From: pjs269@tijc02.uucp (Paul Schmidt)
Subject: Re: EFF and its growing pains...
Organization: Advocates for Self-Government - Davy Crockett Chapter
X-Newsreader: Tin 1.1 PL4
Date: Tue, 26 Jan 93 13:43:33 GMT

strnlght@netcom.com (David Sternlight) writes:
: 
: What I am advocating is modern public utility theory--when a natural
: monopoly exists, it should be permitted to gain the cost-side economies of
: such a natural monopoly, and regulated down to competitive pricing on the
: demand side. It should not be "broken up" on some far-fetched political
: argument about "competition" which has no theoretical economic basis
: whatsoever in the case of "natural" monopolies.

There are very few examples of "natural" monopolies.  The U.S. postal
service was granted monopoly status only because of competition.
Lysander Spooner started the American Letter Service in Boston and was
undercutting the USPS and providing better service.  It was in the face
of competition that the USPS was granted monopoly status.
: 
: In the present case the physics is straightforward: The budgets of the
: "competing" long distance carriers in the U.S., taken together, are much
: higher than AT&T's budget was for marketing, advertising, promotional
: losses, management, and some facilities. Someone is paying for that, and it
: isn't the stockholders or the government. That leaves you and me, boys and
: girls. 

I want to pay the lowest amount for the best service.  I am very pleased
with the lower costs and higher quality that is provided by the
competing long distance companies.  In a monopoly, the company can hold
down supply to reap greater profits.  It is not suprising that costs are
higher in a competitive market because the supply will be higher.
(Notice that long distance rates have gone down to pay for these higher
costs, therefore supply must be up, meeting the natural demand.)
: 
: Similarly, I argue that the (call it what you will) Internet
: backbone/NREN/whatever is a natural monopoly. (For those unfamiliar with the
: term, it means that the technical characteristics of the thing mean costs
: are lower if there's one system and one provider. Regulated public utility
: companies are other examples, as I claim are both local and long distance
: phone services.) The lowest cost to the public and the economy results when
: a natural monopoly is permitted to gain monopoly economies of scale on the
: cost side, but is prevented from monopoly pricing by regulation.

I don't know how a network could be considered a monopoly.  There is no
organization that can demand that you use only them to be part of their
network and survive.  Most of the computer information services now
allow electronic mail in and out of their system because of the high
demand for such a service.  Market forces opened their previously closed
systems.  If I want to hook into a network, I will look for the lowest
cost provider to give the services I need.  This may be "uunet" or a
local site, or many of the other sites.  If I just want to get usenet, I
may choose a satelite downlink (I believe Len Rose is working on such a
product) or work cooperatively with other local organizations.  There
are many options available (cable, phone lines, microwave, fiber optic,
satelite, etc.) that I think the competition will be fierce.  The only
problem is that the government has set up many roadblocks for the
companies through regulations that may not allow as much competition.  I
believe that this is what the EFF is trying to improve.
: 
: I know some of the U.S. legislators who broke up AT&T. Most agree that
: it was a mistake, and that total costs to the public are higher than they
: would have been, but it is too late to put it back together

I do not want to raise individuals costs for any service.  The
government should not be involved in regulating industry since it
usually raises costs and stifles competition.  As W. Edwards Deming
wrote in "Out of the Crisis":

"... not only is the style of American management unfitted for this
economic age, but that many government regulations and the Justice 
Department's Antitrust Division are out of step, propelling American 
industry along the path of decline, contrary to the well-being of the 
American people."

Ultimately, though, there is no moral justification for the use of
government forces to regulate a monopoly.  Government is force.  It
would be wrong for you or I to go into a business with a gun and force
them to charge a certain price.  There are people who voluntarily pay
for such a product.  The rights of government are derived from the
rights of the people (in the U.S.).  Since the people have no such
right, the government also has no legitimate right to price regulate any
industry.
-- 
Paul Schmidt: Advocates for Self-Government, Davy Crockett Chapter President
706 Judith Drive, Johnson City, TN 37604, (615)283-0084, uunet!tijc02!pjs269
"Freedom seems to have unleashed the  creative energies of the people -- and
leads to ever higher levels of income and social progress."  --  U.N. report
Newsgroups: comp.org.eff.talk