The path of reform on China's telecom industry from government regulation to effective competition in the _13994

By Leon Black,2014-11-29 10:54
11 views 0
The path of reform on China's telecom industry from government regulation to effective competition in the _13994

    The path of reform on China's telecom industry from government regulation to effective competition in the

     Paper Keywords: natural monopoly telecommunications industry Herfindahl index

     Abstract:Analysis of the telecommunications industry in the

    traditional sense of the natural monopoly property,A brief review of U.S. and UK, as the representative of the Western countries, based on the "classical regulatory incentive regulation ? ? effective competition" in

    this evolution path in the telecommunications industry management theory and practice ofexperience. On this basis, to explore the international telecommunications industry in recent years, the development trend of the use of Herfindahl index examines the telecommunications industry in China

    since reform and opening up process and the effectiveness of the changes proposed should further open their markets to relax and improve the regulatory system, and ultimately to achieve effective competition, and the view of the current main problems in the telecommunications industry, given the relevant policy recommendations.

     Telecom is a traditional natural monopoly industries, technological progress and economic globalization, driven by the Western countries has been largely achieved deregulation, effective competition goals, while China is still in improving the regulatory system, the introduction of competition stage. From the theoretical analysis of the economic characteristics of the telecommunications industry, and from practice,

    study the performance of its reform, will help China learn from the mature Western experience, and raise the level of government management of the telecommunications industry.

     1, the telecommunications industry in the traditional sense of the natural monopoly property

     (1) The huge amount of investment recovery period is long, contains highly specialized equipment investment, trade entry and exit barriers are high, and, to the telecommunications transmission network to repeat the

physical investment is a non-economic behavior.

     (2) significant economies of scale. Telecommunications industry, high fixed costs, variable low-cost, large-scale increase in the number of

    users can quickly share of low-unit fixed costs, and the positive

    externalities due to network, follow-up to join the user to enjoy a higher

    marginal utility, which enables network a virtuous circle of expansion.

     (3) has a range of cost-effective. Operators to the same

    telecommunications network to provide customers with a variety of services

    (such as voice, short messaging and wireless Internet access services), due to the scope of horizontal expansion of production cost savings.

     Second, the Western countries the management of the

    telecommunications industry, the theoretical basis and practical


     In order to reduce welfare losses caused by a monopoly on the management of natural monopoly industries can be roughly from Regulation and Competition of these two ways to proceed, which actually represents the government and market in which the role. Generally speaking, the Western countries in the telecommunications industry, management theory and practice through the "classical regulation ? ? incentive regulation

    effective competition" three main stages.

     (1) According to the classical regulation theory, the Government may provide that the price is equal to average cost, or to determine a "fair" rate of return of capital, both allow enterprises to have a certain profit, but also to prevent them against the interests of consumers. The

    United States has within the telecommunications industry in the long term rate of return regulation to implement. However, because of asymmetric information, the operators know how to at the lowest cost to meet the established production and quality requirements, while the government enterprises is difficult to ascertain how much efforts to reduce costs. Averch and Johnson proved that yields under the control of the vendor is the pursuit of profit maximization, and if they are regulated rate of

    return is higher than the cost of capital, firms will be excessive use of capital, or will have a competitive company out of the market [1].

     (2) as the improvement of the classical theory of regulation, incentive regulation theory proceed from the premise of information

    asymmetry, the regulatory activity as a principal-agent problem, thanks to

    the emerging mechanism design theory, through the design of incentives to induce companies to tell the truth Regulation contracts, in order to

    enhance regulatory efficiency. In practice, price cap regulation the use of more common. In 1984, the United Kingdom as early as the telecommunications industry, the price-cap regulation, calculation formula

as follows:

     P = RPI-X

     Where, P is the price rate of change in the ceiling, RPI is the retail price index (inflation rate), X for the telecommunications industry regulatory authorities examined the rate of productivity improvement. This means that the outcome of a rise in productivity in the enterprise, there

    are X for consumers to enjoy some more than X, part of the reservations for the enterprise. From 1984 to 1997, X values gradually increased from 3% to 7.5%. U.S. price-cap regulation of telecommunications are not only reflects the price adjustment and inflation rates and industry, the relationship between productivity growth, but also took into account the operator's cost factors are not controllable [2]. Nevertheless, there are still a lot of incentive regulation defects, including regulatory

    agencies, and opportunistic behavior by interest groups to buy the issue, regulatory commitments, as well as the effectiveness and stability of multi-product (service) under the conditions of cross-subsidies, and so on

    [ 3].

     (3) As in any method of control is the existence of its own can not overcome the shortcomings of the Western countries in the

    telecommunications industry to adopt a long-term controls, since the 20th

    century, after another 70 years since deregulation, the introduction of

    competition into the mid-90s has basically achieved effective competition in the target. The so-called "effective competition" is the background: As the economies of scale, companies continued expansion within certain boundaries, causing the concentration of production as well as a monopoly,

    resulting in a lack of competition in energy, trapped in a "Marshall's Dilemma" economies of scale and competitive energy dilemma. Clark pointed out that through reasonable definition of the two "degree", effective

    competition in the dynamic economies of scale and competition between the co-ordination in order to form a climate conducive to long-run equilibrium

    of the competitive landscape, making the socio-economic efficiency


     The United States as early as the introduction of competition in the telecommunications industry, during which consists of four main phases

    [4]. ? private telecommunications network market opening. ?

    international and interstate long distance services market opening. In 1978, a court decision so that AT

Report this document

For any questions or suggestions please email