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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 18: Brazilian telecommunications: experience and future perspectives

Marcelo Resende


Marcelo Resende INTRODUCTION State intervention in Brazil is historically associated with market failure. The emergence of the state as the principal supplier of infrastructure reflects the scarcity of investment funds and an insufficient return (Suzigan, 1976; Trebat, 1983). Recently, the privatization process in Brazil reached a critical point in terms of defining an appropriate role for the state in the economy. Arguments refer to the inadequate productive efficiency of state-owned enterprises and decreasing investment by those firms (Abreu and Werneck, 1993; Pinheiro and Giambiagi, 1994). The possible impact of privatization and the development of a competitive environment in the telecommunications sector are discussed by Ros (1999) in relation to developing economies. Ros (1999) indicates that network expansion, as measured by main lines per 100 inhabitants, is highest in countries with high private ownership, although this relationship does not hold for countries whose GDP per capita is less than 10000 United States dollars (USD). Moreover, Jayakar (1999) obtains econometric evidence on the US for the period 1876 to 1982 indicating that competition positively affects telephone penetration, even in early stages of network development. This result is encouraging for a developing country where competition is being introduced, like Brazil. In Brazil the privatization of telecommunications has attracted intense media coverage because of the dynamic character and pervasiveness of the sector and because of the monetary magnitudes involved (Dores, 1999; Novaes, 1999; Pires, 1999). In July of 1998 the Telebrás system was privatized and its sale realized...

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