Technology policy in the telecommunication sector : market responses and economic impacts; Enterprise Papers No 8/2002

Pro-competitive forces have driven industrialised countries to converge in telecommunication market liberalisation. By 2001, the cellular mobile markets were open to competition throughout the OECD area. Only two OECD countries had a monopoly operator providing fixed-line telecommunication services (OECD, 2001). This outcome has resulted, by and large, from rapid technological progress challenging a telecommunication policy that was established to serve national monopoly markets. Market liberalisation has been closely connected to the substantial regulatory and institutional re-organisation of communication markets. The interaction of and feedback effects between technological advancements and regulatory reform in the communication sector have influenced the behaviour of market players and further created market for new services (e.g. variety of Internet services). This paper has three major objectives. First, it evaluates how regulatory reform, particularly opening up the market to competition, has affected performance in the telecommunication sector. Second, it sheds light on other major forces such as network externalities influencing communication market dynamics. Third, it analyses actual realisation of effective competition in the telecommunication sector and the underlying reasons for the observed market positions of the incumbents and market entrants. In addition, this paper briefly discusses an increasingly important topic, the protection of intellectual property rights, in the communication sector. Enterprise Papers are a mix of policy papers, sector-specific studies, and a combination of both. Written by the staff of the Enterprise Directorate-General, or by experts working in association with them, they aim to raise awareness of enterprise policy issues and stimulate debate. These papers do not necessarily reflect the opinion or position of the European Commission. Occasional 'special editions' may carry communications, working papers, conference proceedings, and reports to the Council.