In the summer of 2017, I decided it was time to put my big-girl pants on and try to talk to my internet provider about my bill. It had been gradually ticking up over the past several months without explanation — let alone better service — and I wanted to know what was up. When I called the company’s customer service line, the woman on the end of the other phone knew something I did not: I didn’t really have other service options available in my area. And so, no, my bill would not be reduced.
More than two years later, I’m still mad about it. And yes, that could seem a little petty. But that monthly annoyance speaks to a broader trend that all Americans should be aware of — and angry about. Across industry after industry, sector after sector, power and market share have been consolidated into the hands of handful of players.
Lately, you’ve probably heard a lot of complaints about the size and scope of big tech companies: Facebook, Google, Amazon, and Apple. But competition is lacking across countless industries, including airlines, telecommunications, light bulbs, funeral caskets, hospitals, mattresses, baby formula, agriculture, candy, chocolate, beer, porn, and even cheerleading, just to name some examples. When you look, monopolies and oligopolies (meaning instead of one dominant company, there are a few) are everywhere. They’re a systemic feature of the economy.
There’s little denying that since the 1970s, the way antitrust has been approached in the United States has led to a landscape where a smaller number of big players dominate the economy. Incumbents — companies that already exist — are growing their market shares and becoming more stable, and they’re becoming harder and harder to compete with. That has affected consumers, communities, competitors, and workers in a variety of ways.
Proponents of the laissez faire, free-market thinking of recent decades will say that the markets have basically worked themselves out — if an entity grows big enough to be a mega-corporation, it deserves its status, and just a handful of players in a given space is enough to keep prices down and everyone happy. A growing group of vocal critics of various political stripes, however, are increasingly warning that we’ve gone too far. Growth and success at the top often doesn’t translate to success for everyone, and there’s an argument to made that strong antitrust policies and other measures that curb concentration, combined with government investments that target job-creating technology, could spur redistribution and potentially boost the economy for more people overall.
If two pharmaceutical companies make a patent-protected drug and then raise their prices in tandem, what does that mean for patients? When two cell phone companies talk about efficiencies in their merger, what does that mean for their workers, and how long does their subsequent promise not to raise prices for consumers actually last? And honestly, wouldn’t it be a lot easier to delete Facebook if there was another, equally attractive social media platform out there besides Facebook-owned Instagram?
We should be asking the government and corporate America how we got here. Instead, we just keep handing over our money.
Seriously, be mad about your internet bill
In 2019, New York University economist Thomas Philippon did a deep dive into market concentration and monopolies in The Great Reversal: How America Gave Up on Free Markets. And one of his touch points for the book is the internet. Looking at the data, he found that the United States has fallen behind other developed economies in broadband penetration and that prices are significantly higher. In 2017, the average monthly cost of broadband in America was $66.17; in France, it was $38.10, in Germany, $35.71, and in South Korea, $29.90. How did this happen? In his view, a lot of it comes down to competition — or, rather, lack thereof.
To a certain extent, telecommunications companies and internet service providers are a sort of natural monopoly, meaning high infrastructure costs and other barriers to entry give early entrants a significant advantage. It costs money to install a cable system, because you have to dig up streets, access buildings, etc., and once one company does that, there’s not a ton of incentive to do it all over again. On top of that, telecom companies paid what were often super low fees — maybe enough to create a public access studio — to wire up cities and towns in exchange for, essentially, getting a monopoly.
But that’s where the government could come in by regulating the network or forcing the company that built it to lease out parts of it to rivals. As Philippon notes, that’s what happened in France — an incumbent carrier was compelled to lease out the “last mile” of its network — basically, the last bit of cable that gets to your hours or apartment building — and therefore letting competitors have a chance at also appealing to customers.
In the US, however, just a few big companies, often without overlap, control much of the telecom industry, and the result is high prices and uneven connectivity. In 2018, Harvard law professor Susan Crawford examined the case of, what do you know, New York City in an article for Wired. The city was supposed to be “a model for big-city high-speed internet,” she explained, after Mayor Mike Bloomberg struck a deal with Verizon to install its FiOS fiber service in residential buildings in 2008, ending what was then Time Warner Cable’s local monopoly. In 2015, a quarter of New York City’s residential blocks still didn’t have FiOS, and one in five New Yorkers still don’t have internet access at home.
“New York City could be in a very different position today if those Bloomberg officials had called for a city-overseen fiber network. The creation of a neutral, unlit ‘last mile’ network that reaches every building in the city, like a street grid, would have allowed the city to ensure fiber access to everyone,” Crawford wrote.
Instead, multiple states (though not New York) have put up roadblocks to municipal broadband to keep cities from providing alternatives to and competing with local entities. It’s an example of lobbying at its finest, so that powerful corporations can keep competitors out and charge whatever they want.
And it’s hardly just the internet. Philippon found similar phenomena in cell phone plans, airline prices, and multiple other arenas, due to a lack of competition. In an interview with the New York Times, he estimated that corporate consolidation is costing American households an extra $5,000 a year.
“Broadly speaking, over the last 20 years in the US, we see profits of incumbents becoming more persistent, because they are less challenged, their market share has become both larger and more stable, and at the same time, we see a lot of lobbying by incumbents, in particular to get their mergers approved or to protect their rents,” Philippon told me.
Incumbents have gotten good at keeping competitors out — and they’ve been allowed to do it
The government is supposed to use antitrust law to ensure competition and stop companies from becoming so big they push everyone else out. Basically, antitrust is supposed to prevent anti-competitive monopolies. In the US in recent decades, regulators, enforcers, and the courts have taken a more lax attitude toward antitrust, which has resulted in more mergers, or companies growing to the point that it’s hard for rivals to stay in the game.
“We basically had a whole legal framework prior to the 1970s that was dedicated to making sure that our businesses were protected from concentrated capital, and so producers were allowed to collaborate in a lot of different ways through unions or coops or various associations, and they got help in the form of lending, supports, patents, copyrights, etc.,” said Matt Stoller, a fellow at left-leaning think tank the Open Markets Institute and author of Goliath: The 100-Year War Between Monopoly Power and Democracy. “Those were all things that were dedicated to protecting the producer from the capitalist, and we just reversed those assumptions.”
Basically, the prevailing viewpoint has been that the market, by and large, can take care of itself, and the government doesn’t need to take such a hands-on approach. And that’s led to gradual concentration over time.
For example, traditional economic thinking is that if profits in a certain industry become very high, it becomes attractive for new incumbents to enter the market, and those excess profits get competed away. But that’s become less and less true over time in the United States. “It’s true sometimes, you could even argue that it’s true often, but it’s not always true — and if you’re not careful, you can end up in a situation where it’s not true anymore, and that’s exactly where we are today,” Philippon said.
Incumbents have a lot of mechanisms to make it hard for competitors to enter, and they use a variety of tactics to keep them out — predatory pricing, patents, contracts, etc.