monopoly was far more common than competition. And it was the heritage of this monopoly that shaped the industry going in to the boom years of the 1990s. While some competition had begun to take root, it was being intro- duced sector by sector. Competitive suppliers were dependent on monopolies, and monopolies, to some extent, depended on competitors. So it may be helpful to determine how and why the monopoly came about in the first place. Natural and Unnatural Monopoly The usual explanation, which the "Bell System" as well as other monopoly tele- phone companies worldwide used for years, was that telecommunications was a "natural monopoly." To the average person, this phrase simply implies that a monopoly exists as sort of a force of nature, something inevitable like the weather. You may not like the weather, but you do not argue with Mother Nature. And you did not argue with Mother Bell. Regulators liked this argu- ment and compounded it with rules and regulations designed to enforce the monopoly. But such de jure monopolies are not the same as a true natural monopoly. Indeed the term natural monopoly has a specific meaning to economists. It is what happens when a given business has sufficient economy of scale, and a high enough entry cost, such that a new competitor would necessarily have higher The Great Telecom Meltdown unit costs than an incumbent, and have little chance of succeeding. In such a case the lowest average cost is theoretically achieved when there is only one provider [1]. Natural monopolies thus take care of themselves. They do not need protection; indeed, it is more likely that governmental action be taken to break them up, in order to let the benefits of competition happen. Or, as hap- pened to the telephone industry, a natural monopoly is subjected to regulation as a substitute for the competition that would otherwise keep profits in check. Natural monopolies are not always safe: New technologies can create substitutes or erode their scope. The telecom boom of the 1990s occurred as the mono