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Competition and the Mobile Sector
 No new service has spread so epidemically throughout the world’s population as mobile telephones. Recall McKinsey’s notorious forecast that by the year 2000 there might be one million mobile subscribers in the United States. Seven years later there were more than three billion worldwide. Moreover the traditional mobile voice services are now being supplemented by mobile broadband services, which have the capacity to transform certain economies quite as much as mobile voice has already done.
Although mobile communications got started in the richer advanced economies, their potential for change in developing countries is even greater. This arises because those countries lack the fixed telecommunications networks that have been ubiquitous in Europe, North America and elsewhere for decades. Poorer countries typically lack the funds to build fixed networks outside metropolitan areas, and their economic performance will hinge upon wireless technologies to a much greater degree. Already evidence is accumulating about how the spread of mobile is contributing significantly to economic growth.
In March 2008, the GSMA published a report “Competition and the Mobile Sector – in Developed and Developing Countries”. In this paper, we draw on the lessons of mobile development in richer countries to reach conclusions about how they should be regulated elsewhere – in the interests of their customers and of the economics which they serve. We do not ignore the differences between developed and developing countries in penetration rates, GDP per capita, the availability of capital and so on, but we argue that one consideration is common to all countries: mobile communications forms a sector which is potentially vibrantly competitive, even if it made up of a comparatively small number of firms. If governments ignore this potential and over-regulate the sector, they can put back the spread of mobile voice and broadband for many years, and do considerable harm to their economies. This risk has been present in developed countries, and some have succumbed to it by excessive regulation which has raised costs, stifled innovation, limited competition and harmed consumer welfare. The risk of such over-regulation is present in developing countries and should be avoided. We argue that the best way to do this, in general terms, is to remove barriers to entry and to rely as far as possible on ex post interventions – taking action only after it has been shown consumers have suffered, rather than intervening in advance.
This distinction between intervening in advance and only when a problem develops is close to that between regulation and competition policy, as the regulator usually prescribes in advance how firms must behave, while a competition authority is responsible for enforcing the prohibition of certain general courses of action – excessive pricing, exclusion of competitors etc – but only enters the field after an abuse has occurred (except when it assesses and sometimes prohibits mergers). The distinction may get blurred, and the same agency may act as both regulator and competition authority in some jurisdictions.
We take the distinction between ex ante and ex post as the basic one. In some jurisdictions there is only a regulator, as there is no competition law. In at least one other (New Zealand) there was for a period only a competition authority, and no sectoral regulator. But we consider whatever the institutional framework, there is always a choice between ex ante and ex post intervention. And ex ante is a much more aggressive form of intervention which we argue is normally inappropriate to the mobile sector, where competitive constraints on operators should be strong.
In part 2 of the report we discuss the course of regulation of mobile in developed countries – how there have been instances of overregulation, although the trend today is towards increasing reliance on ex post competition law. In part 3, we outline how the mobile sector is emerging in developing countries and in part 4 we show how the benefit claimed for regulation in those counties can often be better achieved by alternative measures that seek to develop competition.
Please complete the form to download the report 'Competition and the Mobile Sector – in Developed and Developing Countries'
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