Term Paper, 2010
13 Pages, Grade: 1.0 (A+)
2.1 Local Loop unbundling
2.2 Government Ownership
2.3 Restrictions on foreign-owned companies
3.1 Mobile Phone market
3.1.1. Contract lengths
3.1.2. Portability of phone numbers
3.2.2. Transmission Speed
4. Price Regulation
4.1. Consumer prices
4.2. Interconnection prices
7. List of diagrams
The global telecommunications market has shown steady growth over the last decades. Revenues in the OECD (Organization for Economic Co-operation and development) area have gone up from USD 380.000 in 1991 to USD 1.190.000 in 2007 (in millions).1 Providers increased their number of subscribers, especially for broadband and mobile phone service. The latter accounted for approximately 40% of the total revenue in 2007 compared to 21% in 1997.2
Reasons for this growth are declining prices in many sectors as well as the growing importance of telecommunication in every aspect of life and the change in consumer behavior.
In addition, the market is considerably changing in technology: advancing broadband, optical fiber networks, 3G, Voice over Internet Protocol, digital video broadcast and also new device-technology have been recent innovations.
Due to these rapid changes and the intense growth, telecommunication politics have significantly changed.
Over the last two decades, the majority of countries installed independent bodies that regulate the different aspects of the telecommunication market.
In the early 1990’s the main goal in telecommunication was the creating of a competitive market. In recent years the regulatory topics have shifted towards areas like pricing and service quality.
In this paper these recent trends in policies are introduced and discussed.
The first wave of regulation was the liberalization of the telecommunication markets. Until the 1990’s the telecommunication market was a monopoly in most countries and therefore major regulatory changes had to be set in place to move towards a competitive market.
One of the most important issues concerning a competitive market is the accessibility for new entrants. In the case of the telecommunication market, the costs of wire networks had often stipulated market entrance. Therefore, many countries used Local Loop Unbundling (LLU) to allow companies to enter the market without having to invest in a new wire network. Another measurement to increase the level of competitiveness was the privatization of the often government owned monopolists.
LLU enables market entrants to “rent” existing copper wires to provide services to the end users.
Three Different types of LLU are currently being used:
Illustration not visible in this excerpt
In order to successfully implement LLU, policies have been implemented in most countries but to different extents.
Many regulators introduced policies that obliged the incumbents to grant access to the unbundled loops. Obviously the former monopolists were not eager to allow new competitors to use their networks they had built over many decades.
A second wave of policies in the LLU was pricing regulation. In the last few years many countries adopted regulations that either set specific prices for LLU charges i.e. Austria, Belgium and New Zealand or mandate cost-oriented pricing i.e. Spain. These pricing-regulations were necessary to prevent the incumbents from misusing their bargaining power by charging too high prices for the entrants.
While in many countries the percentage of local exchanges open for LLU is now at 100% i.e. England, Spain and Portugal, it is still considerably low in others, i.e. Mexico.3
The effects of the LLC are mostly viewed as positive, but there still remains controversy. Those who oppose the LLU believe that it prevents investments in new technologies because incumbents would not invest in new networks if they have to allow access to entrants and the entrants on the other side do not have an incentive to invest since they can just use the existing networks for much lower costs.
Besides the LLU another factor in the liberalization of the markets is the privatization of the government owned companies. While in some countries like the US and the UK the market is completely privatized, the majority of countries still own significant shares and in some cases even has full ownership (Mexico, Luxembourg).4
Nevertheless, some countries have already substantially reduced their market shares, such as Turkey, that went from 45% to 30% state ownership in 2008.5
1 OECD , Communications Outlook 2009, Table 3.1.
2 OECD, Communications Outlook 2009, Table 3.4.
3 OECD, Communications Outlook 2009, Table 2.7.
4 OECD, Communications Outlook 2009, Table 2.7.
5 OECD, Communications Outlook 2009, page 32
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