Invalid Competition On The Telecommunications Market

The characters of scale economy, external economy, standard compatibility, resources limitedness of telecom industry determine that its market competition will be inevitably ineffective. This is quite obvious in the development of telecom industry. So theoretically speaking, the realization of effective competition in telecom industry rely more on the government regulation than market power. Now after several reforms on Chinese telecom industry, the oligopoly has come into being in the main business of telecom such as mobile sector, local telephone sector and long-distance telephone sector. However, from the analysis of game theory it is obvious that the individual reasoning cause vicious competition in the market due to the absence of cooperation agreements or an outside binding force. So the current situation also requires the reorganization of government regulation in China. According to the lessons from Britain and USA, China should adopt measures in the following aspects: establishing independent telecom regulation authorities; adopting legal measures to regulate the market; adjusting the content of regulation according to the current situation and the development trend of telecom industry of the world. Finally, the paper again used the game theory to test the effect of new regulation system. Under a more equal and interacting competition environment, telecom companies will compete in cooperation, which is called co-competition. So telecom companies will compete through improving service quality instead of pure price fighting, which will gradually make the effective competition in Chinese telecom industry.