The world of telecommunications services in less developed countries (LDCs) underwent a profound transformation in the final years of the 1980s. The transfer of state-owned telecom companies to private owners and the opening of certain segments of the market to competition has radically altered the sector's traditional institutional and economic arrangements. Major changes first occurred in MDCs such as the United States and Britain, where the explosion and diversification of technological innovations, the merger of telecom and computers, and the demands of large corporate users--who sought more sophisticated and cheaper services to compete in an increasingly global and informatized economy--brought pressure for change.
In LDCs, demise of public utilities monopolies--such as telecom--are less tied to technological innovation or economic growth than to the fiscal crisis and economic decline suffered by most developing nations during the 1980s. Economic constraints and the increasingly crucial role of telecom for economic development led LDC governments to carry out sweeping state reforms, which included the privatization and liberalization of telecommunications services.
The medium- and long-term consequences of these reforms are of great importance for LDC development. Due to the multiplier effects of telecom across almost every economic activity, mistakes in the design of new telecom regimes are quickly felt throughout the productive system, affecting a country's ability to compete in the global economy.
In pursuit of fiscal health, renewed economic growth, and improved telecom services, countries have attempted to privatize SOTEs and liberalize key