Competition And Access Of Telecommunication Network

With the change of technology and demand, the monopoly market structure intelecommunication industry is no more the first best structure of industrial organization.Deregulation and competition have been the effective and common methods for thedevelopment of telecommunication industry. According to the theory of network effects,different telecommunication network must be interconnected with each other in order toachieve effective competition. The interconnection between different telecommunicationnetworksmeans that they must agree on the determination of access price. Both the waythat access price is decided (compulsive or negotiational, reciprocal or nonreciprocalaccess pricing e.t.) and the level of access price will affect the access incentive oftelecommunication operators and the performance of market competition. So this articlestarting from the access among telecommunication networks, analyzing the effects ofaccess pricing on the competition of telecommunication networks. This article alsoanalyzes the telecommunication market in China, and provides some suggests andpolicesforimprovingcompetitioninthisindustry.This article based on the classic SCPframework.Depending on this frameworkthisarticle analyzes the network structure of telecommunication, the behavior of operatorsand performance of market competition. The structure of telecommunication networks isdescribed as follow, horizontal network structure and vertical network structure. Theformer includes the structures based on cover rate, heterogeneous costs and networkdifference(location). Thelaterincludesverticalintegrationnetworkstructureandverticalseparationnetworkstructure.Using the classic LRT model, this article analyzes the network competition of localtelecommunication market and long-distance telecommunication market.Then accordingto the practice of telecommunication market in China, this article expanding the LRTmodel in order to taking China telecommunication market into account. The expandinclude: the effect of enter determination ofmarket structure, competition among mobilenetworks, competition among fixed and mobile networks, and competition amongfull-businessoperators.In this article, using normative analysis method to analyze competition and access issues in telecommunication industry, and using comparative analysis to compare accesspricingbehavior andthe resultingcompetitionperformanceindifferent market structures.This article also uses empirical analysis to analyze the problems of competition andaccess of telecommunication industry in China. Through the empirical analysis, someassessments are obtained, these assessments include market structure, access priceconfiguration, regulation institution, and price competition in retail market. During theprocessofanalyzingfordifferentstructure,gametheoryisintroduced.Wegetthefollowingopinionsthroughnormative analysisand empiricalanalysis:(1) Market structure, interconnection and then access price is the key factor forimproving effective competition in telecommunication industry. As to China, thestructure, access system cannot provide a perfect competition framework. Deregulationandintroducingcompetitionshouldgoon.(2) The cover rate, the network difference, and cost determinate the finalequilibrium. In equilibrium, access price and retail price would affect the finalperformance. In the case of linear pricing, access price becomes tacit collusioninstrument, but in the case of tow-part pricing, access price doesn't become tacitcollusioninstrument.(3) The more intense competition in the local telecommunication market, the lowerprice would be in long-distance sector. As to China, the intense competition inlong-distance sector is not the result of the competition in local sector. The reason isaccessschemeinChina.(4) We analyzed a telecommunication market, in which there is an incumbenttelecommunicationfirm who owns alocal networkandfaces potential competitioninthedownstream market (long-distance telecommunication network). Under asymmetric costinformation, the enter decision of the potential competitor will affect the structure ofdownstream market. In other words, the market structure of downstream market is notexogenous. The retail price and access charge are regulated by the welfare-maximizedregulator. If the welfare -maximized regulator want to obtain efficient competitionstructureindownstreammarket,he/shemustmodifythetraditionalRamseypricingrule.(5) In the case of two-part tariff and nondiscriminated pricing, if the retail price isunregulated,thenthe two-wayretail priceis betterthan one-wayretail pricestrictlyfrom the aspects of operator's profit, consumer's surplus, and total social welfare. But,currently, a common viewpoint in the reform is that, we should cancel the two-wayretailpricing.Thisreformtrendwas wrongiftheretailpricewouldbeunregulated.(6) In the case of two-part tariff and nondiscriminated pricing, the increase ofmarket share in mobile sector would decrease the retail price of this sector. If the fixedoperators increase access charge, the retail price would be increase and themarket sharewould be decrease for mobile sector.The retail price and access price for fixed networkshave no relationship with market share. From the current trend, FMS is more and moresignificant,sofull-businessoperatoristhefirstbestchoiceforregulators.Theexpands for the LRTmodel aremainlyused fortheChinese telecommunicationmarket, using these expands I got the following policy implications for accomplishingeffectivecompetitioninChina: full-business operators, numberportable,virtual operator,regulationschemeinthisindustry,andtheframeworkofaccessprice.