Consumer Improving Telecommunications Market Performance Perfectly - - PowerPoint PPT Presentation

Pro-competitive Role of the Consumer

Improving Telecommunications Market Performance

Perfectly Competitive Markets

Cost Based Prices High Quality Services Product Innovation Market Expansion

Rational Buyers and Sellers Perfect Knowledge Many Buyers & Sellers 2

EMPOWERED CONSUMERS PROFIT DRIVEN SUPPLIERS

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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

• bligated to anyone or anything. (C ESSOCK 1978)”

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Supply Side Market Entry and Licensing Access to and use of Networks Inter- connection Network Build out with Affordable Access Sound Quality of Service

Early Telecom Liberalization Focus

International Supply Policy Framework

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Source: OECD 26 July 2007 ADAPTED

Impose changes in business structures Ensure better information Introduce

• pen standard

Control tying and bundling and product complexity

Remove restriction on entry Impose business conduct rules Control pricing Ensure redress

Monopolies Abuse of dominance

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Empowering Consumers

Develop Consumer Bill of Rights Understand Consumer Behaviour Educate Consumers Reduce Switching Costs Information Sharing and Clarification Appropriate Legislation

Demand Side Policies

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Information Sharing

Provide: complete, comparable, appropriate and accurate information

Publish comparable indicators of quality of service

Introduce Assessment Models

Evaluate Options

Information Sharing and Clarification

Suppliers Regulator Advocacy Groups Consumers

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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

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

WARWICK ECONOMIC RESEARCH PAPERS No. 607

Markets Comparison

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Consumer Legislation

Objectives: Preserves and encourages competition in the interest of the consumer

Benefit: Indirectly enhances consumer welfare through the fruits of competition it engenders

Competition Law

Objectives: Protects the consumer from deceptive, fraudulent and hazardous sale practices.

Benefit: Empowers consumers directly to seek redress for breeches of the law in the transaction of business through the courts

Consumer Rights Law

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Impediments to Consumer Empowerment and Effective Competition

Information Deficit

Non participation in the Market Competitive market failure Pay too much for the Service Consumers not buying the product that best meets their needs

Consumer Behavioral Biases

Choice Information Overload Unstable Preferences Endowment Bias Over Confidence Framing Bias Mis-evaluation of future benefits and cost

Service Provider Anticompetitive Practices

Tied Selling Locked Phones Exit Penalties Long Contractual Periods Fine Print Clauses Deceptive Advertising

Benefits of Demand Side Policies

Demand Side

Stimulate Innovation Improve Quality Increase Competitive Pricing Leads to Productivity Improvements Economic Wide benefits

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Empowered Consumers Behaviour

Effecting/ Withholding Demand Substitutes Searching and Switching Information Sharing Utilizing Legislation

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TELECOMMUNICATIONS SECTOR APPLICATION TO TRINIDAD AND TOBAGO’s

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Telecommunications Markets Characteristics

• High level of Information

Asymmetry

• Significant Market Concentration
• Sellers make Supernormal profit
• Prices diverge from costs
• Customers price sensitivity

equivocal

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Domestic Telecommunications Consumer

Strengths Weaknesses TATT Consumer Support Search Costs Limited by few providers, major providers tariffs data online Prices not easily or continuously published on website Efficient enforcement of Concession Condition C2:4 which mandate tariff publication on companies’ websites Switching Costs Excludes technology Significant menu costs persist Enforcement of Concession Condition C21 which mandates unlocking of network specific technology upon contract retirement Information Sharing Major providers advertise online Consumer reviews platform nonexistent, lobby groups scope excludes service review Enforcement of Act 25. 2(b), Concession Condition C2:3, 9, 15:16, ICT Forums Legislation Retail competition actively regulated Consumer rights regulation absent , lobby groups scope excludes customer Enforcement of the Act and Concessions

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CROP

Access to Digestible Information Respect Privacy Discourage anti- competitive Practices Efficient Dispute Resolution Quality of Service Standards

TATT’s Consumer Rights Obligation Policy (CROP)

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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

Number Portability

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Thank you TELECOMMUNICATIONS AUTHORITY OF TRINIDAD AND TOBAGO