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State-Sponsored Competition Is New Antitrust

BOSTON ( TheStreet) -- Verizon's (VZ - Get Report) FiOS not coming to your neighborhood and Delta's frequent flier program looking a lot like United's aren't signs of monopolies in the making: They're the new competition.

For years, the consumer has been conditioned to view the cable company as a hulking local monopoly, to the point where Cablevision (CVC - Get Report) customers were legitimately upset over the loss of the otherwise free Fox network during a dispute between the provider and News Corp. (NWS) back in October. Yet media monitoring firm SNL Kagan noted earlier this week that cable's multichannel market share has dipped to 60% from nearly 63% a year ago as direct-satellite competitors such as Dish Network (DISH - Get Report) and DirecTV (DTV) continue to surge.

You may not have more than one cable company in your community, but a new form of competition means you probably have a completely different kind of alternative.

Meanwhile, the familiar airline narrative is that mergers between Delta (DAL - Get Report) and Northwest and Continental and United (UAL - Get Report) are limiting passenger choice while eroding network carriers' incentive to differentiate frequent flier programs, fees and other perks. Yet a look at the Department of Transportation's Bureau of Transportation Statistics' latest airline rankings shows low-cost Southwest (LUV) ahead of American (AMR), US Airways (LCC), Continental and United and second only to newly merged Delta in passenger volume. And while their Rapid Rewards frequent flier template and baggage fee stance has been copied throughout the discount carrier ranks, there's no way anyone would ever confuse them with Delta SkyMiles or American's flat $25 fee for a customer's first checked bag.

"Within the last 30 to 40 years, there's been a shift from regulated industries where competition was structured and limited by government rule," says Shubha Ghosh, a professor at the University of Wisconsin Law School specializing in antitrust and intellectual property. "Now that we've moved from that time frame to a more deregulated environment, the question is 'Do we have a realm into which antitrust can expand?'"

Answering requires tailoring the definition of "competition" to the modern marketplace. This was a much simpler issue in the late 19th and early 20th centuries, when manufacturing, transportation and other industries were targeted by antitrust law based on price competition -- or lack thereof. Today, it's no longer a matter of price but of quality. When the Department of Justice hauled Microsoft (MSFT) into court more than a decade ago through the help of the Sherman Antitrust Act, it wasn't because Microsoft's Internet Explorer was the only game in town and forcing consumers to pay exorbitant amounts for its use, but because Explorer lodged itself into Microsoft's dominant Windows OS in such a way that replacing it with Netscape or Opera was a chore by comparison. The ensuing settlement not only paved the way for Google (GOOG) Chrome, Mozilla Firefox, Apple (AAPL) Safari and other browsers, but reframed the argument over market competition.
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