Debate on Need for Deregulation
There are many arguments in favor of deregulation. Advocates argue that continued regulation can only support the development of static markets whereas deregulation is necessary for the development of dynamic markets. Market convergence and related infrastructure competition are more likely to take place in dynamic markets. In many telecom markets, deregulation is currently being discussed, in this article, we will examine the impact of deregulation on the overall economy and study arguments that are placed in favor and against deregulation.
Arguments in favor of Deregulation:
- While achieving a lasting competitive market environment, deregulation is a logical step to sustain the further development of the industry and it supports the liberalization process from a monopoly to a competitive market.
- The rationale for deregulation is that less regulation will lead to higher competitive intensity, an increase in related investments, more innovation, and higher customer benefits.
- Continued regulation can only support the development of static markets whereas deregulation is necessary for the development of dynamic markets. Market convergence and related infrastructure competition are more likely to take place in dynamic markets. Deregulation is expected to positively influence the infrastructure investment decisions of incumbents and to unlock dynamic market effects.
- Increased infrastructure competition raises consumer welfare and operators would be willing to invest in case of an adequate ROI, Market convergence may result in the entrance of neighboring players in each other’s core business, increasing the pressure for innovation and related investment. Expect deregulation of the telecom sector to stimulate investment in new infrastructure.
- Deregulation of the telecom sector is expected to have a positive impact on employment, tax receipts, consumption, and GDP as deregulation stimulates infrastructure investment and has a positive impact on the overall economic growth and consumer welfare. In many countries deregulation of the telecoms sector is being discussed as a means to stimulate investment into new infrastructure.
- It is argued that the analysis of regulatory policy changes in the US over the last years has indicated that deregulation in fact led to significant investment announcements of the leading fixed operators in the country and suggests a positive impact of deregulation on the number of investments in the telecoms sector and on the overall economy.
Arguments against Deregulation:
- Markets are often regulated to prevent abuses by de facto or legal monopolies and to protect consumers' and new entrants' rights.
- Liberalized telecom markets have been regulated to achieve public interest objectives (such as widespread service availability) and to avoid abuse of market power by incumbents through price discrimination, cross-subsidization, and re-monopolization.
- In regulated marked network owners having a considerable market, power is obliged to provide access to other market players (non-discriminating and based on regulated prices).
- Since the passage of the Act, the degree of monopoly power and market concentration in the telecommunications sector has been on the rise, this might have potentially serious consequences for the deployment of technology in disadvantaged communities. There is a common understanding in the US that regulation resulted in a decline in infrastructure investment.
- The Consumers Union concludes that the Telecommunications Act of 1996 did not foster competition among ILECs as the bill had hoped, instead of, ILECs encroaching on each other they did mergers, and five years later the largest four local telephone companies own about 85% of all the lines in the country. It continued the historic industry consolidation reducing the number of major media companies from around 50 in 1983 to 10 in 1996 and just 6 in 2005.
- Now most players will seek to exploit and, control markets and technology for their own advantage. It will be challenging to enforce a set of programs that shape the emerging infrastructure to meet societal efficiency, equity, and universal service goals.
Conclusion:
Although, it is far from clear whether infrastructure investments are best achieved through deregulation and unfettered competition or through some new form of regulatory intervention, however, there are several studies supporting the conclusions that deregulation of the telecom sector triggers investments and overall growth of the economy.
Related Links
You May Also Like
-
Telecommunications Industry Profile
Broadly telecom industry can be divided into two sectors, Equipment Sector and Services Sector. Equipment sector players manufacture telecom products whereas the services sector comprises operators and other service providers. The telecommunications industry equipment sector is comprised of companies that manufacture products that are used by both end-users and input to other telecommunications companies. Customers use these products to access telecommunications services. In this article, we will discuss the industry profile of telecommunications.
-
Debate on Need for Deregulation
There are many arguments in favor of deregulation. Advocates argue that continued regulation can only support the development of static markets whereas deregulation is necessary for the development of dynamic markets. Market convergence and related infrastructure competition are more likely to take place in dynamic markets. In many telecom markets, deregulation is currently being discussed, in this article, we will examine the impact of deregulation on the overall economy and study arguments that are placed in favor and against deregulation.
-
Telecom Industry & Globalization
The telecommunications sector is an important strategic segment of the modern economy. As globalization set the stage, the telecommunications industry became gradually a more global industry with increasing competition. The first factor shaping the telecommunication industry to what it is today is globalization. The telecommunications industry transports information at such incredible speeds that the concept of the virtual world has become true. This article will discuss the impact of globalization and the risks and opportunities it present to the industry.
-
Telecommunications Industry & Deregulation
The Telecommunications Act removed regulatory barriers to entry, opening up the market to new competitors. Deregulation led to a large number of new players. The third factor having a great influence on the modern telecommunication industry is deregulation. This article will discuss some thoughts on the impact of deregulation and unfettered competition on industry and a brief debate on deregulation versus some new form of regulatory intervention.
-
Imperatives of Telecommunication Industry
The telecommunications industry continues to grow steadily on a global scale. The most important imperatives shaping the modern telecommunications industry are globalization (worldwide scale), technology (latest advancements), and deregulation. The first factor shaping the telecommunication industry to what it is today is globalization. The second factor influencing the telecommunication industry greatly is technological advances. This article briefly discusses these three imperatives.
-
Overview of the Telecommunications Industry
Modern telecommunications industry players produce communication equipment and deliver a set of voice, data, and broadband services using wireline or wired infrastructure of cables, networks, servers, computers, and satellites. In this article, we will define the telecom industry and discuss some of the key business drivers. Understand the various constituents of the telecommunication services sector followed by a small discussion on current industry trends.
-
History of Telecommunications Industry
The history of telecommunication began with the use of smoke signals and drums in Africa, the Americas, and parts of Asia. In the 1790s, the first fixed semaphore systems emerged in Europe; however, it was not until the 1830s that electrical telecommunication systems started to appear. Follow this advancement from smoke signals to modern-day internet and mobile technology, understanding the events that have shaped the world of telecommunications.
-
Telecommunications Industry – Business Drivers
To provide solutions to clients in the Telecom industry, it is critical to have a comprehensive understanding of their business, their objectives, and their challenges – those business challenges unique to their organization as well as those triggered by the industry and marketplace. The following article provides an overview of the key business drivers that are impacting telecom carriers and hardware providers.
-
Telecom Industry: Supply & Value Chain
The telecommunications industry has a complex set of suppliers, including vendors for equipment, infrastructure, and service providers. Many service providers own their own transmission networks and infrastructure but there are many who might lease from other players. What is the revenue metric for telecom and who are the major stakeholders in this industry? Read to find out!
-
International Telecommunications
The telecommunications industry has been among the best performing industries in the world in recent years. Until the 1980s, the governance and regulation of international telecommunications regulation were relatively straightforward where state-owned telecom companies provided services within discrete national boundaries. International traffic was carried at rates mutually agreed upon by governments and their respective national carriers. A brief discussion of how the industry is shifting to a multilateral trade framework.
