Regulation and Deregulation Both Make Sense, at Different Times in an Industry's Lifecycle

In 1948, the Supreme Court ruled that five studios had monopolized the American film industry. Paramount, Warner Bros., MGM, RKO, and Fox owned the theaters that showed their own movies.

The court ordered them to sell.

For the next 72 years, the Paramount Consent Decrees kept the studios apart.

In August 2020, a federal judge terminated the decrees. The reasoning was that the market had changed beyond recognition.

Streaming had replaced theaters as the primary distribution channel. The studios were no longer dangerous monopolists. They were struggling incumbents.

Six years later, Paramount and Warner Bros. are merging. The deal is worth $111 billion including debt. The Justice Department approved it on June 12, 2026.

Two of the five studios that the Supreme Court forced apart are coming back together voluntarily. Not because they are too powerful, but because they are too weak to survive alone.

It’s a familiar story. Regulation is often designed to solve a specific market structure problem (monopoly power, natural monopoly characteristics, or high barriers to entry). 

Over time, technology, globalization, new business models, and substitute products can eliminate the original source of market power. Regulations that once made sense may then become unnecessary, counterproductive, or even protective of incumbents.

Industry	Original Monopoly Concern	Regulatory Response	What Changed?	Why Regulation Became Less Necessary
Railroads (1880s)	Railroads often held local transportation monopolies	Interstate Commerce Act of 1887 and creation of the ICC	Trucks, highways, pipelines, barges, airlines emerged	Railroads lost their transportation monopoly and faced extensive intermodal competition. The ICC was ultimately abolished in 1996. (PBS)
Airlines (1938–1978)	Fear that airlines would become monopolies and require centralized route and fare control	Civil Aeronautics Board regulated routes, prices, and entry	Industry matured; economists found regulation often restricted competition rather than promoting it	Congress passed the Airline Deregulation Act of 1978, eliminating most economic regulation. (Congress.gov)
Long-distance telephone service	AT&T dominance in national telephony	Rate regulation, entry restrictions, antitrust oversight	Fiber optics, microwave transmission, wireless networks, internet communications	Long-distance became highly competitive and prices collapsed. (Investopedia)
Telephone equipment	AT&T controlled devices connected to the network	FCC restrictions and later interoperability rules	Standardized interfaces and competitive equipment markets	Consumers now freely purchase phones and network devices from many suppliers. (WIRED)
Telegraph	Western Union's dominance	State and federal oversight of messaging services	Telephone, fax, email, messaging apps	Telegraph market essentially disappeared; monopoly concerns vanished with the technology itself.
Trucking (mid-20th century)	Concern about destructive competition and market concentration	ICC regulation of routes and pricing	Improved logistics, highways, nationwide competition	Most economic regulation was removed in the late 1970s and early 1980s. (LegalClarity)
Natural gas transportation	Pipeline monopolies in some regions	Extensive price and transportation regulation	Competitive gas production, spot markets, interstate trading hubs	Many pricing controls were relaxed as markets became more competitive.
Stock trading commissions	Dominant exchanges could maintain fixed commissions	SEC oversight and fixed-rate structures	Electronic trading and competing exchanges	Fixed commissions were abolished in 1975 ("May Day"), leading to intense competition.
Broadcast television	Scarce spectrum created limited competition	FCC ownership and content regulations	Cable TV, satellite TV, streaming services, internet video	The original scarcity rationale weakened substantially.
Local newspapers	Dominant local print monopolies	Special antitrust accommodations and ownership rules	Internet advertising, social media, digital news	Many newspaper monopolies disappeared due to competition from digital substitutes.

In the case of the studios, massive changes in the video and movie business make older restrictions unnecessary. 

Television was an alternative to “going to the movies, and therefore a threat. But studios discovered:

• TV licensing created new revenue

• Old film libraries became valuable assets

• Syndication emerged as a lucrative business. 

The additional changes in distribution (cable TV, home video, streaming) likewise emphasized the role of content ownership and creation for studios, even as new distributors emerged to capture value. 

Era	Largest Value Capture
Theater	Studios + theaters
Broadcast TV	Networks
Cable TV	Cable operators
DVD	Studios
Streaming	Platforms

Among the new issues with streaming is the importance of distribution versus “discovery,” as “scarcity value” migrates. 

Era	Scarce Resource
Theaters	Screens
Broadcast TV	Spectrum
Cable TV	Channel capacity
DVD	Shelf space
Streaming	Consumer attention

Frequently, the substitute products and competitors come from “outside” an industry’s chosen domain. 

Perhaps the classic example is railroads believing they were in the trains business, when they were actually in the transportation business. The substitutes did not come from inside the “railroad” business but from outside. 

Product	Apparent Monopoly	Important Substitute
Railroads	Railroads	Trucks, barges, airlines
Long-distance calls	AT&T	Mobile, VoIP, messaging apps
Broadcast TV	Local stations	Cable, satellite, streaming
Newspapers	Local newspaper	Internet and social media
Taxi medallions	Local taxis	Ride-sharing platforms
Video rental stores	Blockbuster	Streaming services

Each major distribution innovation created new winners, weakened existing gatekeepers, and shifted where revenue accumulated:

• broadcast television

• cable television

• home video

• DVD

• streaming. 

Era	Dominant Distribution	Key Gatekeeper	Main Revenue Source
1920s–1950s	Movie theaters	Theater chains	Ticket sales
1950s–1980s	Broadcast TV	TV networks	Advertising
1980s–2000s	Cable TV	Cable operators	Subscription fees + advertising
1980s–2010s	VHS/DVD	Retailers & studios	Unit sales/rentals
2010s–present	Streaming	Streaming platforms	Subscriptions
Emerging	AI-assisted distribution	Platforms & recommendation engines	Subscription + advertising + commerce

The point is that “where” monopoly danger exists will shift with time. And so must the regulatory concern.  Emerging industries might need one pattern. Declining industries virtually always need another: preventing concentration early; encouraging it in the industry decline phase.

Google, Blackstone Create TPU "as a Service" Business

Google and Blackstone’s TPU-as-a-service venture is important for any number of reasons:

• it turns TPUs from a mostly Google-hosted product into a broader external infrastructure platform

• strengthens Google’s push to monetize its custom silicon

• gives AI customers a non-Nvidia acceleration path

• might clarify the neocloud business model. 

Blackstone is committing $5 billion in equity and an initial 500 MW of capacity coming online in 2027. 

The move tends to ratify the GPU as a service market and provides an alternative to the Nvidia ecosystem, at least in the “bare metal” portion of the business. 

The venture also might intensify pricing pressure and reduce differentiation in the inference market. 

The venture also tests the durability of the neocloud business itself. Today, a global scarcity of high-end AI training and inference compute creates the basis for the market.

Neoclouds originally emerged as stopgaps to address the GPU shortage, but their bare-metal economics are fragile, being based on what most believe are temporary shortages of capacity. 

Perhaps their long-term viability hinges on their ability to move up the stack into AI-native services, which puts them in direct competition with hyperscalers. And some will note how little protection the business has, given the thin profit margins and high continuing capital investment. 

source: McKinsey 

Neoclouds have a strong demand story, but their business model is structurally difficult because they combine very high capital intensity with fast hardware depreciation and aggressive price competition. The result is a market that can grow fast while still being hard to make sustainably profitable.

The core problem is that graphics processing units are expensive, and their resale or rental value falls quickly as new generations arrive. 

McKinsey notes that over a typical five-year depreciation horizon, GPU-hour pricing can decline by half or more, which forces providers to recover capital quickly or risk stranded assets.

So neoclouds must keep raising capital to buy the next wave of chips even while the prior fleet is losing value. This makes cash flow, financing terms, and utilization rates far more important than simple revenue growth.

GPU clouds are not just chip businesses; they are power, cooling, networking, and operations businesses as well. High energy costs, high-density racks, and increasingly complex cooling requirements raise operating expense and add execution risk.

Up to this point, neoclouds are heavily dependent on Nvidia for the chips, networking ecosystem, and much of the software stack.

Google will test that thesis.

A big reason neoclouds emerged was that they could undercut hyperscalers on price and provisioning speed, sometimes by large margins. But hyperscalers are responding.

That means the initial “GPU scarcity arbitrage” is not a durable moat by itself.

The strategic tension is that investors often want neoclouds to move up the stack into managed services, orchestration, inference platforms, or sector-specific solutions. Those layers can improve retention and margins, but they also bring neoclouds into direct competition with hyperscalers that have deeper ecosystems and broader product bundles.

So the firms face a hard choice: stay close to bare-metal GPU rental, where margins are thin, or build higher-value services, where competition is tougher and sales cycles are longer.

That suggests a need to pioneer niche markets, such as sovereign compute and specialized workloads.