As we talked about today in class, there are
many industries in the US that are controlled by the top two to four
corporations that provide business in that market. From the monopolization of
pharmaceutical drugs to the internet searches we use today, there are many
different pros and cons for consumers that come with a monopolized market. One
interesting case is that of Internet Service Providers (ISPs), the companies
that provide a connection to the internet to people’s homes, such as Comcast or
AT&T.
In the case of ISPs, there isn’t nearly as much
of a monopoly on service across the country, like Google might have on
searches. However, what they do have is nearly a complete monopoly in specific
regions throughout the country. To put this into perspective, there are many
companies that provide internet to people across the country, but despite this,
around 85% of the American population only has a choice between 1 or 2
different ISPs in their region. The monopoly of ISPs has been discussed a lot
more recently due to changes in the regulation of ISPs back in 2017, which
leads to an interesting discussion of the pros and cons of a monopoly on the
internet.
Pros: With the internet being sent through wires
to every household, it could get very messy if all 10 houses on a block wanted
to get their internet from a different ISP, meaning that there might have to be
9 extra wires going through the poles when only one would be necessary if one
company was providing internet to all 10 of those houses. Also, being able to
have monopolies in specific areas incentivizes ISPs to expand outwards into
other areas to provide internet to people that may not currently have a
connection if they are allowed to keep a monopoly there.
Cons: On the other hand, with a monopolized
area, ISPs are theoretically able to do what they want to their customers
internet connection without big repercussions. Since they have a monopoly in
that area, it would be hard to impossible for a customer to switch to a better
ISP. This disincentivizes improvement of their network as they will not gain
more customers by improving their connections (since everyone already gets
internet from that company), but will not lose any customers by having slow
connections since it’s pretty much impossible to live without internet in
today’s world. Also, due to not having competition, ISPs are allowed to be a
price maker.
-Robert Gee
-Robert Gee
Your post was very good at showcasing both the pros and the cons of monopolies. Before reading this, I had only ever considered the cons, mainly that ISPs are able to provide bad service because people don't have a choice. What I had failed to consider, however, was the fact that there would actually have to be more wires, making it messier and more expensive. If an ISP would have only one customer on a block, they would have 1/10th the revenue they would have otherwise, so the cost of the wire would decrease the profit by a larger percent. I was wondering if this was why the near monopolies arose to begin with, that it wasn't worth it providing service to only a small fraction of an area, or if avoiding this was merely a positive side effect of the monopolies for the companies.
ReplyDeleteThis blog post very well-rounded in showing both sides of the argument, and I liked how you analyzed the company’s thinking/decision making in how they become incentivized and disincentivized! I agree that there are pros in accessibility, and am curious about the role government can play—especially in the cons argument where you pointed out that ISPs will not be motivated to improve their slow connections. Building on the discussion of changes in the regulation of ISPs back in 2017 with net neutrality, I think there’s a power imbalance between the monopoly of ISPs and consumer choice , and there should be transparency in how ISPs conduct their service. Perhaps having broadband networks regulated by local governments would redistribute the power to prevent the the growth of such power that ISP monopolies currently have and ensure faster speeds.
ReplyDeletehttps://sites.psu.edu/netneutrality/2018/02/28/the-internet-monopoly/