Economy And Innovations In Technology Essay

Question:

Discuss about the Economy And Innovations In Technology.

Answer:

Introduction:

With progressing economy and innovations in technology and production, newer sectors are gaining more and more importance in the globalized market. One of the primary developing sectors in the current business world is the telecommunication sector. The sector deals with transmission of vocal, verbal or word messages across the globe and with time, the sector has seen massive dynamics with innovations in the concerned technologies (Bigliardi, Ivo Dormio and Galati 2012). Nowadays, this sector has gained utmost importance, with businesses going global, as most of the commercial activities are done through this medium. The report discusses the telecommunication sector in Australia, its current dynamics, players and the issues faced by the players as well as the clientele, as is evident from the survey conducted by the Australian Competition and Consumer Commission (ACCC). From economic perspective, these issues are tried to be analyzed and explained in this report (Accc.gov.au, 2017).

Telecommunication Market: Australia:

The telecommunication market in Australia is one of the most significant revenue generating market, which has seen consistent rise in the number of consumers over the years. The need for the development of this sector has been constantly increasing due to the economic boom and business prospect that the country is showing. The main products of this market are landline service, broadband internet and mobile and data services, the third product seeing significant increase in the demand with time, the demand for the former two remaining significantly high (Makwana, Sharma and Arora 2014).

The market in the country has a big player along with several medium and small ones, thereby giving a distorted semi-monopolistic structure to the concerned market. The big player being Telstra and the other players being Optus, TPG, iiNet and others, the market, though seeing a recent hike in the level of prices, the demand is also showing a continual upward trend. The market shares of the different players in Australia, on the producer side can be shown as follows:


Table 1: Market shares for fixed line broadband:

Provider

Share of market (%)

Telstra

41

iiNet

15

Optus

14

TPG

12

Others

18

(Source: Communications.gov.au, 2017)

Table 2: Market shares for mobile services:

Provider

Share of market (%)

Telstra

45

Vodafone

18

Optus

27

Others

10

(Source: Communications.gov.au, 2017)

Form the above tables, it is evident that Telstra enjoys a huge market share, both in landline services as well as mobile services and the company enjoys almost monopolistic kind of market power, with the other service providers enjoying much lower shares in the telecommunication market of the country. With much of the market share in the hands of a single service providers, the market shows a semi-monopolistic structure, with the economic issues of trade off between equity and efficiency cropping up in the market. This is discussed in details in the following sections of the report, with the help of the study findings of the ACCC (Alizadeh 2015).

Issues in the telecommunication market of Australia:

As shown in the above discussions, the market structure of this sector in Australia is not that of a perfectly competitive type, which in its turn leads to several distortions and unequal distribution of facilities and advantages, both on the producer side and the consumer side, in this market. The issues, as can be derived from the study findings are as follows:

  • The primary player in this market, Telstra, has been in the scenario for quite a long time and has and is still enjoying significant favors and subsidies from the Australian government. Over the years, the company has received huge subsidies in the form of the National Broadband Network Company Agreement or the Obligation of Universal Services, which were basically given to the company in order to ensure equitable as well as superior quality distribution of their services at affordable prices, to people across the country and of different income strata. However, the company has used these subsidies for fulfillment of their vested interest and has achieved significant share of the market overtime (Crouch and Davies 2013).
  • The customer complaints and submissions, as were received by the ACCC, puts forward the efficiency issue of the NBN services. The main issue as has been put forward by them is the issue of inequitable distribution of the services across the country, especially between the urban and more developed regions and the rural and the remote regions. The rural sector customers of the NBN plan, though pay the same amount for availing the service as paid by the urban ones (Crouch and Davies 2013). However, they complain about the distinctively slower speed they receive as compared to their urban counterparts, along with other problems like that of outdate d materials usage, using of fiber in some places and mixed technologies in other places. These problems have created lack of confidence among the rural customer, who, with the progress in the economy and the change in the business modes, are willing to adapt to the new age technologies. The customers are also not happy in terms of the quality of services and follow-ups in case of complaints (Alizadeh 2013).
  • The organizational structure of the NBN and that of Telstra, is also expected to contribute to the issues of market distortions as together they portray a cartel like structure. The symbiotic, profit – maximizing mode of operations of this collusion has in one way ruled out the potential competitions as the monopoly they enjoy due to the presence of increasing returns to scale, cannot be challenged by other players in the market. Many of the potential competitors, though are providing superior services, cannot compete with Telstra, in terms of prices as the latter already has a cost advantage (Patel 2017).

The issues, as discussed above, show the trade-off between the equity and efficiency in the market. Due to the lack of quality and customer satisfaction, Telstra is seeing a loss in their clientele as many of the loyal customers shifting to other service providers.

Conclusion:

The report shows the conflict between equity and efficiency that arises in the telecommunication market of Australia, due to the presence of unequal distribution of market power among one government aided and privileged service providing giant and a few smaller competitors. The reluctant nature of the former and the discrimination in the quality of service provided by the company has given rise to huge dissatisfaction on part of the customers, many of whom are shifting to other service providers, choosing quality over affordability due to the necessary nature of the service discussed about in the report.

References

Accc.gov.au (2017). Communications sector market study. [online] Australian Competition and Consumer Commission. Available at: [Accessed 2 Sep. 2017].

Alizadeh, T., 2013. Towards the socio-economic patterns of the national broadband network rollout in Australia. State of Australian Cities, Sydney. Accessed December, 31.

Alizadeh, T., 2015. The spatial justice implications of telecommunication infrastructure: The socio-economic status of early National Broadband Network rollout in Australia. International Journal of Critical Infrastructures, 11(3), pp.278-296.

Bigliardi, B., Ivo Dormio, A. and Galati, F., 2012. The adoption of open innovation within the telecommunication industry. European Journal of Innovation Management, 15(1), pp.27-54.

Communications.gov.au (2017). [online] Available at: [Accessed 2 Sep. 2017].

Crouch, A. and Davies, S., 2013. A coordinated satellite and terrestrial microwave backhaul for cellular mobile in remote and regional Australia. Australian Journal of Telecommunications and the Digital Economy, 1(1), p.2.

Makwana, K., Sharma, N. and Arora, S., 2014. Factors influencing consumer brand switching behavior in telecommunication industry: An empirical study. Prestige eJ. Management and Res, 1(1), pp.1-10.

Patel, A., 2017. Equity and Efficiency. In Mental Health Economics (pp. 155-161). Springer, Cham.

How to cite this essay: