Does Sequencing Matter? Regulation and Privatization in Telecommunications Reforms

By Scott Wallsten. 2002

151 citations recorded by the source corpus.

The question of the most effective order of reforming state-owned enterprises has been hotly debated over the years. In the early 1990s, many western advisers encouraged Eastern European countries, and the former Soviet Union, to privatize firms quickly under the assumption that market institutions would develop once firms were privately owned. The thinking since then has emphasized the importance of establishing an institutional framework conducive to promoting competition before privatizing firms. To date, there has been little empirical work clarifying the debate. The author attempts to address this gap, by examining the effects of the sequence of reform in telecommunications, particularly the effects of establishing a regulatory authority, prior to privatizing incumbent telecommunications firms. Consistent with current thinking, the author finds that countries that established separate regulatory authorities, prior to privatization, saw increased telecommunications investment, fixed telephone penetration, and cellular penetration compared with countries that did not. Moreover, he finds that investors are willing to pay more for telecommunications firms, in countries that established a regulatory authority before privatization. This increased willingness to pay is consistent with the hypothesis that investors require a risk premium to invest, where regulatory rules remain unclear.

Subfields: Media Technology, Political Science and International Relations, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/99a0da2654edbb5633ec8584c504576f1741b3c5

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Citations in the corpus

The Effects of Public Ownership and Regulatory Independence on Regulatory Outcomes (2004, unknown): “ Wallsten (2001, 2002) similarly uses a dummy for whether a country has established a separate regulatory authority and observes that this variable is “better characterized as indicating a country’s propensity to undertake regulatory reforms rather than the effect of a separate regulator per se.” W”
Private Provision of Infrastructure in Emerging Markets: Do Institutions Matter? (2006, background): “Countries with established regulatory institutions in place before privatisation experienced increased private telecommunication investment post-privatisation (Wallsten, 2002).”
Competition, Regulation and Privatisation of Electricity Generation in Developing Countries: Does the Sequencing of the Reforms Matter? (2005, methodology): “Using data for telecommunications from 197 countries for the period 1985-1999, Wallsten (2002) tested whether the order between regulatory reform and privatisation mattered.”
An assessment of privatization (2004, background): “Clarke and Wallsten (2002) use household data from around the world to examine the performance of public utilities in meeting universal service obligations and the impacts of reform.”