Challenge to libertarians

[gusl]

Your cell number, yours to keep
A law is being passed to force cell phone companies to let consumers keep their numbers when they change services. This will boost competition among cell providers, as having to change one's number is a barrier to changing providers.

Puzzle: Is government intervention necessary in this case? This seems like it will be a good change.
The question is: why didn't companies already compete by having a policy of allowing customers to keep their numbers when they move? Irrationality on part of the providers by not seeing this need? Irrationality on part of the consumers when they didn't see the conditions of their contract? Is it a case of being stuck at a sub-optimal game theoretic equilibrium, where coordination would be necessary for all parties to benefit (a classical justification for coercion)? Are providers going to profit more or less from this change?

Comments

[mathemajician.livejournal.com]

I'm not a libertarian so I can't speak for them. But I guess the answer might go that if consumers really got pissed off enough they could form some kind of a large union and force the telecom companies into providing this service at least for members of the "union".

[easwaran.livejournal.com]

It seems to me that it's one of those sub-optimal equilibria where coordination is necessary. I think for the phone companies it's probably slightly better if every company allows everyone to keep their number even while switching companies, because each can probably expect a similar quantity of new customers taking numbers from other companies and old customers leaving to other companies, but there will also be a very small number of people who don't have a mobile phone that will get one because they now have slightly greater flexibility. For the customers on the other hand, it's a great jump in utility, because they have full flexibility and can force the companies to go into more direct competition.

I don't think there's a way a single company can allow people to keep their numbers when switching, except perhaps to give numbers away to other companies, which is certainly to the disadvantage of any company doing it by itself.

[ex-rumspring720.livejournal.com]

We bargain in the shadow of the law.
In this case, the law was made by rational companies who desire exit to be as difficult as possible.

There was no opportunity for individual negotiation - you interacted with arms of the corporation, the corporation setting the policy. You could not negotiate around the term of losing a phone number having no alternatives. An alternative marketing model would have been a bad idea - it is unnecessary so long as others do not provide it (which none are incentivized to do), particularly since you're then encouraging a consumer who elects for your service with consideration about switching services to join yours. Really, you'd rather not have that customer - yet you're drawing in this demographic and possibly failing to capture other, more rewarding long-term demographics through resources into this program ratehr than others.
Additionally, hold-out problem: phone companies didn't have to accept the transfer. Even if I was to have a service allowing me to keep the number, my next service didnt have to let me have it.

I think govt. intervention was necessary so long as this was something the public genuinely wanted.
But I'm a libertarian who does not appreciate overt forms of coercion and control over my life. While the state has more resources to do this, we can't ignore the obvious corporate collusion that distorts the marketplace where consumers are unable to access information for change.

I think I became much less libertarian after I entered law school. Big reality shot to the nose to read about all the ways to circumvent monopoly law, and consider how companies use legal structures to reinforce their coercive power over others (e.g., Disney setting the copyright terms via shifting definition of term).