Ma Bell's monopoly has never been "natural". It has been enforced by FCC, ever since FCC was formed for that specific purpose in 1934. Even before that, ICC through the Kingsbury Commitment had adopted an ill-considered and unjustified hands-off policy with respect to Ma Bell's anticompetitive actions.
AT&T did not become a monopoly by government action. The Kingsbury Commitment was an agreement by the government not to take antitrust action against AT&T, not an agreement to prevent others from trying to compete with AT&T. The Communications Act of 1934 did solidify AT&T's monopoly by basically freezing in place the status quo. But AT&T became a monopoly in the first place by natural means.
I find this reply to be in complete factual agreement with my original post. You've chosen to emphasize a point which seems unimportant, however. Rockefeller didn't use the government to build Standard Oil into a monopoly. It was a monopoly nonetheless, and the courts still broke it up.
I was a bit surprised myself. It's not illegal to write a chrome extension that blocks ads (yet), but if you try to cut off money from phone companies, you can be sure you'll get jail time...
Jesus, yes, how did I have to scroll down this far before I read "ATT was a government monopoly"?
Google doesn't have a monopoly on anything. They have the best search engine, but I can switch in seconds. Likewise the rest of their products all have very well established and really quite functional competitors. That I don't use, cause I like the big G, but I could if they annoyed me too much.
But new and small businesses can't switch where they go to raise awareness, which always seems to be an underappreciated consequence of Google's monopoly. You either have to buy Google ads or do SEO, and if you SEO, Google can pull the rug out from under you at any moment and you have no recourse.
Consumer protections are for the consumer, not businesses. Plenty of companies have managed to get brand awareness without Google. If you build your business to be entirely dependent on a single point-of-entry, then your business can have the "rug" pulled out by whatever the owner of that point is.
Sure you can. I mean, no offense, but there are a lot of people who will sell you a display ad that gets in front of whoever you want. And lord knows there is nothing stopping you from doing cold outreach.
I think what a lot of people want is inbound warm leads for free, without actually reaching out to do sales.
And no, that's not gonna happen. That ship has sailed long ago. You could go viral, that's still a thing. Viral content has never been able to spread farther and faster, although it's pretty damned competitive these days.
There are lots of competing vendors for display ads. You can also advertise on facebook and Bing. For search ads, I donno. If 1 tv channel was by far the most popular, would ads on it make them an illegal monopoly for businesses that wanted to advertise?
In the context of deciding whether google is a monopoly or not, splitting the advertising market into "search ads" and "display ads" feels pretty artificial.
Google has a monopoly on search ads in the same way that McDonald's has a monopoly on the Big Mac.
You're describing regulatory capture, and it doesn't require a monopoly at all, merely deeply-entrenched players with effective lobbyists. Many, many industries engage in regulatory capture without having a single monopolist, e.g. pharma, defense, even say the SF housing market.
The Bell System was allowed to exist as a monopoly because it was assumed telephone service would produce a natural monopoly. The US government stepped in to regulate it because of the lack of effective competition, and the result was a pretty cozy situation for AT&T for many years. Eventually the prevailing theories changed, and AT&T was forcibly broken up by an antitrust suit.
A monopoly is a seller with few or no competing sellers. In many cases this is bad for consumers, so many governments have taken steps to dismantle some monopolies or ameliorate their bad effects. It's not clear that "natural monopoly" is a category that has any members, but the theory is that a natural monopoly is a monopoly such that dismantling it would have other bad effects that would be worse than the direct bad effects of the monopoly. That is the falsehood that various judges and regulators have countenanced over the century that they have refused to dismantle Ma Bell, while continuing to police other monopoly situations.
> the theory is that a natural monopoly is a monopoly such that dismantling it would have other bad effects that would be worse than the direct bad effects of the monopoly
Hm? That's not what it means. Natural Monopoly actually has a very clear Economics 101 definition: "[a]n industry in which multi-firm production is more costly than production by a monopoly"[1]. Or, paraphrased, a natural monopoly is one where fixed costs/barriers to entry are so high that it is difficult to have competition. It seems that in your OP, you're implying that a "natural monopoly" is one that arises without intervention -- this is often the opposite of the case, governments intentionally create and support natural monopolies when they can identify them.
Telephone service is a great example. Laying physical wires costs a lot of money. Laying the physical wires is probably the most expensive part of providing telephone service. Having multiple companies in competition would result in costs rising for everyone, because the cost to lay the wires is the same for each company, but each company has fewer subscribers to pay off those costs. In this case, a regulated monopoly is the best thing for consumers, with the idea that government regulation would offset the issues that come from monopoly status. "Utilities" as a whole are typically natural monopolies.
The interesting part to me is that in terms of cost a monopolistic company might be the most effective. The problem is just that cost and price don't have much to do with each other. A monopoly provider is unlikely to actually provide low prices unless he knows competition could emerge.
Having two parallel infrastructure might be less efficent in terms of cost, but could still be more efficent in terms of prices to the consumer.
Both politicans and economist have argued that just having government step in could provide low cost and low price.
I think this assumtion is flawed. Having multible infastuctures adds layers of competition that even with government services or regulation are hard to achive. How well you utilise your infrastructre, what sort of payment structure are costumers provided with, quality of service, how for and in what direction do you grow your network and so on.
Government stepping in can maybe solve the short term problem, but if think about the long term, letting this market be free of a government regulated monopoly procides the chance that another company can come in, either starting in places where the monopoly has not reached and expand from there or start where the consumers hurt the most and try to expand from there.
I think the answer here is probebly differnt for every industry, laying a cable and a sewage system have very different cost structures.
The most important thing about these regulation seems to be that you never exclude competition explicitly. So you could regulate a infrastructure provider and give him price ceilings or something.
If you really see a contradiction between our two definitions, I'll take your confident affirmations of the status quo with a grain of salt. See the sibling comment from 'ghaff for a much more complete understanding of this concept.
You say: dismantling it would have other bad effects that would be worse than the direct bad effects of the monopoly
I wanted to clearly state that it's not some sort of abstract "other bad effects", it's that prices would increase for the consumer if the monopoly was disbanded.
My thought/critique of ghaff's comment involves physical last-mile infrastructure. Alternatives to regular natural monopolies exist, but we'd have to have some pretty tight regulations on how, say, land beneath or above roadways could be used.
The idea of having monopolies at local scales that compete at larger scales makes sense to me. But replicating last-mile infrastructure seems wasteful/bad/hard to solve (multiple companies building overhead power lines? multiple companies laying wire beneath roadways and apartment buildings? how do we deal with public land being used for private infrastructure purposes?) without some sort of regulatory control.
Looking at it over sufficiently long time horizons and saying "well, it's all temporary anyway" kinda buries the purpose of even having a discussion.
Ma Bell and her daughters have been getting the same sweet deal for over a century now. If that's "temporary", I don't want to see "permanent".
First/last mile (depends on one's perspective, you know) really is the only remaining support for the whole rotten edifice of USA telecom. Thus it's instructive that FCC fights at every turn to stymie white spaces, SDR, or any other 21C radio technology. When the consumer can choose from many ISPs, the first competition in a century will kill every existing firm.
The assumption around natural monopolies is that they're the inevitable result of the economic dynamics of an industry. Therefore if you carve things up to force competition, the theory goes, you're going to increase capital requirements overall and therefore prices to consumers.
It's also fairly clear that at least over long enough time horizons there aren't many natural monopolies.
I think actually there are many natural monopolies in terms of economic profit and doubling infrastructure is inefficent.
There is a nice private solution to this, and this sort of thing is not talked about enough.
Imagen we have two companies, both are ISP with their own infrastructure. Then because of other reason a new expensive infrastructure project is needed. These two could ban together and form a new organisation (non-provit or a club) that economises on the infrastructure but provides access and price garanties to both companies and maybe even sell access capacity to third parties.
The differnce to a normal company providing infrastructure is that the costumers of that company always need to be afraid of price raises. Once you have this club situation you essentially have one infrastructure, but you avoid monopoly pricing because competitive game has moved to a higher abstraction. This would provide very low cost and very low price to consumers.
If you apply a regulatory system as soon as you think there is a natural monopoly the industry will almost certantly stagnate.
If you're talking about protecting a supposed natural monopoly through regulation, there's probably some truth to that. The thinking probably goes something like "We must protect the public from an unregulated monopoly today." Left unspoken is "And the future is someone else's problem. They'll deal with it if they have to."
As for whether there really are natural monopolies, the classic examples are things like electrical distribution systems. If one company has already wired up a city, it's going to be hard for someone else to come in and wire up the same city in competition. (And may not be a great idea from the perspective of public policy.)
However, over longer timeframes technology change and market forces overturn many monopolies. IBM, Windows, Ma Bell--these were all considered to have monopolies at one time.
