Gerry Faulhaber: Whether or not

Gerry Faulhaber:

Whether or not the telephone industry is a natural monopoly is an empirical question: does it exhibit cost subadditivity? If it does, then it’s a natural monopoly; if it does not, then it isn’t. But the validity of the concept does not depend upon whether or not the telephone biz has it. Many have argued it isn’t (ncluding me). But be very clear: if it is not a natural monopoly, then there is no economic reason to regulate it. We need only open the market to competition and bad behavior will be punished by aggressive entry. Natural monopoly was the sole economic reason the industry was regulated in the first place. If it isn’t a monopoly, then good-bye FCC and state regulators.