Privatizing Monopolies in Developing Countries: The Real Effects of Exclusivity Periods in Telecommunications

When reforming their network utility industries, many developing countries give the newly-privatized incumbent exclusive rights to serve a particular market. These "exclusivity periods" are especially common in telecommunications. Research to date has explored the effects of privatization, competition, and to a lesser extent, regulation. We know very little, however, about the effects of the details of privatization transactions themselves and, in particular, how exclusivity periods matter. I use an original, new dataset to explore the costs and benefits of this approach to privatization. I find that exclusivity periods are associated with significant increases in the firm's sale price. The increased revenues to the government come with a cost, however. Exclusivity periods are correlated with a significant decrease in the incumbent's investment in the telecommunications network, payphones, mobile telephone penetration, and international calling.

Telecommunications Regulation in U.S. States: Its Rise and Impacts in the Early Twentieth Century

In the second half of the 19th century U.S. states began regulating railroads, and in the early 20th century they began regulating utilities, including telephone service. In 1902, only Louisiana had a regulatory agency with authority over telephone companies, but by 1913, 39 states did. These agencies survive today, usually as public utility commissions. This paper explores their impacts on the early development of the U.S. telephone industry. I construct a unique dataset from the 1902, 1907, and 1912 U.S. Census of telephones and from detailed surveys of regulators compiled by American Telephone and Telegraph (AT&T) in 1911 and 1913. These data sources provide an opportunity to test the effects of competition and regulation on development of the telephone industry in an environment where regulations were new and the telephone network relatively undeveloped. Consistent with other research, competition between telephone providers is correlated with growth in telephone penetration. The results also suggest that the presence of state regulators slowed telephone penetration, but that certain specific regulations, such as requiring regulatory approval for mergers, may have stimulated growth.

Do Science Parks Generate Regional Economic Growth? An Empirical Analysis of their Effects on Job Growth and Venture Capital

Agglomerations, or "clusters" of industries, and especially of high-technology industries, can be major sources of economic growth. Policy makers therefore often search for ways to catalyze such clusters. A popular approach is to establish a science or research park in the hopes that it will attract companies and fuel regional economic growth. In this paper I assemble a county-level panel dataset to explore the effects of science parks on job growth and on venture capital. Non-parametric and econometric analysis reveals no positive effect of science parks on regional development overall. In other words, while success stories do exist, the analysis suggests that successes are the exception rather than the rule. Thus, policies intended to promote cluster development by subsidizing scien+C30ce or research parks are unlikely to be effective.

Regulation and Internet Use in Developing Countries

Concerns about a worsening "digital divide" between rich and poor countries parallel the hope that information and computing technologies (ICTs) could increase economic growth in developing countries. Little research, however, has explored ICT growth beyond noting that it is correlated with standard development indicators, and no empirical research has explored the role of regulation. In this paper, Scott Wallsten uses data from a unique new survey of telecommunications regulators and other sources to measure the effects of regulation on Internet development. Controlling for factors such as income, telecommunications infrastructure development, ubiquity of personal computers, and time trends,Mr.Wallstenfinds that countries requiring formal regulatory approval for Internet Service Providers (ISPs) to operate have fewer Internet users and hosts than countries that do not require such approval. Moreover, countries that regulate ISP final-user prices have higher Internet access prices than countries without such regulations. These results suggest that developing countries' own regulatory policies can have large impacts on the digital divide.Technology and Industry, Regulatory Reform, Other Topics

An empirical analysis ofcompetition, privatization, and regulation in telecommunications markets in Africa and Latin America

The author explores the effects of privatization, competition, and regulation on telecommunications performance in 30 African and Latin American countries from 1984 to 1997. Competition is associated with tangible benefits in terms of mainline penetration, number of pay phones, connection capacity, and reduced prices. Fixed-effects regressions reveal that competition - measured by mobile operators not owned by the incumbent telecommunications provider - is correlated with increases in the per capita number of mainlines, pay phones, and connection capacity, and with decreases in the price of local calls. Privatizing an incumbent is negatively correlated with mainline penetration and connection capacity. Privatization combined with regulation by an independent regulator, however, is positively correlated with connection capacity and substantially mitigates privatization's negative correlation with mainline penetration. Reformers are right to emphasize a combination of privatization, competition, and regulation. But researchers must explore the permutations of regulation: What type of regulation do countries adopt (price caps versus cost-of-service, for example)? How does the regulatory agency work? What is the annual budget? How many employees does it have? Where do regulators come from? What sort of training and experience do they have? What enforcement powers does the regulatory agency have? In addition, researchers must deal with endogeneity of privatization, competition, and regulation to deal with issues of casualty.Economic Theory&Research,Environmental Economics&Policies,ICT Policy and Strategies,Trade Finance and Investment,International Terrorism&Counterterrorism,Knowledge Economy,Economic Theory&Research,Education for the Knowledge Economy,ICT Policy and Strategies,Environmental Economics&Policies

Telecom traffic and investment in developing countries : the effects of international settlement rate reductions

Developing countries, which received about $35 billion in net settlement payments from the United States telecom carriers between 1985 and 1998, were upset by the Federal Communications Commission's (FCC) decision to slash rates, because lower rates mean lower payments. They claim that the payments help finance telecom investment, and that the FCC's decision will therefore harm their telecom sectors. The author uses a panel data set for 178 countries from 1985 to 1998 to testhow changes in settlement rates affect telecom traffic and investment. He finds that rates are significantly negatively correlated with traffic, with the greatest effects in the poorest countries. In other words, reduced settlement rates spur telecom traffic from developing countries to the United States. And while there is a statistically significant correlation between settlement payments and telecom revenues in developing countries, he finds no correlation between the payments and the number of telephone mainlines or imports of telecommunications equipment. In short, there is no evidence that the payments are invested in telecom networks.Telecommunications Infrastructure,Housing&Human Habitats,Labor Policies,Payment Systems&Infrastructure,Economic Theory&Research,Airports and Air Services,Economic Theory&Research,Telecommunications Infrastructure,Payment Systems&Infrastructure,Housing&Human Habitats

Has the Internet Increased Trade? Evidence From Developed and Developing Countries

If the Internet made it easier for firms to enter new markets by reducing communication and search costs then it may also have made it easier to export goods and services. We find that higher Internet penetration in developing countries is positively correlated with exports to developed countries, but not with trade between developing countries or with exports from developed countries.Interpreting the correlations is difficult because causation may run from Internet use to exports or from trade openness to Internet use.To test whether Internet use affects export behavior, we endogenize Internet use by using countries' regulation of data services and Internet provision as instrumental variables. The results are robust to endogenizing Internet penetration, suggesting that access to the Internet does affect export performance of firms in developing countries. In other words, Internet access appears to stimulate exports from poor countries to rich countries. Moreover, the analysis suggests that regulatory policies affecting telecommunications and Internet development indirectly affect trade.

The Economic Costs of the War in Iraq

Government policies are routinely subjected to rigorous cost analyses. Yet one of today’s most controversial and expensive policies—the ongoing war in Iraq—has not been. The $212 billion allocated by the U.S. Treasury has been widely reported. But the real, direct economic costs include more than budgetary allocations. Other costs include lives lost, injuries, and lost civilian productivity of National Guard and Reserve troops mobilized for the conflict. The conflict, however, also has generated cost savings, especially in terms of resources no longer being used to enforce UN sanctions and people no longer being killed by Saddam Hussein’s regime. In this paper we monetize these direct costs and avoided costs of the war in Iraq, both to-date and the total expected net present value of costs through 2015. Our estimates are imprecise. The data are not of high quality and every calculation requires a number of assumptions. In addition, we do not calculate indirect effects of the conflict, such as its impact on oil prices or other macroeconomic impacts, or certain intangibles, like the benefits of a stable democratically elected government in Iraq, should one emerge. Nonetheless, our best estimates suggests that the direct economic costs to the U.S. through August 2005 are about$255 billion, about $40 billion to coalition partners, and$134 billion to Iraq. These estimates suggest a global cost to date of about $428 billion. The avoided costs, meanwhile, are about$116 billion. We estimate that the expected total net present value of the direct costs through 2015 could be $604 billion to the U.S.,$95 billion to coalition partners, and $306 billion to Iraq, suggesting a global total expected net present value of about$1 trillion. The net present value of total avoided costs, meanwhile, could be about $429 billion.

An Economic Perspective on a U.S. National Broadband Plan

This paper responds to the U.S. Federal Communications Commission’s request for guidance in designing a national broadband plan. We argue that the U.S. market for Internet services is working well overall, as evidenced by nearly ubiquitous coverage, rapid adoption, large investments, and increasing speeds. Still, the market is not working well for all people in all places, and we offer a framework for considering policies intended to mitigate those issues.

Universal(ly bad) service - providing infrastructure services to rural and poor urban consumers

Until recently, utility services (telecommunications, power, water, and gas) throughout the world were provided by large, usually state-owned, monopolies. However, encouraged by technological change, regulatory innovation, and pressure from international organizations, many developing countries are privatizing state-owned companies and introducing competition. Some observers worry that even if reforms improve efficiency, they might compromise an important public policy goal-ensuring"universal access"for low-income and rural households. The authors review the motivation for universal service, methods used to try to achieve it under monopoly service provision, how reforms might affect these approaches, and the theoretical and empirical evidence of the impact of reform on these consumers. Next, using household data from around the world, they investigate empirically the historical performance of public monopolies in meeting universal service obligations and the impact of reform. The results show the massive failure of state monopolies to provide service to poor and rural households everywhere except Eastern Europe. Moreover, while the data are limited, the evidence suggests that reforms have not harmed poor and rural consumers, and in many cases have improved their access to utility services. Nevertheless, because competition undermines traditional methods of funding universal service objectives (cross-subsidies), the authors also review mechanisms that could finance these objectives without compromising the benefits of reforms.Economic Theory&Research,Health Economics&Finance,Municipal Financial Management,Environmental Economics&Policies,Decentralization,Environmental Economics&Policies,Economic Theory&Research,Health Economics&Finance,Town Water Supply and Sanitation,Municipal Financial Management