Economic freedom and consumer rights

Posted on October 19, 2008  /  0 Comments

This was the title for a presentation I was asked to do for a seminar organized by the SAARC Chamber of Commerce, the FCCISL and the Naumann Foundation.

The presentation examined the broadening of consumer rights in the Sri Lanka industry as a result of the increased economic freedom in the telecom industry enabled by the multi-faceted liberalization undertaken by multiple governments since the 1990s. It then went on to draw lessons for other infrastructure industries and countries. The principle of “competition wherever possible; regulation where necessary” was the anchor of this part of the presentation. It was emphasized that the possible and necessary varied depending on country and time and that there were no one-size-fits-all solutions.

The presentation slides are here.

The recent effort to bring the wisdom of the Supreme Court of Sri Lanka to bear on the prices of fixed telephony services are of interest in this regard. Around ten million Sri Lankans are served by mobile telephony, while only less than three million are served by fixed telephone operators. Prices keep coming down in mobile services, to the extent that some are beginning to fear the companies will cease to make money.

Is it not more logical to ask why there is no need for regulation or for the resetting of the x in the RPI-x price formula in mobile telephony services than to overload the Supreme Court’s already full docket? Is it not more logical to allow the mobiles to enter the fixed space and vice versa, by unifying the licenses, removing obsolete prohibitions on who can and cannot draw wireguides to homes and offices, ensuring that mobile operators are paid for the calls terminated on their networks the same as the fixed operators, and so on?

The logical thing to do is to extend the solution that is working for close to 10 million consumers to the three million in a market still dominated by SLT; not seek to get an overworked court with general competence to order an incompetent regulatory agency to calculate costs of capital and reset the x in RPI-x, which would, by the way, require a modification of the relevant licenses.

Lower prices and higher quality (consumer rights) are assured by policy and regulatory actions that increase economic freedom, using the principle of competition wherever possible; regulation where necessary.

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