Tuesday, March 21, 2006

BT released from price regulation

After 22 years Ofcom have decided to stop regulating BT's prices. The regulators deserve credit for taking a decision that reduces their ability to control and resisting the temptation to define their purpose ever outwards.

The logic behind this move is very sensible. The market for phone calls has been entered by VoIP phone services like SkyPE, cable operators and mobile phone companies. All of these firms bring different advantages from the flexibility offered by mobile phones to the extremely low costs available through Internet services. While BT has advantages in this market, such as a well developed infrastructure, these are not nearly enough to be worthy of monopoly regulation.

The stock market response suggests that investors do not expect new monopoly rents to flow. BT's share price responded with a slight fall; investors can see that with so much new competition and a mature market there are difficult times ahead. While this is hardly cast iron evidence that there are no monopoly rents for BT to make it does suggest that no one can currently see where they might come from.

2 comments:

El Dave. said...

I'm confused:

'While BT has advantages in this market, such as a well developed infrastructure, these are not nearly enough to be worthy of monopoly regulation.'

Surely strong position in the market would be argument against monopoly privileges?

xD.

Matthew Sinclair said...

Regulation as if it were a monopoly. Not a privilege.