The Toronto Transit Company, otherwise known as the TTC, holds a monopoly on transit throughout all of Toronto. Despite criticism for inferior service and high prices, they continue to hold a monopoly. The TTC can be classified as a monopoly because they are able to set the prices meaning they are price makers. They are the only firm in the market because although other transit companies exist, the TTC is the only one that services the Toronto area. The TTC was able to create this monopoly due to legal barriers, Economies of scale, as well as ownership and control of resources.
Multiple legal barriers exist because the TTC can be classified as a crown company which means it’s owned and subsidized by the government. So even though there is no law saying that no other transit company is able to operate in Toronto, it would defiantly be discouraged by the government. The TTC is a publically owned company meaning that it is given access to public services like roads. So when the TTC wants to put a new subway line down Eglinton, they are allowed to. However, if a private company wanted to tear up a public road for a few years to put in a subway, they would defiantly be denied by the government.
These formidable legal barriers are enough to deter other companies, but other barriers such as an advantage due to the economies of scale exist. If the TTC wanted to order new subway cars they would be able to order in bulk because they will have a large demand for these cars. However, if a new startup company wanted to purchase subway cars, they would only be able to order a few at a time because they wouldn’t have much track to put the cars on. This means that they would not be able to buy in bulk and therefore it would cost the new startup firm more per car than it would cost the TTC. This would give the TTC a completive advantage over all other competitors that may want to enter the market.
The TTC is also resembles the characteristics of a monopoly because of its ownership and control of resources. The first way this is shown is through their sheer size. Established in 1954, the TTC fleet consists of 700 subway cars, 247 street cars, and 1800 buses. These vehicles serve the Toronto area with a grid network of four subway lines, 11 street car routes, and more than 140 bus routes. The reason why a competitive company could never compete with the TTC for transit supremacy is because the resources the TTC has are just too overwhelming. A new company could never hope to keep up with one that has been serving the city of Toronto and compiling resources for the last 60 years. The second reason why an upstart company couldn’t compete is because the TTC already has routes that cover all the major streets in Toronto, especially Yonge Street. It would be pointless for another transit company to try and compete because they would only get a fraction of customers compared to the TTC. This is how the TTC shows that it’s a monopoly based on its ownership and control of resources.
The TTC also resembles the characteristics of a monopoly because of its pricing and strategic barriers to entry. The TTC is a price maker, meaning they have significant control over the price of tickets. The TTC is one of the most expensive transit systems in the world but since they have no competition, prices aren’t a concern for them. As a result, the TTC is free to hike up prices as much as they want because there aren’t any competitors in the market and no substitutes.
This is why we believe that the TTC is a perfect example of a monopoly. They have many legal barriers, have barriers to entry through economies of scale, have ownership and control over all essential resources, and finally, have pricing and strategic barriers to entry.
By: David Lancaster and Christian Eisenhauer
"Buying Tickets, Tokens and Passes." TTC. Web. 13 Apr. 2012. <http://www.ttc.ca/Fares_and_passes/Prices/Buying_tickets_tokens_and_passes.jsp>
"General Information." TTC. Web. 13 Apr. 2012. <http://www3.ttc.ca/Routes/General_Information/General_Information.jsp>.
"Schedules and Maps." TTC. Web. 13 Apr. 2012. <http://www.ttc.ca/Routes/index.jsp>.
"Subway/RT." TTC. Web. 13 Apr. 2012. <http://www.ttc.ca/Subway/index.jsp>.