California Declares Free Market Broken, Recommends Price Controls For Phone Services

Verizon, AT&T, and their regulated cohorts love to blab how the “free market” and “competition” will keep prices low for consumers. According to California, it’s a big fat expensive lie. The cost of basic phone service has soared since the Public Utilities Commission lifted price controls in 2006, leading the agency to conclude:

“There is no indication of any change in the near future regarding the current state of competition. Market forces have not yet met the challenge of controlling price increases.”

Here are just a few of the ways competition has benefited consumers:

  • AT&T no longer lets you make five free 411 calls per month. Now it costs $1.50 for local numbers and $1.99 for all others.
  • Verizon won’t let you make four free 411 inquiries anymore. Now they charge $0.95 for local listings and $1.50 for all others.
  • AT&T boosted the price of daytime calls by 34%, evening calls by 93%, and nights and weekend calls by 233%
  • Call waiting is now 86% more expensive.
  • Keeping your name out of the phonebook now costs 346% more.

AT&T defended their thievery by cryptically uttering: “The marketplace changes and you have to change your offerings.” Ohhhh, sure, we see. These “marketplace changes” must really be hurting the poor telecoms.

In a recent briefing for investors, AT&T boasted that its average monthly revenue per primary household line “ramped steadily over the past several quarters,” to $60.16 in the first quarter of 2008 from $57.08 a year earlier.

So much for all that competition between Verizon, AT&T, Frontier, SureWest, Vonage, Skype, and others.

The telecoms have repeatedly proven that their version of the “free market” is a scam that harms consumers and enriches shareholders. California’s Public Utilities Commission has recommended the only reasonable measure: reinstating price controls.

Getting the 411 on phone charges [The Los Angeles Times]
(Photo: Getty)

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  1. DashTheHand says:

    As long as we live in a “free economy” the capitalists will always find a way to rape its customers of their money, and screw them on the services they provide.

    Even companies that claim they want to be different will eventually change their minds when they would rather profit more, or are getting run out of business by larger competitors.

  2. opsomath says:

    Wow, all the hate for the free market. Of course, we all know how well California does when they try to step in and stop “market abuses” with tighter controls:

    Time Warner San Francisco cable fiasco:

    [consumerist.com]

  3. MitchV says:

    I call BS… there are MANY alternatives now. If people are paying that much for their phone service, that’s their problem for not shopping.

    I signed up for Packet8 (VOIP) 4 years ago, the last time a baby bell made me angry, and I’ve never looked back. It’s cheaper, reliable, and has more features than the legacy telcos.

    Cell phones are relatively inexpensive, and like VOIP, offer many advantages. My monthly cell phone fees are less than $60 a month.

    If you dial 411, you need to learn 1-800-GOOG-411. It’s free and does a great job connecting you to whatever number you are after.

    The only companies that need some regulation are the ones who offer the only wired broadband access in town – this is an area of concern!

  4. mgy says:

    California seems to be forgetting that people make terrible choices.

  5. rekoil says:

    @opsomath: Pedantic Cat says: “That article is about Los Angeles, not San Francisco…”

  6. MyTQuinn says:

    Before switching from Verizon to the local cable provider’s triple play a little over two years ago, my monthly cost for home phone service was under $30, including taxes. I’m actually paying MORE now, but the reduced costs of Internet at TV more than offset that increase.

    California’s Public Utilities Commission seems to have forgotten that most of what people are paying for are non-essential add-ons (CallerID, Call Waiting, Home Voicemail, “priority” ring tones, etc.) to what could arguably be considered an essential service (basic telephone service). As such, the mere fact that people are paying for it is a clear indication that prices ARE NOT out of control, and that in fact, it is the customers who are OUT OF THEIR MINDS – paying for features/services they may not use, and certainly don’t NEED.

    Any price controls implemented would not serve to protect the consumer from the evil utilities, but would be protecting the consumers from themselves – something that goes on far too much already.

  7. barty says:

    If you strip down all of the “extras” from phone service here in Atlanta, the taxes on a phone line are as much or maybe even more than the phone service itself. Quite a few folks I know have dropped their phone lines for this reason alone. They just can’t stomach paying $40 a month for a basic phone line when $22 of it is nothing but taxes and fees!

    So perhaps the government ought to take a look at itself before putting their nose where it doesn’t belong again.

  8. ARP says:

    @MitchV: Not so fast. You have VOIP, which means you have a high speed internet connection. Some people don’t want/need that and they shouldn’t be “forced” to get it to have competing service.

    I’ll be labeled a Pinko, but I think we should nationalize wires- cable, telephone, and power. Not the companies, just the lines. Then any company that wants to compete for your dollars can do so by plugging into the grid, without all this quasi-monolpoly crap we have now where a single company owns the lines.

  9. newfenoix says:

    @ARP: Might work

  10. chartrule says:

    here we have bell, rogers, fido, virgin, the list go’s on – it’s obviously not as bad as california – with bell cell service its free on weekends

    (friday night at 6pm to monday morning at 6am )and weeknights between 6pm and 6am

    i am amazed that considering California has a higher population than all of Canada combined that the companies aren’t bending over backwards for their clients with lower prices – a million clients at 1 dollar a month is still better than 100 clients at 100 dollars a month

  11. madanthony says:

    People still use landlines? If you just need basic calling, some people would probably be better off with a cell phone, prepaid if necessary.

    Part of the reason for increased revenue per house might be that people who don’t make a lot of calls are going cell-only, so heavy users and people with lots of services or dsl are pulling the average up.

    And while I can understand the idea of subsidizing or price controlling basic service, it’s hard to argue that people NEED call waiting or 411 so badly as to put price controls on it. I don’t think I’ve ever used 411.

    Charging to keep you out of the phonebook, however, is kind of a dick move.

  12. newfenoix says:

    @MitchV: Don’t have a land line and use U-Verse for TV and internet. Old style phone service is a thing of the past.

  13. Shadowfire says:

    @ARP: Sounds nice, but who fixes the line when lightning strikes, or when a car hits the pole? By your suggestion, it would be the government. We all see how long it takes to get a pothole filled…

  14. novacthall says:

    @opsomath: I agree, the article drips of sarcasm and does more to take away from the debate than it does to offer viable solutions. The author is so dead set on price controls being the “only reasonable measure”, and yet he offers no evidence that such a thing would help matters in the least. We are just expected to take him on his word?

  15. laserjobs says:

    $40 for a YEAR of magicJack has taken my phone bill down significantly

  16. h0mi says:

    @opsomath: Not to mention that abortion that was referred to as “deregulation” of the power companies earlier this decade.

    @Shadowfire: And whenever there’s a budget crisis, what do you think is the first thing to be thrown under the bus?

  17. malan89 says:

    It’s amazing how this thread has become an advertisement for socialism. There is competition. You have choices. It’s not my fault if you can’t shop around.

  18. dragonfire81 says:

    @madanthony: Agreed, forget the landlines. Just get a cheap prepaid cell phone and be done with it.

  19. synergy says:

    Now for California to regulate energy again.

  20. dubs29 says:

    Yes Consumers can find cheaper alternatives but after giving the Telco’s a couple billion dollars back in the 80′s to lay fiber optics and not see it happen and then hearing those same telco’s claim they have no money and are trying their best to but they need to raise prices to make these improvements makes me sick! GO CALI!!!!! Sick-Em like you did with the Bogus ETF Fee’s consumers were getting screwed by!
    Stop blaming the PUC’s and Consumers and at least put part of the blame whre it belongs: MONEY GRUBBING LYING TELCOS…..

  21. MyLud says:

    All of these arguments are missing the point. Not one of them actually addresses the issue that the article raises — runaway higher prices.

    If the free market was supposed to self-regulate its prices, why are they going up so drastically? And given all the options that have been listed right here on this board, prices should be dropping as they compete (as chartrule points out).

    Saying that California did a bad job regulating before has nothing to do with this issue.

    It’s pretty clear that without regulation, prices have gone up, proving the theory that free markets self-regulate a lie (and it’s a theory, not a scientific fact, so you Friedmanites can back off). And this is proven in industry after industry. We need to control these companies who are gouging people, not come up with clever ways to get around the high prices.

    As a California resident, I’m happy.

  22. kathyl says:

    If it’s a number for a business that you’re looking for, DON’T call 411. Try 1-800-GOOG-411, Google’s free 411 service for business telephone numbers. It’s saved my butt a few times, and should hopefully help some people avoid those ridiculously high 411 fees leveed by the telecoms.

    (Don’t work for Google, I swear.)

  23. vitonfluorcarbon says:

    Welcome to the United California Socialist Republic.

  24. itsgene says:

    “If you strip down all of the “extras” from phone service here in Atlanta, the taxes on a phone line are as much or maybe even more than the phone service itself. Quite a few folks I know have dropped their phone lines for this reason alone. They just can’t stomach paying $40 a month for a basic phone line when $22 of it is nothing but taxes and fees!

    So perhaps the government ought to take a look at itself before putting their nose where it doesn’t belong again.”

    Take another look. A large amount of that is not “taxes”, but are fees imposed by the phone company labelled in such a way as to fool people into thinking they’re government taxes. One of the largest is a charge back to customers for government mandates directed at the company, such as the cost of wiring schools for internet and the like. Rather than absorb these costs of doing business and including them in the regular service charge, the phone company makes separate line items so that customers will pay MORE and blame it on the government.

  25. MuppetChrist says:

    Government BAD.

    Business GOOD.

    Fire BAD.

    Napster BAD.

  26. chrylis says:

    @dubs29: This pretty much sums up what’s wrong with the “free market” screams of the New Ma Bell and the cable companies: They conveniently ignore the issue of incumbency and how they got their existing infrastructure.

    Trying not to be melodramatic, I’d compare it to the situation ethnic minorities faced in the 1920′s and 30′s: While technically entitled to “equal protection under the law”, they were in fact so oppressed, due to economic situation and Jim Crow laws, that the idea of effective equality was a joke.

    As a [Ll]ibertarian, I believe that the government should only intervene in those areas in which the free market can’t effectively work–and one of those areas, for now, is the one where two companies per area have essentially had the power to tax consumers to build their private infrastructures and don’t have to play nice with startup competitors.

  27. veronykah says:

    @dragonfire81:Sometimes you actually HAVE to have a home phone, like to use DSL or if you have a job that requires you to have 2 modes of contact via phone. @itsgene: That is the part that gets me. I had a phone line literally for no other reason than I needed it for DSL. I had the measured rate service and NEVER used it. It still cost me $20/month, half of that being taxes and “fees”.

  28. angelmom1 says:

    It’s easy to sit back and blame stupid consumers when you have options where you live. I live in Northern California near the Oregon border, we have no options. If you want high speed internet you have to live within 2 blocks of the telephone exchange building or get satellite. I connect by dial-up at 26.4kbps, I have no choices, we have people in this area on waiting lists for a phone line to their homes. You have to have a phone line to get satellite, no phone line, no tv, no internet, too damn bad. According to ATT there isn’t enough money in making better phone service to ‘remote’ areas. So we have people with phone service at all because their bottom line profit has to stay excessive, just like big oil. The last I heard everyone had the right to basic services. I guess that’s the part of our freedoms that got lost in the push to rape the consumer.

  29. battra92 says:

    I don’t understand why the Consumerist is so anti-trade and anti-business. The free market is not some evil term devised by rich people, it really works.

    @MyLud: As a California resident, I’m happy.
    How was that power situation for you a few years ago when the government stepped in?

  30. hustler says:

    utilities, including telephone service, should be regulated because companies can’t seem to stop colluding and raping my bank account.

  31. barty says:

    @itsgene: Any way you want to spin it, its a tax. It may be disguised as something else, but it has the same net effect. Such as the mandates requiring telcos run phone service into remote areas to serve 1-2 people who live out in the boonies. It is a convenient way for politicians to claim they didn’t raise taxes directly, ie., they’re not taking the money and then having the government run the lines. Instead its just taxation by proxy, with the proxy being the telephone company.

    If the law wasn’t there, the fee wouldn’t be there. Its that simple.

    @angelmom1: There is no “right” or “freedom” of telephone service. Stop using the government as a tool to push your wants on the rest of us. If you don’t like the service you’re getting in the area you live in…MOVE. That is an individual choice you made when you moved there, knowing full and well what was and was not available.

  32. MyTQuinn says:

    @MyLud: …It’s pretty clear that without regulation, prices have gone up, proving the theory that free markets self-regulate a lie…

    Just because prices have not decreased to a level that you or I find acceptable doesn’t mean that self-regulation in a free market isn’t working. If enough consumers find the price of non-essential products or services acceptable (they accept the prices by purchasing said products or services) then the industry as no reason to lower prices. The fact that current prices are higher than you or I find acceptable can be blamed on others who do find them acceptable (as evidenced by their purchases).

  33. Invective says:

    I had always been a strong business supporter, having a few businesses in my lifetime. I still believe in small to medium sized business. However, the Federal government should regulate business to at least some degree. When you have giant (Now world.) businesses donating vast sums of PAC money to politicians, you get abuse and corruption. Our Federal and State Government oversight agencies have had their budgets gutted. Yet their responsibilities have expanded beyond their original charter. FDA & FCC are both prime examples of this. It’s funny watching the arguments about Government Vs. business. Now days instead of being pitted one against the other, we all need to truly think independently. On the one side people say you don’t want your government controlling free enterprise do you, but at the same time those same folks have pretty well stripped those same agencies down to the bone. Both sides do it. Different Government agencies get different priorities throughout the varying Administrations. That’s rather obvious, but it’s never talked about much. Contrary to popular belief, telephone, power and petroleum industries do not operate in a free and open market. These large corporations have learned to take advantage of the opposing political sides and use them to manipulate the market and the market regulations. Career politicians have learned that by simply repeating the tired old mantra, they can receive the PAC money necessary to keep them in office. State tax and utility commissions operate in secrecy. As do Federal regulatory agencies and political hearings on capitol hill. Our Nation’s law enforcement agencies are now employed by business and the appeals court is so stacked with corrupt judges, that most punitive judgments against big business are overturned. You may hear of big awards, but they’re almost always overturned. Consumers are being played big time. If we don’t stop the rampant corruption and get a handle on really properly and fairly regulating business, we will continue to suffer. I think right about now Benjamin Franklin and the others are turning over in their graves. California is at least trying. The other states don’t try anything original.

  34. dragonfire81 says:

    @battra92: How does it really work? It only benefits the businesses and shafts the consumers.

  35. Sudonum says:

    @battra92:
    “That power situation a few years ago” was precisly because the government stepped “out” of the picture. The problems were caused by DEregulation. When they started regulating it again the problems disappeared. Remember how Enron manipulated the market? Would you like me to look up a few cites for you?

  36. BytheSea says:

    “Look, you asked to be treated like adults; we didn’t think you were ready, but we let you out on your own anyway. But clearly you’re still two-year-olds who grab everything and scream ‘MINE!’, so you’ll have to go back in the playpen again until you learn to not be a fascist oligarchy.”

  37. dantsea says:

    I’d say that these prices are proof that the free market is working in California. The landline telcos were free to raise their prices, and consumers were free to move to cell phones and VOIP, and that’s exactly what’s happening.

    Why the old phone companies continue to act like it’s 1964 and they’re the only game in town is another story entirely.

  38. blazenbu says:

    This is a great example of what it takes to live in California. The government here is not for the people, it’s for special interest groups. When the rates were reviewed recently, complaints were flying, but the weasels still allowed them.

    Its fun paying $1.95 to keep my phone number private and having to deal with the Dults (from the land of Dultics) in customer no-service.

    As far as the Public Utilities Commission, it is now considering a 30% rate increased requested by Southern California Edison. Dollars to doughnuts it will sail through the commission.

    As for using VOIP, it is less expensive but when the power goes out, so does your phone. What happens then?

    There is no way out of the AT&T hell. There is no competition just a good old-fashioned monopoly.

  39. dragonfire81 says:

    A free market works well in theory, if all the players are acting honestly, of course we all know how “honest” most companies are these days and thats why Free Markets always result in customer screwjobs.

  40. dragonfire81 says:

    Ok, *almost* always result in…

  41. Brazell says:

    It’s not like there _is_ a free market for phone companies. Telecom, even wireless telecom, is one of the most regulated industries.

    There shouldn’t have to be regulation of a cell phone industry because people have gotten by just fine without cell phones for thousands of years. It’s not until the last 10 years that people have found them to be a dire necessity, and so they’re perfectly willing to pay $50/month for features they never use (like, for me, actually making phone calls). Regulation can help in industries that are necessary functions of regular life… but, generally, in frivolous industries, regulation — which very quickly becomes over-regulation — hurts the consumer.

    But of course, when “capitalism” is the perpetual bad guy, I suppose none of that really matters. Boo capitalism, boo!

  42. rugman11 says:

    Okay. Mods, please forgive me if I’m stepping over the line, but this was just a stupid post. I know it can be trendy to blame the evil corporations, but in this case it is not warranted at all. With the increase in cell phone usage and VOIP more and more people are losing their landlines. There’s only one way for the telecom companies to make up that lost revenue: charge more per consumer. In fact, I would have been shocked if the price per household hadn’t gone up because that would mean that the companies were just letting wireless providers and win and eating the loss out of their profits. It’s the same situation when water and power companies increase their rates when people begin conserving. Except in those cases the outrage is acceptable because utility companies have monopolies, phone companies don’t. To paint the telecoms as the villains when they’re only doing what they have to (raising prices to make up for fewer customers) is just stupid.

  43. SuffolkHouse says:

    GOOD!

    There is no reason for corporations to do anything in the interest of the public. They do what is in the interest of the stock holder. This is why Republicans hate the idea of public influence in the markets, because it makes corporations responsible to the larger public.

    If you want change, vote for it.

  44. MyLud says:

    @battra92: “How was that power situation for you a few years ago when the government stepped in?”

    I blame Enron for that, not California, but full disclosure: I lived in Burbank at the time, which has its own power grid. Didn’t affect me at all, thanks to my old-school, traditional CITY OWNED utility. So it worked fine for me.

    @MyTQuinn: I totally agree, except I can’t personally think of a single unregulated industry where prices have gone anywhere but up! I recognize that my own individual view of the world is not an adequate sample. As for other people finding them acceptable when they shouldn’t? *sigh* Yup, you’re right :)

  45. rberger says:

    I live in Saratoga, CA, part of Silicon Valley. I can not get ANY wired/fiber Internet service at my house. The wireless services available are flakey and expensive.

    My new startup just got an office in Mountain View, CA, practically the center of Silicon Valley and the best high speed internet available for under $300/month is 1.1Mbps down / 768k Up. For $300/month I can get 1.5M/1.5M T1 service.

    This is a complete failure of the “Free Market” the incumbents have no incentive to do better. There is no competition. If a municipality or some other third party tried to deliver fiber services, the incumbents would fight it every way they could (and as they did when there were still CLECs around).

    Its time to split up the Telco/Cableco again, but this time horizontally. A seperate regulated entity that offers physical transport (conduit, fiber, utility poles, copper) and a lightly regulated services company that has to compete with others to use the utility transport or other transports they come up with. But the physical transport that the rate payers already paid for should not be owned by the non-regulated carrier.

  46. cordeduroi says:

    “SAVE US, government! SAVE US!!!! We don’t know what to doooooo!!”

  47. MyLud says:

    @cordeduroi: Uhh, no.

    It’s more, “Government, please close the loop holes that allow companies to fleece us.”

    We know what to do, but we’re not on equal ground to resolve the issue.

  48. LittleCupcakes says:

    Let’s see.

    People now want (in addition to calls) texts, picture mail, web browsing, GPS, video uploading, and more.

    If the prices didn’t go up, THAT would be the story.

  49. tz says:

    I don’t know why something which is horribly regulated is called a “free market” when they undo maybe 10% of the regulations. Can Skype provide these things? A VoIP service? Without E911 MANDATORY fees? 411 calls with a bunch of dead trees with phone numbers listed?

    So government either prevents true competition, or refuses to use eminent domain to let competitors run their copper or fiber parallel (so chooses who wins – unless the locality has a co-op for things like this so anyone can use the fiber everyone pays proportionately for). Then says the “free market” failed. No, the 90% of still regulated stuff that is neither free (in any sense) nor a market failed.

  50. chuckv says:

    This is a perfect example of the failure known as crony capitalism. The price controls have been removed, but there are still numerous regulations which inhibit and bar competing firms from entering, regulations which the established companies were put in place to “protect the customers.” Protect the customers from what, being able to take their business to a competing firm? If this were real capitalism and ATT/Verizon were screwing over their customers, other companies would do everything in their power to set rates below the established firms and steal customers from ATT. The new regulations aren’t going to do anything except limit the growth of new communications technology in California. In this case, it was not the government protecting the people from the big corporations, but instead protecting the big corporations from the effects of the free market.

  51. djanes1 says:

    Yeah, telecoms make tons of money. It’s hard for competition to enter this market, because you have to build all of those phone lines. But price controls? Over here in New York price controls on milk and rent-stabilization are just fabulous! Aren’t there applicable antitrust lawsuits and oligarch fines for this?

  52. kc2idf says:

    …so what happens when all of the telcos decide that it is no longer worth their while to do business in California?

  53. P_Smith says:

    I would like corporations – without fraudulent accounting – to show *one* case anywhere that “free markets” meant lower prices for consumers.

    In every case where there is/was a government monopoly and the prices were high, the price would have been, or became, higher upon “deregulation”.

    Decriminalization is a more apt word than deregulation, because it allows companies to act like thieves. Think of California’s ridiculous and unregulated energy prices, even without the disaster that was En-wrong (a/k/a End-Run-Around-The-Law).

  54. JustThatGuy3 says:

    Problem with telephone service is, the cost is all in delivering the line to the customer. Incremental cost is minimal. The natural pricing structure (i.e. pricing that relates to what things cost) is a substantial monthly fee including unlimited calling. If you want a low monthly fee and per minute charges, though, those per minute charges are going to have to be awfully high if the customer is going to be a breakeven customer.

  55. JustThatGuy3 says:

    @P_Smith:

    Airlines. Fares are about half (after adjusting for inflation) of what they were in 1978.

    [www.usatoday.com]

  56. MyLud says:

    @JustThatGuy3:
    Really? THAT’s What you’re going with? The airline industry?

    OK, then…since deregulation, the airline industry has cut back on services, cut back on leg room, are on-time less, have more complaints, and are currently having major inspection and safety issues.

    It ain’t apples to apples — basic service in 1978 was far superior to what it is today.

    @kc2idf: They leave and miss their quarterlies, and someone else comes in and provides the service.

    @chuckv: Sad, but true…

  57. JustThatGuy3 says:

    @MyLud:

    Prices are half as much. Safety is at least as good, if not improved (look at the accident rates, if you don’t believe me – about 70 fatalities, TOTAL, since the end of 2001, that’s ~10 per year out of 700MM).

    In-cabin service is definitely lower. Your choice, though: double the fares, or the current level of service?

    If you think that Americans would prefer 1976 levels of service at double the fare, go ahead and launch an airline offering that blend. I don’t think you’ll stay in business very long.

    We can’t have our cake and eat it too – deregulation brought much lower fares, and opened air travel to a hugely expanded audience (passenger volumes have more than doubled since 1977). Americans have voted with their feet – they want their air travel cheap, and that’s what deregulation has given them.

  58. Tyr_Anasazi says:

    @battra92: Please give me an example where thr free market truly works…

  59. MrEvil says:

    Those of you claiming that VoIP and Cell service are “competition” I would say that you are quite wrong. If you get VoIP odds are your internet connection you use your VoIP on is provided by AT&T. Sure the ISP you subscribe to isn’t AT&T but they don’t own any wires, AT&T does. Heck, alot of cable companies have only two options for backbone, L3 or AT&T. Cell towers often are hooked up to AT&T lines.

    It’s not true competition because no matter who else you go through the incumbent providers STILL get a portion of your $. And frankly, that’s no competition at all.

  60. @MitchV: goog411 is only for businesses…
    i use goog 411 for businesses, ans free-411 for residential numbers (be forewarned that they play 2 10(ish) second ads while thay’re “processing your request”)

  61. Snarkysnake says:

    @kc2idf:

    “..so what happens when all of the telcos decide that it is no longer worth their while to do business in California? “

    Answer : California is the 7th or 8th largest economy in the WORLD. Too big to ignore. A lower cost competitor that is hungry for business will happily move in and serve the market. Happily.

    The big ,bloated telcos would have you believe that their business model is the only one that works.
    Another case of “clean up your act or the government will clean it up for you” Always with unhappy results.

  62. FoxCMK says:

    There are a few people in here who’ve touched on the truth of the situation, but it’s a bit unnerving to see so many people trumpeting the “virtues” of state-run services.

    The truth, as mentioned before in this discussion, is that telco is one of the highest-regulated industries in the country, and this won’t release much of it. And this regulation isn’t meant to protect the consumer, but rather the actual telcos themselves. State-sponsored, lobbyist-driven protectionism is still called regulation, and like chuckv stated, competition is next to zero.

    So many people ask “how many times has the free market worked?” when there is no possible way to answer that question…there haven’t been any truly free markets in many, many years – probably since the days of true bartering. Government has had its hand in economies and markets for so long that a real example of a free market is too antiquated to be used in a contemporary discussion.

  63. battra92 says:

    @Tyr_Anasazi: I think that is self evident. Give me an example where socialism ever worked.

  64. bigduke says:

    There is no such thing as a free market going on anywhere here. Therefore the opposite of what we have going on here is not socialism. It mistifies me that any attempt to control corporate greed by trying to manage the tightly controlled markets (NOT FREE MARKETS!) that they control is viewed as socialism, when in fact is is truly trying to look out for the consumer. The last thing the AT&Ts of the world want is true competition.

  65. sega8800 says:

    @MitchV: give me some alternative for cellphone, it seems everyday, you read at least one article about cellphone company. while their price is high, nobody is providing customer service anymore. we would like this free market thing work, but there are no alternatives, there is no competition. everybody is the same, their plan cost the same, they all have crappy service, and anybody even try to compete, they’ll just get bought out because it is free market.

  66. Daniels says:

    As soon as Telcos explain why they’re charging $1500/Megabyte for text messaging, then I’ll assume the market is working itself out.

    I would argue the Telcos are in a silent type of collusion that keep their prices artificially high.

  67. Mr. Mangold says:

    “If the free market was supposed to self-regulate its prices, why are they going up so drastically?”

    ummm…maybe that’s what providing the service actually costs? Maybe government regulation was artificially keeping the price of the service low? Isn’t that the POINT of government regulation?

    If government stepped in today and regulated the price of a gallon of gas to 50 cents, that doesn’t mean that when the regulation is lifted and prices rise to $3.50 that the free market doesn’t work.

  68. Erwos says:

    @Daniels: Because the market is willing to bear the cost.

    As an economist, I cringe when I hear that free markets are always going to provide lower prices than markets with regulated prices, because that’s usually not true. What free market pricing does is maximize the total benefit on both sides – and if the regulated market was keeping prices artificially low, thereby causing undue benefit on the consumer side, it’s entirely natural that the consumer would see prices rise.

    In markets where a lack of competition due to regulation is the problem, though, it is not unusual to see prices go down.

  69. Colage says:

    @JustThatGuy3: The plane ticket is half of what it used to cost, but then there’s the fuel surcharge, the checked baggage fee, the price you pay for a meal, the blanket/pillow fee, the drink fee, etc etc etc. The ticket price isn’t what you pay anymore. And this is to say nothing in the drop off in service.

    When the airline industry was regulated and price was fixed, the airlines had to compete on the merits of service. I’ll give you that it’s cheaper to fly now, but I’d hardly say that we’re much better off because of deregulation.

  70. JustThatGuy3 says:

    @Colage:

    “When the airline industry was regulated and price was fixed, the airlines had to compete on the merits of service.”

    The people have spoken, and they want the cheapest ticket possible, and clearly aren’t willing to pay for better service, except for the segment that is willing to pay for first, or for private aviation.

    Again, if you think that we’re worse off now, you’re welcome to launch an airline with 1976 fares (adjusted for inflation) and service. See how that goes. I’d be willing to be that the number of people who, when given the choice between a $450 JFK-LAX ticket with a $50 fee for the bag, having to buy their own $10 lunch, and a $7 blanket feet ($517 total) and $900 ticket which included the bag fee, a blanket, and a free mystery meat lunch, decide that they’ll go with option B, is going to be very very small.

    There’s one group that’s been tremendously hurt by deregulation, and that’s airline shareholders, who no longer own shares in companies that were essentially guaranteed profits (rates set by the gov’t, routes assigned by the gov’t so nobody could enter and undercut, etc.), but rather in companies with huge fixed costs in a brutally competitive business.

  71. zonk7ate9 says:

    Competition generally creates better products and services at lower prices, but in this particular industry I don’t belive there is enough. Or maybe it’s just the way these companies generally operate. They are greedy and love to price gouge their customers and as long as all of them continue to do so it will stop. There just needs to be a system put in place for certain industries that make it very easy for new companies to start up. Just like new NFL franchises each team can protect a certain number of players (in this instance certain areas of infrastructure) and the new franchise (company) get’s to choose which areas of infrastructure it will purchase.

  72. ELC says:

    The problem is not that this is a free market, but that in this market (like the airlines and utilities markets) is an oligopoly. The infrastructure required to provide this service doesn’t allow for true competition between many companies. Even the phone companies competition has to run on the same lines that are built and maintained by the main phone company – whether it’s an online service like Skype or Vonage, or simply another landline competitor.

    These kind of services, like utilities, almost need to be provided by the govt – but the concern there is that they would hose it up worse than it currently is. If the govt could run it competently, then the only price they should charge would be the price required to pay the cost (non-profit) and to put some aside for future and unplanned for work.

  73. ELC says:

    @Invective: Lots of good stuff here!

  74. blackmage439 says:

    Stories like these are lessons to all the fools out there who think the government should stay out of business affairs.

    Gasoline, energy, and telcom prices are all perfect examples of what happens when controls are lifted from a corporation’s greed: a clusterfuck of artificially inflated prices.

    Everything needs control. Our government was designed to police itself. Current and prospective Presidents have (will?) tried to whittle away at the power-policing abilities of other organizations. Only the consumer and citizen is the one who hurts from deregulation.