They proved that the Free Market doesn't automatically provide functional competition, if you think about it, the Western-style free market is very keen on creating and maintaining monopolies, even cheating isn't going to help you here.
> The company laid down fibre because of what they saw as a potential competitor (municipal fibre).
The OP is about free market failures, not about competition. As another example, many people have pointed out that there is much more competition in China than in the US. Hope, this is enough for you to understand the difference.
Free markets tend toward monopoly which restricts individual people’s opportunities for action. In this example, there was a cable monopoly mentioned. The only way to coerce it (not even to defeat it in some way) was through baseless deception, not free market competitive action. The monopoly remained.
Not true and oversimplification. Some markets tend toward monopolies, but you rarely will get one unless enforced/protected by a state. If you navigate through history, you will find almost exclusively monopolies on salt extraction, coal mining oligopolies (with the help of worker unions), silk... Curiously, the Standard Oil was accused of being a monopoly, and the proof was they were offering lower prices than anyone thanks to their scale, destroying the competence. The reward for offering low prices was disolving the company (notice that they never reached the hypothetical price hike stage).
It is also common practice for the state to declare something "public utility" or "natural monopoly", on things like snail mail distribution, telephone or TV, that were clearly not a natural monopoly and could be offered by free market. Here fall a lot of ISPs, that get a "public utility" status and only then can abuse that monopolistic position with the help of the state.
A lot of free market sectors tend to atomization: think hair or nail saloons, masonry, plumbers, carpenters... if you know someone in the sector, it seems that as soon as they get a size over 5 or 6 people, two of them always decide to split and go by themselves.
You're right on most of these, but wrong on telephony. That actually was a natural monopoly.
It's exactly how OP describes it. It's unproductive for multiple companies to maintain disconnected, parallel telephone infrastructures. The most productive use of resources is to lay more wires to more houses, not to lay more wires to places which have already been wired up for telephone service by somebody else. That creates a monopoly, and the government should step in.
With modern tech, you can mandate local-loop unbundling and fix some of this, but that wasn't possible with 1970s (and earlier) phone infrastructure.
We use "natural monopoly" too freely and too quickly, almost as a free card to actually implement monopolies that last for decades. Anecdo-time: in my small city there is a small "natural" monopoly in public bus service: the municipality offers a monopoly on which buses can operate in the city, that lasts for 25 years or so. I lived through a renewal that was a bit rocky, the bus company went on a strike, and as a result there was a vacuum of monopoly for six months. That resulted in a flood of other companies, big and tiny (as in 1 bus only, serving 1 very demanded route), doing the routes. They were as cheap as it gets, offering month cards outrageously cheaper than previous public-natural-monopoly. It was so cheap, and the offer was so high that cars seemed to vanish from the city center, that was so full of buses that you didn't even check the timetable: you just waited for the next for 5 minutes.
Eventually the municipality renewed the previous contract with the same previous company, a contract that forbids other companies from entering the city center, and we went back to the worse service we were used to. Of course they were a lot of narratives: they were trying to capture the market, drive competence away and then hike the prices; they were bounded to bankrupcy at such prices; that many buses were damaging the roads, and others. But the reality was that for a brief time we had the best bus service in the modern world.
As for telephone wires, we went through some years, between copper-IDSN and fiber (the DSL bridge) that a lot of companies found a way to make it profitable to put new copper cable parallel to what it already existed. The only thing the municipality did was to make it mandatory that the first to install it must use a wider-than-needed conduct (a solution much less disruptive than giving a natural monopoly, latest shown by new small companies born everywhere), so if a company wanted to add more cable later could use the same tubing. Predictions about company A blocking their tubing showed false, as other companies could retaliate in other places. No second tubing was allowed until the first tube was full, this was the only state intervention in the issue. The same tubes have now the optic fiber.
I am not fully anti-state, but there are undeniable overreaching everywhere, and a lot of zealots of intervention that are itching to issue mandates and interfere with everything, and then fix what fails with more interventions.
The OP is about telecom. I took a look and learned [1]:
> The telecommunications industry in China is dominated by three state-run businesses: China Telecom, China Unicom and China Mobile.
A little slippery to bring China into the telecom free market discussion and contrast it with “Western-style” while failing to mention the structure of its telecom industry.
> The OP is about telecom. I took a look and learned [1]:
Untrue - in the context of the OP, telecom is just an example. Look at the title.
> The telecommunications industry in China is dominated by three state-run businesses: China Telecom, China Unicom and China Mobile.
"More competition" doesn't mean "no monopolization". Communications are political everywhere, I'd be surprised if they were a subject of less control in China than in the US. However, even on Amazon and even with tariffs, there's more competition between Chinese sellers than between sellers of other origins.
Markets are just a tool. This tool functions on information. OP explained how information (in this case, the rumor of a competitor laying fiber) caused action within the market.
> The only place monopolies tend to emerge is heavily regulated areas that allow for regulatory capture (laying fiber is a great example of this).
No, actually laying fiber is a great example of the problem with a free market.
It's not regulations that make it hard to put down fiber, it's property rights. Without some sort of regulation or government action (such as eminent domain) it's impossible to build out modern infrastructure. There will always be some person with property right in the way of a cable line. You can beg and plead with them to let you bury a line (including pointing out that it's very temporary disruption of soil) and they can still just say no.
It isn't unusual for a phone company that's looking at a difficult land owner to say "ok, screw it, we'll just have to take a 90 mile detour because the guy that owns that 500 yard strip won't let us bury here". Imagine how much harder that is if the land owner is related to or owns stock in a competitor company.
We have been able to lay as much fiber as we have in the US because there's a bunch of regulations around right of way that ultimately grants burying rights near public roads to utilities companies like ISPs. Without those, it'd be almost impossible.
If property rights are regulation, then so is anything that allows you to ignore them.
Once you get down to the level of property rights, the only alternative left is total might-makes-right anarchy.
Property rights are some of the earliest and most basic things protected by governments—indeed, to a large extent they precede governments, being protected with force by the people who wish to assert them.
Wipe out all regulations, all laws, all property rights, and try to run fiber across someone's property without their permission, and they're likely to come out with a shotgun and start shooting everyone digging. Follow the steps logically from that point, and you'll fairly quickly start reinventing governments and regulations.
Ok, let's imagine property rights are gone. Now it's impossible to build a fiber line without also employing an armed guard of that line. Sure, the open market allows for anyone to build out their lines where ever they like, but since we've eliminated all property rights and laws it means the most natural thing to do to your competition is sabotage.
That means if you are a new comer, you have to employ significant military strength to guard and defend your line going in. Otherwise, existing powers will simply stomp it out as soon as they get a whiff that someone is trying to compete with them. That, or they'll simply take your line by force.
That is probably the most difficult form of entry because it requires someone to be independently very wealthy before they could dream of putting in new infrastructure and it requires them to enforce their own property rights since there's no government doing that.
Are you an anarco-communist by chance? That's about the only group I'm aware of that would advocate for the complete elimination of property rights, but they also usually don't advocate for a "free market".
The "only" place monopolies tend to emerge in is any market with a significant barrier to entry. Regulatory regime can be one such barrier, but e.g. up-front capital costs and network effects are other barriers to entry that can and will lead to monopolies.
It is well known that individual businessmen often want to reduce competition, because it's best for them. That is why the government's important role in the free market is to promote competition. But just because the market is imperfect and can be captured without the government making sure that people play fair, does not mean that the free market is "a lie" as TFA claims. It means that it's imperfect, as are all human endeavors.
So this shows competition works, but I thought the original post was about the free market. When the two companies were asked to fill a need for the people, they refused, and the people were not otherwise about to independently provide the service based on their own funds. I feel as though if the only way of getting companies to do something without organic competition is to use underhanded methods (such as lying about another competitor), then the free market has some places for improvement, no?
Competition works up to a certain point its best for short term returns and not for long term as the time and capital investment increases the chances of monopolies forming increases. This is the reason why I think most public infrastructure should be invested in and owned by the government. Let companies compete on building, running and maintaining it.
> ...one day, one of the municipal counselors just called up a friend who worked for a fiber laying company and asked them for a favor: put out a press release saying that they were “investigating” laying an undersea fiber to power a municipal fiber network on the little island.
They called in a favor that put pressure on the company from public expectations.
Yes. What do you think happens in a competitive marketplace? Sony heard about Nintendo partnering up with Philips for the SNES CD expansion, so Sony made their own console. That's literally competition.
The details of how the "public pressure" came to be don't matter, because the monopoly didn't know about that. All they knew was there was a potential competitor, so they behaved according to that information. That's how it works.
Maybe i misinterpreted the original comment, but having the government step in to pressure a company is not usually what i find people mean when they talk about competitive markets. Let alone when the pressure is through a side channel.
Frankly, I think you're trying to poke holes in a straightforward concept. And now you've dug your heels in and you're trying to justify it. But... let's ignore opinions and interpretations...
> Sony heard about Nintendo partnering up with Philips for the SNES CD expansion, so Sony made their own console
This is completely inaccurate in every way possible. You even have the order of events backwards (Nintendo and Sony partnered first). There is in no way in which even the most charitable interpretation of this statement could bear out. Just about the only correct part is that you have some (but not all!) of the relevant parties involved.
If you're wrong about such a well documented, cut and dry matter of historical record, then what else are you wrong about? :)
> That isn’t actually refuting his original argument. Just proving his example false.
Correct. It is extremely false. And it's an extremely well documented event, as well.
> Then you beg the question with a bit of a straw man fallacy thrown in.
I expressed my opinion. I did not misrepresent that person's argument (i didn't represent it at all). As for begging the question, well, I'm not sure what you're referring to, unless you mean the intensely cut and dry sequence of historical events? In which case... well, they're so unaligned with reality that it's comical.
I don't understand this line of thinking. The spreading of a false rumor is an example of a competitive marketplace? If this took place in a different domain wouldn't it be fraud? That it was in the public benefit seems orthogonal.
Yes, if a simple unsubstantiated rumor is enough to get your competitors to spend potentially millions of dollars to fight you, that's a competition. Literally what else could it be?
It can be two things, anyways. You can utilize fraud to manage your competitors expectations. CEOs lie constantly about the state their products are in, in order to drum up more sales.
It has absolutely zero requirement to be beneficial to the public in order to be a competitive marketplace. They're also competing to make as much profit as possible, which has effectively zero benefit for the public.
Plenty of cheap stuff is a consequence of companies interested in people's money and, yes, presence of at least nominal competition between providers (i.e. they can be essentially a cartel, mirrioring each other exactly, but each still wants to step into other's money supply and retain its own). Choice for customer is present but also equally nominal.
In deficit economy, economic agents aren't really interested in people's money, and competition is between consumers - who'll bid higher and offer something of real interest to provider. So providers hoard stuff and there are long lines.
Benefit for public is not a boolean, it's a spectrum. Lots of cheap poor stuff readily availible is better than having to compete for stuff, but less good than having choice between cheap poor stuff and more expensive better stuff, for example. For the latter, you need non-nominal competition and providers having to compete whithin the market, not outside of it, and also each individual provider having infinitesimal effect on whole market.
"Companies optimize to make as much money as possible, which is why there is cheap stuff" does not logically follow. I get what you're saying, but it's not related to the concept of companies trying to make as much profit as possible. Some will simply chase higher profit margins.
But in the case of the grand parent the company had no intention of following through and did it seemingly at the request of the friend.
> one day, one of the municipal counselors just called up a friend who worked for a fiber laying company and asked them for a favor: put out a press release saying that they were “investigating” laying an undersea fiber to power a municipal fiber network on the little island.
Sometimes commenters all over the internet write like this because they just got incredibly jealous after reading the parent post. I've been thinking more and more about how most posts are jealous or depressed outtakes against the world, system, or other person. This fundamental human behavior won't change, and is as reflexive as a monopolistic company reacting to a press release, proving the parent correct despite their scathing response of the child.
It's worth noting that 4chan and Reddit also live here because both sites are insufferable.
They proved that the Free Market doesn't automatically provide functional competition, if you think about it, the Western-style free market is very keen on creating and maintaining monopolies, even cheating isn't going to help you here.
> The company laid down fibre because of what they saw as a potential competitor (municipal fibre).
The OP is about free market failures, not about competition. As another example, many people have pointed out that there is much more competition in China than in the US. Hope, this is enough for you to understand the difference.