Definition of a Monopoly

LFCFan

After posting in the thread about broadband over electricity lines I got to thinking about the true meaning of a monopoly. I know the true meaning is a company that can operate without any competition but I feel that this is not the case.

Nobody ever complains about the ESB or Bord Gais being a monopoly even though in every sense of the word they are. Therefore the word Monopoly should be changed to mean a company that not only is without competition but also a company that is inefficient and overpriced.....ie €ircon.

Boston

Originally posted by LFCFan
After posting in the thread about broadband over electricity lines I got to thinking about the true meaning of a monopoly. I know the true meaning is a company that can operate without any competition but I feel that this is not the case.

Nobody ever complains about the ESB or Bord Gais being a monopoly even though in every sense of the word they are. Therefore the word Monopoly should be changed to mean a company that not only is without competition but also a company that is inefficient and overpriced.....ie €ircon.

A monopoly is any firm that has control over a vital factor of production. Eircom is not a monopoly, at worst its a duopoly, but the real situation here is oligopoly. The reason why people dont moan about board gas or esb is because A) they are run pretty well for semi state companies and they are highly regulated, something which i dont think happened in the telecoms industry untill eircom was sold.

The_Bullman

I think that people will be getting upset with both Bord Gais and the esb since they have/are looking for price hikes.

SkepticOne

Nobody ever complains about the ESB or Bord Gais being a monopoly even though in every sense of the word they are. Therefore the word Monopoly should be changed to mean a company that not only is without competition but also a company that is inefficient and overpriced.....ie €ircon.

It is more helpful to think of companies having monopolies on certain goods or services rather than being monopolies.

Bord Gais has a monopoly on the delivery of gas to the home and the ESB have a monopoly on delivery of electricity (there is a small amount of competition in generation, I believe).

These monopolies are not such a huge problem for consumers because both electricity and gas are not particularly dependent on innovation and the price is regulated.

Eircom have a monopoly on last-mile telecommunications infrastructure in Ireland. This may change in years to come with wireless services. But until then, the current way of preventing abuse are inefectual being mainly, the enforcement of certain wholesale and retail prices and LLU. In other countries, there is substantial competition from cable companies.

The methods of alleviation from the full force of monopoly appear to be as follows:

1. Eircom must offer cost-oriented wholesale products where they offer retail.

The problem with this is that if Eircom feel that a new service, for example ADSL, cannibalises existing revenue streams, they are free to either a) not bring out the product for years (as they did until 2001) or b) bring it out at a very expensive price and justify the high price per service sold on the basis of low volume. The corresponding wholesale price is therefore also extremely high.

2. Eircom cannot refuse reasonable requests.

Problem here is that they can argue at length with the companies seeking these new wholesale services hoping that they give up. This is a problem with complex reqests. FRIACO took six months of negotiations until they inevitably broke down and the regulator could step in.

3. Local loop unbundling.

Not really a huge success, but may be one of those things that keeps them on their toes. In the current financial downturn, we are unlikely to see huge amounts of interest here.

Outside of the last mile there is some competition. At the local access level in Dublin there are several companies competing in the leased line business. Outside of Dublin it is mainly just Eircom and Esat. In many areas it is just Eircom.

There is also competition in long distance and international calls. This competition depends on regulation of Eircoms network as it is via this that these other services are possible.

There are probably other areas of competition but the main problem for consumers in Ireland is the last mile monopoly and its effect on innovation.