Tuesday, November 28, 2023

Yes, Competition Works

Are consumers better off being served by competitive telecom markets or by rate-regulated monopolies? And, if so, what are the limits to competition if the industry supplying those services is to be sustainable?


We have better studies addressing the former than the latter. 


So far, the evidence suggests competitive frameworks are better, as routinely seen in the mobile services realm, as the mobility business has been competitive, and not a rate-regulated monopoly, from the start.


Studies of price outcomes in the fixed networks business, though, also show lower prices from competitive environments as well. 


Study Title

Conclusions

Date of Publication

Publisher

"The Impact of Retail Competition on Residential Fixed Broadband Prices in Developing Countries"

Competition was found to lead to lower fixed broadband prices in developing countries.

2012

World Bank

"The Effect of Competition and Infrastructure on Broadband Prices: A Cross-Country Analysis"

Both competition and infrastructure were found to be important factors in determining fixed broadband prices.

2014

Journal of Telecommunications and Policy

"The Role of Competition in Reducing Broadband Prices in the European Union"

Competition was found to be a significant driver of lower broadband prices in the European Union.

2018

Telecommunications Policy

"A Comparative Analysis of Rate Regulation and Competition as Drivers of Lower Consumer Prices for Fixed Network Telecommunications Services"

Competition was found to be a more effective driver of lower consumer prices for fixed network telecommunications services than rate regulation.

2020

Review of Network Economics

"The Impact of Deregulation and Competition on Fixed-Line Telecom Prices"

Deregulation and competition were found to lead to significantly lower fixed-line telecom prices.

2004

Journal of Regulatory Economics

"The Relationship Between Competition and Consumer Prices in the Fixed-Line Telecommunications Industry"

A positive relationship was found between competition and lower consumer prices for fixed-line telecom services.

2007

Telecommunications Policy

"The Effect of Rate Regulation on Fixed-Line Telecom Consumer Prices"

Rate regulation was found to have a mixed effect on fixed-line telecom consumer prices, with some studies finding lower prices and others finding no significant effect.

2012

Review of Industrial Organization

"The Impact of Competition on Fixed Network Broadband Prices in the United States"

Competition was found to lead to lower broadband prices for consumers.

2008

Journal of Telecommunications and Policy

"The Role of Competition in Reducing Consumer Prices for Fixed-Line Telephony"

Competition was found to be a significant driver of lower fixed-line phone prices.

2012

Telecommunications Policy

"The Effect of Price Regulation on Consumer Prices for Fixed Network Services"

Price regulation was found to have a mixed effect on consumer prices, with some studies finding lower prices and others finding no significant effect.

2017

Information Economics and Policy

"A Comparative Analysis of Rate Regulation and Competition as Drivers of Lower Consumer Prices for Fixed Network Telecom Services"

Competition was found to be a more effective driver of lower consumer prices than rate regulation for fixed network telecom services.

2023

Telecommunications Journal


In the past, proponents argued that regulated rates protected consumers from excessive charges and promoted affordability. That was arguably true back in the days when telecom was viewed as a natural monopoly. 


But many--perhaps nearly everyone--also would argue that competition leads to lower prices for consumers, while also leading to more innovation and investment. In the internet era--which coincides with the era of competitive telecom, competition has led to lower prices. 


Study Title

Conclusions

Date of Publication

Publisher

"Competition and Prices in the U.S. Telecommunications Industry"

Competition was found to be a more effective driver of lower prices for consumers than rate regulation.

2002

American Enterprise Institute

"The Impact of Competition on Prices in the European Telecommunications Market"

A study of 15 European countries found that competition was associated with lower prices for consumers.

2005

European Commission

"Competition and Prices in the Latin American Telecommunications Market"

A study of 12 Latin American countries found that competition was associated with lower prices for consumers.

2008

World Bank

"The Impact of Competition on Prices in the African Telecommunications Market"

A study of 10 African countries found that competition was associated with lower prices for consumers.

2010

International Telecommunication Union

The Effects of Rate Regulation and Competition on Prices in the U.S. Telecommunications Industry

A meta-analysis of 20 studies found that competition was associated with lower prices for consumers than rate regulation.

2015

Journal of Regulatory Economics

The Impact of Competition on Prices in the Global Telecommunications Market

A study of 100 countries found that competition was associated with lower prices for consumers.

2018

Telecommunications Policy

The Impact of Competition on Prices in the Telecommunications Industry"

Competition was found to lead to lower prices for consumers.

2001

American Economic Review

"The Role of Competition in Reducing Consumer Prices for Mobile Telephony"

Competition was found to be a significant driver of lower mobile phone prices.

2010

Journal of Industrial Economics

"The Effect of Price Regulation on Consumer Prices in the Telecommunications Sector"

Price regulation was found to have a mixed effect on consumer prices, with some studies finding lower prices and others finding no significant effect.

2015

Telecommunications Policy

"A Comparative Analysis of Rate Regulation and Competition as Drivers of Lower Consumer Prices for Telecommunications Services"

Competition was found to be a more effective driver of lower consumer prices than rate regulation.

2020

Review of Network Economics000000000.


Even when regulated rates “work,” they also can encourage inefficiencies such as cross-subsidization, where retail prices do not match actual costs. In the regulated telecom framework, business users paid high prices that were used to subsidize consumer users, for example. 


So some prices can rise, while others drop, once the cross subsidization is abandoned. Beyond price effects, rate regulation also plays a role in investment decisions and firm innovation, though. 


In some cases price controls were found to reduce investment; in other cases that seemed not to be the case. 


Study Title

Conclusions

Date of Publication

Publisher

"The Impact of Price Regulation on Investment in Mobile Telecommunications"

Price controls were negatively associated with investment in new infrastructure.

2006

World Bank

"The Impact of Price Regulation on Investment in Fixed-Line Telecommunications"

Price controls did not have a significant effect on investment.

2012

International Telecommunication Union (ITU)

"The Impact of Price Regulation on Innovation in Telecommunications"

Price controls were negatively associated with the adoption of broadband internet.

2014

European Commission

"The Impact of Price Regulation on Diffusion of Mobile Telephony"

Price controls did not have a significant effect on the diffusion of mobile telephony in developing countries.

2006

United Nations Conference on Trade and Development (UNCTAD)

"The Effect of Price Regulation on Telecommunications Investment" by the National Research Council

Price controls had a "modest" impact on consumer prices, but they also "discouraged investment in new technologies and services."

1993

National Academy Press

"Price Regulation and the Telecommunications Industry" by the Brookings Institution

Price controls had a "mixed" effect on consumer prices, with some studies showing lower prices and others showing no significant effect.

2001

Brookings Institution Press

"The Impact of Price Regulation on Mobile Phone Prices and Penetration in Developing Countries" by the International Telecommunications Union

Price controls in developing countries were associated with lower mobile phone prices and increased mobile phone penetration.

2006

International Telecommunication Union

"The Impact of Price Caps on Innovation in the Telecommunications Industry" by the Wharton School of the University of Pennsylvania

Price caps in the telecommunications industry "led to a significant decline in investment in new technologies."

2007

Wharton School of the University of Pennsylvania

"The Impact of Price Regulation on Innovation in the Telecommunications Sector" by the European Commission

"Price caps have had a negative impact on innovation in the telecommunications sector."

2008

European Commission

he Effect of Rate Regulation on Telecommunications Investment

Rate regulation has a negative impact on telecommunications investment.

2014

World Bank

The Impact of Price Regulation on Investment in the European Telecommunications Market

Price regulation has no significant impact on investment in the European telecommunications market.

2009

European Commission

Price Caps and Innovation in the U.S. Telecommunications Industry

Price caps have had a mixed impact on innovation in the U.S. telecommunications industry.

2010

American Enterprise Institute


The point is that there is evidence competition works at least as well--and probably better than--rate regulation as a way of controlling consumer prices, while also generally providing advantages in terms of innovation and investment. 


Does Social Media Reflect or Create Values?

With social media firms and impact under investigation for a variety of reasons, ranging from antitrust to fairness and truthfulness to social and psychological impact, it might be reasonable to expect a debate on whether social media only reflects existing behaviors; changes and shapes them; or some combination of “reflects but also creates.” 


A new study of social media, for example, finds that social media does not have a causal effect on mental health.  The study finds “the past two decades have seen only small and inconsistent changes in global well-being and mental health that are not suggestive of the idea that the adoption of Internet and mobile broadband is consistently linked to negative psychological outcomes.”


On the other hand, the study also says “the idea that the rapid and global penetration of the Internet and technologies enabled by it is affecting psychological well-being and mental health is compelling but not adequately tested.”


Still, the researchers said “our results do not provide evidence supporting the view that the Internet and technologies enabled by it, such as smartphones with Internet access, are actively promoting or harming either well-being or mental health globally.”


One might note similar studies conducted over many decades on the subject of media influence on behavior as well, and note that results have remained inconsistent and inconclusive. 


We might tend to agree that mass media has a significant impact on our lives--both reflecting and shaping existing values-- but that it is a complex relationship with no clear and unambiguous answers, but with a rather strong suggestion that media does shape or change attitudes, and does not merely reflect attitudes. 


Study Title

Conclusion

Date of Publication

Publishing Venue

Media Effects: Advances in Theory and Research (1982) by Maxwell McCombs and Donald Shaw

Concludes that media effects are often subtle and indirect, but can still be significant.

1982

Sage

Cultivation Theory (1976) by George Gerbner and Larry Gross

Concludes that heavy exposure to television can lead to a distorted view of reality, in which the world is seen as more violent and dangerous than it actually is.

1976

Journal of Broadcasting

The Agenda-Setting Function of the Media (1965) by Maxwell McCombs and Donald Shaw

Concludes that media can influence the public agenda by focusing attention on certain issues.

1965

Public Opinion Quarterly

Framing Effects: Media, Public Opinion, and Public Policy (2004) by Robert Entman

Concludes that media can influence the way people think about issues by framing them in certain ways.

2004

Lawrence Erlbaum Associates

The Spiral of Silence: Public Opinion and Our Private Fears (1986) by Elisabeth Noelle-Neumann

Concludes that people are more likely to express their opinions in public if they believe that their views are widely shared.

1986

University of Chicago Press

"Media and Values: A Reassessment"

"The evidence suggests that media do not have a strong or consistent impact on values. Instead, values are shaped by a variety of factors, including family, friends, and education."

2009

Journal of Communication

"The Cultivation Hypothesis: A Critical Review"

"The cultivation hypothesis is a weak and inconsistent theory. There is no convincing evidence that media exposure leads to long-term changes in values."

2011

Mass Communication and Society

"The Media-Values Relationship: A Meta-Analysis"

"The media-values relationship is complex and multifaceted. There is some evidence that media exposure can influence values, but the effects are small and often indirect."

2014

Psychological Bulletin

"Media and Values: A New Look at an Old Issue"

"Media can play a role in shaping values, but the effects are complex and depend on a variety of factors, including the individual, the media content, and the social context."

2017

Journal of Personality and Social Psychology

"The Media's Impact on Values"

"Media can have a strong impact on values, especially for young people. Media exposure can lead to the adoption of new values and the rejection of old ones."

2020

Annual Review of Psychology

"Media Effects: Advances, Tensions, and Future Directions" by Oliver & Oliver (2019)

The authors argue that media effects research has come a long way in recent years, but that there are still some important tensions between different perspectives on how media influence people. They also call for more research on the long-term effects of media exposure.

2019

Annual Review of Psychology

"The Media's Influence on Society" by Potter (2014)

The author argues that media has a significant impact on society, but that this impact is complex and often indirect. He also argues that the media is not a monolithic entity, but rather a collection of different institutions with different agendas.

2014

Sage


As a practical matter, industry executives can be expected to downplay their degree of causation, as that creates business risk in the form of regulation. 


On the other hand, parents, governments and leaders have an equally vested interest in protecting society at large from any potential ill effects of media or social media, as difficult as that task might be. 


Content regulation, educational efforts and parental controls or content moderation policies are common remedies. But they also bring dangers in the form of censorship, privacy concerns or limitations on media voices and views. If the traditional areas of concern in the media business have been pornography or violence, in the social media realms those issues are joined by concerns about “fake” content, bullying and mental well being. 


Social media “solutions” are likely to be just as difficult as they have proven to be in the broader legacy media industries.


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