often more than one provider? My apartment building has two separate cable companies, in addition to Verizon fiber. Is there a general argument for how rental houses often end up with two or more separate cable boxes from more than one provider in areas without government suppression of competition, while still holding that it can’t happen in the general case?
Installing wires requires digging up roads, using utility poles and leaving utility boxes on other peoples’ property. You need permission from local government to do that, period. In some places, the local governments only give one company permission to do that. That’s a government granted monopoly. In other places, they give permission to more than one company, so that they can compete with each other. That’s a government granted oligarchy. But whether there’s one pre-existing cable company or five, if you want to start a new cable company, you need government permission, and you probably won’t get it. It’s nothing like a free market.
And it’s worth noting that a gentlemen’s agreement to not compete too hard is profitable for all parties in a heavily restricted market. Ergo, the government-granted oligopoly is only superior to the monopoly insofar as you expect business executives to be irrational enough to not cooperate in the iterated Prisoner’s Dilemma.
You mean oligopoly
Yep, it’s the bankers that are a government granted oligarchy.
There are other alternatives as well. There’s a company here that provides high speed broadband to businesses via a network of roof mounted microwave transmitters. Businesses use them because they offer better value than paying a local cable company to hook a building up. My parents in rural England had a number of options for broadband despite no cable companies operating in the area, including DSL and a wireless relay from a satellite uplink.