The Case Against Antitrust

By Jai Khemani

Jai recently got 2 A*s and an A in his A levels and is now looking forward to university. Jai is particularly passionate about political economy and a believer in laissez-faire capitalism. The less government the better! His main interests in Economics are Healthcare, monetary, public finances and business cycle theory. He adheres to the Austrian School of Economics, with Ludwig Von Mises and Murray Rothbard as personal favourites.  Jai is currently interning at The Cobden Centre and is working on some interesting economics projects.

The first major intervention that governments have adopted worldwide, is anti-trust legislation. Starting in the late 19th Century, regulation on monopoly power became the norm to correct market failures. Supposedly, markets perform better when there is competition and that monopolies reduce economic efficiency, hence the motivation for anti-trust laws. The legal definition of a monopoly is a firm with more than 25% market share. Free market capitalism is supposedly flawed, this time because of its tendency to produce monopolies.

Aims of Antitrust Laws Achieve the Opposite of Competition

Anti-trust legislation first began in 1890 under the Sherman Anti-Trust Act followed by the Clayton Act of 1914. This began the era of government regulation of monopoly power and a crackdown on ‘uncompetitive’ practices. The end of goal of these laws is to protect consumers from evil monopolies that ‘restrain trade’ and exploit consumers as a result. When antitrust began in the 1890s, the Economics profession was vehemently opposed to antitrust. Their opposition was based on the idea that antitrust is antithetical to competition. This is because competition is simply the idea that over time entrepreneurs compete and production and market structures over time according to consumers. If a certain market best serves consumers if only a few firms dominate the market, then so be it. This is arguably a good thing. These few firms have significantly lower average costs, whilst also having to compete vigorously to earn their market share. As a result, the fall in costs of production allow lower prices to be passed on as well as greater profitability for the firms. Large firms that dominate industries be a good thing (provided they have no government protection) as they achieve significantly more Economies of Scale, more profitability which allows greater innovation and lower prices for consumers. Overall, the economy enjoys better goods and services and consumers enjoy greater disposable income.

 

Obsession with Perfect Competition:

Supporters of antitrust and regulation of monopoly power cite the perfect competition theory as a justification for their views. Those that support antitrust, see market structures with many firms as the goal. Some go further by making the mistake that free markets can be considered’ free markets’ if there is perfect competition. However, both claims are unconvincing. A free market does not necessarily mean lots of competition and low price making power. It is entirely possible that a firm in free market conditions could take 90% share of an industry.

Free markets are the collection and aggregation of peaceful, voluntary transactions between buyers and sellers. In a ‘free market’, artificial barriers to entry such as government licensing, protectionism, legal permission to operate/own a product are not free markets. Free markets entail the peaceful entry and exit of sellers in attempt to achieve a mutually beneficial exchange with a buyer. In other words, the peaceful exchange of goods and services arises from the desire to obtain goods and services one does not have or is able to produce.

Therefore, a chicken farmer who sells chicken breasts and Henry Ford selling Model T’s are the same thing. Both individuals have control over how much quantity they produce and the price which they attempt to sell at. However, they both do not have control over the final price and quantity (Rothbard, Man, Economy and State). The final price and quantity is determined by the voluntary transaction between a buyer and seller. Hence, whether a firm has 1% or 100% of the market is not relevant, assuming there is no coercion involved. Antitrust laws assume competition large market share are mutually exclusive. However, large market shares can easily arise from competition. A firm with a large market share implies that buyers buy more goods from firm A than the other firms. This says nothing about whether consumers are exploited.

In addition, given that competition is a dynamic, rivalrous process (for more Info, see Austrian definition of competition), perfect competition is not competitive. If all firms charge the same price, have perfect information and all the goods are homogenous, then there is no way one firm can get a competitive advantage over another. While supporters of antitrust see this as a benefit, it is not. Superiority of one firm over others implies that firm A provided better products and lower prices for consumers.

 

Empirical Evidence:

The first argument against anti-trust laws is that they assume the development of a monopoly results in inefficiency and exploitation of consumers. Antitrust laws fail to consider just how these monopolies were formed.  However, the basis for anti-trust laws falls flat on its face simply when looking at historical evidence. Take for example, Standard Oil. This company was founded by John D. Rockefeller in the late 1860s and became the most demonized company in America by the 1880s, when market share rose sharply. Eventually, the Supreme Court ruled that Standard Oil must be broken up in 1911. The basis of their decision was a violation of the Sherman anti-trust act. However, while Standard Oil was seen to have engaged in anti-competitive practices as far as Sherman was concerned, none of these behaviours resulted in exploitation of consumers. Between 1870 and 1890, Standard Oil’s market share increased from 4% to 90% of the petroleum refining market. They gained this market share by either making deals with crude oil suppliers or buying them altogether, reduced rates with railroad companies and investments into R&D. The effect was that Standard Oil lit up almost every home in the U.S with Kerosene lamps. While this ‘ruthless’ behaviour was eventually interpreted as ‘anti-competitive and illegal’, the result was lower prices for consumers and lower costs for Standard Oil. In 1869, Rockefeller’s Kerosene cost 30 cents per gallon. By 1880, the price fell to 9 cents and then to 7.4 cents per gallon in 1890. By 1897, prices fell further to just 5.9 cents per gallon (source: Armentano, 1986). In addition, Standard Oil’s acquisition of refineries and integration of the production process led to reduction in costs of production for the company. Between 1870 and 1885, the refining costs per gallon fell from 3 cents to 0.452 cents (source: L Reed, Foundation for Economic Education). This implies that the formation of the Standard Oil monopoly arose from efficiency, resulting in lower costs of production, translating into lower prices for consumers and higher profits for the company. These profits in turn resulted in further development of oil refining and improving the energy efficiency of oil. Thanks to Standard Oil, oil could refine in several ways, paving the way for new industries in the 1900s, namely car manufacturing.

There is further proof that Standard Oil earned its large market share. Simply look at Rockefeller’s testimony on Standard Oil’s success to the Industrial Commission:

‘‘I ascribe the success of the Standard to its consistent policy to make the volume of its business large through the merits and cheapness of its products. It has spared no expense in finding, securing, and utilizing the best and cheapest methods of manufacture. It has sought for the best superintendents and workmen and paid the best wages. It has not hesitated to sacrifice old machinery and old plants for new and better ones. It has placed its manufactories at the points where they could supply markets at the least expense. It has not only sought markets for its principal products, but for all possible by-products, sparing no expense in introducing them to the public. It has not hesitated to invest millions of dollars in methods of cheapening the gathering and distribution of oils by pipe lines, special cars, tank steamers, and tank wagons. It has erected tank stations at every important railroad station to cheapen the storage and delivery of its products. It has spared no expense in forcing its products into the markets of the world among people civilized and uncivilized. It has had faith in American oil, and has brought together millions of money for making it what it is, and holding its markets against the competition of Russia and all the many countries which are producers of oil and competitors against American oil’

(John D Rockefeller, 1899).

This shows that Standard Oil earned its market share through superiority rather than ‘illegal’ behaviour. Given that the end goal of anti-trust laws is to protect consumers from monopolies, the lower prices for consumers shows that efficiency is a consequence of monopoly power. Therefore, these facts prove that anti-trust laws are unnecessary and potentially harmful. They are harmful in that preventing monopolists from gaining a 90% market share, could potentially deprive consumers of even lower prices and superior products. As a result, anti-trust laws assume that a large market share is harmful but completely ignore how these monopolies were formed. Monopolies that were formed due to government action of course need to be addressed, but this also implies that most monopolies are not due to the free market, which the government is so keen to restrain.

In fact, Standard Oil was unable to maintain is market share between 1890 and the year it was broken up. For example, by 1910, Standard Oil’s market share fell to 64%, down from 90% in 1890 (source: Armentano, 1986). This implies that free market monopolies are unlikely but, in the event, that they do form, market shares often deteriorate over time as newcomers find more efficient ways to produce a good. This is particularly true for Standard Oil. What’s also noteworthy, is that Standard Oil in 1911 (year of its breakup) was competing against 100 other oil refineries, meaning that while it had 64% market share, the other 36% market share went to competitors, who could have easily captured more market share if consumers didn’t like Standard Oil.

Another example is ALCOA, or the Aluminium Corporation of America is another example. ALCOA was founded in the late 1800s and was indicted in 1937. However, it was not broken up. Like Standard Oil the company monopolized the aluminium market through economies of scale and innovation. Between 1887 and 1937, the price of aluminium ingot (the primary product for the company) fell from $5 to 22 cents per pound (source: Armentano, 1986)! This is a significant decrease in price. Some supporters of antitrust claim that ALCOA had been able to maintain its market share because of patents and legal right to produce aluminium. However, ALCOA’s patents had expired by 1906, leaving them exposed to competition that could eat up their market share. Thus, the only explanation is that ALCOA was superior to its competitors. In other words, no one wanted to compete with ALCOA.

Another example is Microsoft’s monopolization of the operating systems market. As of 2018, Microsoft’s market share was 75% of the global computer operating systems market (source: Statistica). However, most people who own desktops, which use Microsoft operating system are not exploited in terms of price or quality. Over time, the operating systems produced by Microsoft have improved since Windows was first launched in 1985. The difference between Windows Vista (released in 2006) and Windows 10 (released in 2014) is huge. Notable differences include more available applications and higher processing speed. This is proof that Microsoft has maintained its market share by providing consumers with better products.

What Have We Learned?

  • All 3 companies continued to reduce their prices.
  • Competition was the means to these monopolies. In other words, while these 3 companies gained more than 75% of the market, they did so because of their superiority over their competitors. Consequently, these monopolies arose because consumers rewarded these companies more than their competitors.
  • Antitrust laws make the mistake of assuming monopolies are bad but do not consider how these monopolies occur.
  • Lawmakers make the mistake that monopoly and no competition are synonymous. There are several cases where monopolies have intense competition despite high market share.

 

Development of Alternative Goods

Another reason why monopolies are not to be feared is that consumers can switch to alternatives.

Legal Monopolies and Government Action

While there are monopolies that have proven to be harmless, that does not mean that monopolies in general are a good thing. In fact, monopolies in most cases are harmful for consumers and potentially the industry. Monopolies that have historically been harmful to consumers were formed due to government action.

The government has firstly sponsored monopolies through patents, which grant legal monopolies to individuals and firms. The most notorious example is the American Licensed Automobile Manufacturers (A.L.A.M). A.L.A.M was formed in 1895 because of George Seldan’s invention of the automobile. This meant that there was a legal monopoly on the ‘automobile’ or a vehicle powered by engines. A.L.A.M significantly reduced the initial growth of Automobile manufacturing because they were able to collect royalties on automobile manufacturers as well as denying automobile manufacturers from manufacturing cars in the first place, because A.L.A.M granted licenses to potential manufacturers. The only reason why automobile manufacturing was able to become a colossal industry was because Henry Ford won his court case against A.L.A.M. Furthermore, protectionism is another example of monopolies. Monopolies in domestic markets are well protected if they are not exposed to foreign competition. However, protectionism is position held by many politicians to protect local industry. If that industry is monopolised, free trade opens the industry up to foreign competition, giving consumers more choice, thereby destroying monopolies. This therefore makes antitrust unnecessary.

 

Laws Against Collusion and Mergers

Antitrust laws seek to keep monopolies in check by punishing businesses that engage in anti-competitive behaviour.

One part of antitrust is pricing. Collusion is relevant when there are a few companies that dominate a market. As a result, 2 large companies can come together, and both agree to raise their prices. This is known as a cartel. Given that these 2 companies are now increasing prices in unison, then consumers will be exploited. While collusion is likely to happen when they’re a few large firms, collusion quickly breaks down even in the absence of antitrust laws. This is because firms that are colluding now have an incentive to break the agreement. Suppose 5 large firms all collude. As soon as one breaks his promise and reduces his price, then consumers will start buying from him. As a result, the other 4 firms quickly understand that their profits will diminish and they too, will reduce their prices. As a result, collusion breaks down quickly. Consider Pepsi and Coke. These 2 companies have every incentive to cheat each other if they collude and raise their prices and reduce output. Now that Coke has an incentive to cheat and break the agreement with Pepsi, the price immediately falls back down to normal levels. Furthermore, should Coke and Pepsi’s agreement continue, then consumers can easily switch to other alternatives such as Dr Pepper. However, it is highly unlikely that consumers would ever be faced with such a situation; the fact that Pepsi and Coke are rivals means that the cartel breaks down. Another example is the railroad industry. Railroad tycoons made money by charging businessmen (moving products) and passengers a fare, usually on a per mile basis. Railroad companies that both built the infrastructure and operated the trains were in fierce competition. They would often collude, setting higher freight prices to manufacturers and passengers. However, colluding agreements broke down because of rivalry. It was not until the establishment of the Interstate Commerce Commission in 1887, where the federal government began fixing railroad freight rates. The issue here is that the government may not fix the ‘correct’ price. Prices are determined by how much desire there is for a good and how much the seller can produce in a given time. Consequently, antitrust laws and the committees that enforce them, may set prices that are too high or too low, which distorts the allocation of resources in a given industry.

Mergers and takeovers are activities that are also restricted in antitrust. However, once again, mergers and takeovers are harmless and benefit consumers as well as producers. The first advantage is the economies of scale that arises from mergers. An efficient company, like Standard Oil or Amazon takeover inefficient competitors of the same market. By doing so, a greater share of the respective industry is now provided by these companies. These companies that organize their production effectively, facilitate more economies of scale. The result is that the industry overall could see much lower prices as more efficient firms who are cost efficient are providing a greater proportion of industry output. An inefficient firm ought to be acquired by an efficient firm because then more consumers are served by the more efficient firm and therefore improves consumers’ economic welfare. Also, according to McKinsey and Co. 70% of all mergers have failed. Therefore, acquisitions and mergers are not guaranteed to work, and the firms may breakup soon after.

Anti-trust is Immoral

Now that there is no evidence nor economic justification for antitrust legislation, the fact that competition policy still exists is rather immoral. Antitrust is immoral because of its disregard for property rights. Businessmen who built a large business through innovation and superiority and rewarding consumers, can still be ordered to break up their business. This violates the basic principle that every man, institution or entity is entitled to their property and that government telling a person what he can/can’t do with his property is immoral.

Anti-trust is Open to Corrupt Practices

95% of all antitrust cases, such as the 1995 antitrust case against Microsoft, were brought by rival firms rather than the Justice Department itself. Antitrust, therefore, can be used as a tool for inferior firms to go after superior competitors who offer better products to consumers. Consequently, the claim that monopolies are inefficient and therefore antitrust is essential, has little merit. It seems more likely that antitrust allows inefficient firms to keep their market share and limits the market share of superior firms. This makes it harder for consumers to gain access to better products and lower prices.

Myth of Natural Monopolies

Another justification for antitrust is that certain industries are ‘natural monopolies’, meaning that the large start-up costs inevitably leads to a sole provider of a good or service. Examples include railroad companies, electricity, water and gas. Large amounts of money are spent on the infrastructure, therefore more efficient to have a sole provider. When there is a sole provider, then price making power is extremely large.

However, the theoretical and empirical evidence for ‘natural monopoly’ is unconvincing. As economist George Gunton explained in 1888; ‘concentration of capital does not drive small capitalists out of business, but simply integrates them into larger and more complex systems of production, in which they are enabled to produce … more cheaply for the community and obtain a larger income for themselves. … Instead of concentration of capital tending to destroy competition the reverse is true. … Using large capital, improved machinery and better facilities the trust can and does undersell the corporation’.

What this implies is that a monopolist that has undercut in terms of average cost and price has not killed competition. This is because competition is an ongoing, dynamic process, as the Austrians describe it.

While it is true that some industries will naturally be concentrated, it is never the case that under free market conditions, one firm has 100% market share. The reason once again lies in the empirical evidence. The history of the telephone industry is a good example. Telephone industry could be a natural monopoly as there are large initial costs associated with building telephone wires and installing them in offices and houses. Once the telephones are built, the costs of operating the telephones is very low, therefore more efficient when one firm provides the market as the initial costs are divided over more consumers. However, the evidence shows that when Bell’s patents expired in 1894, the number of telephone companies increased, and the number of telephones increased. This implies that the original monopoly Bell had was due to legal barriers to entry- therefore not the result of the free market. Before 1894, Alexander Graham Bell secured patents for his invention and later formed AT&T in 1885. As a result, before 1894, Bell was the only person legally allowed to provide telephones. This cannot be due to the free market’s natural destruction of competition and formation of monopoly. Once Bell’s patents expired in 1894, the number of telephone companies increased from 1 to 6,000 by 1906. The number of telephones increased from 285,000 to 3.3 million in this period. By 1907, AT&T competitors captured 51% market share, leaving 49% for AT&T, with lower prices across the board.

This runs contrary to the supporters of antitrust- that capital-intensive industries with high fixed costs (like telephones) would lead to a ‘natural monopoly’, which in turn would restrict output/access and higher prices. However, the empirical evidence shows that a greater proportion of households owned telephones over time. The only period where households were unable acquire telephones was when Bell was granted the legal monopoly before 1894.

Another example is the electric light industry. The electric light can certainly be a natural monopoly, because of the high initial costs of building the infrastructure required to support the electrical transmission. However, according to Harold Demsetz in Efficiency, Competition and policy, six electric lights were established in NYC in 1887 alone. In the gas industry, there were 6 competing gas companies before 1884 in NYC. By 1880, there were 3 gas companies competition in Baltimore. One can only conclude that there is no evidence of monopolies even in industries that are typically seen as ‘natural monopolies’.

In fact, the origins of sole gas and electric light companies first took place in Baltimore. In 1890, the Maryland legislature introduced a bill that would give a gas company a 25-year monopoly in return for a fixed sum and share. At this point, other state legislatures introduced contracts, thereby reducing granting a monopoly.

Excessive Duplication?

Proponents of antitrust in the context of natural monopolies claim that it is inconvenient and disruptive to have lots of pipes and wires in the ground. It is too costly to a community, the argument goes, to allow several different water suppliers, electric power producers, or cable TV operators to dig up the streets.

The issue is the government. When the government owns the roads and streets where the wires and pipes are built, that is a barrier to entry for more than one supplier to dig up the streets, as it requires the government’s permission. Plus, when there is only one supplier of gas, electricity etc. then the government can conveniently blame the free market for producing a ‘natural monopoly’!

The problem with the government’s ownership of streets and roads, as Demsetz claims, is that the government cannot/does not put a price for how much it will cost a firm to dig up the ground.

‘problem of excessive duplication of distribution systems is attributable to the failure of communities to set a proper price on the use of these scarce resources. The right to use publicly owned thoroughfares is the right to use a scarce resource. The absence of a price for the use of these resources, a price high enough to reflect the opportunity costs of such alternative uses as the servicing of uninterrupted traffic and unmarred views, will lead to their overutilization. The setting of an appropriate fee for the use of these resources would reduce the degree of duplication to optimal levels’. (Demsetz, 1989, Efficiency, Competition and Policy).

The quote above implies that because the government puts no price and is unable to charge a price on installing wires under the streets (because of economic calculation problem and the lack of information that bureaucrats have). Therefore, either many firms will dig up the ground and build wires, or only one firm could due to permission from the government. As a result, consumers only have one choice of electricity and water supplier. Once than happens, of course, there is unlimited price making power.

As Rothbard puts it: ‘ The fact that the government must give permission for the use of its streets has been cited to justify stringent government regulations of ‘public utilities,’ many of which (like water or electric companies) must make use of the streets. The regulations are then treated as a voluntary quid pro quo. But to do so overlooks the fact that governmental ownership of the streets is itself a permanent act of intention. Regulation of public utilities or of any other industry discourages investment in these industries, thereby depriving consumers of the best satisfaction of their wants. For it distorts the resource allocations of the free market’’. (Rothbard, Man, Economy and State Ch. 10).

However, under a regime where roads and streets were privately owned and hence private property; the owner would decide how many firms can build the infrastructure under the road. The number of firms that do, depends on the price that the owner of road charges. In addition, many homeowners/communities than own their streets would be willing to put up with inconvenience of duplicate gas pipes because then they would have genuine choice and vigorous competition. As a result, lower prices for utilities.

 

Antitrust is Inconsistent

Trade unions or labour unions are in effect, monopoly sellers of labour. If antitrust seeks to restrain monopolies that stifle efficiency, then why aren’t labour unions the subject of scrutiny like Standard Oil was? After all, labour unions impose ‘monopoly pricing’ as they bargain wages above the free market rate. Furthermore, to achieve ‘monopoly pricing’, the firm would have withheld some of his supply so that he can charge higher prices.

In fact, labour unions are a much more dangerous version of monopolies. Consider a monopoly seller of a product (firm). As discussed before, in a free market, the establishment of a monopoly occurs only if the firm is more economically efficient than its competitors. As a result, the firm is rewarded with more consumers, therefore greater market share. However, a labour union does not need to improve the productivity of its individual workers to achieve monopoly status. In addition, labour unions are examples of true monopolies- whereby they own and have a sole monopoly of a factor of production- in this case labour. And most importantly, they do so using force, unlike voluntary transactions between the monopoly firm and its consumers.

This makes them particularly harmful because they withhold the supply of labour to bargain higher wage rates for their members. They withhold the supply of labour, by denying access to newcomers and different people usually non-members. At the same time, the union does not suffer loss of revenue or profit. However, if a firm were to withhold its supply of goods, it sacrifices revenue, therefore, monopolists have no incentive to withhold supply and ‘restrain trade’. This explains why firms that have been accused of being evil monopolies have reduced their prices over time. A union that restricts the number of labourers is not affected- it is the potential workers who are excluded from the industry. Unions’ effect on wages is dubious because the workers that have now been excluded from the industry go to other industries, thereby depressing wages in that industry. As a result, wages in the nation overall are not increased. Instead, the supply of labour is restricted; potential workers are excluded, making monopoly sellers of labour far more harmful than monopoly sellers of goods and services. Monopoly sellers of labour use force to restrict the supply of labour

Unfortunately, sympathy for unions is strong. This is primarily because people do not know the effect of unions restricting labour. It is hard to quantify the loss of wages and jobs, for potential workers.

Historically, unions represented white workers and they had a vested interest to keep black and minority workers out, to raise the price of their ‘white, union members’. For example, prior to the Davis-Bacon Act of 1931, Southern construction companies typically had non-union labour, most of them black. Northern construction companies tended to be heavily unionized, with a white majority of workers. As a result, southern construction companies paid lower wages and were able to bid for federal contracts. The Davis-Bacon act stated that the union wage must be paid for federal construction contracts. This greatly benefitted the white unions but at the expense of black workers who were now unable to work in construction.

The Consequence of Antitrust:

The fundamental consequence of antitrust laws’ misguided premise is the punishment of monopolies. The threat and actual punishment of large firms has led to a fall in innovation and a fall in potential output in the overall economy. While it is difficult to quantify, one cannot know the innovations that could have taken place if large profitable companies could exist. It is also not known how much more Economies of Scale could have taken place if large companies like Standard Oil were not broken up. While the oil industry has gone through major technological change and more efficient production, the rate at which Standard Oil’s innovation and production techniques were improving was particularly quick. Therefore, it is entirely possible that oil extraction and refining could be more efficient if Standard Oil was not broken up and therefore oil prices may be cheaper than today. This is because Standard Oil’s practice of mergers and acquiring inefficient firms would be in direct violation of antitrust laws. As a result, inefficient firms

In his 1966 essay on Antitrust, Alan Greenspan argues that antitrust not only destroys innovation, but it hampers economic development. He writes that ‘’we will never know the innovation, new product and new production techniques that could have taken place’’.

Antitrust is particularly suspicious of monopoly pricing. Antitrust laws regulate what monopolists can charge and if a monopolist charges a price that is deemed too high or too low, they are prosecuted by the authorities. However, prices communicate information about scarcity. Antitrust therefore causes mispricing and price fixing for industries that are concentrated. The effect is that the prices are distorted and therefore communicate the wrong information about the relative scarcity of a certain good. This may lead to large misallocations in the economy.

Conclusion:

Given the lack of evidence for monopolies being ‘evil’ and reducing economic efficiency, antitrust must be repealed effective immediately. Failing that, then competition commissions should simply not enforce antitrust laws. However, before competition law can be abolished, a careful evaluation of all concentrated industries is needed. If there is evidence that certain industries have been monopolised due to government action, then they must be broken up.

In this situation, the UK has made the right decision to leave the EU and should consider a ‘Clean Brexit’. This is because the UK would no longer be subject to EU antitrust laws and competition laws, which are listed under the Treaty of Rome or today known as ‘Treaty on the functioning of the European Union’.

However, while antitrust laws are repealed, the government must remove ALL artificial barriers to entry. Therefore, the government must remove tariffs and quotas, which favour domestic monopolies, the government must not allow patents for a long period of time or should abolish intellectual property (patents) altogether. Occupational and industrial licensing ought to be removed to allow easier access to the market. Hence, the market concentration can thus be determined by market forces. To address the natural monopoly dilemma (utilities market), the government ought to give up ownership to private communities, who in turn privately decide whether one firm or several firms can build wires and pipes. Alternatively, the government could continue its ownership but allow several companies to build the infrastructure under the streets.