Khalid Sekkat (2) Aristomene Varoudakis
Figure 3. Progress in liberalization across countries
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- Table 1. Cross-country differences in telecommunications performance: empirical estimates (Estimation period: 1999)
- Fixed phone (1) Mobile phone (2) Internet hosts
Figure 3. Progress in liberalization across countries
Source: Authors’ calculations; based on Annex, part B. 4. Market Openness and Performance in Telecommunications Better performance in Telecom may result from liberalization, but is also partly driven by economic development. Income growth bolsters demand for telecommunications and networking services, both from businesses and households, and at the same time provides the financial resources for investment necessary to expand the telecommunications infrastructure. Moreover, in higher-income countries services markets are generally more competitive, so that further empirical analysis is needed to disentangle the impact of market liberalization from that of economic development and other factors. Cross-country estimates of the determinants of telecommunications sector performance, covering five core indicators and a varying sample of between 109 and 129 countries, are presented in Table 1. The regressions account for a large part of cross-country variation in performance: ranging between 80 and over 90 percent for fixed line, mobile phone, and internet penetration. Table 1. Cross-country differences in telecommunications performance: empirical estimates (Estimation period: 1999)
Note: Method of estimation: Ordinary Least Squares, with White Heteroskedasticity-Consistent Standard Errors and Covariances; Student’s statistics in parentheses; Fixed phone, mobile phone and internet hosts are per 10,000 people. Dependent and explanatory variables are in log. except dummies and the openness indicator. Source: Authors’ calculations. Structural determinants include the level of per capita income, the size and density of population and controls for small economies, economies in transition and oil exporters. The impact of market openness in telecommunications is captured by the liberalization indicator, transformed in a stepwise manner. Countries are grouped in the four clusters outlined above, with the market openness indicator increasing in four steps, from 1 for the countries with “restricted market access”, to 4 for the group of “full liberalizers”. Per capita income is a main driver of telecommunications services demand, determining the size of the ICT networks. The estimated income elasticity of demand is less than 1 for the fixed line network, but significantly higher than 1 for the mobile network and internet penetration. And though influenced by per capita income, the level of higher education enrolment seems to be a separate driver of fixed line penetration as well. Other structural factors that affect the provision of telecommunications services include the population size and density. Rates of fixed, mobile, and internet penetration invariably turn out to be smaller in countries with large populations. Large populations tend to be more dispersed, and thus harder to cover by ICT networks. By contrast, a high population density seems to be a factor of better mobile phone penetration, as density is higher in urban areas where mobile networks are easier to build.5 Increased market competition boosts demand for fixed and mobile telephone services by lowering prices to users. This is more evident in the case of the mobile network, the size of which increases in step with market openness after accounting for other country-specific structural characteristics. And though there is no evidence of a direct impact of liberalization on fixed line penetration, the increase in the size of the mobile network is indirectly associated with a greater size of the fixed network (eq.1; Table 1). This could reflect positive network externalities, as cheaper mobile communications and broader network coverage are also likely to create incentives for incumbent fixed-line operators to lower prices, introduce new services, and improve efficiency (Rossotto et al., 1999). Policies that inject more competition in areas such as leased lines and backbone networks, along with appropriate pricing policies designed to stimulate demand, are key in supporting internet penetration and broader ICT sector development (OECD, 2000a). After accounting for other structural factors, the spread of the internet—as measured by the relative number of internet hosts—turns out to be greater in countries with greater market openness in telecommunications (eq. 3; Table 1). Greater market openness also props up expenditure on telecommunications, by lowering prices to consumers and thus bolstering demand, and also by expanding the size of the networks and the array of services offered to users. The evidence seems to confirm that increased market openness is indeed associated with a greater size of the telecommunications sector as measured by the share of Telecommunications revenues in GDP (eq.4; Table 1). Injecting greater competition in telecommunication services can also increase the efficiency by which labor and capital are employed in telecommunications. The estimates suggest that greater competition is associated with increased productivity of labor in telecommunications as measured by revenues per employee (eq.5; Table 1). Market openness turns out to significantly affect productivity in telecommunications after controlling for other enabling factors that vary across countries, as captured by differences in per capita GDP. This positive impact is robust to alternative “physical measures” of productivity of labor in telecommunications as, for example, the number of main lines per employee. Physical productivity is also found to increase along with greater market openness, after controlling for other structural determinants captured by differences in per capita GDP (eq.6; Table 1). Higher productivity in turn reduces costs and creates room for lowering the prices of telecommunication services, while competition forces declining margins, with operators passing much of the cost savings to the users. Potential gains could be sizeable: Moving from “restricted market access” to “full market openness” could boost labor productivity in the telecommunications sector (according to the measure in eq.5) by as much as 60 percent. Assuming a similar increase in capital productivity, and taking as benchmark calculations made for developed countries, the increase in efficiency could lower telecommunications costs by as much as 50 percent.6 Using the above estimates, one can assess the potential for development of telecommunications in the region. Starting with mobiles, despite the already adequate rates of mobile penetration in MENA (Figure 1.b), there is still considerable scope for a more competitive environment to further boost the size of the mobile phone networks. Full market openness could—all else equal—boost mobile penetration by about 2 percentage points on average across MENA countries (Figure 4.a). Improvement of living standards would further foster mobile penetration. Because of the high income elasticity of demand (eq.2; Table 1), a baseline trend of 2 percent annual real per capita income growth over a 5-year period could boost mobile penetration by a further 2 percentage points. Thus in a relatively short period of time mobile penetration could increase on average by as much as 50 percent across MENA. The expansion of the mobile network could further boost expenditure in the fixed-line segment, through positive externalities between the two networks (eq.1; Table 1). Thus, even though fixed line penetration seems broadly adequate across MENA countries (Figure 1b), there is much room for growth due to the currently restrictive competitive environment. This would further spur revenue in the telecommunications sector as a whole. In MENA, after accounting for other structural determinants, the share of telecommunications revenues in GDP appears to fall short even of the average share seen in countries with the least competitive markets (Figure 4b). Injecting greater competition (up to the “full market openness mark”) could increase the average size of telecommunications revenues as a share of GDP by as much as 0.8 percentage points. Because greater market openness in telecommunications can lower the cost of access to the internet while encouraging the expansion of backbone infrastructure, it may also have a significant impact on internet penetration. And in MENA there is much room for improvement, as internet penetration falls short of levels seen in countries with the least open telecommunications markets (Figure 4.c). Based on international evidence, “full market openness” would boost internet penetration dramatically, by up to 18 hosts per 10,000 people on average, from about only 2 hosts currently. Baseline per capita real income growth of 2 percent per year over a 5-year period could further raise that ratio to about 23 hosts per 10,000 people. This would bring internet penetration close to levels now seen in higher-income countries (Figure 1.c). Directory: curated curated -> Concept stage curated -> Concept stage curated -> Republic of Côte d'Ivoire Urbanization Review curated -> Report No: aus11011 Central America curated -> Report No. 94474-pk fiscal Disaster Risk Assessment Options for Consideration curated -> Environmental and Social Management Framework for the Costa Rica Telecommunications Sector Modernization Project curated -> Environment Impact Assessment For Jiangxi Shangrao Sanqingshan Airport Beijing Guohuantiandi Environmental Technology Development Center. Ltd. Oct. 2012 Content curated -> Growth through Innovation An Industrial Strategy for Shanghai By Shahid Yusuf Kaoru Nabeshima April 22nd, 2009 curated -> Report No: 70178. People's Republic of China Download 294.64 Kb. Share with your friends:
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