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by STEPHEN
KILALA
It’s better to deregulate first
PUBLIC Enterprise Minister Arthur
Somare’s move to delay ending Telikom PNG’s monopoly in the mobile
telecommunications sector may be a wise one for the people of PNG.
Research has proven that though competition provides benefits of
increased consumer surplus from reduced cost of services and the
introduction of quality goods as a result of efficient and
effective management, competition still cannot ensure the equal
distribution of basic telecommunication goods to consumers
throughout the country.
One researcher demonstrated the effects of privatisation,
competition and regulation on telecommunications performance in 30
African and Latin American countries for the period of 1984-97
using a fixed-effects approach.
He showed that competition, measured by mobile operators not owned
by the incumbent monopoly, is correlated with increases in the per
capita number of main lines, payphones and connection capacity,
and with decreases in the price of local calls.
Hence, private involvement combined with regulation responsible
for the mobile and fixed telephony sectors are positively
correlated with telecom performance measures.
For this reason, I applaud the Independent Consumer and
Competition Commission (ICCC) for pursing the legal recognition of
Telikom’s notice for competition to be introduced on April 1,
2007.
Other research proves that with limited regulation or more
deregulation, competition through freedom of entry and
divestitures (via unbundling of infrastructure networks) is found
to impact positively on efficiency as measured in main lines per
employee.
However, it is not found to affect network expansion throughout
the country. Thus, I do agree with Arthur Somare and Deputy Prime
Minister Don Polye that appropriate policies need to be in place
to ensure all Papua New Guineans can benefit when competition is
introduced.
Careful planning is of the essence before competition can be
introduced benefiting grassroots both rich and poor.
Having said that, however, regulators and policy-makers need to
understand there is always a trade-off between efficiency and
equity.
I would recommend that a policy framework be formulated pushing
for Telikom’s fixed line and mobile businesses to be separated,
and only to be offered up via open concessions bids to the
expertise of the private sector.
In preparation for competition within a year, Telikom and Pacific
Mobile Communications must be segregated and issued to
concessionaires via open public bids for the fixed line and mobile
business individually.
Under the current monopoly, Telikom’s fixed line business is being
cannibalised by the growth of mobile phones and the management is
milking the “cash cow” through inefficient practices, possible
self-serving governance and lack of innovation and productivity.
In my previous correspondence, I outlined the importance of mobile
telecommunications as the key to achieving universal access
policies. So I ask the ICCC, that with PNG’s 1.3% teledensity
(telephone penetration) rate, why introduce competition at this
stage?
Why not utilise the benefits of a natural monopoly to fund
community service programmes throughout the country?
The concessionaire or winning bidder for Pacific Mobile
Communications may be contractually obliged to expand basic mobile
phone services to rural areas if it is to maintain its monopoly
for an exclusive period of five years.
Concurrently, Telikom’s fixed line business may be offered to a
suitable candidate with the capacity to expand digitalised fixed
line technology (Asymmetric Digital Subscriber Line), offering
access prices at wholesale to benefit competing Internet Service
Providers, TV, and other services in urban centres.
And more importantly, the fixed and mobile businesses are
separable and should be made to compete in the long term.
Depending on the Government’s objective, equity-efficiency
trade-offs are needed to enhance networks for concessions.
But an efficient regulatory framework backed by the institutional
and proper legislative empowerment is crucial for such trade-offs.
The Government must never undermine the role of the ICCC or
PANGTEL but maintain a cooperative dialogue for the good of the
nation’s telecommunications sector.
Where regulatory bodies exists, the traditional approach to
pricing is to establish an overall rate of return that yields an
adequate flow of funds to cover the entity’s operation and
maintenance and a fair return on capital.
However, in this case, the concession for mobile services to rural
locales especially may prove inefficient and may require
expenditure of Government fiscal resources to expand national
networks effectively.
The ICCC may need to comply with the Government to formulate a
proper working plan that can fulfil universal access policies and
competition simultaneously.
As mentioned, the cost-effective setup of mobile services can be a
tool to ensure all citizens have access to basic telecommunication
services while fixed line services may be improved to promote
business, IT and academic learning for urban centres.
Note: The writer has a degree in business
economics and is currently pursuing a PhD in international
politics at Waseda University in Tokyo, Japan, under a Japanese
scholarship.
 
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