Monopoly market occurs when we have a market with just one supplier. It is when a firm is the only seller of a good, with no close substitutes exists. For example, public utilities (electric, water), local telephone, cable T.V. Monopoly market is created when there are high barriers to entry (anything that prevents firms from entering the industry), i.e. government licenses, franchise, patents, copyrights and economies of scale. The economic case against monopoly is that a monopoly has a market power, which is a power to set the price in the market while a competitor does not. This is shown by its downward-sloping demand curve (of price versus quantity), which is the same as the market demand curve. As a result, monopolists can pick any point on the demand curve; if it charges higher price, fewer people will buy the product, but with no competitors to undercut the higher price, there is some demand for the product (Taylor and Frost, 2002). In this way monopoly can affect the price in its market by changing quantity it produces. This is the real concern with monopoly market, such market like Telstra, an Australian telecommunication company which was previously owned by the government until it was partly privatised in 1991.
The Australian telecommunications system has undergone radical reform since 1991. Along with New Zealand, Chile and Guatemala, Australia is viewed as one of the leaders in telecommunications reform (Spiller and Cardilli 1997). The former public monopoly, comprising Telecom Australia and the Overseas Telecommunications Corporation (OTC) has been corporatised, taking the name Telstra, and partially privatised. A proposal for full privatisation was put forward in 1998, but abandoned in the face of parliamentary and public opposition. Competition has been promoted by Australian Competition and Consumer Commission (ACCC) through the introduction of a private competitor, Optus in 1991 and the removal of all restrictions on entry in 1997, while Telstra has been subject to special regulation requiring the provision of network access to competitors on favourable terms in markets where it is believed to be dominant.