Competitive significance of substitutes for public utility service

Within the last decade two conflicting lines of thought bearing on the economics of public utility enterprises have appeared. It has been claimed that these industries no longer are essentially monopolistic because of new manifestations of competition; simultaneously, efforts have been made to develop a systematic theory of monopolistic competition. The application of the latter doctrine should shed some light on the former contention. Public utility services are, in most cases, sharply differentiated from substitutes in important respects; and this means that while markets may overlap, normal competition is chiefly at the borderlines. In the public utility industries, wherein important technological changes and shifts in demand have been characteristic, perfunctory analysis may result in confusing competition with the process of economic displacement or exclusion. It may be questioned also, whether the seeming prevalence of close competition is not traceable to monopolisitic policies; artificial market relationships may easily be mistaken for competition.