Monopoly and network effects

Old-fashioned monopolies rely on some sort of coercion.

Perhaps you need to bribe FCC commissioners to avoid net neutrality, or simply influence a local board to permit you to, by law, be the only provider of cable.

Or perhaps you set up interlocking trusts that put a stranglehold on any competitors.

It’s not pretty, and left unchecked, it eliminates all of the benefits of free markets.

Modern monopolies, though, rely on the network effect. People want to join a social network because everyone else is already there.

When we see a monopoly that’s driven by network effects, it’s easy to be conflicted. Because, after all, network effects create real value. If there were ten different phone systems in 1962, calling someone else would have been almost impossible. AT&T seemed like a dream come true in comparison to that sort of chaos.

What’s missing from this analysis is that interoperability is more possible than ever. Companies that provide a conduit to the network can compete with one another fairly if none of them are the network.

Networks, whenever possible, should be peer-to-peer, autonomous and not for profit. The network that delivered you this blog post is all three. There are sections along the way that people and organizations choose to pay for and that definitely make a profit, but the resilient internet, the thing that’s managed to stick around for decades, that has dealt with a huge surge in the last three weeks, outlasts each of them.

The community where we live works the same way. While there are businesses at various points along the path, our support and connection and the magic of the people who see us and care about us is inherently peer-to-peer, autonomous and not for profit. And it’s worth celebrating.