Public Utilities

When one thinks of the term ‘public utilities,’ typically things like energy services, telephone, water and sewer, and cable television may immediately come to mind. There are however, many more examples, but there are many common attributes that these industries share, which I will discuss here that define many of the qualities that constitute a public utility.

A public utility tends to share a common ‘network’ structure, whereby its services are distributed for mass consumption. Many of these public utilities are often wholly owned or subsidized by governments, as they require massive amounts of infrastructure that is most often delivered along public routes, roads, and public rights of way via conduits like pipes or lines. According to Fordham Economics Professor, Rick Geddes, the majority of these public utilities have been granted legal monopolies that cover their service areas.

With many public utilities operating as legal monopolies with few regulatory constraints, private companies and investors were willing to pay handsomely to enter the market through municipal bidding processes, which brought greed and corruption with it, as documented in 2006 by Professor Werner Troesken in “Regime Change & Corruption: A History of Public Utility Regulation.” Troesken defines corruption here as, “the illicit sale of political influence.” It appears that much of the corruption that was identified in the public utilities sector began in the mid-19th century near the end of the industrial revolution as the public utility marketplaces were developing and emerging across the United States.

Many of these monopolies, however have undergone massive regulatory reform in recent years, in large part due to consumer demand for price protection. We have seen in recent years, industries such as telecommunications, energy supply, and cable television all deregulated, in order to promote healthy competition between businesses, where the anticipated outcome is a happy consumer. For example, say you moved into a house 30 years ago, and needed to set your home up in Massachusetts with electricity, water, cable tv, and telephone service. You would have one choice for your electricity (Boston Edison), water would be provided by your city or town, there would be one cable tv provider contracted by the city you moved to, and your phone service would be provided by Bell Telephone services. Today, many of these have been deregulated nationally and locally in the US, allowing for competitive practices to flourish, with the goal of providing better services and value to the American consumer.

The first acknowledged public utility in the United States is here in Massachusetts. The Grist Mill on Mother Brook in Dedham was erected in 1641. Public utilities are also often seen as services that are required to live in a modern society. It could be suggested that the ancient aqueducts in Roman times like Aqua Appia, constructed in 312 B.C. was one of the first public utilities in recorded history, since it possesses many of the attributes described earlier.

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