Study Finds Regulation Good For Telecom Customers 293
jfruhlinger writes "Customers are always better off when government bureaucrats get out of the way and let the market work, right? Well, maybe not in all cases. As described at ITworld.com, a recent study compared the regulatory regimes and telecom environments in various European countries. The study concluded that in countries where regulators had more power to levy fines and punish monopolistic behavior, customers paid less and got more services." From the article: "The report, conducted by Jones Day and Strategy and Policy Consultants Network Ltd., showed that investment in telecommunications, which leads to better services for end users, is lower in countries where there is little competition."
I love it! (Score:5, Interesting)
Independent regulation works perfect.
In Sweden a local landline call was almost 15 cents per minute, now a cell phone call is 5-6 cents per minute depending on your contract.
We also have flat fee for cell phones, call as much as you want to any cell phone operator or landlines, including free SMS and MMS for $45 a month. And free UMTS data traffic for as low as $20. Without a contract! And we are allowed to buy and use almost any phone we can find somewhere in the world - unlike our locked-up American friends, chained to their contracts using branded and crippled last year model phones.
We also have a cell network with almost 100% coverage. Most of my business partners have now canceled their land lines and are only using cell phones for their business.
Governments should think about using the same type of regulation when it comes to digital TV. One standard to help the consumer but completely free market to compete with service and price.
Re:You're kidding, right? (Score:1, Interesting)
Ideally, consumer backlash would be strong enough to keep companies in-line.
For example: A Fry's Electronics and a Compusa exist within about 2-3 miles of each other here. Why does Compusa stay in business? Well, it surely isn't due to competitive pricing!
Business execs seem to have realized that is far easier (and more profit) to create the illusion of value rather than to create value in the first place... Example: What are "screensavers" advertised as a feature on cell phones? Or maybe I should be upset that my microwave doesn't have a cool screensaver....
In many industries, consumers are all too eager just to bend down and grab their ankles...
Bet you didn't see that one coming (Score:3, Interesting)
Remember what happens when we assume? (Score:3, Interesting)
There's an underlying assumption that is not addressed here in the article; it isn't clear from the article whether it's addressed in the report. That assumption is that spending more money correlates to better services for end users. But does it?
Do the authors of the report demonstrate the ways in which investment in telecommunications "leads to better services for end users"? Do they document the services that are better in the countries that they rank as more effectively regulated? "Better" itself is a very subjective term. Better in what way? Using what standard? How is "investment in telecommunications" defined? What kind of corporate expenditures qualify as "investment in telecommunications" and what kind of expenditures do not? Do they consider government subsidies as part of the overall "investment in telecommunications"?
Anecdotal evidence aside, I'd have to see those questions addressed by the authors of the report before I could draw any conclusions one way or the other about whether it demonstrates that a well-regulated industry produces better services. The article is too vague to give any clear indication whether the report itself answers these questions. The fact that it goes into a fair amount of detail in defining what is meant by "effective regulation" makes me think that if other definitions had been addressed, they would have been included.
Maybe regulation is the answer, and maybe this study supports that. Or maybe the free market is the answer, and this study is designed to obscure that by using unsupported assumptions. Maybe neither one is the answer. But without knowing more about the answers to these questions, there's not much point in using the article to stump for your particular pet economic/political point of view.
Hell Yeah (Score:3, Interesting)
Market Structures and Economics (Score:5, Interesting)
If you have a natural monopoly (like the local telephone service in the United States is - like, you can only get service from one company be it Bell South, SBC, Verizon, etc.), you need to regulate the crap out of it. Most economists would agree with this. If you don't regulate them, you'll be paying monopoly prices for the product which is bad for consumers and bad for the economy overall (since less customers will purchase services creating what is know as a dead-weight loss).
Wireless, on the other hand, is both an oligopoly and monopolistically competitive. Now, oligopolies will not give you as cheap a price as perfect competition. In a perfectly competitive industry, you pay the equilibrium price which is as close to a real, fair price as one can claim for a product - it is the price where demand and supply meet and it treats sellers and buyers exactly equal. In oligopoly, you will pay more than the equilibrium price - which favours sellers. In fact, you will be paying the price at the Cournot/Nash equilibrium. The more sellers in the oligopoly, the closer you will get to the equilibrium under perfect competition (when you have 100 firms, you will come within 1% of the perfectly competitive equilibrium).
But wireless is also monopolistically competitive. Monopolistic competition is where you have many firms selling different varients that are close relatives. For example, Verizon Wireless has a different coverage area from Cingular and Cingular has different phones from VZW, etc. They are close, but some people will prefer one to the other. Monopolistic competition is inefficient by economic standards. Why? Because Cingular could serve many more people than the 50 million customers they currently have and they desire to serve more customers. The same can be said for each of the other wireless providers - they all have the capacity and desire to serve more customers. But their prices are also higher than equilibrium prices because they have a product that is different from their competition - and therefore likely to attract less people. If VZW and Cingular had the exact same network with the exact same phones, and exact same everything else, people would choose their carrier on price alone. But because they offer different services, people won't choose based on price and will often take other considerations before price and therefore, all the wireless carriers can charge more than equilibrium.
As such, we can use regulation. We can't use regulation just to force companies to be nice to us, but there are things we can do that are better for consumers and better for society as a whole. For example, if monopolistically competitive firms charge prices higher than equilibrium, we can reduce the differences between firms. By mandating a single technology, GSM or CDMA or anything else, we can eliminate one standard that people choose a carrier by. By mandating that every carrier carry the same lineup of phones, we eliminate another. The more differences we eliminate, the more likely people are going to choose a wireless provider based on price rather than the carrier's own attributes.
Of course, you might see a problem with this. For example, if we mandated that all carriers sell both the Nokia 6010 and 3120 and only those two phones, consumers would have less choice. You would loose the ability to choose something that you liked better - that suited you better. There is no way to quantify the benefits of choice. Think of restaurants. We pay higher prices at restaurants because of the choices we get when we are deciding where to dine, but I don't think any of us would want all restaurants to become Taco Bells just to save a little money.
As an example of this in wireless, before the Cingular ATT merger, Verizon had a far superior national network to any of its competitors. As Cingular got traction, VZW lowered prices because network wasn't going to serve as quite as big a differentiation between
Re:Some myths about the market and competition (Score:3, Interesting)
It's true that companies have no self-interest to fairly review their prodcuts against their competitors'. Is this really a surprise?
But the idea that consumers don't make informed decisions, although true in plenty of cases, is also a theory that contradicts the various review-oriented publications that are out there. Ever heard of Consumer Reports? PC Magazine? Car & Driver? How about the movie and book review sections of your local newspaper? If consumers made uninformed decisions, these publications would not exist, because consumers wouldn't be demanding them.
But consumers *do* demand them -- and thus, they exist. And thus, their decisions are not entirely uninformed.
Re:You're kidding, right? (Score:5, Interesting)
A clear majority of companies fall outside of these categories and ultimately don't need to be regulated, outside of saftey issues. I think that is what the sound bite referenced by the submitter is refering to. It's a shame people use sound bytes without understanding them.
Re:You're kidding, right? (Score:3, Interesting)
Seriously. Plus, something smells funny. Jones Day is the lawfirm that got ICANN into debt. They gave them $3M credit and kept going. ICANN still owes them money. Without reading it I'd expect subtle implications that Jones Day should "be involved" and "get lots of billable hours".
This of this report as an MS "windows is better than Linux" paper.
You were getting low on TP, right?
Re:Phobia (Score:2, Interesting)
Yes. Life was much better under laissez faire. The workers had excelent conditions, and the companies held the customer up as the most important part of their business. We've had industry unregulated in this country before. It made for a large boom in a short time, and was very unsustainable, with the pollution, fraud, corruption and such. Who is responsible for the creation of unions? Was it the evil communist workers? Or was it a backlash against the companies freely killing workers (or allowing them to be killed) for profit? Most of the regulations that are in now are because it was unregulated before, and that simply didn't work. That you have too short a memory or too little education to recognize that doesn't change the fact that the unregulated companies are the ones that forced everyone to band together to regulate them. If the government didn't hold the gun to the company's head, they would act in irresponsible and evil ways. Even with government required regulators, they still steal from the company all the time *cough* *Enron* *cough*. How prevelant would it be if there weren't even the currently required auditors?
Re:Some myths about the market and competition (Score:3, Interesting)
I don't know how many need-to-research products I buy in an average week, but probably around 1. I don't spend much though; I go whole weeks buying nothing more than groceries and gasoline (and paying bills for rent, credit cards, cable TV/internet, etc.).
But take my Sharp Zaurus 6000L. Sharp pulled out of the U.S. market because they sold so few of them; I picked one up when Amazon had dropped the price from $700 to $450. I did LOTS of research on this handheld; I read every review on the web I could find, I read user forums, I hopped on IRC, etc. It was so extensive that that the stats I was keeping on my study habits in university and my purchasing habits at the time showed that much of the time I didn't spend studying (IIRC, it was like a 30-40% decrease in time that particular week) could be correlated to the fact that I spent so much time researching this product. I do that much research for every product that is what I deem "too expensive not to research" (these days, typically anything over $150, but I still do a lesser amount of research on anything that exceeds about $20-$30 or so. I did some research on the quality of a local comedy club's performances, found they were generally positive, and ultimately came out of the place having had a good time).
FYI, there are around 4 million subscribers to Consumer Reports. [wikipedia.org] I will hazard a guess that an order of magnitude more read the magazine on grocery store shelves (some of whom would buy it there too). And then there are the people who (like me presently) don't buy the magazine, but read it at the store or the library or borrow copies from people who do buy it -- who knows what that number of people might be...
Sure. For inexpensive things, like toothpaste and baked beans, we can afford to test these things ourselves without somebody better-funded doing it. If my can of chili sucks, well, that's $2 spent on chili I know I'll never buy again. If my $0.70 loaf of bread goes moldy in a week (it does), then I'll buy the $1.00 bread which tastes better and takes 2 weeks to go moldy (and I'll finish the bread before then). And so on. I might try things based on their brand name -- I know Pillsbury's name better than my local no-name bread maker's, and as a result, I'll be inclined to believe Pillsbury's bread is better, else they would't have the money to advertise -- but at this level, products are so cheap that practically anybody can afford to do their own evaluations.
Jesus, people don't *completely* resemble cattle. What, are you an open mouth with cash-in-hand waiting for somebody to walk by, leave something in your gaping craw and take your money? :P
Think for yourself. Even based on nothing but advertising, a semi-informed decision can be made. Compare 2 products: do they have the same features? What is the price of each? What does each producer emphasize?
For example, take pickup trucks. F150 vs. Chevy Silverado (or whatever they're hawking this week). Ford touts its truck's dependability and po
Re:You're kidding, right? (Score:3, Interesting)
> But to make the leap that nobody would go around brushing their teath or investing in their personal hygiene if Big Brother wasn't their to educate the unwashed masses is really stupid and scary thing to hear said.
Yes, the statement was a little glib, but you'll note that in countries where governments do not actively promote health care, people don't brush. This is not rocket science. If investors do not believe that *people* want something, they will not risk investment in providing a solution. Look at seat belts, look at motorcycle helmets
I dont think its that much of a stretch. Read here: http://www.toothbrushexpress.com/html/toothbrush_
A choice quote:
> Hard to believe, but most Americans didn't brush their teeth until soldiers brought the Army's enforced habit back home from World War II.
Somebody taught your parents. Their parents? Somebody taught them. At some point, brushing your teeth was not the 'common sense' it is today, and I propose that the majority of many commercial markets related to hygine and health only exist through the dissemination of information via public services. Doubly so for socially scorned topics such as AIDs, which private companies were (and in some cases still are) loathe to opine in for fear of consumer backlash.
Sorry bub, but for all intents and purposes, between parents and private companies, both of which exist in many 3rd world nations, there often isn't enough awareness or commercial motivation to provide the tipping point where by a simple act or a small piece of information can be incorperated into the lives of all. That to me is where the government comes in; it is their job as elected officials and public institutions to do the 'dirty work' and never get thanked for it. And yeah, they fuck up just like companies do, and can spread disinformation just like companies can, but thats the technology of communication for you