Competition and performance in the UK telecommunications industry

Judging by historical and crossnational experience, privatization of British Telecom promises to increase the rate of expansion of telecommunications usage, but also to redistribute services and charges. Public dissatisfaction with these reallocations could recreate the political discord that stunted the early growth of the British telecommunications manufacturing sector, unless the new technology and regulatory institutions substantially alter the economic environment. More intense competition. rather than prospective changes of network ownership, seem to have improved the seem to have improved the manufacturing industry's performance in recent years.     

UK strategy - the momentum of change

In July 1980, the UK government set into motion a programme of reform for telecommunications. The British Telecommunications Act 1981 maintains British Telecom's exclusive privilege but provides for market entry in network transmission, services and attachments. The process continues with a new Telecommunications Bill, currently being considered by Parliament, which will make shares available to the public and allow for the creation of a new Office of Telecommunications (OFTEL). Jonathan Solomon considers the impact of the new legislation on the UK telecommunications environment.     

Telecommunications companies: One meeting with any competitor is enough to violate the EU's competition laws and result in fines

This commentary's purpose is to review how Telfort, T-Mobile, Vodafone, and others discovered that one “meeting” of any type with any telecommunications competitor could result in fines up to 10 percent of total “turnover” under EU competition law Regulation no. 1/2003, Article 23(2)(a), and to provide planning tips on how to eliminate the potential for those adverse consequences. While competition laws do not apply solely to the telecommunications industry, they do seem to affect it disproportionately. Telecommunications companies have global reach, and some of the most stringent competition law exists in Europe. Thus, all should review the most recent telecommunications ruling from the European Court of Justice, T-Mobile Netherlands BV v. Raad van bestuur van der Nederlandse Mededingingsautoriteit C-8/08 (2009). ¹ The ruling deals with whether the one meeting was “concerted activity” in violation of Article 81(1) EC.     

Negotiating improved interconnection between US telcos and their competitors

The issue of determining the types and quality of interconnection between US telephone companies and their new competitors is addressed. Instead of prescribing a detailed solution, a regulatory commission should establish ground rules for negotiations, ie ‘market rules’. It must also establish the ‘starting point’ from which bargaining can take place. A ‘starting point’ for negotiations is the a priori property rights vested in the bargaining parties.     

Different paths to universal access: The impact of policy and regulation on broadband diffusion in the developed and developing worlds

The authors examine the broadband digital divide by analyzing the impact of policy and regulation on broadband Internet diffusion. Their multiple regression analysis shows factors that determine broadband diffusion in technologically developed countries do not necessarily have the same impact in less developed countries. They show that in technologically developed countries, there is greater broadband diffusion in countries that make a higher financial investment in information and communication technologies (ICTs), have effective governing practices at the national level, have higher levels of education, and are more urban. In technologically developing nations, a competitive telecommunications sector and higher investment in ICTs lead to greater broadband diffusion, with investment having an even larger impact in the developing world than in the developed world. In addition, stronger democratic political institutions, higher levels of national income and lower levels of income inequality increase diffusion, but the presence of a national telecommunications regulatory authority has a negative impact. These results suggest that the path to widespread availability and use of broadband requires different strategies depending on a nation's level of technological development.     

Demand for telecommunication services in developing countries

Living standards and economic growth in developing countries are invariably linked to the availability and use of telecom services. Effective policy decisions require the best estimates of the drivers of these services. In this paper, telecommunications demand is estimated in models for residential mainline and mobile telephone service for developing countries for the period 1996–2003. The paper tests for cross-price effects between mainline and mobile service and its findings have important policy implications. It finds residential monthly price elasticity to be insignificant for developing countries, but the connection elasticity is larger than generally found in the literature. Mobile monthly price elasticities are very large. A new and important empirical finding is that although wireline phones are substitutes in the mobile market, the contrary is not true—mobile phones are not substitutes in the wireline market, and in fact may be considered complements. This lack of symmetry has important implications for properly defining telecom markets. Universal service subsidies and competitive market initiatives should be reevaluated in light of the paper's elasticity estimates. Increased competition, income growth and enhanced education may be the ultimate universal service promoters.     

The Political Economy of Price Cap Regulation

The last decade has witnessed a dramatic substitutionof price cap regulation for rate-of-return regulationin the telecommunications industry. The 1996Telecommunications Act empowers state regulators toset the terms of competitive entry in local telephonemarkets. We investigate whether the form of regulationendogenously affects the regulator's behavior withrespect to competitive entry. The evidence revealsthat regulators in price cap jurisdictions tend to setmore liberal terms of entry in comparison withregulators in rate-of-return jurisdictions. Thissuggests that price cap regulation suffers fromincomplete contracting, undermining the potentiallysuperior incentive properties of this importantregulatory reform.     

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.     

Behind the scenes of the telecommunications miracle: An empirical analysis of the Indian market

The paper analyzes the demand and supply characteristics of the Indian telecommunications market, with the aim of contributing to the debate on the effectiveness of universal access policies in developing countries. The discussion is supported by some empirical evidence derived from a small time-series-cross-section dataset, containing mainly information on the fixed-lines segment of the market. The analysis suggests that the price elasticity of demand for fixed lines might be sensibly higher than the levels usually found in developed countries, while the crucial role of income and other sociodemographic variables seems to be confirmed. The paper also studies the impact of cellular penetration on fixed-lines diffusion. The results suggest the existence of a (positive) network effect in low penetration areas, while substitution (displacement) seems to arise in the most developed ones. Finally, the paper analyzes the supply side of the market, to assess the impact of market competition on investment. Competition seemingly helps stimulating investment in the most developed areas, but does not seem to have a significant impact in the less developed ones.     

China’s telecommunications evolution,institutions, and policy issues on the eve of 5G: A two-decade retrospect and prospect

Over the past two decades, China’s telecommunications industry has witnessed drastic market reform, steadfast institutionalization, and volatile technological changes, which have driven exponential industry expansion. This paper offers an updated longitudinal and comprehensive review on this reform process on the eve of 5G (the fifth generation mobile communications networks). First, the paper segments the two-decade reform crusade into discernible phases, each of which is embedded with different policy drives. These reform phases are then pattern-matched against the subtleties of the overall institutional, technological, and market backdrop. A series of policy issues are identified through a systematic examination of industry phenomena over the reform course. Finally, the status of research is assessed regarding China’s telecom industry and reform, based on which, knowledge gaps are identified and future research agenda suggested. Conclusions are made regarding future reform and research imperatives. The paper advances the understanding of China’s telecom reform, development, and the underlying policy issues. It updates and expands previous works on similar topics. Overall, this study provides important theoretical, managerial, and policy implications.     

Access regulation and the incumbent investment in quality-upgrades and in cost-reduction

This papers studies if access price regulation has an impact on incumbents’ incentives to invest in their network that might differ according to the nature of investments, that is, quality-upgrading and cost-reducing. It is shown that if the marginal cost of quality-upgrading is very low both types of investment are increasing in the access price. If the marginal cost of cost-reducing is very low, both investments decrease after an increase in the access price. Otherwise, a high access price increases the incentives for quality-upgrading and reduces the incentives for cost-reducing. Therefore, regulators should set a higher access price the lower is the marginal cost of quality-upgrading as compared to the marginal cost of cost-reducing.