Natural Monopolies In The United States
A natural monopoly is defined as a single firm that offers a product or service (Study.com, 2015). This firm has very high fixed costs as a barrier to entry and derives most the benefits of economies of scale available to the whole industry (Study.com, 2015). Before 1984, long-distance phone service was only supplied by AT&T in the United States (FRASER, 2005). AT&T was holding the position as the only firm to supply long-distance phone services created the label of this service being a natural monopoly. The government has anti-trust laws in place to ensure these firms defined as natural monopolies cannot charge whatever they desire for the single point product or service as the public depends on these services (Study.com, 2015). This government …show more content…
Before, it was very difficult to make long distance transmissions because the signals, which follow direct routes, were not able to flex around the Earth to arrive at place that was far. Since satellites are in orbit, the signals may be sent spontaneously into space and thus turn to another satellite or straight to the place they want to reach. Hence, communications satellites helped in expanding international and domestic long distance calling ("Communications Satellites", n.d).
Currently, we have six firms that provide communications satellite service to the U.S including GE Americom, Alascom, AT&T, COMSAT, GTE, and Hughes Communications. (Whalen, n.d). This competition led to a huge decrease cost of long distance calls. The Average retail prices have decreased by approximately 28%, and the current discount plans have decreased the service price by almost 50%. Also, the one dime per minute plans offered by Sprints on evenings and weekends long distances calls have decreased the prices and at the same time has given the customers big cost savings (Kushnick, 1998). Also, in North America charges for long distance call are now dropping to $0.15 per minute or less. Chile, which admits competition in telecommunications has the lowest rate of long distance call of $0.10 per minute regardless of where you are in the country ("Village Telephones: Socioeconomic Impacts And Implications For Rural Futures",
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