Nature of Competition in Telecommunications Industry

by Zahidul Hossain

The telecommunication industry is the primary source of communication for any sector, industry, household, or small business entity. This industry comprises cable companies, internet service providers, satellite companies, and telephone companies [1]. That is why there is a very competitive market environment in the telecommunication industry.

US monopoly American Telephone and Telegraph Company (AT&T) provided local and long-distance telephony [2]. It was also a profitable company. Its origins date back to Alexander Graham Bell, the telephone's inventor [2]. Due to its monopoly, Western Electric got a lucrative captive business of all telecom equipment and line leasing [2]. The longevity of AT&T's monopoly is remarkable in a country that values antitrust enforcement.

Adapting to changing technology, government regulations, and an oligopolistic market creates a never-ending process for the telecommunications industry [3]. The government's regulations' modifications introduced the competition in the telecommunication industry generally controlled by a single corporation [3]. As a consequence, the monopolistic strategy of the company came to an end in 1984, with the parent company keeping long-distance and the regional "Baby Bells" gaining de facto local monopolies [2]. MCI and Sprint entered the long-distance market, increasing competition. Due to AT&T's demise, long-distance carriers' charges to regional Bells became transparent [2]. Until 1984, these fees were opaque, and AT&T subsidized local calls. After the divorce, local calls became more expensive, rising faster than inflation [2]. It was also the era of VOIP (voice over Internet protocol).

Competition in the telecommunications sector is unique [3]. The counter-measure strategies of the rival firms largely determine it [3]. The competitors continue their competition through either loyalty schemes or price wars. The mobile operator companies usually conduct their loyalty programs by Connecting Rewards and Tiered Loyalty Programs [4]. The telecom companies offer a limited-time subscription to streaming platforms or tickets to any famous brand's cultural or sporting events as connecting rewards [4]. Telephone companies typically offer only one-time coupons and discounts. On the other hand, a tiered program rewards people for their loyalty, which increases engagement [4]. For example, the program ranks members based on total spend or years as a customer, with higher levels unlocking many benefits [4].

A price war is a competitive exchange between companies that lower their prices to undercut and gain market share. According to CRISIL, high-end 4G data plans cost one paisa per MB, while Jio Prime members pay 7.5 paisa per MB [5]. Moreover, while 4G is currently cheaper per GB than 3G, the players are compensating by only offering higher GB plans, ensuring overall ARPU protection [5].

Telecom companies had collusive behavior such as spying on customers' info, social media interaction and sharing data with other companies. The former NSA contractor Edward Snowden leaked some documents about the interaction of telecom companies with the intelligence agencies in 2013 [3].

The government's Digital Bangladesh initiative, under Vision 2021, demanded action to promote industry growth while regulating company activity [6]. Significant policies include SMP regulation, tower industry separation, and MNP services [6].

The SMP Regulation established rules for companies with 40% or more market share to prevent monopolization [6]. These rules prohibit collusion and unfair pricing, which harm the market's competitiveness [6]. Grameenphone is the only company eligible for this regulation as of 2019 [6]. The BRTC initially banned exclusive goods or product deals, call drop rates over 2%, and national advertising campaigns, but they withdrew later [6].

The telecommunications companies built and used their towers before. The government announced it would separate mobile service providers from tower-sharing companies by issuing licenses [6]. In 2018, the telecom regulatory committee granted four such firms to take over existing carrier towers [6]. The committee prohibited the carriers from building new towers and will be required to rent towers [6]. This rule encourages operators to invest in technology rather than just building more towers, thus improving network quality and range [6].

As a result of the MNP service, consumers will switch carriers without losing their phone numbers, increasing convenience and industry competitiveness [6]. These policy changes will help sustainably guide the industry's growth. The protection of consumers' interests comes at the expense of operators, who must deal with new regulations, bureaucracy, political influence, and the costs of developing and implementing new strategies [6].



W. Contributors,     "Telecommunications industry," 21 5 2021. [Online]. Available: [Accessed 19 8     2021].


A. Ranade, "Is     telecom still a monopoly?," mint, 6 9 2016. [Online]. Available:     [Accessed 20 8 2021].


M. Contributors,     "Industries :: Telecommunications :: Industry Outlook :: Nature of the     Industry,", 2014. [Online]. Available:     [Accessed 20 8 2021].


A. Nemes,     "Telecommunication Loyalty Programs: A Comprehensive Guide     (2021)," Antavo Loyalty Management Platform | Loyalty Programs for     Retail, 2 10 2020. [Online]. Available: [Accessed 21 8     2021].


ZeeBiz WebTeam,     "Why telecom companies are still indulging in price wars," Zee     Business, 24 4 2017. [Online]. Available:     [Accessed 21 8 2021].


LightCastle     Analytics Wing, "Transformation in the Telecommunications Industry -     LightCastle Partners," LightCastle Partners, 9 7 201. [Online].     Available:     [Accessed 21 8 2021].



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