A natural monopoly's cost structure

A natural monopoly's cost structure is very different from that of most industries. For a natural monopoly, the average total cost continues to shrink as output increases.
Natural monopolies tend to form in industries where there are high fixed costs. A firm with high fixed costs requires a large number of customers in order to have a meaningful return on investment.
Other firms are discouraged from entering the market because of the high initial costs and the difficulty of obtaining a large enough market share to achieve the same low costs as the monopolist.