Page 201 - Communication Cultural and Media Studies The Key Concepts

PRIVATISATION

charges, lease-purchase arrangements and tax reduction to stimulate
private sector investment.
Developments within the telecommunications industry highlight
the issues surrounding privatisation. Economists originally believed
that telecommunications was a ‘natural monopoly’, meaning that one
‘telco’ would be able to provide infrastructure and services more
efficiently than competing providers. As the infrastructure costs of
telecommunications are high, government was called upon to ensure
that infrastructure was provided to remote locations even if it was
considered economically unattractive. In the US the telecommunica-
tions provider was privately owned and heavily regulated. In most
other countries, it was government owned and ran telecommunica-
tions.
In 1982 this began to change. The US introduced legislation that
would allow the telecommunications monopoly AT&T to participate
in the newICT markets if it agreed to allow newplayers into the
telecommunications industry. In the UK, British Telecom was sold to
a private company and a newcompetitor, Mercury, was allowed to
enter the market. Whereas the US was instituting competition policy
and deregulation, the UK was implementing a policy of privatisa-
tion.
In the case of telecommunications, technological change had
altered the way that the market was functioning causing the ‘natural
monopoly’ model to be called into question. It was assumed in the UK
that private industry would be motivated towards greater service and
product innovation. Competition, it was expected, would bring prices
down, resolving market failures. This both did and did not happen, in
different contexts.
However, there is doubt about whether privatisation on the whole
resulted in greater efficiencies (Barr, 2000). Further, many on the left
believe that the up-front money derived from the sale of public assets
would be less than the long-term dividends that could be spent on
public infrastructure and services if the government were to retain
ownership and profits.
Privatisation is not the same as deregulation; nor should it be
assumed that privatisation results in less regulation. In many instances,
governments have set up regulatory authorities to ensure that
privatised industries continue to meet public needs; for instance,
meeting universal service obligations (USO) in the telecommunica-
tions industry. As a result, regulators have taken on a greater role in
governance following liberalisation policies and, as Collins and

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