DEREGULATION HAS NOT DELIVERED THE RESULTS YET – MARCH 2004
Not unreasonably, governments initially thought that they would be able to bring competition to their markets through deregulation. However, it has become clear that this didn’t automatically happen, once they had put their regulations for this to happen in place. It has now become clear that such changes can only be done by a strong regulator who enjoys the support of a forceful and committed government.
Most governments have been far too naïve on the issue – they expected the incumbents to cooperate. And this, of course, was never going to happen. The incumbents sought refuge in privatisation and they saw it as an excellent way to get the government and regulators off their backs.
They wished to go in a totally opposite direction, and ‘shareholders value’ became their mantra. They used this to threaten politicians and regulators, ignoring their users who, in general terms, stood behind the governments’ regulatory policies. Time and time again, international surveys amongst corporate businesses, small businesses and consumer groups indicated that the market perceived a strong regulator as being the best way forward. However, governments, looking for tax cuts to please their constituents, saw the cash-rich telcos as a goldmine that would solve their ongoing tax problem. They could generate income from the process of deregulation and thus offer tax cuts, which are the key to winning the next elections.
And nobody expects any politician to look beyond the next election.
But the regulators have also learned a lot. They have finetuned their operations, demanded additional powers, and, in short, in 2004 they are much better equipped to address anti-competitive behaviour than they were even a few years ago. Slowly but surely a better wholesale regime is being carved out for the companies that want to compete with the incumbent operators. Regulators are learning how to act more quickly, and to prevent the delaying tactics which were so rampant during the 1990s and early 00s.
It is not just new technologies such as broadband, VoIP, WiMax, etc that are disruptive. The regulatory regime is increasingly playing a similar disruptive role. In combination with these new technologies, this will force a further restructuring of the industry.
In some cases, incumbents themselves will start such a process – BT in the UK is one of the first companies to show early signs of this happening. At the other extreme, some governments might have to force structural separation on their incumbent players through their regulators.
And, obviously, a number of other models, such as accounting separation, fit into these developments.
While some early glimpses of these developments became visible in 2003, they will increase during 2004, motivating others, and the full process of restructuring will begin in earnest from 2005 onwards.
See also:
Global – Analysis – Industry – Status of telco restructuring in 2004
Global – Analysis – Industry – Telecoms moving into 2005
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