Analyzing markets for electronic communications services in emerging economies - the case of Romania

Radu Tudorache

No 43, Advances in Economic and Financial Research - DOFIN Working Paper Series from Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB

Abstract: Despite the rapid and complex development of the Romanian electronic communications markets after the full sector liberalization in 2003, local literature often evaluates the development of the Romanian markets in a simplistic manner, by solely comparing the penetration of electronic communication services in Romania with the penetration rates in other European Union countries. The widespread appeal of this assessment method is explained by the availability and accuracy of penetration data in the official statistics as well as by the traditional use of this method before liberalization. This paper argues that assessing the development of electronic communications markets solely by comparing penetration rates entails a number of deficiencies, especially when this method is used to compare emerging economies (such as Romania) against developed economies (such as mature EU 15 countries). In such cases the use of the penetration rates comparison method could lead the regulator into designing ineffecte competitive remedies and service providers into making ineffective strategic investments. Starting from this critical analysis, the paper proposes an alternative method for the evaluation of the development of electronic communications markets in emerging economies, using Romania as a case-study. The proposed method complements the penetration rates comparison by two additional qualitative criteria: intensity of competition, measured by the number of competitors and structure of market shares, and the consumer welfare generated by markets, measured by the indicators of service quality and price levels. In the case of Romania, the analysis of both quantitative and qualitative market indicators recommended by our method yields a different conclusion than the one obtained using the penetration comparison method. While the penetration comparison method labels the electronic communications markets in Romania as underdeveloped in comparison with mature European Union markets, the alternative method proposed by tis paper proves that in the last 7 years of competition, Romanian markets have largely recovered their extensive development handicap, while they are more advanced than most European Union mature markets in terms of competition quality and market dynamics

Keywords: Electronic communications; penetration rates; service bundles; competitive markets; extensive market development; qualitative market development (search for similar items in EconPapers)
Date: 2010-09
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Citations: View citations in EconPapers (1)

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