presumably NDSPs will also be ISPs. That's an interesting conflict of interest, isn't it?
I guess ATHM will have to split into two companies, one is NDSP and the other is the ISP. Same with AOL and any others. We need a competitive market at every separate and distinct level.
By your own assertion we are staying within cable and I think that's right. There is the cable industry separate and distinct from the DSL and wireless industries. So to satisfy the Bork Rule there would be ATHM BB, AOL BB, and say, HSAC BB, within the NDSP level.
That competition weeds out all but the low cost producers,
Then few industries in the US are competitive. This definition is a definition predicated exclusively on price. There are other criteria for choosing one product over another and so competition can proceed in different characteristics which may allow a high cost producer to thrive.
which inevitably leads to monopoly or oligopoly.
Very 20th century of them. A collection of low cost producers doesn't bring about monopoly or oligopoly unless government intervenes for arbitrary reasons. Both monopoly and oligopoly are transient states since they are inherently inefficient. Government creates laws to restrain these two and the result is they are bailed out, propped up, prevented from meeting their timely Schumpeter disappearance.
But, since monopoly is prevented by government intervention,
This is the great mistake of the 20th century. It's built on distrust , yet it is distrust that accelerates the demise of oligopoly and monopoly. When government interferes to protect, they undermine what distrust would do.
the end result is always oligopoly.
If that is the case and the components don't trust each other, then you have the Bork Rule satisfied and ergo a free market. Government intervention creates laws so that the components cooperate. Did you not say, or B & S say, "the propensity of competitive businesses to cooperate at some level to maximize the profits of the group". The government laws constrain the ability to maximize profit and so the components lean on cooperation until it becomes collusion. It isn't overt. It's like the way airlines raise prices.
In a mature market, prices tend towards those that would have been charged by a monopoly.
Mature market can't be defined. For example, is the auto market mature? Any market can have elements of birth and old age in it.
"would have been"? How would anyone know what price this imperative implies? "Intuitively obvious to the most casual observer" criterion? Prices don't don't tend that way anyway. When government enables a monopoly to go on with its misery the efficiency of the monopoly drops so much that government has to subsidize it. Why would government do that? Because the entity is providing an uneconomic perceived social good. There are many examples of this in Europe. Here, the local bus system is usually a good example.
Oligopolies set price and manage technological change, within their own market.
This is dead wrong. This talks as though oligopoly is a single entity, but in reality, it is composed of several companies. It has to be assumed that some degree of collusion is occurring or at least some degree of cooperation so that the several can act as one. When companies cooperate they don't maximize profit. They give profit in one form in order to regain it in another form. It is a type of loss leader strategy. I can't imagine a company CEO calling up another to get instruction about how to set prices so that profit can be maximized. Why would one CEO believe what the other recommended was the way to do it? That requires perfect trust. But then there is no differentiation among components and so the oligopoly is nominal only. There never has been a CEO who trusts any other CEO.
I think B&S would point to the MSOs as an example, or MSFT.
MSOs are a creation of government and since they've chosen to operate within the permitted structure given by government, they're dying. They would have died long ago but people prefer the perceived social good of government protection. This allows MSO to raise prices according to formula. Everyone loses. The MSOs don't make enough the refurbish their networks, the people then have poor service, the MSO uses the permitted pricing formula to avoid from going bankrupt and raises prices, the people complain to government, and so they create more restrictions like price controls. Over time the only resort is to borrow and that's what you find with MSO: giant debt pools. The debt restricts what the MSO may do in the future and so they don't do anything. That's why ATHM and cable are in such a sorry state and why in 5 years there is 5% penetration. |
