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World Telecommunications Markets

The International Handbook of Telecommunications Economics, Volume III

Edited by Gary Madden

This major reference work provides a thorough and up-to-date survey and analysis of recent developments in the economics of telecommunications. The Handbook serves both as a source of reference and technical supplement for the field of telecommunications economics.
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Chapter 2: Evolution of the telecommunications industry

Martin Fransman


Martin Fransman INTRODUCTION In this chapter the transformation from the old to the new telecommunications industry, and then into an info-communications industry, is analysed. The demise of the old telecommunications industry began in the mid-1980s when, due to different combinations of political and economic circumstances, monopoly telecommunications markets were opened to competition in Japan, the UK and the US. By the late 1990s there was widespread consensus that the liberalization of the industry was essential. Accordingly, the European Union and the World Trade Organization (WTO) agreed to liberalize telecommunications markets. The roots of change that gave birth to the new telecommunications industry in the early 1990s, however, were far more fundamental than the political and regulatory decisions that enforced change. In the 1990s a new set of influences that began 30 years earlier ultimately transformed the telecommunications industry into the info-communications industry. The source of change was the Internet based on its triad of core technologies: packet switching, Internet Protocol (IP), and the World Wide Web. THE TELECOMMUNICATIONS INDUSTRY AND THE ECONOMICS OF INDUSTRIAL CHANGE Despite important contributions made by economists a comprehensive theory of the dynamics of industry capable of explaining the process of change in specific industries does not exist.1 Indeed, the search for such a theory would inevitably be wrecked on the rocks of complexity and diversity. In these circumstances detailed accounts of the evolution of particular industries, which focus on what Schumpeter called the ‘engine of change’, are useful. A key part of...

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