LIRNEasia’s service-quality research in 2012-14 drawn upon to shed light on present-day controversies

Posted on July 7, 2017  /  0 Comments

We spent a lot of time thinking about service-quality in relation to electricity and telecom services in 2012-14. We organized the 2013 SAFIR core training course around the theme of service quality.

But the work has more to contribute. The current controversies around private medical education has brought to the fore many neglected issues related to service industries, including the question of service quality or standards. The op-ed seeking to respond some of these erroneous claims states:

As shown by the example of automobile service above, the burden on the regulatory agency is much less when competition exists. Given the difficulties of implementing effective regulation, it is best to shift as much of the burden as possible through competition to the customers themselves. Quality of service in telecom was atrocious before competition was introduced. It improved after competitors entered the fray and gave customers choice, but it was not good enough. The regulator had to intervene.

However, sample surveys of micro and small enterprises owned by those in socio-economic classification groups C, D and E (i.e., not wealthy) by LIRNEasia in 2013 in Colombo and urban locations in Wayamba showed that the quality of service offered by the telecom operators was far superior to that offered by the monopoly electricity distribution companies. Those who were not satisfied with how their complaints had been addressed were 93% in the case of electricity and 7% in telecom.

This not to say competition is adequate by itself in all cases. Albert Hirschman postulated that poor service quality may be found even in the presence of competition. The mechanism that is supposed to raise service quality in a competitive environment is the loss of customers. As customers exit supplier A because of poor quality, supplier A is supposed to feel the pain in the form of reduced revenues and loss of profit. But if, for some reason, the level of quality offered by each of the competitive suppliers is more or less the same, supplier A will not feel the pain.

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