http://bits.blogs.nytimes.com/2009/04/03/the-cost-to-offer-the-worlds-fastest-broadband-20-per-home/
This NY Times blog post explains how the fastest broadband is available in Japan for a very low cost. U.S. cable companies are hesitating to offer the fast broadband technology and the ones that are are doing so at very high prices compared to what is offered in Japan. U.S. companies are also worried that people will cancel their TV cable and watch videos on the Internet at these high prices.
Given the difficulty in fostering more competition in offering cable due to the high infrastructure cost, is this an example of the free market working to the detriment of consumers whereby the cable companies are working in their own best interests?
The real problem are the "franchise monopolies" granted by various communities, giving cablecos no reason to upgrade.
Can you explain how these franchise monopolies work? I took an econ class recently and my professor said its more efficient to have one utility provider in a given area due to the high capital investment necessary and then the government can regulate prices. I'd imagine it would be similar with cable companies and broadband. What is the free market alternative without local government to regulate and provide these monopolies?
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
jpleezy19: took an econ class recently and my professor said its more efficient to have one utility provider in a given area due to the high capital investment necessary and then the government can regulate prices.
But who determines that? Can't the free market determine better than politicians or bureaucrats whether or not capital investment is too high for competition? And if the government sets prices, how do we know that is the best price, for the best service, and consumers are being satisfied?
If the market shows that there is only room for one firm, then there will be only one. If that firm is inefficient, someone else will come in and compete.
Your prof is a statist tool. The alternative is competition which provides each person the choice to make, rather than the local governments extracting tribute from the cablecos.
As far as how the franchise monopolies work, the local government demands extortion money be paid by the cableco in order to operate in the locality without any competition from other cablecos (and sometimes telcos, such as banning the building of U-Verse point-of-presence boxes for several months where I live).
Let us remember Bastiat and Hazlitt in this analysis also: we must take into account both the seen and unseen costs of any policy.
The Japanese and many European countries have faster speeds, no caps, and lower prices with a higher number of "competitors" because the fundamental nature of their markets is different than ours. In those countries, the government (ie. the bureaucrats who bled the taxpayers) paid immense amounts of money for widescale fiber infrastructure. The goverment, being the owner of said infrastructure, leases it out to private companies to provide the service in the area in which the company wishes to provide the service.
Naturally they have more "competitors" in those markets because none of them had to front the actual capital cost of the base infrastructure. However, the government more or less demands the terms under which these competitors operate inorder to utilize the super-low-cost of entry government fiber lines.
The primary reason that in America we are so thoroughly shafted has already been stated: the franchise monopoly. The idea is based on the fundamentally absurd notion that content providers cannot own the rights of way for the infrastructure which carries their content. This state granted privelege is extraordinarily useful in allowing one provider to get a foothold and then, from his position of monopoly, can work through the franchise granter to help prevent the extension of additional franchises to competitors.
Being in a position of legal monopoly, the provider has little if any reason to improve his infrastructure or his service.
You will find my friend that most "market failures" are not failures of the market at all. They are failures in a current scheme of government intervention in those markets.
Edit: The answer tp your question about how precisely the market would work is simply, the utilities would fully own what they paid for with their own capital and could use in whatever manner they choose to. If they paid a ridiculously high cost for their service, then competitors would purchase the land, equipment, and human capital necessary to pull away customers from them. This process would continue until you had enough providers in a given area until the marginal utility law and marginal revenue exceeds marginal costs at roughly the point where any new entrants (unless for some reason they could produce for much lower costs) cannot make a worthwhile profit from the investment in a new venture.
Or a natural market could develop where the infrastructure and service provider are actually seperate entities entirely. It's very hard to say given the level of regulation that remains in the telecommunications markets.