Reference no: EM13762677

A little historical background on the competition in each of these industries:

Sixty years ago there was competition in most major cities with both morning and evening papers. Los Angeles, for example, had two morning and two evening papers as well as many local papers serving smaller communities. Gradually, competition was eliminated, resulting in most major cities today being served by only one paper. Also, corporations started buying up newspapers across the country so that currently the national market is dominated by six firms.

TV and radio

TV and radio originally were broadcast over the air, where there were a limited number of frequencies (about 13 channels and 110 for radio) that could be used. The Federal Communications Commission (FCC) declared that these channels were owned by the public and, therefore, controlled the use of channels by giving out licenses. Several companies created national networks of local TV and radio stations and formed ABC, CBS, and NBC.

Cable TV and telecommunications:

Things got more complicated when TV started being carried by cable. Local communities did not want companies competing because that could mean an overwhelming number of wires going to homes and businesses (see photos at end of this document). Most cities, therefore, gave out a license to a single cable company to bring cable to homes in its jurisdiction, creating legal monopolies for those areas.

As happens many times, competition to these monopolies came from new ways of doing business. For cable TV, it came from two sources: satellite transmission (Dish and DirectTV) and from the internet. Radio also began being delivered by satellite. The original two companies, Siruis and XM Radio, merged in 2007. The FCC approved the merger by finding that it was not a monopoly because competition existed through radio delivery through the internet.

The government has gotten involved in the phone industry many times over the years. AT&T held a monopoly over both local and long distance phone services until 1982 when the courts forced it to give up local service. Communities, once again, did not want multiple lines going into homes and, therefore, created local monopolies.

Delivering phone calls via cells revolutionized the phone industry. Existing phone companies vigorously fought the right of cell companies to have phone service but the FCC permitted them in the 1980's. Since that time, AT&T and other telecommunications giants such as Verizon have integrated into all segments of the phone market: home and business, cell, local and long distance. There is increasing competition from internet phones but the giants still control the industry.

4. Internet

To understand the economics of the internet, it is helpful to review how the internet works.

Questions:

Each of the following questions will involve your analysis of the advantages of a competitive market to both producers and consumers. Use the concepts learned in the chapters on perfect competition, monopoly, and imperfect competition to answer the questions.

We are seeing a merging of media firms. For example, companies like Verizon now provide phone, cell, TV and internet. A common form of selling services involves putting them together in packages or "bundles" and offering them for a lower price than if the services were sold separately. For example, Verizon may offer a deal for phone, TV, and internet services. Also, firms bundle TV channels in different packages. All of these practices have become controversial.