> Is the disagreement here that you think wireless Internet is gypsum, and I think it's canned tomatoes?
You're missing the point. It's not like you can change the fact that telecoms (with current technology) tend towards a natural oligopoly. All you can do is rein in their market power via legislation.
> Competition and cost-based pricing are entirely orthogonal issues.
Not at all. Fundamental economic theory states that in a pure monopoly, sellers have the ability to set the prices, so they can price discriminate and charge each customer the maximum he will pay. In pure competition, the price will eventually reach the marginal cost.
Cost-based pricing isn't symptomatic of commodity markets. Cost-based pricing and commodity markets are symptomatic of pure competition.
> There is intense competition in the market for (say) beer, but it takes the form of a marketing dogfight of changing product attributes and highlighting instead of race-to-the-bottom pricing.
You're conflating the competition's intensity and perfection. As with beer, there's also intense competition among telecoms ("Only the AT&T iPhone lets you talk and browse the web at the same time", "Verizon has 5x better coverage than AT&T"). That doesn't change the fact that there's an oligopoly (both in beer and in telecoms). The fact that the products are not homogenous across the market further emphasizes this.
Comments
> Is the disagreement here that you think wireless Internet is gypsum, and I think it's canned tomatoes?
You're missing the point. It's not like you can change the fact that telecoms (with current technology) tend towards a natural oligopoly. All you can do is rein in their market power via legislation.
> Competition and cost-based pricing are entirely orthogonal issues.
Not at all. Fundamental economic theory states that in a pure monopoly, sellers have the ability to set the prices, so they can price discriminate and charge each customer the maximum he will pay. In pure competition, the price will eventually reach the marginal cost.
Cost-based pricing isn't symptomatic of commodity markets. Cost-based pricing and commodity markets are symptomatic of pure competition.
> There is intense competition in the market for (say) beer, but it takes the form of a marketing dogfight of changing product attributes and highlighting instead of race-to-the-bottom pricing.
You're conflating the competition's intensity and perfection. As with beer, there's also intense competition among telecoms ("Only the AT&T iPhone lets you talk and browse the web at the same time", "Verizon has 5x better coverage than AT&T"). That doesn't change the fact that there's an oligopoly (both in beer and in telecoms). The fact that the products are not homogenous across the market further emphasizes this.