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telecom competition


Chris sent me me the following comment on my previous post regarding telecoms and competition:

Competition from wireless in Ireland... yeah sure!

I do agree that the only route towards lower prices in telecommunication services is through increased competition, but you can't have competition in a country of 3m people! This is not a market worth spending any money on the infrastructure required for all these improved services and at the same time offering them to customers in US prices, let alone having more than two companies fighting for this meagre market. This leads to a typical oligopolistic situation, where a steady state is reached and the "competing" companies get to have the same tariffs and more or less the same number of customers...

As a matter of fact, there are quite a few countries in the EU (Ireland, Portugal, Denmark and Greece, the country that I come from, included) that do not have the critical mass of prospective customers to justify the investment of so much capital for services with a low turnover. At the same time countries like Greece and Ireland, separated from mainland EU (Ireland is an island, Greece doesn't border any other EU country) are not easily included in the business plans of big european companies.

Might that indicate a need for multi-national european corporations, companies that would operate throughout the common european market as a single entity? What's the purpose of the european monetary union if economic development is not facilitated through the adoption of such a scheme? Does anyone think that AT&T Wireless would have offered such connection plans had it been a company operating only in Oregon?

Yet, we have the ludicrous situation of Vodafone, having subsidiaries all over Europe with no association to each other! It's more like a franchising business, similar to a fast-food restaurant chain, with each local Vodafone being a different economic and legal entity, only sharing a common logo and sometimes a common, and usually ill adapted to each region's peculiarities, ad campaign. Actually, roaming is probably the only service offered by this network of companies to those customers of their affiliated companies who are travelling accross Europe!

I think I'm raising a multitude of questions. But I think that Europe won't achieve parity with the US in telecommunications services (not to mention almost any other sector of economic activity) unless this "Common European Market" becomes something more than a simple phrase...
I agree. The EEC part of the EU hasn't yet lived up to its name, mostly because of state protection on industries and competition. Until the EU streamlines the economic relationship between countries so that it matches (or at least) approaches) the relationship between states in the US, the 'common market' will actually be just a bunch of related markets. I don't know if a stronger 'Federation' is implied in this, but certainly lower trade barriers and less local protectionism, that only ends up creating more problems than it solves.

Categories: technology
Posted by diego on October 21 2002 at 1:47 PM

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