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2. The industry of telecommunication has been changing.
The
last 20 years have seen dramaticlly fast rates of change in every aspect of the telecommunications industry. These include
technology changes especially the effects of digitalization, introduction of new products and technologies including internetbased
services, information technology. In meanwhile, the market structure has changed from monopolization organization to integrated
telephone companies by a variety of competing firms. The same changes have seen a massive expansion of independent regulatory
agencies. Their major role has been to determine the terms of competitive interactions between the existing incumbent operators
and new entrants.
3. Natural monopoly and competition companies
Most countries
in the world have a dominant telecommunications carrier that is or was state owned for instance in China. In contrast, the
U.S. Bell system was always in private hands in America.
So natural monopoly and competition companies were always
main rivals in telecommication industry. Some economists thought that competition in the provision of various services, public
long distance or message tool services, local services and even in terminal equipment in the customers home or office, were
in the public interest. Incumbent telephone companies consistently argued that the provision of each and every one of these
severices was a natural monopoly. Therefore, a competitive market structure was inefficient. On the other hand, in rencent
years, many nations such as USA in 1977, the United Kingdom in 1986, Canada in 1993, and the countries of the European Union
in 1998, have introduced competition.
4. Telecommunication industry restructures
1) Industry was
deemed to be natural monopoly for decades
2) Deregulation and competition were introduced as a result
3) Incumbent
operators are being privatized
4) Markets have been largely regulated
5) Proliferation of services and multiplication
of networks
6) Large number of actual or potential players
7) Shift of regulatory focus from incentive regulation
to economic efficiency
5. Investment Characteristic Of Telecommunication industry:
1)
Very large fixed investment costs, part of which is sunk costs
2) Economies of scale: reduced unit costs with increased
output
3) Economies of scope: cost savings related to supplying a number of services by the same firm
4) Economies
of density: reduced network costs per connection with increased density of connections
5) Structural elements of a network
a) Transmission
Optical fibre cables have reduced the cost of cables substantially
Prices for copper wires are
relatively stable, but new compressing techniques are increasing its capacity
At present it is not economical to replace
installed copper cable in the access network
b) Switching and routers
Prices for electronic equipment have decreased
rapidly and are expected to continue declining in the future
Value added services and intelligent services introduce new
types of costs to network operators and leads to an increased share of costs for processing and value added components
Development
costs are usage independent fixed costs, but they are not regular sunk costs
6) Although investment costs are becoming
cheaper, the level of investments in telecom services is growing rapidly and capital costs still constitute a substantial
share of total costs of production
7) Decreasing cost trends reduce the economic lifetime of installed capacity. Investment
must be depreciated at a faster rate and profitability requirements must be raised
8) Development of broadband services
is closely related to reductions in costs of transmission. However, substantial demand will increase the demand for transmission
capacity, and will bring up the costs for access and switching as a result of major network upgrades
9) Digitalization
increases economies of scope for provision of facilities, but reduces economies of scope for service provision
6. Accordint to the statistic number of telecoomunication section
that from Ministry of Transport and Communications, it shows that:
1) Saturation levels for basic telephony is almost
reached
2) Demand of mobile phones and relevant services has been growing constantly
3) Fast growing diversified demand
for an increasing range of services
Reference:
Telecommunication policy 2003
Telecommunication
statistic from Ministry of Transport and Communications of Finland
Handbook of Telecommunications Economics M. Cave,
S. Majumdar and I. Vogelsang
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