Comment by antonovka | Hacker News Reader

Comment by antonovka | Hacker News Reader

Parent Full thread

This can't end well. At the end of the day, Apple and AT&T have the right (or should have the right) to make any agreements they find necessary ...

So can I have the right to broadcast my own GSM signal in the 900 MHz range, or a perpetual sweet-heart franchise agreement with my local municipal government to run last-mile internet to my neighborhood's houses?

These are natural monopolies we're dealing with. My options are constrained to carriers that have been granted guaranteed access to public airwaves by the FCC. The carriers then use technical (carrier locks), legal (contracts), and social (difficult cancellation processes) means to lock consumers in.

The carriers then collude with handset makers to restrict consumer choice further by locking handset features, and restricting the applications that they run. There are ways around this (such as buying third party unlocked, unrestricted phones), but carriers and handset makers leverage their government-backed market position to discourage consumer adoption.

These are natural monopolies we're dealing with.

There is nothing natural about a monopoly (or in this case, oligopoly) ordained by government. And that is the problem that should be addressed directly. Current government policies create an absurd amount of artificial spectrum scarcity.

Edit: Obviously I wasn't clear here -- I should have been straightforward rather than going with a clever turn of phrase. I meant to say, as a point of accepted definition, that government-granted monopolies are not 'natural monopolies.' Natural monopolies are monopolies that occur 'naturally' in the market because of conditions or extreme capital requirements.

"Natural monopoly" is an economics term.

http://en.wikipedia.org/wiki/Natural_monopoly

Please identify whether a "sweetheart municipal franchise agreement" is a "natural monopoly" or a "coercive monopoly."

http://en.wikipedia.org/wiki/Coercive_monopoly

[Edited]

I didn't have to read the Wikipedia page. I linked to it for your benefit because you were degrading someone's comment when they were using a term that anyone with any exposure to economics would be familiar with.

I don't want to quibble about this forever, but you're still missing my point. I said there wasn't anything natural about a government-granted monopoly because government-granted monopolies are not "natural monopolies" (in the academic economic sense of the phrase). I asked if you read the WP page because I felt that if you had, and had read my comment as well, that it would be clear to you that was my point.

You need to go read the section under Regulation. Often natural monopolies do arise in participation with the government.

The section you reference deals with regulation as a solution to mitigating the perceived harms of an existing natural monopoly.

Yes, but they are allowed to continue to exist under government scrutiny. Most local utilities are set up this way. If you're the first there, you usually get to be the only supplier.

We're quibbling about terms, and I always fear at this point in a thread that the need to be right might overwhelm continued reading comprehension. But in economic parlance, if (let's say) a power company came to be a dominant monopoly in a given area without government support, that would be a natural monopoly. If the government then stepped in to regulate the power company as a utility and simultaneously excluded competitors by government force, the power company becomes a coercive monopoly. Is it still a natural monopoly? It's hard to say, because conditions change, but the government grant of exclusivity remains constant. Maybe a new technological innovation would have let a competitor emerge, breaking the natural monopoly. But we would never know as long as the government continued to exclude competitors by force of law.

We may just be disagreeing to disagree at this point. I'll let you have the last word here.

But we would never know as long as the government enforced the coercive monopoly.

This is a one-sided description and a false dichotomy. A non-regulated natural monopoly can be just as suppressive as a government enforced-coercive monopoly. A regulated natural monopoly does not also require the creation of a government-enforced coercive monopoly.

Please provide an example of where this has ever been the case. That is, where a company without a government grant of exclusivity (or other sorts of government favoritism) in a market has been able to 1) sustain that monopoly for more than a few years, and 2) to leave their customers worse off than if the business had never existed in the first place.

http://en.wikipedia.org/wiki/Natural_monopoly#Historical_exa...

That example discusses a naturally competitive situation and how that wasn't apparently optimal. No one was worse off for the companies existing, and they weren't even monopolies, making it irrelevant to our discussion here. The example claims society was better off when the government established monopolies that could be profitable. The government could have done that at any time -- the existing private companies didn't provide any impediment to that. So that's all fine and good, but how does that answer my question? I'll let you have the last word.

Clearly you didn't read it closely enough. They were worse off for the lack of an affordable water supply leading to a lack of sanitation and epidemic.

The inefficient private solution stayed the adoption of a publicly administered one.

Does this break the record for most nested comments?

You're right about reading comprehension degrading. So I'll spell this out simply. When Local Power Company establishes a regional power grid, they are the largest by virtue of being the first. Economies of scale prevent other firms from coming into the market. They would have to build an entirely separate, but redundant, power grid without any indication that customers, who need power to begin with, would purchase from them. This means they have, as the Wikipedia page reads, "an overwhelming cost advantage over other actual or POTENTIAL competitors." (Emphasis mine) This is why the government often steps in and legalizes the natural monopoly.

Both. The first market entrant has "... an overwhelming cost advantage over other actual or potential competitors".

Municipalities also have natural incentives to provide sweet-heart franchise agreements -- it's generally too expensive to do otherwise once the infrastructure is in place, often partially subsidized.

There is nothing natural about a monopoly (or in this case, oligopoly) ordained by government.

http://en.wikipedia.org/wiki/Natural_monopoly

And that is the problem that should be addressed directly. Current government policies create an absurd amount of artificial spectrum scarcity.

Liberalizing spectrum allocation policy -- or opening the airwaves to anarchy -- wouldn't solve the problem that wireless telecoms is a very strong natural monopoly.

Monopoly? Last I checked there were multiple competing mobile carriers. You do have to put a lot of capital at risk though to be a national carrier. Which is exactly the point, really. Someone put a lot of capital at risk, and now that their bet has worked out, the regulators want to step in and tell them how to run their business and (in many cases) how much return is fair for them to get from their investment.

Regulation of this sort is the same as partial nationalization, and has the same effect to a measured degree. When people anticipate that the returns on their winning bets will be 'moderated,' or that they will have to set business policies for the 'greater good,' they will in the future make less risky bets or put less capital at risk.

Monopoly? Last I checked there were multiple competing mobile carriers. You do have to put a lot of capital at risk though to be a national carrier. Which is exactly the point, really. Someone put a lot of capital at risk, and now that their bet has worked out, the regulators want to step in and tell them how to run their business and (in many cases) how much return is fair for them to get from their investment.

Natural monopoly. Not the same thing.

The cellular industry has seen massive consolidation and reduction in consumer choice over the past 15 years -- the existing 5 national wireless carriers (AT&T, Verizon, Sprint, T-Mobile, U.S. Cellular) are comprised of literally hundreds (if not thousands) of formerly independent regional carriers. Cingular itself started as a conglomeration of 100+ regional carriers, before a few more mergers made Cingular into the new AT&T.

This is not a particularly strong testament to consumer choice and competition in the face of a natural monopoly.

Reply on news.ycombinator.com