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An empirical analysis ofcompetition, privatization, and regulation in telecommunications markets in Africa and Latin America

  • Wallsten, Scott J.
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    The author explores the effects of privatization, competition, and regulation on telecommunications performance in 30 African and Latin American countries from 1984 to 1997. Competition is associated with tangible benefits in terms of mainline penetration, number of pay phones, connection capacity, and reduced prices. Fixed-effects regressions reveal that competition - measured by mobile operators not owned by the incumbent telecommunications provider - is correlated with increases in the per capita number of mainlines, pay phones, and connection capacity, and with decreases in the price of local calls. Privatizing an incumbent is negatively correlated with mainline penetration and connection capacity. Privatization combined with regulation by an independent regulator, however, is positively correlated with connection capacity and substantially mitigates privatization's negative correlation with mainline penetration. Reformers are right to emphasize a combination of privatization, competition, and regulation. But researchers must explore the permutations of regulation: What type of regulation do countries adopt (price caps versus cost-of-service, for example)? How does the regulatory agency work? What is the annual budget? How many employees does it have? Where do regulators come from? What sort of training and experience do they have? What enforcement powers does the regulatory agency have? In addition, researchers must deal with endogeneity of privatization, competition, and regulation to deal with issues of casualty.

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    File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1999/09/14/000094946_99072206440581/Rendered/PDF/multi_page.pdf
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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2136.

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    Date of creation: 30 Jun 1999
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    Handle: RePEc:wbk:wbrwps:2136
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    1. Peter Smith, 1997. "What the Transformation of Telecom Markets Means for Regulation," World Bank Other Operational Studies 11581, The World Bank.
    2. Laffont, Jean-Jacques & Rey, Patrick & Tirole, Jean, 1997. "Competition between telecommunications operators," European Economic Review, Elsevier, vol. 41(3-5), pages 701-711, April.
    3. repec:wbk:wboper:11569 is not listed on IDEAS
    4. Armstrong, Mark, 1997. "Competition in Telecommunications," Oxford Review of Economic Policy, Oxford University Press, vol. 13(1), pages 64-82, Spring.
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