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Home Publications Blogs Beat the Press The Telephone/Internet Duopoly

The Telephone/Internet Duopoly

Wednesday, 28 November 2012 05:21

David Cay Johnston has a nice column in the NYT discussing how a failure of antitrust regulation has effectively allowed the old ATT monopoly to recreate itself as a duopoly, although this time without regulation.

Comments (7)Add Comment
So Goes Health Care, Goes Telephone and Internet Service
written by Last Mover, November 28, 2012 5:56
The deregulation and competition sold to Americans as a lie over the years for telephone and internet service by professional crooks in the private and public sector have sent it down the same road of economic failure as health care.

For example, consider this quote from the NYT article by Johnston:
On average, for instance, a triple-play package that bundles Internet, telephone and television sells [in America] for $160 a month with taxes. In France the equivalent costs just $38. For that low price the French also get long distance to 70 foreign countries, not merely one; worldwide television, not just domestic; and an Internet that’s 20 times faster uploading data and 10 times faster downloading it.
analagous indeed
written by frankenduf, November 28, 2012 8:14
philly was supposed to develop infrastructure to make it a giant hotspot- a socialized signal with chepa availability for poor (kids) access- verizon sued the city to block proceeding, claiming it was unfair!?- much like the insurance industry blocking single payer by arguing that private insurance couldn't compete with socialized insurance costs!?
Yet another case of
written by Rob Lewis, November 28, 2012 10:18
"If Americans only knew what things were actually like in other countries, we might stop wasting time telling everyone we're Number One and actually do something to take back our country from the bloated corporatocracy."

(Related question: is anybody out there STILL saying we have the world's best healthcare system?)
Cartels? Overpricing? Sounds like U.S. health care.
written by Rachel, November 28, 2012 10:24

Johnston mentions that in telecommunications, we have "prices that are higher than a truly competitive market would bring."

In health care,the profits of non-competitiveness have reached truly staggering heights. $13 thousand for an appendectomy. This would cost less than $6 thousand in the next most expensive country. (Data from IFHP, 2011)

$89 for an office visit. But just $40 for a visit in Germany. $23 in France.

And the Voices on the Right pretend to be care about competitive markets. Voices on the Left pretend to care about our health. But they are not willing to question the profits of the medical cartels, supported by government policy. It's so much easier to just deny coverage.
Regulators Failed Us
written by Mike, November 28, 2012 2:39
While watching the inexorable consolidation occurring in industries such as telecom and banking over the past couple of decades, I've often wondered for who's interests the regulators have been looking out.

Some thoughts and Google
written by anon, November 28, 2012 8:21
The pricing of internet drives me crazy. In a competitive industry do you think they would be able to charge higher prices in the second year of service than in the first year?

If your unable to switch, without penalty, then the pricing is irrational. If your able to switch, either people are irrational, or there is nowhere else to go.

They perhaps want to get people hooked on the internet then jack up the price in the second year after they're addicted or dependent on it.

It's possible that Google will disrupt these markets though. They already have an internet and cable service in Kansas City and there have been rumors of them getting into cellphone service.

Previously they bid on LTE spectrum supposedly to bid up the price against Verizon, to force some rule change toward more "openness" that kicked in at the higher price. (Although, at least for now, the market doesn't appear to be any more open. This may change when CDMA is deprecated completely in favor of LTE.)

They've also have been trying to sell "unsubsidized" and unlocked phones. (Though, there appear to be no guarantee that a network must accept phones that will work with their network, nor necessarily unlock the phones they sell.)

Overages, plus hidden fees and "taxes", seem something that should be done away with, but with overages companies have argued that warning a customer they may be charge more will be a violation of their free speech.

"Bundling" itself is bad enough.

Sorry, this is a sloppy comment, but I wanted to put a few thoughts out there. I'm pretty astounded that the competitive state of these industries has been written about so little. It seems only now have there been some serious talk about it on mainstream tech sites, like by Nilay Patel on the Verge, but I've seen this is the first mention I've seen from an economist.

(My best guess is that there has been some "faith" among observers surrounding Apple, the iPhone and Steve Jobs, that is perhaps starting to dissipate a year after his death. There seemed to be a belief that the iPhone seriously disrupted the industry. While it perhaps disrupted the handset industry, at least from the perspective of consumer adoption, it seems to have had no effect, yet, on the provider industry.)

But even if Google goes forward and is successful, we then may have a serious Google problem. (There's no guarantee they'll not adopt similar practices. Their strategy seems to be to prevent themselves from getting locked out of being able to collect data from and serve ads to customers. (And possibly a hedge if the advertising model eventually fails.) Although, vertical integration may give them exclusive access to data. If other tech companies, fearing Google, follow them into the industry, we may have a serious shakeup.)
List of Re-Formed Trust So Far
written by leo from chicago, November 29, 2012 2:21
Some of my favorite re-formed trusts exhibiting lack of competition and accountability (also known as regulation) include:

- Internet/Telco (see above)
- Broadcast Radio & TV
- Airlines
- Banks (Chase _Manhattan_ -- in Chicago would've been illegal just a few years ago)

Long Live the Gilded Age!

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.