Comments
Ariella
11/29/2016 2:22:51 PM
User Rank Author
Re: Caption Contest
@srufolo1 yes, I know that's the problem with the assumptions of the books we were given at the time. I found a good article on the concept here https://mises.org/library/myth-natural-monopoly
It is a myth that natural-monopoly theory was developed first by economists, and then used by legislators to "justify" franchise monopolies. The truth is that the monopolies were created decades before the theory was formalized by intervention-minded economists, who then used the theory as an ex post rationale for government intervention. At the time when the first government franchise monopolies were being granted, the large majority of economists understood that large-scale, capital-intensive production did not lead to monopoly, but was an absolutely desirable aspect of the competitive process.
Though the article first discusses public utilities, it does come to cable TV, as well:
"The theory of natural monopoly is an economic fiction. No such thing as a 'natural' monopoly has ever existed."
The existence of longstanding competition in the cable industry gives the lie to the notion that that industry is a "natural monopoly" and is therefore in need of franchise monopoly regulation. The cause of monopoly in cable TV is government regulation, not economies of scale. Although cable operators complain of "duplication," it is important to keep in mind that "while over-building an existing cable system can lower the profitability of the incumbent operator, it unambiguously improves the position of consumers who face prices determined not by historical costs, but by the interplay of supply and demand."[48]
Also like the case of electric power, researchers have found that in those cities where there are competing cable companies prices are about 23 percent below those of monopolistic cable operators.[49] Cablevision of Central Florida, for example, reduced its basic prices from $12.95 to $6.50 per month in "duopoly" areas in order to compete. When Telestat entered Riviera Beach, Florida, it offered 26 channels of basic service for $5.75, compared to Comcast's 12channel offering for $8.40 per month. Comcast responded by upgrading its service and dropping its prices.[50] In Presque Isle, Maine, when the city government invited competition, the incumbent firm quickly upgraded its service from only 12 to 54 channels.[51]
In 1987 the Pacific West Cable Company sued the city of Sacramento, California on First Amendment grounds for blocking its entry into the cable market. A jury found that "the Sacramento cable market was not a natural monopoly and that the claim of natural monopoly was a sham used by defendants as a pretext for granting a single cable television franchise ... to promote the making of cash payments and provision of 'in-kind' services ... and to obtain increased campaign contribution."[52] The city was forced to adopt a competitive cable policy, the result of which was that the incumbent cable operator, Scripps Howard, dropped its monthly price from $14.50 to $10 to meet a competitor's price. The company also offered free installation and three months free service in every area where it had competition.
srufolo1
11/29/2016 2:15:51 PM
User Rank Platinum
Caption Contest
Whoever has their cellphones on, I would appreciate it if you could please turn them off!
srufolo1
11/29/2016 2:13:05 PM
User Rank Platinum
Re: Caption Contest
@Ariella You are probably correct, but it is part of history. The American Telephone & Telegraph Company was a monopoly, but I don't know how "natural" that was. Apparently the Department of Justice didn't think so. Because the antitrust suit in the 80s forced it to break up into 7 companies -- the "Baby Bells."
e
"The Commission votes 3-2 to allow the purchase of Water Works but oppose the acquisition of Park Place."
d
"In front of you, you'll see we've provided transcripts of earlier testimony and a tipping chart."
c
"I now pronounce you monopoly and acquihire. You may split your stock."
elizabethv
11/29/2016 8:47:05 AM
User Rank Platinum
Liz 5
"This is the last merger we'll try to do. No more mergers. We promise. "
"(whispers) Dale...."
"Don't worry, I crossed my fingers."
elizabethv
11/29/2016 8:44:53 AM
User Rank Platinum
Liz 4
I understand your concerns about the share we'll have in the market, but just trust us it won't be an issue. I said it won't and it won't. Just trust us.
elizabethv
11/29/2016 8:42:59 AM
User Rank Platinum
Liz 3
"You keep using that word. I don't think it means what you think it means."
faryl
11/29/2016 1:14:09 AM
User Rank Platinum
Re: Faryl 1
@DHagar Thanks! :)
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