In Business Model, Internet Access, Mobile

Up to a point, competition is good for consumers, leading to better prices and greater value. But there is such a thing as “ruinous competition,” which drives prices below the point at which suppliers can sustain themselves or invest in new products and features that provide more value.

That is a problem in the Taiwan mobile market, says  National Communications Commission (NCC) spokesperson Wong Po-tsungj. The problem is price wars.

Chunghwa Telecom, for example, recently introduced a 4G service plan costing NT$499 monthly (about US$17 a month) for unlimited access to mobile Internet and unlimited phone calls between Chunghwa Telecom subscribers. That basic plan was matched by competitors.

“If telecoms simply want to boost their market shares and revenue by luring subscribers from competitors, rather than with innovative business models, it would not be positive for the development of 5G in the nation,” Wong said.

“What they are doing does not help to make the pie bigger,” said Wong. And though it is easy to criticize firms for making profits, those profits are what allows firms to invest and innovate, as well as stay in business.

That tension between actions and policy that support sustainable competition, or ruinous competition; or competition versus investment, is at the heart of all thinking about ideal mobile market structure.

Few believe any more that telecom is a natural monopoly. But few would deny that sustainable retail markets are likely to be oligopolies. The real questions tend to be over the shape of such oligopolies. How much sustainable competition–especially facilities-based competition–is possible on a sustainable basis?

That is the problem NCC sees with the current price wars.

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