[baddox]

I don't know the financials of Chattanooga's system, but if they're losing money (when you don't count tax revenue) the price comparison isn't very useful from an economic standpoint, at least without introducing another argument like that wealthier people ought to subsidize Internet access for poorer people.

> This is exactly what economic theory predicts will happen in the absence of competition.

Well, I would expect competition to emerge in the absence of competition, if the existing firm is charging so much that competition can be profitable (and if competition isn't prohibited by force). It's true that in an actual natural monopoly (which, remember, I think is rare for Internet access) the monopoly firm has notable market power (the ability to set prices higher than marginal cost). But that market power is not unlimited, and the government solution to a natural monopoly requires the government to be both able and willing to produce at a favorable marginal cost and set prices accordingly.

> What's often ignored is the efficacy of the government getting stuff done is largely dependent on the competency of the officials. But if you have good officials, the government solution to the high speed problem is a fantastic one.

Certainly true. That would be one of the "inputs" I mentioned in my previous comment. Of course, "good officials" probably doesn't mean much more than "true Scotsman."

[cvet]

Good points—the only thing I'd say is that we're talking about a really capital intensive industry where the incumbent may be able to drop prices to compete with a newcomer. Example: If company B comes to a town where company A is already operating, company A can just offer new subscribers the same terms as B, making it hard for B to compete. If B can anticipate A's action (not that hard in this case, because I can do it after a couple of beers) then B may choose not to invest because B's road to a profit requires producing at a lower marginal cost than A and undercutting A's prices. They actually have to pull subscribers away from A. If A is already producing at a low marginal cost but overcharging, then A has the flexibility to fight a price war (and potentially win).

Ha maybe I'm banking too much on those competent government officials. The variance in quality is certainly high.

[baddox]

Regarding your example of companies A and B, I think one obvious solution is service contracts.