The Paradoxical Impact of Asymmetric Regulation in Taiwan's Telecommunications Industry: Restrictions and Rent-Seeking
Telecommunications Policy, 30(4), 171-182
33 Pages Posted: 30 Mar 2001 Last revised: 1 May 2014
Date Written: January 21, 2001
Since open competition began three years ago, the mobile penetration rate in Taiwan has climbed from 6.86 to 72.3 percent. This paper seeks to explain the cause of Taiwan!?s unprecedented mobile growth and to suggest policy strategies useful for countries interested in expanding their telecommunications sector in a short time. Rather than taking liberalization policy as the modus operandi, the authors are the first to recognize the role of asymmetric regulation as the institutional foundation of telecommunications growth in Taiwan. Asymmetric regulation in Taiwan is manifested in a two-fold framework: the dominant carrier vs. competitors and the fixed-line carrier vs. mobile companies. Our econometric analysis confirms that dualistic asymmetric regulation extends to mobile competitors a higher penetration rate and greater revenues. However, the authors warn against the paradoxical consequences of dualistic asymmetric regulation. Mobile entrants tend to convert their regulatory benefits into counter-productive rents, such as when they boycotted the follow-me call service because its pricing scheme contradicted the asymmetric revenue-sharing constraint. This paper therefore advocates a sunset clause for dualistic asymmetric regulation in order to benefit from its merits while curtailing rent-seeking behavior.
Keywords: asymmetric regulation, revenue-sharing constraints, the contractarian approach, regulatory costs, incumbent burdens, rent-seeking
JEL Classification: K230, L510, L960, N450
Suggested Citation: Suggested Citation