[almightysmudge]

Maybe someone can explain the decision in principle to me here, because I don't understand how the deliberate retardation of network infrastructure is beneficial to encouraging competition. I get that the entry costs to the market would be higher for a new start up, but that seems irrelevant given the target competitors, and a silly bloody way of doing it anyway. But I'm genuinely curious to hear the other side of it?

[mattgibson]

If you want to take a cynical stance, you could look at it as deliberately introducing competition to an obvious natural monopoly, which pretty much guarantees an inefficient market and therefore monster profits.

Thatcher (and later Major) did the same in other places e.g. deregulating the City, privatising the railways. Pretty much the same story there, with monster profits and seriously degraded infrastructure.

If you are in the business of doing absolutely anything to maximise profit, then you need to be of the opinion that your changes are a good idea for the population as a whole, otherwise you'll feel guilty. The belief that competition always makes things better for everyone, regardless of the observed outcome, fits the bill here.

[almightysmudge]

She wanted to encourage competition, but that competition never arrived, so we still have a shit infrastructure and an ineffective monopoly essentially?

[mattgibson]

If you define 'effective' as 'maximises the amount of money that shareholders get', then it's not ineffective at all. The best investments you can get are monopolies where the companies provide shit services. Costs are very low (because you pay for as little as possible, therefore it's shit), but the monopoly keeps revenues artificially high, leaving big profits in the middle. A cynic might say that this approach was deliberate, and that the competition not arriving was predictable and intentional. You get a system that looks like a free market, but which isn't.

See the recent parallel in how competition does not work well in the natural monopoly of postal delivery: http://www.telegraph.co.uk/finance/11596796/Royal-Mail-share...

"Whistl's announcement shows it is very difficult to set up a delivery service in urban areas in the UK that makes a profit, the vast majority of the cost is in that last mile of delivery."

Not likely to be much competition then. What better investment could you get (for your mates)? http://www.dailymail.co.uk/news/article-2455653/George-Osbor...

[hackerboos]

I wouldn't say the competition never arrived. We have competition in rail and internet in the UK (rail is slightly different as companies bid for contracts to provide services over a period).

The point is that each company is not going to roll it's own track or fibre. They lease the railways from the government and they buy wholesale bandwidth from BT.

Energy, rail, communications are natural monopolies. It's hard to produce competition in these sectors.

The East coast mainline fell back into government ownership because of the failure of the private company that was running it. The government has earned a lot of money running the line.

http://www.theguardian.com/uk-news/2015/mar/01/east-coast-ra...

[slgeorge]

I don't know about rail, but I don't think it's true to say we have competition in Internet in the UK. We do have some, but it's "constrained" competition, defined in a way that will never be truly disruptive to BT.

The natural monopoly BT has is the core network and the geographical exchanges in every town. In the case of BT it was handed a national network which it then gets to monetise: in return it had to continue to provide 'universal service'. The problem with this type of set-up is that it puts BT in the position where their best minds are in an arms race against the regulator: they use all sorts of tricks to show how expensive their core network is and they make it very difficult for alternative providers. It's just natural, if they can create barriers to competitors or price competitors out then it's to their benefit.

While I'm not in that industry more I'm citing personal experience - I was at a provider when ADSL was coming onto the scene and they made it very difficult and complex to form your own backbone network. It means that you're going to "innovate" on top of the BT network - which will never be disruptive to BT.

There are other situations where you can see the level of monopoly they have. For example, they basically held the government to ransom when they said they "might" not built the advanced network (21CN) which got them a pile of cash.

It's consumers and business outside of the South East (London) that suffer - consumers because it's basically everyone is held to the speed of BT's innovation, and business outside the South East because there often aren't alternatives.

[flarg]

She did not want to encourage competition - if she had then she would have gone for the cheapest solution for all basic infrastructure (power, waste, internet, transport) and used that to power a stronger economy - instead what she really wanted was to break the back of the Labour-funding unions (stronger in public organisations) and provide tax-derived profits for large corporations who would then provide for her and her colleagues in the future.

IMHO

[k__]

Seems to normal with Infrastructure.

All want to use it, but noone wants to invest to build it.

On the other hand, there were those frequency auctions, where providers lost a fortune and mobile internet got really expensive.

[austinjp]

I remember conversations about this 15+ years ago. Opinion among my peers seemed to be that it was in order to prevent British Telecom monopolising the comms infrastructure.

[almightysmudge]

Lucky they nipped that one in the bud, eh?

[zimpenfish]

Just think - if they hadn't, why, we could have BT being the majority provider of ADSL in the country and charging people £££ for the privilege!

(Note to non-UKians: BT do, in fact, control most of the ADSL provision in the country and are still a defacto monopoly.)

[almightysmudge]

Or if we want to go really outrageous, a division of BT still controlling literally every new home install of telephone lines, often with engineers not turning up, or not being trained to do the job they've been sent to!

(As above, this is actually the case. )

[austinjp]

I'm genuinely amazed that anyone still buys the argument that competition in a capitalist economy will improve quality. It does nothing but encourage corner-cutting, box-ticking, de-skilling of the workforce, and the extraction of revenue away from the electorate by monopolies who covertly cooperate to game the system. It demotivates, impoverishes, and homogenises. Truly dreadful.

[pjc50]

Genuine market competition does work, or at least provides customers with a choice from cheap corner-cut option to expensive high-quality option.

What people forget is the list of prerequisite conditions for good market competition: plenty of buyers and sellers, good information about products, easy comparison, low transaction and switching costs, low cost of entry.

Fake markets for denationalised industries (I've seen this called "playing at shops") do not generally work very well because they're missing one or more of those attributes.