Since its beginning, the cable television industry has been viewed as a natural monopoly. Typically, cities would grant individual firms local monopolies and then regulate them. Is this a valid approach from an economic perspective? What do you expect the future of the television-viewing market to hold?
Economies of scale would appear to be important in the cable television industry, so describing it as a natural monopoly would seem correct. During the 1980s, the industry was deregulated, but very few markets experienced entry. As prices rose, many people became sympathetic to the idea of regulation. In a world of rapid technological advance, the future of cable television appears uncertain. Competition from the phone companies, computer systems, and satellite technology may well eliminate the cable company's power as a monopoly.
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