The reason for regulating the Telecom industry?
- Telecoms markets have certain characteristics
- Network Effects
- Value to consumers of service increase with each additional other consumer
- Without interconnection obligation, "tipping" the market
- Economies of Scale, density, and scope
- It's cheaper to run the largest network
- Common cost is allocated across more users and services
- There are high fixed, sunk costs, and low marginal costs
- Predatory Pricing
- Barrier to entry
- Impossible to build a network as big as Mauritius Telecom's
- It was built with your tax RS
- Universal service
- Consumer access to reasonably priced services
- Fuel innovation in the ICT sector
- Internet literacy
- Meet bandwidth demand
What else should the regulators be thinking about? If wholesale prices are too cheap this would inhibit network investment, if wholesale prices are too expensive may inhibit services competition (not sure if anyone is allowed to access MT's network?). The regulation and actions by the regulator should enhance investment thoery > services based competition allows acquisition of a customer base, by providing a better service whomever it is, new entrarnts or Mauritius telecom - the money earned from their customer base (due to their superior service or cheaper service) over which subsequent investment in the network would be amortised.
Increasing competition in the Service Provider Market
The service provider market is made up of complex value chains, varying degrees of services (eg. some consumer only some business only, some bundled, some pure internet, etc), and prices. These service providers rely on inputs, which would mainly be the fixed-line telephone network of Mauritus telecom, or Wimax, or Satellite, or 3G. At the moment no one can use anyone else's network. The reason why WiMax and 3G came up were probably because MT wouldn't let them on their network to provide internet services. As you can see we need more network competition: WiMax and 3G are in their primitive stages, not only are they unreliable and not totally accessible to everyone, they are weak compared to the position of MT. Moreover, there are no small players in the Mauritian Market, those who have tried have faded away or are fading. Are there any incumbents waiting to enter the Mauritian market or who could enter to provide telco services? Orange, Vodacom, Emtel, maybe China Mobile, the Indians failed so far (MTML).
MT Undertakings
Mauritius Telecom is a vertically integrated company which has the ability and the incentive to maximize shareholder value by excluding competitors - this is what MT does at the moment.
Therefore I would suggest that MT be forced to give the ICTA undertakings: The ICTA would have to do an analysis as to how to open up the network so as to protect Mauritius Telecom, yet allow for it's network to be accessed and improved on by others, as well as receive a reasonable tariff applied to all using it's network.
Now to using the Competition Act to enforcing competition
Areas which can be enforced:
- predatory pricing;
- price squeezing;
- price discrimination;
- excessive pricing;
- refusal to supply (outside the context of an interconnection dispute);
- bundling
Abuse of Dominant Position:
Don't know of any Mauritian cases yet on Dominant position so I'll use the definition from Michelin v. Commission: a dominant company "has a special responsibility not to allow its conduct to impair undistorted competition on the common market" (MT would certainly fall into this category)
Abuse is an objective concept relating to the behavior of the undertaking in a dominant position which is such as to influence the structure of the market, where as result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of transaction of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing on the market, or the growth of that competition. Hoffman-Laroche v. Commission
Dominance
10. Monopoly situation
(1) For the purposes of this Act, and subject to subsection (2), a
monopoly situation exists in relation to the supply or acquisition of goods or
services of any description where competition is non-existent or where the
enterprise enjoys a dominant position in a given market.
(2) In determining whether a monopoly situation exists under
subsection (1), account shall be taken of the availability of substitutable goods
or services and all nearby competitors to which consumers could turn in the
short term.
(3) Subsection (1) does not apply to goods and services listed in the
Second Schedule.
(4) For the purposes of this Act, a "dominant position" means an ability
to influence unilaterally price or output of goods or services in a given market.
Qui lui dire: Schedule 2 of the Competition Act :(
SECOND SCHEDULE
(section 10)
GOODS AND SERVICES EXCLUDED FROM PROVISIONS RELATING
TO MONOPOLY SITUATIONS
1. Aviation and harbour services
2. Broadcasting services
3. Electricity services
4. Financial services
5. Freeport services
6. Information and Communications Technologies services
:(
Markets expand by increasing competition— not by protecting against it! That is true for both, the incumbent and the new entrants. The telecom market needs MT, a competitive and innovative MT. In order to grow we need the flexibility of competition law, which would allow market participants to undertake the right investments and earn a fair return on them.
An overriding aim must therefore be to use competition law to deregulate the market further — including ultimately deregulation of the incumbent. But in order to achieve that we first need
competitive market structures and a level playing field, such as access to the local loop—
otherwise we will just produce anti-competitive structures, high prices for the consumer and market stagnation.
