Telecom market liberalization and service performance outcomes of an incumbent monopoly

Abstract

Using data from a high-income, emerging market economy in the Middle East, this study examines changes in service performance outcomes of an incumbent monopoly during different periods in the phased liberalization of the country’s telecommunications market. The study draws on Structure-Conduct-Performance (SCP) theory and Social Exchange Theory (SET) to develop hypotheses about expected changes in four customer-based service performance outcomes—service quality perceptions, customer satisfaction, customer loyalty, and customer attitudes. These are tested using data collected in a longitudinal tracking study spanning different periods in the liberalization process. Results show that all four performance outcomes improved significantly during an early post-liberalization period when there was only one additional competitor in the market, but declined slightly during a later period when a second competitor entered the market. However, structural relationships among the outcomes themselves remained invariant across liberalization periods. Policy-making and theoretical implications of the results are outlined and discussed. Although the data come from a single industry in an emerging market economy, a particularly key implication is that while incumbent monopolies may initially harbor a preference for the comfort and ‘freedom’ that comes with being the only player in the market, under certain circumstances liberalization can actually benefit them through the impetus that it provides for their own service quality improvements.