Saturday, August 21, 2004

Another View on Natural Monopolies

I was semi-idly noodling around the web following link trails of fiberish stuff when I tripped onto a Slashdot forum discussing Fiber To The Home projects. I have tried to tell myself not to get drawn into reading slashdot discussions unless the need is dire. Hours can disappear into that hole with nothing productive emerging. But I still graze those forums when it is something that interests me and this time it paid off.

Lawrence Lessing, he of intellectual property and constitutional law fame, was referenced somewhere in the middle of that very long page of comments and that link lead to a Wired article written in December 2003. There he presented a very clear discussion of the economics of Natural Monopolies as they relate to municipal fiber. If you've looked at my bits on that issue and wondered about the concept and application take a look a Lessing's differently slanted take. Here is representative paragraph from the middle of the short article (AFN is All Fiber Network):
Most economists would leap from the premise of a natural monopoly to the conclusion that such a monopoly must be regulated. But regulation is not the end that McAdams seeks. Ownership is. If a traditional network provider owned an AFN in a particular area, that network provider, acting rationally, would charge customers a monopoly price, or restrict service to get its monopoly benefit. But if the customer owned the network, then the customer could get the same access at a much lower price and be free of use restrictions. McAdams is pushing - and Burlington and other cities are actually deploying - customer-owned AFNs.
You might think that a municipal monopoly might have the same abusive tendencies that any monopoly would have. But according to Lessing you'd be wrong: you'd be missing the essential point of ownership. He notes: "You don't monopolize yourself." Straight to the heart of the matter; I admire that. Lessing illustrates the matter by using the example of Boeing's in-house fiber network. Businesses bring services in-house to save money, increase efficiency and to make sure the services offered meets their quality needs. Its a good deal for Boeing. And exactly the same logic applies to communities. Lafayette can't monopolize itself. Monopolies act "rationally" (according to that strange conception of rationality found in economics) when they maximize profits wherever they are able. But there is no such motive for the people to exploit themselves.


Lessing caught my eye in the scanning because we have recently received a request to reuse material on this site. We're for it, of course, and flattered, but realize that the material here is pretty tightly linked to Lafayette. (As are we.) People reusing the material and customizing it for their site run the risk of violating unreasonably restrictive, in our opinion, new interpretations of what is "fair use" of our material. As we realize how widespread the municipal telecom fight is we'd like for people to be able to freely reuse our material. One of the things Lessing is famous for is championing a less restrictive form of copyright called Creative Commons. It's a great idea that allows people who want their stuff reused to make that clear. So, as soon as we can figure out how to do it, we are putting our material on this site under a Creative Commons license. More when it happens—but suffice it to say that Lessing is a hero of mine and I think well worth reading. He thinks clearly about hard to grasp issues like copyright...and natural monopolies.

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