Mobiles Phone Blogs

CONVENTIONAL wisdom says developing competition in services markets by encouraging private sector participation (both local and foreign) brings large gains for consumers. The gains come in different forms, such as reduced service charge, improved service quality, variety of services and easy access to service. Liberalisation of the telecom sector has been especially welcomed by users because of the supply side constraints in the telecom sector. Moreover, the advent of mobile phone technology, with its unique features of 24 hour availability and instant access, created a huge demand for it.

Although liberalisation of the telecom sector was done in the belief that it would bring benefit to the consumers in terms of cheaper price and better quality of service, that has not always been the case. Contrary to conventional belief, telecom liberalisation resulted in negative consequences for some users in some cases. Liberalisation (especially fixed line telephone) sometimes causes higher prices for customers due to tariff rebalancing and result in reduced access.

In tariff rebalancing, long distance prices fall while (to maintain rates of return) line rentals (and often local call charges also) increase. For instance, in Australia, line rentals increased by 47% after liberalisation (during 1998-2000). In the Northern Territory of Australia, connection to the fixed network had dropped by 2.3 percent after liberalisation. Service standards had also fallen. Similarly, consumers could not reap the benefits of liberalisation (such as lower price) in the UK during 1984-1990 as competition was restricted between the British Telecom (BT) and the new entrant MERCURY (which was licensed to compete with the BT in some segments), and the liberalisation was partial. In 1991, duopoly policy was ended and entrance of new firms was allowed, resulting in intense competition and significant fall in prices, and more than 50% reduction in telephone fees.  More…