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> Can you provide an example of this actually happening in a competitive market? How about EU regulations on the price of mobile phone roaming between member n

> Can you provide an example of this actually happening in a competitive market? How about EU regulations on the price of mobile phone roaming between member nations (the "roam like home" rule)?

AnthonyMouse 3y ago
Either there isn't a lot of competition between carriers there and they were just sticking the roaming fees in their pockets before, or there is a lot of competition and the carriers had to make up for the increased usage and loss of roaming fees by raising the prices of phone plans. This isn't the same thing as whether you like the result of the rule. Maybe paying a little bit more in total in exchange for having a more predictable monthly bill is something people like. It would still be paying a little bit more, if the market there is competitive.
- Agingcoder 3y ago
  Assuming markets default to be competitive is wrong I think . Natural cartels and monopolies do exist after all, or markets have high entry costs etc. Economic theory usually assumes pute and perfect competition, which doesn’t exist in many markets
  - AnthonyMouse 3y ago
    It's not assuming the market is competitive. Wireless markets are often not competitive, because entry is limited by scarce spectrum availability etc. which incumbents lock up to limit competition. The point is that if you had a competitive market, margins would be thin and the only place for lower prices to come from without a reduction in operating costs is higher prices somewhere else. It's easy for regulations to lower costs in an uncompetitive market because the lack of competitive pressure allows the incumbents to do all kinds of inefficient nonsense that would drive them out of business if it was actually practical for new competitors who don't do that to enter the market and undercut them on price. But what you want to do in those cases to the fullest extent possible is to restore competition to the market, not try to regulate the incumbents while keeping them as a monopoly/oligopoly. A set of regulations that gets you 8% of the benefit of actual competition can be a significant improvement from the status quo while still being by far the less effective solution.
- nerdbert 3y ago
  Roaming used to be very expensive and so people almost never used it. Instead they would buy cheap local prepaid SIM cards when they traveled across intra-EU borders. The carriers would charge high prices to each other for roaming, and pass those on to their customers. The market had worked itself into a stupid corner where nobody wanted to come down on wholesale roaming costs because they would lose out to cross-border carriers. The EU capped the wholesale rates and mandated that there be no retail cost, so now carriers are charging less to each other and consumers are roaming on their own numbers without worry, and without the hassle, expense, and waste of buying SIM cards all the time. It's been moderately beneficial for carriers, and a huge benefit for the public. The imposition of regulation has enabled the companies to be more profitable and consumers to get more value.
  - AnthonyMouse 3y ago
    > Roaming used to be very expensive and so people almost never used it. Instead they would buy cheap local prepaid SIM cards when they traveled across intra-EU borders. So it was already available at a low price via a different route. > The carriers would charge high prices to each other for roaming, and pass those on to their customers. The market had worked itself into a stupid corner where nobody wanted to come down on wholesale roaming costs because they would lose out to cross-border carriers. You're describing an uncompetitive market. The local carriers have such high market share that charging otherwise-profitable wholesale rates would deprive them of a monopoly rent so they're not willing to do it. Compare this with a market where there are carriers with low market share who don't care about cannibalizing someone else's retail sales to get more wholesale customers. > It's been moderately beneficial for carriers, and a huge benefit for the public. The imposition of regulation has enabled the companies to be more profitable and consumers to get more value. The drawback of this approach isn't that it can't produce an improvement relative to a preexisting uncompetitive market, it's that it leaves the uncompetitive market in place. Which is almost certainly itself a result of existing regulations. Suppose the way mobile networks operated is that anyone can build an independent cell tower and then auction off capacity in real time. Which makes it easy to operate a cell tower; you just build one and sell into the market. So you end up with dozens of local cell tower operators or more and any carrier, local or otherwise, with a customer in the area can bid for capacity from any of them. Which also means that anyone can start a carrier, because "carrier" just means you resell wholesale capacity from all these independent cell towers and your business is to bill the customer and provide customer service. Doing it that way is going to solve your roaming problem and seven hundred other problems and lower prices. But existing regulations don't facilitate this, do they?
- ffgjgf1 3y ago
  > there isn't a lot of competition between carriers there and they were just sticking the roaming fees in their pockets before, Yes. Now they can’t do that so prices are lower. The regulations didn’t really make the markets more competitive though. They just capped prices.
  - AnthonyMouse 3y ago
    > The regulations didn’t really make the markets more competitive though. They just capped prices. Which is why the regulations are still causing prices to be higher than they ought to be.

> Can you provide an example of this actually happening in a competitive market? How about EU regulations on the price of mobile phone roaming between member nations (the "roam like home" rule)?

AnthonyMouse 3y ago

Either there isn't a lot of competition between carriers there and they were just sticking the roaming fees in their pockets before, or there is a lot of competition and the carriers had to make up for the increased usage and loss of roaming fees by raising the prices of phone plans. This isn't the same thing as whether you like the result of the rule. Maybe paying a little bit more in total in exchange for having a more predictable monthly bill is something people like. It would still be paying a little bit more, if the market there is competitive.

Agingcoder 3y ago
Assuming markets default to be competitive is wrong I think . Natural cartels and monopolies do exist after all, or markets have high entry costs etc. Economic theory usually assumes pute and perfect competition, which doesn’t exist in many markets
- AnthonyMouse 3y ago
  It's not assuming the market is competitive. Wireless markets are often not competitive, because entry is limited by scarce spectrum availability etc. which incumbents lock up to limit competition. The point is that if you had a competitive market, margins would be thin and the only place for lower prices to come from without a reduction in operating costs is higher prices somewhere else. It's easy for regulations to lower costs in an uncompetitive market because the lack of competitive pressure allows the incumbents to do all kinds of inefficient nonsense that would drive them out of business if it was actually practical for new competitors who don't do that to enter the market and undercut them on price. But what you want to do in those cases to the fullest extent possible is to restore competition to the market, not try to regulate the incumbents while keeping them as a monopoly/oligopoly. A set of regulations that gets you 8% of the benefit of actual competition can be a significant improvement from the status quo while still being by far the less effective solution.
nerdbert 3y ago
Roaming used to be very expensive and so people almost never used it. Instead they would buy cheap local prepaid SIM cards when they traveled across intra-EU borders. The carriers would charge high prices to each other for roaming, and pass those on to their customers. The market had worked itself into a stupid corner where nobody wanted to come down on wholesale roaming costs because they would lose out to cross-border carriers. The EU capped the wholesale rates and mandated that there be no retail cost, so now carriers are charging less to each other and consumers are roaming on their own numbers without worry, and without the hassle, expense, and waste of buying SIM cards all the time. It's been moderately beneficial for carriers, and a huge benefit for the public. The imposition of regulation has enabled the companies to be more profitable and consumers to get more value.
- AnthonyMouse 3y ago
  > Roaming used to be very expensive and so people almost never used it. Instead they would buy cheap local prepaid SIM cards when they traveled across intra-EU borders. So it was already available at a low price via a different route. > The carriers would charge high prices to each other for roaming, and pass those on to their customers. The market had worked itself into a stupid corner where nobody wanted to come down on wholesale roaming costs because they would lose out to cross-border carriers. You're describing an uncompetitive market. The local carriers have such high market share that charging otherwise-profitable wholesale rates would deprive them of a monopoly rent so they're not willing to do it. Compare this with a market where there are carriers with low market share who don't care about cannibalizing someone else's retail sales to get more wholesale customers. > It's been moderately beneficial for carriers, and a huge benefit for the public. The imposition of regulation has enabled the companies to be more profitable and consumers to get more value. The drawback of this approach isn't that it can't produce an improvement relative to a preexisting uncompetitive market, it's that it leaves the uncompetitive market in place. Which is almost certainly itself a result of existing regulations. Suppose the way mobile networks operated is that anyone can build an independent cell tower and then auction off capacity in real time. Which makes it easy to operate a cell tower; you just build one and sell into the market. So you end up with dozens of local cell tower operators or more and any carrier, local or otherwise, with a customer in the area can bid for capacity from any of them. Which also means that anyone can start a carrier, because "carrier" just means you resell wholesale capacity from all these independent cell towers and your business is to bill the customer and provide customer service. Doing it that way is going to solve your roaming problem and seven hundred other problems and lower prices. But existing regulations don't facilitate this, do they?
ffgjgf1 3y ago
> there isn't a lot of competition between carriers there and they were just sticking the roaming fees in their pockets before, Yes. Now they can’t do that so prices are lower. The regulations didn’t really make the markets more competitive though. They just capped prices.
- AnthonyMouse 3y ago
  > The regulations didn’t really make the markets more competitive though. They just capped prices. Which is why the regulations are still causing prices to be higher than they ought to be.