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# Local phone companies have monopolies on phone service

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Senior Manager
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Local phone companies have monopolies on phone service [#permalink]

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18 Jan 2012, 10:33
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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.
[Reveal] Spoiler: OA

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Last edited by abhimahna on 02 Oct 2016, 01:34, edited 1 time in total.

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Re: Local phone companies have monopolies on phone service [#permalink]

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18 Jan 2012, 15:48
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Expert's post
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 on phone service [#permalink]

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18 Jan 2012, 19:47
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.

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Re: Local phone companies have monopolies on phone service [#permalink]

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19 Jan 2012, 07:10
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 on phone service [#permalink]

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19 Jan 2012, 08:03
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 on phone service [#permalink]

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23 Mar 2012, 22:56
took 2:09 to reach A.
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Re: Local phone companies have monopolies on phone service [#permalink]

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14 Jun 2012, 02:41
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IMO A... only option that weakens the statement..
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Re: Local phone companies have monopolies on phone service [#permalink]

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01 Oct 2016, 10:40
1990 editorial: Local pay phone calls have cost a quarter apiece ever since the 1970s, when a soft drink from a vending machine cost about the same. The price of a soft drink has more than doubled since, so phone companies should be allowed to raise the price of pay phone calls too.

Which one of the following, if true, most weakens the editorial's argument?

(A) A pay phone typically cost less than a soft-drink machine in the 1970s.
(B) Due to inflation, the prices of most goods more than doubled between the 1970s and 1990.
(C) Government regulation of phone call prices did not become more stringent between the 1970s and 1990.
(D) Between the 1970s and 1990 the cost of ingredients for soft drinks increased at a greater rate than the cost of telephone equipment.
(E) Technological advances made telephone equipment more sophisticated between the 1970s and 1990.

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Re: Local phone companies have monopolies on phone service   [#permalink] 01 Oct 2016, 10:40
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