Article
Assessment of the Structure, Conduct, and Performance of the Philippine Telecommunications Industry
ssrn.com
(2017)
Abstract
The telecommunications sector plays an important role in contributing directly to the Philippine economy. Since 1928 the Philippine Long Distance Telephone Company (PLDT) dominates the industry. Several new players entered in the 1990s after the government deregulated the industry. The fragmentation and lack of economies of scale of the service area scheme led to a series of consolidations and mergers until its present structure where Globe Telecom is the only player that can restrain PLDT’s dominance. An analysis of industry performance using metrics appropriate for an industry characterized with sunk costs and economies of scale and scope shows that the industry players do not exercise abusive market power. Competition exists in the present Philippine telecommunications industry, which is described as a two–player market. The valuable role played by Globe in the industry is to gradually gain operational and financial viability in the long run, and then provide an effective constraint against the exercise of market power by PLDT. The ability to exercise market power by raising prices and reducing the quantity of service is not apparent. On the contrary, fierce price competition and competition to install and upgrade facilities are equally intense. Although globally most telecommunications markets are having 3 to 4 competitors, a third player may have a difficult time attaining financial viability in the short run due to its late-mover disadvantage and the need to penetrate undeveloped areas whose deployment cost is higher than the almost saturated urban markets dominated by the incumbents. The only realistic third player is the government, but its social value is its cost-insensitive capacity to pour investments in “last-mile” and high costs areas, and to build “last-mile” network that complements with existing networks. However, there are historical examples of government failures in direct provision and operation of utility services.
Disciplines
Publication Date
January 31, 2017
DOI
http://dx.doi.org/10.2139/ssrn.2912238
Citation Information
Epictetus E. Patalinghug, Wilfred S. Manuela Jr., Regina M. Lizares and Jason C. Patalinghug. "Assessment of the Structure, Conduct, and Performance of the Philippine Telecommunications Industry" ssrn.com (2017) Available at: http://works.bepress.com/wilfred_s_manuela_jr/9/
Creative Commons license
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