![]() In the case of instant messaging, multiple players have survived because the monopolistic gain is relatively small. Nevertheless, the recently established interoperability agreement between Microsoft and Yahoo is merely a strategic move designed to give them an edge over AOL and Google. ![]() This would increase the level of competition, however, and therefore the major providers generally keep their IM programs closed to outsiders. Instant messaging, for example, would be improved if all of the software packages interoperated with each other. One is naturally better than two or more. We are accustomed to thinking of natural monopolies as those requiring physical infrastructure, but the same principles apply to cyber networks. My point is to highlight the (sometimes) overlooked fact that all of these samples have one thing in common: They are networks. There are other examples, of course, including electricity service, subway systems, roads and railway transportation. ![]() However, unless it would interoperate with the system we refer to as the Internet, it would be of little value. I could - hypothetically - go out and create a new system for connecting computers together, and maybe even convince a few friends of mine to use it. For this reason, the market will “naturally” coalesce around a single, monopoly provider unless the government intervenes. A telephone service is only really valuable if any person with a phone can be connected to any other person with a phone. Economics teaches that the market for some goods and services are “natural” monopolies.
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