Economics of Monopoly Power
Take a position regarding whether the current initiatives of the FCC actually encourage competition in all communication markets and protect the public. Provide specific examples to support your response.
The FCC has over the years been involved in various initiatives to ensure that there is fairer play and a leveled field for the operation of the communication companies in the U.S.A. Though some may point fingers that the FCC has played lip service to the idea of encouraging competition for long, it is apparent that several efforts by the FCC has ensured a more competitive environment especially in the broadband provision.
The reason why the U.S.A. lags behind many countries in the broadband aspect in particular is the fact that there is a stunning lack of competition in this market. It is noticeable that there are a few players who dominate the market and all the time they seem to consolidate their monopoly rather than opening up new competition. This freezing competition comes with the decreasing competition, there seems to be a disappearing urgency to expand the broadband (, 2011). It is in light of the realization that competition drives broadband that FCC has engaged in many endeavors including the latest initiative of “connect2compete” with a sole aim of taking the internet to every single person out there.
The aim of the connect2compete project is to ensure that the millions of families that are not able to afford the exorbitant rates of up to $150 per month are able to access internet at a subsidized price of $10 per month. As if this was not enough, there is an additional benefit of buying a netbook or a PC at prices that are less than $150 with also availed by the FCC (, 2011). This can be termed as one of the biggest steps that the FCC has ever taken in a bid to encourage competition since the other players will also want to drop their prices more and make it more affordable for the average American.
2) Imagine a single organization with a complete monopoly on all post-secondary education and discuss the likely economic impact.
In the event as above, this would be equated to the natural monopolies that exist in the market. Such a monopoly on the means of provision of education without a possibility of another competitor will mean that the proprietor will have the leeway to charge exorbitant service fees without caring about what the clients feel of such fees. Apart from this economic impact, it will also mean that the clients will not be getting value for their service since in the absence of competition in the education system, there is likelihood that there will be reluctance in attaining the best possible levels since there is no other school that the dissatisfied person would run to.
3). Explain the economic consequences that would unfold if one of the major four sports leagues in the United States reorganized into a single-entity league. Discuss the consequences for players and fans.
If such an event happened, this would lead to what is referred to as oligopoly in the economics arena. This will mean that there will be a small group of participants who will have the ability to control and have influence over the forces supply and the prices in this market. In our case, this newly formed oligopoly will be able to give the remaining three leagues a hard time in terms of determining the forces in the sports fraternity. This will include the pay of the players being influenced by this groups with payers having nowhere to run to as most of the teams will be under this oligopoly, the fans will be forced to pay hefty fees as there would be no other leagues to run to watch as all those under the new oligopoly will be charging the same agreed fees.
4). Discuss the likely economic impact to owners, players, and fans if sports leagues were not allowed to function as a cartel.
If the sports leagues were kept under tight check and were not allowed in whichever way to operate in the cartels, the owners would stand to lose a significant amount of money since there would be rife competition and fans will have to choose where to go pay their money based on the price, the product that they expect to watch, the place where they are being held and the packaging that the sporting activity gets for instance the extra things that one would get.
The players here stand to be the biggest beneficiaries as the harmonization of pay between clubs and leagues will no longer work and each league will be paying the players according to the talent and capability.
The fans will also benefit by getting to pay lower fees or more competitive fees since each proprietor will put as much effort as possible to ensure that they attract clients hence the competitive prices.
JSI Capital Advisors, (2011). The FCC’s Egalitarian Cable Broadband Initiative: What does it Mean for RLECs?: The “Biggest Effort Ever” to . Retrieved February 9, 2012 from http://www.jsicapitaladvisors.com/the-ilec-advisor/tag/connect-2-compete
Mike Masnick, (2011). What Has The FCC Done To Actually Encourage Competition? Retrieved February 9, 2012 from http://www.techdirt..shtml