<p>The idea of what a public utility is, economically, <em>rather than just legally</em> is <a href="https://www.jstor.org/stable/2548908?seq=1#page_scan_tab_contents" rel="nofollow noreferrer">not a new point of discussion</a>. Philosophers like John Stuart Mill argued for the public provision of water and gas, based on them being natural monopolies (<a href="http://philosophyfaculty.ucsd.edu/faculty/rarneson/Courses/Mill,%20Principles%20of%20Political%20Economy,%20Book%20V,%20Chapter%20XI-%20Library%20of%20Economics%20and%20Liberty.html" rel="nofollow noreferrer">see here, V.11.36</a>).</p>

<p>Public utilities are a type of public good provision related to services that may have a tendency to form a natural monopoly. Natural monopolies are cases where it may be more efficient to have one provider rather than competing providers for a service, due to large economies of scale, large barriers to entry, inelastic demand of consumers, the need for over-engineering (being able to provide for peak demands), among other factors. Providing tap water, gas, or electricity, usually requires a lot of infrastructure that is expensive to put into place, so this is one example of why these goods do not have a lot of competition in their provision, as these goods tend to exhibit naturally monopolistic tendencies.</p>

<hr>

<p>Although the internet requires a large infrastructure and may have large economies of scale, it does not seem to neatly fit the idea of a public good. A public good is usually non-rivalrous and non-excludable, but the internet however seems to definitely be excludable, and in some places, rivalrous, at least partially (sharing bandwidth with your extended family and/or your neighbor who downloads a lot of mysterious content). There is also a laymen argument to be made that the internet could be a luxury good instead of a necessity, making it inappropriate to regulate as a public utility.</p>

<hr>

<p>There is some evidence that monopolies or oligopolistic competition in related industries, such as cable television, <a href="https://www.journals.uchicago.edu/doi/abs/10.1086/508310" rel="nofollow noreferrer">decrease the quality of its provision in the absence of regulation</a>, but my concern is not to debate regulation with this question. </p>

<blockquote>
  <p><strong>My question is, what economic literature is there for characterizing the economic properties of the internet, either as a public utility as opposed to a luxury or something else?</strong> </p>
</blockquote>

<p>In discussing the answer to this question, papers regarding whether the internet should be regulated as a public utility may pop up, and that is okay. But the primary question I have is not what the nature of regulation should be, if any.</p>

CC BY-SA 4.0
2019-01-04T23:23:01.807Z
It is unlikely Mill (died 1873) argued anything about public electricity supply
Henry
CC BY-SA 4.0
2019-01-05T00:47:19.537Z
@HenryYou are probably right, though I recall him at least somewhere arguing for contributions to public goods, though a citation escapes me at the moment. I will amend my question.
Kitsune Cavalry
CC BY-SA 4.0
2019-01-05T11:48:52.900Z
Mill made a case for public provision of gas and water on grounds of being natural monopolies - see [here](http://philosophyfaculty.ucsd.edu/faculty/rarneson/Courses/Mill,%20Principles%20of%20Political%20Economy,%20Book%20V,%20Chapter%20XI-%20Library%20of%20Economics%20and%20Liberty.html) and scroll down to section 11, para. beginning "But although, for these reasons ...".
Adam Bailey
<reference-request><monopoly><public-economics><public-goods>
Can the internet be characterized as a public utility?
Kitsune Cavalry
# Can the internet be characterized as a public utility?

(Asked by: username_0 on 2019-01-04)

The idea of what a public utility is, economically, *rather than just legally* is [not a new point of discussion](https://www.jstor.org/stable/2548908?seq=1#page_scan_tab_contents). Philosophers like John Stuart Mill argued for the public provision of water and gas, based on them being natural monopolies ([see here, V.11.36](http://philosophyfaculty.ucsd.edu/faculty/rarneson/Courses/Mill,%20Principles%20of%20Political%20Economy,%20Book%20V,%20Chapter%20XI-%20Library%20of%20Economics%20and%20Liberty.html)).

Public utilities are a type of public good provision related to services that may have a tendency to form a natural monopoly. Natural monopolies are cases where it may be more efficient to have one provider rather than competing providers for a service, due to large economies of scale, large barriers to entry, inelastic demand of consumers, the need for over-engineering (being able to provide for peak demands), among other factors. Providing tap water, gas, or electricity, usually requires a lot of infrastructure that is expensive to put into place, so this is one example of why these goods do not have a lot of competition in their provision, as these goods tend to exhibit naturally monopolistic tendencies.

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Although the internet requires a large infrastructure and may have large economies of scale, it does not seem to neatly fit the idea of a public good. A public good is usually non-rivalrous and non-excludable, but the internet however seems to definitely be excludable, and in some places, rivalrous, at least partially (sharing bandwidth with your extended family and/or your neighbor who downloads a lot of mysterious content). There is also a laymen argument to be made that the internet could be a luxury good instead of a necessity, making it inappropriate to regulate as a public utility.

---

There is some evidence that monopolies or oligopolistic competition in related industries, such as cable television, [decrease the quality of its provision in the absence of regulation](https://www.journals.uchicago.edu/doi/abs/10.1086/508310), but my concern is not to debate regulation with this question.

> **My question is, what economic literature is there for characterizing the economic properties of the internet, either as a public utility as opposed to a luxury or something else?**

In discussing the answer to this question, papers regarding whether the internet should be regulated as a public utility may pop up, and that is okay. But the primary question I have is not what the nature of regulation should be, if any.

**Tags:** reference-request, monopoly, public-economics, public-goods

> **Comments:**
> **username_1**: It is unlikely Mill (died 1873) argued anything about public electricity supply  
> **username_0**: @HenryYou are probably right, though I recall him at least somewhere arguing for contributions to public goods, though a citation escapes me at the moment. I will amend my question.  
> **username_2**: Mill made a case for public provision of gas and water on grounds of being natural monopolies - see [here](http://philosophyfaculty.ucsd.edu/faculty/rarneson/Courses/Mill,%20Principles%20of%20Political%20Economy,%20Book%20V,%20Chapter%20XI-%20Library%20of%20Economics%20and%20Liberty.html) and scroll down to section 11, para. beginning "But although, for these reasons ...".  

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## 0 answers

