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Tackling the TM Monopoly

How to make the telecommunications industry in Malaysia competitive.

Written by johnleemk on 12:30:47 pm Jul 11, 2007.

TM (formerly Telekom Malaysia) is one of the most prominent privatised companies in Malaysia. Unfortunately, its status as a monopoly, and the kind of service it gives its consumers, means it has not been privatised properly.

Now, why does TM have a monopoly? Because it controls all the telephone lines in the country — it has scarcity power. Entering the market and competing against TM is ridiculous for reasons that ought to be obvious to anyone.

Now, there are two solutions that could be applied when privatising TM. The government could have split TM into separate companies for different localities, perhaps akin to how the American government broke up AT&T into several smaller companies. The government could regulate the industry as a whole without dictating how individual firms run their business.

The other would have been to declare TM's monopoly a natural monopoly, and regulate how TM conducts its business to ensure it provided a fair level of service at a reasonable price.

Not being familiar with the telecommunications industry, I dare not say which route the government should have taken. Nevertheless, this is completely hypothetical, because the government chose to do neither, and set TM free into a market only it controlled.

The result is that in many things reliant on telephone lines, most notably internet service, it has been difficult for new entrants to the market — even ones with substantial resources such as Maxis — to compete with TM.

As we all hopefully know by now, competition is the key to driving prices down and increasing the quality and quantity of service provided. With TM and its subsidiaries such as TMNet securely ensconced in their monopoly power, competition is effectively stifled.

The government ought to regulate the telecommunications industry to prevent this naked abuse of monopoly power. The pitiful excuses given by TMNet for its pathetic internet services hardly hold any water when you consider that there are people in Bosnia who get same-day installation of their broadband, which is two to ten times faster than that here, for the same price (about RM66).

We need to open up the phone lines so TM's subsidiaries don't get first pick, and any firm which can afford to use them gets to use them. Only through competition can the free market achieve the goals of privatisation.