Ken Schaefer wrote:
Did you read the link I posted to the economic definition of a "natural
monopoly"? Sometimes it helps to draw upon the knowledge of others.
It does, and it helps to understand the difference between real barriers
and artificial barriers, and even understand that there are real
examples of multiple companies running their own side-by-side
infrastructure.
Most distribution networks are natural monopolies - especially the "last mile" - fixed line telephony, electricity distribution, water and sewerage pipes, local roads, railway lines etc. The market is a fixed size, and a new entrant entering the market simply divides the market in half, yet still has to expend a huge amount of capital duplicating an existing distribution network.
The internet isn't the same as sewage pipes. Even with your examples,
local roads are local councils, so even if fixed-line internet was a
monopoly, stating that the solution is a national level network owned by
the government is is really an arbitrary decision unless you are trying
to claim that scales of economy will work better the national level
(hint: they won't).
Sometimes, between major centres of distribution it might be economic to duplicate
infrastructure (e.g. fibre network between Sydney and Melbourne), but this becomes less
and less financially viable the smaller the customer based (i.e. down to the "last
mile"
If this is the case, then why has government had to explicitly ban
competition?
If this is the case, why have independent businesses ran their own
infrastructure in new estates?
It doesn't really matter that Telstra/Telecom was a government monopoly when it built the fixed line network.
Except that it does.
Show me one other modern economy that has multiple fixed line phone companies
competing side-by-side for the same broad customer base. They don’t exist for a
good economic reasons.
"Modern Economy": Can you explain what this is for me? It just seems
like other empty term.
Regardless, there are two easy examples, I am sure there are more:
- Australia: Telstra and Optus!? I have three different sets of cables
that go past my house!
- The United States: When I lived in DC we had a few different cables
that ran past my place.
Does this mean that every house has competition? No. But as I said, via
comparative pricing you still get a mechanism to see if gouging is
taking place and what a fair price might be, this makes it easier for
grievance to be filed with the government/ACCC/etc as there is solid
evidence of pricing in areas with competition. Just because some areas
will have a monopoly is a terrible justification to say that we should
have a monopoly everywher
The argument "because private monopoly" in arguing for a total
government monopoly also totally ignores history where it's shown that
government will sell of the network eventually to fill a deficit/help
their crony buddies/etc. If this is the case, in arguing for a
government monopoly in all areas over a private monopoly in some areas,
you will end up with a private monopoly in all areas.
As I said about the economic reasons in Australia, it's not the cost of
labour or the equipment, but the cost of the regulation, and the fact
that the government gave Telstra a monopoly over public land with their
own cables.
Let's say government owned the pits, and allowed 10 providers to run
their own cable at a cost of say $10 per residence per year and then got
out of the way, I believe in some areas you will have several providers,
and if one provider is the only fibre provider in one area and have high
prices, there is an incentive for competition to enter. The copper
network (which the government want to, but shouldn't shutdown) also
provides a good mechanism for pricing.
Let's say some areas do not want an upgrade (there isn't the demand) and
they are happy with copper, then what does that tell you? (Think back to
intro econ). Just because government gives them a "free gift" that they
actually pay for is the same as stealing someone's wallet and buying
them a new car that they didn't want, how is it different with broadband?
Cheers,
--
Les Hughes
[email protected]
