More on monopoly maintenance
Thanks for the comments and emails yesterday.
1. According to the DC Circuit, we can infer monopoly power from a firm’s possession of a dominant share of a relevant market that is protected by entry barriers.
- Here, we’ve got a dominant player in the local wired high-speed Internet access market. Nothing is really substitutable right now for local wired access - wireless isn’t fast enough, and nothing’s quite like Internet access. In formal terms, there are no substitutes that can reasonably constrain the pricing of wired high-speed Internet access in the reasonably foreseeable future.
- It’s a natural monopoly, because in the last mile the costs of providing services to each house decline dramatically given greater scale. No one really wants more than one wire to a home.
- Entry barriers could include access to rights-of-way granted by municipalities.
- Rates for cable service are said to have been going up - what about rates for broadband service provided by this cable company? Hard to tell with all the bundling, but let’s try to figure this out.
2. The issues for high-tech network products (tipping, lock-in) are arguably much greater for physical infrastructure than for applications. Applications come and go, and users can always leave (”with a click of the mouse,” as the saying goes). But there are very few choices of physical gateways to the Internet these days in this country. Transport really is different. Plus, high-speed Internet access consumers are confronted with sticky bundles of services that can’t be taken apart and are difficult to switch away from. Incompatible hardware, high switching costs - that’s where tipping and lock-in can really take effect. Meanwhile, search engines, online VoIP providers (independent of the network providers), and social networking gambits burst on the scene and disappear later. As a matter of both kind and degree, physical infrastructure is different from the application layer. (Watch out for intentional munging using the phrase “the Internet ecosystem.” These things - transport and applications - really are different.)
3. What procompetitive justification does a natural monopoly provider of high-speed Internet access service have for merging with must-have content? What effiencies are created? It can’t be that the answer is “saving that great American icon, NBC.” That’s patriotic (and believe me, I feel the tug) but hardly efficient. Even if there are efficiences, aren’t they outweighed by the anticompetitive harm of the conduct? That harm includes foreclosing competition from both other cable operators and Internet delivery of network content.
4. All you have to show is that this anticompetitive conduct “reasonably appear[s] capable of making a significant contribution to . . . maintaining monopoly power.” We can infer causation “when exclusionary conduct is aimed at producers of nascent competitive technologies as well as when it is aimed at producers of established substitutes.” Here, both the nascent (Internet video) and the established (smaller cable companies) are being aimed at.
Keep those notes coming.