Liberalization

• Because these services were considered essential for life and health, and essential for citizen’s participation in social and economic life it was decided that the government should be responsible for their provision so that these services were accessible and affordable to all citizens.

• In order to deliver these services to everyone and be affordable these monopolies were often subsidised by the government. However today that is fundamentally changing as these state monopolies are being privatised and opened up to competition from the free market in a process known as liberalization.

• Liberalization in Ireland has been relatively limited over the years but has accelerated somewhat in recent years, particularly with the privatisation of Telecom Eireann which is now Eircom in 1999.

Economic Liberalization

• Economic liberalization is a broad term that usually refers to fewer government regulations and restrictions in the economy in exchange for greater participation of private entities.

• Although economic liberalization is often associated with privatization, the two can be quite separate processes. For example, the European Union has liberalized gas and electricity markets, instituting a system of competition; but some of the leading European energy companies remain partially or completely in government ownership.

• Liberalized and privatized public services may be dominated by just a few big companies, particularly in sectors with high capital costs, or high sunk cost, such as water, gas and electricity. In some cases they may remain legal monopolies, at least for some part of the market (e.g. small consumers).

Economic Liberalization and Telecommunications

• Over the past two decades the European telecommunications sector has moved from a tradition of strong public service monopolies, to one of increasing privatisation and competition. EU policy has evolved with the sector supporting common development, promoting competition and harmonisation.

• The primary driver of change in the telecommunications sector has been the dramatic increase in the use of information technologies, which has revolutionised the industry.

• The main aim has been the move towards a single market for telecommunications services and equipment that progressively removes barriers to allow competitions across European markets.

• In Ireland, up until 1999 Telecom Eireann was the monopoly provider of telecommunications services. However, the market has since been liberalized and now you can buy you telecommunications services from a range of different providers.

Challenges of Economic Liberalization

• Sometimes with the supply SGIs the monopoly supplier may be the only provider in the market because of fundamental reasons such as owning the infrastructure needed to provide the service. In Ireland Eircom was for many years the only providers of telecommunications services because it owned the network of telephone lines. Therefore, liberalization may require further regulation to ensure more service providers are able to operate in the market.

• Even when the market is liberalised there is no guarantee that the new and existing service providers will pass on any cost savings to consumers nor is it certain they will offer new services to consumers.

• Because liberalization supports the close linking of prices to costs as well as not allowing government support in some cases, cost to the consumer for the service may even go up.

• Private entities operating in a liberalized market may decide to ignore supplying new consumers with the service because it is not economically viable to do so. For example, consumers living in rural or remote areas who wish to be supplied with landline telecommunications.