Abstract
Purpose – The paper examines the main regulatory frameworks of the telecommunications industry through the concept of market failure and analyses how and why the policy often leads to undesirable outcomes that might be considered as regulatory failure.
 Methodology/approach/design – The research uses the EU regulatory framework for electronic communications as a base for the analysis of the main policy objectives through the prism of the market failure theory with an eye to the interests of the main market players in the telecommunications markets.
 Findings – About any aspect of regulation allows to find ways to create opportunities for some groups of the industry and stifle activity of others. Despite the theory of market failure provides reasonable justifications for regulation of telecommunications markets, it is possible to argue that many of these problems are mainly the consequence of the policy and could be better solved by market mechanisms.
 Originality/value – The results of the research allow to look at the problems of telecommunications development and issues of the high level of concentration of the telecommunications markets as regulatory formed problems rather than consequences of the inherited industry’s characteristics.
Highlights
Debates about the role of government in economy are very old. It has been incorporated in the mainstream of economics that market mechanisms sometimes lead to undesirable situations, so-called, “market failure”, and, there are needs to interfere in the market in order to mitigate the problem
The given analysis of the main regulatory frameworks through the positions of the concept of market failure with an eye to the interests of the main market players in telecommunications industry allows to draw the following conclusions: First of all, the current way of development of the telecommunications industry is the result of previous policy decisions in this field, and the dominance of supranational companies in the world market can be considered as the consequence of regulatory efforts rather than inherited industry’s characteristics
The prevalence of the idea of the importance of “economies of scale” in telecommunications for the development of the new economy has contributed to the processes of privatization that occurred during the last decades and has allowed transnational giants to take control over the former national monopolies, forming the global oligopolistic market
Summary
Debates about the role of government in economy are very old It has been incorporated in the mainstream of economics that market mechanisms sometimes lead to undesirable situations, so-called, “market failure”, and, there are needs to interfere in the market in order to mitigate the problem. The regulatory failures in these fields affect the public welfare, contribute to the growth of inequality and undermine incentives for innovations in the fields of the new economy From this point of view, the telecommunications industry is an attractive area for such analysis, and, the concentration of power in this industry allows to assume that this situation can be a result of the government activity in this area. The main emphasis is made on the reasons for the government interventions in the telecommunications market from the positions of theories of market failure, and, at the same time, provides basic assumptions how and why these interventions lead to the policy failings and express in the oligopolistic structure of the industry
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