Case Study:
Public Trustee & Competition in Cable & Broadcasting Natural Monopoly

Professor: David Olson
Student: Giovanni Navas
Jan 15, 2012
Telecommunications Law and Regulation
TM584

What is a Natural Monopoly?

The Natural Monopoly figure surge as an implicit regulation to control the market and beneficiate consumers from service or product providers. In essence, a Natural Monopoly surges when a provider is able to supply the products or services the customers demand without intervention of any other firm, and allowing another provider to facilitate the same products or services wouldn’t be beneficial for the consumer.

The Natural Monopoly figure exists because when a company invests money in a product or service, it expects to generate any kind of revenue on the investment, some of these products and services require large amounts of money to be developed and deployed; In order for these providers to succeed in their business plan, they have to be efficient in the processes to deliver their final product or service to the consumer, always taking in consideration the ROI or Return of Investment.

Based on this concept that companies need to recover their return of investment, we can conclude that if company X can have a large portfolio of customers, it’s return of investment is going to be reached faster than if it has a second provider supplying the same service and trying to accomplish the same objective. Having a scenario like the one previously expressed with two providers fighting for the same customer with a limited market to expand, the customer would have to pay more for the service.

This concept is expressed in the RA Posner – Stanford Law Review: The term Natural Monopoly does not refer to the actual number of sellers in a market but to the relationship to demand and technology of supply. If the entire demand within a