I have professional experience in analyzing the electric utility industry, and am interested in how it would work in a truly laissez faire world. By that, I mean no legal monopolies and complete legal freedom of entry and exit. However, as you point out, the context for a free utility or cable industry, or any other industry whose infrastructure crosses roads, is that the roads must also be privately owned.

Much is made by opponents of a laissez-faire utility industry of the allegation that it is only “efficient” to have one copper wire bringing electricity to homes and businesses, and therefore the utility should be a regulated monopoly. Such a leap of logic never made any sense to me. Even if the one-wire-only is efficient argument were valid, why does it follow that competitive entry should be legally banned? Why not allow freedom of entry and exit and see what happens?

However, what is clear to me after reading your post is that freedom of entry and exit cannot be achieved when the roads are publicly owned because any utility competitor would still have to deal with the municipality. As you point out, such a negotiation almost always is a winner-take-all grant of a legal monopoly. So, it is impossible to contemplate a laissez faire electric utility industry without private ownership of roads. With privately owned roads, any potential electric utility competitor could incrementally compete by purchasing easements extending out from his power plant. He can build up his network incrementally. He can compete head-to-head with other utilities by being able to buy easements from many property owners, whereas if he is dealing with the city, he must deal with the monopoly owner of the roads.

The larger issue behind this discussion is “deregulation.” Deregulation is such a poorly defined and understood concept that failed efforts to deregulate are unjustly giving capitalism a bad name. The arch example of this is the so-called “deregulation” of the electric utility industry. A small portion of that industry — construction of power plants — was partially liberated. At the same time, new price controls were imposed on retail prices, maximum wholesale prices were established in an arbitrary ex post facto manner, and the core legal utility monopoly of actually providing power to homes and business through local distribution systems was never touched. It remained a legal monopoly.

The utility deregulationists tried to get around the legal local utility monopoly aspect by *forcing* utilities to buy power from other suppliers. Forcing a utility to be competitive through an arbitrary requirement that it buy from other companies or divest its power plants is no solution, and it has had a disastrous outcome.

The utility industry can only be truly deregulated when its surrounding economic infrastructure, in particular roads, becomes privately owned. Of course, all industries are inter-connected, so the best deregulation experiment will not occur until laissez faire capitalism across the entire economy is established.

We can still push for deregulation one industry at a time, but we have to be careful that the still-regulated or government-run parts of the economy, such as roads, do not pre-ordain that the so-called deregulation will be a failure.