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Local phone companies have monopolies on phone service

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Local phone companies have monopolies on phone service [#permalink] New post 18 Jan 2012, 09:33
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Local phone companies have monopolies on phone service within their areas. Cable television can be transmitted via the wires that are already in place and owned by the phone companies. Cable television companies argue that if the telephone companies were to offer cable service, these telephone companies would have an unfair advantage, because their cable transmissions could be subsidized by the profits of their monopolies on phone service.

Which of the following, if true, would ease the cable companies’ fear of unfair competition?

(A) In order to use existing telephone wire, telephone companies would need to modernize their operations, a process so expensive it would virtually wipe out all profit from their monopoly for the foreseeable future.
(B) If a phone company were to offer cable service within a particular area, it would have a monopoly within that area.
(C) The cost of television service, whether provided by cable or telephone companies, scales; that is, the total cost of transmission rises only marginally as more homes are added to the network.
(D) Cable programming that offers more channels is already available through satellite dish, but the initial cost of the dish is extremely high.
(E) Cable television will never be able to compete with the burgeoning video rental industry, especially as more homes now have video cassette recorders than ever did before.
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Re: Local phone companies have monopolies [#permalink] New post 18 Jan 2012, 14:48
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Cable companies argue that telephone companies would have an unfair advantage if they (the telephone companies) offer cable. The unfair advantage is based on the fact that telephone companies could use the profits from their monopoly on the local market to pay for cables transmissions.

We are looking for the answer choice that most weakens this claim.

(A) This answer gives a clear reason for why the cable companies' fears are unfounded. All the money that telephone companies make from their monopoly would be spent on "moderating their operations." (A) goes on to say that this overhaul would completely sap the companies' financial reserves for a long time to come.

Because the telephone companies stand to lose so much money from cable transmissions they are not, as the cable companies argue, at an unfair advantage.

I hope that makes sense :)
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Re: Local phone companies have monopolies [#permalink] New post 18 Jan 2012, 18:47
Argument Conclusion: Telephone companies can subsidize cable business with "profits" from phone operations.

A. Says profits won't exist so no subsidy from phone business possible.

A is the correct answer.
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Re: Local phone companies have monopolies [#permalink] New post 19 Jan 2012, 06:10
If the subsidies by the profits of their monopolies on phone service is wipe out all profit from their monopoly than the telephone companies would not have an unfair advantage over cable companies hence + 1 for A.
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Re: Local phone companies have monopolies [#permalink] New post 19 Jan 2012, 07:03
A is the answer it clearly says that the profits would be wiped out due to an initial investment .Therefore the telephone companies cannot provide channels at a subsidized rate !!
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Re: Local phone companies have monopolies [#permalink] New post 23 Mar 2012, 21:56
took 2:09 to reach A.
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Re: Local phone companies have monopolies [#permalink] New post 14 Jun 2012, 01:41
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IMO A... only option that weakens the statement..
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Re: Local phone companies have monopolies   [#permalink] 14 Jun 2012, 01:41
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