Breaking up Monopolies- Is it our responsibility?

PresidentClinton on 20/08/2013 - 14:30

Hi everyone, after the collapse of ispONE and watching the ensuing migration to either Boost (Telstra) or Aldi mobile- I was wondering what people thought about the responsibilities involved in breaking up monopolies and duopolies in the market.

Is it largely the responsibility of regulators (govt) or individuals? I am increasingly worried about the state of competition in Australia in virtually every area of business.

Duopolies Include:

  • Supermarkets - Woolies/Coles
  • Telecomm- Optus/Telstra (Vodafone is still losing customers and struggling to stay in the game)
  • Domestic Airlines- Qantas/Virgin
  • Cinemas- Hoyts/Event
  • Cable TV- Foxtel/Optus
  • Department Stores- Myer/David Jones
  • Newspapers- Fairfax/News Limited

Oligopolies Include:

  • Petrol Stations
  • Banks

What is it about us and continuing to use these products despite knowing we are headed for less competition and higher prices in the future. Every one of these duopolies and oligopolies has an alternative-

  • Supermarkets- Aldi/Costco
  • Telecomm- TPG/iiNet dslams
  • Domestic Airlines- Tiger
  • Cinemas- Independent theatres
  • Cable TV- Fetch
  • Department Stores- Local/independent
  • Newspapers- Online resources
  • Petrol Stations- Independent
  • Banks- Smaller banks

Aside from quality issues, are we generally too afraid to try something apart from the crowd? Is it a cultural thing?
We complain about the price gouging that results but fail to change our consumer habits.

So I would argue it really is largely consumer habits that are causing monopolies to form. Just using the Boost vs Aldi debate, I would much rather use a telstra wholesale partner - Aldi than use a virtual Telstra business Boost- to give my money to. Not because I cannot afford the Boost $40 plan vs Aldi's $35, but the difference in speed is not a selling point for me- rather the support of another entry in the mobile market.

We scrutinise charities and where our money goes when we sign up- why not do the same with phone companies?

General Discussion

Comments

  • c64 on 20/08/2013 - 14:44

    westfield try its hardest to stop any new development which might threaten its shopping centres

    • PresidentClinton on 20/08/2013 - 14:49

      That's exactly my point. There are alternatives to westfield. I could drive the extra 200m to the standalone Aldi…but nah can't be bothered.

      • RockyRaccoon on 20/08/2013 - 15:26
        +2

        but nah can't be bothered

        So whats the point of you raising the discussion ;)

        • PresidentClinton on 20/08/2013 - 15:45
          +4

          That was me voicing the majority of people's inner monologue

  • _Bruce_ on 20/08/2013 - 14:59

    Is it largely the responsibility of regulators (govt) or individuals?

    Where it is in the power of individuals to address the situation there is no issue. Government intervention is needed.

    Aside from quality issues, are we generally too afraid to try something apart from the crowd? Is it a cultural thing?
    We complain about the price gouging that results but fail to change our consumer habits.

    Inertia is huge. CBA and Telstra get huge amount of business purely for being the bank/telco.

    On your categories:

    Supermarkets

    This is a tricky one. At present the duopoly is mostly good for consumers, but this is starting to turn around. In particular the customer tracking and cross promotion is something to be very wary of here.

    Telecomm

    The obvious solution here is to use public infrustructure. NBN (mostly) addresses this, but who knows what will happen after the election?

    Domestic Airlines

    Given the nature of the service it is hard to set up too much competition. Public transport is a much worse example. Hard to solve this one.

    Cinemas

    Frankly I don't care. It is a luxury and they can charge what they like (I do not partake).

    Cable TV

    Fortunately Australia doesn't have a huge dependance on this. As each show/sport/whatever gets new methods of access I expect this to die out naturally.

    Department Stores

    Don't really see the issue here. You can buy these goods elsewhere or online. The point of a department store was once the convenience of everything in one place and good service, which people would pay for. Not sure what the point is any more.

    Newspapers

    The issues with the media is not a duopoly one, but a general control/regulation one. ABC helps.

    Petrol Stations

    See supermarkets.

    Banks

    Don't see much of an issue, there are lots of options and they are highly regulated.

    • r3volt on 21/08/2013 - 16:50
      +1

      You can kiss the NBN goodbye if the LNP get in. NBNCO will be sold off to telstra, just when you thought we could finally rid ourselfs of having to deal with their copper.

      • [Deactivated] on 21/08/2013 - 17:05

        I think I read the the LNP would keep the NBN fibre to the home for those that had already had it installed as as public services (libraries, schools, shopping centres and the like) but would only install fibre to the node for everyone else. Then everyone would use the copper lines from the node to their house.

        If I'm wrong, please correct me someone.

        • omniX32 on 21/08/2013 - 21:16

          From what I understand from it - You would have the choice of paying more to get the fibre connected - business will do it without thinking about it - home users will probably just settle for the copper if it was good enough for their purpose.

      • _Bruce_ on 21/08/2013 - 17:53

        Actually the LNP planned to buy the copper off Tesltra… I have no idea how this would work in practice though.

      • omniX32 on 21/08/2013 - 20:53
        -4

        I think you might have this very wrong - also did you know the NBN has NO Backbone? no links between the 150 points on the map, so guess what… it's going to come down to Telstra/Optus to provide those… to connect the 150 separate NBN networks together. The NBN in it's current design does NOTHING to help increase competition (particularly in regional areas) - in fact it will likely have the opposite effect because the back-link providers will ask more for bigger bandwidths.

  • samfisher5986 on 20/08/2013 - 14:59

    I think you are exaggerating and have been reading too much about America's problems.

    Nearly everything has plenty of competition to keep the companies playing fair.

    I think you would struggle to mention any actual competition issues, we actually get a good deal on most things, if anything my complaint would be against Australian distributors/importers who have a special deal with the company that makes it illegal for you to import it and sell it in Australia yourself, that's anti competitive.

    All petrol stations are very expensive and there is no evidence that competition makes a difference or not.

    Telstra is factually a monopoly and has been for a long time, NBN will change that.

    • _Bruce_ on 20/08/2013 - 15:41

      Yes to this. I would have Telstra as issue number one, and wolworths/coles as 'watch closely'. I don't think we have this particular problem elsewhere (though there are many other problems).

    • Eivad on 20/08/2013 - 15:47

      That's true. Telstra has had a monopoly over its copper (only being required to license out to other ISPs at a reasonable price) for a long time, dating back to when it was established as Telecomm Australia set to provide broadband to the Australian population. Back then, it was a government entity.

      Looking forward to the NBN.

      • r3volt on 21/08/2013 - 16:54

        The concensus is that the lnp will sell the nbn infrastructure to telstra.

    • PresidentClinton on 20/08/2013 - 16:02

      Pricing isn't the only issue with duopolies.

      Things like variety, according to different tastes, preferences etc. are all affected by concentrating the market.

      For example- Coles/Woolies are virtually the exact same in design, products, and pricing. There is no variation in how they operate as businesses. When Franklins was still big, their focus was on no-frills shopping through supporting generic brands. This has morphed into Coles/Woolies branded products and a marketing mechanism they utilise to flood the market. They can place their own flour/sugar/butter next to branded products, display them more prominently, price them below-cost and wield their influence for even further market concentration.

      It might seem like all is fine and dandy now, but doing nothing would make things worse. Also, America doesn't have as bad a problem with duopolies as we do.

    • ferguscan on 20/08/2013 - 19:05
      -2

      God I wish the government would get out of the way. Telstra is a monopoly because of the government (government spent gajillions laying the copper, giving telstra a massive advantage over the competition). Likewise, Woolies and Coles enjoy their market position because (AFAIK) the government prevents competitors like Wal-Mart from entering the fray.

      • gibspmuh on 21/08/2013 - 11:04

        There's nothing legally preventing Wal-Mart from entering the Australian market, just as other foriegn retailers such as Aldi and Costco have now done pretty successfully. The bigger issue would be finding the land to actually build sufficient stores the size of an average Wal-Mart to make entering the market worthwhile for them.

    • omniX32 on 21/08/2013 - 21:14

      With the agreement for all Telstra services to move over to the NBN… NBN becomes the monopoly. You solved nothing there.

  • ilostnemo on 20/08/2013 - 15:05
    +1

    You didn't mention any monopolies.

    There are plenty of choices for everything.

  • Baghern on 20/08/2013 - 16:43

    its lack of knowledge and small Australia markets.

    I'm generally find with big companies, what I'm not fine with is that in Australia we don't follow the economic model of profiteering means more competition.

    Our small market, high barriers to entry means we have a lot of "opolies"

    All these international stores opening up in Australia aren't giving us international prices just marginally better than Australian prices.

    The other problem is that CEO's, management in general have a severe lack of understanding the consumer. The "they'll buy what we sell them and be happy about it, has been long prevalent".

    Online shopping has shown people are willing to walk away from "opolies" given the chance. The Retailers blame price, despite constant surveys showing people are willing to pay higher prices (not rip off prices) for better service, more options, better range.

    Try being a male clothes shopper, the selection is horrendous, including the fact that unless your that 1 length they sell at, you always have to retailer the pants of your trousers.

    Unfortunately Australian retailers aren't going to learn until its too late.

    For me, Meyers use to be an easy "goto" store, but they got greedy with perfumes and moved the mens accessories, the the mens department far away on the 4th floor? This is the Sydney Meyers. I use to pick up accessories all the time, and occasionally goto the mens department for other things. Now i just don't bother.

    Rebels, have trashed their own brand. They use to have everything… that's how they got so popular. But then around 7? years ago they severely reduced their products by 80%? To just highly profitable items, what they ignored was people went to Rebels based on the obscure items, but also bought other things there as well. To me this was Rebels downfall, short term high profits, but med/long term decline. They blamed online shopping and improved their customer service towards harassment and aggressive levels. The 2nd last time I was at rebels 3 years ago I had an aggressive manager trying to force a sale on me… it was lunch time in the city… the entire rebels was empty….

    I'm curious to see how far Rebel will have fallen in 5 years time.

    I've recently sent a complaint to JBHIFI in regards to the terrible service.

    We walk with out feet when we can.

    • cwongtech on 22/08/2013 - 16:34

      They blamed online shopping and improved their customer service towards harassment and aggressive levels.

      I don't, I myself welcome online competition, though to be fair, the Australian suppliers do charge Rebel high rates for their shoe orders. So unless I do a direct-from-vendor order for shoes, it's sometimes cheaper to go online and order shoes from wiggle than use the staff discount. As Ruslan Kogan has said, the greatest people mover is price, whoever sets the RRPs isn't helping either. Hiring of crappy managers isn't a great way to raise team morale either, this is passed onto the customer eventually.

  • ethereal88 on 20/08/2013 - 16:49
    -5

    Standard Western capitalist/corporate endpoint. No choice but buy buy buy more rubbish you don't need. Don't worry, the future is Egypt, constant rioting and instability as everything rots and falls apart and people killing each other over a Whopper.

  • tonyjzx on 20/08/2013 - 17:18

    most effective way is to not use them

    but since most people do, it wont work

  • cloudy on 20/08/2013 - 19:33
    +3

    Hmm, I must be living in another world, but from memory, about a decade ago things like supermarkets used to have tones of independents, but I don't remember being better off from localized operations with no scale of deliver or supply chain.

    This post in general seems very 1st world problem esq, the fact is, it is this scale of large companies that has provided us with more goods and services are prices we could not have afforded otherwise.

    Ask yourself this, would we have better communication systems if Telstra and Optus were replaced by largely smaller micro enterprises? Where would they get the investment to build infrastructure around the country?

    Imagine if dozens of small air carriers, each only being able to fly one plane to Sydney a week coz there are so many flights from competition, would it be able to survive with such inefficient economies?

    I think you should be relatively thankful, given our small population of what we are getting in general and not worry about things you can't control.

    • PresidentClinton on 21/08/2013 - 01:56

      To answer your questions:

      Yes we would have much better communications systems today if telstra were forced to sell its copper line rentals/3g network (telstra wholesale) at a below market rate. The reduced barrier of entry into the broadband/3g market would lead to a reduction in pricing and increase in competition. The investment for infrastructure in rural areas was built during its time as a government enterprise. That is no longer needed. In fact, we probably would have had a privately built NBN network by now had telstra been forced to such measures.

      As for small air carriers, right now, one of the busiest air corridors in the world (Brisbane->sydney->melbourne) have 3 carriers flying that route (Qantas/Jetstar, Virgin and Tiger). These routes range from 25-90 flights per day. The south african Cape Town -> Johannesburg route has 31-51 flights a day but with 4 different carriers (South african airways/MANGO, British airways, Kulula and Skywise). Their next-day prices do not differ to their prices when booked a month in advance.

      And I'm very thankful for what we are getting. Thankful enough that I want to improve on it and debate the merits on how to achieve this.

      • competitions on 21/08/2013 - 17:14

        Actually you have a duopoly with TWO carriers doing that route. Qantas/Jetstar, Virgin/Tiger. http://www.theaustralian.com.au/business/aviation/virgin-aus…

      • cloudy on 23/08/2013 - 07:48

        How about my point of supermarkets?

        And I don't think forcing any business to sell any asset for below market rates as u suggested can be good.
        If you did so, will another company ever invest in Australia, when there is precedence in nationalisation of private property? You will simply drive away private capital.

        I can't compare flights with other places, coz I don't know them well, but u have to also consider airport size and capacity, the more carriers the more room u need for maintenance crew and equipment etc… Plus international traffic. So your analysis might be too simplistic to compare apples with apples.
        But I will say, domestic flights aren't really that expensive, it costs less now to fly than it is for me to drive.

        More often than not, be wary of unintended consequences, and as Ronald Regan said, his worst fears is when governments come and say, I'm from the government and I'm here to help.

  • SirFlibbled on 21/08/2013 - 15:10
    +5

    Mobile phone through Vaya. Buy my groceries from Aldi and Costco most of the time. When I do go to Colesworth, I generally will pay more for the non-own branded goods to support the manufacturers.

    Would I call it my responsibility? No but it makes me feel all warm and fuzzy.

  • kenm on 21/08/2013 - 16:18

    Government regulation imposes costs on business which small competitors are unable to meet. This further cements in the big players. More regulation is not the answer.

  • cwongtech on 22/08/2013 - 12:34

    •Telecomm- TPG/iiNet dslams

    I'm not sure about this point here.
    Internet, yup, definitely agree

    There are no alternatives for Optus/Telstra for mobile.
    As you said, Voda network doesn't really count, all the independents [TPG,Vaya,LC,Boost] from Optus/Telstra use their network..

    • PresidentClinton on 22/08/2013 - 13:29

      The DSLAMs are a major step in the right direction for VOIP calling. The reason it hasn't taken off is down to just one company..Telstra.

      They own all the copper and therefore, need everyone on a sub-exchange (or RIM) to have home phone line rental if they want ADSL. Even for naked-DSL. The sooner more people realise how bungled the privatisation of Telstra was- the less likely we will make the same mistakes.

      • _Bruce_ on 22/08/2013 - 13:34

        The sooner more people realise how bungled the privatisation of Telstra was- the less likely we will make the same mistakes.

        Like we will ever stop repeating stupid mistakes from the past.

        • cwongtech on 22/08/2013 - 13:47

          Well it's all about the budget surplus for the elections isn't it.

  • francis.tks on 23/08/2013 - 14:14

    Well, some of it is more of a quality issue. I was with voda till this year but finally swap over (Vaya) because their line was so shit. Also for coles and woolies, its everywhere. If there's an aldi near my place I would go there. For departmental store, i usually go target, its cheap. Domestic airlines, tiger is horrific. Local cinema have cheap prices so still go there.

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