Monopoly, Duopoly, Oligopoly: Can Competition Happen Under All Scenarios?

Most communications regulators believe duopolies are injurious to competition, innovation and investment. And yet the degree to which that is true is a bit unclear. 

Uganda has a mobile duopoly and yet subscriptions keep climbing. In the fixed networks market, while some would argue that the cable operator-telco duopoly is not competitive, others would point to declining prices, heavy investments in bandwidth supply and available speeds as evidence that competition is producing results. 

In the telco world, faster home broadband is nearly synonymous with fiber to the home upgrades. In the U.S. and many other markets, the issue is available bandwidth, not physical media. 

More than 80 percent of U.S. homes can buy gigabit per second internet access if they choose, from the local cable operator. And though U.S. telcos are stepping up their optical fiber access investments, fewer homes are reached by FTTH. 

Still, according to the Federal Communications Commission, 88 percent of U.S. homes can buy internet access at gigabit speeds. The NCTA says home broadband speeds have increased 1880 percent over the last decade alone.  

source: NCTA 

It is possible to debate whether infrastructure or retail competition produces better outcomes, especially since, in many markets, only retail competition (using wholesale access from one facilities supplier) is feasible. 

Some claim U.S. home broadband prices are too high, the typical argument being that U.S. a la carte prices (the retail tariff for internet access, not purchased in a bundle) are higher than prices in other countries.  

Adjusting for currency and living cost differentials, however, broadband access prices globally are remarkably uniform. 

The 2019 average price of a broadband internet access connection--globally--was $72..92, down $0.12 from 2017 levels, according to comparison site Cable. Other comparisons say the average global price for a fixed connection is $67 a month. 

Looking at internet access prices using the purchasing power parity  method, developed nation prices are around $35 to $40 a month. In absolute terms, developed nation prices are less than $30 a month. 

According to a new analysis by NetCredit, which shows U.S. consumers spending about 0.16 percent of income on internet access, “making it the most affordable broadband in North America,” says NetCredit.  

In Europe, a majority of consumers pay less than one percent of their average wages to get broadband access, NetCredit says. In Singapore, Hong Kong, New Zealand and Japan,  10 Mbps service costs between 0.15 percent and 0.28 percent of income. 

The point is that home broadband prices fall everywhere, over time.

source: Strategy Analytics 

Looking at 95 countries globally with internet access speeds of at least 60 Mbps, U.S. prices were $62.74 a month, with the highest price being $100.42 in the United Arab Emirates and the lowest price being $4.88 in the Ukraine. 

According to comparethemarket.com, the United States is not the most affordable of 50 countries analyzed. On the other hand, the United States ranks fifth among 50 for downstream speeds. 

The point is that duopoly, oligopoly or even monopoly can produce retail competition. There is room to argue about how much competition, investment or innovation is possible. But connectivity no longer is a “natural monopoly” in terms of retail competition. 

There is a stronger argument for infrastructure monopoly in many markets. And duopoly might be the only realistic outcome in some mobile markets, even if most regulators believe three is the minimum number of mobile firms necessary to promote robust competition.