Brian Baker Economics 102 T/TH 11:00 ? 12:25 4-9-02 Applied Economics #4 Telecommunications International The article discusses the telecommunications market. This market is currently an oligopoly, however, the focus of this article is to introduce a disruption into this market and evolve it into a market of greater competition. As of now, this oligopolistic market structure is earning economic profit because of its? imperfect competition. Lack of substitutes for their goods allows oligopolies to charge more than what it costs to manufacture them. In other words, total revenue is greater than total cost. Also, because of this, new firms have a hard time breaking into this market. Then again, a new technology known as I.P. is believed and expected to open the doors on the telecommunications market by creating an endless universe for service providers to tap into and start a business. In result, this massive influx of firms would create greater competition.
This greater competition, while still imperfect, would lower business revenues of the preexisting firms from economic profit to merely a profit of normality, I believe.
In class and in the text, we have discusses the behavior of oligopolies. Oligopolies tend to achieve inefficient results from setting prices above marginal cost, except in sales maximizing firms, such as the telecommunications industry. According to the text, Class III oligopolies have output restrictions and adapt poorly to technological changes and changes in demand. This I.P. technology would then seem unfeasible to spread globally on the account that the telecommunications market, I believe, lies somewhere in Class III. This is demonstrated by it's restricted output, which is to only subscribed customers. In addition to that, many believe that the world?s telecommunications market is not ready for I.P. technology and the change in demand that it will cause.