Pro-competitive Role of the
Consumer
Improving Telecommunications
Market Performance
Perfectly Competitive Markets
Perfect
Knowledge
EMPOWERED
CONSUMERS
Many
Buyers &
Sellers
Rational
Buyers and
Sellers
Cost Based Prices
High Quality Services
Product Innovation
Market Expansion
PROFIT DRIVEN
SUPPLIERS
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Key Role for Consumers
The fundamental role of the consumer in the
market is to effect choice and demand goods
and services based on his income, preferences
education and available information.
If consumers fail in this regard the entire economic
system fails.
“ the reins of the free market rely on the consumer…because he is
in the driver’s seat, he has an obligation to consume wisely. Too
many consumers are either unaware of this obligation, or do not
take it seriously, if indeed they even accept the fact that they are
obligated to anyone or anything. (C ESSOCK 1978)”
3
Early Telecom Liberalization Focus
Market
Entry and
Licensing
Access to
and use of
Networks
Sound
Quality of
Service
Supply
Side
Network
Build out
with
Affordable
Access
Interconnection
4
International Supply Policy Framework
Impose
changes in
business
structures
Ensure better
information
Introduce
open standard
Control tying and
bundling and product
complexity
Remove
restriction on
entry
Impose
business
conduct rules
Control pricing
Ensure redress
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Source: OECD 26 July 2007
ADAPTED
Monopolies
Abuse of dominance
Demand Side Policies
Educate
Consumers
Reduce
Switching
Costs
Understand
Consumer
Behaviour
Develop
Consumer
Bill of
Rights
Information
Sharing and
Clarification
Empowering
Consumers
Appropriate
Legislation
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Information Sharing and Clarification
Suppliers
Provide: complete,
comparable,
appropriate and
accurate
information
Consumers
Evaluate
Options
Advocacy Groups
Information
Sharing
Publish
comparable
indicators of
quality of service
Introduce
Assessment
Models
Regulator
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Substitute Searching & Switching
Competitive Impact
 The higher the proportion of active searches in a market, the higher the
proportion of low cost firms in the market
 Where search and switching costs are high, monopoly prices emerge
WARWICK ECONOMIC RESEARCH PAPERS No. 607
Markets Comparison
Consumers Switching % (5-yr period)
Market
Switched
Considered it
Neither
Personal Banking
.6%
15 %
79 %
Motor Insurance
53 %
21 %
Markets Competitiveness
26 %
Market
HHI
Sector Profitability
Competitiveness
Personal Banking
1330
high/excessive
Uncompetitive
Motor Insurance
853
low/ negative
Competitive
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WARWICK ECONOMIC RESEARCH PAPERS No. 607
Consumer Legislation
Competition
Law
Objectives:
Preserves and
encourages
competition in the
interest of the
consumer
Benefit: Indirectly
enhances consumer
welfare through the
fruits of competition it
engenders
Consumer
Rights Law
Objectives:
Protects the
consumer from
deceptive,
fraudulent and
hazardous sale
practices.
Benefit: Empowers
consumers directly to
seek redress for
breeches of the law in
the transaction of
business through the
courts
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Impediments to Consumer Empowerment
and Effective Competition
Information
Deficit
Non participation in the
Market
Competitive market
failure
Pay too much for the
Service
Consumers not buying
the product that best
meets their needs
Consumer
Behavioral
Biases
Service Provider
Anticompetitive
Practices
Choice Information
Overload
Tied Selling
Unstable Preferences
Locked Phones
Endowment Bias
Exit Penalties
Over Confidence
Long Contractual
Periods
Framing Bias
Fine Print Clauses
Mis-evaluation of future
benefits and cost
Deceptive Advertising
10
Benefits of Demand Side Policies
Stimulate
Innovation
Economic
Wide benefits
Improve
Quality
Demand
Side
Leads to
Productivity
Improvements
Increase
Competitive
Pricing
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Empowered Consumers Behaviour
Effecting/
Withholding
Demand
Substitutes
Searching
and
Switching
Information
Sharing
Utilizing
Legislation
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APPLICATION TO TRINIDAD
AND TOBAGO’s
TELECOMMUNICATIONS
SECTOR
13
Telecommunications Markets
Characteristics
 High level of Information
Asymmetry
 Significant Market Concentration
 Sellers make Supernormal profit
 Prices diverge from costs
 Customers price sensitivity
equivocal
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Domestic Telecommunications Consumer
Strengths
Weaknesses
TATT Consumer Support
Search Costs
Limited by few
providers, major
providers tariffs
data online
Prices not easily or
continuously
published on website
Efficient enforcement of
Concession Condition C2:4
which mandate tariff
publication on companies’
websites
Switching
Costs
Excludes
technology
Significant menu
costs persist
Enforcement of Concession
Condition C21 which
mandates unlocking of
network specific technology
upon contract retirement
Information
Sharing
Major providers
advertise online
Consumer reviews
platform nonexistent,
lobby groups scope
excludes service
review
Enforcement of Act 25. 2(b),
Concession Condition C2:3,
9, 15:16, ICT Forums
Legislation
Retail
competition
actively
Consumer rights
regulation absent ,
lobby groups scope
Enforcement of the Act and
Concessions
15
TATT’s Consumer Rights Obligation Policy
(CROP)
Access to
Digestible
Information
Quality of
Service
Standards
Respect
Privacy
CROP
Efficient
Dispute
Resolution
Discourage
anticompetitive
Practices
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TATT’s Consumer Empowering Initiatives
Resource Efficiency
Release of Spectrum
Empowered Demand
Active Consumer Advocacy
“Allocative efficiency “
Cost Based Pricing
Fair Competition
Legislate Competition Powers
Information Asymmetry
Consumer Price Elasticity
Empowered Consumer
Number Portability
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Thank you
TELECOMMUNICATIONS AUTHORITY OF TRINIDAD AND TOBAGO
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