Govt must step in when big players enjoy lopsided gains

The introduction of a fourth telco in Singapore could prove a highly disruptive influence, to consumers' benefit.
The introduction of a fourth telco in Singapore could prove a highly disruptive influence, to consumers' benefit. PHOTO: ST FILE

Consumers have many reasons to embrace competition in a free market economy. However, the domination of an industry by a few large players could instead have regressive effects ("Tweak policies to make telcos compete" by Mr Ben Chen; March 14).

Many of the grievances voiced by Singaporeans against the three major telcos echo the complaints directed at petrol pump prices ("'No evidence of cartel' among petrol companies"; March 1).

In both instances, the market for an essential good is held by a small number of major firms. Classical economics informs us of the likely result - an oligopolistic market.

These firms can therefore exercise considerable power over a captive market, dictating terms to consumers rather than responding to market trends. Moreover, it is in these firms' interests to keep prices high, rather than racing to the bottom in a price war.

Prices across the board typically keep in step so as to maintain a tenuous status quo. Competitive elements are largely absent.

Singapore's pro-business policies contain grey areas which have arguably allowed a number of industries to fall under the control of these sorts of companies that are "too big to compete".

The result is diminished consumer welfare and restricted choice.

Oligopolistic market dynamics also shut out small and medium-sized enterprises (SMEs), which are important actors, both economically and socially.

Society needs a level playing field and, to do so, appropriate regulations must be implemented.

In the case of the telco industry, the introduction of a fourth player could prove a highly disruptive influence. Indeed, with the threat of additional competition on the horizon, the existing market players have already improved their products and slashed prices, to the benefit of their customers.

Where lopsided gains are enjoyed by oligopolies, government intervention is necessary, not only to uphold the interests of consumers, but also to give SMEs breathing space to thrive.

Paul Chan Poh Hoi

A version of this article appeared in the print edition of The Straits Times on March 26, 2016, with the headline 'Govt must step in when big players enjoy lopsided gains'. Print Edition | Subscribe