Telecom fees continue to fall almost everywhere.
Notably, the largest decline can be seen in developing economies. Yet in spite of this, developed economies still maintain the lowest rates.
From the Economist,
DEVELOPING countries still pay far more for communications than developed countries as a proportion of overall income. But over the past two years these services have become more affordable worldwide, according to the ITU (International Telecommunication Union). The ITU’s ICT price basket combines the average cost of fixed-line telephones, mobile phones and fixed-line broadband internet services, calculated as a proportion of gross national income per person. (Broadband is not shown on the chart because in countries where it is still rare, its high cost swamps the chart and makes it difficult to read.) Africa made the biggest gains. Of the countries covered, seven countries had overall price-basket declines greater than 50%, mainly because of declines in fixed broadband. Mobile-phone charges are higher in developing countries in part because many customers pay for calls using pre-paid scratch cards rather than via monthly contracts which include large "buckets" of calling time for which the effective cost per minute is much lower.
Developed economies have the natural advantage of having lower rates primarily because of accumulated wealth (capital stock) and high productivity.
This also shows that an industry once thought as “natural monopoly” has proven to be a myth.
As Professor Thomas DiLorenzo writes,
The biggest myth of all in this regard is the notion that telephone service is a natural monopoly. Economists have taught generations of students that telephone service is a "classic" example of market failure and that government regulation in the "public interest" was necessary.
The ITU seems reticent on why costs have been falling. Their narratives have mainly focused on the developments of falling prices rather than the essence of what makes cost of telecom services decline.
Nevertheless I’ll quote the ITU in 2008,
Market liberalisation has played a key role in spreading mobile telephony by driving competition and bringing down prices.
Lastly, telecom fees signify as great examples of what we shouldn’t be afraid of—deflation.
On the contrary, basic economics in the telecom sector has worked magnificently...
...where falling prices (arising from market based competition) equates to greater volume. This has translated to mass adaption by the public. Worldwide, there are 69 mobile subscribers per 100 people and growing. Chart from Google Public Data
To quote ITU’s Secretary-General Dr Hamadoun Touré
With ICTs now a primary driver of social and economic development, these results are highly encouraging...Our next challenge is to find strategies to replicate the ‘mobile miracle’ for broadband, which is fast becoming basic infrastructure. Countries without affordable broadband access risk falling quickly behind.
Well, the answer to the desire for "mobile miracle" in broadband should be the same dynamics that has made the above circumstances possible—market liberalisation!
