08-11-2011, 07:03 AM
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Confirmed User
Join Date: Mar 2008
Location: London, Saint-Tropez, Bermuda, Moscow
Posts: 5,289
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Quote:
Originally Posted by TheDoc
Regs do not come before the monopoly, they come after the monopoly has happened and abuse has started.
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You sure about that?
This is from "The Myth of Natural Monopoly" by Thomas J. DiLorenzo
Quote:
Once AT&T's initial patents expired in 1893, dozens of competitors
sprung up. "By the end of 1894 over 80 new independent competitors had
already grabbed 5 percent of total marke t share ...after the turn of the
century, over 3,000 competitors existed. In some states there were over
200 telephone companies operating simultaneously. By 1907, AT&T's
competitors had captured 51 percent of the telephone market and prices
were being driven sharply down by the competition. Moreover, the r e
was no evidence of economies of scale, and ent ry barriers were obvi-
ously almost nonexistent, contrary to the s t anda rd account of the the-
ory of na tur a l monopoly a s applied to the telephone industry5"
The eventual creation of the telephone monopoly was the r e sul t of
a conspiracy between AT&T and politicians who wanted to offer "univer-
sal telephone service" as a pork-barrel entitlement to their constituents.
Politicians began denouncing competition as "duplicative," "destructive,"
and "wasteful," and various economists were paid to attend congressional
hearings in which they somberly declared telephony a natural monopoly.
"There is nothing to be gained by competition in the local telephone busi-
ness," one congressional hearing concluded.
The crusade to create a monopolistic telephone industry by govern-
ment fiat finally succeeded when the federal government used World War
I as an excuse to nationalize the industry in 1918. AT&T still operated its
phone system, but it was controlled by a government commission headed
by the Postmaster General. Like so many other instances of government
regulation, AT&T quickly "captured the regulators and used the regula-
tory apparatus to eliminate its competitors. "By 1925 not only had virtu-
ally every state established strict rate regulation guidelines, but local
telephone competition was either discouraged or explicitly prohibited
within many of those jurisdictions."
The complete demise of competition in the industry, Thierer con-
cludes, was brought about by the following forces: exclusionary licensing
policies; protected monopolies for "dominant carriers" ; guaranteed
revenues or regulated phone companies; the mandated government
policy of "universal telephone entitlement" which called for a single
provider to more easily carry out regulatory commands; and rate regu-
lation designed to achieve the socialistic objective of "universal serv-
ice."
That free-market competition was the source of the telephone mo-
nopoly in the early twentieth century is the biggest lie ever told by the
economics profession. The free market never "failed"; it was govern-
ment that failed to permit free-market competition as it concocted its
corporatist scheme to the benefit of the phone companies, at the expense
of consumers and potential competitors.
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Source: http://mises.org/journals/rae/pdf/RAE9_2_3.pdf
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