Recently we studied economic markets that are oligopolies. The firms in these markets offer similar products, have few firms competing in the market and are difficult to enter. An oligopoly market that came to mind while studying this subject was the cable internet market in the US. My husband worked at a company that marketed services for television, internet, phone, and security companies. He said across the nation he dealt without about 13 total companies that supplied television and internet services. While he didn’t deal with every single one, 13 is a very small number of companies across the US to provide these types of services.
Michael Hiltzik wrote about this very issue in an article entitled, “Cable monopolies hurt consumers and the nation.” The article discusses that between Comcast and Time Warner Cable, they effectively control roughly 40% of the internet market of the US. The article went on to explain that Verizon had made an attempt to enter the media market with these two giants, but after less than a decade Verizon decided it did not have the cash to remain competitive and stopped expanding service. If a company as large as Verizon can’t compete who can? This clearly points to an oligopoly as two big firms control a large amount of the market share while the barrier to entry as with Verizon is difficult and costly.
The second thing I noticed in the article was how Time Warner and Comcast seemed to share similar price points. For example it gave a quote on 10 megabit from either one of the companies hovering around $35 per month. This again points to an oligopoly with companies in the market sharing similar price points.
Over the last few years, one of the few large companies that are trying to enter the market is internet behemoth Google. They have begun to roll out their fiber services in two cities in the US. It will be interesting to see what if any effect Google can have on bringing competition back to the internet marketplace.