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Mohamed Bubashait ... price reduction

Competition 'helps Bahrain telecom customers save $195m'

MANAMA, July 20, 2016

Telecom consumers in Bahrain saved at least BD74 million ($196 million) in 2014 compared with 2008 as a result of the competitive environment in the kingdom’s telecommunications sector, a study has revealed.

The competitive environment also led to a significant price reduction for telecommunications services as well as providing variety and quality services, said the study.

The Telecommunications Regulatory Authority (TRA) today released the independent report titled “Consumer Surplus and the Impact of Competition for Telecommunications Services in Bahrain” that was prepared by the expert economic consultancy Berkley Research Group (BRG).

The report presents BRG’s estimate of the change in consumers’ valuation of mobile and fixed broadband services between 2008 and 2014, as well as an analysis of the factors that are most likely to have impacted this valuation.

The study confirms the effectiveness of policies and regulatory actions that have been taken to stimulate competition in the sector, which resulted in a significant price reduction for mobile and fixed broadband services during the period of the study, said a TRA statement.

Moreover, it realises the achievement of TRA’s mission of developing a competition led market for the provision of innovative communications services, available to all, it said.

TRA’s general director Mohamed Bubashait noted: “Measurement of consumer surplus is essential for telecommunications regulators in this sector around the world, as they mainly aim to design and implement regulatory policies that increase consumer saving while promoting investment in new and innovative telecommunications services.”

Bubashait added: “We are continuing to implement regulatory measures that promote effective competition in the telecommunications sector and we will endeavour to achieve TRA’s vision of creating a communications environment that enriches the social and commercial fabric of the kingdom, and transform Bahrain into a hub for local and foreign investment.”

Change in consumers’ valuation of mobile and fixed broadband services is calculated based on “consumer surplus”, which is a standard measure used by economists to quantify the difference between a consumer’s valuation of services and its current price, the statement said.

The analysis shows that the total estimated consumer surplus for mobile services and fixed broadband services was BD133 million in 2008 and BD207 million in 2014, which is an increase in consumer surplus of BD74 million, demonstrating that the regulatory framework governing the telecommunications sector at that time was on the right track.

The study’s findings emphasises the importance of competition, TRA said. It suggests that prices could increase by 10 per cent if there were only two mobile operators. Furthermore, BRG’s analysis indicates that if there was only one mobile operator and no regulation, then there would be a loss of about ½ to 2/3rds of consumer surplus, which means that consumers would be significantly worse off.

The study also emphasises the greatest benefit for consumers in the long-run comes from investment in new services and technologies. Therefore, it is important for regulatory policies and measures to maintain operators’ incentives to invest in new services and technologies.

The approach to estimating the consumer surplus for mobile services and the fixed broadband market in 2008 and 2014 based on a methodology that resulted in conservative estimates. The estimated consumer surplus for mobile services was BD128 million in 2008 and BD197 million in 2014, which is an increase of BD64 million. In addition, the estimated consumer surplus for the fixed broadband market was BD5 million in 2008 and BD15 million in 2014, which is an increase of BD10 million, it said. – TradeArabia News Service




Tags: Bahrain | Telecom | TRA | Competition |

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