Okay, quick: VISA-Mastercard, MillersCoors-Anheuser-Busch, FedEx-UPS, Dish-DirectTV, Pepsi-Coke, Moody’s-S&P; what do they all spell? Duopoly-the peculiar market bottleneck that chokes competition, restricts consumer choice, raises prices, and still somehow, in the eyes of the government, is not monopoly capitalism. AT&T’s proposed acquisition of T-Mobile will fit right in. If the merger is approved—and really, who would suggest it won’t be?—the combined new AT&T will leapfrog over Verizon to become the dominant wireless provider with 129 million subscribers and a 42 percent marketshare. Verizon, the new number two, will control 31 percent of the market with 101 million subscribers. Together they will service three out of every for cellphone users.
“And if regulators approve this deal, they will further cement duopoly control over the wireless market by AT&T and Verizon,” said S. Derek Turner, director of research at Free Press Research, as quoted by the New York Times.
Sprint will be branded an also-ran, with just 50 million subscribers. The number three cellular provider lost $3.5 billion in 2010. It's a no-brainer takeover target for Verizon in the not-too-distant future.
T-Mobile, once the low-cost leader, made a fitting takeover target, especially if you happen to be a corporate oligarch, tired of dealing with pesky competitors who dare to compete on price. And that’s the thing about a duopoly; it represents a stasis, a balance, in which price competition is thwarted.
There’s even a term for the condition: a Nash equilibrium. Wikipedia defines a Nash equilibrium as applied to game theory as one where “no player has anything to gain by changing only his own strategy unilaterally.” It works best in a two-party platform, with its limited universe of moves-in-relation. It means, roughly, in one sense, I lower prices—you lower prices—I lower prices; we both lose. If you lower prices and I hold, a stasis is achieved, you stop lowering prices, I compete on any other variable I chose, and rising costs compel you over time to raise your prices as we achieve parity and equilibrium.
Who loses? Just one guy—the consumer.
A Nash equilibrium is the perfect expression of a coercive duopoly [my term], in which choices are restrained or dominated by force, in this case the pure force of market domination. The crazy thing about coercive duopolies is that they thrive under unregulated, laissez-faire capitalism. So why would capitalists, or adherents of a party that champions same, hold out for such an anti-competitive mechanism? Call it a triumph of rhetoric over reality, especially for those who would adhere to said party thinking that a lack of market regulation somehow benefits the little capitalist, the Main Street capitalist, the entrepreneur dreaming of a start-up, each with a good idea, anteing in on a level playing field.
A coercive duopoly, classic divide-and-conquer strategy that it is, is essentially a strategy of the oligarchs against the little guy. You’ve all heard of regulatory capture as a strategy of capitalism, a strategy to defang regulatory oversight. A coercive duopoly represents market capture. Regulatory capture is just a way station on the way to market capture, which is the true end-state of a marketplace in which the essential strategy is to acquire the competition in lieu of competing with regard to the provision of actual goods and services.
How ironic, then, that Main Street Republicans stick their fingers in their ears and repeat the mantra “money money money money” whenever anyone brings up market regulation, when it is regulation against monopoly that allows a multitude of free-standing players to compete freely on a more or less level playing field. Doubly ironic, I suppose, that the so-called sclerotic welfare democracies of “Old Europe” actually protect the entrepreneur to a far greater degree than you will ever find here. Well, it’s true. Remember, they reined in Microsoft.
Just as the Senate, however controlled, always backs banking, the federal government, however controlled, always allows market contraction towards duopoly. I wonder what we would look like as an economy if we just said no—no to just Fords and Chevys—for once. The effects of a duopoly include almost absolute pricing control; that’s easy enough to understand. But more than that, a duopoly drives other competitors toward extinction at the same time it represents insurmountable barriers to entry. Need a case study? Just check out the aeronautics industry from 1950 to today, when now we have just Airbus and Boeing, and that’s worldwide.
The reason the Senate has been captured to the degree it has is due primarily to concentrated money, the really big money, funding anti-competitive positions. Regulated capitalism of the type that the progressive center espouses actually promotes competition, especially the type so revered by Main Street capitalists. So it is worse than ironic that after all is said and done, after we have to listen to all this…blather…over free markets, that the real money and real corporate power in America has no real use for competition at all. I guess it all comes down to, if ya can’t beat ‘em, eat ‘em. So long, T-Mobile, hello Fords and Chevys.