“Google Is as Close to a Natural Monopoly as the Bell System Was in 1956″
The term &quot;Natural Monopoly&quot; has a special meaning besides just the common definition of both words, which is missing from this discussion, but is in my opinion the most interesting topic of discussion.  Basically all software fits the economic definition of &quot;Natural Monopoly&quot;.<p>Natural monopolies exist in situations where the fixed cost is large and the marginal (per-customer) cost is small.  In these situations, it only makes sense for one company to exist, as each additional company that exists will just increase that large fixed cost, while not decreasing the per-customer cost.  Therefore, each additional company just increases the  the total societal and average per-customer cost.<p>Natural Monopolies have been defined and talked about for longer than software has been around. The long-running natural monopoly example has been that it doesn&#x27;t make sense to have two power lines to your house.  Another historical example includes newspapers, who have fixed article writing costs, but can distribute it to every customer in a city.  Some people consider that Wal-marts in small towns are natural monopolies, given the fixed cost of a large store, and the lack of a market for more than one store in a given area.<p>Software, of course, has large fixed costs and small per-customer costs.<p>The questions for me are:<p>-Historically, why have some natural monopolies been considered bad (railroads, utilities), and needing regulation, and others (newspapers, Walmart) not?<p>-Is Google&#x27;s advantage really as a true economic natural monopoly, or is it just a really powerful habit and brand?  Bing seems pretty close in search quality, but yet few switch over.<p>-If the economic definition of natural monopoly exists at Google and most software companies - why are there countless exceptions in software: database software (Oracle, SQL Server, DB2...), Web browsers (Chrome, Edge, FireFox, Safari), calculator apps, etc?<p>-What are the current issues with potential natural monopolies at these software companies, and would a regulated model make them better or worse for society?<p><a href="http:&#x2F;&#x2F;www.investopedia.com&#x2F;terms&#x2F;n&#x2F;natural_monopoly.asp" rel="nofollow">http:&#x2F;&#x2F;www.investopedia.com&#x2F;terms&#x2F;n&#x2F;natural_monopoly.asp</a><p><a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Natural_monopoly" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Natural_monopoly</a>