Telecoms, At&T, And Natural Monopoly

Telecom is a classic example of an industry which was dominated for decades by government monopolies. Other public utilities such as electricity, gas, and water supply are also traditional domains of government monopolies. In country after country after country, telephony started out as a government-owned monopoly before liberalization opened up the industry to private sector competition. A more competitive market, in turn, tends to bring about lower prices and better service. To be fair, there is an underlying economic argument, of sorts, for government production of telecoms and other public utilities. The natural monopoly argument, according to which one firm can produce certain goods at lower average cost than two or more firms, implies that monopoly is natural and desirable. A natural monopoly can occur if, for example, an industry requires very large capital investments such as on telephone lines. Building a second telephone line would be duplicative and costly…