Monopolies and the telecommunication industry



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Abstract

Telecommunication industries for decades remain characterized as the market of monopolies, a position in which a single seller has a control over the whole industry. This research paper highlights the monopolies in the telecom industries of United States and three major Asian countries. However, the major focus of the paper remain confined to the US telecommunication industry by providing a background, reasons and consequences for the regulatory changes in this industry along with an analysis of the present position.

Table of Contents

Introduction1

Background1

Monopolies and Telecommunication industry3

United States3

Asia3

Revolutionary Change in the telecommunication industry providing challenge to the monopoly situation4

Reasons for the revolutionary changes in telecommunication industry4

Major driving forces in telecom industry and their associated consequences5

Present scenario6

Conclusion7

References8

Outline10

Monopolies and the telecommunication industry

Introduction

Monopoly can be defined as a position in which there is a single producer or seller of a product or service that has no closer substitute. A natural monopoly condition occurs when the company enjoys low cost of producing product or offering service because of the economies of scale. Some of the reason because of which a firm enjoys monopoly in industry includes economies of scale, sole access to some technology, use of non-market means (such as buying up competitors, planning against suppliers etc.) to eliminate competition. Telecommunication industry of United States for a long period of time remains characterized by a monopoly of AT&T. Technological advancements have brought about immense change in the monopolies that were characterizing the telecommunication industry. This research paper is written with an objective to analyze monopolies in telecommunication industry and how a change has been experienced by the industry by the enactment of certain laws that provide the consumers with better option to avail the service.

Background

United States economy has considered the telecommunication industry as a regulated sector. Regulations were being imposed because of the consideration that a natural monopoly was enjoyed by the telecommunication services industry that creates difficulty for the survival of second competitor.

The local exchange carriers (LEC) were the one with whom the monopoly was resided in the telecom sector. All land line calls were needed to be made with the facilitation of such carriers (Epstein, 2005). Since the invention of telephone by Alexander Graham Bell various stages of competition has been faced by the telecommunication services. An overwhelming majority of telephone exchanges has been enjoyed by AT&T. Until the year 1984, telecommunication industry has been successfully monopolized by AT&T. Throughout the period of 1970s and 1980s, the company has suspected of anti- competitive and predatory tactics that create difficulty for the entry of new firms in the industry (Hunt & Lynk, 1991). In the year 1984, the firm was obliged to divest its local operations. During that time, a consortium of 7 regional bell operating companies was created. In this way, the first competitive exchange carriers started their service offerings in 1980s. A grand plan was enacted by Congress with an objective to open up the local phone monopolies that were been left up by ...