Classroom Companion: Business

Digital Market 
Evolution
Contents
5.1 
 Telecommunications as Natural 
Monopoly – 62
5.2 
 De-monopolization of User 
Equipment – 63
5.3 
 De-monopolization of Mobile 
Network Operations – 64
5.4 
 De-monopolization of All
Telecommunications
Operations – 66
5.5 
 Resellers and Virtual Network 
Operators – 68
5.6 
 Conclusions – 71
 References – 72
5

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62
5
 
n Learning Objectives
After completing this chapter, you should be able to:
5
Explain the process leading to de-monopolization of telecommunications in 
Europe.
5
Understand the consequences de-monopolization has on the market structure in 
telecommunications.
5
Explain the difference between the three concepts: reseller, virtual network oper-
ator, and mobile virtual network operator.
5.1 
 Telecommunications as Natural Monopoly
The telecommunications industry has undergone an evolution in market structure 
from monopoly to competition market as illustrated in 
.
Fig. 
5.1
. This process 
is referred to as the de-monopolization of the telecommunications market. Other 
often used terms are market deregulation and market liberalization. This chapter 
describes how this evolution took place in the European Economic Area (EEA).
The evolution in EEA took place in three steps:
1. The market for retail sales of user equipment was opened for competition dur-
ing the period 1985–1987.
2. Competition was introduced for mobile network operation, first in the UK 
(1982) and about 10 years later in other EEA countries (1991).
3. Full competition on all aspects of telephone network operation in Europe was 
introduced in 1998 (in 1996 in the USA).
Traditionally, most telecommunications operators in Europe were state-owned 
monopolies. There were also privately owned telephone and telegraph companies, 
but these companies had monopolistic rights to offer telecommunications services 
in particular regions of the country. The argument in favor of monopolies was that 
it would be more expensive for the users if there were more than one telephone 
operator in the region because of the large investments in telecommunication 
< 1985
1985-1992
1992-1998
1998 >
User equipment 
Networks
Network access
service 
Monopoly
Full competition
Competition on
devices
Competition on mobile
operations and devices
. Fig. 5.1 Evolution of the telecommunications business. (Authors’ own figure)