I read [the other post the other day](https://steemit.com/politics/@vieira/competition-efficiency-and-freedom-vs-monopoly-inefficiency-and-slavery) by @vieira with the claim that [monopolies](https://en.wikipedia.org/wiki/Monopoly) are only allowed to exist due to governments.  I've heard that before as well.  Of course, it may be a question of definitions - some may define the word "monopoly" as a government-sanctioned regime, others may say that the word "monopoly" is inappropriate if there actually exists another provider - even if said provider has less than 1% market share.  I think it's fair to disregard that - natural de-facto monopolies do exist due to the [barriers to enter](https://en.wikipedia.org/wiki/Barriers_to_entry) a market - and no matter the definitions, it is a bad thing when one provider dominates a market - and even if there are some few providers, it's bad if it for all practical purposes is impossible to establish yet another competing company.

I would argue that the examples of companies gaining de-facto monopoly, duopoly or ogligopoly are ripe, that it's a natural phenomena not caused by governments.  Governments ought to do what they can to break up such monopolies - and actually, sometimes they do.

https://upload.wikimedia.org/wikipedia/commons/thumb/7/78/Monopoly_board_on_white_bg.jpg/800px-Monopoly_board_on_white_bg.jpg
[*Taken by fir0002 | flagstaffotos.com.auCanon 20D + Canon 70-200mm f/2.8 L*](https://commons.wikimedia.org/w/index.php?curid=983980), [*licenced through GFDL 1.2*](https://en.wikipedia.org/wiki/en:GNU_Free_Documentation_License)

# The telephone network example

The classic example is telephony service; here the [network effect](https://en.wikipedia.org/wiki/Network_effect) and the high investment costs are the main barriers to entry.

Consider that there is The Telecom Company (TTC) has invested lots into connecting every home and business in a bigger area towards some telephone central, and TTC is owning both the telephone central, the actual telephone lines and the telephony service.  It's pretty much impossible for any Challenging Competing Company (CCC) to establish itself; it's not in TTCs interest to allow customers from CCC to communicate with customers from TTC, it's in nobodys interest to sign up with CCC since they can reach approxomately 0 peers through CCC.  Even if massive investments are done into CCC to make it able to compete with TTC, it won't work - most people would consider that it's not in their interest to allow CCC to dig in their gardens.  Long before CCC gains any real foothold, TTC may respond by lower their prices or even offer their services for free for a period, such a move will likely cause CCC to go bankrupt as they cannot compete.  TTC can charge excessively for their services; the price charged does not reflect the cost of operating the telephony network and central, but how much they are able to charge without a sufficient number of customers becoming enough grumpled to sign up with CCC or foregoing telephony completely.  TTC also doesn't need to be much innovative - there is no need to spend lots of money on R&D, customers won't pay more for "better phones" as long as there are no competitors out there.  TTC doesn't need to be much customer-friendly - a bare minimum of customer service is required, otherwise the customers may revolt.

https://upload.wikimedia.org/wikipedia/commons/4/43/Moscow-Phone_1890.jpg
[*Moscow central telephony hub, 1890*](https://commons.wikimedia.org/wiki/File:Moscow-Phone_1890.jpg)

As long as the TTC customers don't really have anything to compare with, and as long as the bills from TTC is not really painful, they may be happy with the service.  The customers may be blissfully unaware that they are being overcharged.  For the society as such, the TTC monopoly can still be very bad, not only that large amounts of money are siphoned from regular people and into the pockets of the TTC owners, but also that it cripples innovation.

# Other examples

There are many examples of such natural de-facto monopolies, as well as duopolies and ogligopolies.  I came across an article the other day arguing that it's inevitable that Bitcoin mining (or mining of almost any crypto currency) will become centralized and that it's pretty much impossible to compete against Bitmain nowadays: https://blog.sia.tech/the-state-of-cryptocurrency-mining-538004a37f9b

Another example that I have a personal relationship to is Microsoft - it was my "favorite enemy" for many years, perhaps I'll write up a separate post on that.  I was happily using MS-Dos for many years, didn't quite see it as problematic that Microsoft pretty much could define their own de-facto-standards.  I tested Windows 2.0 for a day or two ... it was sort of cool, but no much useful.  I tried out MS Windows 3.0 for two weeks before realizing ... "Windows wasn't made for me ... and actually, it sucks".  After that I stopped using Microsoft products, and I've never looked back - but boy, it has been a difficult time!  Luckily they aren't as dominant as they used to be ... and I attribute it more to luck than anything else.  The Internet could have been as irrelevant today as FidoNet, Usenet and others - they did have a vision was that everyone would connect to the Microsoft Network.  I'm not much happy about Android, but at least I'm very happy that it got more popular than Windows for Mobile.

# Breaking up the monopoly

Such a monopoly sometimes gets broken due to technical innovation.  Cellphone replaces the landphones, internet services supercedes the old voice connections, the old telephony cables becomes obsolete as people want increased bandwidth, i.e. through optical cables.  CCC may break through by being innovative.  We've seen Microsoft losing dominance due to Internet and Cellphones becoming popular.

However, TTC still has a pretty good edge if they stay innovative, gradually exchanging their old copper cables for fibre cables, building out wireless access points for the mobile telephones, gradually rolling out Internet to customers ... though, try for as long as possible to keep the internet connectivity sufficiently crippled that customers will still rely on the TTC network for voice communication with the neighbours.  We've also seen Microsoft trying to gain dominance on networking and mobile OS, luckily without success.

@vieira mentions specialization as the solution.  If we have three companies instead of one - The CablingCompany (TCC) dealing with the physical cabling, The Phone eXchange Company (PXC) company owning the telephone central and the Phone Service Company (PSC) operating the telephony service, then theoretically, CCC can now enter the market in any business area, i.e. negotiating with the PXC and the end customer on equal footing as the TCC and compete directly with TCC on cabling.

# Governance

It has happened several times that governments have forcefully split up businesses to break up monopolies - like in the example above, breaking TTC into CC, PXC and PSC.  I don't think such a split can be possible to achieve without government intervention.  Governments can also put other kinds of regulations in place to encourage competition.

Goverments can also grow monopolies, both de-jure and de-facto monopolies, plus other kinds of regulation causing barriers to entry.  Monopolies may even in some cases be a good idea - but that's a discussion outside the scope of this article.  [Crony Capitalism](https://en.wikipedia.org/wiki/Crony_capitalism) is indeed a real problem, and many telecom companies grew up as regulated monopolies - but to me, it still seems like wishful thinking that we would organically get three entities instead of one in the first place in a world without governments and regulations.

As for Microsoft - admittedly they are spending significant resources on lobbyism, we even saw national standard bodies being outright bought up when they wanted ISO to approve their OOXML format.  Government organizations are maybe the largest customers for their Office suite.  They also get significant subsidies from governments all over the world as pupils and students are efficiently getting education in "the Microsoft way" of doing things - but would it be different without governments?  I doubt so.  The foundation of the Microsoft dominance was laid in November 1980 as they signed a contract with IBM - and private companies and private schools are just as eager on using Microsoft products as governmental organization.

What can be done without governments?  Well, customers can organize themselves, the CCC can be established as a non-profit organization, with people signing up because they know that in the long term they will profit if the CCC can break the monopoly.  How often does that happen?  Extremely rarely ... people are usually only concerned with their own short-term interests, the pragmatic thing to do is to just keep paying to the TTC and ignore the alternatives.  Microsoft is a good example, most people are happy Microsoft customers - by now we even have free alternatives, and quite some organizations have tried pushing the Linux Desktop for end consumers ... without success.  For most people it's easier swallowing the blue pill rather than the red pill.