Dismantling the monopoly mindset


With Betty Ann Blaine

Tuesday, September 18, 2012    

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Dear Reader,

There is a monopoly mindset that seems to have taken deep root in the psyche of certain individuals and organisations in Jamaica, but perhaps more detrimentally inside the corridors of government.

That monopoly mindset reared its head a few weeks ago when the senior adviser to the prime minister, Dr Carlton Davis, was quoted as saying that a properly regulated monopoly was perhaps the best option for Jamaica - the statement made within the context of the monopoly licence currently held by the light and power company, the Jamaica Public Service Company.

Dr Davis's statement sent shock waves across the country for more reasons than one. First, it breached acceptable protocols in that it usurped the portfolio of the Minister of Energy Phillip Paulwell, who should have been the person to speak on such matters. Second, Dr Davis's comment was diametrically opposed to the stated public position of the minister of energy who has been heralding the cause of competition and bemoaning the untenable nature of the current monopoly arrangement with the JPS. Third, Dr Davis's position as head of the LNG (Liquified Natural Gas) Steering Committee represents a de facto conflict of interest inasmuch as it reflects the very same position of the monopoly provider with a potential interest in the LNG market.

I believe that the question must be asked: "Whose side is Dr Davis on?" In addition, as he is senior adviser to the prime minister, are we to deduce that any advice to Mrs Simpson Miller regarding the JPS would favour the retention of that company's monopoly status?

My question to Dr Davis is, "Monopoly best" for whom? The senior adviser should be asked to delineate how the JPS monopoly has been "best" for Jamaican consumers.

The litany of complaints against the JPS is as extensive as it is long-standing. From overbilling, back billing, connections, disconnections and reconnections, Jamaican consumers have continually expressed their disgruntlement with the costs and services offered by the light and power company.

In fact, the formation of the consumer advocacy group, CURE (Citizens United to Reduce Electricity), was as a direct response to the insatiable menu of complaints against the JPS, particularly the cries that went up about the new digital meters that have been introduced for the first time in Jamaica.

And householders were not the only complainers. One of the sectors affected most severely by the high cost of electricity is the country's small and medium-sized businesses. Many have already collapsed and some of those remaining are teetering on the brink of insolvency.

Separate and apart from Jamaica's particular and precarious energy situation, the notion of perpetuating monopolies is fast becoming a thing of the past, but there are those amongst us who simply don't get it.

By definition, a monopoly is a market with only one seller - where a business is the only provider of certain goods or services. Anyone who has ever played the popular game, Monopoly, would have a pretty good idea of what a monopoly is. In the board game, one of the goals is to own all of the properties of a particular colour, or in economic terms, to have a monopoly on properties of a particular colour. It is also the case that when a player has a monopoly on a set of properties, the rents on those properties go up. This is also a realistic feature of the game since it's generally true that monopolies lead to higher prices.

The general agreement is that monopolies are bad for consumers. Under a monopoly, the producer is assured of his profits and his inducement to introduce innovations is unlikely. He is not under any competitive urge to introduce changes or increase output. According to one economist, "The monopolist functions from a position of privilege. He works from behind a protective shell. If capitalism stands for constant changes which provide vitality to the capitalist system, monopoly cannot sustain it."

In 1997, New Yorkers, faced with mounting increases in their electricity bills, moved to dismantle the monopoly held by the light and power company, Con Edison. The plan split Con Edison into three companies. "One will own power plants and compete on the wholesale level with other generators. A second will be a power retailer, buying power from wholesalers and competing with other retailers for customers' business. The third will maintain monopoly ownership of the wires that link customers to the state's power grid and will charge competing retailers for the use of the "network". Although it was not a perfect plan, one official described it as "a floor we can build on". Consumers in New York experienced an immediate 10 per cent cut in electricity rates as a result of the dismantling of the monopoly.

Here at home, dismantling the monopoly mindset appears to be a critical pre-requisite, but one that appears to be inevitable.

With love,





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