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Monopoly tries comeback

/ 01:04 AM June 07, 2011

By coincidence, in California there is at present a telecom monopoly proposed to be formed through the acquisition by AT&T of rival carrier T-Mobile USA. This is being hotly opposed by businesses and the state. In the bad old days, AT&T had a USA-wide monopoly of the telephone carrier business, until it was forced to break up by the US government into several smaller companies.

As everyone knows, in the Philippines it was President Fidel Ramos’ resolute action—reportedly spurred by the anti-monopoly doctrine of national security head Jose Almonte and executed through his intrepid national telecommunications commissioner, the late Josefina T. Lichauco—that broke the relentless 70-year grip of PLDT on the telecom industry. The successful effort transformed the industry into the multi-company, competitive, consumer-friendly and innovative band of fairly balanced telecom rivals that it was until recently—when PLDT bought the ultra-price competitive rival Digitel.

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Are we headed back to the telecom monopoly of old where customers could be burdened with gradually increasing prices? The management of the two companies swear all the price-reduction programs of the now-combined companies will be continued. But is that at all possible in a capitalist economy where open competition is the only effective protection for customers, though governments try to shield them through ineffective systems of regulations and restrictions?

Stop and think for a moment of how the human beings in charge of business companies are incessantly pressured: upper and middle management are constantly under severe pressure from their stockholders and from their performance-based, ever-increasing goals to raise profits, return on investment, and the stock market price of the company they run. Talk of the ultimate incentive—their very jobs and the income they bring home to their families literally depend on their performance measured year after year.

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This pressure is good for the customers, as those in charge innovate new products and services, improve customer service, and lower prices to beat their competition—but only indeed if there is competition. In a monopoly, all the pressure to price competitively and engage in expensive product innovation largely disappears, as both would instead decrease the management’s job security and income, and are replaced by goal-centered inducements to raise prices and cut down on costly product improvements.

Can the government successfully step in with regulations and legislation to protect the customers, or will such measures only result as usual in the regulated industry eventually capturing and controlling the regulator? Should our legislature pass post-haste an anti-trust law aimed at monopolies, not only in the telecom industry but also in the oil, cement and port operation industries—a law that will not be diluted in the crafting and execution processes as the oil price deregulation law allegedly was?

—BENJAMIN B. AGUNOD,
[email protected]

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TAGS: AT&T, Digitel, PLDT, T-Mobile USA, Telecommunications services, telecoms
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