Pro-competitive Role of the Consumer Improving Telecommunications Market Performance
Perfectly Competitive Markets Many Buyers & Sellers Perfect Knowledge EMPOWERED PROFIT DRIVEN Rational CONSUMERS Buyers and SUPPLIERS Sellers Cost Based Prices High Quality Services Product Innovation 2 Market Expansion
Key Role for Consumers The fundamental role of the consumer in the market is to effect choice and demand goods and services based on his income, preferences education and available information. If consumers fail in this regard the entire economic system fails. “ the reins of the free market rely on the consumer … because he is in the driver’s seat, he has an obligation to consume wisely. Too many consumers are either unaware of this obligation, or do not take it seriously, if indeed they even accept the fact that they are obligated to anyone or anything. (C ESSOCK 1978 )” 3
Early Telecom Liberalization Focus Market Entry and Licensing Access to Sound and use of Quality of Networks Service Supply Side Network Build out Inter- with connection Affordable Access 4
5 Impose changes in International Supply Policy Framework business structures Ensure better information Introduce open standard Monopolies Control tying and bundling and product complexity Remove restriction on entry Impose Abuse of dominance business conduct rules Control pricing Source: OECD 26 July 2007 Ensure redress ADAPTED
Demand Side Policies Reduce Educate Switching Consumers Costs Understand Information Consumer Sharing and Behaviour Clarification Develop Empowering Consumer Appropriate Bill of Consumers Legislation Rights 6
Information Sharing and Clarification Suppliers Provide: complete, comparable, appropriate and accurate information Consumers Advocacy Groups Publish Evaluate Information comparable Options Sharing indicators of quality of service Introduce Assessment Models 7 Regulator
Substitute Searching & Switching Competitive Impact The higher the proportion of active searches in a market, the higher the proportion of low cost firms in the market Where search and switching costs are high, monopoly prices emerge WARWICK ECONOMIC RESEARCH PAPERS No. 607 Markets Comparison Consumers Switching % (5-yr period) Market Switched Considered it Neither Personal Banking . 6 % 15 % 79 % Motor Insurance 53 % 21 % 26 % Markets Competitiveness Market HHI Sector Profitability Competitiveness Personal Banking 1330 high/excessive Uncompetitive Motor Insurance 853 low/ negative Competitive 8 WARWICK ECONOMIC RESEARCH PAPERS No. 607
Consumer Legislation Competition Consumer Law Rights Law Objectives: Objectives: Protects the Preserves and consumer from encourages deceptive, competition in the fraudulent and interest of the hazardous sale consumer practices. Benefit : Empowers consumers directly to Benefit : Indirectly seek redress for enhances consumer breeches of the law in welfare through the the transaction of fruits of competition it business through the engenders courts 9
Impediments to Consumer Empowerment and Effective Competition Consumer Service Provider Information Behavioral Anticompetitive Deficit Biases Practices Choice Information Tied Selling Non participation in the Overload Market Unstable Preferences Locked Phones Competitive market failure Endowment Bias Exit Penalties Long Contractual Over Confidence Pay too much for the Periods Service Framing Bias Fine Print Clauses Consumers not buying the product that best Mis-evaluation of future Deceptive Advertising meets their needs benefits and cost 10
Benefits of Demand Side Policies Stimulate Innovation Economic Improve Wide benefits Quality Demand Side Leads to Increase Productivity Competitive Improvements Pricing 11
Empowered Consumers Behaviour Substitutes Effecting/ Searching Withholding and Demand Switching Information Utilizing Sharing Legislation 12
APPLICATION TO TRINIDAD AND TOBAGO’s TELECOMMUNICATIONS SECTOR 13
Telecommunications Markets Characteristics High level of Information Asymmetry Significant Market Concentration Sellers make Supernormal profit Prices diverge from costs Customers price sensitivity equivocal 14
Domestic Telecommunications Consumer Strengths Weaknesses TATT Consumer Support Search Costs Limited by few Prices not easily or Efficient enforcement of providers, major continuously Concession Condition C2:4 providers tariffs published on website which mandate tariff publication on companies’ data online websites Switching Excludes Significant menu Enforcement of Concession Costs technology costs persist Condition C21 which mandates unlocking of network specific technology upon contract retirement Information Major providers Consumer reviews Enforcement of Act 25. 2(b), Sharing advertise online platform nonexistent, Concession Condition C2:3, lobby groups scope 9, 15:16, ICT Forums excludes service review Legislation Retail Consumer rights Enforcement of the Act and competition regulation absent , Concessions 15 actively lobby groups scope regulated excludes customer
TATT’s Consumer Rights Obligation Policy (CROP) Access to Digestible Information Quality of Respect Service Privacy Standards CROP Discourage Efficient anti- Dispute competitive Resolution Practices 16
TATT’s Consumer Empowering Initiatives Resource Efficiency Release of Spectrum Empowered Demand Active Consumer Advocacy “ Allocative efficiency “ Cost Based Pricing Fair Competition Legislate Competition Powers Information Asymmetry Consumer Price Elasticity Empowered Consumer 17 Number Portability
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Thank you TELECOMMUNICATIONS AUTHORITY OF TRINIDAD AND TOBAGO 19
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