Regulation and deregulation of telecommunications: the economic and political realities

Abstract

As part of their political ideology, the Conservative govern ment (UK) which came to power in May 1979 decided to dilute the monopoly power held by the then Post Office. This involved first the separation of postal services from telecom munications—the former remained as the Post Office and the latter became British Telecom—and subsequently the passing of the 1981 and 1984 Telecommunications Acts as a prelude to the privatization of BT. The 1984 Act also created a regulatory body known as OfTel (Office for Telecommunications) to serve as a watchdog over telecommunications development in the UK. This paper, which is the second part in the present series. describes the effects which the privatization of BT have had on consumers, equipment suppliers and particularly on its main rival—Mercury. Our study has shown that despite the genuine efforts of OfTel, privatization has had little effect in breaking the overall monopoly of BT, with the possible exception of the equipment supply market. The main beneficiaries of privatiza tion appear to be business consumers and investors. Genuine competition at the root of the industry, namely networks and lines, has not yet materialized. The privatization programme of the government has always been a highly contentious issue in British politics. Politics emerge obscurely when the government which considers BT as the flagship of its privatization programme quietly raps OfTel for being too harsh on BT, in case actions have a negative effect and subsequently could damage the government's politi cal standing. Nevertheless the trend initiated by the UK has set the ball rolling. Some of the other West European countries, and in particular the members of the EEC, are also planning to open up their respective PTTs to competition. Unlike the UK, they prefer liberalization to privatization. Programmes such as ESPRIT and RACE have been set up by the EEC not only to contain the foreign invasion of the European IT market but also to implement a pan-European digital network. However, because of conflicting national interests and politics, one can only be cautiously optimistic about the prospects of having a unified telecommumcations industry in Europe.