Hacker News Reader

Comment by noir_lord | Hacker News Reader

Sometimes the only way to introduce competition is via regulation when the market is a natural monopoly or the capital costs to compete are so huge (phone system, water system, gas system, electricity system etc).

One way to do this is to force the current monopoly to provide it's services at cost to competitors who can then sell value add on top (this is what we did in the UK with British Telecom (though the different here is that BT was nationally owned)) not sure if you could do that in the US since comcast is a private corp.

View on HN

There is a wrinkle to the UK situation nobody mentions. BT has a monopoly and guarantees in place that ensure return on investment. BT OpenReach, the monopoly division, is more profitable than most U.S. cable companies, including TWC.

That's how the phone system used to be regulated: one company owned all the infrastructure in an area, but there were set fees (tariffs) that any other company could use to provide service on those lines at the end-user's option.

This worked reasonably well for long-distance services (those used to be separate from local phone service) but the advent of high-profit DSL meant that the local monopoly would prioritize fixing their own customers's lines over their competitors, and perhaps do difficult-to-prove-intent things like repurpose competitor copper during a field repair, and then never put it back.

Power distribution is generally done like that in the "deregulated" states in the US. The electric utilities were technically private entities, though not very free. The same legal framework could be used for other sorts of wires, I suppose.

Around here, Comcast (or their predecessor) actually does resell other providers' services through their service. I don't know if it's voluntary or not. It's kind of an odd relationship, but I'm happy to divert a few of my dollars from Comcast to Earthlink.

Same thing in France, France telecom was nationally owned until the early 2000's. Now it still maintains the local loop but is forced through regulations to share copper pairs to any other ISP. That way concurrent isps only have to setup a backbone.

I use sonic.net here in SF and I think they work in a similar way by piggybacking on the ATT local loop. I wonder if there is any local law that forces ATT to co-operate in that case.

It's not a local law, it's FCC regulation. AT&T is the ILEC and Sonic the CLEC. This is part of the reason AT&T wants to move everyone to U-Verse---it's not subject to the same regulation as regular phone lines (being FTTN instead of service via central office, as in regular DSL).

The "natural monopoly" that you speak of actually tends to be enforced by municipal contracts. Cities and counties signed over exclusive service provider rights in this market.

Having regulations that acknowledge the reality of a natural monopoly does not make that monopoly unnatural. When a municipality grants a provider exclusive rights it is almost always done in exchange for requirements that they provide service to residents who would have zero providers to choose from in a competitive market.

This has been illegal for over 20 years.

Reply on news.ycombinator.com