Competition and Regulation in the Telecommunications Industry in ...

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Competition and Regulation in Telecommunicationssignificant for the manufacturing sectors - metal products and equipment(transmission and receiving devices); chemicals, rubber and plastic products (plasticcasings for equipment); paper and printing (marketing and office materials). Thelargest gains are in other service industries, in particular, other communication orbusiness service providers, distribution, transport and utilities. A second round ofoutput and employment creation can be expected stemming from additions to wageand capital income created by the first-round effects.These figures are not high compared to agriculture or manufacturing. Part of thereason for this is a low participation of SA industry in communications equipment,with much derived demand going to imports from other countries. This may changewith time and raise the average multiplier effect.Table 1.5: Direct backward linkages – intermediate inputs into the communications industry(1997) – percentage of total intermediate input costsSector% of intermediateinput costsPrimary products 0.0Manufacturing 20.0Natural resource intensive 0.6Labour intensive 2.6Scale intensive 4.5Knowledge intensive 12.1Other 0.2Services 80.0Producer services 44.3Consumer services 20.2Infrastructural services 13.9Community/socialservicesTotal intermediates/Totalinput costs1.622.9Source: Wefa SAM (1997)1.3.3 Medium for Content ProvidersWhat the analysis of communication services as an intermediate input or as a sourceof derived demand fails to convey, is that entire industries are based around theexistence of communications services and would not exist otherwise - these are thecontent providers. Too often we view the communication services as a demandderived from growth in other industries or in household income. What we fail toappreciate is that innovation, cost reduction, quality improvement and independentexpansion of communication services enable the growth and expansion of a largecontent industry that is transmitted over the communications infrastructure. Thisprocess is one where the communications industry itself creates demand throughinnovation and investment. The links to these content industries cannot be portrayedusefully by an input-output table.The content providers could most easily be classified according to voice, data andimage/video content. Voice would include those companies producing content forradio broadcast - from music to programming. Video/image would be those producing14
Competition and Regulation in Telecommunicationsfor television or education broadcast - from advertising to dramas. Finally, datacontent would be associated with those firms providing content for the Internet orprivate data networks - from online news corporations to electronic commerce. In allthese industries, expansion of the network and lowering the costs of transmissionexpand the number of people connected to the network and therefore expand themarket for content. Enhancing the speed and quality of the networks open up theopportunities for new content products to be introduced which also expands themarket for content. An important question remains - how big are the multiplier effectson content providers stemming from improvements to the network and its expansion.1.3.4 Household Expenditure ItemFinally, communications enter the household consumption function. Communicationsdoes not represent one of the main items that households spend their income on, butat 2.4% of household income, it is still a significant item. In fact, as figure 1.2 shows,households on average spend more on communications than on investments/savings, education, house operations, pensions and fuel/power. The size ofexpenditure is also sufficiently large that price movements in the sector will influenceboth the welfare of consumers and the price level – the consumer price index. In fact,the 1995 survey probably underestimates the expenditure item as it would excludethe rise in cellular telephony and the Internet (both significant expenditure items).Figure 1.2: Household expenditure patterns (1995)15
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