WHAT ? You might be looking at a few local power stations and making an assumption
Like in most parts /states/provinces/regions of most western countries, the monopoly, as a consequence of, and neccessitated by, privatisation, situation in Michigan was broken during the 90’s and 00’s.
So this strongly applies to generation.
Detroit Edison runs 15 large power stations, and one nuclear, but the state has two other nuclear , approx 30 large coal coal power stations, and a whole bunch of gas,water,solar,etc
While there transmission line operators have a monopoly in their area, there are two in the state, so the state can get a second opinion on the issues. (if one says “we have to charge more because”… they run the risk of being exposed as frauds by the other ? They have to tell the truth ??
In terms of retailers, maybe what you see, while there are multiple retailers… In 2008, Michigan legislators passed a bill to restrict retail competition in the state. The law states that no more than 10 percent of electricity in a utility’s service area can come from alternative electric suppliers. So you are stuck on a waiting list if you want to change from your areas main retailer.
It absolutely was. Under the Civil Aeronautics Board regime, from 1938 to 1978, the federal government determined which domestic routes each airline company could fly and regulated their schedules and fares. It was the precise definition of a government-sponsored utility monopoly, though shared between several different legacy carriers. The regime was even designed to subsidize unprofitable rural routes - just like the infrastructure for rural electrification was subsidized.
Deregulation of airlines was chaotic, but after a couple decades most of the airlines either figured out how to behave like actual businesses or failed and got swallowed up by their peers. It also allowed new airlines with different models to compete for the first time. (Fun fact: Southwest originally operated solely within Texas so it did not have to comply with federal CAB fare policies. They started flying to neighboring states the very second that CAB was disbanded.)
That’s not correct - the Telecommunications Act of 1996 which deregulated local phone companies also included regulatory changes for cable TV (definitely a regulated monopoly in each market) and allowed competition among telecom providers for cable and phone services for the first time.
For connectivity, perhaps, but long-distance telephony is now so cheap it might as well be free. (When was the last time you actually thought about whether a number you were calling was “long distance?”)
I’m not saying deregulation of utilities is always a good idea. For one thing, it has to be done in a way that makes sense. The deregulation of airlines and phone companies made sense, for the most part. The deregulation of California’s electricity system was a disaster. That’s not because deregulation of electric utilities it necessarily bad - it was due to incredibly poor policy decisions that created all sorts of perverse incentives for people to behave like dicks, and they did.
We’re paying more for something different -cell phones. I remember lots of differences before the AT&T breakup. Some may have changed before the actual break-up but I remember
having to lease a phone. It was about $3 a month in my area. I believe if you wanted an answering machine, you also had to lease that.
paying for long-distance calls
paying for touch-tone service (otherwise , you got pulse)
paying for each extension.If you wanted a phone in the kitchen and another in the bedroom, you paid more than if you only had one. And they sometimes called to ask how many extensions there were, hoping to get someone who wasn’t aware that the phone company only knew about one of the three phones.
My phone bill in 1987 (which I think was after the breakup- it was definitely after leasing phones ended) was at least $25 and that didn’t include any long-distance calls. That’s around $52 in 2016 dollars. But in 2016, I paid $25 for a landline* with unlimited calls (local and long distance) and voice mail. I don’t need to pay extra for each phone and touch tone service is standard. I am, in constant dollars, paying less for more.
The only reason I have it is because my husband’s company still believes in faxes, and he freaked at the thought of not having a landline. Yes, I’m sure we could send a fax without a landline. No, I’m not sure I could teach him how to do it without killing him.
I think the issue is that “monopoly” refers to a system where there is a single provider, and I’m not sure that air travel pre-1978 qualifies. Was it the case that only a single airline had flights between any two cities so that if you were flying from NY to LA you had no choice of airline?
For the most part, yes. If you wanted to fly from A to B, there was often one airline that had that route. For flagship major-city routes (like NY to LA) there would be multiple airlines, but they each had a set number of flights and had to charge the same fare for the same level of service. (There was wiggle some room; for example if you flew newer or bigger planes, you could charge more. And non-stops were priced separately from stopover flights.)
Airlines had to apply to the CAB to begin or end service on a particular route, and CAB would set the fares to guarantee a profit on long-haul routes which was designed to subsidize money-losing fares on small-town routes. For several decades, not a single new company was permitted to fly interstate passenger service in the United States. Any time a new airport was built, the existing airlines would apply (or not) to service it.
The airlines loved this system because in spite of the inflexible and terribly inefficient bureaucracy, it guaranteed them a consistent profit with no competition. They lobbied hard against deregulation but ultimately lost.
Is it really? Yeah, the United thing, but all of my flights - hundreds of them - have been indistinguishable from any other form of transportaiton. You get on the plane, you sit in a seat, someone drives the vehicle to its destination, and I get off the plane. I don’t recall any torture taking place.
People bitch about air travel non stop but, really, it sure kicks the hell out of the alternatives for a long trip.
[QUOTE=iqor frankensteen]
We are paying more for phone connectivity than ever before.
[/QUOTE]
Phone connectivity has never been cheaper.
Our phone line was literally a throw-in service when we got cable. It’s that worthless.
And long distance was INSANELY expensive. If you adjust for inflation, the price people paid for such things was hard to believe. In 1980 the price to call LA from NYC was about $1.25 per minute. I would have been 9 then, and can remember when calling people long distance was something that was literally times with a watch to ensure we weren’t murdered by the rates. As recently as 1993 or so, when I was dating a girl who lived just 3 hours away, I rolled up $200 in one month in long distance.
As deregulation hit, service to small cities promptly started to evaporate. because, as noted above, the popular routes between big cities were over-priced to subsidize the unpopular routes to small ones. Once the overpricing disappeared, something had to give.
Congress quickly invented Essential Air Service - Wikipedia or EAS to explicitly subsidize that small town service. Support for EAS has ebbed and flowed over the years. Like agricultural subsidies, it’s one form of “welfare” that’s beloved of the GOP.
A lot of the reason for the Regional jet - Wikipedia RJ class of airliners and for the separate-but-cobranded Express airlines who fly them is to “farm the government” for the EAS money.
EAS today is a pale shadow of what it was in the 1980s. Part of that is overall growth of the industry and of medium-sized cities has moved some of the original EAS recipients on to being self-supporting. A larger part is the simple unwillingness of Congress to fund it at a level that would fully cover the “demand” for the service. I put “demand” in quotes because the observed demand for any subsidized product is a different from what the demand would be at the market price. Differing political stripes will see that difference in different lights.
You are either very thin, very lucky , don’t fly coach or some combination of those. Because I have only once been on a flight with all the seats in my row taken where I was physically comfortable. ( and I paid extra for a seat with more space on that flight). I can fit in my own seat, but the person next to me rarely can. I understand that I’m stuck with it because most people want the cheapest price possible ( or at least act as if they do) but that doesn’t make it not torture to sit for five or six hours twisted into a pretzel
It does, but only because of the time issue. Sure, if I want to go from NY to Las Vegas now, I’m going to fly rather than spend four days driving. But that’s mostly because 4 days there and 4 days back will more than a week’s vacation just for traveling. That decision may be different after I retire- since my last trip took me two days to recover from the flight.
Air travel is a bad example, because there were always competing companies. regulators decided who could fly where, but companies could apply to add or subtract routes, and were given the price they could charge. They ensured that airlines could not engage is a “race to the bottom”. The goal, of course, was to ensure profits (stability). Airlines going broke would tend to cut back on things like maintenance, meaning serious risk to the public, as well as the occasional carrier going tits up, leaving people holding expensive but worthless tickets. (not to mention screwing employees out of pensions) Similarly, the bar to entering the industry ensured that the company was well funded.
Power is a natural monopoly, just like roads or water supply or sewage. As others point out, allowing anyone to build any power lines they want causes ugly chaos. Even if just the distribution is unitary, there’s still the issue of matching feed to demand. I want to build a huge plant over there? Now the distributor is required to put up a giant transmission line to there. (Or must they? Can they decline? then what?)
One problem with California, was that IIRC they actually planned for a volatile market. But just like Ontario, they spent enough time talking about it that the then power monopoly put expansion plans on hold. Why build a giant power plan they would have to essentially give away? Producer companies found it easier to buy existing facilities and game the system, than to actually invest in more production. And any private expansion plans would not be implemented until they saw how the market shook out. Not to mention the environmental reviews, and other regulatory delays to any significant additional capacity.
Encouraging volatility - market pricing - over stability - long term contracts - made consumers a sitting duck for the classic Enron maneuvers; shut down supply to drive up per-unit demand. With no cap, the “Sweet spot” on the supply and demand curves was probably a lot higher than would be considered reasonable by consumers, given that nobody was joining in to add capacity, which would be the usual check on gouging.
I think people have overly rosy beliefs about how it worked in the old days as well. Even if you ignore the much better fares, things like involuntary denial of boarding due to overbooking, lost bags, broken down planes, etc. are all less common now than they used to be.
Your bills were high in 1987 because of the Bell breakup (which happened in 1984). In order to keep all the Baby Bells and newly sprung-up non-Bell local carriers from going bust, the FTC had to allow them to charge high rates to connect long distance calls to their own subscribers. Those costs were passed along to the interexchange carriers (long distance providers) which in turn passed them along to their own customers. AT&T didn’t need to charge you anything pre-breakup to connect a call to one of its subscribers because it was already making money on your call. Local calling plans became increasingly expensive despite these fees, because they didn’t increase much and local carriers had to make money somehow.
Your phone bill is extremely cheap today because your carrier has to compete with VOiP providers - who were at least for a while exempt from access charges. In other words, today’s low costs are the result of new technology, not increased competition from the monopoly breakup. It’s also gone down a bit because carriers no longer have to maintain separate equipment for pulse dialing, I think.
The monopoly on long distance, and the gravy train it produced, was a river of money that financed the original Bell with excessive layers of middle management, and perks like the Bell Labs doing basic research rather than concentrating on simple product research. The pricing was still modelled on the older manual long distance system, but digital switching and circuits were making the product incredibly cheap to provide and low maintenance.
but then, all on North America (all of the world) worked on that model where consumers paid through the nose to finance the perks of middle management and overstaffing for the top tiers of business. Then came the computer revolution and disruptive innovation, Wall street analysts, deregulations, mergers, and price wars. So essentially, way back when man exploited his fellow man. Now it’s the other way around. (Only Wall Street gets to gouge us all).
My take: Regulated monopolies can work, as can less regulated privatization, if the startup costs aren’t too high. Less regulated monopolies don’t work, because a monopoly inherently breaks free market. There must be a reason for a company not to overcharge, whether regulation or competition.
Yeah. It’s important to distinguish between a market that logically favors a mostly monopoly structure (what economists call a natural monopoly), versus marketplace participants that happen at the moment to be dominant, whether by fair means or foul.
Utilities are the canonical example of natural monopoly markets. IOW for best efficiency they *should *be serviced by one supplier. Ref BigT’s cogent post just above, that should be a heavily regulated single supplier.
Meantime there are “bad” monopolies where a market that’s not a natural monopoly is somehow captured by one or a few major suppliers able to collude or otherwise stifle effective competition. These markets are most efficiently serviced by many suppliers competing freely and fairly.
The OP sounds like he’s unaware of this distinction.
This was also the situation in the UK. The response was nationalisation - shareholders were compensated and the government took control of the assets. This was a Great Leap Forward, because it enabled standardisation. It also enabled the National Grid and allowed a much better use of expensive generating equipment.
Alas - it seems to be the nature of government bodies to be come more and more schlerotic over time. On the one hand, a cash-strapped (aren’t they always) government wants to put less taxpayer’s money in, and on the other, bureaucracy expands exponentially.
Privatisation was the solution and it has worked pretty well. If I am unhappy with my supplier, I can vote with my feet and switch. Prices are competitive and quality of service varies considerably. Of course, that does not become apparent until there is a problem, but there are many websites that offer comparisons for anyone who cares to search.
The first and most successful privatisation was BT (telephones). At the time, it was run by the Post Office - If you were a new subscriber, you had a choice of two handsets and had to wait several weeks for them to get round to connecting you. The connection charge was over a week’s wages for the average worker. If you called them, it could take an hour or more before anyone from the understaffed customer services department to answer. Basically they didn’t care, because if you wanted a phone, there was nowhere else to go.
Now I have three companies (BT, Sky and Virgin) competing to sell me broadband, cable internet and telephone landlines. If, at the end of my contract, I call my current provider and show that one of the others has made me a better offer, they will invariably better it.
Nationalised industries suffered from decades of under investment (they can’t borrow ob the open market) and poor management. Privatisation is not a universal panacea - Water supply has been less successful with prices rising steeply and operators being bought out by foreign investors; although prices do reflect the fact that many of the pipes under the streets were Victorian cast iron and were well past their service life.
The private companies are not free from government influence though. There is a whole raft of regulatory bodies that prevent them from raising prices without good reason and that can fine them for poor service.
Exelon controls much of the infrastructure here in Chicago (ComED), and I have had countless times where they charged too much and I had to call in to correct it, that was solved by a ‘Smart’ meter though, actually the costs have went down. Whatever regulation is in place for a utility is a good thing, otherwise I wouldn’t trust those smart meters, if its connected to the internet at all, it can be hacked.
Side question? ComED has a large substation that is unenclosed right next to the Chicago River, Wouldn’t corrosion be an issue here even if its not salt water? I’ve always been curious (for Chicago residents… the bridge at Addison and California).
As a former big shot in our company said about organizations, 'Polio is no longer a national epidemic, but there’s still a March of Dimes". That was years ago, before the current vaccination stupidity.
Or I think it’s Jerry Pournelle’s “Iron Law of Organizations” that eventually an organization ceases to exist for it’s purpose, and instead exists for self-preservation. That’s when the visionaries have been replaced by bureaucrats.
Any monopoly will naturally drive up prices, through inefficiency and (if private) greed. They need oversight and regulation to ensure they do not wander from the straight and narrow.
Back in 2009, as the recession hit everyone’s pocketbook and investments, my state’s Power Authority decided they needed to raise electric rates by a large percentage. Not 1 or 2 percent, but something like 12 or 14 percent.
They did this after reporting they had the best financial year ever, the state took $750 million from them, which the power authority said was not a problem. Then they gave out millions in bonuses to employees.
Suddenly, they decided to hold a “public hearing”, not published on the calendar, to ask for a rate hike. They quickly scheduled the unannounced hearing for a Wednesday, during the middle of the day. They stated they were holding only one hearing on the issue.
Of course, they were outed by some pissed off politicians from energy-producing parts of the state, where the Power Authority asked the energy producers to keep their rates low when they were negotiating for the upcoming year.
After arm-twisting the producers to keep rates low, the power authority turned around and wanted to jack up rates significantly in the middle of a rather harsh and protracted recession. You can’t make this stuff up.
I wish this was a one-time occurrence with the various “authorities” in the state, but it’s not. Things like this happen every so often. So I get a kick out of how so many people paint the government as some noble guardian, protecting them from the onslaught of monopolistic evildoers. The irony is amusing, but someone needs to watch the watchers because they’re looking out for their own interests, not yours.