The Consumers’ Telecommunications Network published a collection of research last week raising questions about the benefits of competition in the industry in the past five years. It pointed out that the benefits of competition have not been distributed equitably. In particular, it said that business had benefited disproportionately to residential subscribers to the phone service. The research acknowledged, however, that residential users had benefited from improved services and technological innovation.
There is little doubt that a simple comparison of charging will reveal that business has taken the lion’s share of the cost benefits from competition. Business has got large discounts for high volume, especially on major trunks. Discounts of those sizes have not been available to residential users _ though some have been available. However, there is a flaw in the argument that the spoils of competition should be evenly distributed. It is precisely because telecommunications suppliers have been freed of the fetters of price controls and service regulation that there is any competition dividend in the first place.
The efficiency dividend has come about because the cross-subsidy requirement has been removed. It is a circular argument to say that the distribution of the dividends of freeing the telecommunications markets should be regulated. The network’s own research acknowledges there has been a dividend to residential subscribers from competition _ and presumably that would not have been there otherwise, so it is biting the hand that feeds to complain. That said about the residential-business cross-subsidy, there is still an argument about cross-subsiding remote areas. In a nation with huge distances like Australia, there is a clear social need for some cross subsidy between urban and rural subscribers _ be they business or residential.
Rural communities have an enormous need for communications and there is an underlying philosophy in Australia _ through such things as the Grants Commission _ that people in remote areas will have reasonably comparable services with the city. In telecommunications, as with most things, a moderate dose of market forces can be helpful, but complete surrender to economic rationalism comes with too great a social cost.