Costs of Telecommunications Competition Policies
1 May 2000
By Dr. Agustin Ros, et al.
Competiton policy is a major determinant of telecommunications industry structure and performance. Regulation is on each aspect of competition policy. The economic goal of regulation is to approximate the performance of an unregulated competitive market. To achieve this goal in telecommunications, some countries have used "light-handed" regulation that relies as much as possible on market mechanisms. Other countries have instituted more detailed regulation, i.e., they have created a government agency or agencies charged with setting up specific rules for pricing, interconnection, and industry performance. They also may set up detailed procedural methods -- detailed accounting reports, evidentiary hearings, and formal decision and appeals processes.
This report explores the indirect economic costs of changing competition policy to a more regulatory approach. To do so the authors:
:: compare the telecommunications competition policy approaches in the US and the UK, and how differences in the approaches have affected industry performance in these two countries
:: present cross-country comparisons of the relative economic performance of alternative regimes, i.e., of whether and to what extent various measures of economic performance vary with the degree of regulation in a sample of countries, and
:: discuss the economic mechanisms by which asymetric or excessive regulation leads to inefficient outcomes.
