The World of Grandpa Don

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We had monopolies and monopolies are inherently untrustworthy, or so we thought. Even with government regulation there was no trust, probably because there isn't much trust that the government does it's job. There was ample evidence of the inequalities in the situation. I offer a couple examples, of which, I am familiar.

I worked as a draftsman for Western Electric for about a year. They were the manufacturing division of the big AT&T phone company. AT&T was the nation's phone company at the time. In most areas of the country there was no choice. If you wanted to make a phone call, you used their phone, their lines and their switching office. The phone company owned the phone. That would be like being forced to rent a light fixture from the power company if you wanted to use their electricity. There wasn't anyone else and there were no "features" like caller ID, call waiting, forwarding or answering. Just bare bones conversation when the other guy answered. Otherwise, there was either a "busy signal" or it rang unanswered 'till the caller hung up. I even remember "party lines" earlier in my life when the phone rang, you listened for "your ring" to tell if the call was for you or one of your neighbors or you picked up the phone to make a call and find that a neighbor was already using the line. 

After working for Western Electric for a month or so, I was told to report to our department supervisor. There was a problem. I was told to slow down so that we would continue to work six days a week. After all, many of my coworkers had families and mortgages, etc. and needed the overtime pay to pay the bills. Cost of products and services were not an issue because they could just go to the regulators and say, "These are our costs, we have to raise the rates!" On the upside, the service we had was usually quite reliable.

The same situation applied to the electrical utilities. Commonwealth Edison had a distribution system second to none. I had first hand knowledge of this as I worked at Kelso-Burnett. When power lines were installed they were "oversized" to be sufficient for many years. In addition there were redundant paths of service all over the city. Again, cost was not a problem ... they were the only source of power and only had to show that they had to cover their "Costs". BUT ... Service was reliable!

So, we "FIXED" all that! Consumer advocates came down on government which, in turn hit the utilities. They said they wouldn't approve rate increases so ComEd had to cut costs. Many of the knowledgeable old timers in the engineering department took early retirement eagerly because they could not work with new, low paid, green engineers and managers. Maintenance was cut and systems became inadequate. 

AT&T was broken into pieces. Manufacturing, long distance and Local service were separated from each other and local service was split into a bunch of separate companies. You no longer had to rent your phone. Competition has been introduced along with confusion and yes, a lot of new features. (I will not get into cellular service and the such.) 

Now we have competing phone companies trying to convince the consumer to buy their services. That should be better, right? Please refer to my piece on "Deceptive Practices." 

The company that has installed and must maintain the wires is providing service and, at the same time, leasing lines to a competing service provider. When you switch to a new phone provider, no one installs a new wire to your house, you continue to use the same set of wires that are running in the same cable along with the wires being used by two or three other phone service providers. The government regulators are still involved because someone has to try to be in charge. 

The Electric companies and the Gas companies are moving toward a similar situation. You will be able to buy electricity from a company in the next state. You will use electricity just as you do now but the out of state company will put as much electricity into the power distribution system as you have taken out. Your power provider will pay rent on the distribution system that your present electric company owns and maintains.  It will be similar with the Gas company.

It all sounds pretty complicated and it is. Not impossible but very complicated and we haven't eliminated all of the utility monopoly or the government regulators.

I have a possible solution. We could eliminate the conflict of interest inherent with providing and maintaining a distribution system and being a provider of service in competition with others. Split the distribution ownership from the service provider. 

The distribution system, either power wires, telephone wires, gas pipes, or cable (TV) is owned and maintained by companies which do not provide the service or product. They are monopolies in their area and as such are regulated by government agencies. They could even be owned by the municipality. 

Electrical power would be provided by companies which own and operate generating stations. You could select the power provider based on price, or generating method, coal, wind, hydroelectric, nuclear, gas, sun, or oil. 

You may select to buy natural gas that comes from Alaska, or Texas, or the most economical provider. 

And, the same situation applies to phone and cable TV. There can be as many provider companies as competition will support. 

My solution will not eliminate monopolies or government regulators. It will keep the number and size of these entities to a minimum. The regulators will oversee companies with well defined responsibilities making their job better defined and easier to monitor.

The providers would not be monopolies or have part of their operation monopolistic. Government regulation would not be much more than that necessary for most private corporations. In addition, the conflict of interest is gone and the competitors can not cry "foul" because of unfair treatment from the company that owns the distribution system. Everyone is treated alike.

Of course all this does not eliminate "Deceptive Practices."

Don Plefka
5/176/03