HHI Archives — LIRNEasia

On several occasions, I had stated that the mobile industry HHI in India was lower than the US Department of Justice threshold for all industries. The Obama people had revised it to 2500 in 2010. That means that most S Asian telecom industries are below the threshold. The Justice Department has officially used HHI since 1982, and the guidelines were revised by the Obama administration in 2010. Mr.
Market share is never the final determinant of market power. It is used as a screen for further investigation and/or to shift the burden of proof. So, for example, an HHI (Herfindahl Hirschman Index) greater than 1700 or 1800 is triggers anti-trust investigations by the US government in the case of mergers and acquisitions. In the case of determining significant market power in telecom regulation (LIRNEasia is quite skeptical about the value of this approach in developing countries), market shares of around 35-45 percent shift the burden on the operator to prove that it does not have market power (the ability to set and maintain prices in simple language). But in Bangladesh 20 percent market share is the magic number.
My response to incessant complaints in the region about profits disappearing and investment drying up because of excessive licensing has been to say that liberal and transparent market entry policies must be accompanied by clearly stated exit policies that are consistently enforced. I have also pointed out that in many South Asian markets the levels of competition, as measured by the HHI, are relatively higher than in the US and that what applies in S Asian markets does not necessarily apply in N American markets and vice versa. In this light, it is worth tracking what happens to the AT&T acquisition of T Mobile. AT&T customers, though, could benefit in one notable area: service. Both AT&T and T-Mobile operate on the same technology, known as GSM, so the combination should provide better coverage.
In the course of her research on India’s telecom policy and regulatory environment, LIRNEasia Senior Research Fellow Payal Malik calculated the HHIs for different circles in India and found them to be very low.  Drawing on other TRE research and the literature, she has made a comparative assessment of the level of competition in India and a prognostication on the direction of mobile tariffs in an interview with the Economic Times. Lirneasia’s senior research fellow Payal Malik had published the Herfindahl-Hirschman Index (HHI) – the index for market concentration – in the telecom markets of South Asian countries, last year. Lower the HHI, higher the competitiveness in a market. India’s turned out to be the lowest at 2000, as compared to Indonesia’s 3400 and Thailand’s 3900.