Classroom Companion: Business

 
Chapter 13 · Digital Monopolies and Oligopolies

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cal infrastructure services. It is then the cost of infrastructure that justifies the natu-
ral monopoly in this case. Facebook is not a natural monopoly because the existence 
of several competing “facebooks” will neither cause additional costs for the cus-
tomers nor reduce the versatility of the services offered to the users. Facebook has 
become a de facto monopoly; it is certainly not a natural (or necessary) monopoly.
A particular form of monopoly is the territorial cartel. These are businesses 
that operate as a monopoly within a region, for example, a country. Before the 
market was opened for competition, the telephone operators were regional cartels 
by this definition. When the AT&T (the US telephone operator owning most of the 
telephone infrastructure in the USA) was split into regional operating companies 
(the “Baby Bells”) in 1982, these companies became regional cartels. Since these 
companies were not real competitors, they established a common research center, 
Bellcore, to share costs concerning telecommunications research. After liberaliza-
tion of telecommunications in 1998 in Europe (1996 in the USA), regional cartels 
have almost disappeared from the telecommunications industry.
Definition 13.2 Oligopoly
In the oligopoly market, there are only a few sellers of the same product. Actions 
taken by a single competitor (e.g., lowering the price or offer complementary goods) 
may change the composition of the market; that is, redistributing market shares. If 
there are only two competitors, the market is called a duopoly.
One common strategy in oligopoly markets is that each firm must be aware of 
actions taken by the other firms (on, e.g., price and marketing) and respond accord-
ingly. Actions taken by each company may then have direct impact on prices, com-
petitive strength, and customer behavior. Examples of oligopolies in the digital 
economy are:
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Only a few mobile network operators offer services in each country forming 
local oligopolies.
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Visa and MasterCard share most of the international credit cards market.
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Microsoft and Apple are the dominating producers of operating systems for 
personal computers.
5
Intel and Advanced Micro Devices manufacture most of the CPUs used in 
desktop computers.
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ARINC and SITA share the market for ground station-to-aircraft communica-
tions in Europe.