I've been looking into The competition between cable companies, and it seems like each company secures rights to exclusive service from government agencies called Local Franchise Authorities (LFAs).
Is it true that most/all LFA's only allow one cable company to serve a specific area? Or is there a situation where living at my house I can choose between, say Comcast or Optimum. I know that Verizon Fios is getting into the market, but that's a fiber optic based service, and I think it only constitutes competition in the way that satellite does.
http://encyclopedia.jrank.org/articles/pages/6447/Cable-Television-Regulation-of.html
In the franchising process, municipalities choose among bids from cable-system operators who wish to build in the area. Bids often include promises of maximum channel delivery and public-service projects in exchange for a negotiated fee to the government. Typically, only one cable operator is selected, essentially granting a natural monopoly.
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I predicted a few years ago that cable companies would either have to become content providers or just be suppliers of pipes when internet 2.0 became a reality. And I was right. Look how the cable companies are buying movie studios. Once super fast intenet comes about, content will be on demand and content creators won't need to deal with the cable monopolists who charge both supplier and customer for use of their pipes. Soon, with a fast internet connection, the content provider will sell their own ads and send the program to the customer streaming right over the internet. So if the cable company wants to be more than just an ISP, they'll have to become content providers, which is what they're doing now.
There is no such thing as a "Natural Monopoly". All monopolies are the product of government force and it takes force to maintain the monopoly. Monopolies are not created or maintained by any market or natural process.
Cable companies had the closest thing you could have to a 'natural' monopoly that comes to mind, imo. They laid the cable, often when a neighborhood was being built. It's expensive to do this - the barrier to entry is the extreme cost to lay cable for a competitor, so effectively, whoever lays that cable first, owns that area. Satellite provides a competive wrinkle, but fiber has so much more potential. How would you argue that this isn't close to a natural monopoly?
razerfish:How would you argue that this isn't close to a natural monopoly?
For one thing, you just mentioned two other alternatives, fiber and satellite, which just proved yourself wrong.
The potential alternatives are between TV entertainment providers and not between some physical cables. The consumer couldn't care less about the medium of transmission per se. In a free market, there would also be nothing, in theory, from preventing a second cable company routing their own cables in parallel. That's essentially what Fios just did with their fibers. Apparently Verizon/FiOS has estimated that it would be profitable to route the entire nation with fiber optic cables all the way to your house!!!!!!!! There goes another statist myth about natural monopolies down the drain.
Actually, when I mention fiber I'm talking about the cable companies, not a competitor. Satellites are the only competition I can think of, and that competition is somewhat recent. As for your assertion (Verizon's?) that competing cable could be laid cost effectively to compete, I've only heard the opposite. Do you have any data to back up that claim?
razerfish:Actually, when I mention fiber I'm talking about the cable companies, not a competitor.
razerfish:Actually, when I mention fiber I'm talking about the cable companies, not a competitor. Satellites are the only competition I can think of, and that competition is somewhat recent.
There is the traditional coaxial cables, and the more recent fiber-optic cables. You've never heard of Verizon's FiOs?
You talked about "natural monopolies" so what's even the point of alluding to the present government granted licensed system as some sort of proof for something?
razerfish:As for your assertion (Verizon's?) that competing cable could be laid cost effectively to compete, I've only heard the opposite. Do you have any data to back up that claim?
What assertion? You don't know that Verizon is routing fiber optic cables in every major city and town in the US? It already has millions of customers for TV, Internet, and phone.
As for issue of monopoly, the problem is in your "theory" of monopoly that you are adhering to. If you are using the term monopoly to refer to some dominance in market share of a particular product then I'm afraid that such a concept of monopoly is quite useless. Since according to this theory, everyone is a monopolist since nobody produces an exact identical product.
As for a more meaningful concept of monopoly, especially in its negative connotations, some coercion must be typically present in order to prevent potential competitors from entry.
That entrepreneurs at a particular moment in time think it's not cost effective to compete with a particular producer or product does not make that producer a monopolist no matter if he's the sole producer in some given territory. Free entry is the only criterion that need to apply for competition to take place. Coercive barriers on entry create monopolies, not an efficient sole producer that competitors at present find it more profitable to compete elsewhere.
razerfish:Actually, when I mention fiber I'm talking about the cable companies, not a competitor. Satellites are the only competition I can think of, and that competition is somewhat recent. As for your assertion (Verizon's?) that competing cable could be laid cost effectively to compete, I've only heard the opposite. Do you have any data to back up that claim?
I can't help but point out that traditional broadcast media would (likely) be far more competitive without the FCC and the nationalization of "the EM spectrum". I know that doesn't really help with things in the real world, but it's still food for thought.
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