The Political Economy of Telecommunications Reform in Developing Countries: Privatization and Liberalization in Comparative Perspective

By Ben A. Petrazzini | Go to book overview

In Malaysia telecom reform started in 1985 with the official proposal for the corporatization of the national common carrier, Jabatan Telekom Malaysia. 27 In 1987 the company was restructured into a private company--Syarikat Telekom Malaysia (STM)--with the state still holding 100 percent of the company's shares. Two years later the government sold almost 20 percent of STM shares in the Kuala Lumpur Stock Exchange. The governments of Chile, Jamaica, and Venezuela are also among those nations that succeeded in their privatization efforts. Chile and Jamaica sold their state-owned carriers between 1987 and 1990, and Venezuela followed with the sale of Compañía Anónima Nacional de Teléfonos de Venezuela (CANTV) in December 1991.

Similar cross-country variations can be seen in the outcome of liberalization attempts. The governments of Mexico and Malaysia, for example, were able to achieve a considerable degree of competition in their domestic telecom markets. Most services are either open to competition or the government retains the right to open them when it considers appropriate to do so. Others, such as Thailand, despite failing to privatize their SOTEs, have been able to introduce competition into various segments of the telecom market. On the other hand, Argentina, despite its successful privatization, was unable to liberalize its telecom market. The privatization of the national carrier was accompanied by the official concession of monopoly over most telecom services for a period of up to ten years. Similarly, the Jamaican government has been able to privatize its SOTE, but it has granted private investors a closed market for twenty-five years.

In sum, while most countries started their reform journey with a stateowned telecom firm operating in a closed market, and most intended to move to private ownership and competition, not all were able to achieve their initial goals. The question that drives this study and for which the next chapter attempts to provide a theoretical framework is, Why countries with shared telecom reform goals and similar patterns of development achieve different outcomes in their restructuring attempts?


NOTES
1.
The United States and some countries once dominated by European colonial powers are among the few in the world in which telecom services were provided by private firms.
2.
In African and Asian colonies telecom services were provided by the dominant carriers of the imperial power.
3.
The value of a telecommunication network is based on the expansion of its subscriber base. The larger the number of users connected to the network, the higher the utility and value of the network.
4.
Building up a system that held unique technical standards was also a strategy to lock in customers and raise barriers to the entry of competing firms.
5.
Mueller, on the contrary, contends that the notion of universal service was not an explicitly social policy, but emerged out of the pricing inertia that reined in the PTTs. Originally the price of providing local services was quite low, while long distance services were an extremely expensive operation. From the 1950s major technological innovations reduced long-distance costs approximately 90 percent;

-23-

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