Competition, intrinsically linked to universal access and service (UAS), promotes UAS in the following ways:
- Competition drives expansion (i.e., coverage and availability), as discussed in Section 2.2.1;
- Competition lowers prices (i.e., affordability), introduces new pricing models and promotes better quality of services, as presented in Section 2.2.2;
- Competition encourages market segmentation and stimulates the introduction of innovative new services (i.e., more choices and new services); and promotes the servicing of the less affluent, through removal of non-price barriers (see Section 1.2.2) and subscriber growth, as outlined in Section 2.2.3; and;
- Competition makes universal access and service fund (UASF) tenders for subsidies to provide UAS successful; it often needs more than two major operators in the market for a UASF tender to work;
An openly competitive marketplace is essential for the delivery of communications services to those who had no such service before. For example, fixed telephone penetration in India reached only 2 per cent of the population in the 50 years following independence, 1947-1997. However, industry reforms, including competition and other regulatory measures, launched in 1998 had, by 2008, propelled penetration (including mobile) to almost 20 per cent. The Indian mobile phone market in 2007 had 220 million subscribers and this figure is growing by more than 6 million users per month. [
1].
Research shows that privatization can significantly lead to improved performance regarding increased sales, profits, investment and employment. Across the board, this research also finds that competition drives the greatest improvements in the sector [
2]. For example, markets operating with a duopoly are less able to realize the benefits of free competition, as there is not enough incentive to capture market share by expanding service, or by lowering prices. Collusion between the two operators on keeping retail prices high is also a potential concern.
For more information please also see the ICT Regulation Toolkit,
Module 2: Competition and Price Regulation.
End notes
- The Financial Times, August 2007
- Wallsten, Scott, p 5. Does Sequencing Matter? Regulation and Privatization in Telecommunications Reform, Policy Research Working Paper 2817, The World Bank 2002