Market Power in China: Manifestations, Effects and Legislation

This paper presents a picture of market power in China – its current situation, manifestations, causes, damaging effects and related economic laws and regulations. China is in a transition from a planned economy to a socialist market economy. Market power in China is reflected largely in administrative monopolies inherited from the old system, as well as in economic monopolies created by the new system. Administrative monopolies are worse than economic monopolies in terms of the distortion of transaction behavior and the preclusion of market competition. They have become a pressing issue facing China in its economic and social development. China has been developing a legislative framework on market competition, but this framework currently appears weak and powerless in the face of the administrative monopolies. However, the introduction of an anti-monopoly law will undoubtedly be helpful in enhancing the market competition mechanism.     

Symbiotic production: The case of telecommunication pricing

In this paper we analyze a generalization of vertical monopolies in which monopoly suppliers trade essential inputs with one another. The most obvious applications of the model, which we call symbiotic production, are to postal and telecommunications services. We show how producers can use per-unit tariffs to achieve cooperative outcomes without colluding directly over consumer prices. We then show the firms have an incentive to collude in the setting of tariffs but that suchcollusion will lower consumer prices. This assumes that the suppliers are otherwise unfettered. In contrast, if the constituent monopolies are regulated, we show that collusion enables the firms to completely undo the restraints of regulation. The model has important policy implications for the international telecommunications market.     

Leveraging the EU regulatory framework to improve a layered policy model for US telecommunications markets

What is the best way to overhaul the current telecommunications legislative framework in the United States? This is an ongoing debate among telecom policy analysts and many others affected by the legacy of regulatory compromises that govern US telecommunications (and related information and media) industry sectors. This paper compares a Layered Model for US telecommunications policy with the regulatory framework adopted by the European Union. Both approaches focus on service characteristics rather than underlying technological traits.¹ It becomes clear that the Layered Model could be adopted to move away from sector-specific regulation, and could successfully use conventional market analysis criteria.     

The political economy of the Korean telecommunications reform

South Korea proclaimed a gradual economic liberalization ever since the early 1980s. Regardless of her vow to do so, however, most of liberalization efforts turned out to be a sheer rhetoric. In sharp contrast, genuine market liberalization and regulatory reforms are being introduced in the telecommunication sector, which is unprecedented in the Korean economic history. Why and how could Korea pursue such a full scale market liberalization and regulatory reforms in the telecommunications sector? Though it is argued that a regulatory convergence in economic management is found in everywhere in the world, the particular speed, scope, and/or processes of a country’s telecommunication reform cannot be understood correctly without examining the structures and institutions of the Korean political economy and of the telecommunications industry. This paper examines the causes and consequences of the Korean telecommunication reform by analyzing the relevant institutional changes both in domestic and international, which largely affect the interaction among those involved in the process of market liberalization and regulatory reforms.     

The impact of trade liberalization in telecommunications services: The case of APEC countries

This paper examines the impact of liberalizing the telecommunications services sector on investment and output in the Asia-Pacific Economic Cooperation (APEC) countries by estimating a system of four structural equations that takes into account the causal relationship between national income and telecommunications infrastructure. The degree of openness to trade in telecommunications is represented by a carefully constructed index that reflects a country’s trade and investment policy in terms of market access, national treatment and regulatory principles. One interesting finding from the empirical analysis is that the effects of trade liberalization depend on the risk rating of a country. In countries with relatively high risk ratings liberalization reduces investment in telecommunications.     

On access pricing in telecoms: theory and European practice

This paper discusses European legislation concerning interconnection between telecommunications operators. An important and distinct element of regulatory policy in the European Union is that operators with significant market power are required to provide cost-based interconnection whereas other operators are not required to provide such cost-based interconnection. It analyzes the consequences of different interconnection charges for competition and investments. Using recent insights from the theoretical literature on competition in telecommunications, it finds that the socially optimal regulatory policy concerning interconnection has the same characteristics as that adopted in the European Union.     

Competitive dynamics in Polish telecommunications, 1990–2000: growth,regulation, and privatization of an infrastructural multi-network

This paper analyzes the relationship between governmental regulatory policies and competitive dynamics amongst private operators and the national monopolist, TP SA, in three network segments of the Polish telecommunications sector. Special attention is paid to the evolution of organizational strategies in a regulatory environment characterized by constant strategic indecision and reorientations of national policy makers. The paper finds that regulatory/competition coevolution has taken diverse forms in the three network subsegments, with asymmetric duopoly operating in the local fixed network, hidden competition at work in the long-distance fixed network, and oligopolistic technology-driven competition characterizing the high-growth cellular network. The conclusion reached is that Polish telecommunications to date has been stuck in a broad stage of pre-competitive market maneuverings by domestic and international capital, in preparation for privatization of the national operator and for full liberalization as part of EU integration.     

Convergence between telecommunications and other media: How should regulation adapt?

The paper examines the regulatory issues raised by technological convergence between telecommunications and other media. Market uncertainty for broadband services has gone hand in hand with both uncertainty over how to supply those services and a regulatory framework that will facilitate growth in the sector, ensure a competitive market and provide the necessary protections for consumers and the public. Development of the information market should be determined primarily by market forces. Intervention may be justified but a clear distinction needs to be drawn between regulation in the public interest and regulation to protect against market failure.     

The case against competing infrastructures

The EU Council of Ministers is considering proposals to liberalize telecommunications infrastructure. This article shows that there is no evidence that infrastructure competition in the UK has contributed to improvement in BT's performance. The author argues that the public wants and deserves choice of services and prices at all levels of telecommunications now. It should not have to wait 10 or 20 years while competitors to the old monopolies laboriously construct networks and wrestle with funding problems.     

Institutional environment and complementary assets: Business strategy in China’s 3G development

This paper develops a framework to assess the influences of institutions and markets on the business strategy of firms in transition economies. We argue that regulatory systems and markets in transition economies are interdependent. Their changing conditions will interact and influence the types of partnerships in new market entry. Using a case study approach based on historical data and interviews, we show how China’s telecommunications industry evolved between 1987 and 2007, and led to the development of a 3G (third generation mobile telecommunications) standard and networks. Our analysis based on the framework explains how regulative elements and market conditions shape the strategic choices of partnerships between domestic and foreign firms when entering China’s 3G market.     

The endless need for regulation in telecommunication: An explanation

Telecommunication services have existed as a legal monopoly nearly throughout its entire history. In 1998, telecom market liberalisation was achieved across the European Union (EU) through the introduction of competition among telephone services. Asymmetrical obligations were deemed necessary in order to compensate the market power of the former monopolist.As the evolution of asymmetrical regulation in Spain illustrates, obligations and the telecommunications operators subject to them increased with the regulatory framework established in 2002 in the EU. This new regulatory framework may continue to expand through the inclusion of functional separation as another possible asymmetrical obligation. In short, it seems that the regulatory pressure on the telecommunications industry is increasing, despite the lapse in time since the liberalisation of the industry.In this paper, a methodology developed by the Austrian School of Economics is applied in order to explain why the telecommunication market is subject to increasing regulation in Europe, rather than deregulation, after more than 10 years of liberalisation. In particular, Mises's theory of price control is used to explain the evolution of the regulation of local loop unbundling.     

Market power,regulatory convergence,and the role of data in digital markets

The increased economic importance of digital services has profoundly changed the power structure in telecommunications and media markets. Although these services sometimes directly compete with traditional telecommunications services, the regulatory obligations for both players differ significantly. This article discusses three important areas deemed relevant in order to define a coherent regulatory framework and to account for the specific peculiarities of digital markets: First, challenges associated with assessing market power in digital markets. Second, challenges in harmonizing different regulatory obligations for digital services, and third, the vital role of data and data protection in the context of data-driven business models.     

China's information superhighway: What is it and who controls it?

This paper focuses on China's telecommunications sector from a national perspective, and summarizes the structure of the country's information superhighway. It then analyzes the changing regulatory and policy framework, and the competition among current and potential players in the market. This leads to a final discussion on the implications and likely outcome - who will control the superhighway in China.     

The European Framework for Regulating Telecommunications: A 25-year Appraisal

Review of Industrial Organization - The European telecommunications sector has been radically transformed in the past 25 years: from a group of state monopolies to a set of increasingly...     

A pan-European telecommunications regulator?

Creating a single telecommunications market in the European Union is well under way, particularly with the approach of full competition after 1 January 1998. However, the regulatory framework needs to reflect the demands of the single market and the needs of industry. The European Commission has been reviewing whether a single pan-European telecommunications regulator would offer a valuable focus in streamlining the existing regulatory structure. In so doing, they commissioned Denton Hall and NERA to evaluate the needs of industry and the legal and practical approaches to the creation of a single regulator.     

Ex ante margin squeeze tests in the telecommunications industry: What is a reasonably efficient operator?

This paper studies the implementation of Reasonably Efficient Operator margin squeeze tests by National Regulatory Authorities in European telecommunications markets. It provides a theoretical framework which shows how regulatory authorities deal with the asymmetries between entrants and incumbents by adjusting the Equally Efficient Operator margin squeeze test used in competition policy. Using this framework, this paper presents a benchmark of implementation choices by inspecting authorities' guidelines, market analyses, and decisions. Whereas some implementation choices are very similar across authorities' decisions, some others display a strong heterogeneity.     

The case for a more binding WTO agreement on regulatory principles in telecommunication markets

On February 5, 1998, the WTO agreement on basic telecommunications services entered into force. Although the WTO agreement is a step into the right direction its impact might be rather modest. This is because apart from the many exemptions, which are likely to undermine market access and national treatment commitments, the regulatory provisions laid down in the WTO agreement are neither specific nor comprehensive enough to ensure open market access. Because there is in most cases a lack of clear definition as to the terms and conditions of regulatory provisions, there is a great danger that governments might nullify the commitments by abusing the regulatory requirements.     

The Dubious Antitrust Argument for Breaking Up the Internet Giants

Recent calls for using the antitrust laws to break up the large Internet giants are misplaced for a number of reasons. First, similar efforts against oil, tobacco, motion-picture, and telecommunications monopolies have not proved to be beneficial to economic welfare. Second, the failure to break up Microsoft using Section 2 has not proved to be a mistake: competition in operating systems and Internet browsers has flourished recently. Finally, a Section 2 case against Amazon, Facebook, or Google could not succeed if it focused on the digital advertising market. Even in a case based on market power on the other side of their platforms, a structural remedy—a break-up—would not improve economic welfare in the long run.

     

Competition Policy under Laissez-Faireism: Market Power and its Treatment in Hong Kong

The paper describes the current competition policy framework in Hong Kong: how it came into existence, what business practices are prohibited, and how the enforcement system works. Recent cases in the telecommunications industry are used to illustrate the sectoral approach, a unique feature of Hong Kong's competition policy. We argue that a sectoral approach faces two fundamental drawbacks. First, due to having different ``rules of the game' for different sectors, the allocation of resources may be distorted in the long run. Second, since the relevant regulatory agencies perform dual roles both as competition policy enforcer and as traditional regulator of natural monopolies, the impartiality of their competition decisions may not be credibly conveyed to the public. We also address other specific problems associated with the sectoral approach, such as the exclusion of structural issues, narrow coverage of sectors, and the lack of public enforcement. We conclude that an overall competition law can better promote competition and economic efficiency in Hong Kong.     

Regulation and efficiency in transition: The case of telecommunications in Italy

In regulating the telecommunications industry, the separation between network and retail functions, which is designed to countervail the market power of incumbent operators, is a relevant issue. Despite its importance, little empirical research has addressed the effects of such a separation. Accordingly, this paper provides insights into the consequences of the Italian communications regulatory authority's (AgCom) decision to impose this type of separation on the incumbent telecommunications operator, Telecom Italia. In particular, the studied separation is between the firm's network-related functions, and those used for provision of its communication services. The present research finds that the type of separation implemented by AgCom allows a provider to maintain the advantages of operational scale in its network structure without dampening competition in the existing market for communications services. The study also offers further empirical evidence on the advantages of a composite vs. translog function in analyzing the multiproduct cost structure of a telecommunications operator.