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.
